Rock v. Merrill Lynch, Pierce, Fenner & Smith, Inc., s. 62437

• Decision Date: 07 April 1992
• Docket Number: 62572,Nos. 62437,s. 62437
• Citation: 606 N.E.2d 1054,79 Ohio App.3d 126
• Court: Ohio Court of Appeals
• Parties: , Blue Sky L. Rep. P 73,810 ROCK, Appellant, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Appellee.

Page 126

79 Ohio App.3d 126

606 N.E.2d 1054, Blue Sky L. Rep. P 73,810

ROCK, Appellant, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Appellee.

Nos. 62437, 62572.

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

Decided April 7, 1992.

Walter, Haverfield, Buescher & Chockley, Peter Turner and Jonathan D. Greenberg, Cleveland, for appellant.

Reminger & Reminger Co., L.P.A., and Richard J. Rymond, for appellee.

PER CURIAM.

Alvin G. Rock sued Merrill Lynch, Pierce, Fenner & Smith, Inc. ("Merrill Lynch") for negligence, fraud, breach of contract and breach of fiduciary duties arising from the sale of securities. Merrill Lynch answered and moved for dismissal or a stay based upon an arbitration agreement signed by Rock. The trial court dismissed the action and Rock timely appeals.

In one assignment of error Rock challenges the court's ruling. Upon review of the record, we reverse and remand the case for arbitration.

The arbitration provisions states in relevant part:

"Agreement to Arbitrate Controversies: It is agreed that any controversy between us arising out of your business or this agreement shall be submitted to arbitration conducted under the provisions of the constitution and rules of the board of governors of the New York Stock Exchange, Inc. or pursuant to the Code of Arbitration Procedure of the National Association of Securities Dealers, Inc., as the undersigned may elect."

It is well established that public policy favors dispute resolution by arbitration. Gibbons-Grable Co. v. Gilbane Bldg. Co. (1986), 34 Ohio App.3d 170, 173, 517 N.E.2d 559, 562.

Rock initially argues that Merrill Lynch should be estopped from compelling arbitration because the company denied the existence of the agreement before the lawsuit was filed. The record demonstrates that one month before Rock filed his complaint, a Merrill Lynch representative indicated he could not locate the arbitration agreement and that Rock could pursue his claims through litigation. Nineteen days after Rock filed suit, Merrill Lynch sent him a copy of the agreement and requested Rock pursue arbitration. We do not find Rock demonstrated any prejudice by Merrill Lynch's delay in locating the agreement and asserting its right to seek arbitration. Only nineteen days had passed since the complaint was filed. Furthermore, as noted in Standard Roofing Co. v. John G. Johnson & Sons Constr. Co. (1977), 54 Ohio App.2d 153, 156, 8 O.O.3d 281, 282-283, 376 N.E.2d 610, 613, the preparation for a lawsuit is not substantially different than preparing for arbitration. Thus, we find no grounds for estoppel.

Rock also contends Merrill Lynch waived its right to arbitration by not raising this defense in its answer. In Mills v. Jaguar-Cleveland Motors, Inc. (1980), 69 Ohio App.2d 111, 23 O.O.3d 142, 430 N.E.2d 965, this court held:

"The general rule is said to be * * * that either party to a contract of arbitration may waive it. * * * And a plaintiff's waiver may be effected by filing suit. When the opposite party, the potential defendant, is confronted with a filed lawsuit, the right to arbitrate can be saved by seeking enforcement of the arbitration clause. This is done under R.C. 2711.02 by application to stay the legal proceedings pending the arbitration. Failure to move for a stay, coupled with responsive pleadings, will constitute a defendant's waiver." Id. at 113, 23 O.O.3d at 143-144, 430 N.E.2d at 967. See, also, Jones v. Honchell (1984), 14 Ohio App.3d 120, 14 OBR 135, 470 N.E.2d 219.

