Hocking Valley Community Hosp. v. Community Health Plan of Ohio

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[Cite as Hocking Valley Community Hosp. v. Community Health Plan of Ohio, 2003-Ohio-4243.] IN THE COURT OF APPEALS OF OHIO FOURTH APPELLATE DISTRICT HOCKING COUNTY Hocking Valley Community Hospital, Plaintiff-Appellee, vs. Community Health Plan of Ohio, et al., Defendants-Appellants. : : : : : : : : : : : Case No. 02CA28 DECISION AND JUDGMENT ENTRY RELEASED: 8-06-03 APPEARANCES Dan L. Cvetanovich and W. Evan Price, II, Columbus, Ohio, for appellants. John W. Zeiger and Stuart G. Parsell, Columbus, Ohio, for appellee. Kline, J.: {¶1} Community Hospitals of Ohio ( CHO ) and Community Health Plan of Ohio ( CHPO ) appeal the Hocking County Court of Common Pleas denial of their motion for a stay, pending arbitration, of the proceedings initiated Community Hospital ( Hocking ). against them by Hocking Valley CHO and CHPO contend that the trial court abused its discretion when it declined to stay the proceedings despite the arbitration clause contained in the CHPO Termination Agreement that Hocking executed. Because we find that the Termination Agreement is enforceable against Hocking, and further find that the dispute in this case relates to the Termination Agreement, we agree. Additionally, we find that CHO and CHPO did not waive their right to enforce the arbitration clause by first moving for a change of venue. Accordingly, we reverse the judgment of the trial court. I. {¶2} Hocking was one of several member hospitals of CHO, a non-profit corporation organized by the hospitals to offer managed healthcare to businesses in the hospitals respective areas. CHO owns health-insuring participating discounted Hocking, a non-profit corporation. health fees in CHPO, for addition care CHPO of established a providers services to operator who rendered being a a network agreed to plan member of licensed to of accept enrollees. CHO, was a participating provider with CHPO. {¶3} Pursuant to an Indemnity Agreement between CHO, CHPO, and Hocking, CHO and CHPO agreed to pay Hocking for health care services primary rendered care Agreement to provider also enrollees ( Hocking provided a who chose Hocking Enrollees ). formula for The determining as their Indemnity whether Hocking owed a debt to CHPO for certain health care costs arising from services rendered to Hocking Enrollees. In February 2000, Hocking executed the CHO Membership {¶4} Transfer Agreement ( Transfer Agreement ), pursuant to which Hocking and several other hospitals agreed to transfer their CHO membership interests to Licking Memorial Hospital ( Licking ). The Transfer Agreement required each hospital to notify Licking whether it provider intended with to CHPO. continue Hospitals acting as wishing to a participating discontinue their participating provider relationship with CHPO were required to execute a CHPO Termination Agreement ( Termination Agreement ). Finally, the Transfer Agreement executed the Termination provided Agreement, that then CHPO if a hospital would satisfy government regulatory obligations to notify hospital enrollees of the termination. {¶5} The Termination Agreement provided that the Indemnity Agreement would remain in effect until all of the hospital s enrollees either terminated their enrollment in CHPO or were assigned indemnity to another obligations member of of those CHO which enrollees. agreed to assume Additionally, the Termination Agreement amended the Indemnity Agreement regarding the characterization of monies owed by the hospital to CHPO under the Indemnity Agreement and the calculation of monies owed for certain services Termination Agreement rendered also to hospital contained a enrollees. The forum-selection clause for litigation and a clause requiring arbitration of any dispute arising out of or relating to this [Termination] Agreement. {¶6} Hocking executed the Termination Agreement. The Termination Agreement contained a provision stating that it was not valid until executed by all parties. Despite this provision and the fact that CHO and CHPO never executed the Termination Agreement, the parties proceeded as if the Termination Agreement was in effect. Specifically, the parties do not dispute that Hocking ceased to act as a participating provider with CHPO, and CHPO notified the Hocking Enrollees of the termination. {¶7} After enrollees, amount Hocking CHPO Hocking ceased prepared owed to a providing final services CHPO. accounting Hocking to reflecting CHPO disputed the the debt. Hocking filed a complaint in the trial court asserting claims for declaratory judgment, breach of contract, and an accounting relating to the Indemnity Agreement. {¶8} CHO pursuant to and CHPO the filed forum Termination Agreement. motion to stay the a motion selection for a clause change contained of in venue the One week later, CHO and CHPO filed a trial court s proceedings pending arbitration, citing the arbitration clause in the Termination Agreement. became Hocking argued that the Termination Agreement never effective, because CHO and CHPO never