Pagano v. Heck , 2017 Ohio 8564 ( 2017 )

[Cite as Pagano v. Heck, 2017-Ohio-8564.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT )
JOHN HECK, et al. C.A. No. 28425
Appellants
v. APPEAL FROM JUDGMENT
ENTERED IN THE
SCOTT PAGANO dba ANY EXCUSE COURT OF COMMON PLEAS
FOR A PARTY COUNTY OF SUMMIT, OHIO
CASE No. CV 2015-04-2195
Appellee
DECISION AND JOURNAL ENTRY
Dated: November 15, 2017
CARR, Presiding Judge.
{¶1} Appellant, John Heck, appeals the judgment of the Summit County Court of
Common Pleas. This Court reverses and remands.
I.
{¶2} The instant litigation arises out of a business dispute between Scott Pagano and
John Heck, two men who entered into a partnership agreement regarding an entity known as
SloMo Booths, LLC (“SloMo”). The nature of the business venture involves designing,
manufacturing, and selling slow motion photo booths for the special event industry.
{¶3} On April 6, 2015, Pagano’s business, Any Excuse for a Party, filed a complaint
against Heck and SloMo that included a demand for an accounting as well as a claim for money
damages. Pagano’s central allegation was that Heck, who was responsible for maintaining the
accounting books for SloMo, had breached the partnership agreement by failing to provide
monthly and quarterly reports to Pagano. Heck filed an answer generally denying the allegations
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in the complaint. Significantly, Heck also filed a counterclaim alleging that Pagano had failed to
perform a number of his duties under the partnership agreement, including booking trade show
appearances and contributing to the design, marketing, and selling of the product. Pagano filed
an answer generally denying all of the allegations in the counterclaim.
{¶4} As the litigation unfolded, the parties became entangled in a discovery dispute, a
dispute that rests at the center of the instant appeal. Pagano filed an initial request for discovery
at the same time he filed the complaint. Thereafter, on January 5, 2016, the trial court approved
an agreed protective and confidentiality order. The agreed order set forth guidelines for what
would constitute confidential information for the purposes of the litigation and further outlined
parameters for how that information would be handled by the parties. Approximately one month
later, Pagano filed a motion to compel discovery asserting that Heck had failed to produce an
accounting of the business as requested. Pagano attached Heck’s deposition in support of the
motion to compel and asserted that Heck had acknowledged during his deposition testimony that
he was responsible for providing accounting reports to Pagano under the terms of their
agreement. The trial court subsequently issued a journal entry granting the motion and ordering
Heck to produce all outstanding discovery within 30 days.
{¶5} On February 26, 2016, the trial court issued a journal entry reflecting numerous
stipulations by the parties regarding a variety of procedural matters, including several discovery
issues as well as the filing of an amended complaint. The sixth subheading referenced the
January 5, 2016 protective and confidentially order and purported to supplement the order with
respect to several discovery items. One such paragraph stated that the parties agreed that Pagano
should not be permitted to “achieve the object of this action for an accounting by seeking to
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require defendants to yield such information to [Pagano] without a court’s first entering a final
judgment declaring [Pagano’s] entitlement thereto.”
{¶6} Pagano filed an amended complaint substituting himself in his individual capacity
as plaintiff in place of his company. Heck and SloMo filed an amended answer and
counterclaim. Pagano filed an answer to the amended counterclaim generally denying the
allegations.
{¶7} Thereafter, Heck provided answers to certain discovery requests. At that time,
Pagano filed a second motion to compel discovery. On June 21, 2016, the trial court issued a
journal entry granting the motion and ordering Heck to “produce all outstanding discovery,
including a full accounting, within thirty (30) days of the date of this Entry & Order.” Heck
initially filed a motion to reconsider the discovery order. In support of the motion to reconsider,
Heck argued that they could not provide an accounting of the business during the discovery
phase because the issue of whether they had an obligation to do so was an underlying issue in the
litigation. In addition to filing a memorandum in opposition to the motion for reconsideration,
Pagano filed a motion for sanctions. On August 8, 2016, the trial court issued a journal entry
denying the motion for reconsideration and setting a hearing date on the motion for sanctions.
