Court Opinion

ID: 2689551
Source: CourtListenerOpinion
Date Created: 2014-08-01 19:39:31.269388+00
Date Added: 2024-06-11T12:51:01.908114
License: Public Domain

[Cite as Saffold v. Croom, 2014-Ohio-3241.]

                 Court of Appeals of Ohio
                               EIGHTH APPELLATE DISTRICT
                                  COUNTY OF CUYAHOGA

                              JOURNAL ENTRY AND OPINION
                                      No. 100806

                        RODGER SAFFOLD, III, ET AL.
                                                       PLAINTIFF-APPELLEE

                                                 vs.

                          MICHAEL J. CROOM, ET AL.

                                                       DEFENDANTS-APPELLANTS

                                   JUDGMENT:
                             REVERSED AND REMANDED

                                     Civil Appeal from the
                              Cuyahoga County Court of Common Pleas
                                    Case No. CV-13-807277

        BEFORE:           E.A. Gallagher, J., Celebrezze, P.J., and Kilbane, J.

        RELEASED AND JOURNALIZED: July 24, 2014
ATTORNEYS FOR APPELLANT

Matthew J. Kucharson
Mitchell G. Blair
Calfee, Halter & Griswold, L.L.P.
1405 East Sixth Street
Cleveland, Ohio 44114

ATTORNEYS FOR APPELLEES

For Rodger Saffold, III, et al.

Randy J. Hart
Randy J. Hart, L.L.P.
23600 Commerce Park
Beachwood, Ohio 44122

A. Scott Fromson
32125 Solon Road
Solon, Ohio 44139

For Reggie Cohen

Kevin V. Rogers, Jr.
The Superior Building, 11th Floor
815 Superior Avenue East
Cleveland, Ohio 44114

For Michael J. Croom

Robert J. Zavesky
Berger & Zavesky Co., L.P.A.
614 W. Superior Avenue
Rockefeller Building, Suite 14
Cleveland, Ohio 44113

For Desmond Cummings
Desmond Cummings, pro se
65 Rolling Brooke Way
Northfield, Ohio 44067

EILEEN A. GALLAGHER, J.:
       {¶1} Appellant Liberty Ford, Inc. (“Liberty”) appeals the trial court’s denial of its

motion to stay the proceedings and compel arbitration or, in the alternative, to dismiss.

For the following reasons, we reverse and remand.

       {¶2} Appellee Rodger Saffold, III (“Saffold”) has alleged the following relevant

facts in this case: In January 2011, Saffold was the co-signer on a purchase of a motor

vehicle from Liberty for his father.   In connection with his co-signing, Liberty required

Saffold to provide personal financial information for the purpose of establishing his

creditworthiness. Saffold provided his personal financial information to Liberty solely

in connection with the purchase of the vehicle.

       {¶3} In October 2011, Michael J. Croom, an employee at Liberty, contacted

Saffold through Saffold’s father regarding an investment opportunity. After a number of

calls, Saffold agreed to attend a meeting regarding the investment.           The meeting

occurred at Liberty and Saffold, through his father, was introduced to Reggie Cohen and

Desmond Cummings, both employees of Liberty. Saffold, through an investment entity

he established for the purpose of this transaction, agreed to invest in performances by

various musical artists and comedians in locations throughout the United States. Despite

investing more than $350,000, Saffold has yet to receive any share of the profits.

       {¶4} Saffold filed suit against Liberty, Croom, Cohen and Cummings alleging that

they engaged in a fraudulent scheme to deprive him of his investment.1 Specifically, in

regards to Liberty, Saffold has alleged fraud for the misrepresentation that the personal
    financial information that he had provided would be kept confidential and would not be

    used outside the scope and purpose of the business transaction, i.e., the purchase of a

    motor vehicle.    Saffold has also asserted a negligence claim against Liberty for failing to

    protect Saffold’s personal financial information against use not associated with the

    purchase of a vehicle and for allowing its offices to be used for the purposes of the

    alleged fraudulent investment scheme.

