Ronald Scherer, Sr. v. James Wiles ( 2016 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 16a0521n.06
Case Nos. 15-3809/3832
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
Sep 07, 2016
RONALD E. SCHERER, SR., ) DEBORAH S. HUNT, Clerk
)
Plaintiff-Appellant/Cross-Appellee, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR
) THE SOUTHERN DISTRICT OF
JAMES M. WILES, ESQ., et al., ) OHIO
)
Defendants-Appellees/Cross- Appellants. )
)
BEFORE: SILER, DAUGHTREY, and SUTTON, Circuit Judges.
SILER, Circuit Judge. This legal malpractice action concerns the representation by
Defendants James M. Wiles, Esq., (“Wiles”) and Wiles, Boyle, Burkholder & Bringardner Co.,
L.P.A., (“the Wiles Firm”) (collectively, “Defendants”) of Plaintiff Ronald E. Scherer, Sr., in
litigation concerning Scherer’s family trust. During all relevant times, Bank One Trust
Company, N.A., (“Bank One” or “the Bank”) served as trustee. Bank One and Scherer’s
relationship eroded over the course of two decades until the Bank attempted to resign as trustee
in 2004, when Scherer failed to disclose certain information required to complete a final trust
accounting. Defendants represented Scherer in Bank One’s action against him in an Ohio
probate court, which resulted in a $6.2 million judgment against him. This lawsuit followed.
Case No. 15-3809, Scherer v. Wiles, et al.
Defendants now appeal the district court’s denial of their first motion for summary
judgment, in which they asserted that the relevant statute of limitations barred Scherer’s claims.
Scherer appeals the award of summary judgment for Defendants upon their second motion. In
granting Defendants’ motion, the district court determined that the basis of the causation element
of Scherer’s legal malpractice claim had been previously litigated and decided against him.
Accordingly, the court concluded that Scherer was collaterally estopped from litigating these
issues a second time.
For the reasons set forth below, we AFFIRM the judgments.
Factual Background and Procedural History
A. The trust’s origin and the parties’ disputes
The trust that is the subject of this litigation originated in 1979, when Scherer’s father,
Roger L. Scherer (“Roger”), entered into an agreement with Bank One to create the family trust
and funded it with the stock of the family business. When he died in 1982, the trust was divided
into three subtrusts: (1) a trust for his son, Ronald Scherer; (2) a trust for his daughter, Linda
Scherer Talbott; and (3) a “wife-and-mother trust” for his surviving spouse and his mother. The
trusts designated the named beneficiaries of each as income beneficiaries with distribution
benefits; remainder beneficiaries were also named. The principal assets conveyed to the three
new trusts generally consisted of the stock of entities engaged or affiliated with the family
business.
Upon Roger’s death, Scherer and Talbott became the chief executives of the family
business and oversaw its day-to-day operations. Bank One depended entirely upon Scherer and
Talbott to report on the business’s operations. Pursuant to the trust agreement, after the original
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trust advisors resigned in 1985, Scherer and Talbott assumed the role of trust advisors.1 These
roles entitled them to veto certain of Bank One’s actions as trustee and to block Bank One from
voting shares of the trust-owned corporations. Scherer was thus able to prevent Bank One from
removing him as an officer and director of the trust-owned family businesses.
The instant litigation arose from the decline of the family magazine distribution
businesses. They first began to wane in 1990, when Scherer sold the assets of one of the
businesses and invested the bulk of the proceeds in the stock of National Wholesale Drug Co.,
another business that he operated. Within two years, National Wholesale Drug was defunct and
its stock worthless. In 1998, Scherer combined the remaining family businesses with
comparable regional magazine distributors into a larger entity named Unimag. This transaction
left the Scherer and Talbott trusts with large quantities of Unimag stock and debentures, as well
as shares of the surviving family companies. But the transaction was unsuccessful: months after
Unimag was founded, it ceased operations, leaving its stock without value.
Meanwhile, Bank One remained dissatisfied with the amount of information that Scherer
provided it regarding the trust-owned companies’ remaining assets. Furthermore, the Bank
concluded that Scherer had conveyed various trust assets to himself or to companies that he
controlled without informing the trustee or seeking its approval. As a result, the Bank attempted
to resign as trustee, but it lacked the requisite information to prepare a final accounting.
