2006 Ohio 4383 | Ohio Ct. App. | 2006
{¶ 2} In the event we found merit in Kindig's assignments of error, Selby offered a cross-assignment of error to prevent reversal of the trial court's decision. Initially, Selby argues that several non-statutory grounds support vacatur of the first award. However, because R.C.
{¶ 4} Soon after Selby agreed to construct the new building, Kindig and her husband learned that Selby was experiencing financial difficulties. Concerned, Kindig's husband wrote to Selby's Chief Executive Officer, James Cliborne, about the effect this financial situation would have on Kindig's contract. In February 1998, Mr. Cliborne informed Kindig that Selby's financial situation would impact its ability to begin construction of the new building in the time frame originally anticipated. Upon hearing this, Kindig traveled to Marietta where she learned that Selby was not constructing an office building for her. She immediately withdrew her request for hospital privileges and contacted a recruiter. She also retained an attorney who wrote to Selby demanding assurance that it would perform under the contract. When Selby did not respond to her attorney's letter, Kindig entered into a contract with Lima Memorial Hospital.
{¶ 5} In early 2000, Selby requested arbitration to recover the $25,000 signing bonus it had paid to Kindig.1 Kindig responded by filing a counterclaim alleging that Selby anticipatorily breached the contract. On October 25, 2000, the American Arbitration Association ("AAA") assigned the case to a panel of three arbitrators. Three months later, the arbitrators issued a scheduling order setting the hearing for June 19, 2001. The order required Kindig to disclose her witnesses by March 23, 2001. Moreover, it provided that all deadlines would be "strictly enforced".
{¶ 6} In February 2001, Kindig submitted her initial witness disclosure. Although the witness list did not identify any expert witnesses, it indicated that Kindig intended to call an "expert economist yet to be identified." Additionally, Kindig reserved the right to add expert witnesses to the list as discovery continued. On March 23, 2001, Kindig filed her supplemental witness disclosure. This list also failed to identify any expert witnesses. However, like the first list, it indicated that Kindig intended to call an "expert economist yet to be identified." Again, Kindig reserved the right to add expert witnesses to the list.
{¶ 7} On May 31, 2001, the arbitrators issued a revised scheduling order setting the hearing for August 8, 2001. This second order required the parties to disclose their witnesses by July 6, 2001. In addition, it stated that all deadlines would be "strictly enforced". On July 6, 2001, Kindig submitted her witness disclosure. The list did not identify any expert witnesses, nor did it mention an expert economist. Rather, it stated that Kindig intended to call "[a]ny and all * * * expert witnesses not yet identified."
{¶ 8} The arbitrators subsequently continued the hearing until November 13, 2001. One month before the hearing, on October 11, 2001, Kindig informed Selby that she planned to call Heinz Ickert as an expert witness. Selby immediately wrote to Kindig expressing its disapproval. It indicated that fairness required either (1) that it be permitted to depose Mr. Ickert and, if necessary, retain an expert of its own or (2) that Mr. Ickert's testimony be precluded. Kindig responded by scheduling Mr. Ickert's deposition for October 23, 2001. However, the day before the deposition, Kindig informed Selby that Mr. Ickert would not be able to provide his final opinions at the deposition. Therefore, the parties rescheduled the deposition for November 1, 2001. On October 31, 2001, Kindig provided Selby with Mr. Ickert's report. Selby immediately canceled Mr. Ickert's deposition, stating that it did not have adequate time to prepare for the deposition.
{¶ 9} On November 5, 2001, Selby filed a motion to continue the arbitration hearing. The motion asserted that Kindig's untimely disclosure of her expert placed Selby at a disadvantage. It sought a continuance so that Selby could retain an expert of its own. On November 6, 2001, the arbitrators denied Selby's motion. However, they indicated that if, at the hearing, Selby could convince them that it had been prejudiced, they would adjourn the hearing and accept expert testimony at a later date. The matter proceeded to arbitration on November 13, 2001. At the end of the two-day hearing, the arbitrators stated that they would leave the hearing open for a week. They told Selby that they would then "make a decision as to whether this additional expert should be permitted to testify, if you retain one." On November 20, 2001, Selby informed the arbitrators that it wished to retain "an independent counter-expert". The arbitrators denied Selby's request. On February 22, 2002, the arbitrators issued a decision denying Selby's claim and awarding Kindig $313,329.09 on her counterclaim.