           {¶5} On November 18, 2013, Liberty filed a motion to stay proceedings and

    compel arbitration or dismiss.     Liberty argued that the claims asserted against it clearly

    fall within the arbitration agreement executed in connection to the purchase of the

    vehicle.   In particular, the arbitration agreement provides:

           Either you or Creditor (“us” or “we”) (each, a “Party”) may choose at any
           time, including after a lawsuit is filed, to have any Claim related to this
           contract decided by arbitration. Such Claims include but are not limited to
           the following: 1) Claims in contract, tort, regulatory or otherwise; 2) Claims
           regarding the interpretation, scope, or validity of this clause, or arbitrability
           of any issue; 3) Claims between you and us, your/our employees, agents,
           successors, assigns, subsidiaries, or affiliates; 4) Claims arising out of or
           relating to your application for credit, this contract, or any resulting
           transaction or relationship, including that with the dealer, or any such
           relationship with third parties who do not sign this contract.
           {¶6} The agreement defines “Claim” as “any claim, dispute, or controversy,” and

    it provides that the contract is subject to the Federal Arbitration Act (9 U.S.C. 1 et seq.).

           {¶7} On December 12, 2013, the trial court denied the motion to stay proceedings

    and compel arbitration or to dismiss.          Liberty appeals, raising the following two

    assignments of error:

1
     Croom, Cohen and Cummings have not appealed the trial court’s decision and are not affected by
    1. The trial court erred in denying Defendant-Appellant Liberty Ford, Inc.’s Motion
       to Stay proceedings and compel arbitration or, in the alternative, to dismiss filed
       on November 18, 2013 because the claims alleged against Liberty in the first
       amended complaint fall within the scope of a valid and binding arbitration
       agreement.

    2. The trial court erred in denying Liberty’s November 2013 motion to stay and
       compel because any dispute as to whether the claims alleged against Liberty in the
       first amended complaint fall within the scope of the arbitration agreement should
       have been decided by an arbitrator, not by the trial court.

{¶8}    We find the first assignment of error to be moot based on our resolution of the second

assignment of error.

{¶9} In determining whether the trial court properly denied or granted a motion to compel

arbitration, we must first determine the proper standard of review.       When the question is

whether a party has agreed to submit an issue to arbitration or questions of unconscionability are

raised, we review the matter under a de novo standard of review. Zilbert v. Proficio Mtge.

Ventures, L.L.C., 8th Dist. Cuyahoga No. 100299, 2014-Ohio-1838, ¶ 8-9, citing Shumaker v.

Saks Inc., 163 Ohio App.3d 173, 2005-Ohio-4391, 837 N.E.2d 393 (8th Dist.); Taylor Bldg.

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

{¶10} In the instant case, we apply a de novo standard of review because we are reviewing the

trial court’s decision to deny a motion to stay after finding that the claims are not subject to

arbitration. “Under a de novo standard of review, we give no deference to a trial court’s

decision.”      Brownlee v. Cleveland Clinic Found., 8th Dist. Cuyahoga No. 97707,

2012-Ohio-2212, ¶ 9, citing Akron v. Frazier, 142 Ohio App.3d 718, 721, 756 N.E.2d 1258 (9th

Dist.2001).

{¶11} The arbitration agreement between Saffold and Liberty is subject to the Federal Arbitration

the outcome of this appeal.
Act (“FAA”). The FAA provides that arbitration clauses in commercial contracts “shall be

valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the

revocation of any contract.” 9 U.S.C. 2. If a court determines that the cause of action is

covered by an arbitration clause, it must stay the proceedings until the arbitration process is

complete. 9 U.S.C. 3.

{¶12} In addition, the United States Supreme Court has held that the FAA preempts state laws

and policies regarding arbitration.     Bluford v. Wells Fargo Fin., 176 Ohio App.3d 500,

2008-Ohio-680, 892 N.E.2d 920, ¶ 23 (8th Dist.), citing Southland Corp. v. Keating, 465 U.S. 1,

10-11, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984).

{¶13} Liberty argues that the arbitrability of the claims asserted against it by Saffold in this case

must be determined by an arbitrator instead of the trial court pursuant to the terms of the

arbitration agreement. We agree. Resolution of the question of who decides arbitrability is to

be determined by reference to what the parties agreed about the matter. Reed Elsevier, Inc. v.

