Med. Mut. of Ohio v. FrontPath Health Coalition , 2023 Ohio 243 ( 2023 )

[Cite as Med. Mut. of Ohio v. FrontPath Health Coalition, 2023-Ohio-243.]
IN THE COURT OF APPEALS OF OHIO
SIXTH APPELLATE DISTRICT
LUCAS COUNTY
Medical Mutual of Ohio, et al. Court of Appeals No. L-21-1226
Appellants Trial Court No. CI0201703154
v.
FrontPath Health Coalition DECISION AND JUDGMENT
Appellee Decided: January 27, 2023
*****
Richard M. Knoth, Scott C. Holbrook, Breaden M. Douthett,
Sean E. McIntyre, and Hallie R. Israel, for appellants.
John J. McHugh, III, for appellee.
*****
PIETRYKOWSKI, J.
{¶ 1} Appellants, Medical Mutual of Ohio and Medical Mutual Services, L.L.C.
(collectively “Medical Mutual”), appeal from the judgments of the Lucas County Court
of Common Pleas, dismissing with prejudice two counts from their amended complaint,
and later denying a motion to amend. For the reasons that follow, we reverse.
I. Facts and Procedural Background
{¶ 2} Medical Mutual and appellee, FrontPath Health Coalition (“FrontPath”) are
competitors for public contracts to provide health benefit services to municipal
corporations in northwest Ohio, in this case Wood County and the City of Toledo. At a
very basic level, Medical Mutual alleged that FrontPath recruited to serve on its board,
public officials who were the health benefit decision makers for the municipal
corporations. FrontPath then encouraged and aided those public officials in using their
influence and authority to steer public contracts for the provision of health benefit
services to FrontPath.
{¶ 3} Medical Mutual initiated the present action on June 27, 2017, when it filed a
four-count complaint against appellee, FrontPath Health Coalition. The first count
sought a judgment declaring that the contracts between FrontPath and Wood County and
the city of Toledo were null and void. The second count contained a claim for civil
liability for criminal acts, alleging that FrontPath aided and abetted government
employees in entering into the contracts in violation of Ohio law. The third count
contained a claim for tortious interference with a contractual or business relationship.
Finally, the fourth count contained a claim for violation of the Ohio Valentine Act—
which prohibits conspiracy against trade—alleging that FrontPath engaged in
2.
monopolistic behavior with regard to the market for purchase of health insurance
services.
{¶ 4} On November 5, 2018, Medical Mutual amended its complaint. The
amended complaint added a fifth count alleging a violation of the Corrupt Practices Act
under R.C. 2923.31.
{¶ 5} Shortly thereafter, FrontPath moved to dismiss the amended complaint
pursuant to Civ.R. 12(B)(6). On June 24, 2019, the trial court granted FrontPath’s
motion as to Counts I, II, IV, and V, dismissed those claims with prejudice, and denied
Medical Mutual’s alternative motion to further amend its complaint.
{¶ 6} Following continued discovery, Medical Mutual moved for leave to file a
second amended complaint on January 30, 2020. The second amended complaint sought
to add as defendants, FrontPath’s President and Chief Executive Officer, Susan
Szymanski, and City of Toledo Health Care Cost Containment Committee member and
FrontPath Board of Trustee member, Don Czerniak. In addition to the original five
counts in the amended complaint, the proposed second amended complaint also sought to
add three claims: Count VI, a civil Corrupt Practices Act claim premised upon alleged
violations of the Defend Trade Secrets Act, 18 U.S.C. § 1832; Count VII, a claim for
theft of protectable trade secrets under 18 U.S.C. § 1832, et seq.; and Count VIII, a claim
for theft of trade secrets under R.C. 1333.61, et seq.
3.
{¶ 7} On June 16, 2020, the trial court denied Medical Mutual’s motion for leave
to file a second amended complaint.
{¶ 8} Eventually, in September 2021, the matter proceeded to a jury trial on Count
III, which was the claim for tortious interference with a contractual or business
relationship. Following a month-long trial, the jury returned with a verdict award for
Medical Mutual in the amount of $1,781,750.00. The jury declined to award punitive
damages.
II. Assignments of Error
{¶ 9} Medical Mutual has timely appealed, and now asserts three assignments of
error for our review:
1. The trial court erred by dismissing with prejudice Count V of
MMO’s First Amended Complaint setting forth an Ohio Corrupt Practices
Act claim (the “CPA claim”).
2. The trial court erred by dismissing with prejudice Count II of
MMO’s First Amended Complaint setting forth a claim for civil liability for
criminal acts (the “civil liability claim”).
3. The trial court erred by denying MMO’s motion for leave to
amend its complaint to assert claims against new defendants Donald
Czerniak and Susan Szymanski.
4.
III. Analysis
{¶ 10} Medical Mutual’s first and second assignments of error argue that the trial
court erred when it dismissed with prejudice the Corrupt Practices Act violation claim
and the civil liability for criminal acts claim, respectively. Because those assignments of
error involve similar questions of law, we will address them together, beginning with the
civil liability for criminal acts claim. We will then address Medical Mutual’s third
assignment of error regarding the trial court’s denial of leave to amend the complaint.
A. Civ.R. 12(B)(6) Dismissal of Claims
{¶ 11} “Ohio is a notice-pleading state.” Maternal Grandmother v. Hamilton Cty.
Dept. of Job and Family Servs., 167 Ohio St.3d 390, 2021-Ohio-4096, 193 N.E.3d 536, ¶
10. “This means that outside of a few specific circumstances * * * a party will not be
expected to plead a claim with particularity. Rather, a ‘short and plain statement of the
claim’ will typically do.” Id., quoting Civ.R. 8(A). “The purpose of notice pleading is
clear: to simplify pleadings to a short and plain statement of the claim and to simplify
statements of the relief demanded * * * to the end that the adverse party will receive fair
notice of the claim and an opportunity to prepare his response thereto.” (Internal
quotations omitted.) Wells Fargo Bank, N.A. v. Horn, 142 Ohio St.3d 416, 2015-Ohio-
1484, 31 N.E.3d 637, ¶ 13, quoting Anderson v. BancOhio Natl. Bank, 1st Dist. Hamilton
No. C-840913, 1985 WL 8844, *1 (Nov. 27, 1985).
5.
{¶ 12} “A motion to dismiss for failure to state a claim upon which relief can be
granted is procedural and tests the sufficiency of the complaint.” State ex rel. Hanson v.
Guernsey Cty. Bd. of Commrs., 65 Ohio St.3d 545, 548, 605 N.E.2d 378 (1992). “In
order for a trial court to dismiss a complaint under Civ.R. 12(B)(6) for failure to state a
claim upon which relief can be granted, it must appear beyond doubt that the plaintiff can
prove no set of facts in support of the claim that would entitle the plaintiff to the relief
sought.” Ohio Bur. of Workers’ Comp. v. McKinley, 130 Ohio St.3d 156, 2011-Ohio-
4432, 956 N.E.2d 814, ¶ 12, citing O’Brien v. Univ. Community Tenants Union, Inc., 42
Ohio St.2d 242, 327 N.E.2d 753 (1975), syllabus. “The allegations of the complaint must
be taken as true, and those allegations and any reasonable inferences drawn from them
must be construed in the nonmoving party’s favor.” Id., citing O’Brien at syllabus.
However, “while we are to assume the facts alleged in the complaint are true, we do not
assume the legal conclusions alleged to be drawn from those facts are also true and
disregard any unsupported conclusions included among the facts alleged in the
complaint.” STE Invests., LLC v. Macprep, Ltd., 6th Dist. Ottawa No. OT-21-036, 2022-
Ohio-2614, ¶ 14; Morrow v. Reminger & Reminger Co., L.P.A., 183 Ohio App.3d 40,
2009-Ohio-2665, 915 N.E.2d 696, ¶ 7 (10th Dist.) (“The court need not, however, accept
as true unsupported legal conclusions in the complaint.”). “A motion to dismiss for
failure to state a claim is viewed with disfavor and is rarely granted.” Wilson v. Riverside
Hosp., 18 Ohio St.3d 8, 10, 479 N.E.2d 275 (1985).
6.
{¶ 13} “Appellate review of a trial court’s decision to dismiss a complaint
pursuant to Civ.R. 12(B)(6) is de novo. STE Invests. at ¶ 14, citing Perrysburg Twp. v.
Rossford, 103 Ohio St.3d 79, 2004-Ohio-4362, 814 N.E.2d 44, ¶ 5.
1. Civil Liability for Criminal Acts Claim
{¶ 14} In its second assignment of error, Medical Mutual argues that the trial court
erred in dismissing its claim for civil liability for criminal acts.
{¶ 15} In Jacobson v. Kaforey, 149 Ohio St.3d 398, 2016-Ohio-8434, 75 N.E.3d
203, ¶ 13, the Ohio Supreme Court held that “R.C. 2307.60 creates a civil cause of action
for damages resulting from any criminal act, unless otherwise prohibited by law.” R.C.
