Crosscut Capital, LLC v. DeWitt

173 N.E.3d 536

CROSSCUT CAPITAL, LLC, Plaintiff-Appellee,

v.Nicholas DEWITT, Defendant-Appellant.

No. 20AP-222

Court of Appeals of Ohio, Tenth District, Franklin County.

Rendered on May 27, 2021

On brief: Taft Stettinius & Hollister LLP, and Joseph C. Pickens, Columbus, for appellee. Argued: Joseph C. Pickens.

On brief: Edward S. Brown, for appellant. Argued: Edward S. Brown.

DECISION

DORRIAN, P.J.

{¶ 1} Defendant-appellant, Nicholas DeWitt, appeals the decision and entry of the Franklin County Court of Common Pleas granting the motion of plaintiff-appellee, Crosscut Capital, LLC ("Crosscut"), to compel discovery and denying DeWitt's motion to compel arbitration and stay proceedings. For the following reasons, we affirm.

I. Facts and Procedural History

{¶ 2} On June 4, 2019, Crosscut filed a complaint in the trial court asserting claims against DeWitt for breach of fiduciary duty and breach of operating agreement. In its complaint, Crosscut, an Arizona limited liability company, alleged that in 2015 it entered into an agreement with DeWitt, a resident of Franklin County, Ohio, to form WKND Property Group, LLC ("WKND") for the purpose of purchasing, rehabilitating, leasing, and selling real estate. Crosscut attached documents purporting to be copies of WKND's Operating Agreement ("Agreement"), dated October 26, 2015, and a First Amendment to the Agreement, dated March 23, 2017. In addition to monetary damages, Crosscut sought declaratory judgment and injunctive relief.

{¶ 3} On July 1, 2019, DeWitt filed an answer and counterclaim for breach of contract seeking declaratory relief in addition to costs, attorney fees, expenses, and such other relief as may be appropriate. On July 2, 2019, DeWitt refiled his answer and counterclaim to which he attached exhibits that were not included in the July 1, 2019 answer and counterclaim. On July 30, 2019, Crosscut filed a motion for judgment on the pleadings pursuant to Civ.R. 12(C) on DeWitt's counterclaim. On the same date, Crosscut filed an answer to DeWitt's counterclaim. On August 28, 2019, DeWitt filed a memorandum in opposition to Crosscut's motion for judgment on the pleadings. On September 3, 2019, Crosscut filed a reply in support of its motion for judgment on the pleadings in which it asserted that DeWitt's August 28, 2019 memorandum in opposition should be stricken as untimely.

{¶ 4} On September 5, 2019, Crosscut filed a motion for an order approving sale of real property. On September 19, 2019, DeWitt filed a memorandum in opposition to Crosscut's motion for an order approving sale of real property and motion for order to compel Crosscut to replace money removed against the terms of the Agreement. On September 26, 2019, Crosscut filed a reply in support of its motion for an order approving sale of real property. On October 10, 2019, DeWitt filed a reply in support of his motion for an order to compel Crosscut to replace money removed against the terms of the Agreement.

{¶ 5} On October 1, 2019, DeWitt filed his first set of interrogatories and requests for production of documents pursuant to Civ.R. 34 on Crosscut. On November 8, 2019, Crosscut filed notice that DeWitt's answers to Crosscut's requests for admissions were deemed admitted pursuant to Civ.R. 36. In the notice, Crosscut asserted that it served its requests for admissions on DeWitt on October 8, 2019, but had not received any response.

{¶ 6} On December 3, 2019, Crosscut filed a motion for an order to compel discovery. In its motion, Crosscut asserted it sought DeWitt's answers and responses to Crosscut's first set of interrogatories, requests for production of documents, and requests for admissions, which it asserted was served on DeWitt on October 8, 2019. On December 18, 2019, DeWitt filed a motion to compel arbitration and stay proceedings. On December 24, 2019, Crosscut filed a memorandum in opposition to DeWitt's motion to compel arbitration and stay proceedings.

{¶ 7} On March 27, 2020, the trial court filed a decision and entry granting the motion of Crosscut to compel discovery and denying DeWitt's motion to compel arbitration and stay proceedings. On April 13, 2020, DeWitt filed a notice of appeal. On September 20, 2020, Crosscut filed a motion to supplement the record on appeal.

II. Assignment of Error

{¶ 8} DeWitt assigns the following sole assignment of error for our review:

The trial court abused its discretion and incorrectly interpreted the standard of review for denying a motion to compel an arbitration clause #78 of the Pleadings in the Record, Decision and Entry On Defendant's Motion To Compel Arbitration And/Or Stay Proceedings.

III. Analysis

{¶ 9} In his sole assignment of error, DeWitt asserts the trial court abused its discretion and applied the incorrect standard of review in denying his motion to compel arbitration and stay proceedings.

