TN3, L.L.C. v. Jones , 2019 Ohio 2503 ( 2019 )

[Cite as TN3, L.L.C. v. Jones, 2019-Ohio-2503.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
GEAUGA COUNTY, OHIO
TN3 LLC, : OPINION
Plaintiff-Appellant, :
CASE NO. 2018-G-0171
- vs - :
KENYATTO MONTEZ JONES, et al., :
Defendants-Appellees. :
Civil Appeal from the Geauga County Court of Common Pleas, Case No. 2018 M 000296.
Judgment: Modified and affirmed as modified.
Jonathon W. Groza and Sean P. Malone, Kohrman Jackson & Krantz, LLP, One
Cleveland Center, 1375 East Ninth Street, 29th Floor, Cleveland, OH 44114 (For Plaintiff-
Appellant).
Harold Edward Farling, Law Office of Harold E. Farling, LLC, 22255 Center Ridge Road,
Suite 206, Rocky River, OH 44116 (For Defendants-Appellees).
TIMOTHY P. CANNON, J.
{¶1} Appellant, TN3 LLC (“TN3”), appeals a judgment in the Geauga County
Court of Common Pleas dismissing its complaint against appellees, Kenyatto Montez
Jones (“Jones”), Bear Bull Market Dividends, Inc. (“BBMD”), Ronald Robinson, Jr.
(“Robinson”), and Nexgen EAS, LLC (“Nexgen”). We modify, and affirm as modified, the
judgment of the trial court.
{¶2} TN3 brought suit against the named appellees for declaratory relief,
injunctive relief, breach of contract, fraud, conversion, tortious interference, unjust
enrichment, and civil conspiracy. The relevant allegations leading to the dispute are as
follows:
{¶3} TN3 entered into a Consulting Agreement (“CA”) with BBMD on July 14,
2016, for services related to TN3’s intention to become a profitable, publicly-traded
company and to acquire holding companies. The term of the CA was three years. The
contract also contained an arbitration clause and a forum selection clause, both of which
designated California as the proper location for dispute resolution:
15. Choice of Law, Jurisdiction, and Venue. This Agreement shall
be governed by, construed and enforced in accordance with the laws
of the State of California. The parties agree that the Superior Court
for the State of California, County of Orange will be the venue of any
dispute and will have jurisdiction over all parties. In the event that
any part of this Agreement shall be determined to be void or
unenforceable, the remaining parts shall continue to be construed
separately and apart from such void or unenforceable parts.
16. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the alleged breach thereof, or relating to
Consultant’s activities or remuneration under this Agreement, shall
be settled by binding arbitration in Orange County California, in
accordance with the applicable rules of the American Arbitration
Association, and judgment on the award rendered by the arbitrator(s)
shall be binding on the parties and may be entered in any court
having jurisdiction as provided by Paragraph 14 herein. The
provisions of Title 9 of Part 3 of the California Code of Civil
Procedure, including section 1283.05, and successor statutes,
permitted expanded discovery proceedings shall be applicable to all
disputes that are arbitrated under this paragraph.
{¶4} Jones was not a party to the CA; however, he was responsible for
performance of the contract as the CEO of BBMD and signer on behalf of the company.
{¶5} BBMD initially recommended acquiring the company that is currently known
as Innovest Global, Inc. (“Innovest”) from Schoolboy Industries (“Schoolboy”), a company
in Belize. Schoolboy was represented by Taniesha Matura (“Matura”), designated as its
president, in the transaction. TN3 and Schoolboy entered into a Securities Purchase
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Agreement (“SPA”) whereby TN3 acquired the shares of Innovest for $100,000.00. The
SPA contained the following clause:
5. GOVERNING LAW; DISPUTE RESOLUTION. This Agreement
shall be governed by and interpreted in accordance with the laws of
the State of Nevada. Any controversy or claim out of or relating to
this Agreement, the relationship resulting in or from this Agreement
or breach of any duties hereunder will be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association (“AAA”). All hearings will be held in the City
of Las Vegas, Clark County, Nevada before an Arbitrator who is a
licensed attorney or former judicial officer with at least fifteen (15)
years’ experience in commercial and/or securities law. A judgment
upon the award rendered by the arbitrator shall be entered into a
Court of competent jurisdiction in the City of Las Vegas, Clark
County, Nevada. The Federal Arbitration Act (Title 9 U.S. Code
Section 1 et. Seq.) shall govern all arbitration and confirmation
proceedings. As a condition precedent to the filing of an arbitration
claim, the parties agree to first mediate any claims between them at
AAA. Any party refusing to mediate shall not prevent the other party
or parties from pursuing their claims in arbitration. The parties shall
share the cost of mediation equally. Nothing herein will be construed
to prevent any party’s use of injunction, and/or other prejudgment or
provisional action or remedy. Any such action or remedy will not
waive the moving party’s right to compel arbitration of any dispute.
