COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 66982 BOARD OF PARK COMMISSIONERS, : ETC. : : PLAINTIFF-APPELLEE : JOURNAL ENTRY : v. : AND : E. B. KATZ COMPANY : OPINION : : DEFENDANT-APPELLANT : DATE OF ANNOUNCEMENT OF DECISION: MARCH 2, 1995 CHARACTER OF PROCEEDING: Civil appeal from Common Pleas Court, No. CV-260136. JUDGMENT: REVERSED AND REMANDED. DATE OF JOURNALIZATION: APPEARANCES: For Plaintiff-Appellee: Diane P. Chapman, Esq. Kathryn Young Connors, Esq. James Loeb, Esq. Baker & Hostetler 3200 National City Center 1900 East 9th Street Cleveland, OH 44114-3485 For Defendant-Appellant: Jeffrey R. Appelbaum, Esq. Andrew J. Natale, Esq. Thompson, Hine & Flory 1100 National City Bank Building 629 Euclid Avenue Cleveland, OH 44114 -2- DAVID T. MATIA, J.: Defendant-appellant, E.B. Katz Company, appeals the finding of the Cuyahoga County Court of Common Pleas that appellant's grievance was not arbitrable. The appeal also involves the trial court's order granting plaintiff-appellee's, Board of Park Commissioners of the Cleveland Metropolitan Park District, "Motion to Stay Arbitration Proceeding" and the trial court's order denying appellant's "Cross-Motion to Stay Proceedings Pending Arbitration and Motion to Compel Arbitration." I. STATEMENT OF FACTS In the fall of 1990, plaintiff-appellee, Board of Park Commissioners of the Cleveland Metropolitan Park District ("the Board"), invited contractors to submit bids for the installation of a heating, ventilating and air conditioning system for the "Rainforest" project. This work included the integrated extension of an existing computerized Johnson Controls Direct Digital Control energy management temperature control system. Defendant-appellant, E. B. Katz Company ("Katz"), submitted a bid and on November 29, 1990 entered into a contract with plaintiff-appellee for the above-mentioned project. Several months into this endeavor, appellant informed appellee of their intent to use a different, less costly control system instead of a Johnson Control system. Appellee notified appellant that there could be no substitution and that a Johnson Control system must be used. Appellant acceded to their demand and finished the project using a Johnson Control system. -3- On or about September 30, 1993, defendant-appellant submitted a demand to arbitration which sets forth a claim for increased costs incurred in using Johnson Controls, i.e., $81,000. In response, plaintiff-appellee filed a "Complaint for Declaratory Relief and Determination of Ohio Law" on October 25, 1993. Appellee argued the requirement to use Johnson Controls system was clearly spelled out in the contract. As such, not only are the specifications proper under Ohio law, but appellant cannot raise objections to the specifications after accepting the terms and conditions of the contract. For these reasons, appellee argues, the appellant is legally obligated to use Johnson Controls system. In conjunction with the complaint, appellee filed a "Motion to Stay Arbitration" requesting the arbitration proceedings be stayed pending the Court's determination of their complaint. On November 2, 1993, defendant-appellant filed a "Cross- Motion to Stay Court Proceedings Pending Arbitration and to Compel Arbitration and Brief in Opposition to Plaintiff's Motion to Stay Arbitration." Appellant claimed since the dispute is one of contract interpretation, it is clearly subject to the broad, mandatory arbitration clause set forth in their contract. Additionally, appellant argued the trial court can only enjoin parties from seeking arbitration through injunctive relief and not through appellee's motion to stay. Since appellee did not meet the burden of proof required for injunctive relief, appellee's motion to stay should be denied. -4- On February 23, 1994, the trial court granted plaintiff- appellee's "Motion to Stay Arbitration" and denied defendant- appellant's "Cross-Motion to Stay Trial Court Proceedings Pending Arbitration and to Compel Arbitration." Subsequently, on March 2, 1994, the trial court denied appellee's "Motion to Stay Arbitration" upon the finding that the issues involved were moot. On March 7, 1994, appellant timely filed this appeal. II. FIRST, SECOND, THIRD AND FOURTH ASSIGNMENTS OF ERROR Since defendant-appellant's, Katz, first, second, third and fourth assignments of error contain interrelated issues of law and fact, this court will address them concurrently: 1. WHETHER THE TRIAL COURT IMPROPERLY RULED THAT THE CLAIMS RAISED IN THE COMPLAINT OF PLAINTIFF-APPELLEE THE BOARD OF PARK COMMISSIONERS OF THE CLEVELAND METROPOLITAN PARK DISTRICT (THE "BOARD OF PARK COMMISSIONERS" OR THE "BOARD") ARE NOT ARBITRABLE. 