executed it. Hocking also argued that its complaint relates solely to the Indemnity clause. Agreement, which does not contain an arbitration Finally, Hocking argued that CHO and CHPO waived their right to enforce the arbitration clause because they filed a motion for a change of venue prior to filing their motion for a stay of the proceedings. {¶9} The change of trial court venue arbitration. and denied for a CHO stay and of CHPO s the motions proceedings for a pending The trial court did not articulate its rationale for denying the motions. CHO and CHPO appeal the denial of their motion to stay the proceedings, asserting the following assignment of error: Appellants motion The trial court erred when it denied to stay proceedings pending arbitration pursuant to section 2711.02 of the Ohio Revised Code. II. {¶10} CHO denying their arbitration. arbitration 2711.02(C). and CHPO assert motion to that stay the the trial court proceedings erred in pending The denial of a motion to stay proceedings pending is a final appealable order pursuant to R.C. The parties raise three issues relating to CHO and {¶11} CHPO s assignment of error. the Termination Agreement First, the parties contest whether ever became effective signatures from representatives of CHO and CHPO. contest whether the dispute in this case Second, they relates Termination Agreement under the arbitration clause. regarding the existence of a contract and questions of law, which we review de novo. Condominium Unit Owners Assn. (1996), 74 Ohio St.3d 501, 502. whether CHO and CHPO waived v. Howard E. absent its to the Questions meaning are See Continental Ferguson, Inc. Finally, the parties dispute their right to enforce the arbitration clause when they first filed a motion for a change of venue. The question of whether a party has waived the right to enforce an arbitration clause is one within the trial court s discretion, and we will not reverse the trial court s decision absent an abuse of that discretion. Harsco Corp. v. Crane Carrier Co. (1997), 122 Ohio App.3d 406, 410; Smith v. Kreepy Krauly USA, Scioto App. No. 00CA2709, 2001-Ohio-2358. A. {¶12} CHO and CHPO contend that the Termination Agreement is a valid, enforceable agreement despite the fact that they did not execute the contract. CHO and CHPO contend that performance substitutes for execution of the Termination Agreement in this case. Hocking contends that the Termination Agreement is not an enforceable agreement because CHO and CHPO did not execute it.1 A {¶13} obligation, contract whether is a description an or verbal of in which written, agreement one or party becomes bound to another to pay a sum of money, perform an act, or omit to perform an act. Terex Corp. v. Grim Welding Co. (1989), 58 Ohio App.3d 80, 82. A contract is not valid unless a meeting of the minds of the parties occurs via an offer and an acceptance of the offer. Noroski v. Fallet (1982), 2 Ohio St.3d 77, 79. Generally, an offer is defined as the manifestation {¶14} of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. Leaseway Distribution Centers, Inc. v. Ohio Dept. of Adm. Serv. (1988), 49 Ohio App.3d 99, 105, citing Restatement of the Law 2d, Contracts (1981), 71, 24. Likewise, conduct sufficient to show agreement, including performance, constitutes acceptance. Nagle Heating & Air Conditioning Co. v. Heskett (1990), 66 Ohio App.3d 547, 550; American Bronze Corp. v. Streamway Products (1982), 8 Ohio App.3d 223, 227. 1 Hocking also asserts Termination Agreement is argue in the trial court review of the record, we the trial court. that CHO and CHPO waived the argument that the valid without execution because CHO and CHPO did not that Hocking waived the execution requirement. Upon find that CHO and CHPO clearly raised this issue in Thus, {¶15} a party may prove the existence of an enforceable contract not only through a written agreement, but also in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract. G. Herschman Architects, Inc. v. Ringco Mfg. Co., Inc. (May 11, 1995), Cuyahoga App. No. 67758, quoting American Bronze at 227. the minds, In contracts implied in fact, the meeting of manifested in express contracts by offer and acceptance, is shown by the surrounding circumstances which make it inferable that understanding. the contract exists as a matter of tacit G. Herschman, citing Legros v. Tarr (1989), 44 Ohio St.3d 6, 7. {¶16} Thus, contract does the not fact that necessarily exist between the parties. a mean party that has a not executed contract does failed to execute a not Richard A. Berjian, D.O., Inc. v. Ohio Bell Telephone Co. (1978), 54 Ohio St.2d 147, 151. party a written contract, yet the If one parties proceeded to act as if the contract was in effect, the contract is enforceable. Nagle at 550. Performance can substitute for execution of a written contract against the party who did not execute the contract (Nagle at 550), as well as against the party who executed the contract (CME Fed. Credit Union v. Stultz (Nov. 9, 1999), Franklin App. No. 98AP1598; American States Ins. Co. v. Honeywell, Inc. (Mar. 1, 1990), Cuyahoga