The parties agree to also meet and negotiate in good faith in order
to resolve any disputes which may arise between them.
{¶6} Next, BBMD recommended selling Innovest to Nexgen, which TN3
attempted to do through an Escrow/Accommodation Agreement and Securities Purchase
Agreement for $125,000.00. The agreements were signed by Robinson, as Managing
Member of Nexgen. However, TN3 alleges in its complaint that Nexgen failed to pay the
full price of $125,000.00 within the escrow term of five months. The SPA between TN3
and Nexgen provides the following regarding default and disputes:
e. Default in Payment and Termination. If the Buyer fails to pay any
installment required by the provisions of subparagraph 1.b.iii, above, on the
day that it is due:
i. the Escrow Agent shall, upon written instruction from Seller,
given [sic] written Notice of Default to the Buyer, which shall
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provide that if the defaulted payment is not received by the
Escrow Holder within five (5) calendar days this Agreement is
terminated forthwith; and
ii. in the event that this Agreement is terminated in the manner
provided in subparagraph 1.e.i., the Escrow Agent shall
continue to hold the Closing Documents;
iii. if within the ninety (90) days following termination of this
Agreement Seller delivers to the Escrow Agent seventy-five
(75%) percent of the funds released from escrow to the Seller
with instructions to pay the same to Buyer, the Escrow Holder
shall make such payment to Buyer and shall release the
Closing Documents to Seller. Upon such payment and
delivery, Escrow Holder shall be relieved of all responsibility
and liability.
iv. if within the ninety (90) days following termination of this
Agreement Seller fails to satisfy the conditions of
subparagraph 1.e.iii, the Escrow Holder shall release the
Closing Documents to Buyer. Upon such payment and
delivery, Escrow Holder shall be relieved of all responsibility
and liability.
****
6. GOVERNING LAW; DISPUTE RESOLUTION. This Agreement
shall be governed by and interpreted in accordance with the laws of
the State of California. Any controversy or claim out of or relating to
this Agreement, the relationship resulting in or from this Agreement
or breach of any duties hereunder will be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association (“AAA”). All hearings will be held in the City
of Newport Beach, Orange County, California before an Arbitrator
who is a licensed attorney or former judicial officer with at least fifteen
(15) years’ experience in commercial and/or securities law .. [sic] As
a condition precedent to the filing of an arbitration claim, the parties
agree to first mediate any claims between them at AAA. Any party
refusing to mediate shall not prevent the other party or parties from
pursuing their claims in arbitration. The parties shall share the cost
of mediation equally. Nothing herein will be construed to prevent any
party’s use of injunction, and/or other prejudgment or provisional
action or remedy. Any such action or remedy will not waive the
moving party’s right to compel arbitration of any dispute. The parties
agree to also meet and negotiate in good faith in order to resolve any
disputes which may arise between them.
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{¶7} Following the allegedly failed SPA between TN3 and Nexgen, TN3 alleges
that it discovered a litany of bad conduct constituting an ongoing and overarching scheme
by Jones, through BBMD in its consulting efforts for TN3, to enrich himself at TN3’s
expense. These allegations include claims that (1) BBMD and Jones failed to secure
funding needed to grow Innovest; (2) Jones misled TN3 about his experience and
expertise; (3) Jones owned various (at least seven) shell companies in Nevada; (4) Jones
owned Schoolboy, who was the original selling company for Innovest; (5) Schoolboy
“president” Matura actually worked for Jones at a different company; (6) Jones was
subject to investigation by the SEC for his Nevada companies and transactions in Belize,
where he was prohibited from transferring money; (7) prior to the sale of Innovest to TN3,
Jones, as Schoolboy’s owner, attempted to sell Innovest to a third party, Ray Kim, who
claims that he was defrauded by Jones; and (8) Jones was engaged in a “pump and
dump” scheme related to Innovest and his other interests.
