Contract rights and arms-length negotiations frustrated in Ohio.
The Ohio Supreme Court addressed workers' compensation in September 2020 in Crown Services v. Miami Valley Paper Tube, Slip Opinion No. 2020-Ohio-4409), also available on Justia.com. It is an interesting opinion because it addresses what we refer to as "venue" or the place where the trial is to occur, and also jurisdiction or the authority to hear a case. Various statutes define these, and therefore there are distinctions from jurisdiction to jurisdiction. The specifics of this case address a sub-category of venue selection called "non-conveniens."
In Crown, Crown Services was a "temporary staffing" company that provided employees to a variety of businesses, including Miami Valley Paper Tube (note there is a Miami in Ohio of some prominence, the "Miami University," not to be confused with the University of Miami, which is in the other (Florida) Miami, while the Ohio one is in Oxford, not to be similarly confused with Oxford Mississippi, in which lies Old Miss, and the home of the Oxford Comma). But, I digress.
So, an Ohio manufacturer contracted with a Kentucky-based staffing company to procure labor. The relationship between the two companies was contractual, as are the vast majority of interactions between companies. It behooves those in business to understand contracts. This “General Staffing Agreement” provided for the provision of staff and "required Crown to maintain workers’ compensation insurance for its employees in accordance with the laws of Kentucky," where it was located. In fulfillment of that requirement, Crown obtained a "workers’ compensation policy" from Zurich Insurance.
Additionally, the contract included "a forum-selection clause establishing that the agreement is governed by the laws of Ohio." Thus, the "validity and interpretation of" the contract would be governed by Ohio's laws. In addition, the two parties agreed that the "exclusive personal jurisdiction" would belong to the state courts of Ohio. The word "exclusive" is pretty clear. Therefore, any dispute regarding this contract would be decided in Ohio courts according to Ohio law. This is not because any such dispute would otherwise necessarily be so constrained, but because the two parties to the contract agree to that constraint.
In 2017, there was a work injury at the Miami Valley plant in Crittenden, Kentucky. Therefore, Crown (the employer) and Zurich (the carrier) "became obligated under Kentucky law to pay workers’ compensation benefits" of almost two million dollars. They thereafter sued Miami Valley in an Ohio court to recover those expenditures to the injured worker in the amount of $1,944,807.
Essentially, the employer and carrier claimed Miami Valley "breach(ed) . . . the staffing agreement" in failing to "properly train employees, provide employees with safe working conditions, and properly control and safeguard the premises." Miami Valley tried to change the venue, arguing it had no ties to the Ohio county in which the E/C had sued, but that motion was denied.
Miami Valley next sought to dismiss the lawsuit "based on the doctrine of forum non conveniens. The Ohio company was seeking to litigate the issue instead in Grant County, Kentucky. Crown and Zurich opposed the motion, asserting the contract clause mentioned above that agreed to the jurisdiction of Ohio's courts. Notably, it is not uncommon for parties to a contract to "forum shop" and contractually select the court that will decide disputes. It is likewise not uncommon for a party to seek a more favorable forum when litigation later becomes necessary.
The Ohio trial court disregarded that contract clause and dismissed the lawsuit. The dismissal was based essentially upon the court's conclusion that "the Kentucky court was a more convenient forum for this case because the resolution of the dispute would involve the application of Kentucky workers’ compensation law," and the accident occurred there. One might immediately return to the requirement of non conveniens that some other court must also have jurisdiction, and per the parties' contract, no Kentucky court did.
When Crown and Zurich appealed that dismissal, Miami Valley sought to dismiss "arguing that the trial court’s dismissal . . . was not a final order," and thus not appropriate for review. The Ohio Appellate Court agreed and dismissed the appeal, and the matter proceeded to the Ohio Supreme Court. Ultimately, the Ohio Supreme Court affirmed that decision, and the matter remained dismissed. However, the Court provided interesting edification regarding the effect of such contract clauses.
It noted that the trial court had perhaps missed that "the Supreme Court of the United States has said that when parties agree to a forum selection, they waive the right to challenge that forum as inconvenient." Furthermore, there are multiple cases that hold “a valid forum-selection clause [should be] given controlling weight in all but the most exceptional cases.” It is notable that the cited 2013 decision of the U.S. Supreme Court was also unanimous, which is not necessarily a frequent occurrence. See Atlantic Marine Constr. Co., Inc. v. United States Dist. Court for the W. Dist. of Texas, 571 U.S. 49, 63-64, (2013).
The reason the Ohio Supreme Court affirmed the appellate court, however, was its conclusion that dismissal of an action based upon forum non conveniens is not "a final, appealable order." The trial judge dismissed the matter without prejudice allowing the employer and carrier thereby to refile the complaint for reimbursement in any Ohio trial court thereafter (despite the stated logic that litigation in Kentucky, in violation of the contract, would be more appropriate in the trial court's view). Because that ability to refile in Ohio persists, the Court concluded that the dismissal could not be characterized as "final." That dismissal "without prejudice leaves the parties as if no action had been brought at all.”
The Ohio Supreme Court decision was not unanimous. Two Justices dissented. They stated that a dismissal as in this instance should be characterized as a “final order” because it "affects a substantial right by abrogating constitutionally protected contractual rights." They acknowledged that "[t]his case, on the surface, might appear to concern only an arcane question of appellate jurisdiction."
But, they explain the Court's decision jeopardizes "the freedom of Ohioans to bargain for forum-selection clauses in their contracts and to expect that the parties to them will live up to their side of the bargain." These clauses are characterized as "an indispensable tool of interstate and international business," and they are rendered at best vulnerable and perhaps inoperative by the Court's decision.
The premise is interesting. While the U.S. Supreme Court has concluded that such clauses are fundamental and should be honored absent significant justification, the Ohio Courts effectively excuse ignoring such clauses by the logic of the Crown decision. The decision does not contradict the unanimous U.S. Supreme Court, and its recognition of the critical role of such clauses, but clearly the protection of contract is perhaps impaired by the absence of any effective procedural process to protect or enforce it? In other words, if such a clause can be ignored by the court it selects, and there is no appellate remedy to enforce, what alternative is left to enforce the contract?
In the view of the Ohio Court, the alternative is to file the lawsuit again in Ohio and risk Miami Valley pursuing the same resistance to the exercise of jurisdiction. Each such effort at litigation in Ohio might meet similar resistance and results as noted here. And, each such exercise would require both time and other resources. This perhaps makes for an interesting riddle. However, the expense of a second attempt in Ohio trial court might have been a less expensive and time-consuming exercise than the route through both the Ohio appellate and Supreme courts.
That a court would provide no viable path to protect an admittedly important contract right is both interesting and perhaps troubling. The decision is worthy of review and consideration.
