Caskey v. Sanford-Brown College

[Cite as Caskey v. Sanford-Brown College, 2012-Ohio-1543.]

Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINION
No. 97261

JON McCASKEY
PLAINTIFF-APPELLANT

vs.

SANFORD-BROWN COLLEGE, ET AL.
DEFENDANTS-APPELLEES

JUDGMENT:
AFFIRMED

Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-743061

BEFORE: Celebrezze, J., Boyle, P.J., and Jones, J.

RELEASED AND JOURNALIZED: April 5, 2012
ATTORNEY FOR APPELLANT

L. Bryan Carr
The Carr Law Firm
1392 SOM Center Road
Mayfield Heights, Ohio 44124

ATTORNEYS FOR APPELLEES

Maureen P. Tracey
Elizabeth A. Davis
David J. Tocco
Vorys, Sater, Seymour & Pease, L.L.P.
1375 East Ninth Street
2100 One Cleveland Center
Cleveland, Ohio 44114-1724
FRANK D. CELEBREZZE, JR., J.:

{¶1} Plaintiff-appellant, Jon McCaskey, a graduate of Sanford-Brown College

(“Sanford-Brown”), seeks reversal of a trial court order staying his case against

Sanford-Brown and one of its employees, Kimberly Cole, pending arbitration. He argues

that the arbitration provision is a nullity, unconscionable, and inapplicable. After a

thorough review of the record and law, we affirm the trial court’s order staying the case

pending arbitration.

I. Factual and Procedural History

{¶2} In 2009, McCaskey wished to enroll in a cardiovascular sonography program

at Sanford-Brown. He executed an “Enrollment Agreement” setting forth the costs of

tuition, the length of the program, the applicable fees, and the date the program was to

commence. The agreement also contained several contract provisions, including

cancellation and discrimination policies and a lengthy arbitration provision.

{¶3} In March 2010, McCaskey was close to completion of the program and doing

very well academically. He applied for externships with the Cleveland Clinic

Foundation and University Hospitals. After scheduling interviews, McCaskey caused his

academic transcripts to be sent to these hospitals from Sanford-Brown. The materials

Sanford-Brown delivered indicated McCaskey had failed his final exams and been

expelled from the program. In fact, McCaskey’s grade point average was excellent, and

he graduated from the program in September 2010.
 {¶4} McCaskey asserts that because of Sanford-Brown’s false statements, he was

not given an opportunity to interview with these hospitals or otherwise obtain an

externship.

{¶5} McCaskey filed suit against Sanford-Brown and Cole, who is alleged to have

sent the information to the hospitals. Before filing an answer, Sanford-Brown moved to

stay the proceedings pending arbitration. After extensive briefing and hearing, the trial

court granted Sanford-Brown’s motion and stayed the case. McCaskey appealed that

order to this court assigning a single error.

II. Law and Analysis

A. Enforcement of an Arbitration Provision

{¶6} McCaskey’s sole assignment of error states: “The trial court erred in

granting appellees’ motion to stay and in ordering the case to arbitration.” McCaskey

advances a tripartite attack on this decision, arguing the trial court lacked the ability to

stay the case, the provision is a legal nullity, and the provision is unenforceable by

Sanford-Brown or Cole.

i. Standard of Review

{¶7} The standard of review applicable to this case is in dispute and may depend

on the type of questions raised challenging the applicability of the arbitration provision.

This court has variable holdings in the area, but the most recent pronouncement indicates

that “[w]hen addressing whether a trial court has properly granted a motion to stay

litigation pending arbitration, this court applies an abuse of discretion standard.” U.S.

Bank, N.A. v. Wilkens, 8th Dist. No. 96617, 2012-Ohio-263, ¶ 13. However, that
standard applies in only very limited situations, such as a determination that a party has

waived its right to arbitrate a given dispute. See Milling Away, L.L.C. v. UGP

Properties, L.L.C.,

8th Dist. No. 95751, 2011-Ohio-1103, ¶ 8. A de novo standard applies to questions of

whether a party has agreed to submit an issue to arbitration. Shumaker v. Saks Inc., 163

Ohio App.3d 173, 2005-Ohio-4391, 837 N.E.2d 393 (8th Dist.), citing Vanyo v. Clear

Channel Worldwide, 156 Ohio App.3d 706, 2004-Ohio-1793, 808 N.E.2d 482 (8th Dist.).

{¶8} Likewise, the Ohio Supreme Court has articulated that a de novo standard of

review applies when arguing the unconscionability of an arbitration clause. Taylor Bldg.

