Aubrey Willacy v. Thomas Marotta, et al
Filing
OPINION filed : For these reasons, we reverse the district court s refusal to grant Willacy prejudgment interest, remand for the calculation of prejudgment interest and for a determination of whether Willacy deserves post-judgment interest, and affirm the rest of the district court s decisions, decision not for publication. Karen Nelson Moore, DISSENTING Circuit Judge; Jeffrey S. Sutton, AUTHORING Circuit Judge and Helene N. White, CONCURRING Circuit Judge.
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NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 17a0182n.06
FILED
Case No. 16-3351
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
AUBREY WILLACY,
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Plaintiff-Appellant,
v.
THOMAS MAROTTA; TIMOTHY
MARCOVY; SALVATORE LOPRESTI;
LOPRESTI, MARCOVY & MAROTTA,
LLP,
Defendants-Appellees.
Mar 24, 2017
DEBORAH S. HUNT, Clerk
ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF
OHIO
BEFORE: MOORE, SUTTON, and WHITE, Circuit Judges.
SUTTON, Circuit Judge. Aubrey Willacy and Salvatore LoPresti practiced law together
for decades. When Willacy retired and moved to Florida, he wanted more money for his share in
the partnership than LoPresti and the new partners were willing to pay. LoPresti, Marcovy, and
Marotta dissolved the firm and initiated arbitration, as the partnership agreement allowed. The
district court rightly allowed the arbitrator to resolve the partners’ claims, and we remand the
case only to assess whether Willacy deserves prejudgment or post-judgment interest.
I.
In 1979, Willacy and LoPresti, both practicing lawyers, formed a partnership under Ohio
law. Realizing how little in this world lasts, they agreed that “[t]he partnership shall be dissolved
upon the demand of either of its partners, in which event the partners shall proceed with
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reasonable promptness to liquidate and terminate the partnership business.” R. 28-2 at 7. The
partnership agreement did not spell out how to distribute the dissolved partnership’s assets. But
it did say that, “[i]f the partners are unable to agree upon the method and de[]tails of liquidating
the partnership business, the controversy shall be settled by arbitration in accordance with the
rules of the American Arbitration Association, and judgment upon the award may be entered in
any court having jurisdiction thereof.” Id. at 7–8.
Timothy Marcovy joined the partnership in 1984, prompting the firm to change its name
to Willacy, LoPresti & Marcovy. R. 11 at 3. A 2007 amendment to the partnership agreement
resolved the partners’ dispute about how much capital Marcovy needed to contribute to pay for
his stake in the partnership. That amendment set the firm’s valuation at $1,250,000, stated that
Willacy was to receive his 52% share in equal annual payments over ten years, and provided that
the capital-return payments would stop if the firm dissolved. Id. at 4; R. 28-3 at 6. The
amendment also admitted Thomas Marotta to the partnership and explained how the firm would
compensate partners in transitional and full retirement. Id. at 1–5. Willacy entered transitional
retirement on January 1, 2008, eventually moving to Florida. R. 11 at 2, 5.
A 2009 amendment to the partnership agreement tried to quell a conflict over Willacy’s
retirement compensation and Marcovy and Marotta’s partnership buy-in payments. See R. 1-3.
This amendment reduced the firm’s valuation by introducing an annual valuation based on gross
collections. Instead of getting better, things got worse, prompting another amendment to the
agreement in 2010. See R. 1-4. The 2010 amendment specified that “[a] retiring partner shall
receive an amount equal to one-half of the draw received by the non-retiring partners, to be paid
at the same time and in the same manner as such draws are paid to the non-retiring partners.” Id.
at 1. The partners stipulated “that, as of the date of [the 2010] amendment, the amount of draw
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payments being made to non-retiring partners is One Thousand Five Hundred dollars ($1,500)
per week,” but they also agreed that a majority of the partners could change the frequency and
size of the non-retiring partners’ draws at any time. Id. at 2.
That did not fix things either. Willacy sought over half a million dollars from his
partners—what he felt he was owed based on his remaining interest in the firm at the $1,250,000
valuation. R. 11 at 10. But LoPresti, Marcovy, and Marotta were willing to buy him out for only
$25,000. Id. at 11. Unable to bridge the gap and daunted by the recession’s impact on the firm’s
finances, LoPresti, Marcovy, and Marotta dissolved the firm on July 1, 2014. See R. 1-5.
LoPresti, Marcovy, and Marotta estimated that the dissolution entitled Willacy to “about
$33,500.00, if the disputed half draws are included.” R. 1-6 at 2. On July 17, the three partners
offered to pay Willacy either (1) “$20,000 within 30 days . . . and $1,000/month for 30 months
thereafter, for a total of $50,000”; or (2) “$60,000, paid at $1,000/month, over 60 months.” Id.
