Court Opinion

ID: 4433945
Source: CourtListenerOpinion
Date Created: 2019-08-28 13:08:07.871209+00
Date Added: 2024-06-11T14:53:09.779801
License: Public Domain

[Cite as Slezak v. Slezak, 2019-Ohio-3467.]

STATE OF OHIO                     )                    IN THE COURT OF APPEALS
                                  )ss:                 NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT                  )

DR. FREDERICK A. SLEZAK, M.D., et al.                  C.A. No.     29102

        Appellees

        v.                                             APPEAL FROM JUDGMENT
                                                       ENTERED IN THE
ARNOLD G. SLEZAK                                       COURT OF COMMON PLEAS
                                                       COUNTY OF SUMMIT, OHIO
        Appellant                                      CASE No.   CV-2017-04-1680

                                 DECISION AND JOURNAL ENTRY

Dated: August 28, 2019

        CARR, Judge.

        {¶1}     Defendant-Appellant Arnold Slezak appeals from the judgment of the Summit

County Court of Common Pleas. This Court affirms in part, reverses in part, and remands the

matter for proceedings consistent with this opinion.

                                                 I.

        {¶2}     In 2014, siblings Arnold Slezak, Plaintiffs-Appellees Dr. Frederick Slezak, M.D.,

and Cynthia Slezak owned all of the shares of common stock of Plaintiff-Appellee RJS

Corporation. The Slezaks entered into a close corporation agreement. Arnold Slezak was an

officer, director, and also employee of RJS Corporation. The close corporation agreement

contained an arbitration provision.

        {¶3}     In November 2015, Dr. Slezak and Cynthia Slezak filed a demand for commercial

arbitration. They alleged claims for breach of fiduciary duty against Arnold Slezak, and Arnold
                                               2

Slezak asserted counterclaims for “breach arising out of [Arnold Slezak’s] departure from his

employment and his subsequent removal as an Officer and Director of RJS Corporation, Inc.”

       {¶4}   An arbitrator was appointed January 8, 2016. The arbitration hearing took place

March 1, 2016 through March 3, 2016. On May 24, 2016, the arbitrator issued a decision in

which she made the following findings:

       1) Respondent Arnold Slezak voluntarily resigned as an employee of RJS
       effective January 6, 2015;

       2) Respondent Arnold Slezak was properly terminated from his position as an
       Officer and Director of RJS for cause effective October 23, 2015;

       3) Respondent Arnold Slezak, due to his voluntary resignation as an employee of
       RJS and his subsequent termination from his positions as an Officer and Director
       of RJS for cause, must sell not less than all of the shares owned by Respondent to
       Claimants [Dr. and Cynthia Slezak] and/or the Corporation, pursuant to Section
       7(c) of the Close Corporation Agreement and at a value to be determined in
       accordance with Section 8 of that Agreement.

       4) Respondent and Claimant pursuant to Section 8(a)(i) of the Close Corporation
       Agreement shall attempt to execute an Agreed Value Certificate to the value of
       the Respondent’s shares to be sold to the Claimants and/or the Corporation within
       30 days of the Arbitrator’s final Order, the Claimants and Respondent shall
       adhere to the appraisal procedures for determining the value of Respondent’s
       shares, as outlined in Section 8(a)(ii) of the Close Corporation Agreement.
       Pursuant to the parties’ agreement, Respondent shall receive, in exchange for his
       shares, an amount equal to 100% of their value as reflected in either the Agreed
       Value Certificate or such other appraised value determined in accordance with
       Section 8(a)(ii) of the Close Corporation Agreement.

       5) The administrative filing fees of the American Arbitration Association (“the
       Association”) totaling $10,400.00 and the compensation of the Arbitrator shall be
       borne equally by the parties. Therefore, Respondent shall reimburse Claimants
       the sum of $550.00 for that portion of its share of administrative filing fees
       previously incurred by Claimant.

       6) This award is in full settlement of all claims and counterclaims submitted to
       this arbitration. All claims not expressly granted herein are hereby, denied.

       {¶5}   When the Slezaks could not agree on a value of Arnold Slezak’s shares, the

appraisal process was begun.      The close corporation agreement provided that first RJS
                                                 3

Corporation’s outside certified public accountant would appraise the fair market value of RJS

Corporation and provide an analysis as to the value of one share. The selling shareholder would

then have the opportunity to dispute the valuation, and provide his or her own appraisal. If the

difference between the values was less than 10%, then the mean of the two values would become

the final value. If the difference was more than 10%, then the two appraisers would select a third

appraiser who would choose one of the two original values, which would become the final and

binding value.

