Hedeen v. Autos Direct Online, Inc.

• Decision Date: 25 September 2014
• Docket Number: No. 100582.,100582.
• Citation: 19 N.E.3d 957
• Parties: Tamara HEDEEN, Plaintiff–Appellant v. AUTOS DIRECT ONLINE, INC., Defendant–Appellee.
• Court: Ohio Court of Appeals

19 N.E.3d 957

Tamara HEDEEN, Plaintiff–Appellant

v.AUTOS DIRECT ONLINE, INC., Defendant–Appellee.

No. 100582.

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

Sept. 25, 2014.

Ronald L. Burdge, Elizabeth A. Wells, Burdge Law Office, Dayton, OH, for appellant.

David A. Corrado, Law Offices of David A. Corrado, Cleveland, OH, for appellee.

Before: BOYLE, A.J., KILBANE, J., and JONES, J.

Opinion

MARY EILEEN KILBANE, J.

{¶ 1} Plaintiff-appellant, Tamara Hedeen (“Hedeen”), appeals from the trial court's decision granting the motion to stay proceedings pending arbitration filed by defendant-appellee, Autos Direct Online, Inc. (“ADO”). For the reasons set forth below, we affirm in part, reverse in part, and remand.

{¶ 2} In January 2013, Hedeen filed a complaint against ADO alleging causes of action for breach of contract, violations of the Motor Vehicle Sales Rule and the Ohio Consumer Sales Practices Act, and fraud and deceit. In her complaint, Hedeen alleges that on November 13, 2012, she purchased a used 2011 Mercedes–Benz online from ADO for $28,000. She alleges that prior to purchasing the vehicle, her ADO salesman, Dan Caldwell (“Caldwell”), represented to her that the vehicle had not been in an accident, and that the vehicle came with the remainder of the manufacturer's warranty. After purchasing the online vehicle, Hedeen discovered that the 2011 Mercedes–Benz was in an accident, where it sustained substantial damage.¹

{¶ 3} Pursuant to a stipulated leave to plead, ADO answered Hedeen's complaint in March 2013. In its answer, ADO raised the affirmative defense that Hedeen's claims were subject to the arbitration agreement in the purchase agreement. ADO moved to stay the proceedings pending arbitration in June 2013. ADO attached a copy of the arbitration agreement, which states that: “[b]y agreeing to arbitrate, you and we give up some rights including the right to go to court and the right to a jury trial.” The agreement is dated November 12, 2012, and has signatures for Hedeen and Caldwell. ADO also attached an “Acknowledgment Concerning Vehicle's History,” which indicates that Hedeen initialed the following four paragraphs stating:

a.) I have had an adequate and full opportunity to inspect the vehicle myself, and to have a third party or mechanic of my choice make the inspection for me.

b.) I have had an adequate and full opportunity to request from [ADO] and other sources all information about the vehicle's history, and all other information that I need to determine whether I wish to purchase the vehicle.

c.) [ADO] and others from whom I have requested information, have furnished all information that I requested to my satisfaction, and I have reviewed and considered such information.

d.) No one from [ADO] has made any oral representations, warranties, or statements to me that the vehicle has never been in an accident, or that the vehicle has never experienced any prior damage.

{¶ 4} In response, Hedeen filed a brief in opposition, in which she argued that ADO waived its right to arbitrate; ADO failed to authenticate the documents attached to its motion to stay; the arbitration clause is unconscionable; the arbitration clause is illusory; and the arbitration clause is contrary to public policy. In October 2013, the trial court granted ADO's motion to stay proceedings pending arbitration.

{¶ 5} It is from this judgment that Hedeen appeals, raising the following single assignment of error for review.

Assignment of Error

The trial court abused its discretion when it granted [ADO's] motion to stay pending arbitration.

{¶ 6} In her sole assignment of error, Hedeen raises the following five issues: (1) whether ADO waived its right to arbitrate; (2) whether ADO failed to authenticate the documents attached to its motion to stay; (3) whether the arbitration clause is unconscionable; (4) whether the “loser pay” provision in the arbitration clause is illusory; and (5) whether the arbitration clause is contrary to public policy.

Ohio Arbitration Act

{¶ 7} Ohio public policy favors enforcement of arbitration provisions. Arbitration is encouraged as a method of dispute resolution and a presumption favoring arbitration arises when the claim in dispute falls within the arbitration provision. Williams v. Aetna Fin. Co., 83 Ohio St.3d 464, 471, 700 N.E.2d 859 (1998). Ohio's policy of encouraging arbitration has been declared by the legislature through the Ohio Arbitration Act, R.C. Chapter 2711. Goodwin v. Ganley, Inc., 8th Dist. Cuyahoga No. 89732, 2007-Ohio-6327, 2007 WL 4201359, ¶ 8.