Willacy rejected each offer. The other three partners initiated arbitration over “[a] dispute [that]
has arisen as to the dissolution and winding up of the law partnership of Willacy, LoPresti
& Marcovy, pursuant to the Partnership Agreement and ORC Ch. 1776, including the amount of
distribution to the partners following the winding up.” R. 3-1 at 2.
In response, Willacy filed a lawsuit against the old firm, his former partners, and their
new firm in federal court. See R. 1. The court stayed the case pending arbitration. R. 20 at 10–
11.
The arbitrator found that the old law firm had $69,274.41 in net assets, and she divided
those assets among the four partners. R. 28-46 at 27. Willacy received $16,150 for his half
draws, $20,800 for his original capital contribution, and $4,331.05 for his 33% share of the
remaining assets. Id. In response, Willacy filed motions to lift the stay, to file a second amended
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complaint, and to vacate, modify, or correct the arbitration award. The district court confirmed
the award, denied Willacy’s motions, and entered judgment in favor of the defendants. Willacy
appealed.
II.
Arbitrability.
Willacy first challenges the district court’s arbitrability decision—its
decision to honor the arbitration clause and to stay the lawsuit until the arbitration concluded.
“An order to arbitrate the particular grievance should not be denied unless it may be said with
positive assurance that the arbitration clause is not susceptible of an interpretation that covers the
asserted dispute. Doubts should be resolved in favor of coverage.” United Steelworkers of Am.
v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582–83 (1960). Arbitrators may determine the
arbitrability of claims so long as they are “arguably covered by the agreement.” Turi v. Main
Street Adoption Servs., LLP, 633 F.3d 496, 511 (6th Cir. 2011). Whenever “the contract contains
an arbitration clause,” whether broad or narrow, “there is a presumption of arbitrability.” AT&T
Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 650 (1986).
“The gravamen of plaintiff’s claims,” as the district court correctly framed the issue, “is a
dispute about what compensation plaintiff is entitled to for his interest in” the partnership. R. 20
at 11. The dispute about the half-draw payments no doubt began before the three partners
announced the dissolution of the firm. We would be surprised if most issues related to the
dissolution of a decades-old firm arose overnight. But all of these issues, no matter the first
inkling of the problem, bear on “the method and de[]tails of liquidating the partnership
business,” R. 28-2 at 7, because the partners had a zero-sum pot of partnership assets to
distribute. Willacy’s purported right to the half-draw payments entitled him to a larger share of
the partnership’s assets and impacted his share in the firm’s ownership. See R. 28-46 at 23–25.
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And his “other claims, including unfair dissolution of [the partnership] and failure to provide a
fair buyout price and a statement of partnership assets,” as the district court ruled, “arguably state
claims related to the liquidation of” the partnership as well. R. 20 at 11.
Willacy offers two rejoinders. He (and the dissent) maintain that the district court
abdicated its responsibility to assess whether his claims were arguably covered by the arbitration
provision. The record shows otherwise. The district court, it is true, “le[ft] the final contract
interpretation to the AAA arbitrator.” Id. But it did so only after determining that all of
Willacy’s claims “related to the liquidation of” the firm and were arbitrable, id., an analysis that
more than suffices to respect the arguable-coverage inquiry.
“[P]ayment of half-draws,” we appreciate, “contemplates the continued existence of the
partnership.” Dissenting Op. 4. And resolution of the half-draw issue, we also appreciate,
requires looking elsewhere in the contracts. Id. But the same goes for determining ownership
interests in a partnership.
By the time Willacy filed his lawsuit over the half-draw and
ownership issues, his former partners had dissolved the firm, and arbitration of “the method and
de[]tails of liquidating the partnership business” was his only option. R. 28-2 at 7.
The dissent claims a distinction between broad and narrow arbitration clauses affects the
presumption of arbitrability. We don’t think so—at least not on this record. That “[s]uch a
presumption is particularly applicable where the clause is a[] broad” one, AT&T Techs., 475 U.S.
at 650, does not mean that the presumption does not apply to a run-of-the-mill or a narrow
arbitration clause.