2307.60(A)(1) provides,
Anyone injured in person or property by a criminal act has, and may
recover full damages in, a civil action unless specifically excepted by law,
may recover the costs of maintaining the civil action and attorney’s fees if
authorized by any provision of the Rules of Civil Procedure or another
section of the Revised Code or under the common law of this state, and
may recover punitive or exemplary damages if authorized by section
2315.21 or another section of the Revised Code.
{¶ 16} Relevant here, Medical Mutual alleged:
12. Over the course of several years, FrontPath has enlisted
employees of the Governmental Employers to serve as directors/trustees of
7.
FrontPath and function on behalf of FrontPath and pursue its interests
(collectively, “Government-Affiliated Trustees”). These Government-
Affiliated Trustees played significant roles for FrontPath. For example,
Ms. Pam Boyer, while performing duties as human resource/benefits
manager for Wood County, served for years on the FrontPath Board, even
serving the governance role as Board Chairperson. Ms. Boyer acted on
behalf of FrontPath to thwart Plaintiff’s business efforts in Northwest Ohio.
***
14. Plaintiffs regularly submit bids, or would submit bids in an
unconflicted offering environment, to the Governmental Employers and
other public entities in response to solicitations for bids to provide health
benefit services.
15. FrontPath also regularly submits competing bids or is a
participant in the bidding process to the Governmental Employers in
response to the same bid solicitations to which Plaintiffs respond, or would
respond.
16. On multiple occasions, FrontPath has been selected as the
successful bidder or was a successful participant in the bidding process
with regard to bid solicitations as to which Plaintiffs were, or would have
been, a competing bidder.
8.
17. On multiple occasions, some of the Governmental Employers
and other public entities have awarded contract extensions to FrontPath
without soliciting competing bids from unconflicted health benefit service
providers, including Plaintiffs.
***
23. Government-Affiliated Trustees have used the authority or
influence of their offices to secure authorization of the contracts between
FrontPath, and the Governmental Employers or other public entities in
violation of Ohio law.
***
35. FrontPath solicited, procured or aided and abetted the
Government-Affiliated Trustees in their violation of Ohio law and, thereby,
FrontPath violated Ohio law.
36. By recruiting the Government-Affiliated Trustees as
FrontPath board members, FrontPath and the Government-Affiliated
Trustees joined in a malicious combination to injure the Plaintiffs in person
or property, in a way not competent for one alone, resulting in actual
damages.
9.
37. The entry of FrontPath, and the Governmental Employers or
other public entities into the contracts in violation of Ohio law has injured
Plaintiffs.
38. Pursuant to Ohio law, Plaintiffs are entitled to compensatory
damages, punitive or exemplary damages, and costs and attorney’s fees
from FrontPath for the injury suffered by Plaintiffs due to the violations of
Ohio law.
{¶ 17} In its motion to dismiss, FrontPath argued that count two of the complaint
did not state a claim for relief. In so arguing, FrontPath characterized count two as a
claim for aiding and abetting tortious conduct, which is not a recognized theory of
recovery. Alternatively, FrontPath characterized the count as one for civil conspiracy.
However, FrontPath argued that the intra-corporate conspiracy doctrine precluded the
finding of a conspiracy between FrontPath and the government-affiliated trustees.
{¶ 18} In response, Medical Mutual asserted that count two was a claim for civil
liability for criminal acts under R.C. 2307.60. Medical Mutual stated that, in this case,
the alleged criminal act was complicity to commit a violation of Ohio’s ethics laws,
specifically R.C. 2921.42(A)(1), which prohibits a public official from using his or her
authority or influence “to secure authorization of any public contract in which the public
official, a member of the public official’s family, or any of the public official’s business
associates has an interest.” Violation of R.C. 2921.42(A)(1) is a felony of the fourth
10.
degree. R.C. 2921.42(E). Medical Mutual further argued that FrontPath was complicit
because it “[s]olicit[ed] or procure[d] another to commit the offense,” or “[a]id[ed] or
abet[ted] another in committing the offense.” R.C. 2923.03(A)(1) and (2).
{¶ 19} In its reply, FrontPath argued that Medical Mutual’s subsequent
explanation of the legal theory it was pursuing does not cure the deficiency caused by
Medical Mutual’s failure to plead the commission of an underlying criminal act.
Furthermore, FrontPath argued that the complaint does not adequately plead the crime of
complicity in that it did not allege that FrontPath met the required mens rea of knowingly.
{¶ 20} When the trial court granted FrontPath’s motion to dismiss, it offered two
justifications. First, the trial court reasoned, without further explanation, that “R.C.
2307.60 does not extend to all crimes, only those that injure the claimant in person or
property.” Second, the trial court reasoned that a criminal conviction is required before
liability may be imposed pursuant to R.C. 2307.60, and the complaint did not allege any
such conviction.
{¶ 21} On appeal, Medical Mutual argues that a criminal conviction is not
required before liability may be imposed pursuant to R.C. 2307.60. At the time the trial
court entered its judgment, that question was still unresolved. However, subsequent to
the trial court’s June 24, 2019 judgment entry, the Ohio Supreme Court decided
Buddenberg v. Weisdack, 161 Ohio St.3d 160, 2020-Ohio-3832, 161 N.E.3d 603, ¶ 11, in
which it held that R.C. 2307.60 “does not require proof of an underlying criminal
11.
conviction.” Therefore, this aspect of the trial court’s reasoning in granting FrontPath’s
motion to dismiss was in error.
{¶ 22} Turning to the ultimate question of whether the motion to dismiss was
properly granted, we hold that it was not. At the outset, we note that under the liberal
requirements of notice pleading, Medical Mutual was not required to plead the specific
legal theories or statutes upon which it relied. “A party is not required to plead the legal
theory of recovery or the consequences which naturally flow by operation of law from the
legal relationships of the parties. ‘The rules make clear that a pleader is not bound by any
particular theory of a claim but that the facts of the claim as developed by the proof
establish the right to relief.’” Illinois Controls, Inc. v. Langham, 70 Ohio St.3d 512, 526,
639 N.E.2d 771 (1994), quoting McCormac, Ohio Civil Rules Practice (2 Ed.1992) 102,
Section 5.01. Furthermore, even if Medical Mutual pleaded the wrong claim, “[a]
complaint should not be dismissed for failure to state a claim merely because the
allegations do not support the legal theory on which the plaintiff relies. Instead, a trial
court must examine the complaint to determine if the allegations provide for relief on any
possible theory.” Fahnbulleh v. Strahan, 73 Ohio St.3d 666, 667, 653 N.E.2d 1186(1995).
{¶ 23} Here, construing the allegations and reasonable inferences in Medical
Mutual’s favor, we find that Medical Mutual has adequately pleaded a cause of action
under R.C. 2307.60 for civil liability from FrontPath’s alleged criminal act of complicity
12.
to violate R.C. 2921.42(A)(1). Medical Mutual alleged that FrontPath intentionally
recruited and enlisted public officials to serve on its board of trustees, that FrontPath
solicited and helped those officials use their authority and influence to secure public
contracts for FrontPath for which Medical Mutual had submitted bids, and that Medical
Mutual was injured by this conduct. Medical Mutual’s allegations, while sparse, satisfy
the elements of complicity to commit a violation of R.C. 2921.42(A)(1). Therefore, we
hold that the trial court erred when it granted FrontPath’s motion to dismiss. See
CitiMortgage, Inc. v. Rudzik, 7th Dist. Mahoning No. 13 MA 20, 2014-Ohio-1472, ¶ 19-
21 (trial court erred in dismissing R.C. 2307.60 and 2307.61 claim for civil liability for
embezzlement crime where complaint alleged that the bank told existing borrowers that
they were eligible for a home loan modification, had the borrowers make reduced
payments during a trial period, placed the payments into escrow causing the borrowers to
default on the mortgage, and then moved to foreclose).
{¶ 24} More so than arguing that the trial court properly dismissed the civil
liability for criminal acts claim, FrontPath argues that the matter is moot. FrontPath
explains that in its civil liability for criminal acts claim, Medical Mutual sought to
recover damages for FrontPath’s alleged criminal behavior in being complicit to a
violation of R.C. 2921.42(A)(1). FrontPath contends, however, that Medical Mutual
successfully recovered on this theory in the jury trial on the remaining claim for tortious
interference with a contractual or business relationship. FrontPath emphasizes that the
13.
jury’s decision was directed by the trial court’s instruction that “it is illegal for a public
official to knowingly employ the authority and influence of his or her office to secure a
public contract, including contracts for the provision of health care benefits, for an
organization on which he or she sits as a board member,” which is effectively a
restatement of R.C. 2921.42(A)(1). Thus, FrontPath concludes that Medical Mutual has
already recovered its damages, and should not be permitted a second bite of the apple.
