[Cite as Fields v. Herrnstein Chrysler, Inc.,

.]

IN THE COURT OF APPEALS OF OHIO FOURTH APPELLATE DISTRICT PIKE COUNTY

JAMIE FIELDS, : : Plaintiff-Appellant, : Case No. 12CA827 : vs. : : HERRNSTEIN CHRYSLER, INC., : DECISION AND et al., : JUDGMENT ENTRY : Defendants-Appellees. : Released: 02/07/13 _____________________________________________________________ APPEARANCES:

Jason Shugart and D. Dale Seif, Jr., Seif & Shugart, LLC, Waverly, Ohio, for Appellant.

Christina J. Marshall and John R. Conley, Sutter O’Connell, Cleveland, Ohio, for Appellees, Chrysler Group, LLC, Herrnstein Chrysler, Inc., Bart Herrnstein and Todd Montgomery.

Dale A. Stalf, Wood & Lamping LLP, Cincinnati, Ohio, for Appellee, Capital One Auto Finance, a division of Capital One, N.A. _____________________________________________________________

McFarland, P.J.

{¶1} This is an appeal from a decision by the Pike County Common

Pleas Court which granted Appellees’ joint motion to compel arbitration and

stayed the below action pending arbitration.1 On appeal, Appellant, Jamie

Fields, raises two assignments of error, contending that 1) the trial court

1 The motions of Appellees were actually granted in part and denied in part, which will be more fully discussed infra. Pike App. No. 12CA827 2

committed reversible error by rewriting the arbitration agreement between

the parties and ordering to arbitration Appellant’s claims against parties,

Todd A. Montgomery and Bart Herrnstein, who were neither parties to the

superseding arbitration clause, nor signatories to the arbitration agreement or

contracts; and 2) the trial court committed reversible error by ordering to

arbitration Appellant’s claims against defendant Chrysler Group, LLC, when

Chrysler Group, LLC is neither a signatory, nor a party to the contract or

arbitration agreement.

{¶2} Because we conclude that the claims against the nonsignatories

stemmed from the same transaction as the claims against the signatories, and

because we conclude that the claims are intertwined as between the two and

alleged interdependent and concerted misconduct, we find no abuse of

discretion on the part of the trial court in ordering a stay and referring the

matter to arbitration. Thus, both of Appellant’s assignments of error are

overruled. Accordingly, the decision of the trial court is affirmed.

FACTS

{¶3} On July 10, 2010, Appellant, Jamie Fields, purchased a new,

2010 Jeep Grand Cherokee from Appellee, Herrnstein Chrysler, Inc. The

vehicle purchase was financed by Capital One Auto Finance, Inc., an

assignee of Herrnstein Chrysler, Inc. under the Retail Installment Sale Pike App. No. 12CA827 3

Contract signed by Appellant and Appellee, Herrnstein Chrysler, Inc. This

contract specified that Appellee, Capital One Auto Finance, Inc. was an

assignee under the terms of the agreement. The contract also contained an

arbitration clause, which provided in pertinent part as follows:

“Any claim or dispute, whether in contract, tort, statute or

otherwise (including the interpretation and scope of this

Arbitration Clause, and the arbitrability of the claim or dispute),

between you and us or our employees, agents, successors or

assigns, which arises out of or relates to your credit application,

purchase or condition of this vehicle, this contract or any

resulting transaction or relationship (including any such

relationship with third parties who do not sign this contract)

shall, at your or our election, be resolved by neutral, binding

arbitration and not by a court action.”

