[Cite as Klonowski v. Merrill Lynch, 2020-Ohio-4567.]

COURT OF APPEALS OF OHIO 

EIGHTH APPELLATE DISTRICT 

COUNTY OF CUYAHOGA 

DANIEL J. KLONOWSKI, : 

 Plaintiff-Appellee, : 

 No. 109086 

 v. : 

 

MERRILL LYNCH, ET AL., : 

 

 Defendants-Appellants. : 

 

JOURNAL ENTRY AND OPINION 

 JUDGMENT: REVERSED AND REMANDED

RELEASED AND JOURNALIZED: September 24, 2020 

 

Civil Appeal from the Cuyahoga County Court of Common Pleas 

Case No. CV-19-914407 

 

Appearances: 

Paul V. Wolf Co. and Paul V. Wolf, for appellee. 

McGlinchey Stafford, P.L.L., and Bryan T. Kostura; 

Bressler, Amery & Ross, P.C., and Logan S. Fisher, 

for appellant. 

 

PATRICIA ANN BLACKMON, P.J.: 

Defendants Merrill Lynch, Pierce, Fenner & Smith, Inc. and James R. 

Sophia, Jr. (collectively “Appellants”) appeal the trial court’s denial of their motion 
to compel arbitration and stay proceedings and assign the following error for our 

review: 

I. Whether the trial court’s September 23, 2019 journal entry erred 

by denying the Motion to Compel Arbitration and Stay 

Proceedings filed by Defendants/Appellants Merrill Lynch, 

Pierce, Fenner & Smith Incorporated and James R. Sophia, Jr. 

On November 12, 2007, Daniel Klonowski (“Klonowski”) opened a 

cash management account with Appellants. Klonowski, who is an attorney, signed 

Appellants’ Client Relationship Agreement (“the CRA”), which included an 

arbitration clause. 

On April 24, 2019, Klonowski filed a complaint against Merrill Lynch 

alleging promissory estoppel, breach of contract, negligence, and breach of fiduciary 

duty related to alleged mismanagement of Klonowski’s account. Appellants filed a 

motion to compel arbitration and stay the proceedings in the trial court. The trial 

court held a hearing on August 8, 2019, and denied the motion on September 23, 

2019. It is from this denial that Appellants appeal. 

Appellants’ CRA 

The CRA that Klonowski signed when he opened his account with 

Appellants is six pages long. Within these pages, there are two references to 

arbitration. First, just above Klonowski’s signature, which was required on one page 

of the CRA, the following language is in bold print: 

BY SIGNING BELOW, I AGREE TO THE TERMS OF THE MERRILL 

LYNCH CLIENT RELATIONSHIP AGREEMENT ON THE REVERSE 

SIDE AND: * * * 2. THAT, IN ACCORDANCE WITH SECTION 8, 

PAGE 2 OF THE CLIENT RELATIONSHIP AGREEMENT, I AM 
AGREEING IN ADVANCE TO ARBITRATE ANY CONTROVERSIES 

THAT MAY ARISE WITH YOU * * *. 

Second, Section 8 of the CRA, which is entirely in bold print and is 

titled “AGREEMENT TO ARBITRATE CONTROVERSIES,” states in pertinent part 

as follows: 

This Agreement contains a predispute arbitration clause. By signing an 

arbitration agreement, the parties agree as follows: All parties to this 

Agreement are giving up the right to sue each other in court * * *. The 

rules of the arbitration forum in which the claim is filed, and any 

amendments thereto, shall be incorporated into this agreement. 

Any arbitration pursuant to this provision shall be conducted only 

before the New York Stock Exchange, Inc., an arbitration facility 

provided by any other exchange of which Merrill Lynch is a member, 

or the National Association of Securities Dealers, Inc. * * *. 

