BST Ohio Corp. v. Wolgang , 2019 Ohio 4785 ( 2019 )

[Cite as BST Ohio Corp. v. Wolgang, 2019-Ohio-4785.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
BST OHIO CORPORATION, ET AL., :
Plaintiffs-Appellees, :
No. 108130
v. :
EVAN GARY WOLGANG, ET AL., :
Defendants-Appellants. :
JOURNAL ENTRY AND OPINION
JUDGMENT: REVERSED AND REMANDED
RELEASED AND JOURNALIZED: November 21, 2019
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-18-908058
Appearances:
Ciano & Goldwasser, L.L.P., Phillip A. Ciano, and Brent S.
Silverman; Ulmer & Berne, L.L.P., Michael N. Ungar, and
Amanda Martinsek, for appellees.
Calfee, Halter & Griswold, L.L.P., Colleen M. O’Neil,
Alexandra R. Forkosh; Hamburg, Karic, Edwards &
Martin, L.L.P., Steven S. Karic, for appellants.
MARY J. BOYLE, P.J.:
The question presented in this case is whether R.C. 2711.13 requires a
trial court to wait three months before confirming an arbitration award under R.C.
2711.09 when the party opposing confirmation appears and informs the trial court
that he or she intends to file a motion to vacate within the three-month time frame
set forth in R.C. 2711.13. We hold that it does. We therefore reverse the judgment
of the trial court confirming the arbitration award and remand to give appellants 50
days from the date this case is reactivated on the trial court’s docket to file a motion
to vacate, modify, or correct the award under R.C. 2711.10 or 2711.11 (50 days is the
amount of the time from the judgment entry of confirmation, January 15, 2018, to
the time that appellants would have had to file the motion had the trial court not
confirmed the award prematurely, March 6, 2018).
I. Procedural History and Factual Background
Defendants-appellants, Evan Gary Wolfgang (“Wolfgang”) and
Massillon Management Company (“Massillon Management”), appeal a judgment of
the Cuyahoga County Court of Common Pleas confirming an arbitration award in
favor of plaintiffs-appellees, BST Ohio Corporation and 26 other individuals and
companies. Respondents raise two assignments of error for our review:
1. The trial court erred as a matter of law by granting respondents’
motion to confirm arbitration award under R.C. 2711.09 before the
expiration of the three-month period in which a party may file and
serve a motion to vacate or correct an arbitration award under R.C.
2711.13.
2. The trial court abused its discretion by denying appellants’ motion to
stay proceedings or, in the alternative, for continuance of the hearing
on respondents’ motion to confirm, until after the expiration of the
three-month period in which a party may file and serve a motion to
vacate or correct an arbitration award under R.C. 2711.13.
The parties in this case are owners of Prophecy Massillon L.L.C., a
Delaware limited liability company. Prophecy owns real estate in Massillon, Ohio,
that, according to the arbitrator, “is improved with facilities for dry and cold storage
and distribution, parking, offices, and related uses.” Appellees own a supermajority
interest in Prophecy, and appellants own approximately 17% of it. Massillon
Management, of which Wolfgang was the sole owner, managed Prophecy.
The dispute in this case arose over appellants’ management of
Prophecy. Prophecy was governed by a “Second Amended and Restated Operating
Agreement” (“SOA”), which the owners of Prophecy entered into on May 14, 2014.
The SOA contained an arbitration agreement that stated that “[a] dispute arising out
of or relating to this agreement * * * shall be settled by arbitration in Cuyahoga
County, Ohio, in accordance with the American Arbitration Association.” Under the
SOA, the manager of Prophecy could only be removed for cause.
In accordance with the SOA, appellees commenced commercial
arbitration against appellants in February 2017 with the American Arbitration
Association in Cleveland, Ohio. Plaintiffs sought, in part, a declaration that
appellants should be removed for cause as the manager of Prophecy.
After several weeks of hearings that took place between December
2017 and June 1, 2018, the arbitrator determined, among many other things, that
appellants “breached their fiduciary duty of loyalty by failing to act in good faith or
that constituted willful or wanton misconduct,” which amounted to cause under the
SOA. But the arbitrator determined that she did not have the authority under the
SOA to remove appellants as the manager of Prophecy, leaving that to other
members of Prophecy. The arbitrator also issued a monetary judgment against
appellants.
