Ayers v. Cleveland (Slip Opinion) , 2020 Ohio 1047 ( 2020 )

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
Ayers v. Cleveland, Slip Opinion No. 2020-Ohio-1047.]
NOTICE
This slip opinion is subject to formal revision before it is published in an
advance sheet of the Ohio Official Reports. Readers are requested to
promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
South Front Street, Columbus, Ohio 43215, of any typographical or other
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the opinion is published.
SLIP OPINION NO. 2020-OHIO-1047
AYERS, APPELLANT, v. THE CITY OF CLEVELAND ET AL., APPELLEES.
[Until this opinion appears in the Ohio Official Reports advance sheets, it
may be cited as Ayers v. Cleveland, Slip Opinion No. 2020-Ohio-1047.]
Political-subdivision liability—Former R.C. 2744.07(A)(2), now R.C.
2744.07(B)—The right to indemnification set forth in R.C. 2744.07 may be
asserted only by an employee of a political subdivision—Court of appeals’
judgment affirmed.
(No. 2018-0852—Submitted June 12, 2019—Decided March 25, 2020.)
APPEAL from the Court of Appeals for Cuyahoga County, No. 105074,
2017-Ohio-8571.
__________________
FISCHER, J.
{¶ 1} In this case, we consider whether a judgment creditor may proceed
directly against a political subdivision under R.C. 2744.07. Because we conclude
that the right to indemnification set forth in R.C. 2744.07(A)(2) (relevant statutory
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language now in R.C. 2744.07(B)1) may be asserted only by an employee of a
political subdivision, we conclude that a judgment creditor may not proceed
directly against a political subdivision under that statutory provision.
I. Factual and Procedural Background
{¶ 2} After more than a decade of imprisonment, appellant, David Ayers,
prevailed on federal habeas corpus claims and was released from prison in 2011.
He then filed a complaint in federal district court asserting civil-rights violations
against appellee the city of Cleveland; two of its police detectives, Michael Cipo
and Denise Kovach; and others. The court granted summary judgment in favor of
Cleveland and dismissed all claims Ayers raised against the city.
{¶ 3} After a trial that involved only claims against Cipo and Kovach, the
jury returned a verdict in Ayers’s favor finding that Cipo and Kovach had violated
Ayers’s federal constitutional rights. The district court entered a judgment against
the detectives in the amount of $13,210,000 and later increased the amount by
awarding costs and attorney fees. The detectives twice offered to assign to Ayers
any indemnification claims that they might have against the city in exchange for an
agreement by Ayers to forgo collection efforts against the detectives personally.
Ayers rejected each offer.
{¶ 4} Cleveland did not actively seek to indemnify the detectives, and the
detectives did not seek to enforce any rights to indemnification by the city. Cipo
passed away before paying any amount to Ayers, and Ayers made no claim against
Cipo’s estate. Kovach, represented by David M. Leneghan, a lawyer retained for
Kovach by Cleveland, filed a petition for Chapter 7 bankruptcy, and the bankruptcy
court discharged Kovach’s personal liability on the judgment.
1. The applicable provision in this case is former R.C. 2744.07(A)(2), Am.Sub.S.B. No. 106, 149
Ohio Laws, Part II, 3500, 3515-3516. After the court of appeals issued the decision on appeal, the
General Assembly, in 2018 Sub.S.B. No. 239 (effective Oct. 29, 2018), amended R.C. 2744.07 so
that the relevant provisions are now in R.C. 2744.07(B).
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{¶ 5} After the bankruptcy proceedings were completed, Ayers filed a
motion with the federal district court to reinstate his indemnification claim against
Cleveland. The district court initially granted Ayers’s motion to reinstate the claim,
but it later vacated its order and dismissed the claim for lack of subject-matter
jurisdiction after deciding that the state courts were best positioned to determine
whether indemnification is available.
{¶ 6} Ayers then filed the underlying action in Cuyahoga County Common
Pleas Court against Cleveland, Leneghan, and appellee Joseph Scott, an attorney
who represented both Cleveland and the officers in the prior proceedings. Against
Cleveland, Ayers asserted claims of statutory indemnification pursuant to R.C.