2. WHETHER THE TRIAL COURT ERRED WHEN IT DENIED DEFENDANT-APPELLANT E. B. KATZ COMPANY'S ("KATZ") MOTION TO STAY PROCEEDINGS PENDING ARBITRATION, WHICH WAS FILED PURSUANT TO SECTION 2711.02 OF THE OHIO REVISED CODE. 3. WHETHER THE TRIAL COURT IMPROPERLY RULED THAT KATZ'S CLAIMS FOR INCREASED SUBCONTRACT COSTS ARE NOT ARBITRABLE. 4. WHETHER THE TRIAL COURT ERRED WHEN IT DENIED DEFENDANT-APPELLANT KATZ'S MOTION TO COMPEL ARBITRATION, WHICH WAS FILED PURSUANT TO SECTION 2711.03 OF THE OHIO REVISED CODE. -5- A. ISSUE RAISED: WHETHER THE TRIAL COURT ERRED IN FINDING THE UNDERLYING DISPUTE NON-ARBITRABLE Defendant-appellant contends the trial court erred in determining the dispute between the parties was not arbitrable under the terms and conditions of their contract. Specifically, appellant argues they were not required under the contract to use Johnson Controls equipment for the extension and integration of the existing energy management temperature control system. As such, the dispute arises out of and/or relates to the contract thereby falling within the scope of the arbitration clause in their contract. For these reasons, appellant argues the trial court erred in holding the dispute non-arbitrable and in denying its "Cross-Motion to Stay Trial Court Proceedings Pending Arbitration and to Compel Arbitration." Appellant's first, second, third and fourth assignments of error are well taken. B. THE TRIAL COURT'S DUTY IN DETERMINING WHETHER OR NOT A DISPUTE IS ARBITRABLE In Internatl. Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers of America, Local Union 20 v. City of Toledo (1988), 48 Ohio App.3d 11, the court set forth the applicable standards to be utilized by a trial court when determining whether a grievance is arbitrable: It is unquestionably within the province of this court to decide whether a specific grievance is arbitrable. However, in deciding whether a contract creates a duty to arbitrate a certain grievance, a court is not to `rule on the potential merits of the underlying claims.' *** Furthermore, an -6- arbitration clause in a contract gives rise to a presumption that the particular grievance is arbitrable unless expressly excluded or there exists `the most forceful evidence of a purpose to exclude the claim from arbitration.' Hence, if an arbitration clause is broad, a court is strictly confined to a determination of whether, from the face of the contract, the parties agreed to submit the disputed term to arbitration. ***. (Citations omitted). Id. at 13. This strong presumption of arbitrability has been embodied in the Federal Arbitration Act, Section 2, Title 9, U.S.Code, which governs the enforcement of agreements to arbitrate in contracts involving interstate commerce or in maritime transactions. While the FAA applies to all states, see Southland Corp. v. Keating (1984), 465 U.S. 1; Weiss v. Voice/Fax Corp. (1994), 94 Ohio App.3d 309, it does not in this instance pre-empt our application of the Ohio Arbitration Act since: (1) both parties have agreed in their contract that the grievance will be governed by the law of Ohio, and (2) R.C. 2711 does not undermine or conflict with the goals of the FAA. See Volt Information Sciences, Inc. v. Board of Trustees (1989), 489 U.S. 468, 109 S.Ct. 1248, 103 L.Ed.2d 488. R.C. 2711.01 reads in pertinent part: (A) A provision in any written contract, ***, to settle by arbitration a controversy that subsequently arises out of the contract, or from the refusal to perform the whole or any part of the contract, ***, shall be valid, irrevocable, and enforceable, except upon grounds that exist at law or in equity for the revocation of any contract. -7- As stated, the duty to arbitrate has been created by a contract as opposed to being