GERIG ET AL., APPELLANTS, v. KAHN ET AL.; ST. VINCENT MERCY MEDICAL CENTER, APPELLEE.
No. 2001-0968
SUPREME COURT OF OHIO
Submitted March 27, 2002—Decided June 19, 2002.
95 Ohio St.3d 478 | 2002-Ohio-2581
[This decision has been published in Ohio Official Reports at 95 Ohio St.3d 478.] APPEAL from the Court of Appeals for Lucas County, No. L-00-1135.
DOUGLAS, J.
{¶1} On January 18, 1997, while under the care of Gary Kahn, M.D., Dawn Gerig gave birth to Matthew Gerig at St. Vincent Mercy Medical Center. After the birth, it was discovered that Matthew had several birth defects.1 On March 13, 1997, St. Vincent and Kahn signed an affiliation agreement memorializing Kahn’s new status as a St. Vinсent employee. The agreement also addressed St. Vincent’s obligations to Kahn regarding medical malpractice insurance coverage. On August 4, 1997, Matthew’s parents and Matthew Gerig, by and through his mother, filed a complaint against Kahn,2 alleging that Matthew’s birth defects resulted from mеdical malpractice committed by Kahn during Matthew’s delivery.
{¶3} Although Kahn had been insured by P.I.E. for malpractice liability up to $4 million, recovery from OIGA is statutorily limited to $300,000. Moreover, pursuant to
{¶4} After learning of P.I.E.’s insolvency, the Gerigs reviewed the affiliation agreement and determined that, because of P.I.E.’s insolvency, the agreement required St. Vincent to insure Kahn through its self-insurance plan up to $4 million against medical malpractice claims4 such as the Gerigs’ that were made
{¶5} OIGA also filed a cross-claim for declaratory judgment against St. Vincent, asking the court to declare that the affiliation agreement between St. Vincent and Kahn required St. Vincent to indemnify Kahn. OIGA further asked the court to declare that, pursuant to
{¶6} Kahn filed a counterclaim for declaratory judgment also asking the court to declare that St. Vincent had a contractual duty to allocate $4 million in self-insurance for his indemnification.
{¶7} St. Vincent, relying on an arbitration clause contained in the affiliation agreement, moved the court to stay the proceedings in the medical malpractice action and the declaratory judgment action and also sought an order compelling arbitration of the dispute regarding whether St. Vincent is legally required, pursuant to the agreement, to insure Kahn through its self-insurance plan.
{¶8} The Gerigs and OIGA opposed St. Vincent’s motion, arguing that they could not be compelled to arbitrate the dispute because they were not parties to the affiliation agreement and therefore were not bound by the arbitration clause therein. The trial court denied St. Vincent’s motion to compel arbitration, concluding that, if granted, appellants would be deprived of their right to be heard with regard to the interpretation of the affiliation agreement.
{¶9} St. Vincent appealed the trial court’s ruling to the Court of Appeals for Lucas County.7 The court of appeals reversed the trial court’s dеcision and held
{¶10} The cause is before this court upon our allowance of a discretionary appeal.
{¶11} The issue in this case is whether signatories to a contract may enforce an arbitration provision аgainst a nonsignatory who seeks a declaration of the signatories’ rights and obligations under the contract. For the reasons that follow, we hold that they may, and, accordingly, we affirm the judgment of the court of appeals.
{¶12} In their declaratory judgment action, the Gerigs seek а declaration that the affiliation agreement between St. Vincent and Kahn requires St. Vincent to insure Kahn through its self-insurance plan against the Gerigs’ medical malpractice claim. OIGA seeks the same declaration in its cross-claim against St. Vincent. The Gerigs concede that if Kahn were to seek this same declaration, he would be forced to arbitrate the issue pursuant to the agreement’s arbitration provision. The arbitration clause in the affiliation agreement covers this issue and is undeniably broad. Specifically, it provides:
{¶13} Any controversy оr claim arising out of, or relating in any way to, this Agreement or the breach thereof shall be resolved by arbitration in the City of Toledo, Ohio, in accordance with the rules then obtaining of the American Arbitration Association.
{¶14} The Gerigs and OIGA, however, contend that, as nonsignatories, they аre not bound by the arbitration provision. In support of their position, the Gerigs and OIGA rely on the principle that arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit. Council of Smaller Enterprises v. Gates McDonald & Co. (1998), 80 Ohio St.3d 661, 665, 687 N.E.2d 1352, quoting United Steelworkers of Am. v. Warrior & Gulf Navigation Co. (1960), 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409.
{¶15} St. Vincent, on the other hand, urges this сourt to affirm the decision of the court of appeals, wherein the court held that the Gerigs and OIGA are bound by the arbitration provision. The court determined that it would be inequitable to allow the Gerigs and OIGA to avoid a burden of the agreement, i.e., arbitration, while simultaneously seeking a benefit of the agreement, i.e., medical malpractice insurance coverage for Kahn.