Section 8 of the CRA also states that the consumer — in this case, 

Klonowski — may choose the forum from among those listed, and if the consumer 

fails to choose, Merrill Lynch will select the forum. Additionally, the CRA states that 

“[a]rbitration awards are generally final and binding,” subject to limited ability for 

appellate review; “discovery is generally more limited in arbitration than in court 

proceedings”; “arbitrators do not have to explain the reason(s) for their award”; 

“[t]he panel of arbitrators will typically include a minority of arbitrators who were 

or are affiliated with the securities industry”; arbitrable claims include “those 

involving any transaction in any of your accounts with Merrill Lynch, or the 

construction, performance or breach of any agreement between us”; and “Judgment 

upon the award of arbitrators may be entered in any court, state or federal, having 

jurisdiction.” Furthermore, Section 8 of the CRA notes that time limits for bringing 
a claim in arbitration may be imposed and explains the limitations of arbitrating 

class actions. 

The Motion to Compel Arbitration 

Appellants sought a trial court order compelling Klonowksi to 

arbitrate his claims pursuant to the CRA and stay his pending complaint. Appellants 

argued that the parties agreed in the CRA to arbitration as the dispute resolution 

forum, and Klonowski’s claims against Appellants all relate to his account, thus 

falling within the scope of the arbitration clause. 

Klonowski, on the other hand, argued that he only saw the one page 

of the CRA with his signature on it, and that page does not have the terms of the 

arbitration clause on it. Therefore, Klonowski argued, there was no agreement to 

arbitrate. In his opposition to Appellants’ motion to compel arbitration, Klonowski 

attached an affidavit, which reads in part as follows: 

I executed a one page Merrill Lynch Client Relationship Agreement 

which is attached hereto as Exhibit “1.” 

That to the best of my knowledge, the one page Merrill Lynch 

Relationship Agreement was faxed to me at my law office and the one 

page document was accompanied by instructions to fill in the 

agreement by handwriting. 

That I supplied information in handwriting on the single page that I 

believe was faxed to me and signed that one page document on 

November 12, 20[0]7. 

That the one page document that was faxed to me and which I signed 

did not have a reverse side and the fine print on the one document 

which I was instructed to sign was in substantial portion illegible and 

appeared substantially identical to that which is attached hereto as 

Exhibit “1”. 
That this was the only page of any agreement with Merrill Lynch that 

was ever placed before me or otherwise shown to me until I received 

and read Defendants’ Motion to Compel Arbitration and the 

documents attached hereto. 

In the alternative, Klonowski argued that the provisions in the CRA 

were procedurally and substantively unconscionable, because they “run afoul of the 

test set forth in Cole v. Burns International Security Services, [105 F.3d 1465 

(D.C.Cir.1997)].” Specifically, Klonowski argued that the CRA: does not provide for 

a neutral arbitrator; is not clear whether more than minimal discovery is permitted; 

states that the arbitrators do not have to explain the reasons for their award; gives 

no indication regarding available relief; and exposes him to unreasonable costs. 

In Appellants’ reply brief in support of arbitration, they argued that 

“parties to a contract are presumed to have read the contract and have knowledge of 

its contents.” Appellants provided the court with Klonowski’s original ink signature 

on the CRA showing that the document was, in fact, legible and was not provided to 

Klonowski via fax. Appellants attached an affidavit from Sophia stating that, while 

he did “not recall the specific circumstances surrounding [Klonowksi’s] account 

opening process, it was not, and has never been, my business practice to send a client 

only the signature page to a” CRA. (Emphasis sic.) Sophia’s affidavit further stated 

that his 

standard operating procedure in connection with client’s opening new 

accounts was to: (i) meet in person with the potential client and have 

them execute the necessary account documentation at the in person 

meeting; or (ii) if an in person meeting was not possible, I would mail 

the entire document(s) to the client for execution and request that the 

document be returned to me at Merrill. 
Appellants further argued to the trial court that the CRA was not 

procedurally or substantively unconscionable. First, Appellants pointed out that 

“Cole is a D.C. Circuit case which is not controlling.” Second, Appellants argued that 

there was no absence of meaningful choice, in that Klonowski “could have opened 

an account with virtually any other brokerage firm if he did not want to agree to the 

terms of the [CRA].” Third, Appellants argued that the contract terms are not 

unreasonably favorable to them. 