Bratt Enterprises, Inc. v. Noble International, Ltd. illustrates the point. 338 F.3d 609
(2003). The arbitration provision in Bratt Enterprises was narrow. And yet we invoked the
presumption of arbitrability all the same—that “ambiguities as to the scope of the arbitration
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clause itself” should be “resolved in favor of arbitration.” Id. at 613 (quotation omitted). Just so
here. That we did not apply the presumption of arbitrability to one of the disputes flowed from a
different consideration: The two disputes did not overlap. One of them concerned the valuation
of the accounts receivable, and it was covered by the arbitration clause. The other dispute
concerned whether the parties had agreed to cap liability for the accounts. Id. at 611–13.
Because the second dispute did not affect the arbitrator’s assessment of the accounts’ value, no
arbitration of it was required. Here, in marked contrast, the arbitrator could not determine the
partners’ ownership of the dissolved firm’s assets without resolving the half-draw issue.
Willacy next argues, apparently for the first time on appeal, that the arbitration provision
in the 1979 partnership agreement “was not personally signed by anyone.” Appellant’s Br. 25.
Even if he had preserved this argument, Willacy and the other partners signed the 2007, 2009,
and 2010 amendments to the partnership agreement. E.g., R. 1-3 at 1–2. Each amendment
incorporated the 1979 partnership agreement, which included the arbitration provision. E.g., id.
at 1. No error occurred in staying the litigation pending the arbitrator’s decision.
Confirmation of the award and refusal to correct it. Willacy intermixes his criticism of
the district court’s confirmation of the arbitration award with his arguments about the denial of
his motions to correct, modify, or vacate the award. Because the arbitrator was “arguably
construing or applying the contract” and because Willacy at most has shown potential errors in
the merits of the award, both birds fall with one stone. Mich. Family Res., Inc. v. Serv. Emps.
Int’l Union 517M, 475 F.3d 746, 753 (6th Cir. 2007) (en banc) (quotation omitted). “[J]udicial
consideration of the merits of [an arbitrated] dispute is the rare exception, not the rule.” Id. The
arbitrator’s twenty-five page ruling displayed her awareness of the partnership agreement, the
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partnership’s history, and accounting principles. We “permit only the most egregious awards to
be vacated.” Id. This award readily clears that low bar. See R. 45 at 5–10.
Nothing indicates that the arbitrator’s decision was based on anything but a good-faith
effort to resolve the dispute, and the arbitration agreement amounts to a promise to look to an
arbitrator, not to the courts, to resolve the merits of the parties’ dispute. If “the request for
judicial intervention should be resisted even though the arbitrator made ‘serious,’ ‘improvident’
or ‘silly’ errors in resolving the merits of the dispute,” Mich. Family Res., 475 F.3d at 753
(quotations omitted), it follows that there is little room for a merits review of this award.
Willacy next argues that he is not responsible for half of the arbitrator’s fees. In his view,
the fees should have been split four ways, with equal parts paid by each partner. The arbitrator
ruled that “[t]he administrative filing fees of the AAA totaling $1,275.00 and the compensation
of the Arbitrator totaling $31,710.00 shall be borne equally by the parties. Therefore, [Willacy]
is directed to pay [his former partners] the sum of $637.50 for his share of the AAA filing fees in
this matter.” R. 28-46 at 27. The arbitrator fairly split the costs and fees equally between the
two sides of the arbitration, which is to say between Willacy (the plaintiff) on the one hand and
the other three partners (the defendants) on the other. In using the word “parties,” the arbitrator
was referring to the two sides of the case, as shown by the reality that the “fees and costs”
section begins by describing “[b]oth [p]arties.” Id. at 25.
Nor was it “constitutional error,” let alone constitutional error “beyond compare,” for the
arbitrator to refuse to hear testimony from a witness, the firm’s office manager, whom Willacy
failed to depose during the time allowed by the arbitrator. Appellant’s Br. 39. Arbitrators
generally “are not bound by formal rules of procedure and evidence, and the standard for judicial
review of arbitration procedures is merely whether a party to arbitration has been denied a
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fundamentally fair hearing.” Nat’l Post Office Mailhandlers v. U.S. Postal Serv., 751 F.2d 834,
841 (6th Cir. 1985). Between the preliminary hearing on February 2, 2015, and the deposition
and discovery deadline of April 30, 2015, Willacy did not request a single deposition. R. 28-19
at 1. Even after the arbitrator exercised her discretion to allow Willacy a single post-deadline
deposition, Willacy failed to comply with the new deadline and deposition restrictions. R. 28-29
at 1. The arbitrator had ample grounds for refusing to hear this testimony, especially when other
evidence addressed the same topic: the firm’s finances.
The post-award stay. After confirming the arbitration award, the district court denied
Willacy’s motion to dissolve the stay because that motion had become moot. R. 45 at 10 n.4.
This did not constitute an abuse of discretion. See Bedford v. Bobby, 645 F.3d 372, 375 (6th Cir.