       {¶6}      Here, Arnold Slezak did dispute the value determined by the accountant from RJS

Corporation and had his own appraisal done. That value was significantly higher than that of the

corporation’s accountant. As the difference between the two values was more than 10%, a third

appraiser was chosen and that appraiser chose the value the corporation’s accountant used. That

final appraisal was completed on November 9, 2016.

       {¶7}      Thereafter, RJS Corporation issued a promissory note and began sending monthly

checks to Arnold Slezak. Arnold Slezak refused to accept or cash the payments.

       {¶8}      On April 26, 2017, Dr. Slezak, Cynthia Slezak, and RJS Corporation filed a

“Combined Application to Confirm Arbitration Award and Complaint for Declaratory Judgment

and Mandatory Injunction” in the trial court. Therein, they sought to have the award confirmed,

to have various declarations issued, and for the trial court to issue an injunction requiring Arnold

Slezak to accept the payments made by RJS Corporation as provided by the promissory note. As

to the declarations, Dr. Slezak, Cynthia Slezak, and RJS Corporation requested that the trial court

declare that Arnold Slezak voluntarily agreed to adhere to the arbitration award, agreed to

engage in the valuation process in the close corporation agreement, did engage in the process

without objection, and permitted his shares to be transferred to RJS Corporation.
                                                4

       {¶9}     On June 29, 2017, Arnold Slezak filed an answer and counterclaims for breach of

fiduciary duty and declaratory judgment. He alleged that Dr. and Cynthia Slezak and RJS

Corporation breached their fiduciary duty by providing the third appraiser with “selective and

misleading information” and by excluding Arnold Slezak from the valuation process. Arnold

Slezak sought declarations that the arbitration award should not be confirmed, the appraisal

process was not impartial, the failure to confirm the award prior to the valuation process

rendered the valuation process void, the original valuation was not binding because it used a

valuation date prior to the date of the award, Arnold Slezak was entitled to valuation based on

complete and accurate information, he was entitled to information concerning the valuation

process, and the refusal to allow him to exercise his shareholders rights after October 23, 2015

was contrary to law.

       {¶10} That same day, Arnold Slezak also filed a motion to vacate the arbitration award.

Inter alia, he asserted that the arbitrator lacked subject matter jurisdiction because the close

corporation agreement provided that the arbitrations had to commence within 30 days of the

appointment of the arbitrator and it did not.

       {¶11} Arnold Slezak filed a motion for partial summary judgment and Dr. and Cynthia

Slezak and RJS Corporation filed a motion for summary judgment.

       {¶12} A non-evidentiary hearing was held before a magistrate.           The matter was

supposed to be limited to the application to confirm the award and the motion to vacate the

award; however, some argument concerning the valuation was allowed. The magistrate issued a

decision granting the application to confirm the award, denying the motion to vacate the award

as untimely, and ordering Arnold Slezak to sell his shares at the value determined by the third

appraiser.    Arnold Slezak filed objections to the magistrate’s decision including that the
                                                 5

magistrate erred in failing to hold a full evidentiary hearing when it not only ruled on the

application to confirm but also decided the value of the stock, erred in finding that the valuation

process was part of the award, erred in ordering Arnold Slezak to sell his shares at the value

specified by the third appraiser, erred in concluding the motion to vacate was untimely, and erred

in determining that he waived his objection to the arbitrator’s alleged lack of subject matter

jurisdiction.

        {¶13} The trial court overruled the objections and adopted the magistrate’s decision in

its entirety. It concluded that the application to confirm the arbitration award was timely and the

motion to vacate the award was untimely. The trial court granted the application to confirm the

award and denied the motion to vacate. The trial court ordered Arnold Slezak to sell his shares

at the value determined by the third appraiser. The trial court then dismissed the counts of the

complaint and counterclaim.

        {¶14} Arnold Slezak has raised four assignments of error for our review, which will be

discussed out of sequence to facilitate our analysis.

                                                 II.

