Strnad v. Orthohelix Surgical Designs, Inc.Strnad v. Orthohelix Surgical Designs, Inc.
PLAINTIFF-APPELLANT vs. DEFENDANT-APPELLEE
JUDGMENT: AFFIRMED
Jeffrey M. Embleton
John F. Burke, III
Mansour Gavin Gerlack & Manos
55 Public Square
Suite 2150
Cleveland, Ohio 44113-1994
ATTORNEYS FOR APPELLEE
Kathleen M. Portman
Jeffrey J. Wedel
Squire, Sanders & Dempsey
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
MARY EILEEN KILBANE, P.J.:
{¶ 1} Appellant, Lee Strnad (Strnad), appeals the trial court‘s denial of his application to vacate or modify an arbitration award rendered in favor of appellee, OrthoHelix Surgical Designs, Inc. (OrthoHelix), and the sua sponte confirmation of that award although no application to confirm was pending. After a careful review of the facts and the law, we affirm.
Factual and Procedural History
{¶ 2} On March 5, 2005, Strnad entered into a four-year employment agreement with OrthoHelix to serve as its senior development manager. His
{¶ 3} In this capacity, Strnad earned a base salary, a signing bonus, and could also receive performance-based bonuses and stock options. Part of Strnad‘s compensation came in the form of a $40,000 loan from OrthoHelix, to be repaid in four annual installments.
{¶ 4} During his tenure with OrthoHelix, Strnad worked on two products — the MaxLock Plate & Screwdriver Removal System (MaxLock) and the DR Lock Volar Plate & Screw System (DR Lock or DR Lock System). The MaxLock System was launched on July 27, 2005. By November 1, 2005, OrthoHelix recalled the MaxLock system after the pilot tip of the MaxLock screwdriver repeatedly broke off during surgical procedures.
{¶ 5} From January 10 through January 31, 2006, the FDA conducted an onsite inspection of OrthoHelix, after which it issued a Form 483 to Strnad, reporting its inspection findings. In all, nine observations were reported, all of which were related to deficiencies in OrthoHelix‘s internal reporting of its testing and design procedures relative to the MaxLock System. None of these problems were reported to the FDA.
{¶ 6} On March 28, 2006, OrthoHelix released the DR Lock. From July 12, 2006 through August 12, 2006, OrthoHelix received three complaints from surgeons that the DR Lock screws were passing through the distal plate radius.
{¶ 7} On April 24, 2006, an article was published in Crain‘s Cleveland Business magazine (Crain‘s magazine) reporting the Maxlock recall. The article stated that OrthoHelix has been rebuked by the Food and Drug Administration for failing to notify the agency when the company issued a recall for a surgical device and [t]he FDA also cited five examples of the medical device maker‘s failures to follow good manufacturing processes, which it deemed serious violations of the law.
{¶ 8} On October 3, 2006, Strnad prepared a Healthy Hazard Evaluation form on behalf of Orthohelix for the DR Lock.
{¶ 9} From November 14 through November 17, and December 13 and
{¶ 10} On November 21, 2006, OrthoHelix issued a product recall for the DR Lock.
{¶ 11} On April 3, 2007, OrthoHelix terminated Strnad. Prior to his termination, the company experienced high turnover and internal upheaval in the wake of the FDA‘s issuance of class II and III1 recalls for the MaxLock and the DR Lock System.
{¶ 12} Strnad‘s employment agreement provided that he could only be terminated for cause. The term for cause is found at Section 5(a) of Strnad‘s employment agreement and presents ten instances of conduct that allow employees to be fired for cause. Pertinent to this appeal is Section 5(a)(x), which states that an employee may be terminated for cause for engagement in any act (including, but not limited to, unlawful discriminatory conduct) that results in substantial injury to the reputation of
{¶ 13} On October 4, 2007, Strnad filed a complaint in the common pleas court, seeking to compel OrthoHelix to participate in arbitration as required by his employment agreement. Eventually the parties agreed to arbitration without further intervention of the common pleas court and mutually agreed upon the arbitrator. Strnad did not raise any breach of contract claims with the trial court, based upon the arbitration provisions in his employment agreement.
{¶ 14} On April 21, 22, and 23 and May 18, 2009, the parties arbitrated their dispute. Strnad contended he was not terminated for cause, since he was not responsible for reporting the issues with the MaxLock and DR Lock to the FDA. OrthoHelix contended that the problems all developed under Strnad‘s supervision, and the majority of the deficiencies the FDA discovered were Strnad‘s direct responsibilities.
{¶ 15} On July 21, 2009, the arbitrator issued her award in a 24-page memorandum finding in favor of OrthoHelix and against Strnad on the breach of contract claim he advanced at arbitration. Specifically, the arbitrator found that Strnad was directly responsible for the issues relating to the FDA recall, and that:
The greater weight of the evidence established that Strnad‘s acts and omissions as senior development manager resulted in OrthoHelix‘s first two products being recalled and this caused substantial injury to the reputation of OrthoHelix and subjected the company to embarrassment. Therefore, OrthoHelix had cause to terminate Strnad under the Agreement. (Arbitrator‘s Memorandum at 20.)
{¶ 16} The arbitrator further found that [g]iven the overwhelming corroborative evidence of Strnad‘s responsibility for the FDA inspection and OrthoHelix‘s responses to the FDA‘s complaints, Strnad‘s testimony during the arbitration that he had no responsibility relative to the regulatory and quality issues is just not credible or reasonable. Id. at 21.
{¶ 17} The arbitrator also found in favor of OrthoHelix on its claim for money damages under a cognovit note for $22,560, which was the balance of a $40,000 loan it gave Strnad during his employment.
{¶ 18} On October 21, 2009, Strnad filed an application to modify and/or vacate the arbitration award.
