Morris v. Morris
| Decision Date | 30 September 2010 |
| Docket Number | No. 10AP–15.,10AP–15. |
| Citation | 189 Ohio App.3d 608,939 N.E.2d 928 |
| Parties | MORRIS, Appellee,v.MORRIS et al., Appellees;Barry et al., Appellants. |
| Court | Ohio Court of Appeals |
OPINION TEXT STARTS HERE
The Winkler Law Firm, L.L.C., and John F. Winkler, Columbus; and Stubbins, Watson & Erhard Co., L.P.A., and Brent A. Stubbins, Zanesville, for appellees Michael W. Morris and Amy Morris.Clark & Lowe, L.L.C., and David K. Lowe, Chardon, for appellants.
[Ohio App.3d 612] {¶ 1} Appellants, Richard Barry (“Barry”) and Barry Industries, Inc. (“BI”) (collectively, “appellants”), appeal from the Franklin County Court of Common Pleas' denial of their motion to stay proceedings pending arbitration. For the following reasons, we reverse and remand.
{¶ 2} Because this action has not proceeded past the pleadings, and because we review only the trial court's denial of a motion to stay proceedings pending arbitration, we glean the following brief factual background from the pleadings and the relevant contracts filed in the trial court, and we discuss the alleged facts in conjunction with the relevant procedural history. Because they were the impetus for appellants' motion to stay, we particularly look to the first amended answer, counterclaims, and cross-claims of appellees Michael W. Morris (“Michael”) and Amy Morris (“Amy”), in which Michael and Amy assert both personal claims and claims on behalf of Morgenix, L.L.C. (“Morgenix”).1
{¶ 3} Patricia A. Morris (“Patricia”), a member of Morgenix, commenced this action on April 12, 2007, by filing a complaint in the Franklin County Court of Common Pleas against Morgenix and its other members, Michael, Amy, and Barry. In her complaint, Patricia sought a judicial dissolution of Morgenix and [Ohio App.3d 613] alleged claims for breach of contract and breach of fiduciary duty against Michael and Amy. In addition to answering, Barry filed a cross-claim against Morgenix for an accounting, and Michael and Amy filed counterclaims and cross-claims against Patricia and Barry for breach of contract and breach of fiduciary duties.
{¶ 4} Patricia is a former employee of DuPont, where she served as a lead researcher in the development of a technology used for detecting and measuring quantities of gasses. DuPont recognized that this technology, the “senplex technology,” could be developed into profitable commercial products but was willing to allow third parties to develop and commercialize the technology under license from DuPont. Sometime after the termination of her employment with DuPont, Patricia approached Michael, her brother, to discuss creating a business, using her technical expertise with the senplex technology and his business experience, to license the senplex technology, develop and commercialize it, and provide services to other parties interested in developing and commercializing the technology under their own licenses from DuPont.
{¶ 5} In September 2005, Patricia, Michael, and Amy, Michael's wife, formed Morgenix. Thereafter, in December 2005 and January 2006, the parties executed several agreements relevant to the claims asserted in this action. First, Patricia, Michael, Amy, and Barry executed an operating agreement for Morgenix that set forth the members of Morgenix and their respective ownership interests as follows: Patricia, 45 percent; Michael, 39 percent; Amy, 6 percent; and Barry, 10 percent.2 Although not signed by the members until various dates in January 2006, the operating agreement states that it was entered into on December 15, 2005. Morgenix then executed a License Agreement with E.I. du Pont de Nemours and Company (“DuPont”), effective January 1, 2006, by which DuPont granted Morgenix an exclusive license for all nonautomotive uses of the senplex technology. Finally, Morgenix entered into a collaboration agreement and sublicense agreement (the “collaboration agreement”) with Barry's company, BI, effective January 20, 2006. The collaboration agreement states that Morgenix and BI desire to collaborate in the development of metal oxide gas sensors made in accordance with the senplex technology. Under the collaboration agreement, Morgenix granted BI an exclusive sublicense whereby BI would develop and commercialize military and homeland-security uses of the senplex technology and Morgenix would receive a percentage of all sales by BI.
{¶ 6} Michael served as Morgenix's president until March 23, 2006, when he was informed that Patricia and Barry had voted to terminate his role. On and [Ohio App.3d 614] after March 23, 2006, Patricia and Barry demanded that Michael and Amy surrender their interests in Morgenix, but Michael and Amy refused.