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

“[w]hen a trial court makes factual findings * * * supporting its determination that a

contract is or is not unconscionable, such as any findings regarding the circumstances

surrounding the making of the contract, those factual findings should be reviewed with

great deference.” Id. at ¶ 38.

{¶9} When determining whether a specific issue is encompassed by an arbitration

provision, a mixed question of law and fact arises. But this court has cogently addressed

the proper standard that applies to a motion to stay pending arbitration and addressed the

apparently disparate holding of the Eighth District on this topic. N. Park Retirement

Community Ctr., Inc. v. Sovran Cos., Ltd., 8th Dist. No. 96376, 2011-Ohio-5179. The

Sovran panel found that the language of R.C. 2711.02(B) created a mandatory duty to

stay the proceedings, leaving no discretion for the trial court upon being satisfied that the

matter was subject to arbitration. The court reasoned, “[t]he abuse of discretion standard
of review has no application in the context of the court deciding to stay proceedings

pending the outcome of arbitration because a stay in such circumstances is mandatory, not

discretionary.” Id. at ¶ 7. Therefore, we apply a de novo standard of review to

questions of unconscionability and whether an issue is encompassed by a given arbitration

clause.

ii. Authority to Issue a Stay Pending Arbitration

{¶10} McCaskey first argues the trial court does not have authority to compel

arbitration because Sanford-Brown did not file a motion to compel, only a motion to stay

pending arbitration. However, the trial court’s order states, “motion to stay pending

arbitration is granted. Case is hereby stayed pending completion of arbitration as

ordered.” The effect of the court’s order was to send the case to arbitration, but the order

did not specifically compel arbitration.

{¶11} Where a party moves for a stay pending arbitration, pursuant to R.C.

2711.02(B), the court “shall * * * 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 proceeding with arbitration.”

{¶12} For support, McCaskey points to Drake v. Barclay’s Bank Delaware, Inc.,

8th Dist. No. 96451, 2011-Ohio-5275, ¶ 6. But in Drake, this court overruled an

argument that the trial court must hold a hearing on a motion to stay pending arbitration

where no motion to compel arbitration was pending. While a motion to compel

arbitration requires a hearing according to R.C. 2711.03, one is not required under R.C.

2711.02. Even if it were, the trial court did hold an oral hearing on the motion to stay to
ensure that the matter was subject to arbitration. Therefore, the trial court had the ability

to stay the case.

iii. Applicability to Contracting Parties and Employees

{¶13} McCaskey argues that Sanford-Brown is not a business entity capable of

entering into contracts because its corporate registration was cancelled in 2006.

Therefore, he claims, it could not enforce the arbitration provision. Appellant points to

R.C. 1701.88, dealing with the winding up of corporate business after dissolution, to

assert that Sanford-Brown had no authority to enter into contracts, and therefore, the

arbitration clause is not binding.

{¶14} The corporate entity “Sanford-Brown College, Inc.,” did have its articles

cancelled by the Ohio secretary of state in 2006, but that is not the name of the

contracting party in this case. The contract was executed by “Sanford-Brown College,”

an alternate business name properly registered with the secretary of state for Ultrasound

Technical Services, Inc. (“UTSI”) since 2008.

{¶15} Sanford-Brown, a Delaware corporation, had the ability to enter into

contracts under 8 Del.C. 122(13), similar to R.C. 1701.13(F)(2). Further, people may

adopt any fictitious name they choose so long as it is not done with fraudulent purpose or

against public policy. In re Wurgler, 136 Ohio Misc.2d 1, 2005-Ohio-7139, 844

N.E.2d 919 (P.C.). This right has long been extended to corporations in Ohio. 1932

Ohio Atty.Gen.Ops. No. 1294; see also R.C. 1329.01(A)(3) (the definition of “person”

includes corporations).
 {¶16} There is a statute that arguably may prevent Sanford-Brown from enforcing

the arbitration provision. R.C. 1329.10(B) provides:

No person doing business under a trade name or fictitious name shall
commence or maintain an action in the trade name or fictitious name in any
court in this state or on account of any contracts made or transactions had in
the trade name or fictitious name until it has first complied with section
1329.01 of the Revised Code * * * but upon compliance, such an action
may be commenced or maintained on any contracts and transactions entered
into prior to compliance.

