2018 Ohio 4425
Oh. Ct. App. 8th Dist. Cuyahog...2018Background
- In August 2012 Bryan and Kristi Paulozzi contracted with Parkview Custom Homes to build a house; the written construction agreement contained an arbitration clause naming the Ohio Arbitration and Mediation Center (OAMC) as the forum.
- The Paulozzis allege construction defects (driveway, kitchen floor) and that Parkview failed to repair them or respond to the statutorily required 60-day notice.
- The Paulozzis sued Parkview in 2017 asserting multiple contract, warranty, consumer-protection, and tort claims.
- Parkview moved to stay litigation and compel arbitration under the contract; the Paulozzis opposed, arguing the OAMC is defunct, possibly conflicted/biasing, and that the arbitration clause was induced by fraud.
- The trial court denied the motion, holding the arbitration clause unenforceable under the doctrine of impossibility because it specified a now-defunct forum and provided no alternative.
- The court of appeals reversed, holding arbitration is still practicable (OAMC can be severed and a court-appointed or mutually agreed arbitrator can proceed) and remanded for factual findings on the fraud claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether arbitration clause is unenforceable by impossibility because OAMC is defunct | OAMC appears defunct or nonresponsive, making arbitration impossible | Even if OAMC is unavailable, parties can appoint or seek court appointment of another arbitrator; the arbitration obligation remains performable | Reversed trial court: not impossible; arbitration enforceable because the parties' obligation to arbitrate can be fulfilled by another forum or court appointment |
| Whether identification of OAMC is severable or fatal to arbitration | The specified forum was essential and its unavailability voids the clause | The clause (and parties' intent to arbitrate) is severable from the OAMC identification; other forums or court appointment will permit arbitration | Identification of OAMC may be severed; severability clause and statute permit appointment of an arbitrator, so arbitration survives |
| Whether arbitration clause is void for fraud or conflict of interest | Clause induced by fraud/undisclosed relationships between Parkview and OAMC (bias) | Dispute over bias is factual; does not negate ability to arbitrate—issue for trial court factfinding | Remanded for trial court to make factual findings and rule on fraud/unconscionability allegations |
Key Cases Cited
- Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St.3d 352 (Ohio 2008) (trial-court factual findings on contract enforceability deserve deference)
- Williams v. Aetna Fin. Co., 83 Ohio St.3d 464 (Ohio 1998) (Ohio public policy favors enforcement of arbitration provisions)
- Ignazio v. Clear Channel Broadcasting, Inc., 113 Ohio St.3d 276 (Ohio 2007) (doubts about arbitrability are resolved in favor of arbitration)
- Lake Ridge Academy v. Carney, 66 Ohio St.3d 376 (Ohio 1993) (elements of unconscionability: procedural and substantive)
- Huntington & Finke Co. v. Lake Erie Lumber & Supply Co., 109 Ohio St. 488 (Ohio 1924) (severability depends on parties' intent and contract construction)