[Cite as Biondi v. Oregon Homes, L.L.C., 2013-Ohio-1770.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT )
JAMES X. BIONDI, MD, et al. C.A. No. 26543
Appellees
v. APPEAL FROM JUDGMENT
ENTERED IN THE
OREGON HOMES, LLC COURT OF COMMON PLEAS
COUNTY OF SUMMIT, OHIO
Appellant CASE No. CV-2010-11-7618
DECISION AND JOURNAL ENTRY
Dated: May 1, 2013
BELFANCE, Presiding Judge.
{¶1} Defendant-Appellant Oregon Homes, L.L.C. appeals from an order of the Summit
County Court of Common Pleas denying its motion to compel arbitration. For the reasons set
forth below, we affirm.
I.
{¶2} This Court has previously summarized the facts of this matter in the prior appeal:
John X. Biondi, Thomas F. Bear, MD, Sandra V. Hazra, MD, and Lawrence M.
Saltis, MD (collectively “Appellees”) are each 5% members of Oregon Homes,
LLC. They entered into an operating agreement with respect to Oregon Homes on
July 7, 2006[, which contained an arbitration clause]. Subsequently, Oregon
Homes executed promissory notes in favor of First Merit Bank, N.A. Appellees
executed guaranties on the notes guaranteeing payment to First Merit of all sums
due from Oregon Homes pursuant to the notes. Later when Oregon Homes failed
to pay amounts due to First Merit, Appellees were required to pay in accordance
with their respective guaranties.
On November 12, 2010, Appellees filed suit pursuant to R.C. 1303.59 seeking
reimbursement from Oregon Homes for the monies paid. On January 10, 2011,
Oregon Homes filed a motion to compel arbitration pursuant to [an arbitration
clause found only in] the [O]perating [A]greement. On January 28, 2011,
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Appellees filed a memorandum in opposition to the motion to compel. On March
3, 2011, the trial court denied Oregon Homes’ motion to compel arbitration.
Biondi v. Oregon Homes, L.L.C., 9th Dist. No. 25875, 2012-Ohio-1714, ¶ 2-3.
{¶3} Oregon Homes appealed, and this Court reversed the matter so that a hearing
could be held on the motion to compel arbitration. Id. at ¶ 7. A hearing was held, and,
thereafter, the trial court issued an entry denying Oregon Homes’ motion to compel. Oregon
Homes has again appealed, raising a single assignment of error for our review.
II.
ASSIGNMENT OF ERROR
THE TRIAL COURT COMMITTED ERROR BY THE DENIAL OF THE
MOTION TO COMPEL ARBITRATION.
{¶4} In its sole assignment of error, Oregon Homes asserts that the trial court erred in
denying its motion to compel arbitration. We do not agree.
{¶5} We begin by noting that, despite the fact that a hearing took place on Oregon
Homes’ motion to compel, a transcript of that proceeding is not a part of the record. It is unclear
whether only argument was presented at the hearing or whether evidence was submitted as well.
Because we do not have a transcript of the hearing, to the extent it impacted the trial court’s
decision, we must presume regularity. See Shumate v. Shumate, 9th Dist. No. 09CA009707,
2010-Ohio-5062, ¶ 9. Notwithstanding the absence of a transcript of the proceedings below, this
Court does possess the loan agreements and Operating Agreement, and an evaluation of the
provisions of those documents leads us to conclude that the trial court did not err.
{¶6} The parties do not challenge the validity of the arbitration clause in the Operating
Agreement. Instead, the parties disagree as to whether Appellees’ claim falls within the scope of
the arbitration clause. Oregon Homes asserts that Appellees’ claim is subject to mandatory
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binding arbitration because it is related to the operation of the business. Appellees maintain that
the claim is not subject to arbitration because it could be maintained without reference to the
Operating Agreement.
{¶7} “The question of whether a controversy is arbitrable under a contract is a question
of law for the Court to decide upon an examination of the contract.” (Internal quotations and
citations omitted.) VIS Sales, Inc. v. KeyBank, N.A., 9th Dist. No. 25366, 2011-Ohio-1520, ¶ 8.
“Thus, our review is de novo.” Id.