                                  General Standard of Review

        {¶15} “[W]e generally review a trial court’s action on a magistrate’s decision for an

abuse of discretion, but do so with reference to the nature of the underlying matter.” (Internal

quotations and citations omitted.) Harrison v. Lewis, 9th Dist. Summit No. 28114, 2017-Ohio-

275, ¶ 40. “When reviewing a trial court’s decision to confirm, modify, vacate, or correct an

arbitration award, an appellate court should accept findings of fact that are not clearly erroneous

but should review questions of law de novo.” Portage Cty. Bd. of Dev. Disabilities v. Portage

Cty. Educator’s Assn. for Dev. Disabilities, 153 Ohio St. 3d 219, 2018-Ohio-1590, ¶ 2.
                                                 6

                                ASSIGNMENT OF ERROR IV

       THE TRIAL COURT ERRED IN FINDING APPELLANT’S MOTION TO
       VACATE THE AWARD WAS UNTIMELY AND THAT APPELLANT
       WAIVED HIS RIGHT TO OBJECT TO THE ARBITRATOR’S LACK OF
       SUBJECT MATTER JURISDICTION.

       {¶16} Arnold Slezak argues in his fourth assignment of error that the trial court erred in

concluding that his motion to vacate was untimely because the arbitrator lacked subject matter

jurisdiction. He argues that the arbitrator lacked subject matter jurisdiction because the arbitrator

failed to hold the hearing in the timeframe stated in the arbitration clause. It is undisputed that

the arbitrator did not hold the hearing in the timeframe provided for in the arbitration clause;

however, there was evidence in the record that the parties, through counsel, agreed to at least

some extension of the time period, and there is nothing that suggests Arnold Slezak objected to

the delay in holding the arbitration hearing. Nonetheless, due to this alleged lack of subject

matter jurisdiction of the arbitrator, Arnold Slezak contends that the timing requirement

contained in R.C. 2711.13 was inapplicable. Arnold Slezak does not dispute that his motion to

vacate was filed outside the time period provided in the statute.

       {¶17} “R.C. Chapter 2711 provides the exclusive statutory remedy which parties must

use in appealing arbitration awards to the courts of common pleas.” Galion v. Am. Fedn. Of

State, Cty. & Mun. Emp., Ohio Council 8, AFL-CIO, Local 2243, 71 Ohio St. 3d 620, 623 (1995).

“R.C. 2711.10 and 2711.11 clearly establish the circumstances where a party may appeal to the

common pleas court to vacate, modify, or correct an arbitration award.” Id. at 622. With respect

to a motion to vacate, those circumstances include when “[t]he arbitrators exceeded their powers,

or so imperfectly executed them that a mutual, final, and definite award upon the subject matter

submitted was not made.” R.C. 2711.10(D). “The essential function of paragraph (D) is to

ensure that the parties get what they bargained for by keeping the arbitrator within the bounds of
                                                     7

the authority they gave h[er].” Piqua v. Fraternal Order of Police, 185 Ohio App. 3d 496, 2009-

Ohio-6591, ¶ 21 (2d Dist.). Arguably, Arnold Slezak’s specific claim that the arbitrator lacked

subject matter jurisdiction is in essence an argument that the arbitrator “exceeded [her] powers.”

R.C. 2711.10(D); see also Summit Cty. Children’s Serv. Bd. v. Local No. 4546, Communications

Workers of Am., 9th Dist. Summit No. 21184, 2003-Ohio-726, ¶ 3-22 (considering whether the

arbitrator lacked subject matter jurisdiction as whether the arbitrator violated R.C. 2711.10(D)).

        {¶18} “In order to vacate, modify, or correct an award, a party may file an action in the

common pleas court pursuant to R.C. 2711.13.” Galion at 622. R.C. 2711.13 provides that

“[n]otice of a motion to vacate, modify, or correct an award must be served upon the adverse

party or his attorney within three months after the award is delivered to the parties in interest, as

prescribed by law for service of notice of a motion in an action.” “If the General Assembly did

not intend for the statute of limitations in R.C. 2711.13 to apply [to motions brought pursuant to

R.C. 2711.10 and 2711.11], it would have expressly excluded R.C. 2711.10 and 2711.11 from

[R.C. 2711.13].” Galion at 622. Therefore, “R.C. 2711.13 provides a three-month period within

which a party must file a motion to vacate, modify, or correct an arbitration award under R.C.

2711.10 or 2711.11.” (Emphasis added.) Id. at paragraph one of the syllabus. “If an application

is filed after this period, the trial court lacks jurisdiction.” Id. at 622.

        {¶19} Given the foregoing, including the particular facts of this case, Arnold Slezak has

not convinced us that his argument would allow him to avoid the application of the time period

set forth in R.C. 2711.13. In fact, his argument and the surrounding facts fit neatly into the

situations contemplated by R.C. 2711.10(D) and, thereby the time limit in R.C. 2711.13. See

Galion at 622. Arnold Slezak has not pointed to any Ohio Supreme Court case adopting his

position. Nor has he explained why the language in R.C. 2711.10(D) would not be applicable to
                                                 8

this situation. See App.R. 16(A)(7). Instead, he points to cases from other districts that are not

binding authority that we believe are either distinguishable or not compelling.