B. The pretrial proceedings and discovery sanctions
In September 2004, Bank One filed a declaratory judgment action against Scherer and the
other family-trust beneficiaries in the Franklin County Probate Court in an attempt to compel
1
Talbott served as trust advisor until 2002. Scherer filled this role until the court removed him in 2008, when his son
was appointed in his place.
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Scherer to produce the information required to prepare a final trust accounting, wind up Bank
One’s trusteeship, and appoint a successor trustee. Bank One later filed a “Further Claim and/or
Third-Party Complaint” against Scherer personally, alleging that he had breached his fiduciary
duty by failing to provide the required information. The Bank also alleged that Scherer had
converted trust assets to his own profit without the trustee’s approval. Scherer and the other
beneficiaries counterclaimed, asserting that the Bank breached various fiduciary duties in
administering the trusts.
In December 2004, Bank One served Scherer with a document-production request. In
December 2005, the probate court found that Scherer had failed to comply with discovery,
ordered him to do so by January 13, 2006, and warned that if he did not, the court would issue a
contempt order and a $250 fee for each day of noncompliance. See Bank One Trust Co., N.A. v.
Scherer, Nos. 06AP-70, 06AP-71, 2006 WL 3060136 (Ohio Ct. App. Sept. 29, 2006).
In December 2005, the Wiles Firm filed an appearance on behalf of all beneficiaries to
the family trust, i.e., the defendants in the Bank One litigation. The beneficiaries later filed an
answer and eight counterclaims against Bank One for breach of fiduciary duty. But the Wiles
Firm’s involvement did not mend the contentious nature of the discovery disputes: as the Ohio
Court of Appeals noted, the litigation “reflect[ed] frequent discovery clashes between opposing
counsel and, more significantly, between counsel for [Scherer] and the assigned trial judge.”
Bank One Trust Co, N.A.. v. Scherer, Nos. 08AP-494, 08AP-517, 08AP-526, 2009 WL 4049123,
at *4 (Ohio Ct. App. Nov. 24, 2009).
Scherer had still failed to satisfy his discovery obligations by April 2006. Though the
court allowed him the opportunity to produce certain documents by the end of the month, he
again failed to comply. In June 2006, the court noted that Scherer remained in contempt and
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continued to accrue fines. Two months later, it granted Bank One’s third motion to compel,
finding that Scherer was “blatantly flouting” the discovery process in bad faith. See Bank One
Trust Co., N.A., v. Scherer, et al., 893 N.E.2d 542, 550 (Ohio Ct. App. 2008).
In October 2006, the court held a hearing as to why Scherer should not be held in
contempt and sanctioned. The court also reprimanded Wiles for his lack of effort to respond to
interrogatories and noted that he inappropriately interrupted Scherer ninety-four times in the first
eighty pages of Scherer’s deposition transcript alone. As a discovery sanction, the court
dismissed all of the trust beneficiaries’ claims with prejudice. It also reduced to judgment the fee
for discovery noncompliance, ordering the beneficiaries to pay $74,750 to Bank One and an
additional $250 for each day the judgment remained unpaid. The Ohio Court of Appeals
affirmed. See id.
In an April 2007 hearing, the probate court considered discovery sanctions stemming
from ongoing difficulties in scheduling and completing the depositions of David Thompson and
Kenneth Dean, accountants for the Scherer companies. When the depositions commenced,
Wiles objected so frequently that Dean’s deposition had to be terminated. At the show-cause
hearing, the court admonished Wiles:
In 32 years as a lawyer and 20 years as a judge, I have never seen
less cooperation. It is just absolutely absurd. Mr. Wiles’ conduct
throughout has been reprehensible, inexcusable and contemptible.
He has demonstrated clearly no regard for the law, no regard for
the Court and very little for his own clients. That is a sad, sad
scenario. . . . In my view, Mr. Wiles has conducted himself in no
way like an officer of this court. And frankly, he has demonstrated
himself to be worthy of no veracity, deserves no belief from this
Court. . . . Again, in 32 years of practicing law, I have never seen
depositions so abused, their purposes frustrated as in Mr. Wiles’
case. And I can only conclude because of his continuing, flagrant
efforts that it is intentional.