{¶ 10} On April 3, 2002, Selby filed a motion asking the Washington County Court of Common Pleas to vacate the arbitrators' award. Kindig responded by filing a motion to confirm the arbitrators' award. In July 2002, the trial court granted Selby's motion, vacated the arbitrators' award, and remanded the case for a new arbitration hearing. The court found that the arbitrators' failure to strictly enforce their deadlines "resulted in manifest unfairness to [Selby]." Additionally, it found that Kindig's "extremely untimely" designation of Mr. Ickert violated the orders established by the arbitrators and resulted in "arbitration by ambush." The trial court concluded that the arbitrators committed misconduct by allowing Mr. Ickert's testimony and denying Selby's request to postpone the hearing. Kindig appealed this decision, but we dismissed the appeal for lack of a final, appealable order.2
{¶ 11} In January 2004, a second arbitration hearing was held before a new panel of arbitrators. On April 14, 2004, the arbitrators issued a decision denying Selby's claim and awarding Kindig $267,329.09 on her counterclaim. Selby subsequently filed a motion asking the trial court to confirm the arbitrators' award. On December 13, 2004, the court issued a judgment entry confirming the arbitration award entered on April 14, 2004. Kindig now appeals that judgment and challenges the order that vacated the first arbitration award. She presents the following assignments of error for our review:
{¶ 12} "I. THE TRIAL COURT COMMITTED REVERSIBLE ERROR IN VACATING THE ARBITRATION AWARD BECAUSE SELBY FAILED TO SHOW, AND THE TRIAL COURT FAILED TO FIND, THE EXISTENCE OF ALL THREE MANDATORY ELEMENTS NEEDED FOR VACATING AN AWARD UNDER R.C.
{¶ 13} II. THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY IGNORING OHIO LAW WHICH REQUIRES CONSTRUING ARBITRATION AWARDS AS VALID WHENEVER POSSIBLE."
{¶ 14} In the event that we find grounds for reversal, Selby asserts the following cross-assignment of error for our review:
{¶ 15} "I. ALTHOUGH IT REACHED THE CORRECT RESULT IN VACATING THE FEBRUARY 22, 2002 ARBITRATION AWARD, THE TRIAL COURT ERRED IN ITS DECISION BY FAILING TO FIND THAT ADDITIONAL STATUTORY GROUNDS, AS WELL AS CERTAIN NON-STATUTORY GROUNDS, SUPPORTED VACATUR OF THE ARBITRATION AWARD."
{¶ 17} It is the policy of the law to favor and encourage arbitration. Mahoning Cty. Bd. of Mental Retardation Dev.Disabilities v. Mahoning Cty. TMR Edn. Assn. (1986),
(A) The award was procured by corruption, fraud, or undue means.
(B) There was evident partiality or corruption on the part of the arbitrators, or any of them.
(C) The arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.
(D) The arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.
{¶ 18} Appellate review of an arbitration award is confined to an evaluation of the order issued by the trial court.Northern Ohio Sewer Contrs. v. Bradley Dev. Co.,
{¶ 19} The trial court found that the arbitrators committed misconduct when they denied Selby's request to postpone the arbitration hearing. See R.C.
{¶ 20} Both parties in this case failed to comply with the witness disclosure deadlines contained in the arbitrators' scheduling orders. Selby filed both of its witness lists after the established deadlines.3 And while Kindig filed her witness lists within the deadlines, she did not identify any expert witnesses. Instead, she waited until one month before the hearing to inform Selby that she would be calling Mr. Ickert as an expert.
