Background
Shane Siniscalchi and Eric Velazquez purchased a home from K. Hovnanian Meadow Lakes, LLC and later sued over issues with the transaction. The trial court granted Hovnanian’s motion to compel arbitration based on mandatory arbitration language in the purchase agreement. The arbitrator awarded Siniscalchi and Velazquez $33,214.83 on their breach of contract claim but denied all other claims, including those against the other named defendants.
Almost three months after the trial court dismissed the case following the arbitration decision, Siniscalchi and Velazquez filed a motion to vacate or modify the award. Their sole argument was that the arbitrator acted in “manifest disregard of the law,” a standard the trial court found was no longer recognized under either federal or state law. After denying the motion, the trial court granted Hovnanian’s motion for sanctions under R.C. 2323.51, finding the motion to vacate constituted frivolous conduct, and awarded $9,978.70 in attorney fees and expenses against Siniscalchi, Velazquez, and their attorney.
The Court’s Holding
The Ninth District affirmed the sanctions, finding that the trial court’s determination of frivolous conduct was supported by competent, credible evidence. Under R.C. 2323.51(A)(2)(a)(ii), conduct is frivolous when it is “not warranted under existing law” and “cannot be supported by a good faith argument for an extension, modification, or reversal of existing law.” The court applied an objective standard: whether no reasonable attorney would have asserted the position in light of existing law.
The court noted that the only grounds for vacating an arbitration award are those enumerated in R.C. 2711.10 and R.C. 2711.11, and that “manifest disregard of the law” is not among them. The appellants failed to identify any statutory basis for their motion and could not demonstrate a good-faith argument for changing the law.
Key Takeaways
- Ohio’s grounds for vacating or modifying an arbitration award are strictly limited to those enumerated in R.C. 2711.10 and R.C. 2711.11; “manifest disregard of the law” is not a recognized standard.
- Filing a motion to vacate an arbitration award on a legal theory that has been rejected under existing law may result in sanctions under R.C. 2323.51, including an award of attorney fees against both the party and counsel.
- The objective test for frivolous conduct under R.C. 2323.51 asks whether any reasonable attorney would have asserted the position, not whether the party acted in subjective bad faith.
Why It Matters
This decision is a cautionary tale for Ohio litigators who are disappointed with arbitration outcomes. The narrow statutory grounds for vacating or modifying an arbitration award in Ohio leave little room for creative challenges. Attorneys considering post-arbitration motions should carefully review R.C. 2711.10 and 2711.11 and ensure their arguments fit within those statutory frameworks, or risk sanctions that extend to counsel personally.