mandated by statute. The arbitration clause in this case states: Controversies and Claims Subject to Arbitration. Any controversy or Claim arising out of or related to the Contract, or the breach thereof, shall be settled by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof, except controversies or Claims relating to aesthetic effect and except those waived as provided in Sub-paragraph 4.3.5 [Waiver of Claims: Final Payment]. Such controversies or Claims upon which the Architect has given notice and rendered a decision as provided in Subparagraph 4.4.4 shall be subject to arbitration upon written demand of either party. Arbitration may be commenced when 45 days have passed after a Claim has been referred to the Architect as provided in paragraph 4.3 and no decision has been rendered. In the case sub judice, neither the scope of the arbitration clause nor the fact that the dispute arose during the life of the contract are not in dispute. While we recognize the trial court's duty in determining whether a dispute is arbitrable, we must balance that maxim with the strong presumption and policy favoring arbitration. The trial court is therefore strictly limited to reviewing the arbitration clause and determining whether or not the grievance raised falls within the scope of the parties agreement with all inferences and presumptions construed in favor of arbitration. See Cleveland Police Patrolmen's Association v. City of Cleveland (1995), 95 Ohio App.3d 645. -8- With these principles in mind, we turn to the appellant's grievance. B. SINCE THE NATURE OF THE UNDERLYING DISPUTE ARISES OUT OF THE CONTRACT, THE TRIAL COURT ERRED IN FINDING THE DISPUTE NON- ARBITRABLE AND IN DENYING APPELLANT'S MOTION TO STAY THE PROCEEDINGS AND COMPEL ARBITRATION Initially, we note that not only does the order of the trial court determine the action and prevent judgment pursuant to R.C. 2505.02, but the trial court's denial of appellant's "Cross- Motion to Stay Proceedings Pending Arbitration" is a final order pursuant to the express terms of R.C. 2711.02. Therefore, this cause is a final appealable order ripe for appellate review. See General Electric Supply Co. v. Warden Electric, Inc. (1988), 38 Ohio St.3d 378; Steward v. Shearson Lehman Brothers, Inc. (1992), 71 Ohio App.3d 305. In this case, appellant filed their "Demand for Arbitration" pursuant to the above-mentioned arbitration clause. The nature of the dispute was stated as follows: Claimant [Katz] demands compensation in connection with Respondent's directive requiring Claimant to install Johnson Controls equipment at increased cost without providing compensation therefor, plus additional compensation for subcontract cancellation costs incurred by Claimant to comply with Respondent's change in contract requirements and Respondent's enforcement of alleged proprietary specifications. As previously stated, appellant contends the substantive issue to be arbitrated arises out of and/or relates to the contract and is therefore arbitrable under the contract. We agree and find the issue submitted to arbitration necessarily involves an -9- interpretation of the contract specifications at issue. Hence, the issue arises out of or relates to the contract. Appellee argues, and the trial court agreed, the validity of a contract specification cannot be raised at this point in time as the appellant had already entered into the contract. Since the proper time to challenge the legality of specifications in a contract is before entering into the contract, appellee argues the claim of appellant is moot. In support of this proposition, appellee cites National Electrical Contractors v. Painesville (1973), 36 Ohio St.2d 60. In that case, appellant and other electrical contractors who submitted bids for the electrical work on a project were rejected for noncompliance with the specifications announced by the city of Painesville. Appellant brought an action for declaratory judgment for a judicial determination that the bidding procedures used by the city were illegal. The court found appellant not only failed to protest/complain about the bidding procedures before the contract was awarded to another contractor, but appellant also failed