{¶ 21} In her brief, Kindig argues that her disclosure of Mr. Ickert was not untimely. She notes that under the second scheduling order, the deadline for witness disclosure was 32 days before the scheduled hearing. She claims that the continuance of the second hearing date also resulted in a continuance of the witness disclosure deadline. Thus, she asserts that her disclosure of Mr. Ickert was timely since it occurred 32 days before the arbitration hearing on November 13, 2001.
{¶ 22} Although Kindig's argument is creative, it has no merit. Continuance of the scheduled hearing date does not automatically result in a continuance of the witness disclosure deadline. The arbitrators are free to continue the arbitration hearing without also continuing the deadline for witness disclosure. Indeed, it appears that is what happened here. When the arbitrators continued the first hearing date, they issued a revised scheduling order setting forth a new deadline for witness disclosure. However, when they continued the second hearing date, they did not issue a new scheduling order. Accordingly, the deadlines from the second scheduling order remained in effect. Because Kindig did not disclose Mr. Ickert by July 6, 2001, as required in the second scheduling order, her disclosure was untimely. However, despite this untimely disclosure, we are not convinced the arbitrators committed misconduct in refusing to postpone the hearing.
{¶ 23} The decision to grant or deny a continuance is largely discretionary. Michael v. American Arbitration Assn. (Aug. 17, 1999), Franklin App. No. 98AP-1317; Vet-O-Vitz Masonry Systems,Inc. v. Schnabel Assoc., Inc. (Aug. 25, 1988), Cuyahoga App. Nos. 54261, 54262. If any reasonable basis exists for the arbitrators' decision not to postpone the hearing, the courts will not intervene. DVC-JPW Investors v. Gershman (C.A.8 1993),
{¶ 24} At the time Selby filed its motion for a continuance, the case had been assigned to the arbitration panel for over a year and had already been continued twice. Although untimely, Kindig's disclosure of her expert occurred more than a month before the scheduled hearing. This gave Selby adequate time to consult with an expert. In fact, Kindig's disclosure of her expert gave Selby the same amount of time as that agreed to under the second scheduling order. In addition, although Kindig did not provide Selby with her expert's report until October 31st, Selby had sufficient time to analyze the report in preparation for the hearing. We note that the basis for Mr. Ickert's opinion should not have come as a surprise to Selby. Kindig's motion in opposition to the continuance included a damages calculation sheet that she had provided in response to an interrogatory. The damages sheet indicated that Kindig sought compensation for expenses that she claimed she would have been reimbursed under her contract with Selby. These same reimbursable expenses formed the basis for Mr. Ickert's opinion as to Kindig's damages.
{¶ 25} Finally, the arbitrators' order was not a simple refusal to postpone the arbitration hearing. Rather, the arbitrators indicated that they would adjourn the hearing to accept additional expert testimony if at the hearing, Selby could convince them it had been prejudiced. Thus, the order left open the possibility that the hearing could be adjourned later, if necessary.
{¶ 26} After considering the evidence, we conclude there is a reasonable basis for the arbitrators' decision not to postpone the hearing. See Gershman, supra. Arbitration is designed to provide an efficient, expedited, and economical remedy to resolve disputes. See Buyer's First Realty, Inc. v. Cleveland Area Bd.of Realtors (2000),
{¶ 27} While we might have ruled differently had we been in the arbitrators' position, we cannot say, given the evidence, that the arbitrators were guilty of misconduct in refusing to postpone the hearing. Therefore, we conclude that the trial court erred in vacating the arbitration award on this basis. Accordingly, we sustain Kindig's first assignment of error.
{¶ 30} Initially, Selby contends the R.C.
{¶ 31} Selby also argues that the award is subject to vacatur under R.C.
{¶ 32} The Supreme Court of Ohio has never specifically addressed the meaning of the term "undue means" for purposes of R.C.
{¶ 33} Like R.C.
{¶ 34} Although Kindig's untimely disclosure of her expert was improper, it was not illegal or immoral. See McCollough.