2744.07(A)(2), tortious interference with the enforcement of a judgment, breach of
contract, abuse of process, unjust enrichment, specific performance, and civil
conspiracy. Against the attorneys, he asserted claims of tortious interference with
the enforcement of a judgment, aiding and abetting, abuse of process, and civil
conspiracy. The trial court granted Leneghan’s motion to dismiss the abuse-of-
process claims against him, but it denied his request to dismiss the remaining
claims.
{¶ 7} After discovery, the parties filed limited motions for summary
judgment on the threshold issue whether Ayers is entitled to seek indemnification
from Cleveland pursuant to R.C. 2744.07(A)(2). In his motion for partial summary
judgment, Ayers asserted that R.C. 2744.07(A)(2) affords him relief. In the joint
motion for partial summary judgment of Cleveland and Scott, they primarily
asserted that Ayers lacks standing to bring an indemnification claim against
Cleveland under R.C. 2744.07(A)(2). (For purposes of this opinion, Cleveland and
Scott will be referred to collectively as “Cleveland” from this point forward.) The
common pleas court granted Ayers’s motion for summary judgment after
concluding that R.C. 2744.07(A)(2) requires Cleveland to indemnify the officers
and pay the judgment. The court dismissed Ayers’s other claims as moot.
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{¶ 8} The Eighth District Court of Appeals reversed in a two-to-one
decision. 2017-Ohio-8571, 99 N.E.3d 1269, ¶ 50. The majority concluded that
Ayers, as a judgment creditor, does not have standing to bring a private cause of
action against the city to enforce the city’s obligations to its employees. Id. at ¶ 28.
It concluded that Ayers’s claims “are not within the zone of interest intended to be
protected or regulated by R.C. 2744.07(A)(2).” Id. at ¶ 31. The court further held
that a private cause of action by a judgment creditor does not arise by implication
of R.C. 2744.07(A)(2), the purpose of which is not to benefit third parties injured
by the acts of a state employee but to shield the employee from financial ruin that
may result from an act the employee committed in good faith within the scope of
employment. Id. The court remanded the cause to the trial court for further
proceedings.
{¶ 9} Judge Kilbane dissented. She wrote that the plain intent of R.C.
2744.07(A)(2) is to satisfy judgments when persons have been injured as a result
of a municipal employee’s actions committed in good faith and in the course and
scope of employment. Id. at ¶ 61 (Kilbane, J., dissenting). She added that a third
party has standing to enforce a city’s duty to pay a judgment when there is no
dispute regarding an employee’s statutory right to indemnification. Id. at ¶ 56.
Finally, she concluded that Ayers, as a judgment creditor, is the real party in interest
and has standing to assert the officers’ statutory rights to indemnification against
Cleveland. Id.
{¶ 10} This court accepted jurisdiction over Ayers’s first proposition of law
only: “[R.C.] 2744.07(A)(2) reflects the legislature’s intent to permit a judgment
creditor to proceed directly against an indemnitor.” See 153 Ohio St. 3d 1467, 2018-
Ohio-3450, 106 N.E.3d 65.
II. Analysis
{¶ 11} As set forth in R.C. 2744.02(A)(1), the general rule in Ohio is that
political subdivisions are not liable in damages in civil actions:
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Except as provided in division (B) of this section, a political
subdivision is not liable in damages in a civil action for injury, death,
or loss to person or property allegedly caused by any act or omission
of the political subdivision or an employee of the political
subdivision in connection with a governmental or proprietary
function.
R.C. 2744.02(B) provides five exceptions to this general rule and makes political
subdivisions liable in those specific instances. None of the R.C. 2744.02(B)
exceptions apply in this case.
{¶ 12} Although political subdivisions are not liable for the actions of
employees like those in this case, pursuant to R.C. 2744.07, political subdivisions
are required to indemnify employees in certain instances. At the relevant time
period, R.C. 2744.07(A)(2) provided:
Except as otherwise provided in this division, a political
subdivision shall indemnify and hold harmless an employee in the
amount of any judgment, other than a judgment for punitive or
exemplary damages, that is obtained against the employee in a state
or federal court or as a result of a law of a foreign jurisdiction and
that is for damages for injury, death, or loss to person or property
caused by an act or omission in connection with a governmental or
proprietary function, if at the time of the act or omission the
employee was acting in good faith and within the scope of
employment or official responsibilities.