{¶ 25} Medical Mutual responds that the matter is not moot. Medical Mutual
argues that a civil liability for criminal acts claim under R.C. 2307.60 is subject to a
longer statute of limitations than a claim for tortious interference with a business or
contractual relationship. Thus, Medical Mutual argues that through its civil liability for
criminal acts claim, it would be able to recover damages related to alleged specified
contract renewals and requests for proposals that occurred in 2011 and 2012.
{¶ 26} “A case is moot when the issues presented are no longer ‘live’ or the
parties lack a legally cognizable interest in the outcome.” State ex rel. Ames v. Summit
Cty. Court of Common Pleas, 159 Ohio St.3d 47, 2020-Ohio-354, 146 N.E.3d 573, ¶ 8,
quoting State ex rel. Gaylor, Inc. v. Goodenow, 125 Ohio St.3d 407, 2010-Ohio-1844,
928 N.E.2d 728, ¶ 10. “Conversely, if an actual controversy exists because it is possible
for a court to grant the requested relief, the case is not moot, and a consideration of the
merits is warranted.” Goodenow at ¶ 11.
14.
{¶ 27} Here, we agree with Medical Mutual that the matter is not moot. “A claim
for tortious interference is subject to the four-year statute of limitations set forth in R.C.
2305.09(D).” Morrow, 183 Ohio App.3d 40, 2009-Ohio-2665, 915 N.E.2d 696, at ¶ 41.
Medical Mutual asserts that a claim for civil liability for criminal acts is subject to a six-
year statute of limitations, citing Harris v. Cunix, 2022-Ohio-839, 187 N.E.3d 582, ¶ 27
(10th Dist.). However, Harris—in a lengthy analysis—recognizes that other courts have
considered claims for civil liability for criminal acts to be subject to a one-year statute of
limitations. Id. at ¶ 24, citing, e.g., Ettayem v. H.E.R., LLC., 5th Dist. Delaware No. 19
CAE 12 0070, 2020-Ohio-4647 (“R.C. 2307.60 allows complainants to bring a civil
claim for harm caused to them by others’ criminal activity, and any such claim is subject
to a one-year statute of limitations under R.C. 2305.11(A), which sets a one-year
limitation period for any ‘action upon a statute for a penalty or forfeiture.’”); see also
State ex rel. Cty. of Cuyahoga v. Jones Lang Lasalle Great Lakes Co., 8th Dist.
Cuyahoga No. 104157, 2017-Ohio-7727, ¶ 131 (“R.C. 2307.60 contemplates a penalty,
therefore it is subject to the one-year statute of limitations in R.C. 2305.11(A).”). At this
stage, we find it imprudent to decide whether a claim under R.C. 2307.60 is subject to a
six-year or one-year statute of limitations, particularly where we would be doing so for
the first time on appeal, and without the benefit of argument by the parties. Instead, it is
sufficient for the moment that an actual controversy exists, and it is possible for the trial
15.
court to award the requested relief. Therefore, we reject FrontPath’s argument, and hold
that the claim for civil liability for criminal acts is not moot.
{¶ 28} Accordingly, Medical Mutual’s second assignment of error is well-taken.
2. Corrupt Practices Act Claim
{¶ 29} In its first assignment of error, Medical Mutual argues that the trial court
erred when it dismissed its Corrupt Practices Act claim. The Ohio Corrupt Practices Act
is patterned after the federal RICO statute, and provides that “[n]o person employed by,
or associated with, any enterprise shall conduct or participate in, directly or indirectly, the
affairs of the enterprise through a pattern of corrupt activity or the collection of an
unlawful debt.” R.C. 2923.32(A)(1). R.C. 2923.34(A) grants a civil remedy to “[a]ny
person who is injured or threatened with injury by a violation of section 2923.32 of the
Revised Code.” Notably, a person who is directly or indirectly injured by the corrupt
activity “shall have a cause of action for triple the actual damages the person sustained,”
if the person “prove[s] the violation or conspiracy to violate [R.C. 2923.32] and actual
damages by clear and convincing evidence.” R.C. 2923.34(E). That person shall also be
entitled to recover reasonable attorney fees in the trial and appellate courts. R.C.
2923.34(F).
{¶ 30} “To state a civil claim under the [Corrupt Practices Act], ‘a plaintiff must
establish: (1) that conduct of the defendant involves the commission of two or more
specifically prohibited state or federal criminal offenses; (2) that the prohibited criminal
16.
conduct of the defendant constitutes a pattern; and (3) that the defendant has participated
in the affairs of an enterprise or has acquired and maintained an interest in or control of
an enterprise.” Morrow at ¶ 27; Peirce v. Szymanski, 6th Dist. Lucas No. L-11-1298,
2013-Ohio-205, ¶ 23; Hall v. CFIC Home Mtg., 175 Ohio App.3d 587, 2008-Ohio-1016,
888 N.E.2d 469, ¶ 42 (12th Dist.). Unlike the civil liability for criminal acts claim, which
is subject to notice pleading, the Corrupt Practices Act claim is subject to a higher
pleading standard. “The failure to plead any of [the elements of a Corrupt Practices Act
claim] with particularity results in a defective complaint that cannot withstand a Civ.R.
12(B)(6) motion to dismiss.” (Emphasis added.) Id., citing Universal Coach, Inc. v. New
York City Transit Auth., Inc., 90 Ohio App.3d 284, 291, 629 N.E.2d 28 (8th Dist.1993).
{¶ 31} Here, Medical Mutual alleged:
12. Over the course of several years, FrontPath has enlisted
employees of the [City of Toledo and Wood County] to serve as
directors/trustees of FrontPath and function on behalf of FrontPath and
pursue its interests (collectively, “Government-Affiliated Trustees”). These
Government-Affiliated Trustees played significant roles for FrontPath. For
example, Ms. Pam Boyer, while performing duties as human
resource/benefits manager for Wood County, served for years on the
FrontPath Board, even serving the governance role as Board Chairperson.
17.
Ms. Boyer acted on behalf of FrontPath to thwart Plaintiffs’ business efforts
in Northwest Ohio. * * *
***
16. On multiple occasions, FrontPath has been selected as the
successful bidder or was a successful participant in the bidding process
with regard to bid solicitations as to which Plaintiffs were, or would have
been, a competing bidder.
17. On multiple occasions, some of the Governmental Employers
and other public entities have awarded contract extensions to FrontPath
without soliciting competing bids from unconflicted health benefit service
providers, including Plaintiffs.
***
56. FrontPath is a person as that term is defined in Revised Code
2923.31(G).
57. FrontPath is and has been associated with an enterprise—an
ongoing association-in-fact whose members functioned as a continuing unit
for a common purpose of achieving the objectives of the enterprise—and
conducts and participates in the affairs of that enterprise through a pattern
of corrupt activity.
18.
58. The enterprise consists of, among others, representatives of
the Governmental Employers, third-party administrators, and other public
officials, and exists to secure and control the market for health benefit
services in Northwest Ohio.
59. Third-party administrators provide administrative services in
conjunction with health benefit providers like FrontPath. FrontPath
coordinates with certain third-party administrators, representatives of the
Governmental Employers, and other public officials to steer business
toward FrontPath and its third-party administrator partners. Among other
things, FrontPath submits joint or coordinating bids with third-party
administrators for government contracts, and representatives of the
Governmental Employers and other public officials influence the selection
of those bids by the Governmental Employers.
60. FrontPath has knowingly, intentionally, and maliciously
engaged in, attempted to engage in, conspired to engage in, solicited others
to engage in, and participated in, both directly and indirectly, the affairs of
the enterprise through a pattern of corrupt activity.
61. That pattern of corrupt activity consists of at least two
predicate acts, including, but not limited to, unlawfully, willfully, and
knowingly, soliciting and conspiring with others to violate R.C. 2921.42,
19.
which makes it a crime for any public official to “[a]uthorize, or employ the
authority or influence of the public official’s office to secure authorization
of any public contract in which the public official, a member of the public
official’s family, or any of the public official’s business associates has an
interest.” R.C. 2921.42(A).
62. As further described above, the Government-Affiliated
Trustees and other public officials use their access and influence to further
the goals of the enterprise—specifically, to secure government contracts on
behalf of FrontPath and the third-party administrators.
63. These predicate acts are related, in that they had the same or
similar purposes, results, participants, victims, and methods of commission.
The predicate acts were continuous and occurred over multiple years,
although the acts were not so connected that they constitute a single event.
64. As a direct and proximate result of FrontPath’s conduct of the
affairs of the enterprise through a pattern of corrupt activity, including the
above-listed predicate acts, Plaintiffs have been injured in their business
and property. Plaintiffs’ injuries include, but are not limited to, suffering
competitive injury, loss of business revenue, and other compensatory
damages in excess of $25,000. Plaintiffs were intended targets of
FrontPath’s wrongful conduct.
20.