On December 6, 2018, the day the arbitrator issued her final award,
appellees filed an application for an order confirming it. Appellees served appellants
with their application that same day.
On December 22, 2018, the trial court issued notice to the parties that
it set a hearing on appellees’ application to confirm arbitration award for
December 27, 2018.
On December 24, 2018, appellants moved to stay the proceedings or
in the alternative, for a continuance, requesting an “expedited ruling.” In their
motion, appellants informed the trial court that on December 7, 2018, they filed a
petition to vacate or correct the arbitration award in a county court in Los Angeles,
California (“the California Petition to Vacate”).1 Appellants further asserted that a
stay would be prudent because, inter alia, R.C. 2711.13 allows “any party to the
arbitration to file a motion to vacate, modify, or correct the award within 90 days of
1 Appellants claimed that California was the proper forum to determine the validity
of the arbitration award because the arbitration clause allowed “judicial proceedings to
be brought in courts of competent jurisdiction” and that all parties lived or did business
in California.
the delivery of the award to the parties,” which appellants stated it “fully intend[ed]
to do in the event” the court did not stay the action “in favor of the California Petition
to Vacate.” In the alternative, appellants requested the court continue the
December 27, 2018 hearing due in part to the Christmas holiday and the fact that
they were in California.
The court held the hearing as scheduled on December 27, 2018.
Appellants appeared by telephone.
On January 14, 2019, the trial court denied appellants’ motion to stay
the proceedings or in the alternative, a continuance. On January 15, 2019, the trial
court confirmed the arbitration award. It is from this judgment that appellants now
appeal.
II. R.C. 2711.09 and 2711.13
This case calls upon us to interpret the meaning of two statutes, R.C.
2711.09 and 2711.13. Interpretation of a statute is a question of law. Questions of
law require de novo review by this court. State v. Elkins, 4th Dist. Hocking No.
07CA1, 2008-Ohio-674, ¶ 12, citing Cuyahoga Cty. Bd. of Commrs. v. State, 112
Ohio St. 3d 59, 2006-Ohio-6499, 858 N.E.2d 330. When reviewing a matter de
novo, this court gives no deference to the trial court’s decision. State v. Barclay, 9th
Dist. Summit No. 25646, 2011-Ohio-4770, ¶ 8.
The Ohio Arbitration Act was designed to significantly limit judicial
intervention in the arbitration process and provides the exclusive statutory remedy
that parties must use in appealing arbitration awards to the courts of common pleas.
Galion v. American Fedn. of State, Cty. and Mun. Employees, Local No. 2243, 71
Ohio St. 3d 620, 646 N.E.2d 813 (1995), paragraph two of the syllabus. The
jurisdiction of the courts to review arbitration awards is narrow and limited by
legislative decree. Kelm v. Kelm, 10th Dist. Franklin No. 03AP-472, 2004-Ohio-
1004, ¶ 22. Indeed, “once an arbitration is completed, a court has no jurisdiction
except to confirm and enter judgment (R.C. 2711.09 and 2711.12), vacate (R.C.
2711.10 and 2711.13), modify (R.C. 2711.11 and 2711.13), correct (R.C. 2711.11 and
2711.13), or enforce the judgment (R.C. 2711.14).” State ex rel. R.W. Sidley, Inc. v.
Crawford, 100 Ohio St. 3d 113, 2003-Ohio-5101, 796 N.E.2d 929, ¶ 22.
R.C. 2711.09 provides:
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. Notice in writing of the application shall
be served upon the adverse party or his attorney five days before the
hearing thereof.
R.C. 2711.13 states:
After an award in an arbitration proceeding is made, any party to the
arbitration may file a motion in the court of common pleas for an order
vacating, modifying, or correcting the award as prescribed in sections
2711.10 and 2711.11 of the Revised Code.
Notice of a motion to vacate, modify, or correct an award must be
served upon the adverse party or his attorney within three months after
the award is delivered to the parties in interest, as prescribed by law for
service of notice of a motion in an action. For the purposes of the
motion, any judge who might make an order to stay the proceedings in
an action brought in the same court may make an order, to be served
with the notice of motion, staying the proceedings of the adverse party
to enforce the award.
The Ohio Supreme Court has not addressed the exact question
presented in this case. It has, however, issued decisions that are instructive with
respect to the statutory provisions at issue. The Supreme Court has held that R.C.