to forestall the start or continuation of the project. As such, the trial court dismissed the appeal as being moot. Id. at 61. We believe this case to be inapplicable to the case at bar. While appellee consistently refers to the grievance as a challenge to the legality of the bidding process, we view appellant's claim, as stated in the demand for arbitration, as a challenge to appellee's directive requiring appellant to install -10- Johnson Controls equipment pursuant to the contract. The determining factor in our opinion is that the claim submitted to arbitration "arises out of or relates to the Contract." While the trial court determines whether a dispute is arbitrable, the arbitrator may apply existing Ohio law in determining the posture of the claim and/or the merits of both parties arguments. Both parties conferred such power upon the arbitrator and we believe their contractual commitment to arbitration should be honored. See Gibbons-Grable Co. v. Gilbane Building Co. (1986), 34 Ohio App.3d 170; Davidson v. Bucklew (1992), 90 Ohio App.3d 328; Teramar Corp. v. Rodier Corp. (1987), 40 Ohio App.3d 39. For the foregoing reasons we find the trial court erred in determining the claims of appellant were not arbitrable. Accordingly, the trial court erred in denying appellant's "Cross- Motion to Stay Trial Court Proceedings Pending Arbitration and to Compel Arbitration." Appellant's first, second, third and fourth assignments of error are well taken. III. FIFTH AND SIXTH ASSIGNMENT OF ERROR Since defendant-appellant's, Katz, fifth and sixth assignments of error contain similar issues of law and fact, we will consider them concurrently: 5. WHETHER THE TRIAL COURT IMPROPERLY GRANTED PLAINTIFF-APPELLEE BOARD OF PARK COMMISSIONERS' MOTION TO STAY THE CONSTRUCTION ARBITRATION PROCEEDINGS THAT KATZ HAD INITIATED IN THE AMERICAN -11- ARBITRATION ASSOCIATION'S CLEVELAND TRIBUNAL, PURSUANT TO THE TERMS OF THE MANDATORY AND BINDING ARBITRATION CLAUSE IN THE CONTRACT BETWEEN KATZ AND THE BOARD OF PARK COMMISSIONERS. 6. WHETHER THE TRIAL COURT ERRED WHEN IT ENJOINED THE ARBITRATION PROCEEDINGS EVEN THOUGH THE PLAINTIFF-APPELLEE BOARD OF PARK COMMISSIONERS DID NOT SATISFY ITS BURDEN OF PROOF AND FAILED TO ESTABLISH THAT THE REQUIREMENTS FOR INJUNCTIVE RELIEF WERE SATISFIED. Defendant-appellant, Katz, argues the trial court erred in granting plaintiff-appellee's, the Board, "Motion to Stay Arbitration." Specifically, appellant argues the trial court can only enjoin parties from seeking arbitration through injunctive relief and not through appellee's motion to stay. Since appellee did not meet the burden of proof required for injunctive relief, appellant argues the motion to stay has been denied. Due to our disposition of the first four assignments of error, appellant's fifth and sixth assignments of error are rendered moot. App.R. 12(1)(C). However, assuming arguendo we found the underlying grievance to be non-arbitrable, we will briefly address the jurisdictional power of the trial court. Neither the common law nor the Ohio Arbitration Act confers the authority to a trial court to stay an arbitration proceeding. As such, we believe that while a trial court may enjoin parties from seeking arbitration pursuant to Civ.R. 65, it may not put a stay on an arbitration proceeding. See Davidson, supra; Bd. of Edn. v. Midwest Electric Co. (1980), 1 Ohio App.3d 37; Big Apple Cookie -12- Co. v. Springwater Cookie Co. (S.D. Ohio 1981), 517 F.Supp. 367; R.C. 2711. Reversed and remanded with instructions to submit to arbitration. -13- This cause is reversed and remanded for further proceedings consistent with the opinion herein. It is, therefore, considered that said appellant recover of said appellee its costs herein. It is ordered that a special mandate be sent to said court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. SPELLACY, P.J. and HARPER, J., CONCUR. DAVID T. MATIA JUDGE N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announcement of decision (see Rule 26). Ten (10) days from the date hereof this document will be stamped to indicate journalization, at which time it will become the judgment and order of the court and time period for review will begin to run. .