Crоsscut Capital, LLC, Plaintiff-Appellee, v. Nicholas DeWitt, Defendant-Appellant.
No. 20AP-222 (C.P.C. No. 19CV-4525)
IN THE COURT OF APPEALS OF OHIO TENTH APPELLATE DISTRICT
May 27, 2021
2021-Ohio-1827
DORRIAN, P.J.; SADLER and BEATTY BLUNT, JJ., concur.
REGULAR CALENDAR
On brief: Taft Stettinius & Hollister LLP, and Joseph C. Pickens, for appellee. Argued: Joseph C. Pickens.
On brief: Edward S. Brown, for appellant. Argued: Edward S. Brown.
APPEAL from the Franklin County Court of Common Pleas
{¶ 1} Defendant-appellant, Nicholas DeWitt, appeals the decision and entry of the
I. Facts and Procedural History
{¶ 2} On June 4, 2019, Crosscut filed a complaint in the trial court asserting claims against DeWitt for breach of fiduciary duty and breach of operating agreement. In its complaint, Crosscut, an Arizona limited liability company, alleged that in 2015 it entered into an agreement with DeWitt, a resident of Franklin County, Ohio, to form WKND Property Group, LLC (“WKND“) for the purpose of purchasing, rehabilitating, leasing, and selling real estate. Crosscut attached documents purporting to be copies of WKND‘s Operating Agreement (“Agreement“), dated October 26, 2015, and a First Amendment to the Agreement, dated March 23, 2017. In addition to monetary damages, Crosscut sought declaratory judgment and injunctive relief.
{¶ 3} On July 1, 2019, DeWitt filed an answer and counterclaim for breach of contract seeking declaratory relief in addition to costs, attorney fees, expenses, and such other relief as may be appropriate. On July 2, 2019, DeWitt refiled his answer and counterclaim to which he attached exhibits that were not included in the July 1, 2019 answer and counterclaim. On July 30, 2019, Crosscut filed a motiоn for judgment on the pleadings pursuant to
{¶ 4} On September 5, 2019, Crosscut filed a motion for an order approving sale of real property. On September 19, 2019, DeWitt filed a memorandum in opposition to Crosscut‘s motion for an order approving sale of real property and motion for order to compel Crosscut to replace money removed against the terms of the Agreement. On September 26, 2019, Crosscut filed a reply in support of its motion for an order approving sale of real property. On October 10, 2019, DeWitt filed a reply in support of his motion for an order to compel Crosscut to replace money removed against the terms of the Agreement.
{¶ 5} On October 1, 2019, DeWitt filed his first set of interrogatories and requests for production of documents pursuant to
{¶ 6} On December 3, 2019, Crosscut filed a motion for an оrder to compel discovery. In its motion, Crosscut asserted it sought DeWitt‘s answers and responses to Crosscut‘s first set of interrogatories, requests for production of documents, and requests for admissions, which it asserted was served on DeWitt on October 8, 2019. On December 18, 2019, DeWitt filed a motion to compel arbitration and stay proceedings. On December 24, 2019, Crosscut filеd a memorandum in opposition to DeWitt‘s motion to compel arbitration and stay proceedings.
{¶ 7} On March 27, 2020, the trial court filed a decision and entry granting the motion of Crosscut to compel discovery
II. Assignment of Error
{¶ 8} DeWitt assigns the following sole assignment of error for our review:
The trial court abused its discretion and incorrectly interpreted the standard of review for denying a motion to compel an arbitration clause #78 of the Pleadings in the Record, Decision and Entry On Defendant‘s Motion To Compеl Arbitration And/Or Stay Proceedings.
III. Analysis
{¶ 9} In his sole assignment of error, DeWitt asserts the trial court abused its discretion and applied the incorrect standard of review in denying his motion to compel arbitration and stay proceedings.
A. Applicable Law
{¶ 10} “Both the Ohio General Assembly and Ohio courts have expressed a strong public policy favoring arbitration.” Hayes v. Oakridge Home, 122 Ohio St.3d 63, 2009-Ohio-2054, ¶ 15, citing
{¶ 11}
If any action is brought upon any issue referable to arbitration under an agreement in writing for arbitration, the court in which the action is pending, upon being satisfied that the issue involved in the action is referable to arbitration under an agreement in writing for arbitration, shall on application of one of the parties stay the trial of the action until the arbitration of the issue has been had in аccordance with the agreement, provided the applicant for the stay is not in default in proceeding with arbitration.
