Court Opinion

ID: 4690725
Source: CourtListenerOpinion
Date Created: 2021-05-27 18:12:49.685054+00
Date Added: 2024-06-11T08:05:02.201305
License: Public Domain

[Cite as Zayicek v. JG3 Holdings, L.L.C., 2021-Ohio-1816.]

                              COURT OF APPEALS OF OHIO

                             EIGHTH APPELLATE DISTRICT
                                COUNTY OF CUYAHOGA

JOHN ZAYICEK,                                          :

                Plaintiff-Appellee,                    :
                                                             No. 109910
                v.                                     :

JG3 HOLDINGS, L.L.C., ET AL.,                          :

                Defendants-Appellants.                 :

                               JOURNAL ENTRY AND OPINION

                JUDGMENT: AFFIRMED
                RELEASED AND JOURNALIZED: May 27, 2021

            Civil Appeal from the Cuyahoga County Court of Common Pleas
                                Case No. CV-19-925214

                                            Appearances:

                Lewis Brisbois Bisgaard & Smith, L.L.P., Gregory P.
                Amend, and Andrew J. Pullekins, for appellee.

                Cohen Rosenthal & Kramer, L.L.P., James B. Rosenthal,
                and Joshua R. Cohen, for appellants.

MARY J. BOYLE, A.J.:

                Defendants-appellants, JG3 Holdings, L.L.C., et al. (“JG3”), bring this

appeal challenging the trial court’s judgment denying its motion to stay proceedings

and compel arbitration in a breach of contract action filed by plaintiff-appellee John

Zayicek. After a thorough review of the record and law, this court affirms.
                        I. Factual and Procedural History

            Zayicek resides in the state of Georgia. JG3 is a Delaware limited

liability company with its principal place of business in Cuyahoga County, Ohio. At

the time that JG3’s Operating Agreement was executed in February 2013,

defendant-appellant Joshua Gottlieb was the sole owner and member of JG3.

Gottlieb resides in Chagrin Falls, Ohio.

            The present appeal arose from a dispute between Zayicek and Gottlieb

regarding a business and investment arrangement involving JG3. The present

appeal requires this court to interpret the terms of three contracts. The first

contract, JG3’s Operating Agreement, was executed by Gottlieb on February 5, 2013.

The Operating Agreement contains an arbitration provision and specifies that the

application and interpretation of the Operating Agreement “shall be governed

exclusively by its terms and by the laws of the State of Delaware, and specifically by

the Delaware Act.” The second contract is the January 27, 2016 Amendment to

JG3’s Operating Agreement.        The Amendment, like the original Operating

Agreement, was executed only by Gottlieb.

             The third contract is a Letter Agreement reached between Gottlieb and

Zayicek. The Letter Agreement, dated January 27, 2016, was signed by Gottlieb and

Zayicek on January 28, 2016. The Letter Agreement does not contain an arbitration

provision. However, it contains a “Choice of Law” provision that provides that the

agreement “shall be governed by and construed in accordance with the laws of the

United States and otherwise with the laws of the State of Ohio[.]”
             Pursuant to the terms of the parties’ Letter Agreement, Zayicek was

obligated to contribute $1.8 million in cash or assets to JG3 in exchange for

preferred membership interests in JG3 and guaranteed payments over a period of

20 years. Complaint at ¶ 10. Zayicek alleged that JG3 failed to make the requisite

payments to him during the fourth quarter of 2018, and all four quarters of 2019.

Zayicek alleged that the total of the payments JG3 failed to make was approximately

$312,500. Complaint at ¶ 13-14.

             Pursuant to the terms of the agreement, Zayicek provided a notice of

default on September 11, 2019, in which he notified JG3 of the breach and requested

that the breach be cured. Zayicek also provided a “notice of representation and

litigation hold” to JG3 on October 18, 2019.

             JG3 did not respond to either the notice of default or the notice of

representation. As a result, on October 19, 2019, Zayicek delivered a notice of

intention to file suit to JG3. Gottlieb responded to the notice of intention to file suit

via email and a subsequent telephone conversation with Zayicek’s attorney.

             On November 1, 2019, Zayicek requested information pertaining to JG3

from Gottlieb. The information and documentation requested by Zayicek included:

(1) an accounting of JG3’s assets, (2) an accounting of Zayicek’s capital contributions

to JG3, (3) JG3’s monthly bank statements, (4) JG3’s quarterly financial statements

for 2019, and (5) JG3’s tax returns for 2016, 2017, and 2018.

             On November 4, 2019, Gottlieb acknowledged receiving the request for

documentation and information. Despite assuring Zayicek that the information and
documentation requested would be produced, Gottlieb did not produce any

information or documentation.

