NORTH PARK RETIREMENT COMMUNITY CENTER, INC., ET AL. v. SOVRAN COMPANIES LTD., ET AL.
No. 96376
Court of Appeals of Ohio, EIGHTH APPELLATE DISTRICT, COUNTY OF CUYAHOGA
October 6, 2011
2011-Ohio-5179
JOURNAL ENTRY AND OPINION. Civil Appeal from the Cuyahoga County Court of Common Pleas, Case No. CV-736025. BEFORE: Stewart, P.J., Cooney, J., and Rocco, J.
ATTORNEYS FOR APPELLANTS
Timothy N. Toma
Shannon M. McCormick
Toma & Associates, L.P.A., Inc.
33977 Chardon Road, Suite 100
Willoughby Hills, OH 44094
ATTORNEYS FOR APPELLEES
John J. McHugh
Brian C. Kalas
Sarah A. Miller
McHugh & McCarthy, Ltd.
5580 Monroe Street
Sylvania, OH 43560
MELODY J. STEWART, P.J.:
{¶ 1} Plaintiffs-appellants, North Park Retirement Community Center, Inc., J&R Health Associates, Inc., and John and Kimberly Coury (we shall refer to them collectively as “North Park” unless otherwise noted), appeal from an order that stayed proceedings and referred to arbitration a breach of contract complaint against defendants-appellees, Sovran Companies, Ltd. and William Sheehan. North Park argues that the court erred by finding its dispute with Sovran to be arbitrable because the dispute between the parties was unrelated to a prior agreement that contained an arbitration clause.
I
{¶ 3} These cases do not conflict in the sense that they disagree on the correct standard of review; rather they involve different issues and therefore use different standards of review. For example, in Sikes, the issue was whether the court erred by staying the matter pending arbitration, so the panel applied the abuse of discretion standard to determine whether the stay was properly granted. Other cases raise issues in the context of the referral to arbitration, which is in essence a review of the contract to determine whether the dispute is contractually covered by an agreement to arbitrate, thus requiring the de novo standard of review applied to contract construction. See, e.g., Vanyo v. Clear Channel Worldwide, 156 Ohio App.3d 706, 2004-Ohio-1793, 808 N.E.2d 482, ¶ 8. (“The issue of whether a controversy is arbitrable under the provisions of a written contract is a question of law for the trial court to decide.“)
{¶ 4} The core issue in any dispute regarding the arbitrability of a matter is whether the parties agreed to arbitration. Arbitration is a creature of contract, see United Steelworkers v. Warrior & Gulf Navigation Co. (1960), 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409, so we are guided by “the principle that a party can be forced to arbitrate only those issues it specifically has agreed to submit to arbitration[.]” First Options of Chicago, Inc. v. Kaplan (1995), 514 U.S. 938, 945, 115 S.Ct. 1920, 131 L.Ed.2d 985. This requires an examination of the agreement to arbitrate, which has always been considered a review as a “matter of law;” in other words, a de novo review. See Alexander v. Buckeye Pipe Line Co. (1978), 53 Ohio St.2d 241, 374 N.E.2d 146, paragraph one of the syllabus. If a court determines that the parties have agreed to arbitrate a dispute, it must refer the matter to arbitration. See
{¶ 5} Once a court determines that the parties have agreed to arbitrate a dispute and has ordered the parties to proceed to arbitration, staying the action pending the outcome of arbitration is required. While courts typically have discretion to grant or deny general requests for stays, see State ex rel. Verhovec v. Mascio (1998), 81 Ohio St.3d 334, 336, 691 N.E.2d 282,
{¶ 6}
{¶ 7} That the court has no discretion to refuse to stay a matter that it has determined is subject to arbitration is logical. Arbitration is ultimately a private agreement to avoid the courts — so if the parties have agreed to arbitrate a dispute, the court‘s refusal to stay proceedings would in essence force the parties to submit to court proceedings to which they had agreed to avoid. It follows that appellate courts must review questions of arbitrability under the de novo standard of review applied to contracts. The abuse of discretion standard of review has no application in the context of
II
{¶ 8} The substantive issue raised by North Park is whether the court erred by finding that it and Sovran agreed to arbitrate the present dispute.
A
{¶ 9} North Park operates a retirement and assisted living facility. In 2007, it sought to refinance its debt obligation with National City Bank, so it entered into a consulting agreement with Sovran, through Sovran‘s principal Sheehan, in which Sovran would obtain the necessary financing in exchange for a fee. The consulting agreement contained an arbitration clause that stated:
{¶ 10} “Any controversy arising out of this agreement, or out of the refusal by either party hereto to perform the whole or any part of this agreement that cannot be settled through negotiation, shall be settled by final and binding arbitration in accordance with the provisions of Chapter 2711 of the Ohio Revised Code.”
