Mark Rodio | Frantz Ward
It is a well-known general rule that a court cannot compel parties to arbitrate disputes that they have not agreed in writing to arbitrate.[1] “Indeed, when a party resisting arbitration is not a signatory to an arbitration agreement, a presumption against arbitration arises.” Peters v. Columbus Steel Castings Co., Tenth Dist. No. 05AP-308, 2006-Ohio-382, at ¶ 11.
Despite this general rule, Ohio courts previously have enforced arbitration agreements against non-signatories under several theories, including: incorporation by reference, assumption, ordinary contract and agency principles, veil-piercing or alter ego, third-party beneficiary, and estoppel. As the federal Sixth Circuit court has held (which covers Ohio, Michigan, Kentucky, and Tennessee), a non-signatory can be bound to an arbitration provision under an estoppel theory when it seeks a direct benefit from the contract.[2]
Recently, Ohio’s Tenth District Court of Appeals (which covers Franklin County) held that while Ohio’s arbitration statute (ORC Ch. 2711) requires agreements to arbitrate to be in writing to be enforceable, there is nothing in the Statute that requires signatures to be on those written agreements. See Kevin O’Brien & Assoc. Co., L.P.A. v. E. Worthington, L.L.C., Tenth Dist No. 22AP-700, 2023-Ohio-3494, at ¶ 18. The Court also cited to a Fourth District[3] case which noted that federal courts construing similar provisions of the Federal Arbitration Act (FAA) have consistently held that it is only necessary that the arbitration provision be in writing, not that such writing be signed.
The Tenth District held since the plaintiff was seeking to enforce the unsigned contract, it was bound to the arbitration provision within it.
Obviously, the best practice is to make sure that all agreements are in writing and signed by the party against whom you may try to enforce it. The easiest way to prove consent to a provision (whether for arbitration, indemnity, liquidated damages, recovery of reasonable attorney’s fees, etc.) is to have that party’s signature on a written agreement that includes the provision.
Of course, sometimes project work might proceed without a signature on the contract or subcontract. If that happens, you should consult legal counsel before determining that the lack of signature prevents you from enforcing the provisions to which the parties agreed (but did not sign).
[1] See, e.g., Teramar v. Rodier Corp., 40 Ohio App. 3d 39, 40 (Cuyahoga Cty. 1987).
[2] See Javitch v. First Union Securities, Inc., 315 F. 3d 619, 629 (6th Cir. 2003).
[3] The Fourth District covers Adams, Athens, Gallia, Highland, Hocking, Jackson, Lawrence, Meigs, Pickaway, Pike, Ross, Scioto, Vinton, and Washington Counties.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.