Opinion
A1110410
05-09-2012
CUSO CORP. Plaintiff, v. THE FINANCIAL NETWORK GROUP, LTD., Defendant.
DECISION
This case is before the Court on Defendant's Motion to Dismiss or in the Alternative to Stay Proceedings Pending Arbitration. For the reasons discussed below, Defendant's motion is granted as to the motion to dismiss.
STANDARD
In order to dismiss a complaint pursuant to Civ. R. 12(B)(6) for failure to state a claim upon which relief can be granted, "it must appear beyond doubt from the complaint that the plaintiff can prove no set of facts entitling him to recovery." O'Brien v. University Community Tenants Union, Inc. (1975), 42 Ohio St.2d 242, 327 N.E.2d 753, syllabus. When ruling on a motion to dismiss, the Court must accept all allegations of the Complaint as true and make all reasonable inferences in favor of the non-moving party. Vail v. Plain Dealer Publishing Co. (1995), 72 Ohio St.3d 279, 280, 649 N.E.2d 182, 184 (citing Mitchell v. Lawson Milk Co. (1988), 40 Ohio St.3d 190, 192, 532 N.E.2d 753, 756).
BACKGROUND/FACTS
Plaintiff, Cuso Corporation, and Defendant, The Financial Network Group, entered into a financial services contract in which Defendant would provide investment and financial services to Plaintiff for the benefit of Plaintiffs members. The contract between the parties included an agreement to arbitrate disputes. Paragraph 15 of the contract states:
Any dispute, controversy, or claim arising out of or relating to this Agreement, including its interpretation, performance or termination which is not settled in writing within sixty days notice is given therefor, shall be submitted to arbitration before the Arbitration Department of the FINRA. Any demand for arbitration shall be in writing and be delivered to the other party pursuant to the notice provisions herein. The arbitration shall be conducted in accordance with the rules then in effect for commercial disputes governed by the American Arbitration Association ("AAA"). FINRA or AAA, as applicable, shall administer the arbitration and act as appointing authority. The arbitration shall take place in Cincinnati, Ohio. This agreement to arbitrate is self-executing, and the arbitrators shall be empowered to determine the scope of arbitration, including what is and is not subject to arbitration, and shall have the power to make an award due to the default of a party under arbitration proceedings. Nothwithstanding any provision hereof, each party shall have the right to institute proceedings for equitable relief as may be warranted under the circumstances, with any claims for legal relief submitted to arbitration under this paragraph, to enforce its rights.
When the agreement was terminated between the parties. Plaintiff sought the names, addresses and phone numbers of all Plaintiffs members with accounts in Defendant's control, as well as information on investment services provided by Defendant and the type of accounts in Defendant's possession. In short, Plaintiff seeks a master list identifying all the accounts in Defendant's control. Plaintiff requested this information, and believes it is owed this information under the contract. Paragraph 13 of the contract states in relevant part:
In the event of termination of this Agreement, or at the end of the Initial or Renewal Term, FNG shall cooperate in the transfer of accounts in accordance with the provisions of Section 65 of the Uniform Practice Code of the Financial Industry Regulatory Authority. If this Agreement is terminated and CUSO is transferring its investment business to another broker/dealer FNG shall cooperate in effecting the orderly transfer of the accounts from FNG to the new broker/dealer. ..
Defendant did not provide Plaintiff with the information it requested, and Plaintiff filed an action for discovery.
DISCUSSION
Plaintiff brings this action under Ohio Revised Code § 2317.48 as an action for discovery. This section states in relevant part:
When a person claiming to have a cause of action or a defense to an action commenced against him, without discovery of a fact from an adverse party, is unable to file his complaint or answer, he may bring an action for discovery, setting forth in his complaint in the action for discovery the necessity and the grounds for the action, with any relating interrogatories relating to the subject matter of the discovery that are necessary to procure the discovery sought. . .
