COURT OF APPEALS OF OHIO EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 74615 JAMES P. BOEDEKER, M.D., et al. : : JOURNAL ENTRY Plaintiffs-Appellees : : AND vs. : : OPINION LARRY E. ROGERS, et al. : : : Defendants-Appellants : DATE OF ANNOUNCEMENT DECEMBER 16, 1999 OF DECISION: CHARACTER OF PROCEEDING: Civil appeal from Common Pleas Court Case No. CV-345715 JUDGMENT: AFFIRMED. DATE OF JOURNALIZATION: APPEARANCES: For Plaintiffs-Appellees: For Defendant-Appellant James M. Marietta III: STEVEN S. KAUFMAN ANTHONY J. O'MALLEY FRANK R. DESANTIS WILLIAM G. PORTER II THOMAS L. FEHER MARCEL C. DUHAMEL Kaufman & Cumberland Vory, Sater, Seymour and Pease Co., L.P.A. L.L.P. 1500 Republic Building 2100 One Cleveland Center 25 Prospect Avenue, West 1375 East Ninth Street Cleveland, Ohio 44115-1000 Cleveland, Ohio 44114-1724 (Continued) -2- For Plaintiffs-Appellees (Cont.) BRIAN N. EISEN Greene & McQuillan Co. 1801 Bond Court Building Cleveland, Ohio 44114 TRACY S. JOHNSON Calfee, Halter & Griswold 1400 McDonald Investment Ctr. 800 Superior Avenue Cleveland, Ohio 44114-2688 CHARLES KAMPINSKI Charles Kampinski Co., L.P.A. 1530 Standard Building 1370 Ontario Street Cleveland, Ohio 44113 For Dole P. Baker, M.D.: JOSHUA D. GOLDSTEIN THOMAS J. LEE STEVEN M. O'BRYAN Kelley, McCann & Livingstone 3500 BP America Bldg. 200 Public Square Cleveland, Ohio 44114-2302 Herbert S. Bell, M.D.: DAVID A. SCHAEFER McCarthy, Lebit, Crystal & Haiman 1800 Midland Building 101 Prospect Avenue Cleveland, Ohio 44115 Betty Montgomery, Attorney MARK T. FREEMAN General: MARK I. WALLACH CHRISTOPHER S. WILLIAMS Calfee, Halter & Griswold 800 Superior Avenue, Suite 1400 Cleveland, Ohio 44114 Kenneth A. Buchwach, M.D.: MATTHEW T. FITZSIMMONS III JAMES H. GROVE Nicola, Gudbranson & Cooper 25 West Prospect Avenue 1400 Republic Building Cleveland, Ohio 44115 -3- For Melvyn Dinner, M.D.: WILLIAM MARTIN GREENE JEAN M. McQUILLAN Greene & McQuillan Co. 1801 Bond Court Building Cleveland, Ohio 44115 Christopher Mellino 1530 Standard Building Cleveland, Ohio 44113 For Paul A. Fleitz, M.D.: CRAIG S. COBB MICHAEL N. UNGAR Ulmer & Berne 900 Bond Court Building 1300 East Ninth Street Cleveland, Ohio 44114-1583 For KPMG PEAT MARWICK LLP: JOHN E. CARUSO JOHN W. FRAZIER IV Montgomery, McCracken, Walker & RH The Fidelity Building 123 South Broad Street Philadelphia, PA 19101 JOHN E. MARTINDALE Martindale & Brzytwa 900 Skylight Office Tower 1660 West Second Street Cleveland, Ohio 44113-1411 For Robert C. Loynd, M.D.: FRANK J. KAVENEY Schmitz, Kopman, Schreiber & Kaveney 222 South Central, Suite 101 St. Louis, MO 63105 For Larry E. Rogers: GERALD A. MESSERMAN PHILIP S. KUSHNER Messerman & Messerman 4100 Key Tower 127 Public Square Cleveland, Ohio 44114-1216 For Warren L. Udisky: ROGER M. SYNENBERG MARY JO TIPPING Synenberg & Marein 222 Leader Building 526 Superior Avenue Cleveland, Ohio 44114 For Daniel W. Varga, M.D.: DONALD DARBY Darby & Gazak 1400 En Voy Circle Suite 1608 Louisville, KY 40299 -4- For Lawrence H. Wolkoff, M.D. BRENT M. BUCKLEY Buckley, King & Bluso Bank One Center, Suite 1400 600 Superior Avenue Cleveland, Ohio 44114 WILLIAM G. CHRIS Buckley, King & Bluso 935 West Market Street Akron, Ohio 44313-7142 -5- TERRENCE O'DONNELL, PRESIDING JUDGE: James M. Marietta, III, the former Chief Financial Officer of the P.I.E. Mutual Insurance Company, appeals from a judgment of the common pleas court denying his motion to stay proceedings and compel arbitration of claims filed by James Boedeker, M.D., Blase Pignotti, M.D. and Barbara Walsh, M.D. arising out of the collapse of the medical insurance company. After a review of the record and the applicable case authority, we have concluded the matter should be litigated in a public forum. The record before us reveals that on March 31, 1997, Larry Rogers, as President of PIE, signed a contract agreeing to employ Marietta as the Executive Vice President, Chief Financial Officer and Treasurer of PIE, for a period of ten