[Cite as Woodville Ent., L.L.C. v. Kokosing Materials, Inc., 2017-Ohio-5844.]
IN THE COURT OF APPEALS OF OHIO
SIXTH APPELLATE DISTRICT
SANDUSKY COUNTY
WOODVILLE ENTERPRISE, LLC,
PLAINTIFF-APPELLANT, CASE NO. 16CAS13
v.
KOKOSING MATERIALS, INC., ET AL.,
OPINION
DEFENDANTS-APPELLEES.
Appeal from Sandusky County Common Pleas Court
Trial Court No. 16CV84
Judgment Affirmed
Date of Decision: July 14, 2017
APPEARANCES:
Dennis E. Murray, Jr. for Appellant
Andrew R. Mayle for Appellees
Case No. 16CAS13
PRESTON, P.J.
{¶1} Plaintiff-appellant Woodville Enterprise, LLC (“Woodville”) appeals
the March 16, 2016 judgment entry of the Sandusky County Court of Common Pleas
staying the proceedings in that court pending arbitration. For the reasons that
follow, we affirm.
{¶2} This case stems from an agreement entered into on August 29, 2008
between defendant-appellee Kokosing Materials, Inc. (“Kokosing”), and
Woodville. As part of that agreement, the parties formed two new ventures—Area
Aggregates (“Aggregates”) and Area Asphalt, LLC (“Asphalt”). The parties
entered into a master agreement, as well as an operating agreement for Aggregates
and an operating agreement for Asphalt. Section 24 of the master agreement is an
arbitration provision which says that any claim, dispute, or demand as to any term
or condition of that agreement must be resolved through arbitration.
{¶3} Relations between the parties began to deteriorate, and Woodville filed
its complaint against Kokosing on February 2, 2016. (Doc. No. 1). In its complaint,
Woodville alleged fraud, self-dealing, breach of fiduciary duty, and breach of
contract on the part of Kokosing, with the various allegations stemming from
Kokosing’s management of the companies created by the operating agreements.
(Id.). Woodville sought money damages, the costs of the action, and attorney fees,
as well as injunctive relief and the imposition of a constructive trust. (Id.).
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{¶4} Kokosing filed a motion to stay the proceedings pending arbitration on
February 4, 2016. (Doc. No. 7). In that motion, Kokosing argued that the arbitration
provision at issue is very broad and that it is applicable to disputes arising from the
operating agreements. (Id.). Woodville filed a brief in opposition to the motion to
stay the proceedings pending arbitration on February 24, 2016. (Doc. No. 13). In
that brief, Woodville argued that the arbitration provision in the master agreement
was limited by its terms to disputes arising from that agreement and was therefore
inapplicable to disputes arising from the operating agreements. (Id.).
{¶5} The trial court granted Kokosing’s motion to stay the proceedings
pending arbitration on March 16, 2016. (Doc. No. 18).
{¶6} Woodville filed its notice of appeal on April 11, 2016. (Doc. No. 19).
Woodville brings one assignment of error for our review.
Assignment of Error
The Trial Court Erred In Interpreting The Scope Of An
Arbitration Provision In A Written Agreement Between The
Parties To Cover Claims Brought For Violations Related To
Separate Contracts, Which Were Executed Contemporaneously
With That Agreement.
{¶7} In its sole assignment of error, Woodville argues that the trial court
erred in interpreting the arbitration provision in the parties’ master agreement to
cover claims brought for violations of other contracts executed contemporaneously
with the master agreement. Specifically, Woodville argues that the trial court erred
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in basing its decision on cases involving single contracts rather than cases involving
multiple contracts. Woodville argues that cases involving multiple contracts must
be analyzed differently from single-contract cases because an entirely separate body
of law is applicable. Woodville further argues that the parties clearly did not intend
the arbitration clause in the master agreement to cover breaches of the operating
agreements because the operating agreements included merger clauses preventing
extraneous provisions from being read into them. Woodville further argues that the
trial court mistakenly found that a cross-default clause in the master agreement
incorporated the operating agreements by reference. Woodville last argues that the
trial court applied the wrong test in finding that this dispute was subject to arbitration
and that, even if the trial court applied the correct test, it applied that test incorrectly.
