[Cite as Hicks v. Cadle Co., 2014-Ohio-872.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
TRUMBULL COUNTY, OHIO
KERRY R. HICKS, : OPINION
Plaintiff-Appellant, :
CASE NO. 2013-T-0017
- vs - :
THE CADLE COMPANY, et al., :
Defendants-Appellees, :
THE HOME SAVINGS AND LOAN :
COMPANY OF YOUNGSTOWN, OHIO,
:
Intervening Defendant.
Civil Appeal from the Trumbull County Court of Common Pleas.
Case No. 2011 CV 01148.
Judgment: Affirmed.
Kris J. Kostolansky, Lewis Roca Rothgerber, LLP, 1200 Seventeenth Street, Suite
3000, Denver, CO 80202; Christopher S. Williams, Ronald M. McMillan, and John J.
Eklund, Calfee, Halter & Griswold, LLP, The Calfee Building, 1405 East Sixth Street,
Cleveland, OH 44114 (For Plaintiff-Appellant).
Victor O. Buente, Jr., Cadle Company, 100 North Center Street, Newton Falls, OH
44444-1321; F. Dean Armstrong, Armstrong Law Firm, 1324 Dartmouth Road,
Flossmoor, IL 60422 (For Defendants-Appellees).
TIMOTHY P. CANNON, P.J.
{¶1} Appellant, Kerry R. Hicks, appeals the February 22, 2013 judgment of the
Trumbull County Court of Common Pleas denying his motion to compel arbitration with
regard to the amended counterclaims filed by appellees, The Cadle Company (“TCC”),
Daniel C. Cadle (“Cadle”), and United Joint Venture Limited Partnership (“United”).
Cadle is the former president and current owner and director of TCC, a debt collection
company. TCC is the only general partner and registered agent of United, which is also
a debt collection company. Based on the following, we affirm the judgment of the trial
court.
{¶2} The counterclaims at issue alleged that appellant violated Ohio’s Pattern
of Corrupt Activities Act (R.C. 2923.31, et seq.), intentionally inflicted emotional distress,
and tortiously interfered with the business relations of appellees and The Home Savings
and Loan Company of Youngstown, Ohio (“Home Savings”).
{¶3} Litigation between the parties began in September 2003, when Buckeye
Retirement Co., LLC (“Buckeye”)1 sued appellant and his business partner, Mr. Jaeckle,
in federal district court in Tennessee seeking to collect the outstanding debt on a
promissory note. The various claims included allegations of tortious conduct on both
sides. A history of litigation between the parties is detailed in three opinions of the
United States Court of Appeals for the Tenth Circuit: Hicks v. Bank of Am. N.A. (“Hicks
I”), 218 Fed.Appx. 739 (10th Cir.2007); Hicks v. Cadle Co. (“Hicks II”), 355 Fed.Appx.
186 (10th Cir.2009); and Hicks v. Cadle (“Hicks III”), 436 Fed.Appx. 874 (10th Cir.2011).
{¶4} Appellant and others obtained a loan from Bank of America (“BOA”) in
1999; appellant was one of the signators on the note and two renewed versions thereof.
However, appellant contended he was not liable on the balance of $1,000,000.00
pursuant to an oral, collateral agreement with BOA—the amount that was outstanding
1. Buckeye is another debt collection company and an alter ego of TCC and Cadle. Although Buckeye
was involved at the beginning of the dispute between the parties, it is not a party to this appeal.
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when Buckeye purchased the note from BOA in 2002. The note contains a provision
requiring binding arbitration of:
Any controversy or claim between or among the parties hereto
including but not limited to those arising out of or relating to this
instrument, agreement or document or any related instruments,
agreements or documents, including any claim based on or arising
from an alleged tort[.]
{¶5} The note also contained a venue provision that any litigation would take
place in Tennessee. In proceedings before the Tenth Circuit, the parties agreed that
Tennessee law governed.
{¶6} Shortly after Buckeye purchased the note, TCC, acting on behalf of
Buckeye, attempted to collect the debt from appellant in an action filed in Tennessee.