years with a five-year renewal period, and further, agreeing to pay him a total annual sum of $300,000 per year, a net bonus of $50,000, and $280,000 for termination of his consulting practice. Herbert S. Bell, M.D., Chairman of the Board of Trustees of PIE, acknowledged the contract, which contained inter alia in Article XI, an arbitration clause providing in part: The parties to this Contract stipulate that in the event of a disptue [sic] as to the conditions of performance *** shall be resolved by final and binding arbitration pursuant to the rules of the American Arbitration Association. The agreement further contained a termination clause which provided in relevant part: In the event that the Company is placed in liquidation, receivership, rehabilitation, conservatorship, bankruptcy or any other similar proceeding, or any proceeding which -6- limits, in any manner, the amount or customary distribution of compensation of EMPLOYEE under ARTICLE IV, EMPLOYEE shall be entitled to fifty percent (50%) of all compensation plus the value of all fringe benefits or any other right or moneys EMPLOYEE would be entitled to under this EMPLOYMENT CONTRACT for the remaining term of the EMPLOYMENT CONTRACT. Such amount shall be paid to EMPLOYEE in a lump sum and within tendays [sic] (10) of the filing of an action described in this paragraph. In June 1997, the Ohio Department of Insurance began an examination of PIE's financial affairs. Scarcely a month after that investigation began, on July 29, 1997, Rogers, on behalf of PIE, entered into a new agreement with Marietta which terminated Marietta's March 31 employment contract, recited that PIE had paid Marietta $3,568,863.00 in consideration of such termination, and further provided that Marietta agreed to remain in PIE's employ. Significantly, the new agreement incorporated by reference the arbitration provision of Article XI as contained in the March 31 agreement. Subsequent to the July 29 agreement, PIE consented to the Ohio Department of Insurance directly supervising its affairs. Following takeover by the Department of Insurance, Boedeker, Pignotti, and Walsh filed a purported class action on behalf of themselves and other policyholders, claiming the defendants caused PIE to breach its contract of insurance with its policyholders, made deceptive entries in corporate reports, converted PIE's assets to their own use, breached fiduciary duties, committed malpractice and interfered with the contractual relationship between PIE and its insureds. In addition, they filed a derivative action on behalf of PIE Mutual Insurance Company against Marietta, Rogers, Bell, Warren L. Udisky, Dole P. Baker, M.D., Janet M. Blanchard, -7- M.D., Robert E. Botti, M.D., Kenneth A. Buchwach, M.D., Joseph B. Carter, M.D., Charles Joseph Doyle, M.D., Paul A. Fleitz, M.D., Isadore Lidsky, M.D., Robert C. Loyne, M.D., John T. Makley, M.D., Clarence Reid McLain, Jr., M.D., Tearle Lee Meyer, M.D., John G. Poulos, M.D., James E. Russell, M.D., Gerald Stark, M.D., Robert T. Stone, M.D., George E. Toma, M.D., Daniel W. Varga, M.D., Kenneth A. Weiner, M.D., Robert C. Winslow, M.D., Lawrence H. Wolkoff, M.D., Robert S. Yurick, M.D., all of whom are alleged to be present and former members of the board of directors, and KPMG Peat Marwick L.L.P., the accounting firm alleged to have served as the auditors during all relevant times. In the derivative suit they alleged the futility of demanding action by the officers or directors of PIE or the superintendent of insurance, who had been appointed as the corporation's rehabilitator. In response, Marietta requested arbitration of these claims pursuant to the terms of his employment contract with PIE. The court denied his motion, and he now appeals and raises one assignment of error for our review, which states: THE COURT OF COMMON PLEAS ERRED IN DENYING APPELLANT MARIETTA'S MOTION TO STAY PROCEEDINGS PENDING ARBITRATION. Marietta urges the court erroneously denied