{¶ 11} In 2009, Sovran notified North Park that it had secured funding in the form of a “sale/leaseback” in the amount of $4 million. It forwarded to North Park a letter agreement stating the terms of the funding, identified the assets being purchased, the terms of the lease, and other matters not related to this dispute. North Park paid Sovran a $40,000 underwriting fee for its work. North Park alleged that Sovran never obtained
B
{¶ 12} North Park first argues that the current dispute between the parties was governed by the 2009 letter agreement detailing funding, not the 2007 consulting agreement.
{¶ 13} In AT&T Technologies, Inc. v. Communications Workers of Am. (1986), 475 U.S. 643, 106 S.Ct. 1415, 89 L.Ed.2d 648, the Supreme Court described four basic principles that courts should use to determine whether a disputed issue is subject to arbitration: (1) arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute that he has not agreed to submit; (2) the question of arbitrability is an issue for judicial determination; (3) in deciding whether the parties have agreed to submit a particular grievance to arbitration, a court is not to rule on the potential merits of the underlying claims and must submit the matter if it arguably appears to be encompassed by the language in the written instrument, even if the claim itself appears frivolous; and (4) there is a presumption of arbitrability in the sense that an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Id., 475 U.S. at 648-650, 106 S.Ct. 1415 (internal quotations and citations omitted).
{¶ 15} For the same reasons, we reject North Park‘s argument that the court‘s decision to refer the matter to arbitration compels it to arbitrate that which it did not agree to arbitrate because the 2009 letter agreement did not contain an arbitration clause. The claim that Sovran breached the 2009 letter agreement by failing to provide financing
C
{¶ 16} North Park next claims that it is not bound by the arbitration agreement in the 2007 consulting agreement because that contract was signed by different parties from those who signed the 2009 letter agreement. The 2007 consulting agreement was signed by John P. Coury on behalf of Sovereign Health and North Park Retirement Community Center, Inc., and also signed by John Coury individually. The 2009 letter agreement was signed by John Coury individually and by Kimberly Coury in her individual capacity and on behalf of J&R Healthcare Associates, Sovereign Healthcare Services, and North Park Care Center. North Park argues that John Coury was the only signatory of the 2009 letter agreement to sign the 2007 consulting agreement, so neither Kimberly Coury nor J&R Healthcare were bound by it.
{¶ 17} Because agreements to arbitrate are matters of contract, a person who was not a party to an arbitration agreement cannot be forced to arbitrate. Cleveland-Akron-Canton Advertising Coop. v. Physician‘s Weight Loss Ctrs. of Am., Inc., 184 Ohio App.3d 805, 2009-Ohio-5699, 922 N.E.2d 1012, ¶ 14. Nonetheless, in some circumstances non-signatories to contracts can be contractually bound by ordinary contract and agency principles. Short v. Resource Title Agency, Inc., 8th Dist. No. 95839, 2011-Ohio-1577, at ¶ 14.
{¶ 19} Moreover, an affidavit submitted by Sheehan states that Sovran “was introduced to Sovereign Healthcare as the ‘family entity for several retirement communities in Northeast Ohio operated by the John Coury, Jr. family.‘” Sovereign is the registered trade name of J&R Healthcare as alleged in the amended complaint. This fact is supported by evidence showing that Kimberly Coury filed the application for the Sovereign trade name with the secretary of state on a form that listed her as J&R Healthcare‘s “authorized representative.” We thus find the record gives every indication that these companies and individuals are so affiliated and otherwise intertwined that the
III
{¶ 20} North Park next claims that the court erred by referring the matter to arbitration when Sovran only sought to stay the proceedings. We summarily reject this argument. While it is true that Sovran filed a “motion to stay,” that motion not only sought a stay, but asked the court “to refer any such disputes to final and binding arbitration in accordance with the provisions of Chapter 2711 of the Ohio Revised Code.” This sufficiently requested that the action not only be stayed, but that the court refer it to arbitration.
IV
{¶ 21} Finally, North Park argues that the court erred by referring the matter to arbitration without first conducting an evidentiary hearing.
{¶ 22}
{¶ 24} Regardless of whether the parties met with the court, we find that the issues were sufficiently fleshed out by the parties’ submissions to the court that the matter could be heard on briefs without the need of a full evidentiary hearing. North Park makes no argument that it had evidence to present to the court that it could not present in briefing, nor does it maintain that it wished to raise new arguments in addition to those previously presented to the court. Of course, if the parties did meet with the court, albeit informally in chambers as suggested by Sovran, that fact reinforces our conclusion that North Park was given a full and fair opportunity to present its case for denying Sovran‘s motion to refer the matter to arbitration. With no error remotely manifest, we find that the court did not err by failing to hold a full evidentiary hearing on the motion to refer the case to arbitration.
Judgment affirmed.
It is ordered that appellees recover of appellants their costs herein taxed.
The court finds there were reasonable grounds for this appeal.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure.
MELODY J. STEWART, PRESIDING JUDGE
KENNETH A. ROCCO, J., CONCURS;
COLLEEN CONWAY COONEY, J., CONCURS IN JUDGMENT ONLY