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Id. at 552-53.
With the matter approaching trial, the court entered a series of orders resolving ongoing
discovery disputes and imposing various sanctions on the beneficiaries, including dismissal of
their counterclaims.2 It precluded the beneficiaries from presenting the testimony of Dean and
Thompson in light of Scherer’s refusal to cooperate and interference with the accountants’
availability for depositions. In addition, the court prohibited the beneficiaries from offering any
evidence at the hearing or trial regarding certain proposed testimony. This exclusion effectively
prohibited Scherer from introducing evidence rebutting Bank One’s conversion claim against
him, which involved rents associated with trust-owned property, forgiveness of substantial loans
that Scherer owed to the business, and use of a luxury motor coach owned by a trust-owned
company. 2009 WL 4049123, at *10.
C. The August 2007 bench trial
During the August 2007 bench trial, Bank One sought approval of its accounting and a
judgment of over $6.2 million against Scherer for conversion. The court enforced its previous
rulings precluding the admission of certain evidence and struck most of the beneficiaries’
objections to the final accounting, finding them largely attempts to restate the stricken
counterclaims. See id. at *5.
In its final judgment, the probate court concluded that Scherer had misappropriated
$6,202,623.00 of trust assets over the course of seven years. It found that Scherer, “without
[Bank One’s] knowledge or consent, systematically began liquidating the remaining assets of the
2
The court also found Wiles in direct criminal contempt of court and sentenced him to ten days’ incarceration. The
Ohio Court of Appeals later deemed this sentence excessive. See Scherer, 893 N.E.2d at 555.
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Scherer Family Business and otherwise engaging in transactions outside the usual course of
business.”
Addressing Scherer’s counterclaims against Bank One for misrepresentation and abuse of
process, the court observed, “Contrary to [Scherer’s] allegations, [Bank One’s] final accountings
do not contain misrepresentations, and [Bank One’s] preparation and filing of the final
accountings was not done with an ulterior purpose or in an effort to use court procedures to
accomplish a purpose for which they were not designed.” The court deemed each of Bank One’s
final accountings “true, accurate, and complete.” Moreover, it explained that even if the final
accountings were erroneous, “any such deficiencies were caused by the repeated refusal of
[Scherer] . . . to provide information to [Bank One] despite its repeated and diligent efforts to
obtain the information . . . .”
The court concluded that Scherer breached his fiduciary duties as an officer and director
of the family business and entered judgment against him for $6,202,623.00, plus interest. It
approved Bank One’s resignation as trustee and barred any further objections to the Bank’s final
accountings or claims against it arising from or relating to its administration of the trusts over the
years. Finally, the court appointed a successor trustee, ordered Scherer removed as trust advisor,
and barred him from reappointment. See Scherer, 2009 WL 4049123, at *6.
D. The 2009 appeal
Scherer and his co-beneficiaries appealed the probate court’s judgment. The Ohio Court
of Appeals affirmed the $6.2 million judgment against Scherer for improper diversion of trust
assets, as well as the denial of his January 2006 counterclaims as a discovery sanction. See id.
The court observed that the evidence was “nearly one-sided” in support of the probate court’s
factual conclusions regarding the unauthorized transactions. Id. at *14.
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However, the appellate court reversed the dismissal of the beneficiaries’ counterclaims
based on the misconduct of Scherer and Wiles during discovery. Id. at *13. Though it affirmed
the lower court’s dismissal of Scherer’s own counterclaims as a discovery sanction, it noted that
“[t]o the extent the other beneficiary defendants played any role in the discovery obstruction that
impeded this case, that participation is entirely subordinate to [Scherer’s] direction and control
over the corporations and their assets.” Id. at *11. The appellate court also reversed the probate
court’s decision to strike the beneficiaries’ objections to the final accounting. Id. at *15. It
remanded the matter to the probate court for a new hearing on Bank One’s final accounting for
the trusts and on the counterclaims of the other beneficiaries’ counterclaims. The court
specifically stated that the remanded matters did not include Scherer’s counterclaim or the
money judgment against him. Id. at *16. The Ohio Supreme Court declined review.
