Alert

Ohio Appeals Court Finds Error in Not Staying Discovery Pending Motion to Compel Arbitration

May 7, 2024

In Biotricity, Inc. v. DeJohn, 8th Dist. Cuyahoga No. 113216, 2024-Ohio-1593, the Ohio Eighth Appellate District found that the trial court erred by refusing to stay discovery pending a ruling on a motion to compel arbitration.

Dispute and Motion for Arbitration

The case arose out of a dispute over an alleged violation of a non-compete agreement. The defendant employees moved to stay the case and compel arbitration in accordance with the Federal Arbitration Act (FAA). At the same time, they sought to stay all merits-based discovery until the arbitration motion was ruled upon and to shorten the time to respond to the motion to compel arbitration.

Trial Court’s Initial Decision

Notwithstanding this, the trial court denied the motion to stay and ordered the parties to continue to pursue merits-based discovery while the arbitration motion remained pending. The employees immediately appealed under the FAA.

Appellate Court’s Reversal and Rationale

On appeal, the Eighth Appellate District reversed. In so ruling, the court first found that the FAA, and not Ohio’s Arbitration Act, governed because the issues arose out of employment agreements that relate to interstate commerce. The court further found that “[b]ecause the FAA applies, we find that the trial court’s orders effectively denied appellants’ motion to compel arbitration and thus are immediately appealable.” 

Implications of Continued Discovery During Pending Arbitration

Turning to the merits, the Eighth Appellate District found that the court erred in ordering merits-based discovery to continue while the motion to compel arbitration remained pending. As the court noted, “requiring the parties to undergo full discovery without a clear decision regarding the motion to compel may erase the ‘benefits of arbitration,’ such as ‘efficiency, less expense, less intrusive discovery, and the like’ that appellants contend the parties contracted for.”