{¶4} Appellant and Appellee, Herrnstein Chrysler, Inc., also executed

another, separate arbitration agreement that day, entitled Agreement to

Arbitrate. This agreement provided, in pertinent part, as follows:

“By entering into this Agreement to Arbitrate (“Agreement”),

Customer(s) and Dealership, including any Assignee

(collectively referred to as “the Parties”) agree, except as Pike App. No. 12CA827 4

otherwise provided in this Agreement, to settle by binding

arbitration any dispute between them regarding: (1) the

purchase/lease by Customer(s) of the above-referenced Vehicle;

(2) any products and services purchased in conjunction with the

Vehicle; (3) any financing obtained in connection with the

transaction; and/or (4) any dispute with respect to the existence,

scope or validity of this Agreement. Matters that the Parties

agree to arbitrate include, but are not limited to, disputes related

to the Retail Purchase/Retail Lease Agreement and any

documents incorporated therein by reference (whether such

references made in the Agreement or in the document itself),

the application for and terms of financing for the transaction,

the Finance/Lease Contract, any alleged promises,

representations and/or warranties made to or relied upon by the

Parties, and any alleged unfair, deceptive, or unconscionable

acts or practices.”

The Agreement to Arbitrate further provided that “[i]f any term of this

Agreement conflicts with the terms of any other document or agreement

between the Parties, the terms of this Agreement shall prevail.” The

Agreement to Arbitrate also provided that “THIS AGREEMENT IS Pike App. No. 12CA827 5

INCORPORATED BY REFERENCE INTO THE RETAIL

PURCHASE/RETAIL LEASE AGREEMENT.”

{¶5} Within the first few months after purchasing the vehicle,

Appellant noticed paint chipping and/or peeling off of the vehicle in several

different locations. After contacting both Herrnstein Chrysler and Chrysler

Group and being unable to obtain an offer to remedy the problem that was

acceptable to Appellant, Appellant initiated a complaint in the Pike County

Court of Common Pleas, naming Appellee, Herrnstein Chrysler Inc., Todd

A. Montgomery, Bart Herrnstein, Chrysler Group, LLC, Capital One Auto

Finance, Inc. as well as the John Doe finance agents and representatives of

Herrnstein Chrysler, Inc. The named defendants all filed answers to the

complaint, asserting as a defense the fact that Appellant’s claims were

required to be resolved through arbitration. After filing their answers, on

October 24, 2011, Appellees filed a joint motion to stay and compel

arbitration, citing the court to the arbitration clause contained within the

Retail Installment Sales Contract, as well as the separately executed

Agreement to Arbitrate.

{¶6} On November 10, 2011, Appellant filed a memorandum contra

the motion to stay and compel arbitration. In his motion, Appellant argued,

in part, that because the parties signed two different arbitration agreements, Pike App. No. 12CA827 6

which contained differing terms, that there could have been no meeting of

the minds. Appellant also argued that Herrnstein Chrysler was the only

signatory to the agreement. Appellees responded by arguing that the non-

signatories to the arbitration agreement could enforce the agreement due to

the “close relationship” between the entities involved and because the claims

were “intimately founded in and intertwined with the underlying contract

obligations.”

{¶7} An oral hearing regarding the matter was held on January 4,

2012, and the record contains a certification by the court reporter that the

hearing was recorded. However, Appellant failed to request that any

transcripts be transmitted to this Court on appeal. Thus, the transcript of that

hearing is not currently before us on appeal. In Appellant’s bench brief, he

stated that “Counsel for Defendants admitted during the January 4, 2012

hearing that the Defendant HCI’s (Herrnstein Chrysler’s) Agreement to

Arbitrate trumps the arbitration clause in the Retail Installment Sales

Agreement.” As such, Appellant noted that “[t]he “Parties” to the

Agreement to Arbitrate are specifically narrower than the parties as defined

in the arbitration clause in the Retail Installment Sales Agreement,” and

argued that only the claims against Herrnstein Chrysler, a signatory, and

Capital One, which was Herrnstein’s assignee, should be sent to arbitration. Pike App. No. 12CA827 7

{¶8} After considering bench briefs submitted by the parties, the trial

court issued a decision and journal entry on February 21, 2012. In its

decision, the trial court found that the Agreement to Arbitrate was a “valid,

subsisting, and enforceable agreement[,]” and further ordered as follows:

“1. That all claims pending in this action against Defendants

Herrnstein Chrysler, Inc., Todd A. Montgomery, Bart

Herrnstein and Capital One Auto Finance are referable to

arbitration under the “Agreement To Arbitrate;” and

2. That any and all claims pending in this action against

Defendant Chrysler Group, LLC and that are also pending

against Defendant Herrnstein Chrysler, Inc., Todd A.

