IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
Baker-Henning Productions, Inc.,
:
Plaintiff-Appellee,
:
No. 00AP-36
v.
:
(REGULAR CALENDAR)
Victoria A. Jaffe and Brett Jaffe,
:
Defendants-Appellants,
:
Fifth Third Bank, Central Ohio, et al.,
:
Defendants-Appellees.
:
O P I N I O N
Rendered on November 7, 2000
Artz & Dewhirst, L.L.P., and J. Steven Martin , for appellee.
Brett Jaffe, pro se.
APPEAL from the Franklin County Court of Common Ple as.
PETREE, J.
Defendants, Victoria and Brett Jaffe, appeal a Dece mber 6, 1999 decision
of the Franklin County Court of Common Pleas stayin g this action pending arbitration.
Defendants raise the following assignment of error:
The trial court below erred in granting a stay of t he
proceedings to permit the parties to the lawsuit to arbitrate
their dispute in the absence of compliance, by the party
requesting arbitration, with the conditions precedent to
arbitration set forth in the contract between the p arties, as a
No. 00AP-36
2
result of which, in the absence of a similar reques t by the
responding party, the party so requesting has waive d the right
to arbitrate the dispute as a matter of fact and la w.
On December 2, 1997, plaintiff, Baker-Henning Productions, Inc., and
defendants, Victoria and Brett Jaffe, entered into a contract for the renovation of the
defendants’ garage. During the course of construct ion, plaintiff was paid approximately
$60,000. However, defendants refused to pay the fi nal invoice submitted by the plaintiff,
disputing both the amount owed, as well as the qual ity of workmanship rendered. As a
result, plaintiff filed an affidavit for a mechanic ’s lien against defendants’ property.
Thereafter, defendants served notice upon the plain tiff in accordance with R.C. 1311.11,
which provides that “[t]he owner *** [of] real prop erty upon which a lien has been taken ***
may notify the lienholder to commence suit on the l ien, by written notice delivered to the
lienholder. *** If the lienholder fails to commence suit upon the lien within sixty days after
completion of service upon him of the notice to com mence suit *** the lien is void and the
property wholly discharged from the lien.”
In accordance with the defendants’ notification, plaintiff filed suit on
August 31, 1999. However, two days later, plaintif f moved the court to stay this action
pending arbitration in accordance with R.C. 2711.02 , and Section 10.8 of the parties’
contract, which provides that:
1
All claims or disputes between the Contractor and t he Owner
arising out or relating to the Contract, or the bre ach thereof,
shall be decided by arbitration in accordance with
the
1
The Ohio Arbitration Act allows for either direct or indirect enforcement of an agreement to arbitrat e, either
(1) through an order to compel arbitration pursuant to R.C. 2711.03, or (2) through an order staying
proceedings pursuant to R.C. 2711.02. Specifically , R.C. 2711.03 allows any party aggrieved by the fa ilure
of another to perform under a written agreement to arbitrate, to petition the court for an order direc ting such
arbitration. Conversely, R.C. 2711.02 provides for indirect enforcement whereby a party seeks a stay of any
further proceedings.
No. 00AP-36
3
Construction Industry Arbitration Rules of the Amer ican
Arbitration Association currently in effect unless the parties
mutually agree otherwise and subject to an initial presentation
of the claim or dispute to the Architect as require d under
Paragraph 10.5. Notice of the demand for arbitrati on shall be
filed in writing with the other party to this Agree ment and with
the American Arbitration Association and shall be m ade within
a reasonable time after the dispute has arisen. Th e award
rendered by the arbitrator or arbitrators shall be final, and
judgment may be entered upon it in accordance with
applicable law in any court having jurisdiction the reof. ***
The agreement herein among the parties to the Agree ment
and any other written agreement to arbitrate referr ed to herein
shall be specifically enforceable under applicable law in any
court having jurisdiction thereof.
When presented with a motion to compel arbitration, a state court must first
determine whether the parties agreed to arbitrate t he dispute by applying the “federal
substantive law of arbitrability.” Weiss v. Voice/Fax Corp . (1994), 94 Ohio App.3d 309,
313, citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. (1985), 473 U.S. 614,
626, 105 S.Ct. 3346, 3353. See, also, Roberts v. Bank of America NT&SA (Nov. 7,
1995), Franklin App. No. 95APE02-147, unreported.
The federal substantive law of arbitrability was se t forth by the United States
Supreme Court in Prima Paint Corp. v. Flood & Conklin Mfg. Co. (1967), 388 U.S. 395, 87
S.Ct. 1801. Under Prima Paint, the existence of a contract containing a broad ar bitration
agreement, which was admittedly signed by the contr actual parties, creates a
presumption that the parties agreed to arbitrate al l disputes, including those regarding the
validity of the contract in general. Id. In other words, an agreement for dispute resolutio n
by arbitration will not be denied effect unless it may be said with positive assurance that
the agreement is not susceptible to an interpretati on that covers the asserted dispute.
Neubrander v. Dean Witter Reynolds, Inc. (1992), 81 Ohio App.3d 308, 311.
No. 00AP-36
4
Ohio law encourages participation in arbitration ov er litigation. ABM Farms,
Inc. v. Woods (1998), 81 Ohio St.3d 498, 500; Kelm v. Kelm (1993), 68 Ohio St. 3d 26.