E. Subsequent communication and tolling agreement with the Wiles Firm
In 2010, Scherer emailed Wiles with questions regarding the successor trustee, final
accounting issues, and Wiles’ litigation plan. The following day, Wiles responded, in relevant
part:
Going forward I can’t say that a plan now exists . . . . I have always
felt that what would have to be done is addit[ional] Discovery [with
Bank One], and using Alan [Acker] to lay out everything from start
to finish, and rendering his opinion on all issues. In other words the
approach would be simple. However, as you know we do not know
in whose court it [will] go forward. Also we are out . . . . We
should probably talk.
(emphasis added). In reply, Scherer asked whether Wiles had filed a withdrawal. On May 22,
Wiles responded, “No[,] we did not withdraw. We represented only you. [I]f you are out, so are
we . . . .” (emphasis added).
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After remand, Scherer and his co-beneficiaries retained counsel from Chorpenning,
Good, & Pandora, LLP (the “Chorpenning Firm”), to litigate the remaining counterclaims and
objections to the final accounting. Wiles and Scherer occasionally corresponded after the
Chorpenning Firm was retained. The pair’s final meeting occurred on November 8, 2010, when
Wiles provided Scherer with a final bill for the Wiles Firm’s representation. In an email
apparently following the meeting, Scherer expressed his desire to have “at least one more session
together to pick the right direction[s] for all concerned.” Wiles replied that a meeting on
Tuesday or Wednesday of the following week might be practicable.
Scherer continued to periodically email Wiles. On December 7, 2010, he asked if Wiles
was “attending the Status Conference for the new hearing that [Judge] Sheward has scheduled
for this coming Tuesday, [12/14/2010]?” Wiles replied:
I have now gotten copies of recent filing (which were not provided
to us) by Either side. Big Surprise, the hearing is next week. . . . I
have no desire to appear in front of [Judge] [S]heward at any time,
next week or in the future. If there is something to be gained by
our or my presence, let me know . . . I Guess my thought is I would
only be a liability. The biggest problem is new counsel[’]s Lack of
personal knowledge of prior activities and shenanigans of [Judge]
[S]heward and [Bank One’s] Counsel.
In December 2010, Scherer filed a grievance with the Ohio Supreme Court against
Franklin County Common Pleas Court Judge Richard S. Sheward, who oversaw the probate
proceedings, and emailed Wiles a copy of the grievance. Wiles reviewed the grievance, which
included facts related to the Wiles’ Firm’s representation of Scherer, and suggested certain edits.
On December 18, 2010, Scherer emailed Wiles a copy of a supplemental filing that he had
prepared to be filed with the Office of Disciplinary Counsel. A portion of this filing recounted
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the contempt rulings that Judge Sheward issued against Wiles. Wiles and Scherer exchanged
emails between December 18 and 19, 2010, regarding the supplemental filing.
On December 7, 2011, Scherer and Defendants entered into a tolling agreement. The
agreement provided, in relevant part, that “[f]rom 12/6, 2011, the period of limitations for any
claims of Ronald E. Scherer, Sr. that are not yet barred by the statute of limitations shall be tolled
and suspended.” Defendants signed the agreement but provided a handwritten annotation of
their position that the statute of limitations had already run.
F. Post-remand proceedings and the 2011 trial
In March 2011, the probate court held a hearing to address potential conflicts of interest
arising from defense counsel’s representation of both Scherer and the other beneficiaries, who
would have benefitted from enforcing the $6.2 million judgment against him. The court
observed that all beneficiaries had executed a Conflict of Interest Waiver Agreement, which
provided:
The Beneficiaries have determined that it is in their collective best
interest to appoint a representative to interact with, receive
information from and to help plan and coordinate strategy during
the Litigation with [the Chorpenning Firm]. The Beneficiaries
have appointed Ronald E. Scherer, Sr. to perform these
functions. . . . By signing this Waiver of Conflict, each of the
Beneficiaries has affirmed their selection of Ronald E. Scherer, Sr.
to represent each of them as the intermediary with [the
Chorpenning Firm].