2711.13 provides a three-month statute of limitations within which a party can file a
motion to vacate, modify, or correct an arbitration award. Galion, 71 Ohio St.3d at
621, 646 N.E.2d 813. The Supreme Court further explained in Galion that “R.C.
2711.10 [vacate] and 2711.11 [modify] clearly establish the circumstances where a
party may appeal to the common pleas court to vacate, modify or correct an
arbitration award.” Id. at 622, citing Lake Cty. Bd. of Mental Retardation & Dev.
Disabilities v. Professional Assn. for the Teaching of the Mentally Retarded, 71 Ohio
St.3d 15, 641 N.E.2d 180 (1994).
The Ohio Supreme Court held in Galion:
In our view, the language of R.C. 2711.13 is clear, unmistakable and,
above all, mandatory. R.C. 2711.10 specifies when an arbitration award
can be vacated, R.C. 2711.11 establishes the circumstances under which
the common pleas court may modify or correct an arbitration award,
and R.C. 2711.13 states the time frame in which the motion must be
made. We are unpersuaded by appellant’s argument that the statute of
limitations in R.C. 2711.13 does not apply to motions brought under
R.C. 2711.10 and 2711.11. If the General Assembly did not intend for the
statute of limitations in R.C. 2711.13 to apply, it would have expressly
excluded R.C. 2711.10 and 2711.11 from that section.
Thus, in answering the certified issue, we hold that R.C. 2711.13
provides a three-month period within which a party must file a motion
to vacate, modify, or correct an arbitration award under R.C. 2711.10 or
2711.11. If an application is filed after this period, the trial court lacks
jurisdiction.
Id. at 622.
The Ohio Supreme Court has also held that “[w]hen a motion is made
pursuant to R.C. 2711.09 to confirm an arbitration award, the court must grant the
motion if it is timely, unless a timely motion for modification or vacation has been
made and cause to modify or vacate is shown.” Warren Edn. Assn. v. Warren City
Bd. of Ed., 18 Ohio St. 3d 170, 480 N.E.2d 456 (1985), syllabus. The Supreme Court
stated in Warren that “R.C. 2711.09 through 2711.14 * * * provide the only
procedures for post award attack or support of an arbitration decision.” Id. at 174.
Appellants cite to Schwartz v. Realtispec, Inc., 11th Dist. Lake No.
2002-L-098, 2003-Ohio-6579, in support of their argument that an application to
confirm an arbitration award cannot be granted before the expiration of the three-
month period set forth in R.C. 2711.13. Schwartz, however, is not entirely on point.
The Eleventh District held in Schwartz that the trial court erred by not holding a
hearing before confirming the arbitration award. Id. at ¶ 12. Although not on point,
the Eleventh District explained in Schwartz:
Read together, R.C. 2711.09 and R.C. 2711.13 set forth an intelligible
procedural scheme. To wit, R.C. 2711.09 requires a hearing on an
application to confirm. As a matter of law, a motion to confirm must
be granted unless a timely motion to modify or vacate is made and
cause to modify or vacate is demonstrated. A party seeking to modify
or vacate an arbitration award has up to three months from the date of
the award to file its motion. Therefore, the proper way to approach a
situation such as the one sub judice, is to conduct a hearing after an
adverse party files a motion to modify or vacate. However, if three
months have elapsed since the award and a motion to modify or vacate
has not been filed, a court should continue forward with a hearing on
the motion to confirm.
Id. at ¶ 10.
After reviewing these cases, we agree with appellants that R.C.
2711.09 read in pari materia with R.C. 2711.13 can only mean that the trial court in
this case confirmed the arbitration award prematurely. To hold otherwise would
nullify the provisions set forth in R.C. 2711.13, which would also eliminate a party’s
statutory right to move to vacate, modify or correct an arbitration award set forth in
R.C. 2711.10 and 2711.11. “It is a fundamental rule of statutory construction that
statutes relating to the same subject matter should be construed together. * * * In
construing such statutes in pari materia, they should be harmonized so as to give
full application to the statutes.’” State ex rel. Thurn v. Cuyahoga Cty. Bd. of
Elections, 72 Ohio St. 3d 289, 294, 649 N.E.2d 1205 (1995), citing State v. Leichty,
68 Ohio St. 3d 37, 623 N.E.2d 48 (1993), and United Tel. Co. of Ohio v. Limbach, 71
Ohio St. 3d 369, 643 N.E.2d 1129 (1994).