In Marsalis v. Wilson, 149 Ohio App.3d 637 (2nd Dist. 2002), the Court upheld the trial Court's dismissal of plaintiffs complaint under Civ. R. 12 (B)(6) because it found plaintiff had sufficient information on the merits of the claim in order to bring an action. An action for discovery is to be used only to uncover the facts necessary to pleading, not to gather proof to support a claim. Huge v. Ford Motor Company, 155 Ohio App.3d 730 (8 Dist. 2004), citing Marsalis, 149 Ohio App. 3d. 637. Ohio Revised Code § 2317.48 "provides a satisfactory middle course for litigants who require additional facts in order to sufficiently file a valid complaint, but who already have enough factual basis for their assertions.. ." Id. at 733.
Plaintiffs Complaint alleges that it cannot file a claim against Defendant without obtaining the customer account information it seeks. However, Plaintiff lists a number of claims it anticipates filing. Plaintiff is able support these claims without the discovery of the customer account information. Additionally, Plaintiffs Complaint focuses on the need to transfer the account information to a new service provider and its damages rather than the need to obtain the information necessary to file a claim.
Taking the allegations in the Complaint as true, Plaintiff has not properly stated a claim for discovery. Plaintiff lists breach of contract, unjust enrichment, conversion and intentional interference with business and contractual relations as possible causes of action that it cannot plead without the requested information.
Plaintiff can file a complaint on any of these claims without the information it requests. Plaintiff has a contract with the Defendant, Plaintiff can point to a provision of that contract that it alleges requires Defendant to turn over this information, and Defendant has refused to do so. Plaintiff can allege, from these facts, that Defendant has breached the contract. Plaintiff does not need the account information to know Defendant has not turned over the account information. Additionally, Plaintiff does not need the account information to know it cannot transfer these accounts to a new service provider, and can sufficiently allege intentional interference with business and contractual relations.
Plaintiff also states it may have claims of unjust enrichment and conversion, based on Defendant's alleged controlling of a number of undisclosed accounts that were not subjected to revenue sharing. Plaintiff alleges that on or about June 8, 2010, it discovered Defendant had been controlling accounts Plaintiff was unaware of, and that Plaintiff was not receiving the contractual revenue sharing for these accounts. Plaintiff is aware this has taken place, and does not need to allege specific accounts it believes Defendant has wrongfully controlled. Plaintiff is seeking proof of Defendant's alleged wrongful control of accounts Orather than facts necessary for pleading. This information can be discovered after the action is commenced.
Plaintiff also claims it needs the customer account information to ascertain the damages Plaintiff has suffered. However. Plaintiff can obtain that information through discovery in an underlying action. .
An action for discovery is a limited remedy, intended to allow a party to discover information necessary to plead a claim against an opposing party. Plaintiff does not need the information is seeks to plead its claims against Defendant, as it has all the information necessary to plead these claims in satisfaction of Civ.R. 8(A). Therefore, Plaintiff s Complaint fails to state a claim upon which relief can be granted, and Defendant's motion to dismiss is granted.
Defendant also requests that in the alternative to dismissal, the action be stayed for arbitration. Defendant argues that an action for discovery should be handled in arbitration under the terms of the contract.
Ohio courts have held that an action for discovery is outside the scope of arbitration. In Bartok v. Merrill Lynch, 1990 Ohio App. LEXIS 3455(9th Dist. 1990), the court found that a plaintiff could move forward with his action for discovery despite an arbitration provision in a contract between the plaintiff and defendant. Likewise, White v. Equity, 178 Ohio App.3d 604, 608 (10 1 Dist. 2008), found that a complaint for discovery was not an issue referable to arbitration.
While it is likely that Plaintiffs action for discovery would be outside the scope of the arbitration, the Court finds that Plaintiff has failed to state a claim for discovery under Civ. R. 12(B)(6).
CONCLUSION
Taking the allegations in Plaintiffs Complaint as true, Plaintiff fails to establish it needs the requested information in order to plead a claim against Defendant. Because Plaintiff has sufficient information to properly plead its claims, Plaintiffs complaint for discovery does not fall within the narrow bounds of Ohio Revised Code §2317.48. Therefore, Plaintiffs Complaint fails to state a claim upon which relief can be granted. Defendant's motion to dismiss is granted.
The parties are referred to Local Rule 17 for preparation of an entry.