Nor was her conduct equivalent in gravity to corruption or fraud. See American Postal Workers Union. In its brief, Selby argues that procedural irregularities and unfairness in the case resulted in an arbitration award obtained by undue means. However, Selby does not allege that Kindig acted with malice when she disclosed her expert after the established deadline. Nor is there clear evidence of malice in the record before us. The record indicates that Kindig changed legal counsel sometime after the second scheduling order but before the witness disclosure deadline established in the order. And while this change in legal counsel does not excuse Kindig's untimely disclosure, it might explain it. Because Selby has failed to establish that the first arbitration award was procured by undue means, we conclude the award is not subject to vacatur under R.C.
{¶ 35} Finally, Selby argues that the award is subject to vacatur under R.C.
{¶ 36} It is well-established that an arbitrator will not be found to have exceeded his or her authority so long as the award "draws its essence" from the underlying agreement. See FindlayEdn. Assn.,
{¶ 37} Selby never argues that the arbitrators' award does not draw its essence from the underlying contract. Rather, Selby contends the arbitrators erred in not allowing it to present expert evidence addressing Mr. Ickert's opinions. It argues that the arbitrators exceeded their authority by entering an award without hearing this evidence.
{¶ 38} Although Selby challenges its inability to present expert evidence under R.C.
The arbitrator is the judge of the admissibility and relevancy of evidence submitted in an arbitration proceeding. The arbitrator is not bound to hear all of the evidence tendered by the parties; however, he must give each of the parties to the dispute an adequate opportunity to present its evidence and arguments. * * * Every failure of an arbitrator to receive relevant evidence does not constitute misconduct requiring vacatur of an arbitrator's award. A * * * court may vacate an arbitrator's award only if the arbitrator's refusal to hear pertinent and material evidence prejudices the rights of the parties to the arbitration proceedings. An arbitration award must not be set aside for the arbitrator's refusal to hear evidence that is cumulative or irrelevant. Vacatur is appropriate only when the exclusion of relevant evidence `so affects the rights of a party that it may be said that he was deprived of a fair hearing.'
Hoteles Condado Beach, La Concha and Convention Ctr. v. UnionDe Tronquistas Local (C.A.1 1985), 763 F.3d 34, 39-40 (Citations omitted).
{¶ 39} The dispute about Kindig's damages centered on the terms of her contract with Selby. Both the Selby and Lima contracts were income guarantee contracts whereby the hospitals would, if necessary, loan Kindig sufficient money so that her income would not fall below a designated monthly minimum. The Lima contract guaranteed Kindig a monthly "net practice income" of $20,834. It determined the amount of her net practice income by deducting her reasonable business expenses from her gross collections. The Selby contract guaranteed Kindig $25,000 a month in "net collections", which it defined as "the cash collections from the practice". Selby argued that its contract functioned in the same manner as Lima's contract, i.e., it determined Kindig's net collections by deducting her business expenses from her gross collections. Kindig, however, disagreed. She argued that in addition to the monthly income guarantee, Selby's contract also would have reimbursed her for certain business expenses, up to a capped amount.
{¶ 40} At the arbitration hearing, Kindig called Heinz Ickert, a certified public accountant, as an expert. Mr. Ickert testified that the main difference between the Selby and Lima contracts was the business expense reimbursements provided for in the Selby contract. Using the lesser of the contract's capped amount or Kindig's actual expenses in Lima, Mr. Ickert concluded that Kindig suffered damages in the amount $317,000. To rebut this evidence, Selby called Debra Cunningham, who testified that she is responsible for negotiating and administering Selby's contracts with the physicians.5 Ms. Cunningham indicated that she reviewed the Selby and Lima contracts and determined that both contracts functioned in a similar manner. Specifically, Ms. Cunningham testified that Selby's monthly income guarantee was based on a net figure obtained by deducting Kindig's business expenses from her gross collections. She ultimately concluded that Kindig did not suffer any damages since the Lima contract was the better contract overall.
