THEODORE DUMAS, ET AL., Plаintiffs-Appellees, v. NORTH EAST AUTO CREDIT, L.L.C., Defendant-Appellant.
Nos. 108151 and 108388
COURT OF APPEALS OF OHIO EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA
November 21, 2019
2019-Ohio-4789
Civil Appeal from the Cuyahoga County Common Pleas Court Case No. CV-17-885863
JUDGMENT: AFFIRMED AND REMANDED
RELEASED AND JOURNALIZED: November 21, 2019
Appearances:
Frederick & Berler, L.L.C., Ronald I. Frederick, Michael Berler, and Michael L. Fine, for appellees.
The Gertsburg Law Firm Co., L.P.A., Mark M. Turner, Eugene Friedman, Maximilian Julian, and Cynthia M. Menta; and William J. Krueger, for appellant.
SEAN C. GALLAGHER, J.:
{¶ 1} North East Auto Credit, L.L.C. (“NEAC“), appeals the denial of its motion to stay the trial court proceedings under
{¶ 2} Theodore Dumas and Charlene Parker purchased a vehicle from NEAC. In their purchase agreement, Dumas and Parker agreed that either party may seek to arbitrate any disputes arising thereunder, and that if the matter was arbitrated, the plaintiffs waived any right to join a class-action lawsuit:
1. Either yоu or we may choose to have any dispute between us decided by arbitration and not in court or by jury trial.
2. If a dispute is arbitrated, you will give up your right to participate as a class representative or a class member on any class claim you have against us including any right to class arbitration or any consolidation of individual arbitrations.
* * *
Any claim or dispute, whether in contract tort, statute or otherwise (including the interpretation and scope of the Arbitration Agreement, and the arbitrability of the claim or dispute), between you and us or our employees, agents, successors or assigns, which arises out of or relates to * * * [the] purchase or condition of this vehicle, this contract or any resulting transaction or relationship (including any such relationship with third parties that don‘t sign this contract) shall, at your or our election, be resolved by neutral, binding arbitration and not court action.
In light of the permissive nature of the arbitration clause, Dumas and Parker chose to file a lawsuit to settle a disagreement with NEAC, which in turn, consented to proceed on the individual claims despite preserving its affirmative defense of arbitration. We note that according to the express terms of their agreement, Dumas and Parker have not waived their right to participate as class representatives or
{¶ 3} During the pretrial proceedings, Dumas and Parker requested and were granted leave to amend their complaint, although the basis of that rеquest is disputed. The motion for leave was made orally during a pretrial conference, and there is no record of the proposed amendments. The amended complaint included allegations for similarly situated, putative class members. Dumas and Parker claim that NEAC should have been aware of the impending class-action allegations regardless of any confusion over the substantive basis of their request, and therefore, NEAC consented to including the class allegations. NEAC claims that Dumas and Parker only аsked for leave to amend the complaint in order to address their individual claims; otherwise, NEAC would have objected to the inclusion of the class-action allegations.
{¶ 4} Because there is no record substantiating the basis of Dumas and Parker‘s oral motiоn, we cannot conclude that NEAC affirmatively consented to the amended complaint including the class allegations to waive any defenses to the amendment of the allegations. “To establish waiver, the party seeking waiver must demonstrate (1) that the party knew of its right to assert an argument or defense and (2) that the totality of the circumstances establish that the party acted inconsistently with that right.” Gembarski v. PartsSource, Inc., Slip Opinion No. 2019-Ohio-3231, ¶ 25, citing Donnell v. Parkcliffe Alzheimer‘s Community, 6th Dist. Wood No. WD-17-001, 2017-Ohio-7982, ¶ 21; and Atkinson v. Dick Masheter Leasing II, Inc., 10th Dist. Franklin No. 01AP-1016, 2002-Ohio-4299, ¶ 20. In light of the silent record, brought on by the fact that the motion for leave to amend the pleading was made orally with nо notation in the record as to its substance, we cannot consider Dumas and Parker‘s argument that NEAC affirmatively consented to an amendment to include the class allegations, and through that alleged consent, waived the right to challenge the class-action allegations.