Montgomery, Bart Herrnstein, and/or Capital One Auto

Finance, are referable to arbitration under the “Agreement To

Arbitrate;” and

3. That any and all claims pending in this action against

Chrysler Group, LLC that are not also pending against either

Defendant Herrnstein Chrysler, Inc., Todd A. Montgomery,

Bart Herrnstein, or Capital One Auto Finance, are not referable

to arbitration under the “Agreement To Arbitrate.” Pike App. No. 12CA827 8

The trial court further ordered “that trial in this action is hereby stayed

pending arbitration as to all claims referred to in paragraphs “1” and “2,”

above; but is not stayed as to any claims to which paragraph number “3”

may apply, and this action shall proceed upon any such claims referred to in

paragraph number “3.”

{¶9} It is from this decision and journal entry that Appellant now

brings his timely appeal, assigning the following errors for our review.

ASSIGNMENTS OF ERROR

“I. THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY REWRITING THE ARBITRATION AGREEMENT BETWEEN THE PARTIES AND ORDERING TO ARBITRATION PLAINTIFF- APPELLANT’S CLAIMS AGAINST THE PARTIES, TODD A. MONTGOMERY AND BART HERRNSTEIN, WHO WERE NEITHER PARTIES TO THE SUPERSEDING ARBITRATION CLAUSE, NOR SIGNATORIES TO THE ARBITRATION AGREEMENT OR CONTRACTS.

II. THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY ORDERING TO ARBITRATION PLAINTIFF-APPELLANT’S CLAIMS AGAINST DEFENDANT CHRYSLER GROUP, LLC, WHEN CHRYSLER GROUP, LLC IS NEITHER A SIGNATORY, NOR A PARTY TO THE CONTRACT OR ARBITRATION AGREEMENT.”

ASSIGNMENTS OF ERROR I AND II

{¶10} As Appellant’s assignments of error are interrelated, we will

address them in conjunction with one another. In his first assignment of

error, Appellant contends that the trial court committed reversible error by Pike App. No. 12CA827 9

“rewriting” the arbitration agreement and ordering to arbitration his claims

against parties, Todd A. Montgomery and Bart Herrnstein, who he claims

were neither parties to the superseding arbitration clause, nor signatories to

the arbitration agreement or contracts. In his second assignment of error,

Appellant contends that the trial court committed reversible error by also

ordering to arbitration his claims against Chrysler Group, LLC, when

Chrysler Group, LLC is neither a signatory, nor a party to the contract or

arbitration agreement. Appellant contends that the second arbitration

agreement that he signed, which did not include Montgomery, Herrnstein

(individually), or Chrysler Group, LLC, superseded the first agreement he

signed, which did include these individuals and/or entities. A review of the

record reveals that the trial court agreed, and specifically stated in its

decision that the second agreement was valid and enforceable. Appellant

argues, however, that the trial court essentially rewrote the arbitration

agreement between the parties when it included other parties who were

neither signatories, nor parties to the arbitration agreement, simply because

similar facts or claims existed as between them.

{¶11} Appellees contend that the trial court did not “rewrite” the

arbitration agreement, but instead relied upon the doctrine of estoppel in

reaching its decision. As such, Appellee contends that the only issue on Pike App. No. 12CA827 10

appeal is whether the trial court abused its discretion in applying an

alternative estoppel theory to compel this result. Appellant, in his reply

brief, seems to agree that this is the proper issue to be determined on appeal,

and argues that application of this doctrine by the trial court was not

warranted, as the claims brought were not intertwined.

STANDARD OF REVIEW

{¶12} An appellate court reviews a trial court's decision to grant or to

deny a motion to compel arbitration or stay the proceedings under the abuse

of discretion standard. K.M.P., Inc. v. Ohio Historical Society, 4th Dist. No.