{¶ 7} As noted, Patricia filed her complaint in April 2007 against Morgenix, Michael, Amy, and Barry. On June 7, 2007, BI filed a motion to intervene in the action pursuant to Civ.R. 24. Attached as an exhibit to BI's motion was a proposed cross-claim against Morgenix for breach of contract. BI alleged that it had loaned Morgenix $160,775.77, that it had demanded repayment, and that Morgenix had refused to pay. The loan from BI to Morgenix and the outstanding balance were also alleged in Patricia's complaint. BI's proposed cross-claim demanded that Morgenix be dissolved and “that the claim of [BI] * * * be honored * * * and that any assets remaining with [Morgenix] * * * be paid to satisfy such claim.” BI withdrew its motion to intervene on June 15, 2007, before the trial court ruled on it.
{¶ 8} On February 22, 2008, with leave of court, Patricia filed an amended complaint. Patricia's amended complaint set forth claims for judicial dissolution of Morgenix, an accounting, breach of the operating agreement, negligence, breach of fiduciary duty, fraud, and a claim for punitive damages.
{¶ 9} On March 7, 2008, Michael and Amy, individually and on behalf of Morgenix, filed an answer to the amended complaint, along with amended counterclaims and cross-claims against Patricia and Barry, as well as claims against new counterclaim defendants, BI and Senplex Sensors, Inc. (“Senplex Sensors”). Michael and Amy allege that after March 23, 2006, Patricia and Barry “concocted a scheme by which the senplex technology could be developed and commercialized without giving [Michael and Amy] the benefit of their 45% interest.” They allege that on June 12, 2006, Patricia and Barry formed Senplex Sensors to replace Morgenix and for the purpose of developing and commercializing the senplex technology.3 They further allege that the scheme involved obtaining the judicial dissolution of Morgenix and a transfer of Morgenix's assets to Senplex Sensors. Appellees' amended pleading sets forth 21 claims for relief, including claims against Barry for conspiracy to abuse process, breach of fiduciary duty, fraud, breach of contract, malice, conspiracy, and unjust enrichment, and claims against BI for conspiracy to abuse process, conspiracy to injure, malice, declaratory judgment, intentional interference with contract, intentional interference with economic relations, unfair competition, and conspiracy. In addition to compensatory damages, Michael and Amy requested injunctive and declaratory relief, including the imposition of a constructive trust in favor of [Ohio App.3d 615] Morgenix and/or Michael and Amy on Morgenix's assets, including business opportunities, and benefits or profits from use of the senplex technology.
{¶ 10} On April 14, 2008, appellants filed a motion to stay this action pending arbitration, pursuant to R.C. 2711.02 and Section 3 of the Federal Arbitration Act, Section 1 et seq., Title 9, U.S.Code. Appellants maintain that appellees' claims are subject to arbitration under the collaboration agreement, which contains the following arbitration provision:
Any and all disputes under this Agreement shall be settled by arbitration to be held in Boston, Massachusetts before a single arbitrator under the rules of the American Arbitration Association. As to any dispute concerning the interpretation of a patent licensed hereunder or other patent issue, the arbitrator shall be an experienced patent attorney versed in the applicable technology of the Patent Rights. The decision of the arbitrator shall be final and binding and shall be enforceable in any state or Federal court having jurisdiction over the applicable party or parties.
Also on or around April 14, 2008, Barry filed a Civ.R. 12(B)(6) motion to dismiss certain of appellees' claims for failure to state a claim, and BI filed a motion to dismiss appellees' claims against it for lack of personal jurisdiction. Appellants also filed motions for extensions of time to respond to discovery and to answer appellees' amended claims, pending the trial court's decisions on the motions to stay and/or dismiss.
{¶ 11} The trial court journalized its denial of appellants' motion to stay on December 17, 2009. The court stated that “[t]he Collaboration Agreement does not require these parties to arbitrate because the agreement is not applicable to all the claims asserted here.” The court also found, without stating any basis for its finding, that “any right to arbitrate has been waived.”
{¶ 12} Appellants filed a timely notice of appeal, and they raise the following assignments of error:
Assignment of Error No. 1
The court erred at law when it held that the collaboration agreement is not binding in this case.
The trial court erred when it failed to determine the arbitration clause was valid and enforceable.
The trial court erred when it held that the collaboration agreement does not require the parties to arbitrate, because the agreement to arbitrate is not applicable to all the claims asserted.
[Ohio App.3d 616] The trial court erred [when it] failed to determine that appellees' claims relating to the development and commercialization of senplex sensors were subject to...
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