Thus, a party to an arbitration agreement or provision may obtain a stay of litigation in favor of arbitration. Pinnell v. Cugini & Cappoccia Builders, Inc., 10th Dist. No. 13AP-579, 2014-Ohio-669, ¶ 16. An order under
{¶ 12} As with any other contractual right, a party may waive the right to arbitrate. Murtha v. Ravines of McNaughton Condominium Assn., 10th Dist. No. 09AP-709, 2010-Ohio-1325, ¶ 20, citing Rock v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 79 Ohio App.3d 126, 128 (8th Dist.1992). In light of Ohio‘s public policy favoring arbitration, the party asserting waiver bears the burden of proof. Morris v. Morris, 189 Ohio App.3d 608, 2010-Ohio-4750, ¶ 17 (10th Dist.), citing Murtha at ¶ 20. Furthermore, a “court will not lightly infer waiver of a right to arbitrate.” Id. at ¶ 18, citing Harsco Corp. v. Crane Carrier Co., 122 Ohio App.3d 406, 415 (3d Dist.1997).
{¶ 13} A party asserting waiver must establish: (1) the waiving party knew of the right to arbitrate, and (2) under the totality of the circumstances, the waiving party acted inconsistently with that known right. Pinnell at ¶ 18; Dispatch Printing Co. v. Recovery Ltd. Partnership, 10th Dist. No. 10AP-353, 2011-Ohio-80, ¶ 21. See Morris at ¶ 18, quoting Harsco Corp. at 414, quoting Phillips v. Lee Homes, Inc., 8th Dist. No. 64353 (Feb. 17, 1994) (” ’ “The essential question is whether, based on the totality of the circumstances, the party seeking arbitration has acted inconsistently with the right to arbitrate.” ’ “). In determining whether the totality of the circumstances supports finding that a party waived arbitration, a court may consider the following factors, in addition to any other relevant factors: “(1) whether the party seeking arbitration invoked the court‘s jurisdiction by filing a complaint or claim without first requesting a stay; (2) the delay, if any, by the party seeking arbitration to request a stay; (3) the extent to which the party seeking arbitration has pаrticipated in the litigation; and (4) whether prior inconsistent acts by the party seeking arbitration would prejudice the non-moving party.” Morris at ¶ 18.
B. Standard of Review
{¶ 14} The standard of review on appeal from an
{¶ 15} However, where the issue is whether a party has waived arbitration, we apply an abuse of discretion standard due to the ” ’ “fact-driven” ’ ” nature of the inquiry. Morris at ¶ 17, quoting Murtha at ¶ 20, quoting ACRS, Inc. v. Blue Cross & Blue Shield of Minnesota, 131 Ohio App.3d 450, 456 (8th Dist.1998). Therefore, as the sole issue raised by DeWitt in this appeal turns on the question of waiver, we review the trial court‘s decision for abuse of discretion. An
C. Analysis
{¶ 16} Here, DeWitt admits he knew of the right to arbitrate in the Agreement thereby satisfying the first factor in the test for waiver. However, DeWitt argues Crosscut did not establish the second factor by demonstrating he acted inconsistently with the right to arbitrate under the totality of the circumstаnces. DeWitt argues he never waived the arbitration clause because he timely filed the motion to compel arbitration and stay proceedings. Crosscut responds that: (1) DeWitt waived any right to arbitrate by filing an answer and counterclaim in which he failed to assert arbitration as a defense, (2) DeWitt waived any right to arbitrate by failing to assert any such right until Deсember 18, 2019, (3) it will be prejudiced by an order compelling arbitration, and (4) the trial court correctly declined to sua sponte refer the parties to arbitration. Crosscut also asserts that DeWitt‘s assignment of error should be overruled for failing to comply with
{¶ 17} In denying DeWitt‘s motion to compel arbitration and stay proceedings, the trial court found DeWitt actеd inconsistently with his right to arbitrate by filing an answer and counterclaim on July 2, 2019 in which he made no mention of the defense of arbitration or sought a stay of the proceedings. Furthermore, the trial court found DeWitt “extensively participated in the current litigation” beyond the filing of the answer and counterclaim by “actively participat[ing] in discovery” and responding tо Crosscut‘s motions. (Mar. 27, 2020 Decision at 5.) As a result, the trial court found DeWitt‘s motion to compel arbitration and stay proceedings untimely.