              On November 15, 2019, Zayicek filed a complaint and a motion for

prejudgment attachment against defendants JG3, Gottlieb, The Gottlieb

Organization, L.L.C., Management Solutions, L.L.C., and John Does 1-10. Therein,

Zayicek asserted causes of action for breach of contract, an accounting of all

activities and assets of JG3, and declaratory judgment. Zayicek sought a declaration,

pursuant to R.C. 2721.02 et seq., that the required minimum payments JG3 was

required to make be accelerated, and the entire amount be due and owing by

defendants to Zayicek.

             Zayicek amended his complaint on July 6, 2020. Zayicek’s amended

complaint asserted claims for breach of contract, an accounting, declaratory

judgment, fraudulent inducement, fraudulent misrepresentation and concealment,

actual fraudulent transfers pursuant to R.C. 1336.04, and constructive fraudulent

transfers pursuant to R.C. 1336.05.

             On July 24, 2020, JG3 filed a motion to stay and compel arbitration,

pursuant to R.C. 2711.02, and for leave to plead. Therein, JG3 argued that Zayicek’s

claims were subject to arbitration “according to the arbitration agreement between

[Zayicek] and [JG3] as contained in [JG3’s] Operating Agreement[.]” In support of

its motion to stay and compel, JG3 submitted an affidavit of Gottlieb, JG3’s

Operating Agreement, and the Amendment to JG3’s Operating Agreement.
             On July 31, 2020, Zayicek filed a brief in opposition to JG3’s motion

to stay and compel arbitration and for leave to plead. Therein, Zayicek argued that

(1) Zayicek’s claims pertain to the January 27, 2016 Letter Agreement, not JG3’s

February 5, 2013 Operating Agreement, (2) Zayicek was not a party to, and did not

sign JG3’s Operating Agreement, and (3) JG3 waived its right to stay proceedings

and compel arbitration by actively participating in the litigation for eight months

without raising the issue of arbitration. Zayicek submitted the January 27, 2016

Letter Agreement in support of his brief in opposition.

              On August 12, 2020, the trial court denied JG3’s motion to stay and

compel arbitration and for leave to plead. The trial court concluded that (1) Zayicek

was not a signatory to the Operating Agreement, (2) the only signatory on the

Operating Agreement and Amendment thereto was Gottlieb, (3) although the

Operating Agreement contains an arbitration clause, the Letter Agreement does not,

(4) the Letter Agreement is enforceable without relying on any rights or obligations

created by the Operating Agreement, and (5) the rights Zayicek was seeking to

enforce were created by the Letter Agreement, not the Operating Agreement.

             On August 24, 2020, JG3 filed the instant appeal challenging the trial

court’s August 12, 2020 judgment. JG3 assigns four errors for review:

      I. The trial court erred by denying [JG3’s] motion to stay and compel
      arbitration.

      II. The trial court erred by finding that there was no agreement to
      arbitrate.

      III. The trial court erred by finding that there were no claims subject
      to the parties’ arbitration agreement.
      IV. The trial court erred by not staying the matter as to claims and
      parties that are not subject to mandatory arbitration.

                                 II. Law and Analysis

              JG3’s assignments of error all challenge the trial court’s judgment

denying JG3’s motion to stay proceedings and compel arbitration. Accordingly,

JG3’s assignments of error will be addressed together.

                                A. Standard of Review

      When reviewing a challenge to an arbitration clause, the appropriate
      standard of review depends on “the type of questions raised challenging
      the applicability of the arbitration provision.” McCaskey v. Sanford-
      Brown College, 8th Dist. Cuyahoga No. 97261, 2012-Ohio-1543, ¶ 7.
      Generally, an abuse of discretion standard applies. Id., citing Milling
      Away, L.L.C. v. UGP Properties, L.L.C., 8th Dist. Cuyahoga No. 95751,
      2011-Ohio-1103. Whether a party has waived the right to arbitrate a
      dispute is subject to an abuse-of-discretion standard. Id. However, the
      issue of whether a party has agreed to submit an issue to arbitration or
      questions of unconscionability are reviewed under a de novo standard
      of review. Id. at ¶ 7-8, citing Shumaker v. Saks Inc., 163 Ohio App.3d
      173, 2005-Ohio-4391, 837 N.E.2d 393 (8th Dist.), and Taylor Bldg.
      Corp. of Am. v. Benfield, 117 Ohio St.3d 352, 2008-Ohio-938, 884
      N.E.2d 12.