03CA2,

, ¶ 14; see, also, Strickler v. First Ohio Banc &

Lending, Inc., 9th Dist. Nos. 08CA009416 & 08CA009460, 2009-Ohio-

1422, ¶ 7; River Oaks v. Krann, 11th Dist. No.2008-L-166,

,

¶ 41; Grady v. Winchester Place Nursing and Rehabilitation Ctr., 5th Dist.

No. 08CA59,

, ¶ 15; Medallion Northeast Ohio, Inc. v. SCO

Medallion Healthy Homes, Ltd., 9th Dist. No. 23214,

.

But, see, Bentley v. Cleveland Browns Football Co., LLC, Cuyahoga App.

No. 95921,

, ¶¶ 12 and 13 (noting divergent authority

regarding whether an abuse-of-discretion or de novo standard is the

appropriate standard of review applicable to a trial court's decision regarding

a motion to stay or compel arbitration and declining to explicitly adopt either Pike App. No. 12CA827 11

standard). We further note that an abuse of discretion connotes more than

simply an error in judgment; rather, the court must act in an unreasonable,

arbitrary, or unconscionable manner. See, e.g., Blakemore v. Blakemore,

,

(1983). Furthermore, when an

appellate court applies the abuse of discretion standard, it may not simply

substitute its judgment for that of the trial court. See, e.g., Berk v. Matthews,

,

(1990).

{¶13} R.C. 2711.02 embodies Ohio's public policy to favor arbitration

and requires courts to stay an action if the issue involved falls under an

arbitration agreement. See ABM Farms v. Woods,

,

(1998); Gerig v. Kahn,

, 2002-Ohio-

2581,

; Tomovich v. USA Waterproofing & Foundation

Services, Inc., 9th Dist. No. 07CA9150,

; citing Schaefer

v. Allstate Co.,

,

(1992). R.C.

2711.02(B) provides:

“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 Pike App. No. 12CA827 12

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.”

{¶14} Thus, R.C. 2711.02 requires a court to stay the trial of an action

“on application of one of the parties” if (1) the action is brought upon any

issue referable to arbitration under a written agreement for arbitration, (2)

the court is satisfied the issue is referable to arbitration under the written

agreement, and (3) the applicant is not in default in proceeding with

arbitration. See Wishnosky v. Star-Lite Bldg. & Dev. Co., 8TH Dist. No.

77245,

(Sept. 7, 2000); MGM Landscaping Contrs., Inc.

v. Berry, 9th Dist. No. 19426 (Mar. 22, 2000).

{¶15} “A prime objective of an agreement to arbitrate is to achieve

‘streamlined proceedings and expeditious results.’ ” Kellogg v. Griffiths

Health Care Group, 3rd Dist. No. 9-10-59,

, quoting

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,

,

(1985). “Arbitration is favored because it provides the

parties thereto with a relatively expeditious and economical means of

resolving a dispute.”

; see, also, Hayes v. Oakridge Home,

,

,

. Thus, “if a dispute even Pike App. No. 12CA827 13

arguably falls within the [parties'] arbitration provision, the trial court must

stay the proceedings until arbitration has been completed.”

;

citing Featherstone at ¶ 5.

{¶16} Generally, “ ‘ parties who have not agreed to arbitrate their

disputes cannot be forced to forego judicial remedies.’ ” Short v. Resource

Title Agency, Inc., 8th Dist. No. 95839,

, ¶ 13; quoting

Cleveland-Akron-Canton Adverstising Coop. v. Physicians Weight Loss

Ctrs. of Am., Inc.,

,

,

; citing Moore v. Houses on the Move, Inc.,

, 2008-

Ohio-3552,

. However, there are certain instances when

equity demands that parties who have not agreed to arbitration may be

forced to do so when “ordinary principles of contract and agency” require.

Id. at ¶ 14; citing McAllister Bros., Inc. v. A & S Transp. Co.,

(C.A.2, 1980).