App. No. 56552). In {¶17} this case, Hocking contends that the Transfer Agreement terminated the relationship between the parties, and that the Termination Agreement never took effect because CHO and CHPO never executed contracts does not Agreement clearly membership interests it. However, support stated Hocking s that the Licking to our did examination claim. The transfer not of the Transfer of Hocking s terminate Hocking s status as a participating provider with CHPO, and that Hocking needed to execute a termination agreement if it wished to terminate its participating provider relationship with CHPO. Hocking executed the Termination Agreement. {¶18} Although the Termination Agreement contains a paragraph stating that the agreement needed to be executed by all parties before it became effective, Hocking participating admits provider with that it ceased CHPO without to first act as a receiving an executed copy of the Termination Agreement from CHO and CHPO. Hocking does not dispute that CHPO notified Hocking Enrollees that Hocking terminated its participating provider relationship with CHPO and asked Hocking Enrollees to select a new primary care provider. Hocking does not contend that CHO or CHPO attempted to continue to treat it as a participating provider in any way. Thus, the parties all behaved in a manner consistent with the terms of the Termination Agreement, and inconsistent with the absence of such an agreement. The conduct of the parties in this case indicates that {¶19} all recognized the existence of the Termination Agreement. The parties conduct was not only consistent with the terms of the Termination Agreement, but also inconsistent with the absence of such an agreement. Agreement took Therefore, effect, and we that find it that is the Termination enforceable against Hocking as a matter of law. B. CHO and CHPO contend that the dispute in this case {¶20} relates to the Termination Agreement, and therefore that the matter is subject to the arbitration clause in the Termination Agreement. Hocking contends that the dispute in this case relates solely to the Indemnity Agreement. {¶21} When parties to a contract have agreed in writing to arbitration of disputes, the trial court must, upon application of a party and being satisfied that the issue is referable to arbitration, stay its proceedings pending the arbitration. 2711.02(B). A strong presumption exists in R.C. favor of arbitration, and any ambiguities or doubts regarding the scope of the arbitration clause should be resolved in favor of arbitration. Sasaki v. McKinnon (1997), 124 Ohio App.3d 613, 616; Gaffney v. Powell (1995), 107 Ohio App.3d 315, 320. The {¶22} Termination Agreement provides that any controversy, dispute or disagreement arising out of or relating to the Termination Agreement shall be settled by arbitration if it cannot be resolved through mediation. The United States Supreme Court has defined relating to as to stand in some relation; to have bearing or concern; to pertain; bring into association with or connection with. refer; to Morales v. Trans World Airlines, Inc. (1992), 504 U.S. 374, 383, 112 S.Ct. 2031, 2037, 119 L.Ed.2d 157, 167, citing Black s Law Dictionary (5 Ed. 1979) 1158. See, also, Kagy v. Toledo-Lucas Cty. Port Auth. (1998), 126 Ohio App.3d 675, 680. Hocking {¶23} filed a complaint asserting claims for declaratory judgment, breach of contract, and an accounting, all pursuant to the Indemnity Agreement between Hocking, CHO, and CHPO. Hocking did not mention the Termination Agreement in its complaint. Nonetheless, CHO and CHPO contend that the complaint relates to the Termination Agreement. Specifically, CHO and CHPO point out that the Termination Agreement explicitly amends the Indemnity Agreement. In amending the Indemnity Agreement, the Termination Agreement defines the nature of the amount due to CHPO under the Indemnity Agreement ( any amounts due to CHPO under said Indemnity Agreement shall constitute a debt to CHPO, notwithstanding the fact that the Hospital s membership in CHO may have terminated * * *. ). Additionally, the Termination Agreement delineates which expenses are chargeable to Hocking ( the Hospital s obligations under the Indemnity Agreement shall extend to any Health Care Expenses incurred by CHPO for services rendered to Hospital Enrollees after termination * * * which Health Care Expense arose from services performed while the Hospital Enrollee was covered by the Indemnity Agreement, * * *. ). Hocking s complaint in this case did not explicitly {¶24} refer to the undoubtedly Termination has some Termination Agreement. Agreement. connection However, or the association complaint with the In particular, the Termination Agreement defines the nature of the debt and the extent to which certain items may be properly included in the amount charged to Hocking. Under the presumption favoring arbitration, and resolving any ambiguities in the scope of the Termination Agreement in favor of arbitration, we find that a dispute relating to the amount Hocking owes to CHPO Termination Agreement. constitutes a dispute