Fries v. Greg G. Wright & Sons, LLC

• Citation: 2018 Ohio 3785,120 N.E.3d 426
• Decision Date: 21 September 2018
• Docket Number: NO. C-160818,C-160818
• Parties: Carl FRIES, Plaintiff-Appellee, v. GREG G. WRIGHT & SONS, LLC, CKF Ohio Asset Acquisitions, LLC, Margaret Grossmann, Thomas E. Grossmann, and Charles Fischer, Defendants-Appellants.
• Court: United States Court of Appeals (Ohio)

120 N.E.3d 426

2018 Ohio 3785

Carl FRIES, Plaintiff-Appellee,

v.GREG G. WRIGHT & SONS, LLC, CKF Ohio Asset Acquisitions, LLC, Margaret Grossmann, Thomas E. Grossmann, and Charles Fischer, Defendants-Appellants.

NO. C-160818

Court of Appeals of Ohio, First District, Hamilton County.

Date of Judgment Entry on Appeal: September 21, 2018

Cors & Bassett, Kevin R. Feazell, Susan Bell, Cincinnati, and Kelly Johnson, for Plaintiff-Appellee,

Thomas E. Grossmann, Cincinnati, for Defendants-Appellants Greg G. Wright & Sons, LLC, Margaret Grossmann, and Thomas E. Grossmann,

Charles Fischer, for Defendants-Appellants CKF Ohio Asset Acquisitions, LLC, and Charles Fischer.

OPINION.

Mock, Presiding Judge.

{¶ 1} This court is tasked with determining when causes of action involving members of a limited liability company and litigation arising from the breach of several lease agreements fall within the arbitration clause of Greg G. Wright & Sons's operating agreement. For the reasons set forth below, we affirm the trial court's judgment in part, reverse it in part, and remand the cause for further proceedings.

Member Leaves Company, Litigation Ensues

{¶ 2} Defendant-appellant Greg G. Wright & Sons, LLC, is a machine tool, stamping, engraving, and CNC lathe company that was founded in 1860 by the grandfather of defendant-appellant Margaret W. Grossmann. In 2003, Margaret Grossmann purchased the assets of Greg G. Wright & Sons from her father, who had been the sole owner, and hired plaintiff-appellee Carl A. Fries, III, as the chief executive officer. When he was hired, Fries was given a 15 percent ownership interest in Greg G. Wright & Sons. After each year of employment, Fries earned an additional three percent interest. By the time he left the position in March of 2011, Fries had accumulated a 36 percent ownership interest in Greg G. Wright & Sons.

{¶ 3} Section 9.1 of the operating agreement of Greg G. Wright & Sons contained the following dispute resolution provisions:

(a) Except as provided otherwise in this Agreement, if any dispute or deadlock has not been resolved by negotiation within thirty (30) days of either party's written notification to the other party of the dispute, the parties shall endeavor to settle such disputes or deadlock by mediation under the then current Center for Public Resources ("CPR") Model Procedure for Mediation of Business Disputes. The neutral third party required by the procedure shall be a lawyer selected by the CPR Panel of Neutrals. If the parties encounter difficulty in agreeing on a neutral party, they will seek the assistance of CPR in the selection process with respect thereto.

(b) Except as provided otherwise in this Agreement, if any dispute regarding the interpretation of this Agreement or the rights of the Members hereunder (but not as to any business decisions to be made by the Board of Managers within the scope of this Agreement) has not been resolved by mediation within sixty (60) days of the initiation of such procedure, the parties shall finally settle such dispute by binding arbitration conducted expeditiously in accordance with the CPR-Rules for Non-Administered Arbitration of Business Disputes by a sole arbitrator; provided, however, that if one party has requested the other to participate in negotiations or mediation and the other had failed to participate the requesting party may initiate arbitration before expiration of the above period. The sole arbitrator will be a lawyer selected from the CPR Panel of Neutrals. If the parties encounter difficulty in agreeing on an arbitrator they will seek the assistance of CPR in the selection process. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. § 1 - 16 and judgment upon the award rendered by the Arbitrator(s) may be entered by any court having jurisdiction thereof.

(c) The parties shall conduct any mediation or arbitration pursuant to this § 9.1 in Cincinnati, Ohio, and the arbitrator shall apply the substantive law of Ohio as applicable to the dispute.

(d) The arbitrator is not empowered to award consequential or punitive damages under any circumstances, whether statutory or common law in nature, and including, but not limited to, treble damages awarded by any statute. Parties shall make the arbitrator aware of this provision limiting damages and liabilities before the start of any arbitration proceedings.

