Ohio Plumbing, Ltd. v. Fiorilli Constr., Inc.
111 N.E.3d 763
Ohio Ct. App.2018Background
- Fiorilli (contractor) and Ohio Plumbing (subcontractor) entered a written subcontract for plumbing work on a SteinMart project; the contract included a multistage dispute-resolution clause culminating in binding dispute resolution (arbitration or litigation) at Fiorilli’s sole discretion.
- Ohio Plumbing performed work and claimed final approval; it sued Fiorilli in Cuyahoga County for $5,337, interest, and fees for alleged nonpayment, attaching the subcontract.
- Fiorilli moved to transfer venue and, relevant here, moved to stay or dismiss and compel arbitration under R.C. 2711.02, relying on the contract’s dispute-resolution clause.
- Ohio Plumbing opposed, arguing there was "nothing to arbitrate," that arbitration was unsuitable for a payment claim, that Fiorilli had not initiated arbitration (so was in default), and that the clause was unconscionable.
- The trial court summarily denied Fiorilli’s motion to stay pending arbitration; Fiorilli appealed.
- The appellate court reversed, finding the claims fall within the arbitration clause, Fiorilli had not defaulted in invoking arbitration, and Ohio Plumbing failed to prove unconscionability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ohio Plumbing’s breach-of-contract and Prompt Payment Act claims are subject to the contract’s arbitration clause | Claims are simply unpaid invoices — “nothing to arbitrate” and unsuitable for arbitration | Claims arise from the subcontract and thus fall within the broad "disputes under the Agreement" arbitration clause | Held: Claims are arbitrable; they arise from the contract and are within the clause’s scope |
| Whether Fiorilli was in "default in proceeding with arbitration" because it did not initiate arbitration before moving to stay | Fiorilli failed to serve a demand/commence arbitration and thus is in default under R.C. 2711.02(B) | No statutory or contractual requirement to commence arbitration before seeking a stay; moving promptly to stay does not waive the right | Held: Fiorilli was not in default; moving for a stay pending arbitration was proper and did not waive the right |
| Whether the arbitration provision is unconscionable and unenforceable | Clause is one-sided, confusing, costly and oppressive (procedural and substantive unconscionability) | Commercial parties freely negotiated the subcontract, Ohio Plumbing initialed each page, and no evidence was presented to show procedural or specific substantive unconscionability | Held: Ohio Plumbing failed to prove both procedural and substantive unconscionability; clause enforceable |
Key Cases Cited
- Hayes v. Oakridge Home, 122 Ohio St.3d 63 (2009) (recognizes strong public policy favoring arbitration and requires proof of both procedural and substantive unconscionability)
- Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St.3d 352 (2008) (arbitration clauses presumptively enforceable; discusses unconscionability analysis)
- Alexander v. Wells Fargo Fin. Ohio 1, Inc., 122 Ohio St.3d 341 (2009) (test whether an action can be maintained without reference to the contract to determine arbitral scope)
- Council of Smaller Ents. v. Gates, McDonald & Co., 80 Ohio St.3d 661 (1998) (arbitration clause should not be denied effect unless clearly inapplicable)