Crockett, S.D. Ohio No. 3:10cv248, 2012 U.S. Dist. LEXIS 23947, *15 (Feb. 24, 2012), citing

First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985

(1995). To determine whether the parties agreed to allow the arbitrator to decide the question of

arbitrability, courts should apply state law principles of contract construction, while declining to

assume that the parties agreed to arbitrate arbitrability, unless there is clear and unmistakable

evidence that they did so. Id. at 16. The Supreme Court of Ohio has held that when parties to a

contract have clearly and unmistakably vested the arbitrator with the authority to decide the issue

of arbitrability, the question of whether a matter is arbitrable is to be decided by the arbitrator.

Blemont Cty. Sheriff v. Fraternal Order of Police, 104 Ohio St.3d 568, 2004-Ohio-7106, 820
  N.E.2d 918; see also Park-Ohio Industries, Inc. v. Atwood Resources, 8th Dist. Cuyahoga No.

  58142, 1990 Ohio App. LEXIS 562 (Feb. 15, 1990).

  {¶14} In the present case, the arbitrability agreement provides that the parties agree to submit to

  the arbitrator “claims” (broadly defined as “any claim, dispute or controversy”) “regarding the

  interpretation, scope, or validity of this clause, or arbitrability of any issue.”

  {¶15} In this instance, the parties have clearly and unmistakably agreed that the arbitrator will

  have the authority to decide the issue of arbitrability. Therefore, Liberty’s second assignment of

  error is sustained, the judgment of the trial court is reversed and the matter is remanded for

  further proceedings in accordance with this decision.

  It is ordered that appellant 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.

EILEEN A. GALLAGHER, JUDGE

MARY EILEEN KILBANE, J., CONCURS, and
FRANK D. CELEBREZZE, JR., P.J., CONCURS WITH SEPARATE OPINION

FRANK D. CELEBREZZE, JR., P.J., CONCURRING:
{¶16} I concur with the majority’s resolution of this case, but write separately to further

elucidate why the agreement limits the trial court’s analysis on whether the matter is

subject to arbitration and why a different decision may be reached with the codefendants.

{¶17} R.C. 2711.02(B) directs courts to stay a case pending arbitration “upon being

satisfied that the issue involved in the action is referable to arbitration under an agreement

in writing for arbitration * * *.” Where the issue of whether a matter is subject to

arbitration is governed by a clause in the agreement giving the arbitrator the power to

determine that issue, it almost certainly means that the trial court should be satisfied that

the case is referable to arbitration.      However, where claims have no conceivable

relationship to the contract — such as Saffold’s claims against codefendants Croom,

Cohen, and Cummings — the court’s decision may be different than that reached for

Liberty. The same is true under federal law given that 9 U.S.C. 3 contains substantially

similar language to R.C. 2711.02(B) (“upon being satisfied that the issue involved in such

suit or proceeding is referable to arbitration under such an agreement”).

{¶18} Where the contract that contains the arbitration provision clearly has no

relationship to the claims in the case, a trial court cannot be satisfied that the case is

referable to arbitration no matter if the arbitration provision contains a clause similar to

the one in the present case. This is because the parties did not agree to submit such

claims to arbitration and therefore did not agree to have an arbitrator determine the scope

of the provision as it relates to claims that did not arise from the contract. Tedeschi v.

Atrium Ctrs., L.L.C., 8th Dist. Cuyahoga No. 97647, 2012-Ohio-2929, ¶ 15.
      {¶19} Liberty argues for the application of federal law to this case given the agreement

      specifies that the FAA governs. Under federal law, courts have discretion to stay only

      those claims in a suit that are subject to arbitration. Moses H. Cone Mem. Hosp. v.

      Mercury Constr. Corp., 460 U.S. 1, 20-21, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).

      Where claims are separable, the court may choose to have parallel litigation commence

      simultaneously; some through arbitration and some litigated before the court.                          Id.;

      Janmort Leasing, Inc. v. Econo-Car Internatl., Inc., 475 F.Supp. 1282, 1293

      (E.D.N.Y.1979).