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(Emphasis added.) Am.Sub.S.B. No. 106, 149 Ohio Laws, Part II, 3500, 3515-
3516. This provision in R.C. 2744.07 has since been amended, but, as relevant to
this case, the current version of the statute contains no significant differences.
{¶ 13} In this case, Kovach never asserted her right to indemnification.
Instead, it is Ayers who seeks to assert the officer’s right to indemnification. The
issue in this case is thus whether a judgment creditor may enforce the
indemnification provision of R.C. 2744.07(A)(2) or whether that provision may be
asserted only by an employee.
A. The parties’ arguments
{¶ 14} Ayers argues that the text of R.C. 2744.07(A)(2) permits a judgment
creditor to proceed directly against a political subdivision. He further argues that
this interpretation of the statute is supported by its legislative history; comports
with the legislature’s intent and with the common practice of political-subdivision
indemnification; protects public employees; provides a form of public insurance;
promotes judicial economy; and avoids unfairness, gamesmanship, and injustice.
Finally, he argues that he has third-party standing to enforce the indemnification
provision of R.C. 2744.07(A)(2).
{¶ 15} Cleveland counters that the text of R.C. 2744.07(A)(2) clearly and
unambiguously limits indemnification rights to employees. It further asserts that
its interpretation is supported by other statutes, that there is no need to consider
legislative history because the statute is not ambiguous, and that Ayers’s arguments
based on legislative history are unconvincing. It also argues that adopting Ayers’s
position would nullify R.C. Chapter 2744’s immunity scheme by making political
subdivisions directly liable for damages in circumstances in which that Chapter
otherwise says that they should not be directly liable.
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B. R.C. 2744.07(A)(2) does not permit a judgment creditor to proceed directly on
an indemnification claim against a political subdivision
{¶ 16} At the outset of our analysis, we emphasize the limited nature of the
precise issue before the court. The parties have raised numerous arguments that are
based on the facts of this case, including regarding whether Kovach’s bankruptcy
proceedings were related to Cleveland’s legal strategy to avoid paying the judgment
against the officers and whether Cleveland may use a ruling in its favor in this case
to its future advantage. In its opinion below, the Eighth District emphasized that
its decision was limited strictly to the statutory-interpretation question that has now
been appealed to this court. The Eighth District explained that Ayers’s other claims
against Cleveland had not yet been litigated and that these fact-based arguments
should not be addressed until the parties have had an opportunity to develop and
litigate them on remand. For this reason, we focus solely on the issue whether a
judgment creditor may proceed directly against a political subdivision under R.C.
2744.07(A)(2), and we note that any remaining issues preserved by the parties may
be addressed in any further proceedings that may occur below.
{¶ 17} The primary goal of statutory construction is to give effect to the
legislature’s intent, and in determining the legislature’s intent, we first look to the
plain language of the statute. State v. Gordon, 153 Ohio St. 3d 601, 2018-Ohio-
1975, 109 N.E.3d 1201, ¶ 8. “When a statute is plain and unambiguous, we apply
the statute as written.” Id., citing Portage Cty. Bd. of Commrs. v. Akron, 109 Ohio
St. 3d 106, 2006-Ohio-954, 846 N.E.2d 478, ¶ 52, citing State ex rel. Savarese v.
Buckeye Local School Dist. Bd. of Edn., 74 Ohio St. 3d 543, 545, 660 N.E.2d 463
(1996).
{¶ 18} In reviewing the plain language of R.C. 2744.07(A)(2), it is clear
that a political subdivision must indemnify an employee in the amount of any
judgment qualifying under the statute. A relevant consideration in applying this
statute is who qualifies as an “employee.”
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{¶ 19} The definition of “employee” is contained in R.C. 2744.01(B):
“ ‘Employee’ means an officer, agent, employee, or servant, whether or not
compensated or full-time or part-time, who is authorized to act and is acting within
the scope of the officer’s, agent’s, employee’s, or servant’s employment for a
political subdivision.” (Emphasis added.)
{¶ 20} Ayers clearly does not qualify as an employee under the statute. The
issue, then, is whether Ayers, as a third-party judgment creditor, may assert an
employee’s indemnification rights when proceeding directly against a political
subdivision under R.C. 2744.07(A)(2).