Gertson v. Parma VTA, L.L.C., 8th Dist. Cuyahoga No. 108823, 2020-Ohio-3455,

¶ 11. In determining “whether a party has agreed to arbitrate, we apply ordinary

principles of contract formation.” Avery v. Academy Invests., L.L.C., 8th Dist.

Cuyahoga No. 107550, 2019-Ohio-3509, ¶ 9, citing Seyfried v. O’Brien, 2017-Ohio-

286, 81 N.E.3d 961, ¶ 18 (8th Dist.), and Palumbo v. Select Mgt. Holdings, Inc., 8th

Dist. Cuyahoga No. 82900, 2003-Ohio-6045, ¶ 18 (“The question whether the

parties agreed to arbitrate their dispute is * * * a matter of contract. The terms of a

contract are a question of fact.”).
      Ohio recognizes a “strong public policy” in favor of arbitration and the
      enforcement of arbitration provisions. Hayes v. Oakridge Home, 122
      Ohio St.3d 63, 2009-Ohio-2054, 908 N.E.2d 408, ¶ 15; Taylor Bldg.
      [at] ¶ 24; R.C. 2711.01(A). A presumption favoring arbitration arises
      when the claim in dispute falls within the scope of the arbitration
      provision and courts must resolve any doubts in favor of arbitrability.
      See, e.g., Williams v. Aetna Fin. Co., 83 Ohio St.3d 464, 471, 700
      N.E.2d 859 (1998); Taylor Bldg. at ¶ 26; see also Council of Smaller
      Ents. v. Gates, McDonald & Co., 80 Ohio St.3d 661, 669, 687 N.E.2d
      1352 (1998) (arbitration provision should not be denied effect “‘unless
      it may be said with positive assurance that the arbitration clause is not
      susceptible of an interpretation that covers the asserted dispute’”),
      quoting Independence Bank v. Erin Mechanical, 49 Ohio App.3d 17,
      18, 550 N.E.2d 198 (8th Dist.1988).

Ohio Plumbing, Ltd. v. Fiorilli Constr., Inc., 2018-Ohio-1748, 111 N.E.3d 763, ¶ 11

(8th Dist.). “Despite the presumption in favor of arbitration, a party cannot be

compelled to arbitrate a dispute the party has not agreed to submit to arbitration.”

(Emphasis added.) Id. at ¶ 15, citing Council of Smaller Ents. at 665.

                                  B. The Contracts

                        1. JG3’s Operating Agreement

             JG3’s Operating Agreement, executed solely by Gottlieb on

February 5, 2013, contains an Arbitration provision (Article 15, Section 16), that

provides,

      Any dispute, controversy or claim arising out of or in connection with,
      or relating to, this Agreement or any breach or alleged breach hereof
      shall, upon the request of any party involved, be submitted to, and
      settled by, arbitration in Charlotte, Delaware, pursuant to the
      commercial arbitration rules then in effect of the American Arbitration
      Association (or at any time or at any other place or under any other
      form of arbitration mutually acceptable to the parties so involved). Any
      award rendered shall be final and conclusive upon the parties and a
      judgment thereon may be entered in the highest court of the forum,
      state or federal, having jurisdiction. The expenses of the arbitration
      shall be borne equally by the parties to the arbitration, provided that
       each party shall pay for and bear the cost of its own experts, evidence
       and counsel’s fees, except that in the discretion of the arbitrator, any
       award may include the cost of a party’s counsel if the arbitrator
       expressly determines that the party against whom such award is
       entered has caused the dispute, controversy or claim to be submitted to
       arbitration as a dilatory tactic.

              The Operating Agreement also contains an “Application of Delaware

Law” provision, Section 15.1, that provides, “[t]his Agreement and the application or

interpretation hereof, shall be governed exclusively by its terms and by the laws of

the State of Delaware, and specifically by the Delaware Act.” Zayicek was not a party

to, nor identified generally or as a member in the February 5, 2013 Operating

Agreement.

                            2. The Letter Agreement

              The Letter Agreement provided the basis for an agreement between

Gottlieb and Zayicek regarding Zayicek’s “Investment and Retirement Income

Program.” Gottlieb signed the Letter Agreement as follows: “Joshua L. Gottlieb,

individually and as agent for affiliated Gottlieb companies.” JG3 was not specified

as one of the affiliated Gottlieb companies. Furthermore, Zayicek signed the Letter

Agreement in his individual capacity, not in his capacity as a purported member or

preferred membership interest holder of JG3. The Letter Agreement was drafted on

letterhead of “the Gottlieb Organization, LLC” not JG3. The Letter Agreement

provides that Gottlieb formed JG3 for the purpose of entering into the arrangement

described herein with Zayicek individually, who will also be a preferred member of

JG3.
              Section 2 of the Letter Agreement, pertaining to Zayicek’s

contributions, provides:

      [Zayicek] will, directly or through whatever means he deems
      appropriate, contribute assets to JG3 with a reasonably-estimated
      value of $1,800,000 in cash and in kind.