{¶8} Further, while ownership of Innovest following the SPA issue between TN3
and Nexgen remained under dispute, Nexgen agreed to transfer all its shares in Innovest
that were to be acquired under the SPA to BBMD for $40,000.00. Following the transfer
from Nexgen to BBMD, Jones has repeatedly contacted shareholders and third parties
notifying them of the transfer of ownership and that he has appointed himself as the sole
director of Innovest.
{¶9} TN3 filed suit in Geauga County and requested a variety of remedies. First,
TN3 requested a declaratory judgment that the SPA between TN3 and Schoolboy is valid
and binding, therefore vesting TN3 with the ownership of Innovest that it attempted to sell
to Nexgen. Next, TN3 sought injunctive relief prohibiting all defendants from asserting
ownership of Innovest. Third, TN3 brought a breach of contract claim against BBMD and
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Jones for breach of the CA. Finally, TN3 brought various tort claims—including fraud,
conversion, tortious interference, unjust enrichment, and civil conspiracy—against all
parties for the ongoing deceptive scheme outlined in the complaint.
{¶10} The trial court dismissed the claims without prejudice after determining that
the claims were subject to binding arbitration or, in the alternative, subject to a forum
selection clause designating California as the appropriate forum.
{¶11} TN3 filed a timely notice of appeal and raises two assignments of error for
our review.
{¶12} TN3’s first assignment of error states:
{¶13} “The Trial Court erred as a matter of law when it dismissed the Complaint
because the claims alleged are not subject to arbitration but rather arise out of a
conspiracy to defraud TN3 and usurp control of Innovest.”
{¶14} “‘The scope of an arbitration clause, that is whether a controversy is
arbitrable under the provisions of a contract, is a question for the court to decide upon
examination of the contract.’” Owens Flooring Co. v. Hummel Constr. Co., 140 Ohio
App.3d 825, 829 (11th Dist.2001), quoting Divine Constr. Co. v. Ohio-American Water
Co., 75 Ohio App.3d 311, 316 (10th Dist.). “[T]he standard of appellate review in
determining the enforceability of an arbitration provision is de novo; however, any factual
findings by the trial court must be accorded deference.” Jamison v. LDA Builders, Inc.,
11th Dist. Portage No. 2011-P-0072, 2013-Ohio-2037, ¶21, citing Taylor Bldg. Corp. v.
Benfield, 117 Ohio St.3d 352, 2008-Ohio-938, ¶2.
{¶15} “Generally, public policy in Ohio encourages the resolution of disputes
through arbitration.” Owens Flooring, supra, at 829 citing Kelm v. Kelm, 68 Ohio St.3d
26, 27 (1993). “Any uncertainty regarding the applicability of an arbitration clause should
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be resolved in favor of coverage.” Id., citing Grcar v. Lanmark Homes, Inc., 11th Dist.
Lake No. 91-L-128, 1992 WL 134235, *1 (June 12, 1992). “An arbitration clause should
not be denied effect unless it can be determined to a high degree of certainty that the
clause does not cover the asserted dispute.” Id. (citation omitted). As the Ohio Supreme
Court has held, “an arbitration provision must be enforced unless it is not susceptible of
an interpretation that covers the asserted dispute, with any doubt being resolved in favor
of arbitration.” Alkenbrack v. Green Tree Servicing, LLC, 11th Dist. Geauga No. 2009-G-
2889, 2009-Ohio-6512, ¶14, citing Academy of Medicine of Cincinnati v. Aetna Health,
Inc., 108 Ohio St.3d 185, 2006-Ohio-657, ¶14.
{¶16} In the matter sub judice, each of TN3’s claims are susceptible to an
interpretation that an arbitration clause in one of the various agreements applies to the
asserted dispute. First, the claim for breach of contract against BBMD and Jones is
undisputedly subject to arbitration, as it pertains directly to the contract containing the
clause. Further, the claim for declaratory relief requests the court to interpret the validity
of the SPA between TN3 and Schoolboy, and the request for injunctive relief requests the
court to interpret the validity and potential breach of the SPA between TN3 and Nexgen.
Both of these claims are related to contracts containing arbitration clauses, which are
binding on the parties.