A. Applicable Law

{¶ 10} "Both 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. See also Taylor Bldg. Corp. of Am. v. Benfield , 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, ¶ 27, quoting Williams v. Aetna Fin. Co. , 83 Ohio St.3d 464, 471, 700 N.E.2d 859 (1998) (stating that "Ohio courts recognize a ‘presumption favoring arbitration’ that arises ‘when the claim in dispute falls within the scope of the arbitration provision’ "). " ‘Arbitration is favored because it provides the parties thereto with a relatively expeditious and economical means of resolving a dispute.’ " Kelm v. Kelm , 68 Ohio St.3d 26, 29, 623 N.E.2d 39 (1993), quoting Schaefer v. Allstate Ins. Co. , 63 Ohio St.3d 708, 712, 590 N.E.2d 1242 (1992). "Arbitration also has the additional benefit of unburdening crowded court dockets." Hayes at ¶ 15, citing Mahoning Cty. Bd. of Mental Retardation & Dev. Disabilities v. Mahoning Cty. TMR Edn. Assn. , 22 Ohio St.3d 80, 83, 488 N.E.2d 872 (1986). "In light of the strong presumption favoring arbitration, all doubts should be resolved in its favor." Id. , citing Ignazio v. Clear Channel Broadcasting, Inc. , 113 Ohio St.3d 276, 2007-Ohio-1947, 865 N.E.2d 18, ¶ 18.

{¶ 11} R.C. Chapter 2711 governs arbitration. R.C. 2711.01 provides that an arbitration agreement or provision in a written contract "shall be valid, irrevocable, and enforceable, except upon grounds that exist at law or in equity for the revocation of any contract." See Hayes at ¶ 16. R.C. 2711.02(B) provides as follows:

If any action is brought upon any issue referable to arbitration under an agreement in writing for arbitration, the court in which the action is pending, upon being satisfied that the issue involved in the action is referable to arbitration under an agreement in writing for arbitration, shall on application of one of the parties stay the trial of the action until the arbitration of the issue has been had in accordance with the agreement, provided the applicant for the stay is not in default in proceeding with arbitration.

Thus, a party to an arbitration agreement or provision may obtain a stay of litigation in favor of arbitration. Pinnell v. Cugini & Cappoccia Builders, Inc. , 10th Dist. No. 13AP-579, 2014-Ohio-669, 2014 WL 742430, ¶ 16. An order under R.C. 2711.02(B) that grants or denies a stay of a trial pending arbitration "is a final order and may be reviewed, affirmed, modified, or reversed on appeal pursuant to the Rules of Appellate Procedure and, to the extent not in conflict with those rules, Chapter 2505. of the Revised Code." R.C. 2711.02(C).

{¶ 12} As with any other contractual right, a party may waive the right to arbitrate. Murtha v. Ravines of McNaughton Condominium Assn. , 10th Dist. No. 09AP-709, 2010-Ohio-1325, 2010 WL 1229211, ¶ 20, citing Rock v. Merrill Lynch , Pierce , Fenner & Smith, Inc. , 79 Ohio App.3d 126, 128, 606 N.E.2d 1054 (8th Dist.1992). In light of Ohio's public policy favoring arbitration, the party asserting waiver bears the burden of proof. Morris v. Morris , 189 Ohio App.3d 608, 2010-Ohio-4750, 939 N.E.2d 928, ¶ 17 (10th Dist.), citing Murtha at ¶ 20. Furthermore, a "court will not lightly infer waiver of a right to arbitrate." Id. at ¶ 18, citing Harsco Corp. v. Crane Carrier Co. , 122 Ohio App.3d 406, 415, 701 N.E.2d 1040 (3d Dist.1997).

{¶ 13} A party asserting waiver must establish: (1) the waiving party knew of the right to arbitrate, and (2) under the totality of the circumstances, the waiving party acted inconsistently with that known right. Pinnell at ¶ 18 ; Dispatch Printing Co. v. Recovery Ltd. Partnership , 10th Dist. No. 10AP-353, 2011-Ohio-80, 2011 WL 199120, ¶ 21. See Morris at ¶ 18, quoting Harsco Corp. at 414, 701 N.E.2d 1040, quoting Phillips v. Lee Homes , Inc. , 8th Dist. No. 64353, 1994 WL 50696 (Feb. 17, 1994) (" ‘ "The essential question is whether, based on the totality of the circumstances, the party seeking arbitration has acted inconsistently with the right to arbitrate.’ " "). In determining whether the totality of the circumstances supports finding that a party waived arbitration, a court may consider the following factors, in addition to any other relevant factors: "(1) whether the party seeking arbitration invoked the court's jurisdiction by filing a complaint or claim without first requesting a stay; (2) the delay, if any, by the party seeking arbitration to request a stay; (3) the extent to which the party seeking arbitration has participated in the litigation; and (4) whether prior inconsistent acts by the party seeking arbitration would prejudice the non-moving party." Morris at ¶ 18.

B. Standard of Review

{¶ 14} The standard of review on appeal from an R.C. 2711.02(B) order granting or denying a stay pending arbitration depends on the nature of the issues raised on appeal. Pinnell at ¶ 17, citing Dispatch Printing at ¶ 17. See Benfield at ¶ 35 ; Ignazio at ¶ 19. We apply a de novo standard of review to a decision granting or denying a...