{¶17} Even if Sanford-Brown’s trade name was not registered, the contract is still

legally binding on the parties. Baldwin Realty Co. v. Smith, 23 Ohio N.P. (N.S.) 489, 31

Ohio Dec. 527, 1920 WL 601 (1920). Sanford-Brown would just be barred from

enforcing the contract through Ohio courts until it registered the name with the secretary

of state pursuant to R.C. 1329.10(B). See Cheliotis v. Gould, 2d Dist. No. 14471, 1994

WL 701963, *4-5 (Dec. 14, 1994). Because the name was registered and Sanford-Brown

is not attempting to commence or maintain suit, the statute has no application here.

{¶18} McCaskey also argues that Cole cannot hide behind an arbitration provision

because she was not a party named in the contract. Generally, non-signatories to a

contract are not subject to its provisions. “Nonetheless, in some circumstances

non-signatories to contracts can be contractually bound by ordinary contract and agency

principles.” Sovran, 2011-Ohio-5179, ¶ 17, citing Short v. Resource Title Agency, Inc.,

8th Dist. No. 95839, 2011-Ohio-1577, ¶ 14.

{¶19} Here, Cole is an employee of Sanford-Brown acting within her capacity as

an employee when sending transcript information to potential employers of

Sanford-Brown students. The arbitration provision also encompasses any dispute
involving “any act or omission regarding the Student’s relationship with [Sanford-Brown,

or] its employees * * *.”

{¶20} This provision clearly encompasses disputes between signatories and

employees acting as employees of Sanford-Brown, including Cole. The Enrollment

Agreement specifically mentioned employees of Sanford-Brown, and agency principles

also allow Cole to make use of the provision.

{¶21} McCaskey also argues that the provision does not encompass the type of

dispute involved in this case. However, the provision is very broad and applies to “[a]ny

disputes, claims or controversies * * * arising out of or relating to * * * career service

assistance” by Sanford-Brown. This distinguishes the present case from Drake,

2011-Ohio-5275, and Shumaker, 2005-Ohio-4391. In those two cases, this court held

that the dispute did not relate to the contract provisions provided in the applicable

agreements. The clause in this case specifically includes disputes about “career service

assistance.” Therefore, the arbitration clause applies to the case unless the agreement is

otherwise unenforceable as discussed below.

iv. Unconscionability

{¶22} McCaskey also argues that the trial court erred in granting the motion to stay

because the arbitration clause is both procedurally and substantively unconscionable.

{¶23} In Ohio, arbitration is favored as a more expedient and cost effective means

of resolving disputes, and any doubts in the applicability of a given provision should be

resolved in favor of arbitration. Hayes v. Oakridge Home, 122 Ohio St.3d 63,

2009-Ohio-2054, 908 N.E.2d 408, ¶ 15. However, reasons in law or equity may exist to
preclude binding a party to arbitrate a dispute. Unconscionability is such a reason. Id.

at ¶ 19.

Unconscionability includes both “‘an absence of meaningful choice on the
part of one of the parties together with contract terms which are
unreasonably favorable to the other party.’” The party asserting
unconscionability of a contract bears the burden of proving that the
agreement is both procedurally and substantively unconscionable. (Internal
citations omitted.) Taylor, 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d
12, at ¶ 34.

a. Procedural Unconscionability

{¶24} According to the case law in Ohio, unconscionability comes in two flavors

— procedural and substantive.

Procedural unconscionability examines the bargaining process and may
include factors such as the ‘“age, education, intelligence, business acumen
and experience, * * * who drafted the contract, * * * whether alterations in
the printed terms were possible, [and] whether there were alternative
sources of supply for the goods in question.”’ Id. at ¶ 44, quoting Collins v.
Click Camera & Video, Inc., 86 Ohio App.3d 826, 834, 621 N.E.2d 1294
(2d Dist.1993), quoting Johnson v. Mobil Oil Corp., 415 F.Supp. 264, 268
(E.D.Mich.1976).

{¶25} To support a claim of procedural unconscionability, McCaskey claims he

was a young student with little business acumen, unfamiliar with arbitration provisions,

rushed when given the contract with inadequate time to read and understand the

document, and Sanford-Brown was in a better bargaining position. It should be noted

that it is McCaskey’s burden to show, based on evidence in the record, that the arbitration

provision is procedurally unconscionable. Hayes, 122 Ohio St.3d 63, 2009-Ohio-2054,

908 N.E.2d 408, at ¶ 27.

{¶26} What we know from the record is that McCaskey is a bright, young

individual capable of achieving excellent academic success at a post-secondary level.
There is no evidence that he was prevented from reading the contract before signing or

that he is incapable of understanding the document based on a mental or physical

impairment. The Enrollment Agreement is not some voluminous tome, but consists of

two oversized pages. The print on the second page containing the arbitration clause is

small, but not exceedingly so. Also, directly above the signature line in bold type is the

advisement that “THIS CONTRACT CONTAINS A BINDING ARBITRATION

PROVISION WHICH MAY BE ENFORCEABLE BY THE PARTIES.”

