Taylor v. Ernst & Young, L.L.P.
2011 Ohio 5262
| Ohio | 2011Background
- ACLIC was insolvent; Ernst & Young audited ACLIC's 1998 financials under an engagement letter that included an arbitration clause.
- The superintendent, as liquidator, filed suit against E&Y in 2003 alleging malpractice and preferential payments post-insolvency.
- E&Y moved to compel arbitration; the trial court denied, and the appellate court affirmed, relying on non-signatory status.
- Ohio Supreme Court reviewed whether the liquidator, not a signatory, could be bound by the arbitration clause or whether the Liquidation Act and Arbitration Act conflicted.
- The Court held the liquidator is not bound by the arbitration clause since the claims do not arise from the engagement letter, and tolling did not preserve such right; judgment affirmed remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the liquidator bound to arbitrate as a nonsignatory? | E&Y: liquidator stands in ACLIC's shoes and is bound. | Liquidator acts to protect public interests and may disavow contracts. | Not bound; liquidator not in signatory shoes. |
| Do the malpractice claims arise from the engagement letter? | Claims arise from the contract governing auditing services. | Claims arise from statutory duties and public filings, not the contract. | No; claims do not arise from the engagement letter. |
| Did tolling preserve the right to compel arbitration? | Tolling preserved defenses and arbitration rights as of effective date. | Tolling does not preserve arbitration rights for nonsignatories under current law. | No; tolling did not preserve the right to compel arbitration. |
| Are the liquidator's preference claims subject to arbitration? | Preferences are contractual and arbitrable as part of the contract claims. | Preferences are statutory claims that cannot be bound by arbitration. | Not subject to arbitration. |
Key Cases Cited
- United States v. Waffle House, Inc., 534 U.S. 279 (Supreme Court, 2002) (EEOC not bound by employer arbitration; strong federal enforcement framework)
- Gerig v. Kahn, 95 Ohio St.3d 478 (Ohio 2002) (nonsignatory arbitration when pursuing rights arising from contract interplay)
- Henderson v. Lawyers Title Ins. Corp., 108 Ohio St.3d 265 (Ohio 2006) (liquidator/contractual rights distinction in arbitration context)
- Peters v. Columbus Steel Casting Co., 115 Ohio St.3d 134 (Ohio 2007) (statutory claims (fraudulent transfers) not bound by arbitration)
- Academy of Medicine of Cincinnati v. Aetna Health, Inc., 108 Ohio St.3d 185 (Ohio 2006) (arbitration clause broad enough to cover disputes arising out of business relationship)
- Bennett v. Liberty Natl. Fire Ins. Co., 968 F.2d 969 (9th Cir. 1992) (liquidator standing and arbitrability in derivative claims)
- Costle v. Fremont Indemnity Co., 839 F.Supp. 265 (D. Vt. 1993) (arbitration and liquidator scope discussion)