All of the beneficiaries indicated that they did not want the successor trustee to collect the merits
judgment or the contempt judgment against Scherer, and the successor trustee agreed not to do
so. The court concluded that despite the judgments against him, all beneficiaries “ha[d]
voluntarily agreed to stand by their father [and brother] in this action in all respects . . . so that
there is complete commonality of interests among [themselves], acting as ‘one family,’” and/or
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as “a unified group . . . with a common purpose” and “common interest.” The court therefore
found no conflict of interest and approved the Chorpenning Firm’s representation of all
beneficiaries, including Scherer, in the upcoming trial.
After the conflicts hearing, the beneficiaries objected to Bank One’s final accounting.
The probate court held a new trial on the accuracy of Bank One’s final accounting and on the
original counterclaims, with Scherer serving as the beneficiaries’ representative. In December
2011, the court approved Bank One’s final accounting, resolved all counterclaims in the Bank’s
favor, and confirmed the $6.2 million judgment against Scherer.
Noting Scherer’s second opportunity to present the previously precluded testimony, the
probate court observed:
In Defendants’ objections and exceptions to the Final Accounting,
all Defendants, including Scherer, Sr., object to the entries in the
Final Accounting indicating that Scherer, Sr. misappropriated and
wrongfully diverted approximately $6.2 million of the Trust assets.
Defendants assert that Scherer, Sr. “didn’t misappropriate
anything.” In response to Defendants’ objection, Bank One
presented additional evidence at the July 2011 trial supporting its
accounting for Scherer, Sr.’s unauthorized transactions. At the
July 2011 trial, all Defendants had a full and fair opportunity to
present evidence in support of their assertion that [Scherer] did not
misappropriate Trust assets or otherwise engage in unauthorized
transactions, but they failed to do so. Defendants could have
called Scherer, Sr. as a witness to explain these transactions, but
they did not do so. Defendants could have called David Thompson
or Kenneth Dean, the Family Business’ accountants during many
of the years in question, or any other person with knowledge, to
explain these transactions, but Defendants did not do so.
Defendants also could have presented additional financial
documents from the Scherer Family Business regarding these
transactions, but they did not do so. Upon consideration of the
totality of the evidence offered at the August 2007 trial and the
July 2011 trial, and the credibility and demeanor of all witnesses,
the Court finds that Bank One accounted for these unauthorized
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transactions and that Scherer did, in fact, misappropriate and
wrongfully divert $6,202.623 of Trust assets.
See Scherer v. Wiles, No. 2:12-CV-1101, 2015 WL 4512393, at *6 (S.D. Ohio July 24, 2015).
G. The 2011 federal case
On the first day of the probate court’s proceedings in July 2011, Scherer sued JP Morgan
Chase (“Chase”), Bank One’s successor, in federal court, alleging abuse of process, civil
conspiracy, and violation of the Fair Debt Collection Practices Act. The district court granted
Chase’s motion to dismiss, finding Scherer’s claims were barred by the collateral-estoppel
doctrine. It explained that the underlying factual basis for each of the claims—that is, the Bank’s
allegedly false statements about Scherer’s refusal to provide information—had been litigated and
decided against Scherer in the probate action. See Scherer v. JPMorgan Chase & Co., No. 2:11-
cv-635, 2011 WL 6884237, at *4 (S.D. Ohio Dec. 29, 2011).
We affirmed the dismissal, explaining that “all of Scherer’s claims are premised on his
assertion that the bank used false statements, and otherwise engaged in false or deceptive
representations, to establish that Scherer stymied discovery and diverted millions of dollars in
assets from the Trusts. These factual predicates to Scherer’s claims were clearly resolved by the
probate court.” Scherer v. JP Morgan Chase & Co., 508 F. App’x 429, 438 (6th Cir. 2012).
H. Malpractice allegations and procedural history
In November 2012, Scherer asserted claims for legal malpractice against Defendants. He
alleged that Defendants’ misconduct caused the probate court’s discovery sanctions, including
the dismissal of his counterclaims and exclusion of rebuttal testimony. Defendants asserted a
statute-of-limitations defense in their first motion for summary judgment. Defendants filed their
second motion for summary judgment in 2015, alleging that Scherer’s legal malpractice claim
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was barred by collateral estoppel. The district court denied the first motion but granted
Defendants’ second motion and dismissed the case.
