When parties to a contract agree to resolve their disputes through arbitration, Ohio courts will generally force the parties to arbitrate. Ohio’s arbitration statute, R.C. 2711.01, offers little discretion to courts when determining the enforceability of an arbitration clause. This statute states that “a provision in any written contract…to settle by arbitration a controversy that subsequently arises out of the contract…shall be valid, irrevocable, and enforceable…”
However, a court cannot force parties to arbitrate when the parties have not agreed to do so. A recent case from Ohio’s Ninth Appellate District provides an example of how courts will not expand an arbitration clause that limits itself to certain aspects of the underlying contract.
The dispute in Avenbury Lakes Homeowners Assn., Inc. v. Avenbury Lakes, Inc., 2012 Ohio App. LEXIS 2253, arose from the construction of a community clubhouse within a residential development. The homeowners’ association filed a lawsuit against the developer alleging poor workmanship and severe deficiencies in the construction of the clubhouse, which resulted in damages in the amount of $698,118.
In response to the lawsuit, the developer asserted similar claims against the architect and HVAC engineer who designed the clubhouse. The architect also asserted claims against the HVAC engineer. Since the contract between the architect and the HVAC engineer contained an arbitration provision, the HVAC engineer asked the trial court to stay the underlying lawsuit so that the architect and the HVAC engineer could arbitrate the claims between them. When the trial court agreed to stay the entire lawsuit pending the results of the arbitration, the architect appealed arguing that the dispute was not within the scope of the arbitration clause.
In reviewing the matter, the Court acknowledged that there were two basic types of arbitration provisions. First, there is an “unlimited clause,” which requires arbitration of all disputes between the parties arising out of the contract. Second, there is a “limited clause,” which limits arbitration to specific types of disputes that arise out of a contract.
The Court looked to the arbitration provision to determine whether the parties agreed to arbitrate the dispute at issue. The Court found that the arbitration agreement at issue was a limited clause as follows:
The arbitrators will not have jurisdiction, power or authority to consider, or make findings (except in denial of their own jurisdiction) concerning any claim, counterclaim, dispute or other matter in question where the amount in controversy of any such claim, counterclaim, dispute or matter is more than $100,000 (exclusive of interest and costs).
In applying the arbitration provision to the dispute, the Court held that the dispute in question fell outside the scope of the provision because the amount in controversy was $698,118, which exceeded the $100,000 limit. As a result, the Court found that the trial court erred in staying the proceedings pending the outcome of arbitration between the architect and the HVAC engineer.