2011). District courts “must grant” a motion to confirm a valid arbitration award “unless the
award is vacated, modified, or corrected.” 9 U.S.C. § 9. Willacy raised every issue in his
amended complaint as a counterclaim during the arbitration proceedings. R. 28-20 at 4. He
indeed submitted his amended complaint in its entirety to the arbitrator. Id. at 9–30. The
arbitration award was a “full settlement of all claims and counterclaims submitted. All claims
not expressly granted herein [we]re hereby denied.” R. 28-46 at 27. There was no need to
restart the litigation after the confirmed arbitration award resolved the entire dispute.
Willacy insists that the arbitrator had no authority to resolve the statutory or tort claims
raised in his amended complaint. A more limited arbitration provision, it is true, might preclude
arbitration of such claims. See, e.g., Turi, 633 F.3d at 510–11. But not this one. “Even real torts
can be covered by arbitration clauses [i]f the allegations underlying the claims ‘touch matters’
covered by the [agreement].” Fazio v. Lehman Bros., Inc., 340 F.3d 386, 395 (6th Cir. 2003)
(quotation omitted). And Willacy’s statutory claims cannot “be maintained without reference to
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the contract or relationship at issue.” Nestle Waters N. Am., Inc. v. Bollman, 505 F.3d 498, 505
(6th Cir. 2007).
Each of the statutory claims hinges on the partnership’s liquidation and the amount of the
firm’s assets owed to Willacy. Count III hinges on whether the “notice of dissolution . . . was
unlawful and ineffective because same was not premised upon the occurrence of any of the
events specified in [Ohio Rev. Code] § 1776.61.” R. 11 at 11. Count IV could not be decided
without determining whether Willacy’s dissociation from the firm did “not result in a dissolution
and winding up of the partnership business,” as Ohio Rev. Code § 1776.54(A) provides. See R.
11 at 12–13.
Count V turned on whether Willacy was “contractually due” the half-draw
payments that the arbitrator awarded him. Id. at 14. And Count VI turned on whether his former
partners violated their fiduciary duties under Ohio Rev. Code § 1776.44(B)(1) by
“transferring . . . the assets of [the old firm] to their newly formed partnership.” Id. at 16. The
district court could not resolve these claims, or any of the others, without relitigating the
arbitrator’s key decisions: whether Willacy’s partners dissolved the partnership and, if so, what
assets Willacy were due.
The second amended complaint. After confirming the arbitration award, the district court
denied Willacy’s motion for leave to file a second amended complaint, which included a
revamped civil RICO claim. No abuse of discretion occurred. See Perkins v. Am. Elec. Power
Fuel Supply, Inc., 246 F.3d 593, 604–05 (6th Cir. 2001). A little background is in order. In
Willacy’s first amended complaint, he added a civil RICO claim based on his partners’ supposed
bank fraud. The district court granted Willacy’s motion to dismiss this claim without prejudice
after the other partners pointed out that Willacy, who is not a financial institution, lacked
standing to bring a civil RICO claim premised on bank fraud when his personal injury was not
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the same as the injury to the financial institutions. See R. 12 at 5–7; see also Jackson v.
Sedgwick Claims Mgmt. Servs., Inc., 731 F.3d 556, 564–66 (6th Cir. 2013) (en banc).
The second amended complaint did not materially improve on the first one or offer a
good explanation for the delay. It alleged that the former partners had used the partnership’s
bank account to pay automobile leases, in an inappropriate attempt to obtain “‘draws’ in amounts
greater than those to which they were contractually entitled,” and that they had misstated the
ownership interests in the firm when applying for a line of credit. R. 25-1 at 16–17. That is not
much of an improvement on the first RICO claim, which alleged that the partners had attempted
“to unjustly enrich themselves” by “causing checks . . . to be issued to themselves . . . for socalled partnership ‘draws’ in amounts greater than those to which they were contractually
entitled” and by misstating the ownership interests in the firm when applying for a line of credit,
R. 11 at 14–15. Willacy surely knew about the evidence of wire fraud—the “long-distance,
interstate, telephone conversation” on December 10, 2013, between Willacy and his partners—
before filing his original and first amended complaints in 2014. R. 25-1 at 17. Willacy after all
was on the call and mentioned it in his prior complaints. R. 1 at 8; R. 11 at 8. Any other new
evidence would not help Willacy overcome the difficulties that led to his request for dismissal of
the first amended complaint’s civil RICO claim. The district court acted within its discretion in
deciding that a new amended complaint “[a]t th[at] point in the litigation—seventeen months
after the case was initiated, after the plaintiff had a full and fair opportunity for his claims to be
heard in arbitration, and after [the district court] ha[d] confirmed the arbitration award—. . .
would be extremely prejudicial to defendants.” R. 45 at 10 n.4; see Wade v. Knoxville Utils. Bd.,
259 F.3d 452, 458–59 (6th Cir. 2001).
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“[T]here is nothing in the text of the RICO statute,” contrary to Willacy’s argument, “that
even arguably evinces congressional intent to exclude civil RICO claims from the dictates of the
Arbitration Act” if the arbitration agreement covers the claim. Shearson/Am. Express, Inc. v.