The debt collection activities of TCC and Buckeye are intertwined. TCC employees
were, at times, also Buckeye employees. TCC employees, including Cadle, made
collection calls and participated in collection-related correspondence in Buckeye’s
name. TCC computer systems and phones were also used in Buckeye’s name. Three
separate arbitrations in Colorado followed Buckeye’s efforts to collect from appellant.
Appellant was successful in all three arbitrations and eventually obtained a large award
against Cadle. The amount due on the note itself, if any, was assigned back to BOA in
2003.
{¶7} This Ohio action between appellant and appellees began in May 2011
when appellant sought declaratory judgment and injunctive relief to prevent appellees
from transferring assets belonging to Cadle, a principle of TCC and United. Cadle,
TCC, and United were in negotiations with Home Savings to refinance an outstanding
debt. Appellant was apparently concerned that funds from Cadle’s IRA account would
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be used to pay Home Savings and would therefore not be available to satisfy the
arbitration award. Appellant registered his arbitration award in the United States District
Court for the Northern District of Ohio and brought suit in Trumbull County seeking to
enforce the award. A temporary restraining order was issued, and the matter was set
for hearing on appellant’s request for a preliminary injunction. Appellees then filed an
answer, counterclaims, and a jury demand.
{¶8} At a June 28, 2011 hearing, appellant’s request for a preliminary injunction
was denied, and the temporary restraining order was dissolved. Thereafter, the
arbitration award was paid, and appellant voluntarily dismissed his claims. With regard
to appellees’ counterclaims, appellant filed a motion to stay litigation and compel
arbitration or, in the alternative, to dismiss for failure to state a claim. While the motion
was pending, appellees filed amended counterclaims. Cadle alleged violations of
Ohio’s Pattern of Corrupt Activities Act (R.C. 2923.31, et seq.) and intentional infliction
of emotional distress; furthermore, appellees together alleged tortious interference with
business relationships. Appellees’ amended counterclaims cover conduct alleged to
have occurred between 2007 and 2011. The trial court denied appellant’s motion to
compel arbitration finding that appellees’ counterclaims were not subject to the note’s
arbitration provision.
{¶9} Appellant appealed this order and asserts a single assignment of error:
{¶10} “Whether the Trial Court erred in denying Mr. Hicks’ Motion to Compel by
finding that the Amended Counterclaims do not ‘arise out of’ or ‘relate to’ the Note and
that Defendants are not bound by the Note’s broad arbitration provision.”
{¶11} Under this assignment, appellant frames two issues for our determination:
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[1] Whether Defendants’ Amended Counterclaims, which seek
adjudication of factual allegations relating to the Note that were
decided by or occurred in arbitration, “arise out of” or “relate to” the
Note.
[2] Whether Defendants are bound by the Note’s broad arbitration
provision where TCC is an assignee of the Note and all prior courts
and arbitration tribunals have held that Mr. Cadle and his agents
and alter ego entities are so bound.
{¶12} A trial court’s ruling denying a motion to compel arbitration is a final,
appealable order. R.C. 2711.02(C); EMCC Inv. Ventures, LLC v. Rowe, 2012-Ohio-
4462, 11th Dist. Portage No. 2011-P-0053, 2012-Ohio-4462, ¶17. Generally, this court
reviews a trial court’s ruling on a motion to compel arbitration for an abuse of discretion.
Id. at ¶18. However, “this court reviews de novo a trial court’s legal conclusion as to
whether a party is contractually bound by an arbitration clause.” Liberty Credit Servs.
Assignee of or Successor in Interest to Capital One v. Yonker, 11th Dist. Portage No.
2012-P-0096, 2013-Ohio-3976, ¶12. When deciding motions to compel arbitration, we
look to the scope of the arbitration clause to determine whether the parties actually
agreed to arbitrate the issue. Taylor v. Ernst & Young, L.L.P., 130 Ohio St.3d 411, 417
(2011).