R.C. 2711.01(A) provides that:
A provision in any written contract, except as prov ided in
division (B) of this section, to settle by arbitrat ion a
controversy that subsequently arises out of the con tract, or
out of the refusal to perform the whole or any part of the
contract, or any agreement in writing between two o r more
persons to submit to arbitration any controversy ex isting
between them at the time of the agreement to submit , or
arising after the agreement to submit, from a relat ionship then
existing between them or that they simultaneously c reate,
shall be valid, irrevocable, and enforceable, excep t upon
grounds that exist at law or in equity for the revo cation of any
contract.
The defendants do not dispute that they entered int o an agreement to
resolve “all claims or disputes” with the plaintiff through binding arbitration. However, they
now seek to avoid that agreement arguing: (1) that the plaintiff waived its right to seek
arbitration when it filed suit to foreclose its lie n against defendants’ property, and (2) that
the plaintiff has failed to comply with the conditi ons precedent to arbitration.
While a party to an arbitration agreement may waive the right to proceed
with arbitration, we do not accept the defendants’ contention that the filing of suit always
constitutes such a waiver. In so finding, we adopt a balancing test such as that utilized by
the Cuyahoga County Court of Appeals in Phillips v. Lee Homes, Inc. (Feb. 17, 1994),
Cuyahoga App. No. 64353, unreported. Therein, the court stated that “[t]he essential
question is whether, based on the totality of the c ircumstances, the party seeking
arbitration has acted inconsistently with the right to arbitrate.” Id.
No. 00AP-36
5
When viewing the “totality of the circumstances,” w e consider the following
factors: (1) whether the party seeking arbitration invoked the jurisdiction of the court by
filing a complaint, counterclaim, or third-party co mplaint without asking for a stay of the
proceedings; (2) the delay, if any, by the party se eking arbitration to request a stay of the
judicial proceedings, or an order compelling arbitr ation; (3) the extent to which the party
seeking arbitration has participated in the litigat ion, including a determination of the status
of discovery, dispositive motions, and the trial da te; and (4) whether the nonmoving party
would be prejudiced by the moving party’s prior inc onsistent actions.
Applying this analytical framework to the facts of this case, we are unable to
conclude that the plaintiff has waived its right to seek arbitration in accordance with the
contract. Although it filed suit, plaintiff did so only in response to the defendants’ R.C.
1311.11 notification, and immediately thereafter mo ved the trial court for a stay of the
proceedings. Moreover, aside from the filing of th e complaint, the only legal action taken
by the plaintiff in this case has been in response to the defendants’ attempts to avoid
arbitration. Additionally, neither party has expen ded time or money conducting discovery,
pretrial motions, or trial preparation. As such, t his is not a case where the defendants will
be prejudiced by dilatory conduct by the plaintiff.
Finally, defendants incorrectly argue that the tria l court, and this court on
appeal, must decide whether or not the parties have complied with the conditions
precedent to arbitration.
We believe the United States Supreme Court’s decisi on in Wiley & Sons,
Inc. v. Livingston (1964), 376 U.S. 543, 84 S.Ct. 909, to be both ins tructive and
controlling. Therein, the Court was presented with a challenge of so called “procedural
No. 00AP-36
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arbitrability.” Specifically, the plaintiff argued that the arbitration agreement provided for
arbitration as the third step of an agreed upon gri evance procedure. Plaintiff went on to
argue that since the first and second steps had not been followed, it had no duty under
the third step to arbitrate the dispute with the de fendant. Addressing this argument, the
Supreme Court responded:
Once it is determined *** that the parties are obli gated to
submit the subject matter of a dispute to arbitrati on,
“procedural” questions which grow out of the disput e and bear
on its final disposition should be left to the arbi trator. Even
under a contrary rule, a court could deny arbitrati on only if it
could confidently be said not only that a claim was strictly
“procedural,” and therefore within the purview of t he court, but
also that it should operate to bar arbitration alto gether, and
not merely limit or qualify an arbitral award. In view of the
policies favoring arbitration and the parties’ adop tion of
arbitration as the preferred means of settling disp utes, such
cases are likely to be rare indeed. In all other c ases, those in
which arbitration goes forward, the arbitrator woul d ordinarily
remain free to reconsider the ground covered by the court
insofar as it bore on the merits of the dispute, us ing the
flexible approaches familiar to arbitration. Reservation of
“procedural” issues for the courts would thus not o nly create
the difficult task of separating related issues, bu t would also
produce frequent duplication of effort. [ Id. at 558, 919.]
Indeed, more recently this court explained in Reynoldsburg City School
Dist. Bd. of Edn. v. Reynoldsburg School Support As sn. (June 4, 1991), Franklin App.No.
90AP-1233, unreported, that:
*** seeking court intervention as to whether there should or
should not be arbitration and when facts are in dis pute does
not comport with the accepted policy favoring arbit ration and
removing these issues from the court. ***
Having found no waiver of the plaintiff’s right to pursue arbitration and,
further, having found that the procedural prerequis ites should be left to the arbitrator, we
No. 00AP-36
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overrule defendants’ assignment of error and affirm the judgment of the Franklin County
Court of Common Pleas.
Judgment affirmed.
DESHLER and BROWN, JJ., concur.
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