Standard of Review
We review the district court’s grant of Defendants’ second motion for summary judgment
de novo. Miller v. Admin. Office of the Courts, 448 F.3d 887, 893 (6th Cir. 2006).
Discussion
To establish a cause of action for legal malpractice, a plaintiff must demonstrate “(1) that
the attorney owed a duty or obligation to the plaintiff, (2) that there was a breach of that duty or
obligation and that the attorney failed to conform to the standard required by law, and (3) that
there is a causal connection between the conduct complained of and the resulting damage or
loss.” Vahila v. Hall, 674 N.E.2d 1164, 1169 (Ohio 1997). Only the third element is at issue
here. Where the merits of the underlying litigation are at issue, “it is insufficient for the plaintiff
to present simply ‘some evidence’ of the merits of the underlying claim.” Envtl. Network Corp.
v. Goodman Weiss Miller, L.L.P., 893 N.E.2d 173, 177 (Ohio 2008). Rather, the plaintiff must
prove “by a preponderance of the evidence that but for [Defendants’] conduct, [he] would have
received a more favorable outcome in the underlying matter.” Id. at 178.
The court concluded that the collateral-estoppel doctrine barred Scherer from proving
that he would have avoided the adverse judgment and been successful on his counterclaims but
for Defendants’ alleged negligence. It held that as the appointed leader of the trust beneficiary
group, Scherer had a full and fair opportunity to try the facts and issues necessary to prove the
causation element of his legal malpractice claim in 2011.3 The 2011 final accounting established
3
However, the district court determined that it was “inappropriate to invoke collateral estoppel to prevent [Scherer]
from relitigating the $6.2 million judgment on the basis of the outcome of the 2007 trial,” finding it “a question of
disputed fact whether Defendants’ alleged negligence contributed to the adverse judgment in the 2007 trial.”
Therefore, we need not analyze the preclusive effects of the first trial.
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that Scherer misappropriated $6.2 million and disposed of the remaining beneficiaries’
counterclaims—the same counterclaims that Scherer would have brought but for the discovery
sanctions—in the Bank’s favor. The court therefore concluded that “the facts and issues fully
litigated in the second trial have preclusive effect as to the causation element of this legal
malpractice claim.”
Generally, “[f]ederal courts must give the same preclusive effect to a state-court
judgment as that judgment receives in the rendering state.” Abbott v. Michigan, 474 F.3d 324,
330 (6th Cir. 2007) (citing 28 U.S.C. § 1738). Therefore, in a federal action, we look to the law
of the rendering state to determine whether and to what extent the prior judgment should be
afforded preclusive effect. Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 81 (1984).
Ohio law thus governs our consideration of the preclusive effect of the judgment against Scherer.
Under Ohio law, “issue preclusion precludes the relitigation of an issue that has been
actually and necessarily litigated and determined in a prior action.” McKinley v. City of
Mansfield, 404 F.3d 418, 428 (6th Cir. 2005). This principle governs “whether the cause of
action in the two actions be identical or different.” Fort Frye Teachers Ass’n v. State Emp’t
Relations Bd., 692 N.E.2d 140, 144 (Ohio 1998). Collateral estoppel applies when the fact or
issue (1) was actually and directly litigated in the prior action, (2) was passed upon and
determined by a court of competent jurisdiction, and (3) when the party against whom collateral
estoppel is asserted was a party or in privity with a party to the prior action. Daubenmire v. City
of Columbus, 507 F.3d 383, 389 (6th Cir. 2007).
The court held that as a party to the final accounting in the July 2011 trial, Scherer
enjoyed a full and fair opportunity to present facts, evidence, and witnesses regarding the
transactions that comprised the $6.2 million judgment. The court noted that although Scherer
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had new counsel and was unrestrained by the discovery sanctions imposed in the earlier action,
he failed to present any evidence supporting his assertion that he neither misappropriated trust
assets nor otherwise engaged in unauthorized transactions. Given this “second bite at the apple,”
the court determined that collateral estoppel precluded Scherer from showing that Defendants’
negligence contributed to his alleged damages.