McMahon, 482 U.S. 220, 238 (1987). His claim instead looks like an effort to evade the
consequences of the arbitrator’s decision “by renaming [his] claims so that they appear facially
outside the scope of the arbitration agreement.” Simon v. Pfizer, Inc., 398 F.3d 765, 776 (6th
Cir. 2005). Because the civil RICO claim requires the court to determine Willacy’s rights to the
dissolved partnership’s assets, the civil RICO claim could not “be resolved in [Willacy’s] favor
even [though] he los[t] the arbitration.” Id. at 777. Consider the overlapping relief sought in
each claim. The second amended complaint requested “an amount not less than $520,000” for
his civil RICO claim, R. 25-1 at 18, an amount quite similar to the “$525,110 return of capital
obligation” requested in the first amended complaint, R. 11 at 10, and the “capital account . . .
amount of $512,000.00” he requested from the arbitrator, R. 28-46 at 12. The district court fairly
rejected the motion.
The proposed pronouncement. The district court declined Willacy’s invitation to issue a
Civil Rule 54(b) certification or “a pronouncement that all of [Willacy’s] claims against
defendant LoPresti, Marcovy, and Marotta, LLP, and those of plaintiff’s claims against the
individual defendants . . . which sound in tort remain pending and undetermined in this case.”
R. 47 at 1; R. 53 at 9. The court based its ruling on res judicata principles, but the dispute was
more fundamentally about what the arbitrator did in her confirmed award. The arbitration award
was in fact a “full settlement of all claims and counterclaims submitted.” R. 28-46 at 27.
Under the Federal Arbitration Act, we look to federal law to determine whether the
arbitrator had authority to decide Willacy’s claims, even the claims based on Ohio law.
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Southland Corp. v. Keating, 465 U.S. 1, 16 (1984). Because Willacy and his former partners
consented to arbitration of claims arguably related to the liquidation of the partnership, the
arbitrator had the power to decide Willacy’s claims. This includes both the statutory and tort
claims. See Shearson/Am. Express, 482 U.S. at 238; Fazio, 340 F.3d at 395. Willacy might have
made more headway if he had filed his counterclaims correctly, as the arbitrator instructed him.
See R. 28-24. But he is not correct in asserting that he “had no opportunity whatsoever to litigate
his RICO and state tort law claims in the arbitral forum.” Appellant’s Br. 46.
As Willacy acknowledges, the Rule 54(b) certification became moot when the district
court entered final judgment as to all parties still in the litigation. Id. at 42; see Gen. Acquisition,
Inc. v. GenCorp, Inc., 23 F.3d 1022, 1026–27 (6th Cir. 1994). Because res judicata “bars further
claims by parties or their privies based on the same cause of action,” the confirmation of the
arbitration award resolving all claims against LoPresti, Marcovy, and Marotta necessarily barred
Willacy’s claims against the new law firm, LoPresti, Marcovy & Marotta, LLP, as well.
Montana v. United States, 440 U.S. 147, 153 (1979). No error occurred.
Costs and interest. The district court also refused to grant Willacy the costs of his
lawsuit under Civil Rule 54(d)(1) and declined to give him interest on the amount of his award in
the arbitrator’s ruling. R. 53 at 4–6, 9. The district court was correct in part and incorrect in one
small part.
The court correctly ruled that Willacy was not entitled to his costs as “the prevailing
party.” Fed. R. Civ. P. 54(d)(1). “[A] plaintiff ‘prevails’ when actual relief on the merits of his
claim materially alters the legal relationship between the parties by modifying the defendant’s
behavior in a way that directly benefits the plaintiff.” Farrar v. Hobby, 506 U.S. 103, 111–12,
(1992); see Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res.,
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532 U.S. 598, 604 (2001). Yet Willacy’s partners were the ones who requested arbitration and
confirmation of the arbitrator’s award, and that’s what happened. They prevailed, not Willacy.