{¶13} We recognize a presumption in favor of arbitration when claims between
the parties to a contract fall within the scope of an arbitration clause. Id. Under both
Ohio and Federal law, whether a party may be compelled into arbitration is a matter of
contract. Id. at 416-417. Because the arbiter derives his power from the contractual
consent of the parties, a party cannot be compelled to arbitrate a dispute that the party
never agreed to submit to arbitration. Id. at 417.
To determine whether the claims asserted in the complaint fall
within the scope of an arbitration clause, the Court must ‘classify
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the particular clause as either broad or narrow.’ 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.
(Citations omitted). Academy of Medicine of Cincinnati v. Aetna Health, Inc., 108 Ohio
St.3d 185, 188 (2006). Even a broad arbitration clause, however, does not render all
claims subject to arbitration. Id. at 189.
{¶14} The Ohio Supreme Court has held that whether a cause of action is within
the scope of an arbitration agreement may be determined by applying the federal
standard found in Fazio v. Lehman Bros., Inc., 340 F.3d 386 (6th Cir.2003). Academy
of Medicine, supra, 188 (“[A] state court may rely on a federal standard in applying Ohio
law on the issue of arbitrability. However, that standard must be consistent with Ohio
law and must reflect a correct statement of the applicable federal jurisprudence. The
appellate court’s reliance on Fazio is appropriate in both regards.”). Fazio held that “[a]
proper method of analysis here 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.” Fazio at 395. Fazio further stated: “Even real torts can
be covered by arbitration clauses ‘[i]f the allegations underlying the claims “touch
matters” covered by the [agreement].’” Id.
{¶15} In Fazio, the Sixth Circuit found that claims relating to the theft of
investors’ assets by their broker could not be maintained without reference to the
account agreements, which contained the arbitration clause. Id.
[I]t is evident that the fraudulent activities were a violation of the
account agreements and arose out of activities contemplated by
those agreements—the sale and purchase of securities and the
management of accounts. The lawsuit by necessity must describe
why [the defendant] was in control of the plaintiffs’ money and what
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the brokerage houses’ obligations were. The plaintiffs therefore
cannot maintain their action without reference to the account
agreements[.]
Id. The Fazio Test “allows courts to make determinations of arbitrability based upon the
factual allegations in the complaint instead of on the legal theories presented. It also
establishes that the existence of a contract between the parties does not mean that
every dispute between the parties is arbitrable.” Academy of Medicine, supra, 191.
{¶16} Furthermore, when the contractual agreement containing the arbitration
provision has terminated prior to the dispute, the grievance is said to
arise under the contract only where it involves facts and
occurrences that arose before expiration, where an action taken
after expiration infringes a right that accrued or vested under the
agreement, or where, under normal principles of contract
interpretation, the disputed contractual right survives expiration of
the remainder of the agreement.
Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 205-206 (1991).
{¶17} Applying these principles, appellees’ claims can be maintained without
reference to the note; the conduct of which appellees complain occurred, if at all, after
the note was assigned back to BOA in 2003. Appellant was formally relieved of any
possibility of liability on the note in 2004, when BOA assigned the note to a third-party,
acknowledging appellant’s nonliability. Although Cadle controls TCC, United, and
Buckeye, along with many other debt collection entities, he did not sign the note. The
assignments indicate that Buckeye purchased the note from BOA and that Buckeye
sold it back to BOA. Thus, at the very latest, any contractual relationship between
appellant and appellees based on the note terminated in 2004. These facts are
distinguishable from Fazio, where the conduct complained of occurred while a
contractual broker-client relationship was in force. Furthermore, no action alleged
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“infringe[s] on a right that accrued or vested under” the promissory note, nor is there a
“disputed contractual right that survives” the note’s expiration.