{¶ 21} R.C. 2744.07(A)(2) provides that a political subdivision “shall
indemnify and hold harmless an employee.” (Emphasis added.) Thus, the right of
indemnification is personal to the employee. The limited nature of this
indemnification right is underscored by what the statute does not say. For example,
the statute does not provide that a political subdivision shall indemnify any
judgment against an employee. Nor does the statute provide that a third party may
enforce this right of indemnification on behalf of an employee. Based on the
unambiguous language of the statute, which serves only to indemnify an employee
and does not vest any rights in third parties connected to the employee, we conclude
that R.C. 2744.07(A)(2) does not permit a judgment creditor to proceed directly
against an indemnitor.
{¶ 22} Our conclusion is further supported by a prior decision of this court
in which we explained that indemnification is a personal right rather than a right
that may be enforced by a third party. See Worth v. Aetna Cas. & Sur. Co., 32 Ohio
St.3d 238, 240, 513 N.E.2d 253 (1987). In Worth, this court explained:
Indemnity arises from contract, either express or implied,
and is the right of a person, who has been compelled to pay what
another should have paid, to require complete reimbursement.
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Travelers Indemnity Co. v. Trowbridge (1975), 41 Ohio St. 2d 11, 70
Ohio Op. 2d 6, 321 N.E.2d 787, paragraph two of the syllabus. In
general, to indemnify is to make whole and has been defined to mean
to save harmless by giving security for the reimbursement of a
person in case of anticipated loss, as by execution and delivery of a
bond. See, generally, 41 American Jurisprudence 2d (1968) 687,
Indemnity, Section 1.
(Emphasis added.) Id.
{¶ 23} Ayers argues that Worth is inapposite and that this court should not
apply the definition of “indemnify” from that decision because that definition is
limited to the context of contract law. This argument is unavailing. While the
Worth decision does note that the concept of indemnification arises from contract
law, the court set forth in that decision a general definition of “indemnity” that is
applicable in this case. As this court explained in Worth, indemnification exists to
“make whole” the person who is indemnified. Id. In other words, indemnification
does not exist to benefit a third party.
{¶ 24} Finally, we note that limiting the right of indemnification under R.C.
2744.07(A)(2) to employees is consistent with the overarching framework of
political-subdivision liability in Ohio. As this court has explained, political
subdivisions are generally shielded from liability for the acts of their employees
and exceptions to that general rule must be specifically set forth in statute. Wilson
v. Stark Cty. Dept. of Human Servs., 70 Ohio St. 3d 450, 452, 639 N.E.2d 105
(1994). R.C. 2744.07(A)(2) provides for a political subdivision to indemnify only
employees of the political subdivision. Because the statute does not specifically
provide for a third-party to enforce an employee’s right of indemnification against
a political subdivision, we may not read that provision into the statute.
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{¶ 25} We accordingly hold that under R.C. 2744.07(A)(2),
indemnification by a political subdivision is a personal right of a particular
employee. Based on the plain language of that statute, the personal right of
indemnification may be asserted only by the employee and it may not be asserted
by a judgment creditor.
C. The issue of third-party standing is not properly before the court in this appeal
{¶ 26} Ayers further argues that even if R.C. 2744.07(A)(2) permits only
employees to seek indemnification, he still has third-party standing to enforce the
statute under the facts of this case.
{¶ 27} This third-party-standing argument is not properly before the court
in this appeal. The argument goes beyond the interpretation of R.C. 2744.07(A)(2),
which is the discrete legal issue raised in Ayers’s proposition of law that this court
accepted for review. Moreover, while the Eighth District rejected Ayers’s third-
party-standing argument, that argument was not raised in Ayers’s memorandum in
support of jurisdiction. For these reasons, we decline to address this argument on
the basis that it is beyond the scope of this appeal.
III. Conclusion
{¶ 28} Because we conclude that the right to indemnification set forth in
R.C. 2744.07(A)(2) may be asserted only by an employee of a political subdivision
as specifically set forth in that statute, we hold that a judgment creditor may not
proceed directly against a political subdivision under that statutory provision. We
accordingly affirm the judgment of the court of appeals.
Judgment affirmed.
O’CONNOR, C.J., and KENNEDY, FRENCH, DEWINE, and DONNELLY, JJ.,
concur.
STEWART, J., dissents, with an opinion.
