Marion v. AWHR, L.L.C. , 2012 Ohio 2912 ( 2012 )

[Cite as Marion v. AWHR, L.L.C., 2012-Ohio-2912.]
COURT OF APPEALS
STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
SANDRA MARION, ET AL. : JUDGES:
:
: Hon. Patricia A. Delaney, P.J.
Plaintiffs-Appellees : Hon. John W. Wise, J.
: Hon. Julie A. Edwards, J.
-vs- :
: Case No. 2012CA00005
AWHR, LLC, ET AL. :
:
:
Defendants-Appellants : OPINION
CHARACTER OF PROCEEDING: Appeal from the Stark County Court of
Common Pleas, Case No. 2011CV03165
JUDGMENT: REVERSED AND REMANDED
DATE OF JUDGMENT ENTRY: June 22, 2012
APPEARANCES:
For Appellants: For Appellees:
CRAIG S. COBB DANIEL J. FUNK
55 Public Square, Suite 1580 400 S. Main St.
Cleveland, OH 44113 North Canton, OH 44720
Delaney, P.J.
{¶1} Defendant-Appellant AWHR, LLC appeals the December 9, 2011
judgment of the Stark County Court of Common Pleas to deny the motion to compel
arbitration and stay proceedings filed by AWHR, LLC. Plaintiffs-Appellees are Sandra
Marion and Ted Marion.
{¶2} This case comes to us on the accelerated calendar. App. R. 11.1, which
governs accelerated calendar cases, provides in pertinent part:
(E) Determination and judgment on appeal.
The appeal will be determined as provided by App.R. 11.1. It shall be
sufficient compliance with App.R. 12(A) for the statement of the reason
for the court's decision as to each error to be in brief and conclusionary
form.
The decision may be by judgment entry in which case it will not be
published in any form.
This appeal shall be considered in accordance with the aforementioned rule.
FACTS AND PROCEDURAL HISTORY
{¶3} On February 5, 2009, AWHR installed a hot water tank and circulating
pump for the Marions at their residence. On that same day, a representative of AWHR
and Sandra Marion entered in a written agreement entitled: “AWHR Appliance Lifetime
Warranty and Service Plan Agreement.” The terms of the Agreement provide for the
installation and maintenance by AWHR of the hot water tank for a monthly charge of
$17.99 per month.
{¶4} Paragraph 17 of the Agreement states:
Mandatory Arbitration of Disputes. ANY CLAIM, CONTROVERSY OR
DISPUTE OF ANY KIND BETWEEN THE CUSTOMER AND THE
COMPANY ARISING OUT OF OR RELATED TO THIS AGREEMENT
(WHETHER BASED ON CONTRACT, TORT, STATUTE, FRAUD,
MISREPRESENTATION OR ANY OTHER LEGAL OR EQUITABLE
THEORY) SHALL BE RESOLVED BY FINAL AND BINDING
ARBITRATION, PURSUANT TO THE FOLLOWING TERMS: (i) The
Federal Arbitration Act not state law, shall govern the arbitration process
and the question of whether a claim is subject to arbitration. The
customers, however, retains [sic] the right to take any claim, controversy
or dispute that qualifies to small claims court rather than arbitration. (ii)
A single arbitrator engaged in the practice of law will conduct the
arbitration. The arbitrator will be selected according to the rules of the
American Arbitration Association or alternatively, may be selected by
agreement of the parties, who shall cooperate in good faith to select the
arbitrator. The arbitration shall be conducted by, and under the then
applicable rules of, the American Arbitration Association. Any required
hearing fees and costs shall be paid by the parties as required by the
applicable rules, but the arbitrator shall have the power to apportion such
costs as the arbitrator deems appropriate. (iii) The arbitrator’s decision
and award will be final and binding, and judgment on the award rendered
by the arbitrator may be entered in any court with jurisdiction. (iv) No
claim, controversy or dispute may be joined in an arbitration with a claim,
controversy or dispute of any other person, or resolved on a class-wide
basis. The arbitrator may not award damages that are barred by this
Agreement, and the Customer and the Company both waiver any claim
for an award of damages that is excluded under this Agreement.
{¶5} The hot water tank leaked and caused water and mold damage to the
Marion’s residence.
{¶6} After the unsuccessful settlement of their claim through the insurance
providers for AWHR, the Marions filed a Complaint with the Stark County Court of
Common Pleas. The Complaint named AWHR and its insurer Zurich dba Maryland
Casualty Insurance Company as defendants. In the Complaint, the Marions alleged
the following against AWHR:
4. The Plaintiffs entered into an agreement with the Defendant, AWHR,
LLC, for the installation, leasing and servicing of a hot water tank and
circulating pump (see attached Exhibit A [AWHR Appliance Lifetime
Warranty and Service Plan Agreement]).