{¶ 5} In response to the amended pleading, NEAC retained additional counsel and immediately filed a motion to strike the class claims under
{¶ 6} Regardless, in this appeal, the only issue that we have jurisdiction to address is the denial of the motion to stay pending arbitration of the class allegations. It is without question that an order granting or denying a motion fоr stay pending arbitration is a final appealable order.
{¶ 7} In Gembarski, Slip Opinion No. 2019-Ohio-3231, the individual plaintiff included class allegations in the initial complaint. The Ohio Supremе Court concluded that when a case originates with an individual plaintiff who is also named as a class representative, the defendant need not raise an arbitration defense relating to the putative class members during the initial stages of the litigation. Id. at ¶ 3.
{¶ 8} Certification of the class, the point in which the unnamed putative class members actually beсome parties to the action, is the first time during the proceedings that a defendant may assert the arbitration defense against the class members. This is because without the class being certified, there is “no justiciable controversy between a defendant аnd the unnamed putative class members.” Id., citing Kincaid v. Erie Ins. Co., 128 Ohio St.3d 322, 2010-Ohio-6036, 944 N.E.2d 207, ¶ 17. Thus, under Gembarski, before the certification stages, a defendant has no duty to raise an argument that the unnamed putative class members were parties to arbitration agreements and that the individual plaintiffs failed to satisfy
{¶ 9} In this case, arguably, the plaintiffs were not required to arbitrate their claims because of the permissive nature of the particular arbitration сlause and the fact that NEAC acquiesced to the trial court action. We recognize one difference between the current case and Gembarski. In this case, the individual plaintiffs are
{¶ 10} NEAC could not have waived any individual defenses against the putative class members because those members are not yet parties in this action, nor can Dumas and Parker elect to avoid arbitration on behalf of the putative class members, who themselves have the individual right to request arbitration and against whom NEAC can elect to seek individual arbitration. Rimedio v. SummaCare, Inc., 9th Dist. Summit No. 21828, 2004-Ohio-4971, ¶ 14. In accordance with Gembarski, the trial court erred in concluding that NEAC waived its right to assert an arbitration defense to the individual putative class members before the class-certification stages.
{¶ 11} This conclusion, however, may be of little value to NEAC‘s current appeal. Because the putative class members are nоt parties in this proceeding and are not under the trial court‘s authority, it necessarily follows that there is no justiciable controversy upon which arbitration could be compelled or the action stayed at this point in time. Gembarski, Slip Opinion No. 2019-Ohio-3231, at ¶ 31. As the Ohio Supreme Court also сoncluded, a defendant has no right to an
{¶ 12} Until the class-certification stage, NEAC cannot waive its right to assert an arbitration defense against the putative class members or as a basis to demonstrate that Dumas and Parker failed to demonstrate the typicаlity or adequacy requirements of
{¶ 13} Although the trial court‘s reason for denying the motion to stay pending arbitration was erroneous in light of the later-issued decision in Gembarski, the correct result was nonetheless reached. Nothing in our decision should be interpreted to mean that NEAC cannot raise the affirmative defense of arbitration against the putative class members at the appropriate time. Our sole conclusion is that the triаl court reached the correct result in denying the motion to stay pending arbitration because consideration of the arbitrability of the unnamed, putative class members’ claims is premature at this point in time. We affirm the decision denying NEAC‘s motion to stay the рroceeding pending the arbitration. The matter is remanded for further proceedings.
It is ordered that appellant and appellees share costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered thаt a special mandate be sent to said court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure.
SEAN C. GALLAGHER, JUDGE
MARY J. BOYLE, P.J., and
LARRY A. JONES, SR., J., CONCUR