{¶8} Appellees’ claim asserts that, pursuant to R.C. 1303.59, they are entitled to
recover money from Oregon Homes that they paid First Merit Bank, N.A. as guarantors of five
promissory notes when Oregon Homes failed to pay on the promissory notes according to the
terms of the note. Oregon Homes asserts that the dispute is subject to arbitration based upon an
arbitration clause in the Operating Agreement, which Appellees signed. The arbitration clause
provides that:
[a]ny dispute arising out of, relating to this Agreement, a breach hereof, or the
operation of the business of the Company, shall be settled by arbitration in Lucas
County, Ohio, in accordance with the rules of the American Arbitration
Association then existing, provided that discovery as provided for under the Ohio
Rules of Civil Procedure shall be available to all parties to the arbitration. This
agreement to arbitrate shall be specifically enforceable and the arbitration award
shall be final and judgment may be entered upon it in any court having
jurisdiction over the subject matter of the dispute.
{¶9} Ohio has a “strong public policy favoring arbitration, which is consistent with
federal law supporting arbitration.” Taylor v. Ernst & Young, L.L.P., 130 Ohio St.3d 411, 2011-
Ohio-5262, ¶ 18. Nonetheless, “when deciding motions to compel arbitration, the proper focus
is whether the parties actually agreed to arbitrate the issue, i.e., the scope of the arbitration
clause, not the general policies of the arbitration statutes.” Id. at ¶ 20. Thus, “Ohio courts
recognize a presumption in favor of arbitration when a claim falls within the scope of an
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arbitration provision.” Id. at ¶ 21. “[A]n order to arbitrate the particular grievance should not be
denied unless it may be said with positive assurance that the arbitration clause is not susceptible
of an interpretation that covers the asserted dispute.” (Internal quotations and citations omitted.)
Academy of Medicine of Cincinnati v. Aetna Health, Inc., 108 Ohio St.3d 185, 2006-Ohio-657, ¶
14. “[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration
any dispute which [it] has not agreed so to submit.” (Internal quotations and citations omitted.)
Taylor at ¶ 20.
{¶10} “We look first to whether the arbitration clause itself or the statute at issue
contains limitations as to arbitrability.” Academy of Medicine of Cincinnati, 108 Ohio St.3d 185,
2006-Ohio-657, at ¶ 17. “Had the parties removed statutory claims from the scope of the
arbitration provision, or had the General Assembly evinced an intention to preclude a waiver of
judicial remedies for the statutory rights” at issue, the claim could not be said to be within the
scope of the arbitration clause. (Internal quotations and citation omitted.) Id. There is nothing
in either the clause or the statute to suggest the claim could not be arbitrated.
{¶11} The “next consideration is whether the arbitration clause limits itself only to
certain aspects of the underlying contract.” Id. at ¶ 18. This involves classifying the clause as
either broad or narrow. Id. “An arbitration clause that contains the phrase ‘any claim or
controversy arising out of or relating to the agreement’ is considered the paradigm of a broad
clause.” (Internal quotations and citation omitted.) Id. The clause at issue states in pertinent
part, that “[a]ny dispute arising out of, relating to this Agreement, a breach hereof, or the
operation of the business of the Company, shall be settled by arbitration * * *.” Thus, it must be
considered a broad clause.
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{¶12} Nonetheless, “even the presence of a broad arbitration clause does not make all
claims subject to arbitration.” VIS Sales, Inc., 2011-Ohio-1520, at ¶ 11. In determining whether
a cause of action is within the scope of an arbitration agreement, a court must ask “whether an
action can be maintained without reference to the contract or relationship at issue.” Alexander v.
Wells Fargo Fin. Ohio 1, Inc., 122 Ohio St.3d 341, 2009-Ohio-2962, ¶ 25. If it can, the dispute
“is likely outside the scope of the arbitration agreement.” (Internal quotations and citations
omitted.) Id. at ¶ 24. Applying this test “prevents the absurdity of an arbitration clause barring a
party to the agreement from litigating any matter against the other party, regardless of how
unrelated to the subject of the agreement.” Academy of Medicine of Cincinnati, 108 Ohio St.3d
185, 2006-Ohio-657, at ¶ 29.