***
COUNT ONE: BREACH OF EXPRESS/IMPLIED WARRANTY OF
FTNESS [sic]
6. Plaintiffs incorporate herein by reference the allegations contained in
paragraphs 1-5 of their Complaint as if fully rewritten here.
7. At the time of entering above referenced agreement, Defendant,
AWHR, LLC, expressly and/or impliedly warrantied [sic] that the installed
hot water tank would function properly.
8. Defendant, AWHR, LLC, materially breached its’ [sic] express and/or
implied warranty of fitness and duty to provide an operable and non-
defective hot water tank.
{¶7} AWHR filed an Answer to the Complaint asserting an affirmative defense
that the claims were subject to a mandatory arbitration provision in the Agreement.
AWHR filed a Motion to Compel Arbitration and Stay. The Marions filed a response to
the motion. In their response, the Marions argued their claim in the Complaint against
AWHR was not based on the Agreement. AWHR filed a reply.
{¶8} On December 9, 2011, the trial court held a non-oral hearing and denied
the Motion to Compel Arbitration and Stay. The trial court found the arbitration clause
was both substantively and procedurally unconscionable as it relates to a consumer in
a consumer setting. It further held the claims presented by the Marions were not
based on the Agreement and therefore not subject to arbitration.
{¶9} It is from this judgment AWHR now appeals.
ASSIGNMENTS OF ERROR
{¶10} AWHR raises two Assignments of Error:
{¶11} “I. THE TRIAL COURT ERRED WHEN IT DENIED AWHR’S MOTION
TO COMPEL ARBITRATION AND STAY AFTER FINDING THE ARBITRATION
PROVISION TO BE UNCONSCIONABLE WHERE APPELLEES MADE NO SUCH
ARGUMENT AND PRESENTED NO EVIDENCE TO SUPPORT THAT
CONCLUSION.
{¶12} “II. THE TRIAL COURT ERRED WHEN IT FOUND THAT APPELLEES’
CLAIMS FELL OUTSIDE OF THE CONTRACT AND THEREFORE WERE NOT
SUBJECT TO ARBITRATION.
ANALYSIS
{¶13} The Ohio General Assembly and Ohio courts have expressed a strong
public policy favoring arbitration. Hayes v. Oakridge Home, 122 Ohio St.3d 63, 2009-
Ohio-2054, 908 N.E.2d 408, ¶ 15 citing R.C. Chapter 2711 and Taylor Bldg. Corp of
Am. v. Benfield, 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, ¶ 27. Because
of the strong presumption favoring arbitration, all doubts should be resolved in its
favor. Hayes, supra citing Ignazio v. Clear Channel Broadcasting, Inc. 113 Ohio St.3d
276, 2007-Ohio-1947, 865 N.E.2d 18, ¶ 18.
UNCONSCIONABILITY
{¶14} AWHR argues in its first Assignment of Error that the trial court erred as
a matter of law in finding the arbitration clause was both procedurally and
substantively unconscionable. We agree.
{¶15} An arbitration agreement is enforceable unless grounds exist at law or in
equity for revoking the agreement. R.C. 2711.01(A). Unconscionability is a ground for
revocation of an arbitration agreement. Taylor Bldg., supra at ¶ 33. Whether an
arbitration clause is unconscionable is a question of law for which the reviewing court
employs a de novo standard of review. Taylor Bldg., supra at ¶ 37.
{¶16} This Court examined the unconscionability of an arbitration agreement in
Lynn v. McKinley Ground Transport, LLC, 185 Ohio App.3d 146, 2009-Ohio-6088 (5th
Dist.). We stated:
Unconscionability rests on a two-prong analysis: substantive and
procedural. Eagle v. Fred Martin Motor Co., 157 Ohio App.3d 150, 2004-
Ohio-829, 809 N.E.2d 1161. Substantive unconscionability relates to the
contract terms themselves and whether they are commercially reasonable.
Procedural unconscionability deals with those factors relating to the
ultimate bargaining positions of the contracting parties, i.e., age,
education, intelligence, business acumen, and experience.
In Eagle, our brethren from the Ninth District explained the
following:
“An unconscionable contract clause is one in which there is an
absence of meaningful choice for the contracting parties, coupled with
draconian contract terms unreasonably favorable to the other party.
Collins v. Click Camera & Video, Inc. (1993), 86 Ohio App.3d 826, 834,
621 N.E.2d 1294. Thus, the doctrine of unconscionability consists of two
separate concepts:
“‘(1) [U]nfair and unreasonable contract terms, i.e., “substantive
unconscionability,” and (2) individualized circumstances surrounding each
of the parties to a contract such that no voluntary meeting of the minds
was possible, i.e., “procedural unconscionability.” * * * These two
concepts create what is, in essence, a two-prong test of unconscionability.