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(f) The remedies and procedures set forth in this § 9.1 are exclusive, final, and binding remedies and procedures and shall be in lieu of any right of the parties to institute proceedings in any court of law.

{¶ 4} In 2013, two years after Fries had left Greg G. Wright & Sons, a complaint was filed against Greg G. Wright & Sons and Fries individually alleging that Greg G. Wright & Sons had failed to make payments on certain equipment leases—payments for which Fries had made a personal guarantee. The plaintiff, PNC Equipment Finance, LLC, sought a total of $336,101.79 in damages, jointly and severally, from Greg G. Wright & Sons and Fries. Defendant-appellant Thomas Grossmann, an attorney, sought an extension of time to file an answer and subsequently filed an answer on behalf of only Greg G. Wright & Sons. Fries, who had been previously represented by Grossmann in other matters relating to Greg G. Wright & Sons, claimed that he was not informed that Grossmann was filing only on behalf of Greg G. Wright & Sons, and subsequently failed to file his own answer in the case.

{¶ 5} During the course of the litigation, PNC Equipment Finance filed a motion for a substitution of parties, asserting that the right to collect the money due had been transferred to defendant-appellant CFK Ohio Asset Acquisitions, LLC. While the motion was filed on behalf of PNC Equipment Finance, the signature lines reflect the initials "TEG per telephone authority." The certificate of service was signed by Thomas Grossmann.

{¶ 6} Fries sought to exercise his rights, as a member of Greg G. Wright & Sons, to examine its books and records. Greg G. Wright & Sons, through Thomas Grossmann, refused to allow him to examine the records, claiming that he was no longer a member of Greg G. Wright & Sons. CFK Ohio Asset Acquisitions sought and received a judgment against Fries, and dismissed Greg G. Wright & Sons as a party to the case. Fries filed a motion for relief from judgment, pursuant to Civ.R. 60(B), asserting that he had believed that Thomas Grossmann had been representing him as well as Greg G. Wright & Sons. The trial court denied the motion, concluding that Fries had not established that his belief was reasonable. Fries did not appeal that decision.

{¶ 7} On May 19, 2015, Fries filed a verified complaint against Greg G. Wright & Sons, Thomas Grossmann, Margaret Grossmann, CKF Ohio Asset Acquisitions, and Charles Fischer (hereinafter collectively "appellants"). Fries's verified complaint lists six causes of action: breach of fiduciary duty, unjust enrichment, conversion, right of reimbursement, fraudulent concealment, and civil conspiracy. The first three causes of action arose from his status as a member with Greg G. Wright & Sons, the second set of claims involved his having signed as a personal guarantor on the lease agreements that resulted in litigation.

{¶ 8} After the verified complaint was filed, the parties engaged in significant—and often contentious—litigation. During the course of the proceedings below, appellants filed a limited number of pleadings before filing a motion to stay the proceedings in order for the parties to submit to arbitration. After the motion for a stay was filed, the course of the litigation took a decidedly tortured path, as the trial court described

[t]his case, due to two appeals and several affidavits of disqualification and continuance requests from the defendants, has only been active on my docket for a short time this year. The appeals have now been dismissed by the First Appellate District and the Affidavits have been denied by the Chief Justice of the Ohio Supreme Court. I have been sued in my official capacity in a Writ of Procedendo which had not had a final disposition. * * * Paradoxically, all of the failed appeals and affidavits have had the effect of delaying a ruling on the pending motions while the Application for Writ of Procedendo decries the lack of ruling on the motions. Of course, more motions have been filed while the case was stayed.

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Mr. Fischer claims that he will not provide discovery because counsel for other defendants have filed a Motion for Arbitration. There is no law supporting this position.

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The defendants have refiled their motions for more definite statement that were previously overruled.

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These parties do not agree on much, including whether the case should go to arbitration. This is not a situation where counsel, working collegially, have agreed to work together. The attorneys do not discuss the case. There are lectures but no discussions. In most instances, procedural problems tend to be worked out. The case at bar is the polar opposite of cooperation.

{¶ 9} After conducting a hearing on the motion to stay the proceedings, the trial court found that appellants had waived their right to seek arbitration, and that the record had not been sufficiently developed to determine if the claims involved fall within the scope of the arbitration clause. Appellants appeal the decisions of the trial court to deny their motion for a more definite statement and their motion to stay the proceedings pending arbitration, and to grant Fries's motion to compel discovery.

Motion For A More Definite Statement

{¶ 10} In their first assignment of error, appellants claim that the trial court erred when it denied their motion for a more definite statement for Fries's failure to attach documents to his verified complaint. They claim that the decision was a final, appealable order because it affected "a substantial right in an action and prevent[ed] a judgment." See R.C. 2505.02(B)(1).

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