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Tuesday, November 19, 2019

Ohio Supreme Court determines when class action defendant can raise arbitration issue

State Court

By Mario Marroquin | Aug 23, 2019


COLUMBUS (Legal Newsline) – The Supreme Court of Ohio recently reversed rulings from the Portage Court of Common Pleas and an appeals court in an arbitration dispute between an employee and his former employer regarding whether the employee could proceed with his lawsuit as a class action.

In a slip opinion for Gembarski v. PartsSource Inc., the court concluded that in determining the right time for a defendant to raise a class action defense, defendant PartsSource need only raise such defense after the class certification stage in legal proceedings.

“In a class-certification case, when the case originates with a single named plaintiff and that plaintiff is not subject to an arbitration agreement that was entered into by unnamed putative class members, the defendant need not raise a specific argument referring or relation to arbitration in the answer,” Ohio Supreme Court Justice Patrick Fischer said, writing on behalf of the court. 

“Defendant may raise an argument that relates to arbitration against putative class members at the class-certification state of proceedings.

"As relevant to this case, PartsSource had no duty to assert arbitration as a defense in its answer because (plaintiff Edward) Gembarski, the only named class representative, was not subject to an arbitration agreement that had been entered into by unnamed putative class members.

"Thus, because arbitration was not available as a defense at the time PartsSource submitted its answer, PartsSource could not waive a right to assert arbitration at that time, as PartsSource had no such right to waive."

The lower courts granted the plaintiff's motion to certify the class action. According to Fischer, the lower courts improperly merged the analysis of arbitration as a response to an action and arbitration.

The Supreme Court’s decision stems from an October 2012 case when Gembarski, a former employee at PartsSource, filed a class-action complaint against it. According to the Supreme Court ruling, Gembarski brought allegations of breach of contract, unjust enrichment, conversion, equitable restitution, construction trust and money had and received against PartsSource. The plaintiff also alleged his former employer had withheld and deducted commission from Gembarski and other account managers and that his claims were typical of putative class-action members that were employed by PartsSource.

Gembarski first filed a motion to certify the suit as a class action in 2015. PartsSource then moved to oppose the certification of a class action on the basis of an alternative-dispute-resolution program it implemented in January 2011 that concluded in binding arbitration. Gembarski refused to sign on to the alternative-dispute-resolution program and alleged PartsSource waived the defense of arbitration because it did not raise the arbitration defense prior to the class action certification.

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