_________________
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STEWART, J., dissenting.
{¶ 29} I would reverse the judgment of the court of appeals and hold that
R.C. 2744.07(A)(2) (now R.C. 2744.07(B)2) reflects the legislature’s intent to
permit a judgment creditor to proceed directly against a political-subdivision
indemnitor. I disagree with the majority’s holding that under the statute, only
employees can invoke a political subdivision’s obligation to indemnify the amount
of a judgment awarded against the employees.
{¶ 30} R.C. 2744.07(A)(2) is limited to a small and very specific class of
judgments. As this case demonstrates, a judgment creditor is in the best position to
assert the rights created by this statute. See Jackson v. Birmingham Bd. of Edn.,
544 U.S. 167, 181, 125 S. Ct. 1497, 161 L. Ed. 2d 361 (2005). When applying a
statute, courts must presume that the General Assembly intended a just and
reasonable result. R.C. 1.47(C); see State ex rel. Cincinnati Post v. Cincinnati, 76
Ohio St. 3d 540, 543-544, 668 N.E.2d 903 (1996) (R.C. 121.22, Ohio’s “Sunshine
Law,” cannot be interpreted in a manner that circumvents the purpose of the statute,
which is to prohibit secret deliberations of elected officials). Instead of a just and
reasonable interpretation of R.C. 2744.07(A)(2), the majority’s decision renders the
statute meaningless.
{¶ 31} We determine legislative intent by considering the language of the
statute and the purpose to be accomplished. Sutton v. Tomco Machining, Inc., 129
Ohio St. 3d 153, 2011-Ohio-2723, 950 N.E.2d 938, ¶ 12. R.C. 2744.07(A)(2)
provides that “a political subdivision shall indemnify and hold harmless an
employee in the amount of any judgment * * * that is obtained against the employee
* * *.” The purpose of the statute is to pay qualifying judgments obtained against
employees of a political subdivision so that employees are not burdened by those
judgments. There is no dispute that the judgment in this case qualifies under the
2. The statutory provisions at issue in this case in former R.C. 2744.07(A)(2), Am.Sub.S.B. No. 106,
149 Ohio Laws, Part II, 3500, 3515-3516, now appear in R.C. 2744.07(B).
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statute, and there is no dispute that the persons against whom appellant, David
Ayers, obtained that judgment were employees of appellee the city of Cleveland.
The only question, then, is how is the political subdivision’s indemnification
obligation invoked? The majority leaves this question unanswered. This is
problematic for the reasons that follow.
{¶ 32} R.C. 2744.07(A)(2) does not contain any language establishing a
procedure for an employee to invoke the city’s indemnification obligation. The
Ohio General Assembly clearly knows how to establish such procedures. See, e.g.,
R.C. 9.87(E) (establishing the procedure for invoking indemnification for
judgments against state officers and employees incurred in the performance of
official duties); R.C. 9.871(C) (establishing the procedure for invoking
indemnification for the cost of legal representation of employees of the Department
of Rehabilitation and Correction in connection with the dismissal or acquittal of
criminal charges for actions that occurred within the course and scope of
employment); R.C. 120.41(B)(2) (establishing the procedure for invoking
indemnification for public defenders in connection with malpractice actions).
Without statutory language setting forth a procedure, there is no clear intent by the
legislature to limit initiating the city’s indemnification obligation to only
employees. See Griffith v. Aultman Hosp., 146 Ohio St. 3d 196, 2016-Ohio-1138,
54 N.E.3d 1196, ¶ 28 (declining to impose a requirement that a patient seeking a
medical record under R.C. 3701.74 state a reason for the request because the statute
had no such requirement); see also State v. Morgan, 153 Ohio St. 3d 196, 2017-
Ohio-7565, 103 N.E.3d 784, ¶ 28 (this court may not restrict, qualify, narrow, or
enlarge the General Assembly’s wording when construing the meaning of a statute).
{¶ 33} In the absence of a statutory procedure, and as the majority suggests
by reference, majority opinion at ¶ 22, a political subdivision could fulfill its
indemnification obligation by reimbursing an employee who pays a judgment.
