The arbitration panel that reinstated a former Cedar Fair executive to his job exceeded its authority, given the terms of the executive’s employment contract, the Ohio Supreme Court held today.

In the court’s unanimous ruling, Justice William M. O’Neill wrote that “specific performance” in the form of reinstatement is not an available remedy for the breach of an employment contract unless the contract itself or an applicable state law clearly provides for such a result.

The decision reverses the judgment of the appeals court and also returns the case to the common pleas court to decide what pay and benefits are due to the former executive based on the contract.

In 2005, Jacob Falfas was named chief operating officer of Cedar Fair, which owns and manages amusement parks including Cedar Point in Sandusky. Falfas had a written employment agreement, and he reported to Richard Kinzel, who was then Cedar Fair’s chief executive officer, president, and board chair.

One of Falfas’s responsibilities included purchasing and negotiating contracts for the shows at the parks. Kinzel was dissatisfied with one show’s contract and budget, leading to a 94-second phone call between the executives on June 10, 2010. Following the call, Falfas thought he had been fired, while Kinzel believed Falfas had resigned.

The dispute went to arbitration. The arbitration panel determined that Falfas had been fired without cause. Though it was eight months after Falfas’s employment ended, the panel ordered Cedar Fair to reinstate Falfas to his former job.

Cedar Fair appealed to the Erie County Common Pleas Court, which found that the panel had gone beyond its authority by ordering the reinstatement. On appeal, the Sixth District Court of Appeals reversed the trial court decision.

Justice O’Neill wrote that, under R.C. 2711.10, courts may vacate an arbitrator’s award if the award resulted from corruption, fraud, or undue means; if an arbitrator was biased or corrupt; if the arbitrators engaged in misconduct or misbehavior; or if the panel exceeded its powers.
Falfas’s employment contract stated if he was terminated for reasons other than cause, he would receive his base salary for one year or the remaining term of his contract, whichever was longer, and benefits as described in that contract provision. The contract also said the arbitration panel “shall have authority to award any remedy or relief that an Ohio or federal court in Ohio could grant in conformity with applicable law on the basis of the claims actually made in the arbitration.”

In contract law, an award of specific performance requires the parties to complete all their duties under a contract. But after examining relevant precedent, Justice O’Neill noted that an order of specific performance is rarely a proper remedy for breach of an employment contract. There are some exceptions to this rule, though, for violation of certain employment discrimination laws, or when a contract explicitly provides for reinstatement.

But the contract in this case does not contain any provisions authorizing reinstatement, Justice O’Neill explained. And, he continued, the section of the court of appeals’ opinion about the arbitration panel’s rights in relation to Ohio and federal law “is completely undermined” by the contract’s detailed provisions explaining what the parties agreed to if Falfas was fired for cause, fired without cause, or resigned.

“Nearly eight months passed between Falfas’s termination and the arbitration panel’s award,” Justice O’Neill wrote. “How could a large business entity like Cedar Fair properly function if an arbitration panel was authorized to force it to reemploy an unwanted senior officer after it had obviously moved on? Why would any such entity or employee agree to give an arbitration panel the power to cause such disruption?”

“[W]e hold that specific performance is not an available remedy for breach of an employment contract unless it is explicitly provided for in the contract or by an applicable statute and that the arbitration panel in this case exceeded its authority by holding otherwise,” he concluded. “Because the [panel] determined that Falfas was terminated for reasons other than for cause, he is entitled to his base salary for either one year or his remaining employment term, whichever is longer. That matter and other concerns are to be addressed by the trial court upon remand. But the contract clearly does not entitle him to reinstatement.”

2013-0890. Cedar Fair, L.P. v. Falfas, Slip Opinion No. 2014-Ohio-3943.

View oral argument video of this case.

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