The Hearing 

At the hearing on Appellants’ motion to compel arbitration, the 

parties first addressed whether the CRA was enforceable, based on Klonowski’s 

allegation that he only saw the page he signed. Klonowski’s attorney argued that “I 

don’t necessarily think that it’s his responsibility to ask if there [are] other pages to 

the * * * [CRA].” 

In response, Appellants’ attorney stated as follows: 

there is an onus on Mr. Klonwoski based upon the fact he signed the 

relationship agreement and agreed to these terms, and the fact of the 

matter is these were not in fine print. These were not hidden someplace 

in the contract. They’re laid out very clearly about what they can and 

cannot do and the rights and responsibilities for which Mr. Klonowski 

agreed to pursuant to this contract. 

The court agreed with Appellants as follows: “I agree that the Plaintiff 

had an obligation if he is signing this and he didn’t get all these pages, to say, well, 

where is the section on arbitration because that is one of the last sentences just above 
where he signed.” The essence of the court’s conclusion was that Klonowski agreed 

to the CRA in its entirety. 

The parties next argued about whether the CRA was unconscionable, 

and the court stated the following on the record: 

It says in here that * * * the rules of the arbitration forum in which the 

claim is filed and any amendments thereto shall be incorporated into 

this agreement. 

Can someone point me to the arbitration forum rules that are 

incorporated into this agreement, because that’s where I see a problem, 

not with the facts [sic] that [the] arbitration agreement is not — that 

there is not a section in here that addresses it, but where is the rest of 

the — where are the rest of the applicable rules here for the arbitration 

[forum]? 

The court continued: “There [are] choices that he can make as far as 

which arbitrator he wants to use, but there is no — that’s not provided. There is a 

certain list, but he has to guess as to which arbitrat[ion forum Appellants are] a 

member of.” According to the court, “shouldn’t that have been part of the 

agreement? * * * But under the arbitration provision where it is being incorporated 

into the agreement, there is no information provided to the person who is being 

bound by this agreement as to where to go or where to get this list of acceptable 

arbitrators to choose from.” 

Appellants’ attorney argued that, if a dispute arose, the consumer 

could choose the arbitration forum, of which Appellants are members, from those 

listed in the CRA. Thereafter, “the arbitration rules would be incorporated once the 

specific forum is chosen. We’re not going to choose a forum for the — for Mr. 

Klonowksi unless he decides not to choose one for himself.” 
In response, Klonowski’s attorney argued that it “would be difficult” 

for a customer to determine which arbitration forums Appellants were members of 

and that “the terms itself are very problematic.” The remainder of Klonowski’s 

attorney’s arguments at the hearing concerned his client allegedly not receiving all 

of the pages of the CRA. 

Analysis 

In its September 23, 2019 journal entry, the court made the following 

findings when denying Appellants’ motion to compel arbitration: “Substantial 

terms for this arbitration provision are contained in different documents which were 

never given to plaintiff, shown to plaintiff, or put in front of plaintiff, and thus this 

arbitration clause is both procedurally and substantively unconscionable.” 

To support its finding, the court relied on Jamison v. LDA Builders, 

Inc., 11th Dist. Portage No. 2011-P-0072, 2013-Ohio-2037, a case in which the 

plaintiffs “entered into a New Home Purchase Agreement with LDA, a seasoned 

home builder, for the construction of a home * * *.” Id. at ¶ 2. In Jamison, the court 

found that the arbitration clause at issue was both procedurally and substantively 

unconscionable when the plaintiff did not receive the arbitration agreement until 

after signing the contract at issue, the defendant had the right to choose the 

arbitrator, and the plaintiffs “could obtain a copy of the applicable rules and 

procedures upon request.” Id. at ¶ 48. 

Upon review, we find that the facts of the case at hand are different 

than the facts in Jamison. In the instant case, the arbitration clause was included in 
the document that Klonowski signed on November 12, 2007. Although Klonowski 

argued that he was only provided with the signature page, therefore, he never agreed 

to arbitrate, the trial court did not find this argument to be credible. Klonowski’s 

signature is on a page that states he is agreeing to arbitration “in accordance with 

section 8, page 2” of the CRA. Klonowski is an attorney, and a “party to a contract 

is presumed to have read and understood the terms and is bound by a contract that 

he willingly signed.” Michael A. Gerard, Inc. v. Haffke, 8th Dist. Cuyahoga No. 