{¶18} As the trial court held, “the [amended] counterclaims all involved alleged
tortious activities by [appellant] having no relationship to any particular term of the note
or any right or obligation of any party under the note.” Cadle made the following
allegations: (1) appellant falsely accused Cadle of stalking appellant’s wife and
daughter; (2) appellant lured Cadle to a public meeting of company stockholders and
there embarrassed him by having him detained and removed from the premises by
police on the basis of an ex parte civil protection order appellant had obtained without
Cadle’s knowledge; (3) appellant caused to be distributed a false report indicating that
Cadle had filed for bankruptcy; (4) appellant caused the distribution of a false report that
Cadle was a threat to the physical safety of appellant’s family and had personality traits
consistent with a killer; (5) appellant filed duplicative litigation against appellees in
Cadle’s hometown in order to embarrass Cadle; (6) appellant fraudulently obtained a
temporary restraining order, which interfered with appellees’ business relations by
enjoining the refinancing of a longstanding loan; (7) appellant threatened an IRS
investigation of Cadle’s daughter if the counterclaims were not dismissed. All of these
events are alleged to have occurred after termination of the relationship between the
parties liable on the note. Thus, the dispute at issue is not “related” to the note.
{¶19} On the basis of these allegations, appellees filed claims for intentional
infliction of emotional distress, tortious interference with business relations, and
engaging in a pattern of corrupt activity. None of these claims require reference to the
note, as none seek to enforce any right or obligation or derive any benefit from the note.
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This also contrasts with the situation in Fazio, where the claims involved theft and
misuse of money entrusted to the broker. The relationship was based on account
agreements that contained the arbitration clause. These very account agreements were
allegedly breached by the broker’s misconduct.
{¶20} Appellant’s reliance on Alexander v. Wells Fargo Fin. Ohio 1, Inc., 122
Ohio St.3d 341 (2009), is also misplaced. In Alexander, the Ohio Supreme Court
consolidated two cases involving statutory rights. Id. at 342. The first involved an
action for failure to timely file an entry of satisfaction of a mortgage. Id. The second
involved an action for failure to timely file a termination statement. Id. at 343. The
underlying contracts—the mortgage and the loan agreement, each of which contained
an arbitration clause—were necessary to the claims because the statutory right
underlying the claims can arise only from the execution and satisfaction of such credit
agreements. Id. at 342, 345-346. Without proving the existence and terms of the
underlying agreements, neither plaintiff would have been able to demonstrate that their
creditor had failed to fulfill the statutory obligation to timely file an entry of satisfaction or
a termination statement. Id. Thus, the claims could not be maintained without
reference to the underlying agreements.
{¶21} Here, appellees’ counterclaims do not rely on a statutorily-created right
that arises only in the presence of a valid and satisfied mortgage or loan agreement.
Instead, appellees’ claims sound in tort and require no proof that the agreement existed.
If the alleged conduct occurred, it could be actionable even if there was never an
agreement between the parties. In Alexander, the claims could not exist unless the
agreements existed. That is not the case here.
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{¶22} Appellees further assert that this case is analogous to Dodeka, L.L.C. v.
Keith, 11th Dist. Portage No. 2011-P-0043, 2012-Ohio-6216. In that case, we found
that a person who was not shown to have expressly or implicitly assented to a
contractual arrangement was not subject to an arbitration provision contained within the
purported contract. Id. at ¶35. We affirm that the claims at issue here do not fall within
the scope of the arbitration provision. The argument that appellees did not assent to
being bound by the note’s arbitration provision is moot.
{¶23} Finally, appellant, in a section of his appellate brief entitled, “Standard of
Review,” states: “Whether the Trial Court properly denied Mr. Hicks’ request for limited
discovery as to the relationship between United and Mr. Cadle and TCC is reviewed for
abuse of discretion. See Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406,
430 fn. 24 (9th Cir.1977).” There is some further discussion near the end of appellant’s
brief that indicates appellant would like further discovery as to the relationship between
Cadle and United. However, as appellant assigns no error in this regard, we decline to
address the discovery issue. See, e.g., App.R. 16.
{¶24} Appellant’s sole assignment of error is without merit. The judgment of the
trial court is affirmed.
DIANE V. GRENDELL, J.,
COLLEEN MARY O’TOOLE, J.,
concur.
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