Ohio Court Affirms Trust-Arbitration Award
Ohio Court Affirms Trust-Arbitration Award

On September 29, 2020, the Ohio Tenth District Court of Appeals affirmed a trust-arbitration award in Hughes v. Hughes, 2020-Ohio-4653.

This is one of the first, if not the first, trust arbitration cases to make its way through Ohio Courts. The Ohio legislature recognized arbitration  as an option for trust dispute resolution with the March 2019 enactment of Ohio Revised Code Section 5802.05.  Here, the parties commenced arbitration in July 2018, and the arbitration hearing took place in October 2018. The Arbitrator issued his decision that same month, and the award was carried out by November 2018. The aggrieved trustee appealed to the common pleas court in December 2018, and the common pleas court denied the appeal by April 2019.

In Hughes, there was a dispute between co-trustees over the administration of closely held business stock that was the trust’s main asset. The Arbitrator determined that a trustee committed a breach of trust by refusing to distribute the stock or agree to a plan for pay taxes for the stock, suspended that trustee, and ordered the stock be distributed during the suspension. The aggrieved trustee appealed the decision to the common pleas court in Franklin County as Ohio’s arbitration statutes allow. The aggrieved trustee argued on appeal that the Arbitrator showed a “manifest disregard” for the law by considering extrinsic evidence related to the settlor’s intent. A trial court is precluded from examining the merits of the issues arbitrated, however. The common pleas court stated that Ohio law limits judicial review of arbitration awards to claims of fraud, corruption, misconduct, an imperfect award, or the arbitrator exceeded his authority. The common pleas court denied the appeal. The court of appeals affirmed the common pleas court, adding that Ohio has never expressly recognized the “manifest disregard” standard to set aside arbitration awards, the standard is “questionable,” and recent federal court decisions have “undermined” the standard.

The takeaway here is that arbitration is an effective alternative to quickly bring an end to a trust dispute. Thus, the dispute was principally resolved, including an appeal, within 10 months. This is much faster than typical litigation in the courts. While there are additional potential avenues for appeal of this case, the two court decisions have narrowed the grounds to challenge the arbitration award, making further appeal unlikely.

In addition to an expedient and final resolution, arbitration offers privacy and specialized knowledge by the finder of fact. Reminger attorneys have served as arbitrators for trust disputes, and they have published various articles regarding Ohio’s recent legislative approval of trust arbitration that can be read here, here and here.

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