      Gottlieb and [Zayicek] agree that [Zayicek] has rights, assets and
      expectancies in various Gottlieb-controlled entities with a deemed
      value of $650,000 (collectively, the “[Zayicek] Assets”). [Zayicek] shall
      contribute or cause to be contributed to JG3 all of the [Zayicek] Assets
      plus cash payments totaling $1,150,000 to JG3 for the purpose of
      fulfilling his agreed upon capital contributions to JG3. [Zayicek] shall
      be issued preferred membership interests in JG3 and shall be the sole
      member with such preferred membership interests, as described in
      more detail below.

              Section 4 of the Letter Agreement, governing JG3’s capital structure,

provides, in relevant part,

      [t]he rights and payments defined above [in the Letter Agreement] for
      the preferred membership interests in JG3 to be held by [Zayicek] are
      the sole rights and claims in and to the assets of JG3 by [Zayicek]. Upon
      the completion of the payments in full to [Zayicek] set forth in section
      3b (if any) and in section 4a above, JG3 shall redeem [Zayicek’s]
      interests in JG3 for $1.00 and Gottlieb and JG3 shall have no further
      payment obligations to [Zayicek] hereunder.

              The Letter Agreement contains an integration clause, or “Entire

Agreement” provision, that provides

      This Agreement constitutes the entire agreement between the Parties
      relating to the subject matter hereof and supersedes all previous
      writings and understandings. No terms and provisions of this
      Agreement shall be varied or modified by any prior or subsequent
      statement, conduct or act of either of the Parties, except as the Parties
      may amend this Agreement by a writing signed by representatives of
      each party.
             The Letter Agreement contains a “Choice of Law” provision that

provides,

      The Parties agree that this Agreement shall be governed by and
      construed in accordance with the laws of the United States and
      otherwise with the laws of the State of Ohio without reference to its
      conflicts of law principles. Any dispute, controversy, or difference
      which may arise between the parties out of or in connection with this
      Agreement, or for the breach thereof that cannot otherwise be resolved,
      shall be heard before a court of competent jurisdiction located in
      Cuyahoga County, Ohio.

(Emphasis added.)

             The Letter Agreement was dated January 27, 2016, and signed by

Zayicek on January 28, 2016.      The Letter Agreement does not reference or

incorporate JG3’s Operating Agreement or the January 27, 2016 Amendment

thereto. There is no arbitration or dispute resolution provision in the Letter

Agreement.

                     3. Amended Operating Agreement

             The Operating Agreement was amended on January 27, 2016. The

Amendment provides,

      The Company is hereby authorized to issue, in addition to the existing
      issued and outstanding class of voting common membership interests
      (“Common Interests”), a preferred, non-voting class of membership
      interests (“Preferred Interests”) upon terms and conditions established
      by the vote of the holders of a Majority Interest, which terms and
      conditions shall be set forth in writing and attached to the Member
      resolutions adopting same, from time to time.

             The January 27, 2016 amendment also changed JG3’s principal place

of business from 18 N. Main Street, Suite 200, Chagrin Falls, OH 44022, to 200

Public Square, Suite 3210, Cleveland, OH 44114.        The Amendment to JG3’s
Operating Agreement was executed on January 27, 2016, and signed by one

member, Gottlieb. Zayicek was not a party to, nor identified generally, or as a

member or preferred member in the January 27, 2016 Amendment.

             Because the Letter Agreement was executed by Zayicek on January 28,

2016, after the Amendment to the Operating Agreement was executed by Gottlieb

on January 27, 2016, the Letter Agreement’s integration clause, or “Entire

Agreement” provision applies, pursuant to which the Letter Agreement superseded

the Amendment to the Operating Agreement, which was a previous writing or

understanding.

                                    C. Analysis

              In this appeal, JG3 argues that the trial court erred in denying its

motion to stay and compel arbitration because (1) Zayicek is a member of JG3 and,

as a result, is bound by the Operating Agreement, (2) Zayicek’s claims cannot be

maintained based solely on the Letter Agreement without reference to the

relationship between the parties and the parties’ rights set forth in the Operating

Agreement, and (3) pursuant to the estoppel exception, Zayicek is bound by the

Operating Agreement’s arbitration provision although Zayicek did not sign the

Operating Agreement or Amendment thereto.