However, requiring the employee to first pay the judgment and then seek
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reimbursement does not indemnify or hold the employee harmless. In reality, a
great deal of harm could befall an employee who would be required to first pay a
judgment from his or her personal resources before eventually recovering the
amount from the political subdivision. See, e.g., Dixon v. Holden, 923 S.W.2d 370,
378 (Mo.App.1996) (reasoning that by enacting a statute creating a fund to defend
and pay judgments against state employees, the legislature intended to protect them
as much as possible from the rigors of litigation and that requiring an employee to
pay from his or her pocket prior to being made whole would defeat that purpose).
Moreover, R.C. 2744.07(A)(2) is not worded to indemnify employees for losses
they suffer as a result of paying a judgment. The statute indemnifies employees
against the judgment itself. The difference is significant and cannot be ignored.
See Henderson-Achert Lithographic Co. v. John Shillito Co., 64 Ohio St. 236, 254-
255, 60 N.E. 295 (1901) (discussing the essential difference between
indemnification against loss and indemnification against liability).
{¶ 34} Under the majority’s decision, the only other option would be for an
employee to invoke his or her clear right to have the political subdivision pay the
judgment. Either one of these options could have taken place here but did not, thus
vesting the employees against whom the judgment was rendered with the ultimate
authority over whether the judgment was paid. This cannot be what the legislature
intended. Additionally, as the majority notes, “The detectives twice offered to
assign to Ayers any indemnification claims that they might have against the city in
exchange for an agreement by Ayers to forgo collection efforts against the
detectives personally. Ayers rejected each offer.” Majority opinion at ¶ 3. Noting
these facts begs a key question: Why did the detectives not simply invoke their right
to have the city pay the judgment? If they had done so, as the majority holds only
they could do, the city would have had to pay the judgment and there would be
nothing left for Ayers to collect from the detectives. Thus, the offer to assign any
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claims the employees “might have [had] against the city” in exchange for a
forbearance of collection efforts is suspect.
{¶ 35} The majority’s interpretation of the statute—that only the employee
can seek indemnification—disregards the statutory language that requires the
political subdivision to pay the judgment against the employee. The statute cannot
be applied in a way that subjects employees to financial ruin or that allows
employees to control whether a legally qualifying judgment is paid. The language
of R.C. 2744.07(A)(2) establishes that its purpose is to satisfy judgments that result
from a political subdivision’s employee’s conduct committed in good faith and
within the scope of employment and thereby to protect employees by indemnifying
and holding them harmless from the burdens of those judgments.
{¶ 36} The trial court did not err when it ruled that Ayers could proceed
against the city for indemnification for the judgment obtained against the
employees. I would hold that the political subdivision’s obligation to pay the
judgment can be enforced when a qualifying judgment is obtained against an
employee and the judgment creditor proceeds against the political subdivision for
payment of the judgment. This interpretation satisfies the purpose of R.C.
2744.07(A)(2). Because the majority holds otherwise, I respectfully dissent.
_________________
Law Office of Michele L. Berry and Michele Berry; and Loevy & Loevy,
Scott Rauscher, Anand Swaminathan, Debra Loevy, Matthew Topic, and Daniel
Twetten, for appellant.
Littler Mendelson, P.C., Robert M. Wolff, and Inna Shelley; and Barbara
A. Langhenry, Cleveland Director of Law, and Mark V. Webber, Assistant Director
of Law, for appellee city of Cleveland.
Littler Mendelson, P.C., Robert M. Wolff, and Inna Shelley, for appellee
Joseph Scott.
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Latham & Watkins, L.L.P., Samuel B. Isaacson, and Alex Grabowski; and
Porter, Wright, Morris & Arthur, L.L.P., and Kathleen M. Brinkman, urging
reversal for amici curiae Ohio law professors Avidan Cover, Llewellyn Gibbons,
Doron Kalir, Andrew Pollis, Cassandra Burke Robertson, John Sahl, and Rachel
Smith.
Ron O’Brien, Franklin County Prosecuting Attorney, and Arthur J.
Marziale Jr., Nick A. Soulas Jr., and Amy L. Hiers, Assistant Prosecuting
Attorneys, urging affirmance for amicus curiae Ohio Prosecuting Attorneys
Association.
Mazanec, Raskin & Ryder Co., L.P.A., and Frank H. Scialdone, urging
affirmance for amicus curiae Ohio Association of Civil Trial Attorneys.
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