{¶ 32} In its motion to dismiss, FrontPath argued that Medical Mutual did not
plead its claim with specificity, noting that while Medical Mutual made sweeping
generalizations that government-affiliated trustees used their access and influence to
secure government contracts on behalf of FrontPath, it did not specify a single instance
when the alleged “steering” took place regarding any particular bid or government
contract. Furthermore, FrontPath argued that Medical Mutual failed to sufficiently plead
the existence of an enterprise; FrontPath contends that the conclusory language of the
complaint provides no facts to support an allegation that the unidentified third-party
administrators and public officials ever held or maintained any interest or control in an
ongoing enterprise that was separate and apart from the pattern of corrupt activity.
{¶ 33} In opposing the motion to dismiss, Medical Mutual first argued that the
requirement of an enterprise separate and apart from the pattern of corrupt activity was
eliminated by the Ohio Supreme Court in State v. Beverly, 143 Ohio St.3d 258, 2015-
Ohio-219, 37 N.E.3d 116, syllabus (“The existence of an enterprise, sufficient to sustain a
conviction for engaging in a pattern of corrupt activity under R.C. 2923.32(A)(1), can be
established without proving that the enterprise is a structure separate and distinct from a
pattern of corrupt activity.”). Medical Mutual then argued that the allegations in its
complaint were sufficiently specific because it identified the enterprise participants by
their occupations and roles. By alleging that FrontPath associated with third-party
administrators, public officials, and the government-affiliated trustees, to coordinate bids
21.
and use the trustees’ influence to secure public contracts, Medical Mutual asserted that
FrontPath had enough information to be able to identify its own third-party administrators
and the public contracts on which they jointly bid.
{¶ 34} In its reply in support of the motion to dismiss, FrontPath argued that
Medical Mutual misconstrued the holding in Beverly, and that nothing in Beverly
eliminated the requirement to allege the existence both of an enterprise and the connected
pattern of racketeering activity. Moreover, FrontPath contended that Medical Mutual
failed to allege what role the un-named third-party administrators or other government
officials played in the enterprise or how those parties participated, if at all, in the alleged
corrupt activities. Thus, FrontPath concluded that Medical Mutual’s allegations were
nothing more than legal conclusions not sufficient for stating a claim.
{¶ 35} Upon consideration of the parties’ arguments, the trial court granted
FrontPath’s motion to dismiss the Corrupt Practices Act claim. The trial court
acknowledged that Medical Mutual sufficiently alleged a corrupt activity, but noted that
the alleged corrupt activity was the use of a public position to obtain a personal benefit.
However, the trial court found that Medical Mutual did not allege that any governmental
actor benefited personally from his or her service on the FrontPath board. Therefore, the
trial court granted FrontPath’s motion to dismiss.
{¶ 36} On appeal, Medical Mutual focuses exclusively on the trial court’s
determination that the complaint must be dismissed because Medical Mutual did not
22.
allege that any government actor received a personal benefit. Medical Mutual argues that
it is not required to allege a personal benefit, and that R.C. 2921.42(A)(1) makes it illegal
for a public official to influence or secure authorization of any public contract in which
“any of the public official’s business associates has an interest.” In this case, Medical
Mutual argues that its allegation of a corrupt activity was sufficient because FrontPath is
a business associate of the public officials who are also the “government-affiliated
trustees.”
{¶ 37} In response, FrontPath does not strenuously contest that the trial court erred
when it determined that Medical Mutual’s complaint failed to state a claim because it did
not allege that the public officials received a personal benefit. Instead, FrontPath again
suggests that Medical Mutual’s complaint was not pled with sufficient specificity.
{¶ 38} Medical Mutual’s argument on appeal addresses only the first of the three
elements required to be alleged with particularity in order to survive a Civ.R. 12(B)(6)
motion to dismiss the Corrupt Practices Act claim. Because we are reviewing the trial
court’s decision de novo, we will address each element in turn, relying upon the
arguments made on appeal and in the trial court.
a. Corrupt Activity
{¶ 39} Under the first element, Medical Mutual was required to allege with
particularity that FrontPath was involved in a corrupt activity. “‘Corrupt activity’ means
engaging in, attempting to engage in, conspiring to engage in, or soliciting, coercing, or
23.
intimidating another person to engage in any of the following: * * * (2) Conduct
constituting any of the following: (a) A violation of section * * * 2921.42 * * * of the
Revised Code.” R.C. 2923.31(I)(2)(a).
{¶ 40} In this case, Medical Mutual alleged that FrontPath was involved in at least
two instances of unlawfully, willfully, and knowingly, soliciting and conspiring with
others to violate R.C. 2921.42. R.C. 2921.42(A)(1) states that “No public official shall
knowingly do any of the following: (1) Authorize, or employ the authority or influence
of the public official’s office to secure authorization of any public contract in which the
public official, a member of the public official’s family, or any of the public official’s
business associates has an interest.” Specifically, Medical Mutual alleged that public
officials utilized their authority and influence in the municipal entities to steer public
contracts to FrontPath, for which they served on the board of trustees. Contrary to the
decision of the trial court, we agree with Medical Mutual that the plain language of R.C.
2921.42(A)(1) does not require a showing that the public official received a personal
benefit. We also agree that by virtue of serving on the board of trustees, the public
officials are business associates of FrontPath. Furthermore, we find that FrontPath has an
obvious interest in the public contract that it sought to be awarded. Therefore, we hold
that Medical Mutual sufficiently pled with particularity that FrontPath was engaged in a
corrupt activity.
24.
b. Pattern of Corrupt Activity
{¶ 41} Under the second element, Medical Mutual was required to plead with
particularity that FrontPath’s conduct constituted a pattern of corrupt activity. “‘Pattern
of corrupt activity’ means two or more incidents of corrupt activity, whether or not there
has been a prior conviction, that are related to the affairs of the same enterprise, are not
isolated, and are not so closely related to each other and connected in time and place that
they constitute a single event.” R.C. 2923.31(E). “[A] pattern of corrupt activity under
the [Corrupt Practices Act] requires that predicate crimes be related and pose a threat of
continued criminal activity.” Morrow, 183 Ohio App.3d 40, 2009-Ohio-2665, 915
N.E.2d 696, at ¶ 30.
{¶ 42} To determine whether a complaint alleges a pattern, courts should consider
various factors, including “the length of time the racketeering activity existed; the
number of different schemes (the more the better); the number of predicate acts within
each scheme (the more the better); the variety of species of predicate acts (the more the
better); the distinct types of injury (the more the better); the number of victims (the more
the better); and the number of perpetrators (the less the better).” Morrow at ¶ 34, quoting
Columbia Natural Resources, Inc. v. Tatum, 58 F.3d 1101, 1110 (6th Cir.1995); Sun
Bldg. Ltd. Partnership v. Value Learning & Teaching Academy, Inc., 2021-Ohio-2008,
175 N.E.3d 10, ¶ 61 (1st Dist.).
25.
{¶ 43} Here, Medical Mutual alleged only that the corrupt activity occurred over
the course of “several years,” and occurred on “multiple occasions.” Medical Mutual
also broadly alleged that the “predicate acts are related, in that they had the same or
similar purposes, results, participants, victims, and methods of commission,” and “[t]he
predicate acts were continuous and occurred over multiple years, although the acts were
not so connected that they constitute a single event.”
{¶ 44} Upon review, we find that Medical Mutual’s allegations as to the existence
of a pattern contain no operative facts, and are merely a recitation of the statutory
language. Medical Mutual does not allege when any of the predicate acts occurred, other
than to say that they occurred continuously over several years, but it does not identify
which years. Likewise, Medical Mutual does not identify any particular contract for
which it submitted a bid, but which was ultimately awarded to FrontPath. Therefore, we
hold that Medical Mutual failed to plead the existence of a pattern of corrupt activity with
specificity. See Fed. Land Bank Assn. v. Walton, 3d Dist. Wyandot No. 16-94-9, 1995
WL 359856, *4 (June 16, 1995) (upholding dismissal of RICO claim where the
complaint asserted legal conclusions, “but no facts or time period to which [it] was
referring”).
c. Enterprise
{¶ 45} For the third element, Medical Mutual was required to plead with
specificity the existence of an enterprise. “‘Enterprise’ includes any individual, sole
26.
proprietorship, partnership, limited partnership, corporation, trust, union, government
agency, or other legal entity, or any organization, association, or group of persons
associated in fact although not a legal entity. ‘Enterprise’ includes illicit as well as licit
enterprises.” R.C. 2923.31(C). “The definition of ‘enterprise’ is remarkably open-
ended.” State v. Beverly, 143 Ohio St.3d 258, 2015-Ohio-219, 37 N.E.3d 116, ¶ 8. In
this case, Medical Mutual alleged a de facto, or an “association-in-fact enterprise.” “An
association-in-fact enterprise has been defined as ‘a group of persons associated together
for a common purpose of engaging in a course of conduct.’” Id. at ¶ 9, quoting United
States v. Turkette, 452 U.S. 576, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981).
{¶ 46} Here, we find that Medical Mutual satisfied its pleading requirement.