                                   1. Member

              First, JG3 argues that as a member or preferred member of JG3,

“Zayicek is in all respects bound by the terms of the company’s Operating

Agreement, as amended.” Appellant’s brief at 7. Furthermore, JG3 contends that
as a member of JG3, Zayicek is bound by the Operating Agreement as a matter of

law pursuant to Delaware’s Limited Liability Company Act, which provides that “[a]

member or manager of a limited liability company or an assignee of a limited liability

company interest is bound by the limited liability company agreement whether or

not the member or manager or assignee executes the limited liability company

agreement.” 6 Del. C. §18-101(9).

              The parties dispute whether Zayicek is a member of JG3.              JG3

contends that Zayicek and defendant-appellant Joshua Gottlieb “are the sole

members in [JG3] formed expressly to be the vehicle for the parties’ investment

program. Zayicek is the company’s sole preferred member; Gottlieb is its sole

manager.” Appellant’s brief at 3.

              Zayicek, on the other hand, contends that he was not admitted as a

member of JG3. Although the Letter Agreement references JG3 and provides that

Zayicek will be issued “preferred membership interests in JG3,” Zayicek asserts that

he was never granted said preferred membership interests.

              After reviewing the record, we disagree with Gottlieb and JG3, and

find that Zayicek did not become a member of JG3 by executing the Letter

Agreement.

              Section 1.22 of JG3’s Operating Agreement defines a “member” as

“[a]n Owner who executes a counterpart of this Agreement and holds all of the

rights set forth in Article 5 hereof including all of the rights of an Economic Interest

Owner as well as the right to vote on, consent to, or otherwise participate in certain
decisions of the Company.” (Emphasis added.) “Owner” is defined by Section 1.27

of the Operating Agreement as “[a]n owner of a Membership Interest and/or

Economic Interest.”

                JG3 has failed to produce a counterpart of the Operating Agreement

executed or signed by Zayicek. The only “member” identified in JG3’s Operating

Agreement was Gottlieb. JG3 appears to argue that Zayicek is a member of JG3,

and thus bound by the Operating Agreement, despite the fact that Zayicek did not

execute a counterpart to the Operating Agreement.

                To the extent that JG3 argues that Zayicek became a member of JG3

by executing the Letter Agreement, JG3’s argument is misplaced. “Counterpart” is

defined as “one of two corresponding copies of a legal instrument.” Merriam-

Webster    Online      Dictionary,   https://www.merriamwebster.com/dictionary/

counterpart (accessed Apr. 15, 2021); see also Placid Oil Co. v. George, 49 So.2d

500, 506 (La.App.1950), rev’d on other grounds, 1952, 221 La. 200, 59 So.2d 120,

citing 10 Words & Phrases, Perm.Ed., page 43, verbo Counterpart, and Black’s Law

Dictionary, 452 (3d Ed.1933) verbo Counterpart (“It is our understanding that a

counterpart must be considered as an exact copy of another instrument generally

used for convenience in procuring signatures of several parties to the same

agreement.”).

                Because the Letter Agreement is not a counterpart of the original or

amended Operating Agreement, Zayicek did not become a member of JG3 by

executing the Letter Agreement.
                       2. Scope of Arbitration Provision

              Second, JG3 argues that the present dispute falls under the “broad”

arbitration provision in JG3’s Operating Agreement because Zayicek’s claims

(1) cannot be maintained based solely on the Letter Agreement, (2) “cannot be

maintained without reference to the relationship between the parties as members of

JG3,” and (3) cannot be maintained without reference to the parties’ rights set forth

in the Operating Agreement. Appellant’s brief at 12. JG3 contends that Zayicek’s

claims for breach of contract and “allegations of mismanagement of [JG3]” invoke

and require referencing the Operating Agreement. In support of its arguments, JG3

directs this court to Ohio Plumbing, 2018-Ohio-1748, 111 N.E.3d 763.

      Despite the presumption in favor of arbitration, a party cannot be
      compelled to arbitrate a dispute the party has not agreed to submit to
      arbitration. Council of Smaller Ents. v. Gates, McDonald & Co., 80
      Ohio St.3d 661, 665, 687 N.E.2d 1352 (1998). In deciding whether a
      dispute falls within the scope of an arbitration agreement, “‘[a] proper
      method of analysis * * * is to ask if an action could be maintained
      without reference to the contract or relationship at issue. If it could, it
      is likely outside the scope of the arbitration agreement.’” Alexander v.
      Wells Fargo Fin. Ohio 1, Inc., 122 Ohio St.3d 341, 2009-Ohio-2962, 911
      N.E.2d 286, ¶ 24, quoting Fazio v. Lehman Bros., Inc., 340 F.3d 386,
      395 (6th Cir.2003); see also Park Bldg. Condominium Assn. v. Howells
      & Howells [Ents.], L.L.C., 2017-Ohio-1561, 90 N.E.3d 131, ¶ 16 (8th
      Dist.).