{¶ 41} At the conclusion of the hearing, the arbitrators and the parties discussed whether the arbitration hearing should be adjourned so that Selby could present additional expert testimony. During the discussion, Selby's counsel acknowledged that it would be pointless to submit additional expert evidence if the issue was a matter of contract interpretation.6 Arbitrator Jordan agreed, stating: "I think the panel clearly understands the difference in the contract which separates the parties. I don't think we would instruct you to bring in some other expert that's going to testify to the position already offered." However, Arbitrator Jordan continued: "If there is something — if there's an approach mathematically that their expert took that you haven't had time to properly review because of the procedure that took place, I think we're going to afford you the opportunity to take that review and advise us of the fact if you want to come back and make a different assessment of his testimony." In the end, the arbitrators adjourned the hearing for one week. They stated that if, in that time, Selby indicated that it wished to retain an expert and present additional expert testimony, they would consider the request.
{¶ 42} On November 20, 2001, Selby informed the arbitrators that it wished to retain an "independent counter-expert" to provide further analysis of the two contracts. Selby argued that Mr. Ickert's conclusions on damages were unsupportable, stating:
Mr. Ickert mistakenly believes that Selby's costs in covering Dr. Kindig's business expenses would somehow relate to her claim for damages, even though her damages, if any, must necessarily be directly related to proof of loss of income based upon the income guarantee. Such a conclusion makes absolutely no sense at all. The cost to Selby under the contract has nothing to do with any damages that Dr. Kindig might claim.
In addition, Selby argued: "Mr. Ickert failed to consider that unlike the Lima Memorial contract, the Selby contract did not propose to cover all of Dr. Kindig's expenses, only some of them. Thus, Dr. Kindig would have been required to pay for certain expenses on her own under the Selby agreement." Selby requested an additional 30 days to provide the arbitrators with a written report from a qualified expert or, in the alternative, to present further testimony at a hearing. However, the arbitrators denied Selby's request to submit additional expert evidence.
{¶ 43} Selby contends the arbitrators erred in not permitting it to prepare and submit expert evidence addressing Mr. Ickert's position. It argues that the refusal to allow this expert evidence deprived it of a fair hearing. We disagree. At the close of the hearing, the arbitrators indicated that they understood each party's position with respect to the interpretation of the Selby contract. They further indicated that they would not allow Selby to bring in an additional expert to testify to the position already offered. However, they stated that if Selby wished to submit additional expert evidence challenging Mr. Ickert's mathematical approach, they would consider such a request. Despite these statements, Selby did not express a desire to submit expert evidence addressing Mr. Ickert's mathematical approach. Rather, Selby's letter to the arbitrators evidenced a desire to submit expert evidence regarding the interpretation of the contract. Thus, the arbitrators could reasonably conclude that the expert evidence Selby wished to submit would be merely cumulative of testimony offered by Ms. Cunningham. Having reviewed the record, we conclude the arbitrators were not guilty of misconduct in refusing to allow Selby to submit additional expert evidence. Likewise, we find no merit in Selby's argument that the arbitrators exceeded their authority by issuing an award without hearing this additional expert evidence. For the reasons expressed above, we overrule Selby's cross assignment of error.
{¶ 44} In summary, we conclude that the trial court erred in vacating the first award based on the arbitrators' refusal to postpone the arbitration hearing. Moreover, we conclude the alternate bases advanced by Selby do not support vacatur of the award. Thus, we reverse the trial court's judgment and remand this case for further proceedings. On remand, the trial court shall issue an order confirming the arbitration award entered on February 22, 2002.
JUDGMENT REVERSED AND CAUSE REMANDED.
The Court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this Court directing the Washington County Common Pleas Court to carry this judgment into execution.
Any stay previously granted by this Court is hereby terminated as of the date of this entry.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure.
Exceptions.
Abele, J.: Concurs in Judgment and Opinion as to Assignment of Error I and Concurs in Judgment Only as to Assignment of Error II and Cross Assignment of Error.
Kline, J.: Concurs in Judgment Only.