{¶16} In support of its decision, the court of appeals cited Fawn v. Heritage Mut. Ins. Co. (June 30, 1997), Franklin App. No. 96APE12-1678, 1997 WL 359322. Kim Fawn was injured in an automobile accident while she was operating a vehicle оwned by Robert Beach. After settling with the tortfeasor, Fawn sought underinsured motorist coverage from Beach’s insurer, Heritage Mutual Insurance Company. Fawn subsequently sued Heritage, and Heritage moved for a stay pending arbitration pursuant to its contract of insurance with Beach. The trial court denied the motion, and Heritage appealed. The court of appeals reversed, holding
{¶17} The Gerigs and OIGA argue that the holding in Fawn is not applicable to this case because, unlike Fawn, they are neither insureds nor third-party beneficiariеs of the agreement. They claim instead to be incidental beneficiaries with sufficient interest in the affiliation agreement to satisfy the requirement for bringing a declaratory judgment action under
{¶18} We acknowledge that the relationship between Fawn and Heritage was different from the relationship between the parties in this case. We find, however, that the differences make application of the equitable estoppel doctrine even morе appropriate here. Unlike Fawn, the Gerigs and OIGA do not have a direct dispute with a signatory regarding their rights under the agreement. Rather, the Gerigs and OIGA have an interest in Kahn’s dispute with St. Vincent regarding Kahn’s rights under the agreement. Because appellants derive their interest in the agreement through Kahn, they can have no greater right than Kahn to a judicial interpretation of the agreement. Luntz v. Stern (1939), 135 Ohio St. 225, 230, 14 O.O. 62, 20 N.E.2d 241.
{¶19} Moreover, we find that it would be inequitable to allow an interested nonsignatory to determine the forum in which an agreement is to be interpreted when the signatories prеviously agreed in writing to arbitrate any controversy relating to the agreement. Accordingly, we hold that a signatory to a contract may enforce an arbitration provision against a nonsignatory seeking a declaration of the signatories’ rights and obligations under the contrаct.
{¶20} Our holding is in keeping with this court’s long history of favoring and encouraging arbitration. Brennan v. Brennan (1955), 164 Ohio St. 29, 57 O.O. 71, 128 N.E.2d 89, paragraph one of the syllabus; Schaefer v. Allstate Ins. Co. (1992), 63 Ohio St.3d 708, 711, 590 N.E.2d 1242. Moreover, it is consistent with Ohio’s Arbitration Act, codified in
{¶21} A provision in any written contract * * * to settle by arbitration a controversy that subsequently arises out of the contract * * * shall be valid, irrevocable, and enforceable * * *.
{¶22} And
{¶23} 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 аction 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 accordance with the agreement * * *.
{¶24} Furthermore, while the specifiс issue in this case appears to be one of first impression, we note that many federal and state courts have recognized exceptions to the rule that a person cannot be compelled to arbitrate a dispute which he did not agree to submit to arbitration. See, e.g., Hilti, Inc. v. Oldach (C.A.1, 1968), 392 F.2d 368, 369, fn. 2; Thomson-CSF, S.A. v. Am. Arbitration Assn. (C.A.2, 1995), 64 F.3d 773, 778; Inernatl. Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH (C.A.4, 2000), 206 F.3d 411, 418; Grigson v. Creative Artists Agency (C.A.5, 2000), 210 F.3d 524; Arnold v. Arnold Corp.-Printed Communications for Business (C.A.6, 1990), 920 F.2d 1269; Hughes Masonry Co., Inc. v. Greater Clark Cty. School Bldg. Corp. (C.A.7, 1981), 659 F.2d 836, 839; Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc. (C.A.11, 1993), 10 F.3d 753, 757; Infiniti of Mobile, Inc. v. Office (Ala.1999), 727 So.2d 42, 48; Am. Ins. Co. v. Cazort (1994), 316 Ark. 314, 320-323, 871 S.W.2d 575, 579-580; Harris v. Superior Court (1986), 188 Cal.App.3d 475, 478, 233 Cal.Rptr. 186; Application of General Re Corp. v. Foxe (1998), 177 Misc.2d 867, 878, 678 N.Y.S.2d 459; In re FirstMerit Bank (2001), 44 Tex.Sup.Ct.J. 900, 52 S.W.3d 749. See, also, 2 Macneil, Speidel, and Stipanowich, Federal Arbitration Law (1994), Section 18.7.2.3 (when seeking rights under a contract, a nonsignatory is bound by the contract’s arbitration clause).
{¶25} We now turn to the second issue raisеd in OIGA’s cross-claim against St. Vincent. In addition to asking the court to interpret the affiliation agreement and declare that it requires St. Vincent to insure Kahn through its self-insurance plan, OIGA also requests that the court declare St. Vincent’s self-insurance to be other insurance within the purview оf
{¶26} Although the exhaustion issue could be resolved before coverage is determined, the arbitrator’s determination regarding cоverage may render the exhaustion issue moot. That is, if the arbitrator determines that the affiliation agreement does not require St. Vincent to insure Kahn through its self-insurance plan, then the determination of whether the exhaustion provision in
{¶27} For the foregoing reasons, we affirm the judgment of the court of appeals.
Judgment affirmed.
MOYER, C.J., DESHLER, F.E. SWEENEY, PFEIFER and LUNDBERG STRATTON, JJ., concur.
COOK, J., concurs in judgment.
DANA A. DESHLER, JR., J., of the Tenth Appellate District, sitting for RESNICK, J.
Williams, Jilek, Lafferty, Gallagher & Scott Co., L.P.A., and Martin W. Williams, for appellants Matthew Gerig, Dawn Gerig, and LaMar Gerig.
Vorys, Sater, Seymour & Pease, L.L.P., F. James Foley and Rosemary D. Welsh, for appellant Ohio Insurance Guaranty Association.
Shumaker, Loop & Kendrick, L.L.P., John C. Barron and Neema M. Bell, for appellee.