{¶8} After the trial court denied the motion for reconsideration, Heck filed a motion to
modify the trial court’s June 21, 2016 discovery order on the basis that the order was
“inconsistent with the terms of [the] stipulated order entered by this court on February 26,
2016[.]” Therein, Heck again posited that it would be improper to require the business to furnish
an accounting prior to the trial court determining that issue on the merits. Pagano filed a
memorandum in opposition to the motion to modify, arguing that the trial court had already
settled the discovery dispute between the parties.
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{¶9} On August 25, 2016, the trial court issued a journal entry captained, “Order
Modifying June 21, 2016, Order Compelling Discovery Nunc Pro Tunc[,]” wherein the court
amended its prior discovery order to remove the language compelling Heck to provide a “full
accounting” of the business. The trial court took this action with the aim of being consistent with
the prior stipulation of the parties that was reflected in the order issued on February 26, 2016.
{¶10} Heck subsequently filed a motion to strike Pagano’s second set of interrogatories
on the basis that Pagano failed to secure leave from the trial court to serve such interrogatories in
accordance with a local rule.
{¶11} On October 14, 2016, the trial court issued a journal entry noting that Heck had
still not complied with the trial court’s discovery orders. The trial court then ordered Heck and
SloMo “to produce all outstanding discovery, including a full accounting within fourteen (14)
days of the date of this Entry & Order. Failure to comply with this Entry & Order may result in
sanctions for misconduct in discovery.” After the expiration of the 14-day window, Heck
retained new counsel. On November 14, 2016, Heck and SloMo filed a notice of appeal.
{¶12} On appeal, Heck raises three assignments of error.
II.
ASSIGNMENT OF ERROR I
THE TRIAL COURT ERRED BY ORDERING HECK TO PRODUCE
CONFIDENTIAL AND PRIVILEGED DISCOVERY.
ASSIGNMENT OF ERROR II
THE TRIAL COURT ERRED BY ORDERING HECK TO PRODUCE AN
ACCOUNTING AND DISCOVERY CONSTITUTING A DE FACTO
ACCOUNTING WITHOUT A DETERMINATION BY A TRIER OF FACT
THAT PAGANO’S CLAIM FOR AN ACCOUNTING WAS MERITORIOUS.
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{¶13} In his first and second assignments of error, Heck advances multiple arguments in
support of the proposition that the trial court erred when it issued the October 14, 2016 discovery
order. This Court agrees.
Jurisdiction
{¶14} At the outset, we note that this Court is obligated to raise sua sponte questions
related to its jurisdiction. Whitaker-Merrell Co. v. Geupel Constr. Co., Inc., 29 Ohio St.2d 184,
186 (1972). This Court has jurisdiction to hear appeals only from final judgments. Article IV,
Section 3(B)(2), Ohio Constitution; R.C. 2501.02. In the absence of a final, appealable order,
this Court must dismiss the appeal for lack of subject matter jurisdiction. Lava Landscaping,
Inc. v. Rayco Mfg., Inc., 9th Dist. Medina No. 2930-M, 2000 Ohio App. LEXIS 176, *2 (Jan. 26,
2000). “Generally, trial court orders addressing discovery issues are merely interlocutory and
not immediately appealable.” Bowers v. Craven, 9th Dist. Summit No. 25717, 2012-Ohio-332, ¶
14. Several matters may be appealed on an interlocutory basis pursuant to R.C. 2505.02(B),
which states, in part:
An order is a final order that may be reviewed, affirmed, modified, or reversed,
with or without retrial, when it is one of the following:
(1) An order that affects a substantial right in an action that in effect determines
the action and prevents a judgment;
(2) An order that affects a substantial right made in a special proceeding or upon a
summary application in an action after judgment;
(3) An order that vacates or sets aside a judgment or grants a new trial;
(4) An order that grants or denies a provisional remedy and to which both of the
following apply:
(a) The order in effect determines the action with respect to the provisional
remedy and prevents a judgment in the action in favor of the appealing party with
respect to the provisional remedy.
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(b) The appealing party would not be afforded a meaningful or effective remedy
by an appeal following final judgment as to all proceedings, issues, claims, and
parties in the action.
{¶15} On November 22, 2016, this Court issued a magistrate’s order noting that it was
unclear whether the October 14, 2016 order constituted a final, appealable order under R.C.
