[Cite as Vaughn v. Paychex Ins. Agency, Inc., 2014-Ohio-42.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
RANDY VAUGHN, : APPEAL NO. C-130396
TRIAL NO. A-1204123
Plaintiff-Appellee, :
vs. :
O P I N I O N.
PAYCHEX INSURANCE AGENCY, :
INC.,
:
Defendant-Appellant.
:
Civil Appeal From: Hamilton County Court of Common Pleas
Judgment Appealed From Is: Reversed and Cause Remanded
Date of Judgment Entry on Appeal: January 10, 2014
Clements Taylor & Cohen, LPA, Co., Catharin R. Taylor, and Mackenzie M. Farmer, for
Plaintiff-Appellee,
Taft Stettinius & Hollister, LLP, Samuel M. Duran, and Beth A. Bryan, for Defendant-
Appellant.
Please note: this case has been removed from the accelerated calendar.
OHIO FIRST DISTRICT COURT OF APPEALS
S YLVIA S IEVE H ENDON , Presiding Judge.
{¶1} Defendant-appellant Paychex Insurance Agency, Inc., appeals the judgment
of the Hamilton County Common Pleas Court denying its motion to stay this action by
plaintiff-appellee Randy Vaughn, pending arbitration. Because nothing in the record
supports the trial court’s determination that the parties’ arbitration agreement was
unconscionable or otherwise unenforceable, we reverse the court’s judgment and remand
the matter for the trial court to issue a stay pending arbitration.
Relevant Background
{¶2} In May 2006, Vaughn was the sole owner of Vaughn Maintenance Services,
LLC, when he filed paperwork with the Ohio Bureau of Workers’ Compensation (“BWC”)
electing to have self-coverage under the workers’ compensation system. He signed a two-
page contract on behalf of the company entitled, “Paychex Ohio Workers’ Compensation
Payment Service Agreement.” Under the contract, Paychex agreed to remit premiums for
workers’ compensation coverage to the BWC.
{¶3} In August 2010, Vaughn suffered a work-related injury, and the BWC denied
him workers’ compensation benefits.
{¶4} In May 2012, Vaughn initiated this action against Paychex for breach of
contract and for negligence. Vaughn alleged that Paychex had breached the contract by
cancelling his workers’ compensation coverage without his knowledge and by failing to pay
the necessary workers’ compensation premiums. In his negligence claim, Vaughn alleged
that Paychex had breached its duty to him by breaching the contract. As a result of
Paychex’s conduct, he alleged, he was denied the right to participate in the Ohio workers’
compensation system for his 2010 injury.
2
OHIO FIRST DISTRICT COURT OF APPEALS
{¶5} In response, Paychex filed a motion to dismiss Vaughn’s complaint or to stay
the action pending arbitration. Paychex argued that Vaughn was bound by the contract’s
arbitration clause, which provided in pertinent part:
14. Governing Law and Arbitration. The Agreement shall be
governed by the laws of the State of New York. Except as provided
herein, any dispute arising out of, or in connection with, the
Agreement shall be determined by binding arbitration in Rochester,
New York, in accordance with the commercial rules of the American
Arbitration Association. * * * Client hereby waives any jurisdictional
defenses and submits to the exclusive jurisdiction of the New York
courts.
{¶6} The trial court heard arguments on Paychex’s motion, but it did not receive
any evidence at the hearing. Thereafter, on June 3, 2013, the court issued its decision
denying the motion upon its finding that the contract’s arbitration clause was
unconscionable. On June 26, 2013, Paychex filed a timely notice of appeal. Two days later,
Vaughn filed an affidavit in the trial court with respect to the contract negotiations.
Arbitration is Strongly Favored
{¶7} In three assignments of error, Paychex argues that the court erred by (1)
failing to find that the arbitration clause was valid and enforceable; (2) finding that the
clause was procedurally unconscionable; and (3) finding that the clause was substantively
unconscionable.
{¶8} In Ohio, arbitration is strongly favored as a means for resolving disputes. See
R.C. Chapter 2711; Hayes v. The Oakridge Home, 122 Ohio St.3d 63, 2009-Ohio-2054, 908
N.E.2d 408. This is reflected in R.C. 2711.01(A), which provides that an arbitration
agreement “shall be valid, irrevocable, and enforceable, except upon grounds that exist at
3
OHIO FIRST DISTRICT COURT OF APPEALS
law or in equity for the revocation of any contract.” Unconscionability is recognized as a
ground for revocation. Taylor Bldg. Corp. of Amer. v. Benfield, 117 Ohio St.3d 352, 2008-
Ohio-938, 884 N.E.2d 12, ¶ 32.
{¶9} A party asserting that an arbitration agreement is unconscionable must prove
that it is both procedurally and substantively unconscionable. Taylor at ¶ 33. A
determination of procedural unconscionability involves consideration of the circumstances
surrounding the parties’ negotiations, while a determination of substantive
unconscionability involves consideration of the reasonableness of the terms of the
agreement. See Taylor at ¶ 43; Hayes at ¶ 32. We review de novo a trial court’s
determination of whether an arbitration agreement is enforceable in light of alleged
unconscionability. Taylor at ¶ 37.
{¶10} In order to overcome the presumption of the validity of the arbitration
agreement in this case, Vaughn had the burden to demonstrate that it was both procedurally
and substantively unconscionable. Without a showing on both aspects, Vaughn’s challenge
to the validity of the agreement must fail.
No Evidence of Procedural Unconscionability
{¶11} At the hearing before the trial court, Vaughn presented no evidence of the
circumstances surrounding the parties’ contract negotiations. In finding that the arbitration
agreement was procedurally unconscionable, the trial court erroneously relied upon facts
not in the record. See Hayes at ¶ 25. Moreover, we cannot consider any assertions in the
affidavit that Vaughn filed well after the trial court’s judgment. Because Vaughn failed to
demonstrate the procedural unconscionability of the arbitration agreement, the trial court
erred by refusing to grant Paychex’s motion for a stay of proceedings pending arbitration.
Consequently, we sustain the first and second assignments of error. Given our disposition
of these assignments of error, the third assignment of error is moot.
4
OHIO FIRST DISTRICT COURT OF APPEALS
{¶12} We therefore reverse the trial court’s judgment and remand the cause to the
court with instructions to stay the proceedings pursuant to R.C. 2711.02.
Judgment reversed and cause remanded.
DINKELACKER and DEWINE, JJ., concur.
Please note:
The court has recorded its own entry on the date of the release of this opinion.
5