Staff v. State Farm Mut. Ins. Co.

• Decision Date: 03 May 1993
• Docket Number: No. 61907,61907
• Citation: 87 Ohio App.3d 440,622 N.E.2d 434
• Parties: STAFF et al., Appellants, v. STATE FARM MUTUAL INSURANCE COMPANY, Appellee.
• Court: Ohio Court of Appeals

Page 440

87 Ohio App.3d 440

622 N.E.2d 434

STAFF et al., Appellants, v. STATE FARM MUTUAL INSURANCE COMPANY, Appellee.

No. 61907.

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

Decided May 3, 1993.

Paul Mancino, Jr., Cleveland, for appellants.

Joseph H. Wantz, Cleveland, for appellee.

HARPER, Judge.

Plaintiffs-appellants, Joseph R. and Angela Staff, appeal from the denial of their motion to vacate an arbitration award and the granting of a motion to dismiss the underlying complaint of defendant-appellee, State Farm Mutual Automobile Insurance Co. ("State Farm"), in the Court of Common Pleas of Cuyahoga County. A careful review of appellants' assignments of error and the record compels reversal in part of the trial court's rulings.

On November 1, 1986, Mr. Staff was driving his motor vehicle on Route 84 in Mentor, Ohio. His wife was a passenger in the vehicle. The appellants' vehicle was involved in a collision with a vehicle driven by Cindy Fievet. Appellants subsequently reported the accident to their insurer, State Farm.

State Farm commenced an investigation of the accident. Its investigation first revealed, and there is no dispute, that Fievet was an uninsured motorist at the time of the accident. Second, State Farm concluded that Mr. Staff had been negligent in the operation of his vehicle and that his negligence was the sole proximate cause of the November 1, 1986 accident. State Farm, therefore, advised the appellants that it was denying their uninsured-motorist claim as a result of this conclusion.

Appellants filed a complaint in the trial court on July 25, 1988. Therein, they set forth three claims for relief: (1) State Farm had failed and refused to honor its policy with appellants under the terms of the uninsured-motorist provision; (2) State Farm had acted in bad faith by settling Fievet's claim; and (3) " * * * in the event it is determined that Joseph Staff was careless and negligent * * * [Mrs. Staff] would have a claim against him by reason of his carelessness and negligence and for which the defendant, State Farm Insurance Co., would be required to defend."

State Farm filed its answer and subsequently filed a motion for dismissal, or summary judgment on May 1, 1989.

On November 22, 1989, the trial court entered a stay of all proceedings. The parties were ordered to proceed to uninsured-motorist arbitration in accordance with the terms of State Farm's insurance policy with appellants.

A majority of the arbitrators found that Fievet had not been negligent. They, therefore, ruled in favor of State Farm.

Appellants responded on January 14, 1991 by filing objections and exceptions to the report and award of the arbitrators. State Farm, on the other hand, filed an application to confirm the report and award of the arbitrators and a reply to plaintiff's objections and exceptions.

The trial court confirmed the arbitrators' report and award on May 6, 1991, by granting State Farm's application. The trial court then dismissed the underlying complaint pursuant to State Farm's motion and denied appellants' motion to vacate the award.

This appeal followed, with appellants raising the following errors for review:

"1. The court committed prejudicial error in confirming the award of the arbitrators as the plaintiff had shown grounds for vacated [sic ] the arbitration award.

"2. The court committed prejudicial error in dismissing the claim of Angela Staff against Joseph Staff.

"3. The court committed prejudicial error in dismissing the bad faith claim of the plaintiffs.

"4. The court committed prejudicial error in referring this matter to arbitration as it had been [sic ] a waiver of the right to arbitrate the uninsured motorist claim."

The three members of the arbitration panel were Edward Galaska, who had been selected by appellants; John Neville, who had been selected by State Farm; and Clark Weaver, who had been jointly selected by Galaska and Neville. The majority, Neville and Weaver, rendered a decision in favor of State Farm, i.e., that Fievet was not negligent when her vehicle collided with the appellant's vehicle on November 1, 1986.

Appellants sought vacation of the arbitration award based on conflict of interest. They argued in the trial court and now argue on appeal in their first assignment of error that there was an "improper relationship" between the arbitrator Weaver and an attorney, Henry Hentemann, who was a member of the law firm representing State Farm in this matter, Meyers, Hentemann, Schneider & Rea Co., L.P.A.

The "improper relationship" stemmed from Hentemann's having signed a campaign endorsement letter for Weaver, who was running for a seat on the Court of Common Pleas of Cuyahoga County. Appellants submit that this undisclosed relationship between State Farm's attorney of record, Hentemann, and Weaver "violated not only due process of law but also the statutory provisions concerning qualification of arbitrators."