In its answer, Merrill Lynch raised as an affirmative defense the court's lack of jurisdiction over the subject matter of the lawsuit. Although the better practice would be to explicitly plead the right to arbitration, we find Merrill Lynch's answer adequately preserved its rights under the arbitration agreement since the company also filed a motion to dismiss or stay the action pursuant to R.C. 2711.02. Mills, supra; Jones, supra. See, also, Channel Dry, Inc. v. Haver (1990), 70 Ohio App.3d 197, 202, 590 N.E.2d 868, 871 (lack of jurisdiction proper Civ.R. 12[B] defense when asserting right to arbitration).

Finally, Rock argues that assuming Merrill Lynch is entitled to arbitration the court should have stayed the lawsuit instead of entering a dismissal. We agree. R.C. 2711.02 states:

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

This court has held that when a dispute is subject to arbitration under R.C. 2711.02 the trial court should stay the lawsuit rather than dismiss it. Gibbons-Grable, supra, 34 Ohio App.3d at 176, 517 N.E.2d at 564; Cleveland Bldg. Corp. v. Boyd (Nov. 10, 1988), Cuyahoga App. No. 54702, unreported, at 4, 1988 WL 121040.

Accordingly, we overrule the assignment of error in part and sustain it in part. The judgment is reversed and the cause is remanded to the trial court for proceedings consistent with this opinion.

Judgment reversed and cause remanded.

NAHRA, P.J., and LILE, J., concur.

HARPER, J., concurs in part and dissents in part.

ROGER G. LILE, J., of the Tuscarawas County Common Pleas Court, sitting by assignment.

HARPER, Judge, concurring in part and dissenting in part.

I concur with the reversal of this case, but dissent from the majority decision to remand the case for arbitration. I think that the case should be remanded to the trial court to reinstate appellant's action and proceed with the litigation for the following reasons.

Like the majority, I agree that R.C. 2711.01, which governs arbitration, recognizes generally that provisions in a written agreement providing for arbitration are enforceable. However, exceptions apply to this general rule and a right to arbitration can be waived by actions of the parties. See Mills v. Jaguar-Cleveland Motors, Inc. (1980), 69 Ohio App.2d 111, 23 O.O.3d 142, 430 N.E.2d 965.

Appellant's counsel, before filing a lawsuit, sought a settlement in his letter of March 13, 1991, which provides in part:

"Mr. Rock is willing to discuss a resolution to this serious matter on terms that will compensate him for his loss. If you are unwilling to discuss such a resolution, please provide me copies of any and all customer agreements or applications signed by Mr. Rock in setting up account number 617-96237. In particular, I am interested to learn whether Mr. Rock agreed to submit this dispute to arbitration, or whether I may proceed by filing a complaint in the Court of Common Pleas.

"If I have not heard from you either way in this regard by the end of this month, I will assume that you are not interested in discussing a settlement and that there is no binding arbitration provision. Accordingly, I will proceed to finalize and file Mr. Rock's complaint alleging fraud, breach of fiduciary duty and seeking thereunder all damages allowable."

Appellee responded as follows:

"Merrill Lynch cannot agree with your conclusion that the firm or Mr. Gendler acted wrongly in connection with the contested trades. We do not believe that Mr. Gendler engaged in any unsuitable or unauthorized trading on Mr. Rock's behalf. Nor do we believe that Mr. Gendler either misrepresented or concealed any material information in connection with the bond trades. Under the circumstances, Merrill Lynch is not prepared to offer Mr. Rock any compensation on the basis of his claims.

"We have located no arbitration agreement between Merrill Lynch and Mr. Rock. If Mr. Rock chooses to press this matter further, he may do so through litigation in the courts. If Mr. Rock wants to voluntarily submit his claims to arbitration, Merrill Lynch would willingly consent.

"Of course, our real preference would be for Mr. Rock to drop this matter."

Appellee's failure to consider a settlement by daring appellant to go to court and litigate, in and of itself, was...