Bass, Berry & Sims attorney Chris Lazarini reviewed the court's decision in Bank of America vs. Telerico in which the court determined that Telerico waived his right to arbitrate by not raising the issue at the trial court level. Chris provided the analysis for Securities Litigation Commentator (SLC). The full text of the analysis is below and used with permission from the publication. If you would like to receive additional content from the SLC, please visit the SLC website to sign up for the newsletter.
Bank of America vs. Telerico, No. 2015-P-0026 (Ohio App., 11Dist., 11/2/15)
The right to arbitrate may be waived by participating in court proceedings.
In 2011, Bank of America ("BOA") filed a foreclosure action against broker Telerico and Stifel Bank & Trust ("Stifel Bank"). Stifel, Nicolaus & Co ("Stifel"), as assignee of Stifel Bank, answered and cross-claimed against Telerico on a $400,000 Deed of Trust. While the BOA claims were pending, the trial court granted Stifel's motion for summary judgment on its cross-claim and entered a final judgment in Stifel's favor.
Telerico appealed, arguing that the trial court was divested of subject matter jurisdiction over Stifel's cross-claim due to a related FINRA arbitration and that, under the Deed of Trust, the trial court erred in entering a final judgment for Stifel while the BOA claims were pending.
The Court rejects Telerico's jurisdictional argument, holding that the right to arbitrate is waived if not raised in the course of litigation. It follows, the Court concludes, that if the right to arbitrate can be waived, the fact that issues may be subject to arbitration does not automatically divest the court of jurisdiction. The Court also rejects Telerico's argument that the judgment for Stifel was premature, finding that Telerico violated the Deed of Trust. The Court also finds the appeal frivolous and grants Stifel its costs and expenses because Telerico's assigned errors were raised for the first time on appeal and were not supported by the record.
There is no discussion in the case about the outcome of the FINRA arbitration and no Award was located in SAC's or FINRA's Award databases that appears to be related to the dispute. Had Telerico filed a motion to stay the case after the arbitration commenced, the trial court would likely have considered factors such as whether the arbitration claims were related to the Deed of Trust claims, the time that had elapsed in the litigation, the amount of resources the parties and the court had committed to the litigation (depositions, motion practice, etc.,), and the resulting prejudice, if any, to Stifel if the matter were compelled to arbitration.