October 16, 2019 Practice Points

Ohio Appellate Court Enforces Arbitration Agreements, Leaves Conflicts to Arbitrator

The court ordered arbitration for a dispute involving multiple parties and contracts in a strong opinion supporting arbitration and the authority of an arbitrator under the AAA rules.

By Michael H. Diamant

In TN3, LLC v. Kenyatto Montez Jones, et. al. 2019-Ohio-2503, 2018 WL 7107533, __ N.E. 3rd. __, the Ohio Court of Appeals following Ohio’s strong pro-arbitration policy, affirmed and modified a trial court’s ruling, ordering arbitration for a dispute involving multiple parties and multiple contracts in a strong opinion supporting arbitration and the authority of an arbitrator under the American Arbitration Association rules. 

The dispute involved a business consulting agreement to take a small company public and acquire holding companies. Ultimately, a number of contracts were involved with multiple parties. Each contract had an arbitration agreement under the AAA Commercial Arbitration Rules. However, one had a California governing law and an Orange County, California, venue provision; another mandated Nevada governing law and a Las Vegas, Nevada, venue; while a third mandated California governing law and a Newport Beach, Orange County, California, venue.

The complaint alleged both contract and tort claims. The trial court dismissed the complaint without prejudice, finding that all claims were subject to binding arbitration or, in the alternative, subject to the California forum selection clause. The defendants appealed arguing that the claims arose from an alleged conspiracy to defraud and were not arbitrable. 

The Court of Appeals first cited a litany of Ohio cases stating that appellate review of the enforceability of arbitrability is de novo, that any uncertainty should be resolved in favor of arbitration, that arbitration should not be denied unless it can be determined with a high degree of certainty that the dispute is not covered, and that an arbitration clause must be enforced unless it is not susceptible to an interpretation that covers the subject dispute. Relying on prior Ohio Supreme Court decisions, the court found that, since both the declaratory judgment and tort claims were related to the contract claims and arose from the business relationship among the parties, they were subject to arbitration.

The court also modified the trial court’s judgment that simply dismissed the case and held that each claim pled was subject to arbitration no matter under which agreement it arose. Further, the court held that, following U.S. Supreme Court precedent, an arbitrator needs to determine as to which contract each claim applies. The court then stated that alternative dispute resolutions efficiencies suggest that multiple claims should be heard in the same proceeding, but concluded that, neither it nor the trial court had jurisdiction to dictate the ultimate venue or process, thereby impliedly leaving those issues for the arbitrator(s) to determine. 

Michael H. Diamant is an independent arbitrator and mediator and of counsel at Taft Stettinius & Hollister LLP in Cleveland, Ohio.

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