Court Opinion

ID: 2703021
Source: CourtListenerOpinion
Date Created: 2014-08-04 20:02:55.846263+00
Date Added: 2024-06-11T12:51:41.901781
License: Public Domain

[Cite as Malburg v. Shaughnessy, 2012-Ohio-5419.]

                Court of Appeals of Ohio
                              EIGHTH APPELLATE DISTRICT
                                 COUNTY OF CUYAHOGA

                             JOURNAL ENTRY AND OPINION
                                      No. 98092

                                 ROBERT MALBURG

                                                          PLAINTIFF-APPELLEE

                                                    vs.

                   MICHAEL SHAUGHNESSY, ET AL.
                                                          DEFENDANTS-APPELLANTS

                                          JUDGMENT:
                                           AFFIRMED

                                     Civil Appeal from the
                            Cuyahoga County Court of Common Pleas
                                     Case No. CV-763507

        BEFORE: Stewart, J., Blackmon, A.J., and Boyle, J.

        RELEASED AND JOURNALIZED:                         November 21, 2012
ATTORNEYS FOR APPELLANTS

Christine M. Garritano
Robert B. Casarona
Roetzel & Andress, LPA
One Cleveland Center, 9th Floor
1375 East 9th Street
Cleveland, OH 44114

ATTORNEYS FOR APPELLEE

Alan N. Hirth
Debra J. Horn
Meyers, Roman, Friedberg & Lewis
28601 Chagrin Boulevard, Suite 500
Cleveland, OH 44122

MELODY J. STEWART, J.:

      {¶1} Defendants-appellants Michael Shaughnessy and John Haugh, the principal

owners of a corporation named ColorMatrix, appeal from an order that denied their

motion to have a lawsuit filed by plaintiff-appellee Robert Malburg stayed and referred to

arbitration. Malburg, a salesperson for ColorMatrix, filed a complaint that alleged that

Shaughnessy and Haugh promised him an ownership stake in the corporation in exchange

for restructuring his compensation pursuant to the terms of a deferred compensation

agreement. Shaughnessy and Haugh did not answer the complaint, but sought arbitration

on grounds that the deferred compensation agreement contained an arbitration clause that

required arbitration of “any dispute” between the parties relating to the interpretation,
breach, or enforcement of the agreement. The court denied the motion without opinion.

The sole assignment of error contests the court’s refusal to refer the matter to arbitration.

       {¶2} Our task is to determine whether the facts alleged in the complaint fall within

the arbitration clause in the deferred compensation agreement. In doing so, we recognize

that “[w]hether a claim falls within the scope of an arbitration agreement turns on the

factual allegations in the complaint rather than the legal causes of action asserted.”

Gregory v. Electro-Mechanical Corp., 83 F.3d 382, 384 (11th Cir.1996).

       {¶3} Malburg alleged that he began employment with ColorMatrix in 1990 and

received a salary in addition to a 4 percent commission on any sales.               In 1997,

Shaughnessy and Haugh told him that they could not afford to pay his commissions.

They proposed that Malburg forego his commission in exchange for a straight salary and

a deferred compensation plan.       That same year, Shaughnessy and Haugh allegedly

promised Malburg that they would grant him an ownership stake in ColorMatrix to

compensate him for the loss of income. Malburg signed the deferred compensation

agreement on October 31, 1997. That agreement contained an arbitration agreement that

required the parties to arbitrate any dispute “relating to the execution, interpretation,

breach or enforcement of the Agreement or the Plan * * *.”

       {¶4} Malburg alleged that in 1998, Shaughnessy and Haugh proposed that in lieu

of paying him on commission, they would grant Malburg a 5 percent ownership stake in

ColorMatrix. He agreed to these terms but claimed that Shaughnessy and Haugh kept

changing the terms of the deferred compensation plan.            He alleged that when he
complained about these changes, he was told that “as an owner of ColorMatrix” he should

not try to “kill the goose that lays the golden egg” and that “you have to trust us.” When

Malburg asked for a document “formalizing” his ownership interest, Shaughnessy and

Haugh “told him that they did not want to issue formal stock due to the legal complexity

in doing so and that they did not want to reveal ColorMatrix’s financial statements.”

       {¶5} In 2000, Shaughnessy and Haugh changed the deferred compensation plan to

a bonus program, but they only authorized bonuses in the years 2000 and 2002. Malburg

alleged that Shaughnessy and Haugh continued to assure him that “he would be more

than compensated by his ownership interest in ColorMatrix.” In 2006, ColorMatrix was

acquired by another company. Shaughnessy and Haugh remained shareholders in the

company. Malburg alleged that “[i]n order to have taxes paid on Malburg’s deferred

compensation plan, he was required to put the monies from the plan into company stock.”