Medical Mutual alleged that the enterprise consisted of FrontPath, representatives of the
municipal corporations—at least one of whom was named—, third-party benefits
administrators, and other public officials, and existed to “secure and control the market
for health benefit services in Northwest Ohio.” Medical Mutual further alleged that the
enterprise operated by “FrontPath submit[ting] joint or coordinating bids with third-party
administrators for government contracts, and representatives of the Governmental
Employers and other public officials influenc[ing] the selection of those bids by the
Governmental Employers.” Thus, Medical Mutual demonstrated the existence of a group
of persons engaging in a course of conduct for a common purpose.
27.
{¶ 47} In the trial court, FrontPath argued that an enterprise must have “a structure
separate and apart, or distinct, from the pattern of corrupt activity,” citing Dixon v.
Huntington Natl. Bank, 8th Dist. Cuyahoga No. 100572, 2014-Ohio-4079, ¶ 17.
However, the Ohio Supreme Court implicitly rejected this reasoning in Beverly. In that
case, the court held, “the existence of an enterprise, sufficient to sustain a conviction for
engaging in a pattern of corrupt activity under R.C. 2923.32(A)(1), can be established
without proving that the enterprise is a structure separate and distinct from a pattern of
corrupt activity.” Beverly at ¶ 13; see also Boyle v. United States, 556 U.S. 938, 951, 129
S.Ct. 2237, 173 L.Ed.2d 1265 (2009) (“The existence of an association-in-fact is
oftentimes more readily proven by what it does, rather than by abstract analysis of its
structure. * * * [P]roof of a pattern of racketeering activity may be sufficient in a
particular case to permit a jury to infer the existence of an association-in-fact
enterprise.”). Thus, we hold that Medical Mutual was not required to plead an enterprise
having a structure separate and apart from the pattern of corrupt activity, and that
Medical Mutual satisfied its burden to plead the existence of an enterprise with
specificity.
d. Dismissal without Prejudice
{¶ 48} Because we find that Medical Mutual did not plead the existence of a
pattern of corrupt activity with particularity, we hold that the Corrupt Practices Act claim
fails to state a claim upon which relief can be granted.
28.
{¶ 49} Notwithstanding that, Medical Mutual alternatively argues that the trial
court erred in dismissing its claim with prejudice and not allowing it to amend the
complaint. We agree. “A trial court’s grant of Civ.R. 12(B)(6) dismissal is without
prejudice except in those cases where the claim cannot be plead in any other way.” STE
Invests., LLC v. Macprep, Ltd., 6th Dist. Ottawa No. OT-21-036, 2022-Ohio-2614, ¶ 16,
quoting Krohn v. Ostafi, 6th Dist. Lucas No. L-19-1002, 2020-Ohio-1536, ¶ 12.
Additionally, “[i]f a motion for failure to state a claim is sustained, ‘leave to amend the
pleading should be granted unless the court determines that allegations of other
statements or facts consistent with the challenged pleading could not possibly cure the
defect.’” State ex rel. Hanson v. Guernsey Cty. Bd. of Commrs., 65 Ohio St.3d 545, 549,
605 N.E.2d 378 (1992), quoting McCormac, Ohio Civil Rules of Practice (2 Ed.1992)
150, Section 6.20. “The [Civil Rules] are structured to allow prompt and summary
disposition of cases at early stages in cases where recovery could not under any
circumstances be made. * * * The spirit of the Civil Rules is the resolution of cases upon
their merits, not upon pleading deficiencies. Civ.R. 1(B) requires that the Civil Rules
shall be applied ‘to effect just results.’ Pleadings are simply an end to that objective.”
Peterson v. Teodosio, 34 Ohio St.2d 161, 174-175, 297 N.E.2d 113 (1973).
{¶ 50} Here, the claim was capable of being pled with more particularity regarding
the alleged pattern of corrupt activity, thereby curing the defect. Consequently, we hold
29.
that the trial court erred when it dismissed Medical Mutual’s Corrupt Practices Act claim
with prejudice and denied Medical Mutual leave to amend the complaint.
{¶ 51} Accordingly, Medical Mutual’s first assignment of error is well-taken.
B. Denial of Leave to Amend the Complaint
{¶ 52} Finally, in its third assignment of error, Medical Mutual argues that the trial
court abused its discretion when it denied Medical Mutual’s motion for leave to file a
second amended complaint.
{¶ 53} Relevant here, Civ.R. 15(A) provides that a party may amend its pleading
with the court’s leave. “The court shall freely give leave when justice so requires.” Id.“While the rule allows for liberal amendment, motions to amend pleadings pursuant to
Civ.R. 15(A) should be refused if there is a showing of bad faith, undue delay, or undue
prejudice to the opposing party.” Turner v. Cent. Local Sch. Dist., 85 Ohio St.3d 95, 99,
706 N.E.2d 1261 (1999), citing Hoover v. Sumlin, 12 Ohio St.3d 1, 465 N.E.2d 377(1984), paragraph two of the syllabus.
{¶ 54} “A trial court’s denial of a motion for leave to amend a pleading will not be
reversed absent an abuse of discretion.” Leo v. Burge Wrecking, LLC, 2017-Ohio-2690,
89 N.E.3d 1268, ¶ 9 (6th Dist.), citing State ex rel. Askew v. Goldhart, 75 Ohio St.3d 608,
610, 665 N.E.2d 200 (1996). An abuse of discretion connotes that the trial court’s
attitude was unreasonable, arbitrary, or unconscionable. Blakemore v. Blakemore, 5 Ohio
St.3d 217, 219, 450 N.E.2d 1140 (1983).
30.
1. Trial Court’s Judgment Denying the Motion for Leave to Amend
{¶ 55} On January 30, 2020, approximately two and one-half years after the
original complaint was filed, Medical Mutual moved for leave to file its second amended
complaint. Medical Mutual asserted that documents produced in discovery showed that
FrontPath, along with proposed new defendants Don Czerniak and Susan Szymanski,
obtained Medical Mutual’s trade secret information in violation of state and federal trade
secret statutes, including at times while the litigation was pending. Medical Mutual
sought to add the two new defendants to all of the existing claims, and also sought to add
three new claims against all defendants under the Ohio Corrupt Practices Act, Ohio’s
Trade Secrets Act, and the federal Defend Trade Secrets Act. In seeking to add the new
defendants to the existing claims, Medical Mutual recognized that the trial court had
already dismissed Counts I, II, IV, and V, but included those counts for purposes of
protecting the record on appeal.
{¶ 56} In support of its motion, Medical Mutual argued that it had not acted in bad
faith, and that the proposed amended complaint would not cause undue delay or
prejudice. Medical Mutual noted that the active case management order did not provide a
deadline to amend pleadings or add additional parties. Further, Medical Mutual
recognized that discovery was stayed by the court for much of the lawsuit pending
FrontPath’s production of documents. Consequently, at the time of the motion for leave
to amend, neither party had deposed a witness, identified potential experts, or submitted
31.
motions for summary judgment. Medical Mutual also argued that the defendants’ alleged
wrongful conduct was only discovered—and could only have been discovered—after a
careful review of the documents produced by FrontPath in 2019, including documents
which showed that some of the alleged conduct occurred while the litigation was
pending. Lastly, Medical Mutual argued that the amended complaint would not
substantially alter the scope of discovery, which already included responsive documents
regarding the claim that FrontPath conspired with third-party administrators, public
officials, and others to secure and control the market for health benefit services in
northwest Ohio. Medical Mutual asserted that the newly added defendants participated in
the scheme, and the newly added claims elaborate on how the defendants accomplished
the goals of the enterprise.
{¶ 57} After briefing by the parties, the trial court entered its judgment on June 16,
2020, denying Medical Mutual’s motion for leave to file a second amended complaint. In
reaching its decision, the trial court found that Medical Mutual’s request to amend the
complaint was untimely, and would be prejudicial to FrontPath and to the proposed
additional defendants. The trial court reasoned that the case has been pending for nearly
three years, and discovery has been ongoing since 2017. The court also noted that
discovery oftentimes has been contentious, and the parties have been litigating and
conducting discovery under a closed set of pleadings since June 14, 2019, when the trial
court granted FrontPath’s Civ.R. 12(B)(6) motion to dismiss as to all of the claims except
32.
for tortious interference with a business or contractual relationship. Further, the
discovery deadline has been moved more than once, and the parties have continued to
disagree about the appropriate scope of discovery. The court found that Medical
Mutual’s proposed additional claims would significantly expand the scope of discovery,
and would result in additional pleadings and dispositive motions that would impact the
parties’ ability to comply with the case management schedule. The court noted that the
deadline for mediation was only a few months away, and the parties already anticipate a
tight discovery and dispositive motion practice schedule through the trial date set for
March 2021.