One must allege and prove a “quantum” of both prongs in order to
establish that a particular contract is unconscionable.’ (Citations omitted.)
[Collins v. Click Camera & Video, Inc.], 86 Ohio App.3d at 834, 621 N.E.2d
1294.” Eagle, 157 Ohio App.3d 150, 2004-Ohio-829, 809 N.E.2d 1161, ¶
30.
In Hayes v. Oakridge Home, 122 Ohio St.3d 63, 2009-Ohio-2054,
908 N.E.2d 408, ¶ 30, the Supreme Court of Ohio stated the following:
“All of the factors must be examined and weighed in their totality in
determining whether an arbitration agreement is procedurally
unconscionable. These findings must be considered in tandem with the
analysis on substantive unconscionability. A party challenging an
arbitration agreement must prove a quantum of both procedural and
substantive unconscionability.”
Lynn, supra at ¶ 17-22.
{¶17} AWHR argues the Marions failed to meet their burden to allege and
prove a quantum of both substantive and procedural unconscionability of the
arbitration clause. We agree. A trial court’s determination of procedural and
substantive unconscionability must be based on the evidence in the record. See
Lynn, supra at ¶ 23, 26, and 32. In this case, there is no evidence in the record, other
than the Agreement and the arbitration clause, to support the trial court’s finding the
arbitration clause was procedurally and substantively unconscionable. The trial court
held a non-oral hearing on the Motion. The Marions’ response to the Motion to
Compel Arbitration and Stay did not raise the argument of unconscionability.
{¶18} Accordingly, the first Assignment of Error of AWHR is sustained.
CLAIMS WITHIN THE AGREEMENT
{¶19} AWHR next argues the trial court erred in determining the Marions’
claims against AWHR were not based on the Agreement. We agree.
{¶20} The Marions argued in their response to the Motion that the Agreement
was a service contract and not the basis of their claim for breach of warranty to
provide an operable and non-defective hot water tank. In their Complaint, however,
the Marions alleged:
4. The Plaintiffs entered into an agreement with the Defendant, AWHR,
LLC, for the installation, leasing and servicing of a hot water tank and
circulating pump (see attached Exhibit A [AWHR Appliance Lifetime
Warranty and Service Plan Agreement]).
***
COUNT ONE: BREACH OF EXPRESS/IMPLIED WARRANTY OF
FTNESS [sic]
6. Plaintiffs incorporate herein by reference the allegations contained in
paragraphs 1-5 of their Complaint as if fully rewritten here.
7. At the time of entering above referenced agreement, Defendant,
AWHR, LLC, expressly and/or impliedly warrantied [sic] that the installed
hot water tank would function properly.
8. Defendant, AWHR, LLC, materially breached its’ [sic] express and/or
implied warranty of fitness and duty to provide an operable and non-
defective hot water tank.
{¶21} The arbitration clause reads in pertinent part:
ANY CLAIM, CONTROVERSY OR DISPUTE OF ANY KIND BETWEEN
THE CUSTOMER AND THE COMPANY ARISING OUT OF OR
RELATED TO THIS AGREEMENT (WHETHER BASED ON
CONTRACT, TORT, STATUTE, FRAUD, MISREPRESENTATION OR
ANY OTHER LEGAL OR EQUITABLE THEORY) SHALL BE
RESOLVED BY FINAL AND BINDING ARBITRATION * * *
{¶22} The Marions’ claim for breach of warranty is within the Agreement and is
subject to the arbitration clause.
{¶23} The second Assignment of Error of AWHR is sustained.
CONCLUSION
{¶24} Upon review, we find the trial court erred in denying AWHR’s Motion to
Compel Arbitration and Stay. AWHR’s Assignments of Error are sustained.
{¶25} The judgment of the Stark County Court of Common Pleas is reversed
and the matter is remanded for further proceedings consistent with this opinion and
law.
By: Delaney, P.J.
Wise, J. and
Edwards, J. concur.
HON. PATRICIA A. DELANEY
HON. JOHN W. WISE
HON. JULIE A. EDWARDS
PAD:kgb
IN THE COURT OF APPEALS FOR STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
:
SANDRA MARION, et al. :
:
Plaintiffs-Appellees : JUDGMENT ENTRY
:
:
-vs- :
: Case No. 2012CA00005
AWHR, LLC, et al. :
:
Defendants-Appellants :
:
For the reasons stated in our accompanying Opinion on file, the judgment of the
Stark County Court of Common Pleas is reversed and remanded. Costs assessed to
Appellees.
HON. PATRICIA A. DELANEY
HON. JOHN W. WISE
HON. JULIE A. EDWARDS