{¶13} In the instant matter, the claim filed pursuant to R.C. 1303.59 could be maintained
without reference to the operating agreement that contains the arbitration clause. The issue to be
decided, whether the Appellees can obtain reimbursement from Oregon Homes for making
payments under the separate bank loan agreements, would require reference to only the loan
agreements themselves. See Academy of Medicine of Cincinnati v. Aetna Health, Inc., 155 Ohio
App.3d 310, 2003-Ohio-6194, ¶ 5 (1st Dist.). Further, under the circumstances, it seems hard to
believe that the parties intended to arbitrate this particular dispute involving reimbursement
pursuant to the bank loan agreements. It appears that the loan agreements were created by a
third party – FirstMerit Bank, N.A. – an entity that was not involved with the Operating
Agreement.1 Furthermore, the loan documents contain no reference to the Operating Agreement.
In other words, this is neither a dispute concerning any aspect of the operation of the LLC nor a
1
The loan documents appear to be standard forms. There are no substantive alterations
to the form documents that would suggest a connection between the loan documents and the
Operating Agreement.
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dispute involving any aspect of the Operating Agreement. Nor is it a dispute involving a breach
of any aspect of the Operating Agreement. Rather, Appellees’ claim entails the exercise of a
statutory right arising out of separate loan agreements. Furthermore, to the extent that a
transcript of the proceedings below would support Oregon Homes’ argument, we note that it is
absent from the record, and we thus must presume regularity in the proceedings. See Shumate,
2010-Ohio-5062, at ¶ 9. Based upon the record before us, we cannot say that the claim falls
within the scope of the arbitration clause and, thus, cannot say that the trial court erred in
denying Oregon Homes’ motion to compel arbitration. Oregon Homes’ assignment of error is
overruled.
III.
{¶14} In light of the foregoing, we affirm the judgment of the Summit County Court of
Common Pleas.
Judgment affirmed.
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
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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 to Appellant.
EVE V. BELFANCE
FOR THE COURT
CARR, J.
CONCURS.
WHITMORE, J.
DISSENTING.
{¶15} I respectfully dissent. I would conclude that these claims arise from loans
executed for the operation of the business and, given the strong presumption in favor of
arbitration, fall within the parties’ broad arbitration clause.
{¶16} “‘[U]nless it may be said with positive assurance that the subject arbitration
clause is not susceptible to an interpretation that covers the asserted dispute[,]’ the trial court
should stay the proceedings” and submit the matter for arbitration. Tomovich v. USA
Waterproofing & Foundation Servs. Inc., 9th Dist. No. 07CA009150, 2007-Ohio-6214, ¶ 8,
quoting Neubrander v. Dean Witter Reynolds, Inc., 81 Ohio App.3d 308, 311 (9th Dist.1992).
Compare Hollinger v. Keybank Natl. Assn., 9th Dist. No. 22147, 2004-Ohio-7182, ¶ 13 (claims
not arguably within the arbitration clause when individual investors filed suit against Keybank
alleging fraud and civil conspiracy based on a third party’s handling of investments and “at the
time the parties entered th[e] contract, they could not have contemplated that [Keybank] would
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either conspire to commit fraud with a third party or fail to investigate the actions of a third party
thereby aiding fraud perpetrated on its customers.”).
{¶17} Here, Oregon Homes executed five promissory notes in favor of FirstMerit Bank.
There is no evidence in the record, nor has there been any argument made, that these loans were
for anything other than the operation of the business. The arbitration clause in the Operating
Agreement is broad. The parties agreed to arbitrate “[a]ny dispute arising out of * * * the
operation of the business * * *.” While it is true that the claim arises out of the guaranties signed
by Appellees, those guaranties were for commercial loans executed by Oregon Homes for the
operation of the business. The arbitration provision is susceptible to an interpretation that covers
this dispute. See VIS Sales, Inc. v. KeyBank, N.A., 9th Dist. No. 25366, 2011-Ohio-1520, ¶ 22.
{¶18} Appellees’ claim for reimbursement for payments made on business loans taken
out by the company for the operation of the business is a dispute the parties arguably intended to
submit to arbitration. Given the strong presumption in favor of arbitration and that the dispute
arguably falls within the arbitration provision, I would conclude that the trial court erred in
denying Oregon Homes’ motion to compel arbitration. See Tomovich at ¶ 8. Therefore, I
respectfully dissent.
APPEARANCES:
SCOTT A. WINCKOWSKI, Attorney at Law, for Appellant.
THOMAS M. SAXER, Attorney at Law, for Appellees.