{¶17} With regard to the remaining tort claims for fraud, conversion, tortious
interference, unjust enrichment, and civil conspiracy, we refer to Academy of Medicine,
supra, and Alexander v. Wells Fargo Fin. Ohio 1, Inc., 122 Ohio St.3d 341, 2009-Ohio-
2962. See also Alkenbrack, supra, at ¶19. The Supreme Court of Ohio has held that
Ohio courts may determine whether a cause of action is within the scope of an arbitration
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agreement based on the federal standard found in Fazio v. Lehman Bros., Inc., 340 F.3d
386 (6th Cir.2003). In Fazio, the Sixth Circuit Court of Appeals held:
A proper method of analysis here is to ask if an action could be
maintained without reference to the contract or relationship at issue.
If it could, it is likely outside the scope of the arbitration agreement. *
* * Even real torts can be covered by arbitration clauses ‘if the
allegations underlying the claims “touch matters” covered by the
[agreement].’
Fazio, supra, at 395, quoting Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d 840, 846
(2d Cir.1987).
{¶18} Here, TN3 alleged in its complaint that BBMD, through Jones, engaged in
a scheme to mislead and deceive TN3 rather than offer legitimate consultation services.
As part of this ongoing scheme, Nexgen and Robinson were used to cause TN3’s
controlling interest in Innovest to be transferred to BBMD through a Securities Purchase
Agreement and subsequent transfer. Each of TN3’s claims relate to the business
relationship between the parties under either the CA, the first SPA between TN3 and
Schoolboy, or the second SPA between TN3 and Nexgen. Therefore, TN3’s claims are
derived from the contracts between the parties and are intertwined with them.
{¶19} We therefore hold that TN3’s tort claims could not be maintained without
reference to the parties’ contracts and are subject to arbitration.
{¶20} TN3’s first assignment of error is without merit.
{¶21} TN3’s second assignment of error states:
{¶22} “The Trial Court erred as a matter of law when it dismissed the Complaint
on the grounds that venue should be in Orange County California because venue is in
fact proper in the Geauga County Court of Common Pleas.”
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{¶23} Because we have determined that the claims are subject to binding
arbitration, they are subject to the agreed provisions regarding venue set forth in the
various agreements. While it is not clear whether all of the claims can be heard in the
same venue, it is clear that venue in the Geauga County Court of Common Pleas is not
proper.
{¶24} TN3’s second assignment of error is not well taken.
{¶25} The trial court determined that “the contract between the parties herein
clearly and unequivocally provides that any controversy or claim arising out of or relating
to the agreement, or the alleged breach thereof, or relating to Defendants’ activities or
remuneration, shall be settled by binding arbitration in Orange County, California.” This
is true with regard to the CA between TN3 and BBMD; however, the trial court’s order
must be modified to reflect that different claims made by TN3 are subject to the other two
agreements.
{¶26} The issue of arbitrability of the breach of contract claim for breach of the CA
was conceded in favor of arbitration by TN3. With regard to the other agreements, both
the first SPA between TN3 and Schoolboy and the second SPA between TN3 and Nexgen
state that “[a]ny controversy or claim out of or relating to this Agreement, the relationship
resulting in or from this Agreement or breach of any duties hereunder will be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (‘AAA’).”
{¶27} The United States Supreme Court recently decided a case involving
arbitrability of claims where the parties agreed to the AAA rules, stating that “when the
parties’ contract delegates the arbitrability question to an arbitrator, the courts must
respect the parties’ decision as embodied in the contract.” Henry Schein, Inc. v. Archer
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& White Sales, Inc., 139 S.Ct. 524, 528 (2019). This is because “[t]he rules of the
American Arbitration Association provide that arbitrators have the power to resolve
arbitrability questions.” Id. Therefore, the trial court reached the correct conclusion by
leaving a determination of arbitrability of the claims in the hands of an arbitrator; however,
the language of the judgment entry seemingly only references one contract—the CA
between TN3 and BBMD.
{¶28} As a result, the judgment of the Geauga County Court of Common Pleas is
modified to reflect that each claim pled by TN3 is subject to a valid and binding arbitration
clause, whether it be under the CA, the first SPA between TN3 and Schoolboy, or the
second SPA between TN3 and Nexgen. An arbitrator will need to determine which
contract applies to each claim. Alternative dispute resolution efficiencies suggest the
multiple claims should be merged and heard at the same place and time. However,
neither this court nor the Geauga County Court of Common Pleas has jurisdiction to
dictate the ultimate venue or process under which these claims should proceed.
{¶29} The judgment, as modified, is affirmed.
THOMAS R. WRIGHT, P.J.,
CYNTHIA WESTCOTT RICE, J.,
concur.
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