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John R. Davis Trust 8/12/05 v. Beggs

December 4, 2008

JOHN R. DAVIS TRUST 8/12/05 ET AL., PLAINTIFFS-APPELLEES,
v.
ROBERT J. BEGGS, DEFENDANT-APPELLANT.



APPEAL from the Franklin County Court of Common Pleas. (C.P.C. No. 07CVH08-11062).

The opinion of the court was delivered by: Brown, J.

(REGULAR CALENDAR)

OPINION

{¶1} Robert J. Beggs, defendant-appellant, appeals from a judgment of the Franklin County Court of Common Pleas, in which the court denied his motion to stay further proceedings pending mediation and arbitration and his motion to dismiss.

{¶2} John R. Davis Trust 8/12/05 (individually "Davis trust") and Patricia J. Shorr (individually "Shorr"), plaintiffs-appellees (collectively "appellees"), along with appellant, were involved in investing in real estate together for approximately ten years, and the transaction here was similar to past transactions. In the present case, appellant located a property, Coventry East Apartments ("apartments"), and signed a purchase contract. The parties then formed Coventry East Investors, LLC ("CEI"), and signed an operating agreement, which contained mandatory mediation and arbitration clauses as part of a dispute resolution provision. As an attorney and certified public accountant, appellant, at times, performed legal and accounting activities for CEI.

{¶3} In September 2005, CEI formally acquired the apartments. Spectrum Capital, LLC ("Spectrum"), which was co-owned by appellees, provided various analyses and handled various financial issues related to the transaction. Spectrum received payments for services associated with the acquisition. Further, CEI hired Fleetwood Management Company ("Fleetwood") to manage the apartments. Fleetwood was wholly owned by appellant.

{¶4} In June 2007, appellees allegedly discovered property taxes were delinquent on several of the apartment complexes it owned with appellant, and appellees requested various financial documents from appellant regarding the limited liability companies that held the apartments. Unsatisfied with appellant's actions, appellees filed the present action against appellant on August 20, 2007, seeking injunctive relief, declaratory judgment, and damages. Appellees believed appellant had engaged in various fraudulent activities related to the apartments. On November 29, 2007, appellant filed a motion to stay the action pending mediation and arbitration pursuant to the terms of the operating agreement. The trial court did not rule on the motion to stay, and further proceedings, investigations, and depositions ensued. On February 28, 2008, appellant filed a motion to dismiss the case, again based upon the mediation and arbitration clauses in the operating agreement. On May 13, 2008, the trial court issued a judgment denying appellant's motions, finding that the arbitration clause in the operating agreement was unconscionable. Appellant appeals, asserting the following assignment of error:

The Trial Court Erred as a Matter of Law by Denying Appellant Robert J. Beggs' Motion to Stay Further Proceedings Pending Mediation and Arbitration and by Denying Appellant, Robert J. Beggs' Motion to Dismiss.

{¶5} In his sole assignment of error, appellant argues that the trial court erred when it denied his motion to stay further proceedings pending mediation and arbitration and when it denied his motion to dismiss. We must first address appellees' assertion that the trial court's denial of appellant's motion to dismiss was not a final, appealable order, and, thus, this court does not have jurisdiction to address it. An appellate court has jurisdiction to review, affirm, modify, set aside, or reverse judgments or final orders of courts of record inferior to the court of appeals. Section 3(B)(2), Article IV, of the Ohio Constitution; see, also, R.C. 2505.03.

{¶6} R.C. 2711.01 et seq. provides for either direct enforcement of arbitration agreements through an order to compel arbitration, pursuant to R.C. 2711.03, or indirect enforcement through an order staying proceedings under R.C. 2711.02. Dismissal of a claim allegedly subject to arbitration is not a remedy authorized by R.C. 2711.01 et seq. Notwithstanding, it is clear that the denial of a motion to dismiss is not a final, appealable order. See Lonigro v. Lonigro (1989), 55 Ohio App.3d 30, 31; Taylor v. Norfolk Southern Ry. Co., Cuyahoga App. No. 85699, 2005-Ohio-4576, at ¶20; citing Celebrezze v. Netzley (1990), 51 Ohio St.3d 89; Lakewood v. Pfeifer (1992), 83 Ohio App.3d 47; Hill v. Home & Roam Pools, Ashtabula App. No. 2003-A-0097, 2003-Ohio-5862, at ¶8; and Shane v. Tracy (Aug. 24, 2000), Cuyahoga App. No. 77025. With regard to a denial of a motion to dismiss specifically relating to an arbitration provision, it has been likewise held that a denial of a motion to dismiss based upon an arbitration provision is not a final, appealable order. See Taylor, supra, at ¶12, citing Rock v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1992), 79 Ohio App.3d 126, and Ponyicki v. Monterey Homes, Inc. (May 19, 1994), Cuyahoga App. No. 65549. See, also, Frank Novak & Sons, Inc. v. Greater Cleveland Growth Assn. (Aug. 1, 1996), Cuyahoga App. No. 69778 (a denial of a motion to dismiss arbitration is not a final, appealable order, as the error can always be assigned on appeal at the end of trial); Shopsmith Woodworking Promotions, Inc. v. Am. Woodworking Academy, Inc. (Oct. 18, 1995), Montgomery App. No. 15268 (in appeal of two separate motions-one to stay and one to dismiss-there is no jurisdiction to consider the trial court's denial of motion to dismiss based upon arbitration clause, as it did not affect a substantial right, pursuant to R.C. 2505.02, because the court's order did not preclude future relief via an appeal of the arbitration issue from the court's denial of a stay). Therefore, we find that we do not have jurisdiction to consider appellant's appeal of the trial court's denial of his motion to dismiss, as it is not a final, appealable order.

