2016 Ohio 1283
Ohio Ct. App.2016Background
- DRI and E&Y entered a 2006 Services Agreement containing a broad arbitration clause and a delegation clause stating arbitrators decide issues concerning the extent of arbitrability under the FAA.
- The parties extended the agreement through Dec. 31, 2012; E&Y later began using Scherzer (a DRI competitor) and stopped sending business to DRI.
- DRI sued E&Y and Scherzer in federal court asserting conspiracy, tortious interference, and other claims, voluntarily dismissed for lack of jurisdiction, then refiled in Lorain County Common Pleas.
- E&Y moved to compel arbitration under the FAA; Scherzer joined. DRI opposed, arguing the Services Agreement was illusory, arbitrability is for the court, its claims fall outside the arbitration clause, and Scherzer (a non‑signatory) cannot be compelled to arbitrate.
- The magistrate held arbitrability and enforceability issues belong to the arbitrators under the delegation clause, the arbitration clause broadly covers the dispute, and equitable estoppel (conspiracy allegations) binds Scherzer; the trial court adopted that decision and stayed the litigation.
- On appeal, the Ninth District affirmed, overruling all four of DRI’s assignments of error.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Services Agreement is illusory and thus unenforceable | Agreement is illusory; so arbitration clause unenforceable | Valid delegation clause makes enforceability an arbitrator issue; alternatively agreement is not illusory | Validity of entire agreement is for arbitrators under Supreme Court precedent; assignment overruled |
| Whether arbitrability is for the court or the arbitrator | Court should decide arbitrability | Delegation clause "clearly and unmistakably" delegates arbitrability to arbitrators | Delegation language (Exhibit E) construed under New York law clearly delegates arbitrability to arbitrators; assignment overruled |
| Whether DRI’s claims fall within scope of arbitration clause | Claims do not relate to services under the Agreement and thus are non‑arbitrable | Arbitration clause is broad; if delegation did not apply, court would find claims arbitrable | Court need not reach scope because arbitrators decide arbitrability; related assignment overruled |
| Whether non‑signatory Scherzer can be compelled to arbitrate | No arbitration agreement with Scherzer; E&Y not necessary party | Conspiracy/allegations show interdependent misconduct; equitable estoppel binds non‑signatory | Allegations of concerted conspiracy permit equitable estoppel; stay as to Scherzer proper; assignment overruled |
Key Cases Cited
- Rent‑A‑Ctr., W., Inc. v. Jackson, 561 U.S. 63 (challenge to entire contract must go to arbitrator)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (same principle: validity of contract as whole is for arbitrator)
- AT&T Technologies, Inc. v. Communications Workers of Am., 475 U.S. 643 (two‑step test: existence of arbitration agreement and scope)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (who decides arbitrability depends on parties’ agreement)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (liberal federal policy favoring arbitration; enforce agreements according to terms)
- Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1 (resolve doubts about arbitrability in favor of arbitration)