2505.02(B)(4). Both parties were provided an opportunity to brief the issue. Upon reviewing
the record and the filings in this matter, it is apparent that the appealed order does constitute a
final, appealable order. In the complaint, Pagano demanded an accounting of the business and
payment of any amount found due. In his answer and counterclaim, Heck maintained that he
was not required to provide an accounting of the business because Pagano had failed to fulfill a
number of responsibilities under their partnership agreement. The trial court’s October 14, 2016
discovery order required Heck to “produce all outstanding discovery, including a full
accounting” of the business. Thus, the order effectively determined the primary controversy
between the parties set forth in the pleadings. As Heck would be prevented from prevailing on
that claim in a later appeal should he be forced to provide a full accounting of the business, the
discovery order does, in fact, constitute a final, appealable order under R.C. 2505.02(B)(4).
Discussion
{¶16} Heck raises multiple arguments in support of his challenge to the October 14,
2016 discovery order. First and foremost, Heck argues that the discovery order compels the
disclosure of privileged information. Heck stresses that the trial court erred by ordering the
parties to disclose information that fell within the scope of the parties’ agreed protective order.
Heck further argues that the discovery order offends notions of due process by forcing Heck to
disclose confidential business materials prior to the court ruling on whether Pagano has a right to
that information.
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{¶17} The trial court erred by prematurely ordering the disclosure of potentially
confidential or privileged information without first conducting an in camera inspection of those
materials. At the outset of the litigation, the parties disputed whether certain portions of SloMo’s
business records were confidential, privileged, or beyond the scope of discovery given the nature
of the underlying cause of action. The parties eventually entered into an agreed protective order
pertaining to confidential materials where it was stipulated that Pagano should not be permitted
to “achieve the object of this action for an accounting by seeking to require defendants to yield
such information to [Pagano] without a court’s first entering a final judgment declaring
[Pagano’s] entitlement thereto.” Given that the parties reached an agreement, the record is
lacking evidence regarding whether the documents in question constitute confidential business
records. See generally Gibson-Myers & Assocs., Inc. v. Pearce, 9th Dist. Summit No. 19358,
1999 Ohio App. LEXIS 5010, *7 (Oct. 27, 1999). The trial court recognized the validity of the
parties’ agreement prior to issuing the October 14, 2016 discovery order where it inexplicably
ordered Heck to “produce all outstanding discovery, including a full accounting[.]” Pagano
maintains on appeal that Heck has no basis to challenge the order because he never requested an
in camera inspection or submitted a privilege log. In light of the parties’ agreement, however,
Heck had no reason to request an in camera inspection or submit a privilege log because he had
no reason to anticipate that the trial court would order him to turn those materials over during the
discovery phase. See generally Mulkerin v. Cho, 9th Dist. Medina No. 07CA007-M, 2007-Ohio-
6550, ¶ 6-7. Under these circumstances, the trial court erred by ordering Heck to disclose the
requested information, including a “full accounting” of the business, without first conducting an
in camera review to determine if any of the requested materials were confidential or privileged.
Id.8
{¶18} The first and second assignments of error are sustained.
ASSIGNMENT OF ERROR III
THE TRIAL COURT ERRED BY ORDERING HECK TO RESPOND TO THE
2ND ROGS, [SIC] WHICH WERE PROPOUNDED IN CONTRAVENTION OF
SUMMIT COUNTY LOCAL RULE 17.01.
{¶19} In his third assignment of error, Heck argues that the trial court erred in ordering
him to respond to a second set of interrogatories. As our resolution of Heck’s first and second
assignments of error is dispositive of this appeal, we decline to address the third assignment of
error as it has been rendered moot. See App.R. 12(A)(1)(c).
III.
{¶20} Heck’s first and second assignments of error are sustained. We decline to address
the third assignment of error as it has been rendered moot. The judgment of the Summit County
Court of Common Pleas is reversed and the cause remanded for further proceedings consistent
with this decision.
Judgment reversed,
and cause remanded.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is
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instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30.
Costs taxed to Appellee.
DONNA J. CARR
FOR THE COURT
SCHAFER, J.
TEODOSIO, J.
CONCUR.
APPEARANCES:
JOEL A. HOLT, Attorney at Law, for Appellants.
THOMAS C. LOEPP, Attorney at Law, for Appellee.