{¶17} Under an equitable estoppel theory, “a nonsignatory who

knowingly accepts the benefits of an agreement is estopped from denying a

corresponding obligation to arbitrate.” I Sports v. IMG Worldwide, Inc.,

,

,

. While that scenario

is not applicable sub judice, as noted in Sports I, several federal circuits

have also recognized an “alternate estoppel theory” whereby “arbitration Pike App. No. 12CA827 14

may be compelled by a nonsignatory against a signatory due to the ‘close

relationship between the entities involved, as well as the relationship of the

alleged wrongs to the nonsignatory's obligations and duties in the contract *

* * and [the fact that] the claims were “intimately founded in and

intertwined with the underlying contract obligations.” ’ ” Id. at ¶ 14,

, quoting Thomson-CSF, S.A. v. Am. Arbitration Assn.,

, (C.A.2, 1995); quoting Sunkist Soft Drinks, Inc. v. Sunkist Growers,

, (C.A.11, 1993). For instance, under this theory, because an

individual defendants' allegedly wrongful acts relate to their actions as

agents of a company that was a party to an arbitration agreement, the

nonsignatory agents should also have the benefit of the arbitration agreement

made by their principal. See, e.g., Genaw v. Lieb, 2d Dist. No. Civ.A. 20593,

.

{¶18} As set forth in I

at ¶ ¶ 16, 17 and 20:

“Where estoppel has been extended to ‘intertwined claims,’ it is generally

applied in two circumstances: (1) where a signatory must rely on the terms

of the written agreement in asserting claims against a nonsignatory and (2)

where the signatory alleges substantially interdependent misconduct by both

the nonsignatory and one or more signatories to the contract. Grigson v.

Creative Artists Agency, L.L.C. (C.A.5, 2000),

, quoting Pike App. No. 12CA827 15

MS Dealer Serv. Corp v. Franklin (C.A.11, 1999),

, 947.

Whether equitable estoppel should be applied will turn on the facts of each

case. Grigson,

.”

{¶19} Under the first circumstance for “intertwined claims,” equitable

estoppel binds a nonsignatory to an arbitration clause only when the

signatory to the written agreement “must rely on the terms of the written

agreement in asserting its claims against the nonsignatory.” Hill v. G.E.

Power Sys., Inc. (C.A.5, 2002),

. It is not sufficient that the

plaintiff's claims “touch matters” concerning the agreement or that the

claims are “dependent upon” the agreement.

at 348–349.

***

The second circumstance under which equitable estoppel is applied arises

when the signatory to the contract alleges “substantially interdependent and

concerted misconduct by both the nonsignatory and one or more of the

signatories to the contract.” Hill,

.”

LEGAL ANALYSIS

{¶20} As set forth above, this matter stems from Appellant’s purchase

of a new vehicle from Herrnstein Chrysler, Inc., which developed a paint

problem within a few months after purchase. Specifically, the paint on the

vehicle began to chip and peel from several different locations. When Pike App. No. 12CA827 16

Appellant was unable to reach a satisfactory resolution to this problem with

either the dealer or the manufacturer, Appellant filed a lawsuit, naming

Herrnstein Chrysler, Inc., Todd A. Montgomery, Bart Herrnstein, Chrysler

Group, LLC, Capital One Auto Finance, Inc., and other John Doe finance

agents and representatives of Herrnstein Chrysler, Inc. as defendants in the

complaint.

{¶21} In his complaint, Appellant initially set forth a twenty-eight

paragraph section entitled “Common Facts,” which alleged that defendants

Herrnstein Chrysler, Inc., Chrysler Group, Bart Herrnstein as well as the

John Doe financing agents and employees were all “Defendants Suppliers”

for purposes of the agreement between the parties. Appellant further alleged

that at all times, “Defendants Suppliers” were acting as “dealers” while

dealing with him and further that Chrysler Group and Herrnstein Chrysler

were both in the business of supplying automobiles in the State of Ohio and

providing warranties for new automobiles. Appellant further alleged in the

common facts section that he was forced to hire legal counsel to seek redress

as a result of “Defendants Suppliers’ misconduct.”