       {¶20} Arnold Slezak has not demonstrated that the trial court erred in concluding that

his motion to vacate the arbitration award was untimely. His fourth assignment of error is

overruled.

                                 ASSIGNMENT OF ERROR I

       THE TRIAL COURT ERRED IN FINDING THAT OHIO REVISED CODE
       CHAPTER 2711 APPLIES TO APPELLEES’ COMPLAINT FOR
       DECLARATORY JUDGMENT AND APPELLANT’S COUNTERCLAIM.

       {¶21} Arnold Slezak essentially argues in his first assignment of error that the trial court

erred in determining that confirming the arbitration award required the trial court to order Arnold

Slezak to sell his shares at the value determined by the third appraiser and also required the trial

court to dismiss the complaint and counterclaims.

       {¶22} It is true that, “[w]hen a motion is made pursuant to R.C. 2711.09 to confirm an

arbitration award, the court must grant the motion if it is timely, unless a timely motion for

modification or vacation has been made and cause to modify or vacate is shown.” Warren Edn.

Assn. v. Warren City Bd. of Edn., 18 Ohio St. 3d 170 (1985), paragraph one of the syllabus; see

also State ex rel. R.W. Sidley, Inc. v. Crawford, 100 Ohio St. 3d 113, 2003-Ohio-5101, ¶ 22.

There also appears to be no dispute that Dr. and Cynthia Slezak and RJS Corporation timely

moved to confirm the arbitration award. Further, given our resolution of Arnold Slezak’s fourth

assignment of error, it is clear that the trial court was bound to confirm the award. See id.

Instead, much of the dispute concerns what exactly confirming the award resolved.

       {¶23} Here, the trial court confirmed the arbitration award; however, it also appears that

the trial court believed that doing so required it to confirm the value of the shares, which was
                                                9

determined subsequent to the arbitration proceedings.        The arbitrator made the following

findings:

        1) Respondent Arnold Slezak voluntarily resigned as an employee of RJS
       effective January 6, 2015;

       2) Respondent Arnold Slezak was properly terminated from his position as an
       Officer and Director of RJS for cause effective October 23, 2015;

       3) Respondent Arnold Slezak, due to his voluntary resignation as an employee of
       RJS and his subsequent termination from his positions as an Officer and Director
       of RJS for cause, must sell not less than all of the shares owned by Respondent to
       Claimants [Dr. and Cynthia Slezak] and/or the Corporation, pursuant to Section
       7(c) of the Close Corporation Agreement and at a value to be determined in
       accordance with Section 8 of that Agreement.

       4) Respondent and Claimant pursuant to Section 8(a)(i) of the Close Corporation
       Agreement shall attempt to execute an Agreed Value Certificate to the value of
       the Respondent’s shares to be sold to the Claimants and/or the Corporation within
       30 days of the Arbitrator’s final Order, the Claimants and Respondent shall
       adhere to the appraisal procedures for determining the value of Respondent’s
       shares, as outlined in Section 8(a)(ii) of the Close Corporation Agreement.
       Pursuant to the parties’ agreement, Respondent shall receive, in exchange for his
       shares, an amount equal to 100% of their value as reflected in either the Agreed
       Value Certificate or such other appraised value determined in accordance with
       Section 8(a)(ii) of the Close Corporation Agreement.

       5) The administrative filing fees of the American Arbitration Association (“the
       Association”) totaling $10,400.00 and the compensation of the Arbitrator shall be
       borne equally by the parties. Therefore, Respondent shall reimburse Claimants
       the sum of $550.00 for that portion of its share of administrative filing fees
       previously incurred by Claimant.

       6) This award is in full settlement of all claims and counterclaims submitted to
       this arbitration. All claims not expressly granted herein are hereby, denied.

       {¶24} Thus, the arbitrator did not determine the value of Arnold Slezak’s shares.

Instead, the arbitrator ordered the parties to engage in a process by which the value of the shares

would be determined in the future. Accordingly, confirming the arbitration award and entering

judgment thereon would not determine the value of the shares. See Accu-Med Servs., Ltd. v.

Omnicare, 1st Dist. Hamilton No. C-020789, 2004-Ohio-655, ¶ 24-28. Therefore, while the trial
                                                 10

court did not err in confirming the arbitration award and entering judgment thereon, it was

mistaken as to the breadth of what the arbitrator actually decided.