Ohio Plumbing at ¶ 15.

              After reviewing the record, we find JG3’s reliance on Ohio Plumbing

to be misplaced.

              In Ohio Plumbing, plaintiff-appellee subcontractor Ohio Plumbing

filed a complaint against defendant-appellant contractor Fiorilli for breach of
contract and violation of the Ohio Prompt Payment Act, R.C. 4113.61, based on

Fiorilli’s purported failure to pay Ohio Plumbing for work performed under the

parties’ contractual agreement. Id. at ¶ 4. The parties’ contract for plumbing

services contained an arbitration provision that applied to any “disputes under the

[a]greement.” Id. at ¶ 16. Fiorilli moved, in relevant part, to stay the action pending

arbitration of Ohio Plumbing’s claims. The trial court summarily denied Fiorilli’s

motion.

              On appeal, this court held that the trial court erred in denying Fiorilli’s

motion to stay proceedings pending arbitration. Id., 2018-Ohio-1748, 111 N.E.3d

763, at ¶ 31. This court explained that Ohio Plumbing’s claims could not be

maintained without referencing the contract or relationship between Ohio

Plumbing and Fiorilli. Id. at ¶ 16, citing Alexander, 122 Ohio St.3d 341, 2009-Ohio-

2962, 911 N.E.2d 286, at ¶ 24, and Fazio, 340 F.3d at 395. Furthermore, this court

concluded that Ohio Plumbing’s purported right to recover $5,337 arose out of the

contractual agreement that contained an arbitration provision.

              In Ohio Plumbing, it was “undisputed that the parties’ agreement

contains a dispute resolution provision and that the dispute resolution provision

includes an agreement to arbitrate, at Fiorilli’s discretion, ‘disputes under the

Agreement.’” Id. at ¶ 14. Furthermore, the issue was whether the parties’ dispute

fell within the scope of the arbitration agreement.

              In the instant matter, it is undisputed that the Letter Agreement does

not contain an arbitration provision, and the primary issue is the existence of an
enforceable agreement between Zayicek and JG3, not the scope of an arbitration

agreement.    The record reflects that Zayicek’s claims for breach of contract,

accounting,    declaratory   judgment,     fraudulent    inducement,     fraudulent

misrepresentation and concealment, and actual and constructive fraudulent

transfers are based on the terms of the Letter Agreement that does not contain an

arbitration provision.

              Unlike Ohio Plumbing, 2018-Ohio-1748, 111 N.E.3d 763, Zayicek’s

claims can be maintained based solely upon the Letter Agreement’s terms and

without reference to the Operating Agreement or Amendment thereto.              The

payments, accounting, and declaratory judgment to which Zayicek claims he is

entitled arise from the Letter Agreement’s terms, not the terms of the Operating

Agreement. Zayicek’s claims arise from the rights due to him and JG3’s contractual

obligations under the Letter Agreement. The Letter Agreement sets forth the terms

for the cash payments Zayicek was entitled to receive over the course of 20 years.

The Letter Agreement sets forth the accounting and reporting requirements Zayicek

sought to enforce.

              The Letter Agreement provides that “[t]he rights and payments

defined above for the preferred membership interests in JG3 to be held by [Zayicek]

are the sole rights and claims in and to the assets of JG3 by [Zayicek].” (Emphasis

added.) In other words, Zayicek’s rights and claims in and to the assets of JG3 were

limited to those specified in the Letter Agreement and did not include the rights

afforded to JG3’s members in the Operating Agreement. As noted above, JG3’s
argument regarding Zayicek’s status as a member of JG3 is misplaced and

unsupported by the record.

              JG3 further argues that the Letter Agreement and Operating

Agreement “cannot be construed as entirely independent contracts.” Appellant’s

brief at 16. In support of its argument, JG3 directs this court to Schneider v.

Shafran, 1st Dist. Hamilton No. C-120225, 2013-Ohio-380, asserting that Schneider

is “nearly identical” to the present case.

               After reviewing the record, we find Schneider to be distinguishable

from the instant matter.       First, in Schneider, the parties entered into two

agreements. The first agreement contained an arbitration provision, and the second

agreement contained a forum-selection clause.         Here, there is one agreement

reached between JG3 and Zayicek — the Letter Agreement. The record reflects that

JG3’s Operating Agreement was not an “agreement” reached between Zayicek and

Gottlieb or JG3.