98488, 2013-Ohio-167, ¶ 19. Furthermore, Klonowski had the right to choose an 

arbitrator from a finite list, and the applicable arbitration rules were incorporated 

by reference. 

Standard of Review for a Motion to Compel Arbitration 

“[A]lthough arbitration is encouraged as a method to settle disputes, 

an arbitration clause is not enforceable if it is found to be unconscionable.” Felix v. 

Ganley Chevrolet, Inc., 8th Dist. Cuyahoga Nos. 86990 and 86991, 2006-Ohio4500, ¶ 15. The Ohio Supreme Court has held that “the proper standard of review 

of a determination of whether the arbitration agreement is enforceable in light of a 

claim of unconsionability is de novo, but any factual findings of the trial court must 

be accorded appropriate deference.” Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio 

St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, ¶ 2. 

In the case at hand, the trial court found in its journal entry that the 

CRA was unconscionable, because “substantial terms” of the arbitration clause were 

not part of the CRA that Klonowski signed. Although the court did not explain what 
“substantial terms” it was referring to, we glean from the record, and particularly 

the motion hearing, that the trial court deemed substantial the fact that the specific 

arbitration organization, along with its rules and procedures, is not identified in the 

CRA. Rather, a list of acceptable arbitration organizations is provided, the consumer 

has the option to choose from the list, and the chosen organization’s particular rules 

are “incorporated by reference” into the CRA. 

Giving deference, as we must, to the trial court’s factual finding that 

the specific rules and procedures of the arbitration forum to be chosen were “never 

given to plaintiff, shown to plaintiff, or put in front of plaintiff,” we find no error 

here. However, we review whether these facts are unconscionable under a de novo 

standard. 

Upon review, we find no authority to support the trial court’s finding 

that the CRA in this case is unconscionable. “Unconscionability includes both ‘an 

absence of meaningful choice on the part of one of the parties together with contract 

terms which are unreasonably favorable to the other party.’ The party asserting 

unconscionability of a contract bears the burden of proving that the agreement is 

both procedurally and substantively unconscionable.” (Citations omitted.) Taylor 

Bldg. Corp. of Am. v. Benfield, 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, 

¶ 34. 

In the case at hand, the court made no finding under the first prong 

of the Taylor test regarding procedural unconscionability. In Olah v. Ganley 

Chevrolet, Inc., 8th Dist. Cuyahoga No. 86132, 2006-Ohio-694, ¶ 16 (quoting 
Johnson v. Mobil Oil Corp., 415 F.Supp. 264, 268 (E.D.Mich. 1976)), this court held 

the following: 

Procedural unconscionability involves those factors bearing on the 

relative bargaining position of the contracting parties, e.g., age, 

education, intelligence, business acumen and experience, relative 

bargaining power, who drafted the contract, whether the terms were 

explained to the weaker party, whether alterations in the printed terms 

were possible, [and] whether there were alternative sources of supply 

for the goods in question. 

Upon review, we find no evidence that Klonowski was under pressure 

to open an account with Appellants and no evidence that he could not open an 

account elsewhere. The CRA is legible, clear, unambiguous, and Klonowski signed 

it. The references to arbitration are in bold print. Klonowski presented no evidence 

that he was a “weak” party in this transaction. Indeed, Klonowski is an attorney 

whose education and experience should render him able to read and understand the 

language in the CRA. 

Turning to the second prong of the Taylor test, Ohio courts have held 

that substantive unconscionability “involves those factors which relate to the 

contract terms themselves and whether they are commercially reasonable.” Collins 

v. Click Camera & Video, 86 Ohio App.3d. 826, 834, 621 N.E.2d 1294 (2d Dist.1993). 

These factors may include: “the fairness of the terms, the charge for the service 

rendered, the standard in the industry, and the ability to accurately predict the 

extent of future liability.” Id. 