relating to the Consequently, we find that the dispute falls within the scope of the arbitration clause as a matter of law. C. Hocking {¶25} contends that even if the Termination Agreement is enforceable and even if the dispute in this case falls within the scope of the arbitration clause, the trial court did not abuse its discretion in denying the motion for a stay pending arbitration because CHO and CHPO waived their right to arbitration by first filing a motion for a change of venue. As {¶26} we noted above, when reviewing a trial court s determination that a party has waived its right to arbitrate, we apply an abuse of discretion standard. Harsco, supra at 410. A finding that a trial court abused its discretion implies that the court acted unreasonably, arbitrarily or unconscionably. Blakemore v. Blakemore (1983), 5 Ohio St.3d 217, 219. To prove that a defending party waived its right to {¶27} arbitration, the plaintiff is required to demonstrate that the defendant knew of an existing right to arbitration, see List & Son Co. v. Chase (1909), 80 Ohio St. inconsistently with that right to arbitrate. 42, and acted Harsco at 414, quoting Phillips v. Lee Homes, Inc. (Feb. 17, 1994), Cuyahoga App. No. 64353. The essential question is whether, based on the totality of the circumstances, the party seeking arbitration has acted inconsistently with the right to arbitrate. at 414. Harsco Failure to move for a stay of proceedings, coupled with a defendant s responsive pleadings, constitutes a waiver of the right to enforce an arbitration clause. Mills v. Jaguar- Cleveland Motors Inc. (1980), 69 Ohio App.2d 111, 113. To determine whether a defendant acted inconsistently {¶28} with arbitration, the court should consider: (1) any delay in the requesting party s demand to arbitrate via a motion to stay judicial proceedings and an order compelling arbitration; (2) the extent of the requesting party s participation in the litigation prior to its filing a motion to stay the judicial proceeding, including a determination of the status of discovery, dispositive motions, and the trial date; (3) whether the requesting party invoked the jurisdiction of the court by filing a counterclaim or third-party complaint without asking for a stay of the proceedings; and (4) whether the non- requesting party has been prejudiced by the requesting party s inconsistent acts. citing Rock v. Harsco at 414, quoting Phillips, supra, and Merrill, Lynch, Pierce, Fenner & Smith, Inc. (1992), 79 Ohio App.3d 126; Brumm v. McDonald & Co. Securities, Inc. (1992), 78 Ohio App.3d 96. In {¶29} this case, Hocking contends that CHO and CHPO waived the right to arbitrate by first filing a motion for a change of venue. However, a motion for a change of venue constitutes minimal participation in the proceedings; CHO and CHPO did not cause discovery to commence and did not file any dispositive motions, and no trial date was imminent. The trial court had not yet ruled on the motion for change of venue when CHO and CHPO filed their motion to compel arbitration. CHO and CHPO s delay in filing the motion was also minimal; they filed the motion for a stay just one week after filing their motion for a change of venue. CHO and CHPO did not invoke the jurisdiction of the court by filing a counterclaim or thirdparty complaint before requesting the stay. Finally, Hocking suffered little, if any, prejudice as a result of CHO and CHPO filing a motion for a stay one week after filing a motion for a change of venue. {¶30} Based on the factors outlined above, we find that CHO and did CHPO arbitration. fact, find not act in a manner inconsistent with seeking Thus, we find that if the trial court did, in that CHO and CHPO waived arbitration, that determination constituted an abuse of discretion. III. In sum, we enforceable, that the {¶31} find that dispute the in Termination this case Agreement relates to is the Termination Agreement and hence falls within the scope of the arbitration clause, and that CHO and CHPO did not waive their right to arbitrate the dispute by first filing a motion for a change of venue. Accordingly, we reverse the judgment of the trial court. JUDGMENT REVERSED. JUDGMENT ENTRY It is ordered that the JUDGMENT BE REVERSED and the cause remanded to the trial court for further proceedings consistent with this opinion, costs herein taxed to appellee. The appeal. Court finds there were reasonable grounds for this It is ordered that a special mandate issue out of this Court directing the Hocking County Court of Common Pleas to carry this judgment into execution. Any stay previously granted by terminated as the date of this Entry. this Court is hereby A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. Exceptions. Evans, P.J.: Concurs in Judgment only. Harsha, J.: Concurs in Judgment and Opinion. For the Court BY: Roger L. Kline, Judge NOTICE TO COUNSEL Pursuant to Local Rule No. 14, this document constitutes a final judgment entry and the time period for further appeal commences from the date of filing with the clerk.

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