2019 Ohio 1350
Ohio Ct. App.2019Background
- Reznik contracted with Canon Construction for roof repairs; disputes arose over performance and parties sued defendants and their surety asserting CSPA violations and other claims.
- The written contract contained both an arbitration clause (mandating AAA arbitration in Summit County) on the reverse side and a separate "disputes" clause stating disputes "shall be subject to legal proceedings in any court."
- Defendants moved to compel arbitration and stay or dismiss; Reznik opposed, alleging lack of mutual assent, misidentification/fraud by defendants, unconscionability (procedural and substantive), and requested limited discovery and a jury trial on the arbitration issue.
- The trial court granted the motion to compel arbitration without holding a hearing or allowing discovery; it did not issue a stay under R.C. 2711.02.
- On appeal, the Eighth District reversed and remanded, holding a hearing under R.C. 2711.03 was mandatory because the validity/applicability of the arbitration agreement was in dispute and factual issues existed (conflicting contract provisions; identity/misrepresentation issues).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trial court properly compelled arbitration without a hearing | Reznik: arbitration clause is unenforceable/unconscionable; there was no meeting of minds; identity and fraud issues place validity in dispute, so hearing and discovery required | Defendants: contract contains clear arbitration clause; claims referable to arbitration so court may compel arbitration | Court: reversed — under R.C. 2711.03 a hearing is required when the making/validity of the arbitration agreement is in issue; remanded for hearing and discovery |
| Whether conflicting contract provisions negate arbitration | Reznik: contract’s disputes clause providing court litigation conflicts with arbitration clause, creating ambiguity favoring plaintiff | Defendants: arbitration clause governs despite drafting tensions | Court: conflict and "inartfully crafted" provisions create factual/legal questions; conflict supports need for hearing |
| Whether noncompany individual defendants are subject to arbitration | Reznik: individual Dewalds and Kvak are not signatories and cannot be compelled | Defendants: sought to compel arbitration generally (some arguments may include agency/alter ego) | Court: left unresolved — factual determination required at remand hearing |
| Whether limited discovery and a jury trial were required before compelling arbitration | Reznik: requested limited discovery and demanded jury trial on factual issues of agreement formation | Defendants: moved to compel arbitration without extended discovery; argued court could compel | Court: agreed discovery and a hearing are required when validity is in issue; sustained assignments regarding discovery and hearing |
Key Cases Cited
- Maestle v. Best Buy Co., 800 N.E.2d 7 (Ohio 2003) (distinguishes stay under R.C. 2711.02 from compel under R.C. 2711.03 and explains hearing requirement when validity of arbitration agreement is in issue)
- Taylor Bldg. Corp. of Am. v. Benfield, 884 N.E.2d 12 (Ohio 2008) (arbitrability and related challenges are reviewed de novo when they concern agreement to arbitrate or unconscionability)
- Shumaker v. Saks Inc., 837 N.E.2d 393 (Ohio Ct. App. 2005) (discusses standards for reviewing arbitration-agreement challenges and applicability of de novo review)