{¶7} As for the trial court's denial of his motion to stay proceedings pending mediation and arbitration, R.C. 2711.02(C) specifically provides that an order that grants or denies a stay of a trial of any action pending arbitration is a final order and may be reviewed, affirmed, modified, or reversed on appeal. Appellate courts generally review a trial court's decision regarding a motion to stay proceedings pending arbitration under an abuse of discretion standard. Khoury v. Denney Motors Assoc., Inc., Franklin App. No. 06AP-1024, 2007-Ohio-5791, at ¶7, citing Peters v. Columbus Steel Castings Co., Franklin App. No. 05AP-308, 2006-Ohio-382, at ¶10. However, the de novo standard of review is proper when the appeal presents a question of law. Id. Bearing these standards in mind, we review appellant's assignment of error.

{¶8} Appellant presents two arguments under his assignment of error: (1) the trial court committed reversible error when it failed to conduct a hearing on his motion to stay further proceedings pending mediation and arbitration; and (2) the trial court committed reversible error when it found that the dispute resolution provisions in the operating agreement were unconscionable. With regard to appellant's first argument, appellant claims that, pursuant to R.C. 2711.03(A), a trial court is required to conduct a hearing when a party files a motion to compel arbitration in order to determine the validity of the arbitration clause; thus, the trial court erred here when it failed to conduct a hearing prior to denying his motion to stay. We disagree. Appellant moved for a stay pending arbitration, which is guided by R.C. 2711.02. Nowhere in R.C. 2711.02 is there a requirement for a hearing prior to determining the motion. See Castron v. Higginbotham, Cuyahoga App. No. 88559, 2007-Ohio-3260, at ¶9 (R.C. 2711.02 does not require a hearing). Although R.C. 2711.03 contains a requirement for a hearing when a party files a motion to compel arbitration, appellant did not seek such relief herein; thus, this provision is inapplicable.

{¶9} In support of his claim that a hearing was required, appellant contends that, whenever the unconscionability of an arbitration agreement is raised, a hearing is required, regardless of whether it is in the context of a motion to stay under R.C. 2711.02 or a motion to compel under R.C. 2711.03. In support, appellant cites Bencivenni v. Dietz, Cuyahoga App. No. 88269, 2007-Ohio-637, in which the court held, with regard to a motion to stay under R.C. 2711.02, "where a party disputes the making of the agreement, or alleges that the arbitration clause is unconscionable, a hearing should be held." Id., at ¶14. However, the court in Dietz cites no authority for this proposition, and merely states a hearing "should" be held. We fail to find any statutory authority or case law to support the conclusion reached in Dietz, and that court's bare assertion is unpersuasive.

{¶10} Furthermore, the Ohio Supreme Court has specifically held that a trial court considering whether to grant a motion to stay proceedings pending arbitration filed under R.C. 2711.02 need not hold a hearing, pursuant to R.C. 2711.03, when the motion is not based on R.C. 2711.03. See Maestle v. Best Buy Co., 100 Ohio St.3d 330, 2003-Ohio-6465, at syllabus. This court has acknowledged the Ohio Supreme Court's determination in Maestle that no hearing is required when a party files a motion to stay pursuant to R.C. 2711.02. See Pyle v. Wells Fargo Financial, Franklin App. No. 05AP-644, 2005-Ohio-6478, at ¶21; Cheney v. Sears, Roebuck & Co., Franklin App. No. 04AP-1354, 2005-Ohio-3283, at ¶21 (because appellee sought a stay of proceedings guided by R.C. 2711.02, and did not seek relief pursuant to R.C. 2711.03, pursuant to Maestle, the trial court was not required to hold a hearing regarding the making of the arbitration agreement). Other courts are in accord. See, e.g., Snider v. S. Forty Homes, Inc., Muskingum App. No. CT2007-0027, 2008-Ohio-385, at ¶18 (trial court was not required to hold a hearing when motion to stay was premised solely upon R.C. ...


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