Klonowski, who bears the burden to show unconscionability, has 

failed to set forth any evidence or legal authority supporting the argument that the 
terms in the CRA are commercially unreasonable. He argues that the CRA “offers 

absolutely no guidance whatsoever as to even a brief outline of the type of rules that 

would apply” to an arbitration. He further argues that “it is absolutely irrelevant 

that hypothetical rules that apply to several fora, one of which no longer even exists, 

are purported to be incorporated by reference.” 

Contrary to Klonowski’s argument, the CRA offers some guidance as 

to the parameters of arbitration and then incorporates by reference the particular 

rules of the chosen forum. This court has upheld arbitration clauses that are 

substantially similar to the one at issue. In Melia v. OfficeMax N. Am., Inc., 8th 

Dist. Cuyahoga No. 87249, 2006-Ohio-4765, the trial court granted a motion to stay 

pending arbitration, and this court affirmed. The arbitration clause at issue 

incorporated by reference the arbitration rules of the chosen forum. 

[I]t is commonplace for arbitration agreements to incorporate the 

[American Arbitration Association] rules. The mere fact that an 

agreement incorporates the rules does not make it invalid. Rather, the 

complaining party must be able to specifically cite to, and demonstrate 

how, a specific provision in the [American Arbitration Association] 

rules renders the Agreement invalid. * * * We therefore find that 

Melia’s contention that the incorporation of the [American Arbitration 

Association] rules invalidates the Agreement to be without merit.” 

Id. at ¶ 36-37. See also Conte v. Blossom Homes L.L.C., 8th Dist. Cuyahoga No. 

103751, 2016-Ohio-7480. 

Additionally, this court reversed the trial court’s denial of a motion to 

compel arbitration under circumstances strikingly similar to the facts of the case at 

hand. In Estate of Brewer v. Dowell & Jones, Inc., 8th Dist. Cuyahoga No. 80563, 
2002-Ohio-3440, the plaintiffs opposed arbitration “on the grounds they did not 

receive or review the ‘Customer Agreement’ containing the arbitration clause at the 

time they opened their Fidelity account * * *.” This court found that the plaintiffs 

agreed to arbitration. 

Here, Fidelity had a standard account application and customer 

agreement which all of its customers received and were required to sign 

prior to opening a new brokerage account. * * * 

The Customer Agreement containing the arbitration provision is 

specifically identified and incorporated, in bold type-face print, in the 

New Account Application. 

Plaintiffs claim that they did not have knowledge of and failed to receive 

the incorporated Customer Agreement containing the arbitration 

clause and thus, did not understand that they were bound to arbitrate 

all disputes with Fidelity. Plaintiffs also state that they did not read the 

Fidelity application containing the incorporated clause. These 

arguments must fail. 

First, physical delivery of a contract is not essential to create a legally 

enforceable agreement. * * * Where the parties intend to be bound by 

the contract, it is valid, even where a party later claims that he never 

received a copy of the agreement. 

* * * 

A party entering a contract has a responsibility to learn the terms of the 

contract prior to agreeing to its terms. The law does not require that 

each aspect of a contract be explained orally to a party prior to signing 

it. * * * ‘It will not do for a man to enter into a contract, and, when called 

upon to respond to its obligations, to say that he did not read it when 

he signed it, or did not know what it contained. If this were permitted, 

contracts would not be worth the paper on which they are written.’” 

(Citations omitted.) Id. at ¶ 8-13. 

In the instant case, the court erred as a matter of law by finding that 

the CRA is both procedurally and substantively unconscionable. Appellants’ sole 

assigned error is sustained. The trial court’s denial of Appellants’ motion to compel 
arbitration and stay proceedings is reversed, and this case is remanded to the trial 

court for proceedings consistent with this opinion. 

It is ordered that appellants recover from appellee costs herein taxed. 

The court finds there were reasonable grounds for this appeal. 

It is ordered that a special mandate be sent to said court to carry this judgment 

into execution. 

A certified copy of this entry shall constitute the mandate pursuant to Rule 27 

of the Rules of Appellate Procedure. 

 ____ 

PATRICIA ANN BLACKMON, PRESIDING JUDGE 

ANITA LASTER MAYS, J., and 

RAYMOND C. HEADEN, J., CONCUR