 He did not receive any compensation from the sale of the stock but was promised “that

he would be paid after the next sale, when Defendants sold their remaining stock.” In

2011, ColorMatrix was again sold and Malburg made a demand based on his 5 percent

ownership share. He claimed that Shaughnessy and Haugh refused to issue his stock.

       {¶6} There is such a strong presumption in favor of arbitration, ABM Farms, Inc.

v. Woods, 81 Ohio St.3d 498, 500, 1998-Ohio-612, 692 N.E.2d 574, that an agreement to

arbitrate must be enforced unless “it may be said with positive assurance that the

arbitration clause is not susceptible of an interpretation that covers the asserted dispute.”

Williams v. Aetna Fin. Co., 83 Ohio St.3d 464, 471, 1998-Ohio-294, 700 N.E.2d 859.
When, as here, an arbitration clause is broad (“any dispute”), the presumption in favor of

arbitrability is even greater. Academy of Medicine of Cincinnati v. Aetna Health, Inc.,

108 Ohio St.3d 185, 2006-Ohio-657, 842 N.E.2d 488, ¶ 18.

      {¶7} Despite there being a strong presumption in favor of arbitration, arbitration is

a matter of contract and a party cannot be forced to arbitrate that which the party has not

agreed to arbitrate.     Taylor v. Ernst & Young, L.L.P., 130 Ohio St.3d 411,

2011-Ohio-5262, 958 N.E.2d 1203, ¶ 20. For that reason,

      although any ambiguities in the language of a contract containing an
      arbitration provision should be resolved in favor of arbitration, the courts
      must not “override the clear intent of the parties, or reach a result
      inconsistent with the plain text of the contract, simply because the policy
      favoring arbitration is implicated.”

Id., quoting Equal Emp. Opportunity Comm. v. Waffle House, 534 U.S. 279, 294, 122

S.Ct. 754, 151 L.Ed.2d 755 (2002).

      {¶8} Shaughnessy and Haugh argue that the court should have read the deferred

compensation agreement as encompassing an agreement to grant Malburg an ownership

interest in ColorMatrix because it was intended to compensate Malburg for the money he

would lose by foregoing his commission. This argument relies on a selective reading of

the factual allegations of the complaint.         The implementation of the deferred

compensation agreement occurred in 1997, but Malburg alleged that it was not until 1998

that Shaughnessy and Haugh made a firm promise for a 5 percent ownership interest.

The terms of the deferred compensation agreement reflect this reality — nothing in the
deferred compensation agreement says anything about granting Malburg an ownership

interest in ColorMatrix as compensation for his foregoing his sales commission.

       {¶9} There is no basis for implying that the arbitration clause contained in the

deferred compensation agreement could be applied to a subsequent agreement to grant

Malburg an ownership interest. The arbitration clause is limited to disputes “relating to

the execution, interpretation, breach or enforcement of the Agreement or the Plan * * *.”

An objective reading of the allegations of the complaint yields no basis for finding that a

promise to grant Malburg an ownership interest in ColorMatrix was part and parcel of the

deferred compensation agreement.

       {¶10} Shaughnessy and Haugh argue that an alleged oral agreement to grant

Malburg an ownership interest would be a form of compensation that would necessarily

invoke the deferred compensation agreement and thus invoke the arbitration clause of the

deferred compensation agreement. That conclusion rests on the faulty premise that the

deferred compensation agreement controlled the entirety of Malburg’s compensation.

Suppose ColorMatrix decided to reinstate Malburg’s commission structure in a separate

agreement, but made no changes to the deferred compensation program. There would be

no colorable argument that a breach of the subsequent agreement to pay a commission

would be subject to arbitration under the deferred compensation agreement. For the

same reason, the alleged promise to grant Malburg an ownership interest in ColorMatrix

existed separate and apart from the deferred compensation agreement.               This is
particularly true when the alleged promise to grant Malburg an ownership interest was

antecedent to and unrelated to the scope of the deferred compensation agreement.

      {¶11} We find that the court did not err by refusing to stay the proceedings and

refer the matter to arbitration. Nothing in the deferred compensation agreement could be

construed as encompassing a later promise to grant Malburg an ownership interest in

ColorMatrix.

      {¶12} Judgment affirmed.

      It is ordered that appellee recover of appellants his costs herein taxed.

      The court finds there were reasonable grounds for this appeal.

      It is ordered that a special mandate issue out of this court directing the Cuyahoga

County Court of Common Pleas 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.

MELODY J. STEWART, JUDGE

PATRICIA ANN BLACKMON, A.J., and
MARY J. BOYLE, J., CONCUR