{¶8} Whether a party has agreed to submit an issue to arbitration is an issue
we review de novo, a standard under which we accord no deference to the ruling of
the trial court. Arnold v. Burger King, 8th Dist. No. 101465, 2015-Ohio-4485, ¶ 11.
See also Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St.3d 352, 2008-Ohio-938,
¶ 2. Arbitration is a matter of contract, and a party cannot be made to submit to
arbitration unless he has agreed to do so. Academy of Medicine of Cincinnati v.
Aetna Health, Inc., 108 Ohio St.3d 185, 2006-Ohio-657, ¶ 11. A state court may
rely on a federal standard in applying state law on the issue of arbitrability, but that
standard must be a correct statement of both Ohio law and applicable federal
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precedent. Id. ¶ 15. When a contract contains an arbitration provision, there is a
strong presumption in favor of arbitration in the sense that arbitration should not be
denied unless it can be said with “positive assurance” that the arbitration clause is
not susceptible to an interpretation that covers the dispute in question. Id. at ¶ 14.
The inquiry is whether an action can be maintained “without reference to the
contract or relationship at issue.” Alexander v. Wells Fargo Fin., 122 Ohio St.3d
341, 2009-Ohio-2962, ¶ 25; Fazio v. Lehman Bros., Inc., 340 F.3d 386, 395 (6th
Cir.2003). If the action can be maintained without reference to the contract or
relationship at issue, then the action is likely beyond the scope of the arbitration
agreement. Fazio at 395. Doubtful cases must be resolved in favor of coverage.
Aetna at ¶ 14.
{¶9} When determining whether an issue is fit for arbitration, we must first
determine whether the arbitration clause includes limitations as to arbitrability, such
as whether the arbitration clause removed specific types of claims from its scope.
Id. at ¶ 17. Second, we must determine whether the arbitration clause at issue is
broad or narrow, it being understood that an arbitration clause that applies to “any
claim or controversy arising out of or relating to the agreement” is the very paradigm
of a broad arbitration clause. Aetna at ¶ 18. The Supreme Court of Ohio reinforced
the same understanding of what constitutes a broad clause three years after Aetna.
Alexander at ¶ 16.
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{¶10} The arbitration clause at issue in this case does not, by its terms,
remove a particular subset of claims from its scope. (See Plaintiff’s Ex. 1 at 16).
Section 24 reads:
The parties agree that any claim, dispute, or demand concerning any
term or condition of this [a]greement, and any claim, dispute[,] or
demand (“Claims”) concerning the breach, performance, or non-
performance of any term of this [a]greement, by any party hereto,
shall be resolved through arbitration.
(Id.). The same arbitration clause that removes no specific claims from the scope
of arbitrability is, without question, a broad clause. Aetna at ¶ 18. The clause at
issue uses the word “any” no fewer than four times. (Plaintiff’s Ex. 1 at 16). In this
sense, the language of section 24 is even broader than the language that the Supreme
Court of Ohio said in Aetna was the paradigm of a broad clause. Aetna at ¶ 18. The
only difference between section 24 and the language that Aetna held to be broad is
that the former concerns “this” agreement, while the later speaks of “the”
agreement. Compare (Plaintiff’s Ex. 1 at 16) with Aetna at ¶ 18.
{¶11} Much of Woodville’s argument, whether made with reference to
merger clauses or cross-default clauses, centers on the contention that the master
agreement and the two operating agreements were three separate contracts rather
than one contract with separate parts. Even if we assume without deciding that this
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case involves multiple contracts, the Supreme Court of Ohio did nothing to limit its
Aetna analysis to cases involving one contract. Aetna at ¶ 16-18. In fact, Aetna
itself involved multiple contracts. Id. at ¶ 3 (quoting the trial court’s finding that
the dispute did not “arise out of or relate to the contracts” between the parties).