              R.C. 1705.01(J) defines “operating agreement” as “all of the valid

written or oral agreements of the members * * * as to the affairs of a limited liability

company and the conduct of its business.” (Emphasis added.) “A limited liability

company’s operating agreement determines the actual membership in the limited

liability company and the rights and responsibilities of the limited liability

company.” N. Hill Holdings, L.L.C. v. Concheck, 8th Dist. Cuyahoga No. 108168,

2019-Ohio-5119, ¶ 15, citing Matthews v. D’Amore, 10th Dist. Franklin No. 05AP-

1318, 2006-Ohio-5745, ¶ 36.
                As noted above, the Operating Agreement defined a “member” as a

“[a]n Owner who executes a counterpart of this Agreement[.]” Zayicek did not

execute the original Operating Agreement, the Amendment thereto, or a counterpart

to either agreement. Nor was Zayicek referenced or identified in the agreements.

                Second, the subsequent agreement in Schneider, 1st Dist. Hamilton

No. C-120225, 2013-Ohio-380, specifically referenced and sought to amend the first

agreement containing the arbitration clause. Here, the Letter Agreement does not

reference, incorporate, nor purport to amend JG3’s Operating Agreement. The

Letter Agreement’s integration clause, or “Entire Agreement” provision, belies JG3’s

argument that the Letter Agreement and Operating Agreement are not independent

contracts and must be construed together. Accordingly, JG3’s reliance on Schneider

is misplaced.

                                    3. Estoppel

                Third, JG3 argues that the estoppel exception applies in this case

under which Zayicek, a nonsignatory to the Operating Agreement or Amendment

thereto, is bound by the arbitration provision in the Operating Agreement.

      This court has recognized several theories under which nonsignatories
      may be bound to the arbitration agreements of others. These theories,
      which arise from common law principles of contract and agency law,
      are: (1) incorporation by reference; (2) assumption; (3) agency; (4) veil
      piercing/alter ego; and (5) estoppel. [I Sports v. IMG Worldwide, Inc.,
      8th Dist. Cuyahoga No. 83349, 2004-Ohio-3113, ¶ 12], citing
      [Thomson-CSF, S.A. v. Am. Arbitration Assn., 64 F.3d 773, 776 (2d
      Cir.1995)]; Cleveland-Akron-Canton [Advertising] Coop. v.
      Physician’s Weight Loss Ctrs. of Am., 184 Ohio App.3d 805, 2009-
      Ohio-5699, 922 N.E.2d 1012, ¶ 14-17 (8th Dist.).
         The theories were explained in I Sports as follows: (1) a nonsignatory
         may compel arbitration against a party to an arbitration agreement
         under a theory of incorporation by reference where the party has
         entered into a separate contractual relationship with the nonsignatory
         that incorporates the existing arbitration clause; (2) a nonsignatory
         may be bound by an arbitration agreement if the nonsignatory’s
         conduct indicates that it assumed the obligation to arbitrate;
         (3) traditional principles of agency law may bind a nonsignatory to an
         arbitration agreement; (4) veil piercing and alter ego theories may be
         used to bind a nonsignatory corporation to an arbitration agreement
         signed by another corporation; and (5) a nonsignatory to an arbitration
         agreement may be estopped from denying an obligation to arbitrate
         where the nonsignatory has knowingly accepted the benefits of an
         agreement that contains an arbitration clause. [I Sports] at ¶ 13-14.

Miller v. Cardinal Care Mgt., 8th Dist. Cuyahoga No. 107730, 2019-Ohio-2826,

¶ 24-25.

                In support of its argument that the estoppel exception applies in this

case, JG3 directs this court to Katz v. Katz, 6th Dist. Lucas No. L-17-1157, 2018-

Ohio-3210, asserting that it is a “thoroughly analogous situation.” Appellant’s reply

brief at 5. In Katz, there were two contractual agreements at issue: (1) a 2006

Operating Agreement of Mollie K Ltd., a limited liability company, that contained

an arbitration provision, and (2) a 2013 final judgment entry of divorce between

plaintiff-appellee and one of the defendants-appellants, under which the ex-

husband transferred his 25 percent interest in Mollie K to plaintiff, and plaintiff was

guaranteed to receive distributions from Mollie K for a period of ten years. Id. at

¶ 3-6.