      {¶20} In Janmort, the district court recited the factors that a court should consider when

      granting or denying a stay pending arbitration where some claims are subject to

      arbitration and others are not.

      [F]ederal courts have not hesitated to stay the litigation of nonarbitrable claims until the
      conclusion of arbitration, provided that economies of time and effort for court and parties
      can thereby be achieved and that “the party seeking the stay can demonstrate that he will
      not hinder the arbitration, that the arbitration will be concluded within a reasonable time;
      and that the delay will not work an undue hardship on the party opposing the stay.”

Id. at 1293, quoting Societe Nationale v. General Tire & Rubber Co., 430 F.Supp. 1332,

      1334 (S.D.N.Y.1977).

      {¶21} Analyzing the similarly worded R.C. 2711.02(B),2 some Ohio courts have come to

      the conclusion that a stay of some claims pending arbitration means the entire action must

  2
   R.C. 2711.02(B) provides, “If any action is brought upon any issue referable to arbitration under an
  agreement in writing for arbitration, the court in which the action is pending, upon being satisfied that
  the issue involved in the action is referable to arbitration under an agreement in writing for arbitration,
  shall on application of one of the parties stay the trial of the action until the arbitration of the issue has
  been had in accordance with the agreement, provided the applicant for the stay is not in default in
   be stayed. “In cases where some claims are exempt from arbitration and others are not,

   trial courts properly stay claims exempt from arbitration until the claims subject to

   arbitration are resolved.” Riggs v. Patriot Energy Partners, L.L.C., 7th Dist. Carroll No.

   11 CA 877, 2014-Ohio-558, ¶ 3. See also Cheney v. Sears, Roebuck & Co., 10th Dist.

   Franklin No. 04AP-1354, 2005-Ohio-3283, ¶12. However, one district court in Ohio

   has analyzed the issue and found:

   Section 2711.02 has been interpreted to require the trial court “to stay an action if the
   issues involved fall under a valid, enforceable arbitration agreement.” Poling v. American
   Suzuki Motor Corp., 2001 Ohio App. LEXIS 4074 (Ohio App. 8th Dist. Sept. 13, 2001).
   However, that statutory provision does not mandate the issuance of a stay of proceedings
   for issues that are not subject to arbitration. See, e.g., Kline v. Oak Ridge Builders, Inc.,
   102 Ohio App.3d 63, 656 N.E.2d 992 (Ohio App. 9th Dist. 1995) (reversing stay of
   proceedings and order of arbitration proceedings for claims against individual defendants
   who did not agree to arbitrate); Owens Flooring Co. v. Hummel Constr. Co., 140 Ohio
   App.3d 825, 749 N.E.2d 782 (Ohio App. 11th Dist. 2001) (“Owens is not a party to the
   contract that contains the arbitration provision. In fact, Owens does not have any contract
   with Altercare. Therefore, Owens is not subject to the stay provisions of R.C. 2711.02.”).
   Thus, the Court concludes that it is not required by § 2711.02 to stay Plaintiff’s
   proceedings against KMC, on the ground that the claims against KRI and KRIC are
   subject to arbitration.

Orcutt v. Kettering Radiologists, Inc., 199 F.Supp.2d 746, 757 (S.D.Ohio 2002).

   {¶22} Under Ohio law, the trial court should have discretion to stay claims that are not

   subject to arbitration where they are presented with arbitrable claims following the factors

  proceeding with arbitration.” (Emphasis added.)

           9 U.S.C. 3 provides, “If any suit or proceeding be brought in any of the courts of the United
  States upon any issue referable to arbitration under an agreement in writing for such arbitration, the
  court in which such suit is pending, upon being satisfied that the issue involved in such suit or
  proceeding is referable to arbitration under such an agreement, shall on application of one of the
  parties stay the trial of the action until such arbitration has been had in accordance with the terms of
  the agreement, providing the applicant for the stay is not in default in proceeding with such
set forth above.     The intertwined factual allegations in the present case may make

separate proceedings inequitable or impracticable, but the trial court should be able to

make that determination based on the facts of each case.

arbitration.” (Emphasis added.)