{¶ 58} In addition, the trial court found that Medical Mutual certainly knew of the
identities and alleged involvement of the proposed additional defendants prior to filing its
motion for leave to file the second amended complaint. In support of this finding, the
trial court referenced Medical Mutual’s original claim that FrontPath had an
informational advantage because certain governmental employees were allegedly
“wearing two hats.” Finally, the court found that the prejudice to the proposed additional
defendants would be severe as they would be thrust into the late stages of a case with a
lengthy history, and would be given a very short time under the existing case schedule to
prepare to take discovery, to participate in mediation, and to hire experts.
{¶ 59} Alternatively, the trial court found that the motion for leave to file a second
amended complaint should be denied because the amendment would be futile.
33.
Addressing the proposed Corrupt Practices Act claim in Count VI, the trial court found
that the proposed second amended complaint failed to state a claim upon which relief
could be granted.1 Specifically, the trial court found that the second amended complaint
did not allege the existence of a corrupt activity, a pattern of corrupt activity, and an
enterprise.
{¶ 60} As to the existence of a corrupt act and a pattern of corrupt activity, the
trial court found that the second amended complaint generally alleged
at least two predicate acts, including but not limited to, unlawfully,
willfully, and knowingly, soliciting and conspiring with others to violate 18
U.S.C. § 1832, which makes it a crime for Defendants to steal, appropriate,
take, carry away, copy, duplicate, sketch, draw, photograph, download,
upload, alter, destroy, photocopy, replicate, transmit, deliver, send, mail,
communicate, or convey Plaintiffs’ trade secrets in such a way that benefits
anyone other than the Plaintiffs or causes harm to Plaintiffs.
However, the court found that the second amended complaint only specifically alleged
two violations of 18 U.S.C. § 1832, one occurring in 2015, and another occurring in
1
In addition to finding that the proposed Corrupt Practices Act claim in Count VI failed
to state a claim upon which relief could be granted, the trial court found that the
allegations of violations of the Federal Defend Trade Secrets Act and the Ohio Trade
Secrets Act in Counts VII and VIII, respectively, likewise failed to state claims upon
which relief could be granted. Regarding those claims, the trial court found that they
were barred by the statute of limitations. On appeal, Medical Mutual does not raise any
arguments pertaining to those claims, thus we will not address their dismissal by the trial
court.
34.
2017. Because the 2015 violation occurred outside of the statute of limitations, the trial
court held that it could not be used as a predicate act for a Corrupt Practices Act claim.
Moreover, the trial court found that Medical Mutual’s allegations reveal a single scheme
to exclude Medical Mutual’s competition in northwest Ohio, and the allegations consist
of one type of predicate act, causing one type of injury, to one victim. Thus, the court
found that the second amended complaint does not allege a pattern of corrupt activity.
{¶ 61} As to the existence of an enterprise, the trial court found that Medical
Mutual’s allegations were vague in that they included no particularities about the
identities of those in the alleged enterprise, nor did they describe the alleged enterprise’s
structure. Furthermore, the court found that Medical Mutual did not allege that there was
an enterprise separate and apart from the corrupt activity.
2. Whether the Second Amended Complaint was Untimely or Unduly
Prejudicial
{¶ 62} On appeal, Medical Mutual first argues that its request to file a second
amended complaint was neither untimely nor prejudicial. Upon consideration of the
record and litigation history, we agree.
{¶ 63} The trial court’s decision emphasizes the fact that the litigation had been
pending for almost three years, which we agree is an undesirably long time. But, when
considering whether an attempt to amend a pleading is untimely, we find that the
temporal relationship to the proceedings, rather than the absolute length of time, is of
much greater importance. While prejudice and timeliness are related considerations,
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“prejudice is the most critical factor to be considered in determining whether to grant
leave to amend.” Musil v. Gerken Materials, Inc., 6th Dist. Lucas No. L-19-1262, 2020-
Ohio-3548, ¶ 25, citing CommuniCare, Inc. v. Wood Cty. Bd. of Commrs., 161 Ohio
App.3d 84, 89, 2005-Ohio-2348, 829 N.E.2d 706, ¶ 17 (6th Dist.). Thus, although
“amendment after an unjustified delay could result in prejudice to the opposing party,”
Zak v. Airhart, 6th Dist. Lucas No. L-21-1052, 2021-Ohio-4399, ¶ 37, an amendment
may not be as prejudicial where it was made without delay or with justified delay.
{¶ 64} In this case, the original complaint was filed on June 27, 2017, and after
being granted an extension, FrontPath answered on August 28, 2017. An initial pretrial
hearing was held on October 5, 2017, at which the parties were granted 60 days to submit
a joint report defining the issues and scope of discovery in preparation of another pretrial
hearing on December 12, 2017. The trial court stayed all discovery until the December
12, 2017 pretrial. Following the December 12, 2017 pretrial, discovery commenced
subject to a joint stipulated protective order concerning confidential material. A
subsequent pretrial was held on March 22, 2018, at which FrontPath was granted
additional time until April 2018 to answer pending interrogatories and to produce
responsive records.
{¶ 65} On May 22, 2018, the trial court held a pretrial at which it established a
preliminary case management order. The preliminary order established a written
discovery deadline of December 7, 2018, and a non-expert discovery deadline of June 3,
36.
2019. The court further ordered that dispositive motions were to be filed by November 4,
2019.
{¶ 66} In August 2018, FrontPath moved for judgment on the pleadings.
Ultimately, Medical Mutual moved to amend its complaint in October 2018, which
FrontPath did not oppose. The trial court granted Medical Mutual’s motion to file the
amended complaint, and the amended complaint was filed on November 5, 2018, thereby
rendering moot FrontPath’s motion for judgment on the pleadings.
{¶ 67} Shortly after the amended complaint was filed, FrontPath moved to dismiss
the amended complaint. The parties litigated the issue, resulting in the trial court’s June
24, 2019 judgment entry dismissing all of Medical Mutual’s claims except for tortious
interference with a contractual or business relationship, which is discussed above in
Medical Mutual’s first and second assignments of error.
{¶ 68} Concurrent with the litigation on the motion to dismiss, on November 26,
2018, FrontPath filed an emergency motion for a protective order regarding Medical
Mutual’s November 20, 2018 subpoenas. The trial court held a hearing on the emergency
motion a few days later, on December 7, 2018. At the December 7, 2018 hearing, the
parties agreed to suspend compliance with all third-party subpoenas. The parties also
recognized that FrontPath was still in the process of responding to additional discovery
requests from Medical Mutual, and that upon such production, Medical Mutual would
then either withdraw the third-party subpoenas, or elect to proceed with the third-party
37.
subpoenas, at which time the trial court would hear and decide the emergency motion for
a protective order. The court ordered that all discovery was stayed pending the resolution
of the emergency motion for a protective order, except for FrontPath’s agreed-upon
responses to Medical Mutual’s additional request for documents. On January 7, 2019,
FrontPath served its responses to Medical Mutual’s second combined set of
interrogatories and requests for production of documents.
{¶ 69} A further pretrial was held on April 5, 2019. At that pretrial, the case
management order was amended to provide a new discovery deadline of December 20,
2019. Dispositive motions were ordered to be filed by May 11, 2020, and mediation was
ordered to be completed by June 1, 2020. Jury trial was set for September 14, 2020.
{¶ 70} On June 27, 2019, another pretrial hearing was held. Because the trial
court had just three days earlier granted, in part, FrontPath’s motion to dismiss the
amended complaint, the trial court invited the parties to submit post-hearing briefs to
allow FrontPath to argue why the scope of discovery should be limited, to allow Medical
Mutual to argue why the information it is seeking is relevant and discoverable, and to
allow both parties to address the third-party subpoenas. Following the hearing, on
October 1, 2019, the trial court ordered that Medical Mutual could seek information
pertaining to the names of potential entities that it bid and lost to FrontPath within a five-
year time period, and then discovery would be limited to those entities rather than all
governmental employers for whom FrontPath has provided services. The court further
38.
ordered that FrontPath’s provider pricing was in the nature of a trade secret, that it was
not relevant at that time, and thus was not discoverable. Lastly, the trial court approved
FrontPath’s proposed disclosure process to lift the stay on certain third-party discovery.
{¶ 71} Approximately four months after the trial court’s October 1, 2019 order
regarding the scope of discovery, Medical Mutual moved for leave to file its second
amended complaint on January 30, 2020. Subsequent to its motion for leave to file its
second amended complaint, on March 26, 2020, the parties filed a stipulated amendment
to the case management schedule, seeking to extend the existing deadlines by six months.
On March 31, 2020, the trial court amended the case management schedule, setting a new
discovery deadline of June 19, 2020, a mediation deadline of September 1, 2020, and a
dispositive motion deadline of January 11, 2021. Trial was set for March 15, 2021.
{¶ 72} On June 2, 2020 the parties filed a joint status report and stipulation to
amend the case management order. In their filing, the parties noted that they continued to
engage in written discovery, and anticipated supplementing their prior responses to
interrogatories. The parties also commented that although certain depositions had been
previously scheduled, those depositions were cancelled in response to Covid-19.