his motion to stay the proceedings pending arbitration because the claims alleged are within the scope of the arbitration provision of his employment contract with PIE, and even though the individual policyholders did not sign that contract, the court should enforce the arbitration clause contained in it. Boedeker, Pignotti, and Walsh maintain the claims alleged against Marietta should be litigated in court -8- because they never signed the employment contract, are not subject to its terms, and claim Marietta negotiated the arbitration clause in violation of his fiduciary duties to the corporation and its policyholders. The sole issue then for our review on this appeal concerns whether the trial court properly denied Marietta's motion to arbitrate these claims. As a general proposition, a party to an action cannot be required to arbitrate a dispute between itself and a second party unless they have previously agreed in writing to arbitration. See Painesville Twp. Local School Dist. v. Natl. Energy Mgt. Inst. (1996), 113 Ohio App.3d 687, at 695, citing Kline v. Oak Ridge Builders, Inc. (1995), 102 Ohio App.3d 63. In accord with this case authority, the individual claims asserted by the appellees here are not subject to the arbitration clause, since none of the appellees are signatories to Marietta's employment contract. Therefore, with respect to those claims, we affirm the judgment of the court. Regarding the remaining derivative claims asserted in this litigation, we recognize that those asserting these claims do so on behalf of and as the corporation. The contract here makes disputes as to the conditions of performance of Marietta's contract subject to arbitration. Hence, we concern ourselves with the question of whether the asserted derivative claims relate to the conditions of performance of Marietta's employment contract. The claims filed in this lawsuit do not allege Marietta failed to perform his duties under his employment contract, but rather that -9- he engaged in conduct beyond the scope of that employment; that he violated or aided and abetted violation of Ohio insurance law; caused false entries to be made in the books and records of PIE to deceive public officials; withheld records to conceal material facts regarding the company's financial condition; converted monies to himself which belonged to PIE; and breached his duties as an officer by engaging in financial misconduct, excessive payments, and by interfering with the loans made by policyholders to the surplus accounts of PIE. These claims do not seek relief based on Marietta's performance of his duties as Treasurer or Chief Financial Officer of the company; rather, they are tort claims for an alleged breach of a fiduciary duty which arises as a result of his position of trust as an officer of the corporation, not from a breach of his employment contract. Hence, they are not subject to the provisions of the arbitration clause contained in the employment contract. Accordingly, we have concluded the trial court did not abuse its discretion in denying the motion to stay proceedings pending arbitration. Judgment affirmed. -10- It is ordered that appellees recover of appellant their costs herein taxed. The court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this court directing the Common Pleas 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. DIANE KARPINSKI, J., and KENNETH A. ROCCO, J. CONCUR PRESIDING JUDGE TERRENCE O'DONNELL N.B. This entry is an announcement of the court's decision. See App.R. 22(B), 22(D) and 26(A); Loc.App.R. 22. This decision will be journalized and will become the judgment and order of the court pursuant to App.R. 22(E) unless a motion for reconsideration with supporting brief, per App.R. 26(A), is filed within ten (10) days of the announcement of the court's decision. The time period for review by the Supreme Court of Ohio shall begin to run upon the journalization of this court's announcement of decision by the .