AJZ's Hauling, L.L.C. v. TruNorth Warranty Program of N. Am.
2021 Ohio 1190
| Ohio Ct. App. | 2021Background
- AJZ Hauling (Pa. LLC registered to do business in Ohio) bought a 2011 Kenworth from Premier (Ohio); the sale included a two‑year TruNorth warranty covering major components. TruNorth is a North Carolina entity.
- AJZ experienced engine/transmission failures, submitted claims to Premier/TruNorth, and paid for repairs when TruNorth declined coverage.
- In Case No. CV‑19‑915772 AJZ sued Premier and TruNorth; TruNorth moved to stay and compel arbitration (and alternatively to dismiss under the warranty’s North Carolina forum clause). The trial court granted TruNorth’s motion to compel arbitration on Aug. 6, 2019; AJZ did not appeal; later AJZ dismissed claims against TruNorth without prejudice and settled with Premier.
- AJZ then filed a new complaint against TruNorth (CV‑19‑926630). TruNorth again moved to compel arbitration and relied on the prior order; the trial court denied the motion on March 7, 2020, finding the arbitration and forum‑selection clauses procedurally and substantively unconscionable based largely on AJZ’s affidavit that the warranty was emailed four days after delivery and was not explained.
- The Eighth District affirmed: it declined to apply res judicata (the earlier order was summary and lacked factual findings), held no remand for an evidentiary hearing was required given the parties’ briefing and evidence, and concluded the arbitration clause and North Carolina forum clause were unenforceable because enforcement would be unfair and effectively deny AJZ its day in court.
Issues
| Issue | Plaintiff's Argument (AJZ) | Defendant's Argument (TruNorth) | Held |
|---|---|---|---|
| Whether res judicata bars relitigation of arbitrability | Prior grant of motion to compel was not final for purposes of preclusion in fairness; trial court may reconsider | Prior August 6, 2019 order was a final appealable order; AJZ’s failure to appeal bars relitigation | Res judicata not applied: prior order was summary, lacked factual findings, and fairness permitted reconsideration |
| Whether the court was required to hold an oral/evidentiary hearing under R.C. 2711.03 | Court could decide based on full briefing and affidavits; no remand needed | R.C. 2711.03 requires the court to "hear the parties" and hold a hearing when enforceability is contested | No reversible error: parties fully briefed and submitted evidence; the court effectively "heard" the parties and made reasoned findings |
| Procedural unconscionability of arbitration clause | Warranty was emailed 4 days after delivery, clause not explained, AJZ (small family business) had no meaningful choice or notice | AJZ is a commercial entity that should have read the agreement; clause was standard and enforceable | Clause procedurally unconscionable: lack of meaningful notice/explanation, adhesive presentation, undisputed affidavit showing no meeting of the minds |
| Substantive unconscionability and forum‑selection enforceability | Arbitration would be prohibitively costly (three arbitrators, travel to NC), forum clause unjust and would deny day in court | Arbitration/fórum clause are presumptively valid in commercial contracts and should be enforced | Clause substantively unconscionable and forum selection unenforceable: potential prohibitive costs, NC in‑person arbitration would be unreasonable and unjust for AJZ |
Key Cases Cited
- Maestle v. Best Buy Co., 800 N.E.2d 7 (Ohio 2003) (distinguishes procedure for stays vs. petitions to compel arbitration and explains hearing requirement under R.C. 2711.03)
- Taylor Bldg. Corp. of Am. v. Benfield, 884 N.E.2d 12 (Ohio 2008) (sets out two‑prong unconscionability analysis—procedural and substantive)
- Mynes v. Brooks, 918 N.E.2d 511 (Ohio 2009) (R.C. 2711.02(C) orders staying trial pending arbitration are final appealable orders)
- Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. 1983) (policy favoring arbitration and resolving doubts in favor of arbitration)
- Green Tree Financial Corp. v. Randolph, 531 U.S. 79 (U.S. 2000) (party claiming prohibitive arbitration costs must show likelihood of such costs)
- Kennecorp Mortgage Brokers v. Country Club Convalescent Hosp., 610 N.E.2d 987 (Ohio 1993) (forum‑selection clauses prima facie valid in commercial context unless enforcement is unreasonable or unjust)
- Hayes v. Oakridge Home, 908 N.E.2d 408 (Ohio 2009) (party must prove both procedural and substantive unconscionability)
- Grava v. Parkman Twp., 653 N.E.2d 226 (Ohio) (res judicata and its equitable limits; doctrine applied as fairness requires)
- State ex rel. Estate of Miles v. Piketon, 903 N.E.2d 311 (Ohio 2009) (res judicata not applied when fairness and justice would not support it)