                Plaintiff filed a complaint against her ex-husband and a limited

liability company formed by the ex-husband after the divorce to which Mollie K sold
its real estate holdings. Plaintiff asserted claims for breach of fiduciary duty and

fraud pertaining to her ex-husband’s dealings in forming the limited liability

company and transferring Mollie K’s real estate holdings to the limited liability

company following the parties’ divorce. Id. at ¶ 9. Although plaintiff did not sign

Mollie K’s operating agreement, defendants-appellants moved, in relevant part, to

stay proceedings and compel arbitration, arguing that plaintiff was a member of

Mollie K and bound by the operating agreement. Id. at ¶ 10. Plaintiff opposed the

motion to stay and compel arbitration, arguing that she was not a member of Mollie

K, she never signed an arbitration agreement, and that the rights she was seeking to

enforce arose from the final judgment entry of divorce rather than Mollie K’s

operating agreement. Id. at ¶ 11. The trial court denied the motion to stay and

compel arbitration, concluding that plaintiff’s claims “were not subject to arbitration

because they ‘are outside the scope of the arbitration clause,’ ‘have nothing to do

with a purported business relationship with Mollie K,’ and ‘could be maintained

without any reference to the Operating Agreement.’” Id. at ¶ 16. The trial court held

that plaintiff’s claims arose from the divorce settlement and the purchase agreement

under which her ex-husband’s limited liability company purchased Mollie K’s real

estate holdings, rather than Mollie K’s operating agreement. Id.

              On appeal, the Sixth District reversed the trial court’s judgment

denying defendants-appellants’ motion to stay and compel arbitration. The court

held that (1) plaintiff’s claims for breach of fiduciary duty, misappropriation, and

fraud “require reference to the operating agreement and, therefore, arise out of or
relate to that agreement,” and (2) under the theory of estoppel, plaintiff could not

avoid application of the operating agreement’s arbitration provision because

plaintiff “unquestionably benefitted from the operating agreement insofar as she

received distributions from Mollie K and exercised voting rights.” Id. at ¶ 29, 36.

              After reviewing the record, we find Katz, 6th Dist. Lucas No. L-17-

1157, 2018-Ohio-3210, to be distinguishable from the instant matter. Here, unlike

Katz, Zayicek did not receive distributions or exercise other rights, such as voting,

pursuant to JG3’s Operating Agreement.         Zayicek’s rights to cash payments,

accounting, and reporting arose from, and were governed by the Letter Agreement.

Accordingly, while Zayicek unquestionably benefitted from the Letter Agreement,

the same cannot be said about the Operating Agreement. Finally, as noted above,

JG3’s assertion that Zayicek, as a member of JG3, is bound by the Operating

Agreement is unsupported by the record. Accordingly, JG3’s reliance on Katz is

misplaced.

              “Arbitration agreements apply to nonsignatories only in rare

circumstances.” I Sports, 8th Dist. Cuyahoga No. 83349, 2004-Ohio-3113, at ¶ 14,

citing Westmoreland v. Sadoux, 299 F.3d 462, 465 (5th Cir.2002). Furthermore,

the party moving for arbitration has the burden of establishing the existence of an

enforceable arbitration agreement between it and the party against whom the

moving party seeks enforcement. Fifth Third Bank v. Senvisky, 8th Dist. Cuyahoga

Nos. 100030 and 100571, 2014-Ohio-1233, ¶ 11. In the instant matter, JG3 failed to

demonstrate that it is entitled to enforce the arbitration agreement in JG3’s
Operating Agreement against Zayicek, a nonsignatory to the agreement. See Miller,

8th Dist. Cuyahoga No. 107730, 2019-Ohio-2826, at ¶ 34.

              In the instant matter, Zayicek is seeking to enforce the Letter

Agreement, not the Operating Agreement. Zayicek made payments in the amount

of $1.15 million to JG3 pursuant to the terms of the Letter Agreement, not the

Operating Agreement.     The reporting obligations that Zayicek is alleging that

Gottlieb or JG3 breached are set forth in the Letter Agreement, not the Operating

Agreement.

             The payments Zayicek received from Gottlieb or JG3 in 2017 and 2018

(Quarters 1, 2, and 3), totaling $250,000, were made pursuant to the Letter

Agreement, not the Operating Agreement. The payments that Zayicek alleged that

he was entitled to, but did not receive (starting with the 2018 Quarter 4 payment

and the payments thereafter) were based on the terms set forth in the Letter

Agreement, not the Operating Agreement.

              For all of the foregoing reasons, the trial court did not err in denying

JG3’s motion to stay proceedings and compel arbitration. JG3’s assignments of

error are overruled.

              Judgment affirmed.

      It is ordered that appellee recover from appellants 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.

MARY J. BOYLE, ADMINISTRATIVE JUDGE

ANITA LASTER MAYS, J., and
EILEEN T. GALLAGHER, J., CONCUR