Global Pacific, L.L.C v. Kirkpatrick
2017 Ohio 1332
Ohio Ct. App.2017Background
- Reale Group (Global Pacific, LLC/Christopher Reale) and Kirkpatrick Group (Larry Kirkpatrick, KZB entities) were co-owners of R&K Machinery under a 2006 operating agreement that required mediation then arbitration of disputes between those two groups.
- Reale entered a 2010 agreement with franchisor BlueLine surrendering franchise interests; that agreement specified binding arbitration in Hawaii and Hawaii law.
- Kirkpatrick later asserted sole ownership of the Ohio franchise and executed an Asset Purchase and Termination Agreement with BlueLine containing broad releases by the Kirkpatrick Group in favor of BlueLine.
- Reale sued the Kirkpatrick Group in 2015 claiming his membership interest was never transferred; Kirkpatrick moved to compel arbitration under the 2006 operating agreement and then impleaded BlueLine seeking indemnity.
- The trial court stayed the underlying action pending arbitration per the 2006 operating agreement and ordered all parties, including nonsignatory BlueLine, to participate in mediation/arbitration and discovery.
- The Twelfth District reversed as to BlueLine: it held BlueLine was not a signatory or intended third-party beneficiary of the 2006 agreement and could not be compelled to arbitrate; the court also vacated discovery obligations as to BlueLine and remanded for disposition of BlueLine’s pending motions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can a nonsignatory (BlueLine) be compelled to mediate/arbitrate under the 2006 R&K Operating Agreement? | Kirkpatrick: BlueLine is effectively bound — either as a third-party beneficiary or under equitable estoppel/other doctrines; judicial economy supports joining BlueLine. | BlueLine: Not a party, did not sign the 2006 agreement, and has not sought to enforce its terms; thus cannot be forced to arbitrate. | BlueLine cannot be compelled to mediate/arbitrate under the 2006 agreement; no evidence it was an intended third-party beneficiary or otherwise bound. |
| Does incidental benefit to franchisor make it an intended beneficiary of co-owners’ operating agreement? | Kirkpatrick: The operating agreement was entered to run a BlueLine franchise, so BlueLine was intended to benefit. | BlueLine: Any benefit to franchisor was incidental, not a promise to confer enforceable rights. | Benefit to BlueLine was incidental; not an intended third-party beneficiary. |
| Can equitable estoppel or acceptance of benefits bind BlueLine to arbitration? | Kirkpatrick: BlueLine accepted benefits of the operating agreement by operating as franchisor and thus should be estopped from denying arbitration. | BlueLine: It did not accept direct benefits under the 2006 agreement or rely on it; releases/termination may negate claims. | No estoppel: record lacks evidence of BlueLine enforcing or accepting direct benefits tied to the 2006 agreement. |
| Was trial court required to rule on BlueLine’s motion for judgment on the pleadings or stay pending arbitration after ordering arbitration/mediation? | BlueLine: Trial court should not have ordered discovery or ignored its post-order dispositive motion; court should rule on pleadings before imposing obligations. | Trial court: ordered ADR for judicial economy and stayed litigation pending arbitration. | Court held discovery and ADR obligations for BlueLine were improper; BlueLine need not engage in discovery until trial court rules on outstanding motions; motion ruling was left to trial court on remand (third assignment moot). |
Key Cases Cited
- Benjamin v. Pipoly, 155 Ohio App.3d 171 (10th Dist.) (party cannot be required to arbitrate absent written agreement)
- Council of Smaller Enters. v. Gates, McDonald & Co., 80 Ohio St.3d 661 (Ohio 1998) (arbitrators derive authority only from parties’ agreement)
- Boedeker v. Rogers, 136 Ohio App.3d 425 (Eighth Dist.) (nonsignatories cannot be compelled to arbitrate under another’s contract)
- Taylor v. Ernst & Young, L.L.P., 130 Ohio St.3d 411 (Ohio 2011) (nonsignatory liquidator not bound to arbitration absent signature)
- Gerig v. Kahn, 95 Ohio St.3d 478 (Ohio 2002) (equitable estoppel can bind a nonsignatory who seeks relief under a contract containing arbitration clause)
- Hill v. Sonitrol of Sw. Ohio, 36 Ohio St.3d 36 (Ohio 1988) (intended third-party beneficiary test requires promisee’s intent to benefit third party)