See Riviera Distribs., Inc. v. Jones, 517 F.3d 926, 928–29 (7th Cir. 2008); R. 53 at 6 n.4.
Arbitration agreements like this one “are designed to reduce the price tag of decision-making.
By filing . . . suit, [Willacy] forced [his partners] to bear the very expenses that the parties had
agreed to avoid. The party responsible for creating excessive legal costs must bear them itself in
the end.” Riviera, 517 F.3d at 929.
That the arbitrator awarded Willacy $41,281.05 does not make him the prevailing party
either. That amount was a small percentage of the half-million dollars he requested. Id. And
Willacy opposed confirmation of the award, and lost. See R. 24; R. 25; R. 27; R. 41; R. 42; R.
47; R. 49; R. 50; R. 52; R. 54. He cannot now claim prevailing party status.
All of this does not mean, however, that the district court correctly denied him
prejudgment interest on the $41,281.05 award. “[S]tate law governs awards of prejudgment
interest.” F.D.I.C. v. First Heights Bank, FSB, 229 F.3d 528, 542 (6th Cir. 2000). Under Ohio
law, “when money becomes due and payable . . . upon any settlement between parties, upon all
verbal contracts entered into, and upon all judgments, decrees, and orders of any judicial tribunal
for the payment of money arising out of tortious conduct or a contract or other transaction, the
creditor is entitled to interest.” Ohio Rev. Code § 1343.03(A) (emphases added). The district
court’s judgment, by confirming the arbitrator’s award, “include[d] the $41,281.50 to [Willacy].”
R. 53 at 6. Willacy therefore had “a right under [Ohio Rev. Code §] 1343.03(A) to an interest
award as a matter of law, and the trial judge ha[d] no discretion not to grant any interest award.”
Lincoln Elec. Co. v. St. Paul Fire & Marine Ins. Co., 210 F.3d 672, 692–93 (6th Cir. 2000); see
also Broad Street Energy Co. v. Endeavor Ohio, LLC, 806 F.3d 402, 409 (6th Cir. 2015).
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Though the rest of the arbitration award favored Willacy’s partners, they had the “use of money
which rightfully belonged to” Willacy before the district court entered its judgment. Musisca v.
Massillon Cmty. Hosp., 635 N.E.2d 358, 360 (Ohio 1994).
Willacy, it is true, did not request pre-award interest from the arbitrator or raise the issue
in a timely motion to modify the arbitrator’s award. See 9 U.S.C. § 12. But Ohio law required
Willacy’s partners to pay prejudgment interest once the district court entered its judgment even
though this “was not a matter presented to the arbitrators.” Hellmuth, Obata & Kassabaum v.
Ratner, 487 N.E.2d 329, 331 (Ohio Ct. App. 1984). Willacy’s motion to correct the judgment
also was timely, even if we treat it as a motion to alter or amend the judgment. See Fed. R. Civ.
P. 59(e), 60; Pogor v. Makita U.S.A., Inc., 135 F.3d 384, 388 (6th Cir. 1998).
Willacy also requested “post-judgment interest,” an issue controlled by federal law.
Broad Street Energy Co., 806 F.3d at 410; see 28 U.S.C. § 1961. But the district court did not
consider the issue. On remand, then, the court should determine how much prejudgment interest
Willacy deserves and decide whether post-judgment interest is proper as well. Cranpark, Inc. v.
Rogers Grp., 821 F.3d 723, 741 (6th Cir. 2016).
For these reasons, we reverse the district court’s refusal to grant Willacy prejudgment
interest, remand for the calculation of prejudgment interest and for a determination of whether
Willacy deserves post-judgment interest, and affirm the rest of the district court’s decisions.
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HELENE N. WHITE, Circuit Judge, concurring. I concur because the half-draw
dispute was arguably arbitrable under the partnership agreement’s arbitration clause.
The clause required “arbitration in accordance with the rules of the American Arbitration
Association . . . .” P’ship Agreement, R. 1-1, PID 22. The AAA’s rules vest the arbitrator with
“the power to rule on his or her own jurisdiction, including . . . the arbitrability of any claim or
counterclaim.” AAA Commercial Rule 7 (2013); see also Bishop v. Gosiger, Inc., 692 F. Supp.
2d 762, 769 (E.D. Mich. 2010) (collecting cases holding that contracts requiring arbitration
under AAA rules vest arbitrators with the authority to decide arbitrability). However, as the
dissent emphasizes, “even where the parties expressly delegate to the arbitrator the authority to
decide the arbitrability of the claims related to the parties’ arbitration agreement, this delegation
applies only to claims that are at least arguably covered by the agreement.” Turi v. Main Street
Adoption Servs., LLP, 633 F.3d 496, 511 (6th Cir. 2011) (first emphasis added and second in
original). The more narrow an arbitration clause, the less likely it is that a claim is “arguably”
covered by it. See id. at 507.