Recognizing that the current discovery deadline was June 19, 2020, the parties stipulated
to a fact deposition discovery deadline of December 1, 2020. The parties also stipulated
that additional third-party discovery may proceed.
39.
{¶ 73} Two weeks later, the trial court denied Medical Mutual’s motion for leave
to file a second amended complaint.
{¶ 74} In its opposition to Medical Mutual’s motion for leave to amend, FrontPath
cited two cases in support of its argument that Medical Mutual’s second amended
complaint was untimely and prejudicial.
{¶ 75} In the first case, Turner v. Cent. Local Sch. Dist., 85 Ohio St.3d 95, 706
N.E.2d 1261 (1999), the Ohio Supreme Court held that the trial court abused its
discretion when it allowed an untimely motion to amend the answer to assert an
affirmative defense of immunity. In that case, Central moved for summary judgment on
Turner’s negligence claim, arguing that the injury to Turner was not foreseeable.
Summary judgment was awarded to Central, but ultimately reversed on appeal on the
grounds that questions of fact remained. Id. at 96. Upon remand, Central moved to
amend its answer to assert the defense of statutory immunity. Id. The Ohio Supreme
Court reasoned that the motion for leave to amend was untimely and unfairly prejudicial,
noting that it was made two years and ten months after the litigation had commenced, and
after a trial date had been set. Id. at 99. The court also recognized that the motion came
after all experts were in place, and discovery was complete. Id. Lastly, the court was
troubled by the fact that Central did not give a rationale for waiting so long to assert an
obvious defense that “most likely would have terminated the litigation in the first
instance, or at the very least, would have narrowed the issues remaining for resolution.”
40.
Id. The Ohio Supreme Court therefore reasoned that the amendment unfairly prejudiced
Turner, who had already been forced to expend time, resources, and money to oppose the
first motion for summary judgment and the appeal therefrom. Id.
{¶ 76} In the second case, Columbia Gas of Ohio, Inc. v. Toledo Edison Co., 6th
Dist. Lucas No. L-14-1263, 2015-Ohio-3942, ¶ 27-28, this court held that the trial court
did not abuse its discretion when it denied the plaintiff’s motion for leave to amend its
complaint. In that case, the motion for leave to amend was filed almost two years after
the original complaint had been filed and after extensive discovery had been conducted,
and one day after the trial court denied the plaintiff’s motion to continue the trial date and
set alternative cut off dates. Id. at ¶ 27. The plaintiff filed its leave to amend less than
one week before the deadline for filing summary judgment motions, and after the
deadlines for disclosing expert witnesses. Id. In affirming the trial court’s denial of the
plaintiff’s motion for leave to amend, this court noted that the plaintiff offered no
explanation for the delay other than vaguely stating that it was necessary to “update and
refine the allegations to conform to the information revealed by discovery.” Id. at ¶ 28.
This court also found that the defendant would be prejudiced because the defendant
would have to file additional pleadings, further discovery would be needed, and the
deadline for filing motions for summary judgment would have to be extended. Id.
{¶ 77} In addition to the cases cited by FrontPath, we have also addressed the
issue of whether an amendment is untimely and unfairly prejudicial in two recent cases.
41.
{¶ 78} In Musil, 6th Dist. Lucas No. L-19-1262, 2020-Ohio-3548, at ¶ 23-29, this
court affirmed the trial court’s denial of Musil’s motion for leave to amend the complaint.
In that case, the motion was filed more than a year after the original complaint, more than
eight months after discovery was substantially completed, almost seven weeks after the
defendant filed its motion for summary judgment, and just two months before the trial
date. Id. at ¶ 28. This court reasoned that Musil knew of the facts giving rise to his
amended complaint for more than eight months before filing his motion, and that “the
costs of continued litigation, both in terms of time and resources, constitutes prejudice to
[the defendant] where [Musil] waited to file a motion for leave to amend until after [the
defendant] filed a meritorious motion for summary judgment.” Id. at ¶ 29.
{¶ 79} Similarly, in Zak, 6th Dist. Lucas No. L-21-1052, 2021-Ohio-4399, at ¶ 29-
40, this court affirmed the denial of a motion for leave to amend the answer to plead
statute of limitations as an affirmative defense. In Zak, the defendant did not raise the
statute of limitations in his motion for summary judgment, and only raised it for the first
time in his reply in support of his motion for summary judgment. The trial court denied
the defendant’s motion for summary judgment, finding that he waived the statute of
limitations defense. Thereafter, less than a month before the trial date, the defendant
filed a motion for leave to amend his answer to assert the statute of limitations defense.
The trial court denied the motion, finding that it would jeopardize the trial date and would
require a reopening of discovery to address the new defense. On appeal, this court
42.
affirmed, holding that the trial court did not abuse its discretion in denying leave to plead
an “eleventh hour affirmative defense.” Id. at ¶ 39. This court reasoned, “To require
amendment in such circumstances would subject an opposing party to piecemeal motions
that delay trial and force duplication of time and resources in responding to the newly
asserted defenses.” Id.
{¶ 80} In contrast, in Christ v. Konski, 181 Ohio App.3d 682, 2009-Ohio-1460,
910 N.E.2d 520 (6th Dist.), this court reversed the trial court’s judgment vacating its own
prior order to grant the appellant’s motion for leave to amend his complaint to add a new
party defendant. In Christ, the original complaint was filed on August 9, 2005, then
voluntarily dismissed, and re-filed on January 7, 2008. Id. at ¶ 5-6. The refiled
complaint was intended “to reflect the intervening death of Christ, as well as to curtail the
volume of defendants named in the refiled action.” Id. at ¶ 6. On June 11, 2008, the
appellant deposed one of the defendant’s medical expert witnesses, and based on that
testimony sought to add an additional defendant. Id. at ¶ 7-8. The trial court initially
granted the motion for leave to amend the complaint, and at the same time vacated the
scheduled August 18, 2008 trial date. The defendant then sought relief from that
judgment, arguing that the motion for leave to amend was untimely and unduly
prejudicial, and asserting that vacating the trial date would adversely affect the
defendant’s patient care, ability to earn a living, and insurance status. Id. ¶ 10. The trial
court adopted the defendant’s arguments without limitation, vacated its previous order,
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and struck the amended complaint from the record. However, the trial court affirmed its
prior order vacating the trial date. Id. at ¶ 11.
{¶ 81} On appeal, this court reversed the decision of the trial court, finding that it
was unreasonable and arbitrary. This court reasoned that the appellant’s motion was not
untimely, as it was filed within a week of the deposition where it learned of the basis for
adding the new defendant. Furthermore, this court recognized that while adding a new
defendant may involve inconvenience in the form of additional discovery and the
continuation of the trial date, there was nothing in the record to establish undue, actual
prejudice. Id. at ¶ 18. To the contrary, this court stated, “barring appellant from pursuing
action against the pathologist whom appellee’s own expert witness believes breached the
standard of care with adverse consequences to decedent would constitute extreme actual
prejudice.” Id. Thus, this court held that the trial court abused its discretion because
neither unreasonable delay nor actual prejudice were shown, and because the trial court
simply adopted the arguments of the defendant yet those arguments contradicted the
portion of the judgment that vacated the trial date. Id. at ¶ 19.
{¶ 82} Upon review, the facts of this case are much more closely aligned to Christ,
than to Turner, Columbia Gas, Musil, or Zak. Here, the motion for leave to amend was
not filed on the eve of trial, after discovery had been completed, and either after
dispositive motions had been made or were just about to be made. To the contrary,
discovery was ongoing, and would later be extended by stipulation twice for almost
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another year after the motion for leave to amend was filed. At the time the trial court
denied Medical Mutual’s motion for leave to amend, no depositions had been taken, and
the parties contemplated that discovery would continue for at least another six months,
and dispositive motions were not due for approximately seven months. In addition, third-
party discovery in this complex case had only begun four months earlier, and had not to
that point received much response. This is not a case where Medical Mutual dilatorily sat
upon information, then sought to amend its complaint at a late stage. Instead, the record
shows that Medical Mutual sought to amend its complaint as it received new information
from the protracted and ongoing discovery provided by FrontPath.
{¶ 83} Nor do we find reasonable the trial court’s conclusion that Medical Mutual
knew of the identity and alleged involvement of the proposed additional defendants at the
time of the original complaint. In so concluding, the trial court referenced Medical
Mutual’s general allegation that FrontPath had an informational advantage because some
governmental employees were “wearing two hats.” However, a general allegation of an
informational advantage does not mean that Medical Mutual knew or could have known
that the proposed additional defendants were stealing Medical Mutual’s trade secret
pricing information as alleged in the second amended complaint. Furthermore, the trial
court’s conclusion that the proposed additional defendants would be unduly prejudiced
by being added to the lawsuit is unreasonable. A new defendant is always prejudiced by
having to defend against allegations in court, and such a defense would certainly be
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burdensome in complex cases. However, that prejudice is not unfair where the facts
underlying the allegation were discovered, and motion for leave to amend was filed, at a
relatively early stage of the litigation. Indeed, it would be monumentally more unfair to
not allow a plaintiff to seek recovery against a defendant for wrongdoing simply because
it would be expensive and burdensome for the defendant to have to defend himself or
herself.