{¶ 8} R.C. 2711.01(A) provides that an arbitration agreement in a written contract “shall be valid, irrevocable, and enforceable, except upon grounds that exist in law or equity for the revocation of any contract.” Ohio law directs trial courts to grant a stay of litigation in favor of arbitration pursuant to a written arbitration agreement on application of one of the parties, in accordance with R.C. 2711.02(B), which 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 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.

Standard of Review

{¶ 9} The appropriate standard of review depends on “the type of questions raised challenging the applicability of the arbitration provision.” McCaskey v. Sanford–Brown College, 8th Dist. Cuyahoga No. 97261, 2012-Ohio-1543, 2012 WL 1142880, ¶ 7. Generally, an abuse of discretion standard applies in circumstances, such as a determination that a party has waived its right to arbitrate a given dispute. Id., citing Milling Away, L.L.C. v. UGP Properties, L.L.C., 8th Dist. Cuyahoga No. 95751, 2011-Ohio-1103, 2011 WL 826354. However, the issue of whether a party has agreed to submit an issue to arbitration or questions of unconscionability are reviewed under a de novo standard of review. Id. at ¶ 7–8, citing Shumaker v. Saks Inc., 163 Ohio App.3d 173, 2005-Ohio-4391, 837 N.E.2d 393 (8th Dist.) and Taylor Bldg. Corp. Of Am. v. Benfield, 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12. Under a de novo standard of review, we give no deference to a trial court's decision. Brownlee v. Cleveland Clinic Found., 8th Dist. Cuyahoga No. 97707, 2012-Ohio-2212, 2012 WL 1795273, ¶ 9, citing Akron v. Frazier, 142 Ohio App.3d 718, 721, 756 N.E.2d 1258 (9th Dist.2001).

{¶ 10} In the instant case, Hedeen raises questions challenging waiver, whether she agreed to arbitration, and the unconscionability of the arbitration agreement. Therefore, we review the waiver issue for an abuse of discretion and the unconscionability issue de novo standard of review.

Waiver of Right to Arbitrate

{¶ 11} Hedeen first argues that ADO waived its right to arbitrate because it participated in discovery and pretrial hearings and waited five months to file its motion to stay.

{¶ 12} We note that to prove the defending party waived its right to arbitration, the complainant is required to demonstrate that the defending party knew of an existing right to arbitration and acted inconsistently with that right to arbitrate. Phillips v. Lee Homes, Inc., 8th Dist. Cuyahoga No. 64353, 1994 WL 50696, *3 (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.” Id.

{¶ 13} In Phillips, this court has set forth a list of factors to consider whether a party has acted inconsistently with the right to arbitrate: (1) any delay in the requesting party's demand to arbitrate via a motion to stay the judicial proceeding and an order compelling arbitration; (2) the extent of the requesting party's participation in the litigation prior to its filing a motion to stay the judicial proceeding, including a determination of the status of discovery, dispositive motions, and the trial date; (3) whether the requesting party invoked the jurisdiction of the court by filing a counterclaim or third-party complaint without asking for a stay of the proceedings; and (4) whether the nonrequesting party has been prejudiced by the requesting party's inconsistent acts. Id. at *4.

{¶ 14} In the instant case, a review of the record reveals that ADO answered Hedeen's complaint on March 19, 2013, after Hedeen stipulated to ADO's leave to plead. In its answer, ADO asserted the affirmative defense of its right to arbitration under the agreement. Although ADO appeared for a pretrial on April 24, 2013, appeared for a telephone status conference on May 2, 2013, and responded to Hedeen's request for admissions on May 13, 2013, it moved to stay the proceedings pending arbitration on June 10, 2013—only two-and-a-half months after it answered Hedeen's complaint. Based on the totality of these circumstances, the trial court did not abuse its discretion in finding that ADO did not waive its right to arbitrate. Therefore, Hedeen's first issue lacks merit.

Authenticated Evidentiary Material

{¶ 15} In her second issue, Hedeen, relying on McGuinea v. Ganley Nissan, Inc., 8th Dist. Cuyahoga No. 86050, 2005-Ohio-6239, 2005 WL 3120217, argues that ADO's motion to stay pending arbitration should have been denied because ADO failed to attach any authenticated evidentiary material in support of its motion. We find McGuinea to be distinguishable from the instant case.

{¶ 16} In McGuinea , this court upheld a trial court's decision denying the defendant's motion to stay the proceedings pending arbitration because the defendant failed to submit a properly authenticated copy of the contract and arbitration clause with its motion to stay. Id. at ¶ 15. The plaintiff bought a vehicle...