         {¶25} Because the trial court ordered Arnold Slezak to sell his shares at the value

determined by the third appraiser and dismissed the complaint and counterclaims solely because

it confirmed the arbitration award and thereafter entered judgment, we agree that the trial court

erred. Confirming the arbitration award and denying the motion to vacate did not inherently

render the complaint and counterclaims moot, as they at least, in part, addressed issues that

occurred subsequent to the arbitration award, nor did it require that the trial court order Arnold

Slezak to sell his shares at the value chosen by the third appraiser.

         {¶26} Notably, the parties filed motions for summary judgment addressing the

complaint and counterclaims. The merits of those issues were never considered by the trial court

as the trial court dismissed the claims and counterclaims and concluded that the remaining

pending motions were moot, including Dr. and Cynthia Slezak’s and RJS Corporation’s

alternative motion to stay the proceeding pending arbitration.

         {¶27} Arnold Slezak’s first assignment of error is sustained to the extent discussed

above.

                                 ASSIGNMENT OF ERROR II

         THE TRIAL COURT ERRED BY FAILING TO HOLD A FULL
         EVIDENTIARY HEARING.

         {¶28} Arnold Slezak argues in his second assignment of error that the trial court erred in

failing to hold a full evidentiary hearing. First, we note that Arnold Slezak’s argument appears

to be that the trial court’s error discussed in the first assignment of error essentially deprived him

of review of the merits of his counterclaims and due process. To the extent that is the case,

Arnold Slezak’s current argument is moot.
                                                 11

       {¶29} To the extent Arnold Slezak argues that the trial court was required to hold an

evidentiary hearing on the application to confirm and motion to vacate the arbitration award, we

disagree. This Court in the past has concluded that, in situations such as this, where both an

untimely motion to vacate is filed along with a timely application to confirm, failing to hold any

hearing on the motions is not reversible error. Falkowski v. Strategic Merchandising, Inc., 9th

Dist. Lorain No. 99CA007610, 2000 WL 1752240, *2 (Nov. 22, 2000). Accordingly, given that

precedent, Arnold Slezak has not convinced us that a full evidentiary hearing is warranted under

the circumstances.

       {¶30} Arnold Slezak’s second assignment of error is overruled.

                                ASSIGNMENT OF ERROR III

       THE TRIAL COURT ERRED IN FINDING THAT APPELLANT IS
       REQUIRED TO SELL HIS SHARES AT A VALUE OF $66,863.00 PER
       SHARE.

       {¶31} Arnold Slezak argues in his third assignment of error that the trial court erred by

requiring him to sell his shares at the value determined by the third appraiser because the

valuation process that occurred was improper and violated the provisions of the close corporation

agreement. To the extent he argues that the trial court erred in ordering him to sell his shares at

the value specified, we sustain his argument for the reasons, and to the extent, discussed in his

first assignment of error. However, to the extent that he argues the valuation process was

improper, the trial court has yet to consider the merits of that argument. Accordingly, it would

be premature for this Court to address this issue.

       {¶32} Arnold’s Slezak’s third assignment of error is sustained in part. The remainder of

the assignment of error is premature.
                                                12

                                                III.

       {¶33} Arnold Slezak’s first assignment of error is sustained to the extent discussed

above. His second and fourth assignments of error are overruled. His third assignment of error

is sustained in part. However, because a portion of his third assignment of error is premature, we

decline to address it. The judgment of the Summit County Court of Common Pleas is affirmed

in part, reversed in part, and the matter is remanded for proceedings consistent with this decision.

                                                                        Judgment affirmed in part,
                                                                                 reversed in part,
                                                                             and cause remanded.

       There were reasonable grounds for this appeal.

       We order that a special mandate issue out of this Court, directing the Court of Common

Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy

of this journal entry shall constitute the mandate, pursuant to App.R. 27.

       Immediately upon the filing hereof, this document shall constitute the journal entry of

judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the

period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is

instructed to mail a notice of entry of this judgment to the parties and to make a notation of the

mailing in the docket, pursuant to App.R. 30.

       Costs taxed equally to both parties.

                                                       DONNA J. CARR
                                                       FOR THE COURT
                                     13

TEODOSIO, P. J.
CALLAHAN, J.
CONCUR.

APPEARANCES:

ROBERT D. KEHOE, KEVIN P. SHANNON, and LAUREN N. ORRICO, Attorneys at Law,
for Appellant.

RONALD S. KOPP, STEPHEN W. FUNK, and JESSICA A. LOPEZ, Attorneys at Law, for
Appellees.