{¶27} McCaskey also insists the contract is one of adhesion, and, as such, it should

be viewed with scepticism with any doubts resolved in his favor. A “contract of

adhesion” is “a standardized form contract prepared by one party, and offered to the

weaker party, usually a consumer, who has no realistic choice as to the contract terms.”

Taylor, 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, at ¶ 49, citing Black’s Law

Dictionary 342 (8th Ed.2004). These take-it-or-leave-it contracts have significantly

grown in frequency in modern society. However, the fact that McCaskey claims he

could not alter the terms of the agreement does not mean the terms are unenforceable.

There is no evidence that McCaskey attempted to alter any terms. Also, there is no

evidence of oppressive or fraudulent intent as there was in Williams v. Aetna Fin. Co., 83

Ohio St.3d 464, 700 N.E.2d 859 (1998).

{¶28} An important consideration is “whether ‘each party to the contract,

considering his obvious education or lack of it, [had] a reasonable opportunity to

understand the terms of the contract, or were the important terms hidden in a maze of fine

print * * *?’” Blackburn v. Ronald Kluchin Architects, Inc., 8th Dist. No. 89203,
2007-Ohio-6647, ¶ 29, quoting Vanyo v. Clear Channel Worldwide, 156 Ohio App.3d

706, 2004-Ohio-1793, 808 N.E.2d 482 (8th Dist.), ¶ 18, citing Ohio Univ. Bd. of Trustees

v. Smith, 132 Ohio App.3d 211, 724 N.E.2d 1155 (4th Dist.1999). Here, McCaskey was

objectively capable of understanding the provisions included in a two-page contract.

There are no allegations that an infirmity or incapacity impacted McCaskey’s ability to

understand the Enrollment Agreement’s provisions.

{¶29} McCaskey had the opportunity to read the agreement, and the above-quoted

advisement put him on notice that an arbitration provision was contained in the

agreement. There is simply no evidence that the bargaining process was so oppressive as

to remove meaningful choice. This is in contrast to the process used in Rude v. NUCO

Edn. Corp., 9th Dist. No. 25549, 2011-Ohio- 6789. There was evidence in that case

that a great deal of pressure was applied to get prospective students to sign a contract by

the end of a meeting with school personnel or risk losing a seat in the program. Id. at ¶

14. No similar evidence was put forth by McCaskey. McCaskey had two months before

classes began during which he could have taken the time to read and understand the terms

in the Enrollment Agreement. His affidavit is devoid of any evidence that he was told he

could be denied admission to the program if he wanted to take time to read the contract or

have it reviewed by counsel.

b. Substantive Unconscionability

{¶30} “An assessment of whether a contract is substantively unconscionable

involves consideration of the terms of the agreement and whether they are commercially

reasonable.” Hayes at ¶ 33, citing John R. Davis Trust 8/12/05 v. Beggs, 10th Dist. No.
08AP-432, 2008-Ohio-6311, ¶ 13; Dorsey v. Contemporary Obstetrics & Gynecology,

Inc., 113 Ohio App.3d 75, 80, 680 N.E.2d 240 (2d Dist.1996). Further, factors to

consider include, but are not limited to:

[T]he fairness of the terms, the charge for the service rendered, the standard
in the industry, and the ability to accurately predict the extent of future
liability. No bright-line set of factors for determining substantive
unconscionability * * *. The factors to be considered vary with the content
of the agreement at issue. Id.

{¶31} McCaskey spends time arguing the unconscionability of a financing

provision of the Enrollment Agreement, but the Ohio Supreme Court has held that a party

opposing arbitration must show that the arbitration provision, not the contract as a whole,

is substantively unconscionable.

[W]hen a party challenges an arbitration provision as unconscionable
pursuant to R.C. 2711.01(A), the party must show that the arbitration clause
itself is unconscionable. If the court determines that the arbitration clause is
enforceable, claims of unconscionability that relate to the contract
generally, rather than the arbitration clause specifically, are properly left to
the arbitrator in the first instance. Taylor, 117 Ohio St.3d 352,
2008-Ohio-938, 884 N.E.2d 12, at ¶ 42.

