2020 Ohio 3455
Ohio Ct. App.2020Background
- Kenneth and Kimberlee Gerston formed the Gerston Family Trust; after Kenneth's 2010 death Kimberlee served as trustee.
- Kenneth Gerston and Allan Robbins created Parma GE 7400 and Parma VTA to hold commercial property at 7400 Broadview Road; the parties executed a Tenants‑in‑Common Agreement (TIC) that contains a mandatory arbitration clause for controversies arising from the Agreement.
- Kimberlee sued in 2014 seeking a declaratory judgment that the Trust owned Parma GE 7400; the trial court tried ownership first (bifurcated issues) and found the Trust the majority owner; this court affirmed in 2018.
- After remand Parma GE 7400 was realigned as a plaintiff and plaintiffs filed a supplemental complaint (March 2019) asserting claims tied to the TIC.
- Defendants first raised arbitration in April 2019 and moved for a partial stay to arbitrate five claims; the trial court denied the stay. The sole appellate question was whether defendants waived their right to arbitrate by litigating the case for five years without invoking arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether defendants waived the right to arbitrate claims in the supplemental complaint | Defendants litigated for ~5 years without invoking arbitration and failed to reserve the right, so they implicitly waived arbitration and prejudiced plaintiffs | Arbitration clause governs disputes between Parma GE 7400 and Parma VTA; Parma GE 7400’s realignment triggered defendants’ obligation to seek arbitration and they did so promptly after realignment | Court affirmed denial of stay: under the totality of circumstances defendants implicitly waived arbitration by long delay and participation; trial court did not abuse its discretion |
| Proper standard of review for waiver | Waiver is fact driven, so deferential (abuse of discretion) review | Some arbitration threshold questions are de novo, but waiver is factual | Court applied abuse‑of‑discretion to waiver and held even under de novo review result would be the same |
Key Cases Cited
- Taylor Bldg. Corp. of Am. v. Benfield, 884 N.E.2d 12 (Ohio 2008) (standards for arbitrability and when de novo review applies)
- Gembarski v. PartsSource Inc., 134 N.E.3d 1175 (Ohio 2019) (limitations on when arbitration defenses must be raised in class‑action contexts)
- Cleveland‑Akron‑Canton Advertising Cooperative v. Physician’s Weight Loss Ctrs. of Am., 922 N.E.2d 1012 (8th Dist. 2009) (equitable principles can bind non‑contracting plaintiffs to arbitration when they accept benefits of the contract)
- McAllisters Bros., Inc. v. A & S. Transp. Co., 621 F.2d 519 (2d Cir. 1980) (equity may require arbitration by parties who did not directly contract if agency/benefit principles apply)
- Harsco Corp. v. Crane Carrier Co., 701 N.E.2d 1040 (3d Dist. 1997) (strong public policy favoring arbitration; waiver not lightly inferred)
- Bass Energy, Inc. v. Highland Hts., 954 N.E.2d 130 (8th Dist. 2010) (explaining implicit waiver when party litigates in a manner inconsistent with arbitration and the opposing party is prejudiced)
- Shumaker v. Saks Inc., 837 N.E.2d 393 (8th Dist. 2005) (distinguishing issues reviewed de novo from those reviewed for abuse of discretion)
- Kincaid v. Erie Ins. Co., 944 N.E.2d 207 (Ohio 2010) (justiciability requires a present controversy)