Despite the existence of multiple contracts in Aetna, the Supreme Court of Ohio
held specifically that the test from Fazio v. Lehman Bros., Inc. was the proper one.
Id. at ¶ 24.
{¶12} Federal precedent has held similarly. Nestle Waters North America
Inc. v. Bollman, 505 F.3d 498 (6th Cir.2007). In Nestle Waters North America, Inc.
v. Bollman, the Sixth Circuit Court of Appeals confronted a situation in which
Nestle filed suit against the Bollmans over subsurface water rights. Id. at 499. The
deed touching the water rights was silent as to arbitration, but the Bollmans argued
that an arbitration clause in the contract that first established their business
relationship with Nestle—one that predated the deed—should govern the dispute.
Id. In concluding that the arbitration clause covered the dispute at issue, the court
noted that it had adopted tests that differed from the Fazio standard in cases that
involved multiple contracts. Id. at 504. The court analyzed multiple-contract cases
by asking which agreement “determines the scope of” contested obligations, and it
rejected the view that a dispute is arbitrable simply because it “touch[es] matters
covered by” an arbitration provision. Id., citing Alticor Inc. v. Natl’ Union Fire Ins.
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Co. 411 F.3d 669, 672-673 (6th Cir.2005). The court in Nestle further noted that
other federal appellate courts had applied still other standards, such as one which
held that “arising out of” clauses encompass “all disputes having their origin or
genesis in the contract, whether or not they implicate interpretation or performance
of the contract per se.” Id. at 504-505, quoting Sweet Dreams Unlimited, Inc. v.
Dial-A-Mattress Int’l, Ltd., 1 F.3d 639, 642 (7th Cir.1993). Despite an obvious
awareness of alternative standards and the opportunity to endorse one of them or
propound its own, the court in Nestle unambiguously declared that Fazio articulated
the proper standard in the Sixth Circuit even in cases that involved multiple
contracts. Nestle at 505. We therefore conclude that the trial court, in applying the
Fazio test, applied the proper standard for determining whether a matter is
arbitrable.
{¶13} Woodville next argues that, if the trial court applied the proper
standard in granting the motion to stay the proceedings, it applied that standard
improperly because Woodville’s action can be maintained without reference to the
master agreement.
{¶14} We note from the outset that the broadness of the arbitration clause
creates a presumption in favor of arbitrability. Nestle at 505. Arbitration is not
limited to claims alleging breach of contract, and pleading claims creatively will not
overcome a broad arbitration provision. Aetna at ¶ 19. Broad arbitration clauses
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like the one at issue in this case have even been held to make alleged conversion
arbitrable. Fazio at 395 (finding that allegations of theft were arbitrable because the
lawsuit stemming from the theft would require the parties make reference to the
agreement that includes the arbitration clause).
{¶15} Based on the principles above, we conclude that the trial court did not
err in granting the motion to stay the proceedings pending arbitration. We cannot
say with positive assurance that the arbitration provision does not encompass the
dispute at issue here. The master agreement that contains the arbitration provision
is the agreement that began the parties’ relationship, and it is highly likely that the
parties will need to reference the master agreement to at least some degree in the
course of the dispute. Nestle at 505 (finding that arbitration applied because it was
likely that the dispute would require reference to other documents, including the
document that began the relationship between the parties).
{¶16} The cases reviewed above, together with the pro-arbitration
presumption created by the broad arbitration clause, as well as the Supreme Court
of Ohio’s command that we resolve any doubts in favor of arbitrability, convince us
that the trial court applied the proper legal test and that it applied that test correctly.
{¶17} For the forgoing reasons, Woodville’s assignment of error is
overruled.
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{¶18} Having found no error prejudicial to the appellant herein in the
particulars assigned and argued, we affirm the judgment of the trial court.
Judgment Affirmed
WILLAMOWSKI and SHAW, J.J., concur.
/jlr
Judges Vernon L. Preston, John R. Willamowski and Stephen R. Shaw, from the
Third District Court of Appeals, sitting by assignment of the Chief Justice of the
Supreme Court of Ohio.
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