R.C. 2711.09 and 2711.13 relate to the same subject matter, namely,
arbitration awards, and, specifically, whether a trial court should confirm, vacate,
modify, or correct them. We simply do not believe that the legislature intended for
the winning party in an arbitration case to be able to race to the court to request
confirmation before the three-month statute of limitations in R.C. 2711.13 has
passed to completely eliminate an opposing party’s statutory right to move to vacate,
modify, or correct the award — especially when the opposing party appears and
states his or her intentions to file such a motion, as appellants did in this case.
Appellees cite to two Tenth District cases that they contend have
definitively decided the issue in this case in their favor: Amanda Scott Publishing v.
Legacy Marketing Group, 10th Dist. Franklin No. 92AP-233, 1992 Ohio App. LEXIS
4267 (Aug. 11, 1992), and Goldsmith v. On-Belay, Inc., 10th Dist. Franklin No.
90AP-301, 1990 Ohio App. LEXIS 4114 (Sept. 20, 1990). We agree with appellees
that these cases stand for the proposition that a trial court can confirm an arbitration
award in some situations before the three-month statute of limitations in R.C.
2711.13. See Amanda Scott at 3-4, quoting Goldsmith (‘“It is appellant’s contention
that this provision [R.C. 2711.13] gives it an absolute period of three months (ninety
days) to file an objection to the award regardless of any action taken by appellee to
obtain confirmation of the award and that the trial court may not act upon the award
within such period. Such, however, is not the law.”’) Nonetheless, those situations
are not present here, and Amanda Scott and Goldsmith are easily distinguishable
on their facts.
In Amanda Scott, the winning arbitration party moved to confirm the
arbitration award within three months of the award being issued. The vice president
of the company opposing confirmation appeared at the confirmation hearing and
“endeavored to file a response.” Id. at 1. The Tenth District explained that “a
corporation cannot maintain litigation in proprio persona, or appear, in court
through an officer of the corporation or an appointed agent not admitted to the
practice of law.” Id. at 2. It therefore determined that the vice president’s response
was a nullity and did not provide the notice contemplated by R.C. 2711.13. Id. at 2-
3. Here, however, the proper parties moved to stay the proceedings or, in the
alternative, for a continuance. They also appeared at the December 27th hearing
and expressed their explicit intent to file a motion to vacate the arbitration award
with the three-month statutory timeframe.
In Goldsmith, the party opposing confirmation of the arbitration
award appeared at the confirmation hearing and did not inform the trial court or the
opposing party that it intended to file a motion to vacate the arbitration award. The
party opposing confirmation then filed a motion to vacate the confirmation of the
award at a later point (but within the three-month statutory timeframe). The Tenth
District upheld the trial court’s denial of that motion, explaining, “Appellant had the
opportunity to oppose the application and to make its contentions known to the trial
court at the hearing on June 6, 1989. It failed to do so. This resulted in the issuance
of a final appealable order confirming the award. This order was not appealed.” Id.
at ¶ 4. Again, in the present case, appellants made it known the trial court and
appellees in their motion to stay or continue and at the December 27th hearing that
they fully intended to move to vacate the arbitration award.
Accordingly, we conclude that the trial court erred as a matter of law
when it confirmed the arbitration award in this case before the three-month statute
of limitations had passed as set forth in R.C. 2711.13. Appellants’ first assignment
of error is sustained. Appellants’ second assignment of error claiming that the trial
court should have granted their motion to stay or continue is moot.
Judgment reversed and remanded. Upon remand, the trial court
must give appellants 50 days from the date the case is reactivated on the trial court’s
docket upon which to file their motion to vacate, modify, or correct the arbitration
award under R.C. 2711.10 or 2711.11 (again, 50 days is the amount of time from the
judgment entry of confirmation, January 15, 2018, to the time that appellants would
have had to file the motion had the trial court not confirmed the award prematurely,
March 6, 2018).
It is ordered that appellant recover from appellee costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment
into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27
of the Rules of Appellate Procedure.
MARY J. BOYLE, PRESIDING JUDGE
KATHLEEN ANN KEOUGH, J., and
RAYMOND C. HEADEN, J., CONCUR