{¶ 84} Finally, while amending the complaint would have expanded the scope of
discovery relative to FrontPath—although it is unclear to us how significantly it would
have expanded the scope given that the proposed additional claims arose out of the same
transactions as the claims in the original and amended complaints for which written
discovery had been ongoing, and given that it would not have required a second round of
depositions because no depositions had yet occurred—that expansion was largely due to
the trial court’s prior erroneous dismissal with prejudice of Medical Mutual’s claims.
{¶ 85} Thus, while we recognize that the addition of new claims and defendants
would result in the inconvenience and cost of additional pleadings and discovery, we hold
that it is not unduly prejudicial to FrontPath, or the proposed additional defendants, where
the information was learned during the course of the litigation, and the motion for leave
to amend the complaint was made while the litigation was still in the discovery phase and
months before any dispositive motions were due to be filed. Therefore, we hold that the
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trial court abused its discretion when it denied Medical Mutual’s motion for leave to file
its second amended complaint as untimely and unduly prejudicial.
3. Whether the Second Amended Complaint was Futile
{¶ 86} Alternatively, the trial court justified its denial of Medical Mutual’s motion
for leave to amend on the basis that the motion was futile because the second amended
complaint failed to state a claim upon which relief could be granted.
{¶ 87} “Where a plaintiff fails to make a prima facie showing of support for new
matters sought to be pleaded, a trial court acts within its discretion to deny a motion to
amend the pleading.” Wilmington Steel Prods., Inc. v. Cleveland Elec. Illuminating Co.,
60 Ohio St.3d 120, 573 N.E.2d 622 (1991), syllabus. This consideration “is meant to aid
in determining whether the amendment is ‘simply a delaying tactic, [or] one which would
cause prejudice to the defendant.’” Darby v. A-Best Prods. Co., 102 Ohio St.3d 410,
2004-Ohio-3720, 811 N.E.2d 1117, ¶ 20. Because consideration of whether a proposed
claim would survive a motion to dismiss is a legal issue, we review de novo the trial
court’s denial of the motion for leave to amend the complaint on this basis. Hollinghead
v. Bey, 6th Dist. Lucas No. L-99-1351, 2000 WL 1005205, *8 (July 21, 2000), citing
Marx v. Ohio State Univ. College of Dentistry, 10th Dist. Franklin No. 95APE07-872,
1996 WL 87462, *3 (Feb. 27, 1996).
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{¶ 88} Having already discussed the elements of a Corrupt Practices Act claim in
Medical Mutual’s first assignment of error, we will address the elements in a truncated
fashion.
a. Corrupt Activity
{¶ 89} In its judgment entry, the trial court found that Medical Mutual only
specifically alleged two corrupt activities, those being violations of the federal Defending
Trade Secrets Act and its Ohio counterpart, but that one of the corrupt activities occurred
before the Defending Trade Secrets Act was enacted. However, the trial court did not
consider the other parts of the second amended complaint, which were incorporated by
reference, and which alleged that the defendants also violated the Ohio ethics laws under
R.C. 2921.42(A)(1). Thus, the second amended complaint sufficiently alleged a corrupt
activity.
b. Pattern of Corrupt Activity
{¶ 90} As to the pattern of corrupt activity, the trial court found that Medical
Mutual alleged a single scheme to exclude its competition in northwest Ohio, and that the
scheme consisted of only one type of predicate act causing only one type of injury to only
one victim. The trial court reasoned that this type of allegation was insufficient to
constitute a pattern of corrupt activity. Again, the trial court did not consider the other
allegations in the complaint.
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{¶ 91} In this case, Medical Mutual alleged that FrontPath and others engaged in
multiple acts violating R.C. 2921.42(A)(1) and the federal Defend Trade Secrets Act and
its Ohio counterpart, that those acts were in furtherance of the goal to secure public
contracts for FrontPath and its third-party administrative partners, that those activities
occurred on multiple instances with multiple government entities over a course of years,
and that those activities culminated in FrontPath being awarded multiple public contracts.
Unlike the amended complaint, the second amended complaint provided specific
allegations that certain actors took certain actions in 2015, 2017, and 2019.2 Taking these
allegations as true, and construing any reasonable inferences from them, we hold that the
second amended complaint sufficiently alleged a pattern of corrupt activity.
c. Enterprise
{¶ 92} Finally, the trial court found that the second amended complaint
“include[d] no particularities about the identities of those in the alleged association-in-
fact enterprise, nor do they describe the alleged enterprise’s structure.” As with the other
two elements, the trial court did not consider the entirety of the allegations in the second
amended complaint.
{¶ 93} Medical Mutual alleged that the enterprise consisted of: “among others,
representatives of the Governmental Employers, third-party administrators, other public
2
The second amended complaint was filed under seal. We have reviewed the second
amended complaint, but because of the confidentiality of the document, we will not
repeat the specific allegations.
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officials, consultants and others and exists to secure and control the market for health
benefit services in Northwest Ohio.” The factual allegations in the complaint, however,
specifically name FrontPath, the proposed additional defendants, the third-party
administrator HealthScope, and several other named individuals as being involved. Thus,
we hold that the second amended complaint sufficiently alleged the existence of an
enterprise.
{¶ 94} Therefore, because the second amended complaint alleged with
particularity the existence of a corrupt activity, a pattern of corrupt activity, and an
enterprise, we hold that the second amended complaint was not futile.
4. Relief Limited
{¶ 95} In sum, because the second amended complaint was not untimely or unduly
prejudicial, and because it was not futile, we hold that the trial court abused its discretion
when it denied Medical Mutual’s motion for leave to amend.
{¶ 96} However, the scope of Medical Mutual’s third assignment of error only
pertains to the additional new defendants, Donald Czerniak and Susan Szymanski.
App.R. 12(A)(1)(b) mandates that “a court of appeals shall * * * [d]etermine the appeal
on its merits on the assignments of error set forth in the briefs under App.R. 16 * * *.”
For this reason, it is well settled that “[a]ppellate courts determine appeals on the basis of
assignments of error rather than arguments in support of assignments of error.” Bodager
v. Campbell, 4th Dist. Pike No. 12CA828, 2013-Ohio-4650, ¶ 32; see also Jensen v.
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AdChoice, Inc., 6th Dist. Lucas No. L-14-1014, 2014-Ohio-5590, ¶ 23, fn. 4, quoting
Bonn v. Bonn, 10th Dist. Franklin No. 12AP-1047, 2013-Ohio-2313, ¶ 9 (Refusing to
consider an issue that was “not raise[d] * * * as part of [appellant’s] assignment of error *
* *” because “‘this court rules on assignments of error only, and will not address mere
arguments.’”); Evans v. Ohio Dept. of Rehab. & Corr., 10th Dist. Franklin No. 18AP-
713, 2019-Ohio-3788, ¶ 11, fn. 2 (Refusing to consider an issue that “does not correlate
with [appellant’s] sole assignment of error” because appellate courts must “determine
appeals based on assignments of error, not mere arguments * * *.”).
{¶ 97} Here, the third assignment of error asserts: “The trial court erred by
denying MMO’s motion for leave to amend its complaint to assert claims against new
defendants Donald Czerniak and Susan Szymanski.” (Emphasis added.)
{¶ 98} Our decision is therefore confined to resolution of this assigned error.
{¶ 99} Accordingly, Medical Mutual’s third assignment of error is well-taken.
IV. Conclusion
{¶ 100} For the foregoing reasons, we find that substantial justice has not been
done the party complaining. The trial court erroneously dismissed with prejudice
Medical Mutual’s civil liability for a criminal act and Corrupt Practices Act claims. The
trial court abused its discretion when it denied Medical Mutual’s motion for leave to
amend the complaint to assert claims against new defendants Daniel Czerniak and Susan
Szymanski. Therefore, as described above, the June 24, 2019, and June 16, 2020
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judgments of the Lucas County Court of Common Pleas are reversed. This matter is
remanded to the trial court for further proceedings consistent with this decision.
FrontPath is ordered to pay the costs of this appeal pursuant to App.R. 24.
Judgments reversed
and remanded.
A certified copy of this entry shall constitute the mandate pursuant to App.R. 27.
See also 6th Dist.Loc.App.R. 4.
Mark L. Pietrykowski, J. ____________________________
JUDGE
Thomas J. Osowik, J.
____________________________
Christine E. Mayle, J. JUDGE
CONCUR.
____________________________
JUDGE
This decision is subject to further editing by the Supreme Court of
Ohio’s Reporter of Decisions. Parties interested in viewing the final reported
version are advised to visit the Ohio Supreme Court’s web site at:
http://www.supremecourt.ohio.gov/ROD/docs/.
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