Scherer relies upon Goodson v. McDonough Power Equip., Inc., 443 N.E.2d 978, 987
(Ohio 1983), for the proposition that collateral estoppel applies “only when the identical issue
was actually decided in the former case.” He insists that “[a]pproval of the final accounting and
liability for fiduciary breach and conversion are not identical issues which were actually litigated
in 2011.” (internal quotation marks omitted).
Scherer is mistaken. He suggests that claim preclusion, not issue preclusion, applies
here. See generally Fort Frye Teachers Ass’n, 692 N.E.2d at 144 (“[T]he claim preclusion
concept holds that a valid, final judgment rendered upon the merits bars all subsequent actions
based upon any claim arising out of the transaction or occurrence that was the subject matter of
the previous action.”). But the two concepts are distinct. Under Ohio law, issue preclusion
“precludes the relitigation, in a second action, of an issue that had been actually and necessarily
litigated and determined in a prior action that was based on a different cause of action.” State ex
rel. Nickoli v. Erie MetroParks, 923 N.E.2d 588, 592 (Ohio 2010). Because the same issues, if
not claims, were litigated in the 2011 action, the outcomes of the counterclaims and final
accounting have preclusive effect. As to Scherer’s would-be counterclaims, the district court
determined that “Scherer was given a full and fair second opportunity . . . to litigate for the first
time the counterclaims initially barred by discovery sanctions.”
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The court’s application of collateral estoppel to Scherer’s counterclaims was grounded
upon its conclusion that that Scherer was in privity with the other beneficiaries in the July 2011
trial. The court observed that Scherer and his co-beneficiaries admitted that they were acting in
concert during the trust litigation and constituted a unified group with common interests, goals,
and purposes. Additionally, it looked to the Conflict of Interest Waiver Agreement and the post-
remand proceedings between Scherer and the other beneficiaries. The court held that collateral
estoppel prevented Scherer from proving that he would have won on these claims but for the
Wiles Firm’s alleged negligence.
Scherer submits that he did not exercise sufficient control or adequately participate in the
July 2011 trial so as to warrant a finding of privity. He insists that he was only “a liaison
between counsel and the other beneficiaries” who interacted with, received information from,
and helped coordinate strategy with counsel during the litigation. But even this depiction of
Scherer’s role does not alter the outcome. Although Scherer was not a party, he “actively
participated in, if not controlled, all aspects of the 2011 trial inasmuch as any party controls the
litigation of his claims when represented by counsel.”
Given Scherer’s involvement, the district court correctly looked to Montana v. United
States, 440 U.S. 147 (1979), which provides:
To preclude parties from contesting matters that they have had a
full and fair opportunity to litigate protects their adversaries from
the expense and vexation attending multiple lawsuits, conserves
judicial resources, and fosters reliance on judicial action by
minimizing the possibility of inconsistent decisions. These
interests are similarly implicated when nonparties assume control
over litigation in which they have a direct financial or proprietary
interest and then seek to redetermine issues previously
resolved. . . . [T]he persons for whose benefit and at whose
direction a cause of action is litigated cannot be said to be
“strangers to the cause. . . . [O]ne who prosecutes or defends a suit
in the name of another to establish and protect his own right, or
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who assists in the prosecution or defense of an action in aid of
some interest of his own . . . is as much bound . . . as he would be
if he had been a party to the record.
Id. at 153-154 (alterations in original) (internal quotation marks and citations omitted).
Pursuant to Montana and Ohio cases like it, Scherer was collaterally estopped from
relitigating the underlying issues. As the district court observed, “[U]nder no other circumstance
could it be said that someone who was not a party to a claim had a more fair and full opportunity
actively to participate in the litigation of a claim in which he shared a common interest.”
“[A]though not a party,” Scherer nonetheless “had a sufficient ‘laboring oar’ in the conduct of
the state-court litigation to actuate principles of estoppel.” Montana, 440 U.S. at 155; see Brown
v. Dayton, 730 N.E.2d 958, 962 (Ohio 2000) (“[A] mutuality of interest, including an identity of
desired result, creates privity.”). Accordingly, the district court’s application of collateral
estoppel was not erroneous.
We decline to decide the issue regarding the statute of limitations involved in the first
motion before the district court, as it is unnecessary to the resolution of this case.
AFFIRMED.
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