There is no doubt that this arbitration clause is a narrow one. Between 1979 and 2014, no
dispute between the partners, including the half-draw dispute, would have been “arguably”
arbitrable under the clause because the “partnership business” was ongoing. The clause was
inoperable until the firm dissolved, the “partnership business” reached its end, and only
liquidation remained. At that point, the arbitration clause arguably took on a fairly broad scope.
The arbitration clause uses the phrase “method and de[]tails of liquidating the partnership
business” without further elaboration. P’ship Agreement, R. 1-1, PID 22. One may fairly read
the phrase as not covering the half-draw dispute because that dispute did not arise from the
liquidation. Or, the dispute may fairly be viewed as well within the scope of the arbitration
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clause as a detail of the liquidation because all that remained were partnership assets and the
partners’ claims. The arbitration provision is sufficiently ambiguous that the half-draw dispute
was at least arguably a “de[]tail[] of liquidating” what remained of the partnership business.
See id. The district court’s order referred the arbitrability question to the arbitrator, and the
arbitrator resolved the half-draw dispute, implying that she considered it covered by the
arbitration clause.
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KAREN NELSON MOORE, Circuit Judge, dissenting. I disagree with the majority
that the half-draw claim raised by Willacy was subject to arbitration. Although federal policy
favors broad construction of a general arbitration clause, when the parties limit the scope of
arbitration to a narrow set of issues, we are required to enforce the contract as written and
exclude claims not contemplated by the agreement. Because I believe that Willacy’s half-draw
claim is separate from the “method and de[]tails of liquidating the partnership business,” I
respectfully dissent.
In his motion to modify and correct the arbitral award or, in the alternative, vacate the
award, Willacy argued that the arbitrator made material miscalculations, including by
miscalculating the withheld half-draw payments. R. 27 (Mot. to Modify & Correct/Vacate at
13–15) (Page ID #364–66); Appellant’s Br. at 18. On appeal, Willacy argues that the district
court erred in denying this motion because the award “ignored unambiguous and clearly
applicable specific terms of the parties’ partnership agreement.” Appellant’s Br. at 34–36.
When we apply the correct standard, it is clear that the issues addressed by the arbitrator
exceeded the scope of the narrow arbitration clause. We review de novo a district court’s
arbitrability decision. Simon v. Pfizer Inc., 398 F.3d 765, 772 (6th Cir. 2005). Although it is
generally true that “[d]oubts should be resolved in favor of coverage,” United Steelworkers of
Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582–83 (1960), “the FAA’s presumption
of arbitrability regarding the merits of a dispute does not apply with equal force to narrow
arbitration agreements,” Turi v. Main St. Adoption Servs., LLP, 633 F.3d 496, 507 (6th Cir.
2011); see also Simon, 398 F.3d at 775 (“[a] longstanding principle of this Circuit is that no
matter how strong the federal policy favors arbitration, ‘arbitration is a matter of contract
between the parties, and one cannot be required to submit to arbitration a dispute which it has not
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agreed to submit to arbitration’”) (citation omitted). “The more narrow the arbitration clause in
question, the more likely that the provision does not even ‘arguably’ apply to the dispute at
issue.” Turi, 633 F.3d at 507.
We have distinguished between broad arbitration clauses that submit to arbitration “[a]ny
controversy arising out of or relating to” an agreement, Fazio v. Lehman Bros., Inc., 340 F.3d
386, 392 (6th Cir. 2003), and narrow arbitration clauses that limit the scope of arbitration to a
fixed set of issues. Simon, 398 F.3d at 775. In interpreting the former, the presumption favoring
arbitration applies. Id. We have therefore recognized that when construing a general arbitration
clause, “[a] proper method of analysis . . . is to ask if an action could be maintained without
reference to the contract or relationship at issue.” Fazio, 340 F.3d at 395.
In contrast, when interpreting a narrow arbitration clause, the fact that two claims have
the same factual underpinnings is not dispositive. Simon, 398 F.3d at 776. We have therefore
held narrow arbitration clauses inapplicable to claims that rely on different legal standards or
require proof of additional elements even when the claims rely on the same set of facts. See,
e.g., Turi, 633 F.3d at 511 (holding that plaintiffs’ state tort and RICO claims were not covered
by an arbitration clause covering disputes “regarding fees”); Simon, 398 F.3d at 777 (holding that
plaintiff’s claims were not covered where the claims “require consideration of some factual
issues that are subject to arbitration, but . . . have independent legal bases,” including
establishing “termination for gross misconduct” as opposed to “termination for Just Cause”).