{¶22} Appellant’s complaint went on to allege claims based upon the

Consumer Sales Practices Act, deceptive trade practices, breach of express

warranties, breach of implied warranties, the Equal Credit Opportunity Act, Pike App. No. 12CA827 17

negligence, and unjust enrichment. In his first claim for relief based upon

the Consumer Sales Practices Act, Appellant alleged that all defendants,

with the exception of Capital One, knowingly committed unfair and

deceptive acts by misrepresenting the quality of the vehicle and the

warranty, and by failing to honor the term of the warranty. Likewise,

Appellant alleged concerted actions by the “Defendants Suppliers” in his

deceptive trade practices claim (second claim), his breach of express

warranties claim (third claim), and also his negligence claim (sixth claim).

The remaining claims were more specific, basing the breach of implied

warranty claim (claim four) on the conduct of Chrysler Group, the Equal

Credit Opportunity Act claim (claim five) on the conduct of Herrnstein

Chrysler, and the unjust enrichment claim (seventh claim) on the conduct of

both Herrnstein Chrysler and Chrysler Group.

{¶23} Appellant does not dispute that the first, second, third, fifth,

sixth and seventh claims in his complaint were properly referred to

arbitration as against Herrnstein Chrysler, which was a signatory to the

agreement.2 He claims instead that it was improper to refer these claims to

arbitration as against the other parties, which were not signatories to the

agreement. However, as set forth above, Appellant alleges common facts

2 The trial court did not refer Appellant’s fourth claim, which involved breach of implied warranty as against Chrysler Group only, to arbitration. As such, that claim is not at issue on appeal. Pike App. No. 12CA827 18

that describe each of these defendants, except Todd Montgomery and

Capital One, as “Defendants Suppliers” whose misconduct led to this

lawsuit.3 Thus, although Appellant claims that these claims are not

“intertwined” for purposes of application of the alternative estoppel theory

and do not allege concerted misconduct, we disagree.

{¶24} Further, we conclude that the claims alleged by Appellant fell

within the purview of the arbitration agreement, which covered the purchase

of the vehicle, the financing of the vehicle, the scope and validity of the

arbitration agreement, any alleged promises, representations and/or

warranties made to or relied upon by the parties, as well as any alleged

unfair, deceptive or unconscionable acts or practices. We reach our decision

in part based upon Appellant’s own categorization of Appellees as

“Defendants Suppliers” whose common actions led to the filing of the

underlying lawsuit. Our conclusion is further supported by the fact that all

of Appellant’s claims arise out of a single transaction, which was the

purchase of a new vehicle from Herrnstein Chrysler.

{¶25} Thus, we conclude that this is one of those limited situations in

which a nonsignatory may bind a signatory to an arbitration agreement. As

3 Todd Montgomery is not expressly mentioned at all in the complaint, other than in the case caption. However, it appears from the record he was an employee and/or agent of Herrnstein Chrysler who was involved in the sale of the vehicle to Appellant. Thus, he would properly be grouped into the “Defendants Suppliers” category in Appellant’s complaint. Further, Appellant does not object to the trial court’s referral of claims to arbitration as against Capital One, which was an assignee of Herrnstein Chrysler. Pike App. No. 12CA827 19

such, we find no abuse of discretion on the part of the trial court in ordering

a stay and referring the claims to arbitration as against these particular

nonsignatories to the agreement. Accordingly, we find no merit to the

assignments of error raised by Appellant and the decision of the trial is

affirmed.

JUDGMENT AFFIRMED. Pike App. No. 12CA827 20

JUDGMENT ENTRY

It is ordered that the JUDGMENT BE AFFIRMED and that the Appellees recover of Appellant costs herein taxed.

The Court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate issue out of this Court directing the Pike County Common Pleas Court to carry this judgment into execution.

Any stay previously granted by this Court is hereby terminated as of the date of this entry.

A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. Exceptions.

Abele, J. & Kline, J.: Concur in Judgment and Opinion.

For the Court,

BY: _________________________ Matthew W. McFarland Presiding Judge

NOTICE TO COUNSEL

Pursuant to Local Rule No. 14, this document constitutes a final judgment entry and the time period for further appeal commences from the date of filing with the clerk.