{¶ 18} In support of his argument, DeWitt compares the matter at hand with our decision in Murtha. In that case, the trial court granted the defendants’ motion to stay proceedings and to appoint an arbitrator. On review, we found the defеndants’ filing of an answer and counterclaim and participation in discovery to be inconsistent with a request for arbitration. Nevertheless, we found that the two-month delay between the filing of defendants’ pleadings and their motion for a stay pending arbitration was a shorter period than in other, similar cases involving waiver. Furthermore, the plaintiff failed to demоnstrate prejudice in the defendants’ delay in requesting arbitration. Ultimately, although we found the matter presented a “somewhat close question,” we declined to find the trial court abused its discretion in determining that the totality of the circumstances supported a determination that the defendants did not waive their right to arbitration. Id. at ¶ 26.
{¶ 19} Here, under the first factor in thе totality of the circumstances test, DeWitt filed an answer and counterclaim without first requesting a stay thereby indicating invocation of the trial court‘s jurisdiction. As in Murtha, this factor weighs in favor of finding waiver of arbitration. Id. at ¶ 23.
{¶ 20} Under the second factor, the record reflects DeWitt waited over six months from the filing of his answer and counterclaim before filing the motion to compel arbitration and stay proceedings. The trial court found DeWitt‘s motion to be untimely. Although substantially longer than the two-month delay between the filing of the answer and counterclaim in Murtha, DeWitt‘s delay is not as lengthy as some other cases in which courts have
{¶ 21} Under the third factor, the record reflects DeWitt participated in the litigation not only by filing an answer and counterclaim, but also by filing a motion to compel on September 19, 2019, a first set of interrogatories and requests for produсtion of documents pursuant to
{¶ 22} Next, we consider under the fourth factor whether prior inconsistent acts by the party seeking arbitration would prejudice the non-moving party. Crosscut argues it would be prejudiced by granting DeWitt‘s motion to compel arbitration and stay proceedings because there has been significant activity in the current litigation and DeWitt has benefitted from the open discovery process in the trial court under
{¶ 23} Finally, we note that DeWitt, despite his admission that he was aware of the right to arbitrate, did not include the right to arbitrate as an affirmative defense in his answer. Although it is not necessary to affirmatively plead arbitration as a defense in order to avoid waiver, the failure to plead such right may be considered as a factor under the totality of the circumstances. See Hunter at ¶ 22 (stating that the “absence of the defense” of arbitration “contributes to the overall analysis” of whether the party waived arbitration); Zellner v. Prestige Gardens Rehab. & Nursing Ctr., 3d Dist. No. 14-18-14, 2019-Ohio-595, ¶ 35 (stating that “[a]lthough a party is not required to affirmatively plead the right to arbitrate in order to presеrve the right, doing so is a factor that weighs against a finding of waiver“); U.S. Bank Natl. Assn. v. Allen, 3d Dist. No. 11-15-09, 2016-Ohio-2766, ¶ 18; Blue Technologies Smart at ¶ 22 (noting the defendants filed two answers and a counterclaim without seeking a stay or including the right to arbitrate as an affirmative defense); Donnell v. Parkcliffe Alzheimer‘s Community, 6th Dist. No. WD-17-001, 2017-Ohio-7982, ¶ 23 (noting arbitration was raised as an affirmative defense in party‘s answer); Hudson v. Ernst & Young, L.L.P., 189 Ohio App.3d 60, 2010-Ohio-2731, ¶ 37 (10th Dist.), quoting Atkinson v. Dick Masheter Leasing II, Inc., 10th Dist. No. 01AP-1016, 2002-Ohio-4299, ¶ 23 (recognizing that ” ‘an arbitration defense, pursuant to
{¶ 24} Having reviewed the totality of the circumstances, considering Ohio‘s public policy favoring arbitration, and mindful of the standard of review, we cannot find the trial court abused its discretion by concluding DeWitt waived his right to arbitrate. Accordingly, we overrule DeWitt‘s sole assignment of error.
D. Crosscut‘s Motion and Requests
{¶ 25} Finally, we address Crosscut‘s motion to supplement the record, request to disregard DeWitt‘s assignment of error pursuant to
{¶ 26} Finally, we address Crosscut‘s request in their brief for sanctions
IV. Conclusion
{¶ 27} Having overruled DeWitt‘s sole assignment of error, we affirm the judgment of the Franklin County Court of Common Pleas.
Motions denied; judgment affirmed.
SADLER and BEATTY BLUNT, JJ., concur.