{¶32} McCaskey also argues that the arbitration clause is substantively

unconscionable because it does not disclose the costs of arbitration, which, he asserts, are

higher than judicial proceedings. However, this argument was considered in Taylor

where that court cited approvingly the Supreme Court’s holding that a failure to disclose

the costs of arbitration did not make a provision per se unconscionable. Id. at ¶ 56-58,

citing Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 90-91, 121 S.Ct. 513,

148 L.Ed.2d 373 (2000). The Taylor court required specific and individualized evidence

that arbitration costs were unduly burdensome to the party opposing it.
 {¶33} Here, just as in Taylor, there is no evidence that McCaskey would be

prevented from prosecuting his claim in arbitration even though he did submit various fee

schedules for the American Arbitration Association (“AAA”) and the National

Arbitration Forum (“NAF”). This is in contrast to the nursing students in Rude, where

the waiver of class actions came together with the arbitration provision to greatly increase

the costs associated with obtaining relief. Rude at ¶ 25. There is no similar issue here,

and appellant has not demonstrated, as the nursing students in Rude did, that the costs

associated with arbitration prevented him from pursuing his case.

{¶34} Sanford-Brown argues that citation to the AAA and NAF rules within the

arbitration clause reasonably apprised McCaskey of the costs of arbitration because these

rules include fee schedules. The fact that a fee schedule is contained in some ancillary

document referenced in the arbitration clause does not reasonably apprise a consumer of

the costs of arbitration. However, that is not required to find the clause enforceable.

Without some evidence that a party would be precluded from bringing a claim, the cost of

arbitration, standing alone, is not a justifiable reason to find unconscionability.

{¶35} The fact that Sanford-Brown chose the applicable governing rules to be

those that apply to commercial arbitration proceedings is troubling given that the dispute

here does not involve a commercial dispute. Further, the arbitration clause limits the

types of damages that may be awarded. It provides:

The arbitrator shall have the authority to award monetary damages and may
grant any non-monetary remedy or relief available by applicable law and
rules of the arbitration forums governing the proceedings and within the
scope of this Enrollment Agreement. * * * The arbitrator will have no
authority to award consequential damages, indirect damages, treble
damages or punitive damages, or any monetary damages not measured by
 the prevailing party’s economic damages. The arbitrator will have no
authority to award attorney’s fees except as expressly provided by the
Enrollment Agreement or authorized by law or the rules of the arbitration
forum.

{¶36} McCaskey, citing to cases dealing with the impermissible abrogation of

statutory rights in employment cases, argues that the clause in this case is similarly

unconscionable. However, he fails to point to a statutory right that is impermissibly

limited by the damage limitation provision. In fact, the provision specifically authorizes

the arbitrator to award damages authorized by statute or the applicable arbitration rules.

In Post v. Procare Automotive Serv. Solutions, 8th Dist. No. 87646, 2007-Ohio-2106, ¶

13-16, this court found an arbitration clause to be substantively unconscionable where it

abrogated an aggrieved employee’s right to recover punitive damages and attorney fees

pursuant to R.C. 4112.99. The present case does not require the careful reconciliation

of “the ‘liberal federal policy favoring arbitration agreements,’ with the important rights

created and protected by federal civil rights legislation.” Morrison v. Circuit City Stores,

Inc., 317 F.3d 646, 652-653 (6th Cir.2003). There is no similar limitation of an

important statutory right in the present case.
 III. Conclusion

{¶37} McCaskey has failed to show that the arbitration clause was inapplicable or

unenforceable. The dispute here involves the provision of career services by

Sanford-Brown, a topic specifically named in the arbitration clause. Sanford-Brown had

the ability to contract with McCaskey and the ability to enforce the arbitration provision.

Sanford-Brown’s employee could also avail herself of the provision because disputes

with employees of Sanford-Brown acting in their employment capacity are included in the

provision as well as through agency principles. McCaskey also has failed to establish

that the arbitration provision is substantively or procedurally unconscionable. Therefore,

the trial court did not err in staying the case pending arbitration.

{¶38} Judgment affirmed.

It is ordered that appellees recover from appellant 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.

FRANK D. CELEBREZZE, JR., JUDGE

MARY J. BOYLE, P.J., and
LARRY A. JONES, SR., J., CONCUR