More importantly, under this strict approach, we may determine that a claim is beyond the scope
of a narrow arbitration clause even when resolution of the claim requires reference to the
arbitrable dispute. Bratt Enters., Inc. v. Noble Int’l Ltd., 338 F.3d 609, 613 (6th Cir. 2003).
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Our holding in Bratt is particularly instructive. There we considered whether a claim
regarding the liability limit in a business purchase agreement was covered by a narrow clause
that subjected to arbitration “disagree[ments] with any of the amounts included in the Closing
Balance Sheet.” Id. at 612. Plaintiff disputed its obligation to pay any amount exceeding the
liability limit, and argued that this claim was related to a balance sheet dispute. We disagreed,
and held that although the liability limit would have controlled the amount of recovery under the
balance sheet, the dispute did “not itself involve a ‘disagree[ment] with any of the amounts
included in the Closing Balance Sheet,’” and therefore was beyond the scope of the arbitration
clause. Id. at 613. Contrary to the lead opinion’s assertion, our conclusion in Bratt did not
depend upon two disputes that did not overlap. In holding that the arbitration clause did not
cover the liability limit, we held that a strict and narrow reading was required even where the
claim regarding the limit “would obviously require reference to the closing balance sheet to
determine matters of valuation.” Id. Even where two claims relate, “[t]he federal policy that
favors arbitration is not so broad that it compels the arbitration of issues beyond those agreed to
by the parties.” Id.
Here, the partnership did not contain a general arbitration clause. The parties committed
to arbitration only disputes about the “method and de[]tails of liquidating the partnership
business.” R. 28–2 (Law Partnership Agreement at 7) (Page ID #386). The half-draw claim is
clearly outside the scope of this clause. The claim relates to a separate contractual arrangement
regarding compensation of retiring partners, and relies on completely different legal standards
that are in no way “substantially identical” to the question of how to liquidate a partnership.
Simon, 398 F.3d at 776. Indeed, payment of half-draws contemplates the continued existence of
the partnership, and is therefore clearly distinct from dissolution. As was the case in Bratt,
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resolution of the half-draw claim, though significant to liquidation, did not itself involve a
determination of the method and details of liquidation. See Bratt, 338 F.3d at 613 (noting that
the key inquiry underlying the liability limit related to mutual mistake, not the amount in the
closing balance sheet). Moreover, the arbitration clause was contained in the specific section of
the Partnership Agreement dealing with termination of the partnership.
R. 28–2 (Law
Partnership Agreement at 7) (Page ID #386). Separate sections dealing with the withdrawal of a
partner, id. at 5–6 (Page ID #384–85), and subsequent amendments that provide for payment of
half-draws, R. 1–4 (2010 Amendment at 1–2) (Page ID #34–35), make no mention of arbitration.
See Simon, 398 F.3d at 775–76 (noting that the scope of arbitration provisions is confined to the
scope of the two sections that provide for arbitration).
Finally, the half-draw claim at issue here arose before dissolution. Appellant’s Br. at 27.
The lead opinion argues that the time at which the claim arose is of no relevance, because “the
partners had a zero-sum pot of partnership assets to distribute.” Under the strict analysis in
Bratt, however, that determination is insufficient to end the inquiry. A dispute is not covered by
an arbitration clause merely because its resolution bears directly on the arbitrable issue. Simon,
398 F.3d at 777.
Nor can we construe that clause broadly in order to “avoid piecemeal
litigation.” Id. Whether the half-draw claim affects the amount subject to liquidation is a
separate matter.
In construing a narrow arbitration clause, we must instead ask whether
resolution of the claim at issue involves the object of the clause itself. Where, as here, resolution
of the claim does not by itself involve consideration of the issues that were submitted to
arbitration, the clause is not ambiguous, and cannot be interpreted to cover that claim. Because
the half-draw claim is not a dispute about the “method and de[]tails of liquidating the partnership
business,” resolution of that claim should not have been submitted to arbitration.
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When parties agree to arbitrate only a limited set of issues, federal courts may not submit
to arbitration disputes outside the scope of a narrow arbitration clause. Here, the arbitrator
incorrectly resolved Willacy’s half-draw claim, which was not a dispute about the “method and
de[]tails of liquidating the partnership business.” R. 28–2 (Law Partnership Agreement at 7)
(Page ID #386). Because I disagree that the half-draw claim was arbitrable, I respectfully
dissent.
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