Arbitration is favored by the law, Mahoning Cty. Bd. of Mental Retardation v. Mahoning Cty. TMR Edn. Assn. (1986), 22 Ohio St.3d 80, 84, 22 OBR 95, 98, 488 N.E.2d 872, 875, and an arbitration award is presumptively valid, Findlay City School Dist. Bd. of Edn. v. Findlay Edn. Assn. (1990), 49 Ohio St.3d 129, 551 N.E.2d 186, paragraph one of the syllabus. Therefore,

" ' * * * [i]t has been held that the arbitrator is the final judge of both law and facts, and that an award will not be set aside except upon a clear showing of fraud, misconduct or some other irregularity rendering the award unjust, inequitable, or unconscionable * * *, and that even a grossly erroneous decision is binding in the absence of fraud. * * * ' (Citations omitted.) Goodyear v. Local Union No. 200 (1975), 42 Ohio St.2d 516, 522 [71 O.O.2d 509, 512, 330 N.E.2d 703, 707]." Menardi v. Petrigalla (1983), 11 Ohio App.3d 9, 11, 11 OBR 21, 23, 462 N.E.2d 1246, 1249.

R.C. 2711.10 delineates the circumstances which allow the trial court to vacate an arbitration award. This statute provides in part as follows:

"In any of the following cases, the court of common pleas shall make an order vacating the award upon the application of any party to the arbitration if:

"(A) The award was procured by corruption, fraud, or undue means.

"(B) There was evident partiality or corruption on the part of the arbitrators, or any of them."

" 'Only relationships from which one could reasonably infer bias, not those which are "peripheral, superficial or insignificant" will require vacating the award.' " Gerl Constr. Co. v. Medina Cty. Bd. of Commrs. (1985), 24 Ohio App.3d 59, 63, 24 OBR 113, 117, 493 N.E.2d 270, 275, quoting R.E. Bean Constr. Co. v. Middlebury Assoc. (1980), 139 Vt. 200, 207, 428 A.2d 306, 310. The instant case deals with an alleged direct relationship between an arbitrator and a member of the law firm that represented a party. It does not involve an alleged direct relationship between an arbitrator and a party as in Close v. Motorists Mut. Ins. Co. (1985), 21 Ohio App.3d 228, 21 OBR 244, 486 N.E.2d 1275, a case cited by appellants.

In Gerl Constr. Co., 24 Ohio App.3d at 63, 24 OBR at 116, 493 N.E.2d at 275, the court quoted from Freeport Constr. Co. v. Star Forge, Inc. (1978), 61 Ill.App.3d 999, 1003-1004, 19 Ill.Dec. 57, 61, 378 N.E.2d 558, 562, in stating:

" 'While the case law indicates that an undisclosed relationship between an arbitrator and a nonparty may also "be sufficient to create an impression of bias" * * *, it is obvious that the nexus between the nonparty and the arbitration must be substantial in order to reasonably create such an impression. In the final analysis, these matters must be decided on a case-by-case basis depending on the facts.' " (Citations omitted.) See, also, Furtado v. Hearthstone Condominium Assn. (May 19, 1987), Franklin App. No. 86AP-1003, 1987 WL 11606.

In Furtado, one of the arbitrators rented office space from one arbitration party's counsel. This relationship included the sharing of a receptionist and limited referrals of legal work to the arbitrator. The two individuals also enjoyed a limited personal relationship. The court found there was no evidence which showed bias on behalf of the arbitrator because:

"The mere imaginative appearance or suspicion of partiality is insufficient to establish under R.C. 2711.10(B) that there was 'evident partiality' on the part of the arbitrator. The phrase 'evident partiality' connotes more than a mere suspicion or appearance of partiality. See, e.g., Merit Ins. Co. v. Leatherby Ins. Co. (C.A.7, 1983), 714 F.2d 673, 681-682; International Produce, Inc. v. A/S Rosshavet (C.A.2 1981), 638 F.2d 548, 551. As the trial court's entry indicates, considering the circumstances of this case, plaintiff has failed to carry her burden of proof that the arbitrator was biased and has not shown substantially 'any reason for vacating the award,' pursuant to R.C. 2711.10 or 2711.11." Id. at 2.

In the present case, this court, in reviewing the record, finds that appellants have not carried their burden of proof that the arbitrator Weaver was biased and, therefore, have not substantially demonstrated any basis for vacating the award pursuant to R.C. 2711.10 for bias. That attorney Hentemann signed an endorsement letter for Weaver's judicial campaign, a letter which praised Weaver's integrity, does not show "evident partiality" on Weaver's part. The trial court thus properly denied appellants' motion to vacate the award, which was based on the position that the arbitrator Weaver was a biased participant in the proceedings. Furtado, supra.

Appellants' first assignment of error is accordingly overruled.

Appellants propose in their second assignment of error that the trial court erred in dismissing Mrs. Staff's third claim for relief. This claim reads:

"17. Plaintiff, Angela Staff, and for her claim for relief against Joseph Staff, and [sic ] states that she was a passenger in a motor vehicle being...