{¶ 19} On November 18, 2009, the trial court denied Strnad‘s application and sua sponte confirmed the arbitration award in favor of OrthoHelix.
{¶ 20} On December 17, 2009, Strnad appealed, asserting two assignments of error.
{¶ 22} Strnad‘s first assignment of error states:
The trial court erred in denying appellant‘s application to modify and/or vacate the arbitration award.
Standard of Review
{¶ 23}
{¶ 24} [V]acation, modification or correction of an arbitration award may only be made on the grounds listed in
{¶ 25} With respect to the standard of review in appeals of arbitration
{¶ 26} Strnad argues that the arbitrator‘s decision was in violation of Ohio law since the evidence at arbitration showed that Strnad was terminated without cause, as that term is defined under his Employment Agreement with OrthoHelix. He argues that this decision departed from the essence of his contractual agreement. He further argues that the arbitrator exceeded her power under
Strnad‘s Employment Agreement
{¶ 27} Strnad‘s employment agreement expressly provides that cause means:
{¶ 28} engagement in any act* * * that results in substantial injury to the reputation of the Company, or which subjects the Company to public ridicule.
{¶ 29}
Analysis
{¶ 30} While Strnad argues that the trial court was required to correct or modify the arbitrator‘s decision, there is no dispute that the trial court may only modify or correct an arbitrator‘s decision for the reasons enumerated in the statutes cited above. See Internatl. Bhd. of Elec. Workers. None of those statutory factors from
{¶ 31} To the contrary, the arbitrator‘s memorandum determined that OrthoHelix did not breach its contract in terminating Strnad under Section
{¶ 32} The record also shows that the company endured significant embarrassment after the FDA issued recalls for these products, including the article in Crain‘s magazine. The trial court did not err in denying Strnad‘s application to modify or vacate the arbitration award, but properly confirmed the award as required by statute. See
{¶ 33} Strnad‘s first assignment of error is overruled.
{¶ 34} Strnad‘s second assignment of error states:
The trial court erred in issuing an order confirming the arbitration award when no party submitted a request to confirm the award.
{¶ 35} At issue in this assignment of error is whether a trial court errs by sua sponte confirming an arbitration award, when no application to confirm is pending, after it denies a motion to modify or vacate. Strnad
{¶ 36} As mentioned above, arbitration procedures are governed by
At any time within one year after an award in an arbitration proceeding is made, any party to the arbitration may apply to the court of common pleas for an order confirming the award. Thereupon the court shall grant such an order and enter judgment thereon, unless the award is vacated, modified, or corrected as prescribed in sections 2711.10 and 2711.11 of the Revised Code.
{¶ 37} Ordinarily, [w]hen a motion is made pursuant to
Whether a Hearing was Required Before Confirmation of the Arbitration Award.
{¶ 38} This court has long rejected the notion that a hearing is required before confirming an arbitration award under
{¶ 39} In this case, the issues are not so much substantive as they are procedural: OrthoHelix‘s application to confirm the arbitration award was not filed until July 19, 2010 — approximately eight months after Strnad‘s appeal was filed. The trial court, however, confirmed the arbitration award on November 18, 2009, before the application was even filed.
Whether the Trial Court‘s Order Constitutes a Final, Appealable Order
{¶ 40} In the instant case, we must first decide whether the trial court‘s denial of Strnad‘s application to vacate would constitute a final, appealable order even if it had not sua sponte confirmed the arbitration award. We find that it is.
{¶ 41} Most recently, the Tenth District held in Geiger v. Morgan Stanley DW, Inc., 10th Dist. No. 09 AP-608, 2010-Ohio-2850, that: * * * [t]o require a party to obtain confirmation of an objectionable arbitration award
{¶ 42} In so holding, the Geiger court clarified a split in authority in Ohio between Binns v. Sterling Jewelers, Inc., 9th Dist. No. 24522, 2009-Ohio-3359 and FIA Card Servs., N.A. v. Wood, 7th Dist. No. 08-JE-13, 2009-Ohio-1513. Binns held that an order of the court of common pleas denying modification of an arbitration award is not a final, appealable order, reasoning that the trial court‘s order, although rendered in a special proceeding, did not foreclose appropriate relief in the future since the award could be confirmed and then appealed. Id. at ¶16. See, also, Geiger at ¶11. According to the Geiger court, [Wood] considered the case of a party appealing from a denial of a confirmation order under
{¶ 43} In following the holding of Wood, the Geiger court reasoned that:
[R]equir[ing] a party to obtain confirmation of an objectionable arbitration award before appealing a denial of a motion to modify that award serves neither the interest of reaching the merits of the case nor that of judicial economy, * * * [and injects] * * * a vain and superfluous procedural step, one which, moreover, introduces awkward paradox into the judicial process. Id. at ¶13.
{¶ 44} In the instant case, the trial court‘s further action in confirming the arbitration award erases any argument that the order being appealed from is not a final, appealable order under
Whether the Trial Court Erred in Sua Sponte Confirming the Arbitration Award
{¶ 45}
{¶ 46} Strnad argues that he was not given the opportunity to be heard, since he could not oppose an application to confirm that was not pending. However, the trial court had already considered the substance of any argument against confirming the award in his application to vacate or modify.
{¶ 47} Judgment affirmed. It is ordered that appellee recover from appellant costs herein taxed. The court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this court directing the common pleas court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to MARY EILEEN KILBANE, PRESIDING JUDGE COLLEEN CONWAY COONEY, J., and *(SITTING BY ASSIGNMENT: JUDGE JOSEPH J. VUKOVICH OF THE SEVENTH DISTRICT.)
JOSEPH J. VUKOVICH, J.,* CONCUR