Bobst v. Chem-Tech Consultants, Inc. ( 2014 )

[Cite as Bobst v. Chem-Tech Consultants, Inc., 2014-Ohio-3457.]
COURT OF APPEALS
RICHLAND COUNTY, OHIO
FIFTH APPELLATE DISTRICT
SCOTT BOBST : JUDGES:
: Hon. Sheila G. Farmer, P.J.
Plaintiff-Appellant : Hon. John W. Wise, J.
: Hon. Patricia A. Delaney, J.
-vs- :
:
CHEM-TECH CONSULTANTS, INC. : Case No. 13CA15
:
Defendant-Appellee : OPINION
CHARACTER OF PROCEEDING: Appeal from the Court of Common
Pleas, Case No. 2010 CV 541
JUDGMENT: Affirmed/Reversed in Part and
Remanded
DATE OF JUDGMENT: August 7, 2014
APPEARANCES:
For Plaintiff-Appellant For Defendant-Appellee
ERIC S. MILLER J. JEFFREY HECK
13 Park Avenue West One Marion Avenue
Suite 608 Suite 104
Mansfield, OH 44902 Marion, OH 44903
Richland County, Case No. 13CA15 2
Farmer, P.J.
{¶1} Appellant, Scott Bobst, was an employee for appellee, Chem-Tech
Consultants, Inc. Appellant's employment terminated on February 15, 2010. Upon
termination, appellant signed a severance agreement which contained a covenant not to
sue.
{¶2} On April 29, 2010, appellant filed a declaratory judgment action, asking
the trial court to construe the severance agreement and a non-competition agreement
between the parties.
{¶3} On June 1, 2010, appellee filed a motion to dismiss pursuant to Civ.R.
12(B)(6), asserting the covenant not to sue barred the action. By judgment entry filed
August 2, 2010, the trial court agreed and dismissed the complaint. On appeal, this
court reversed, holding Civ.R. 12(B)(6) was not the appropriate vehicle to determine the
action. Bobst v. Chem-Tech Consultants, Inc., 5th Dist. Richland No. 2010-CA-0104,
2010-Ohio-574.
{¶4} On remand, appellee filed an answer to appellant's complaint and a
counterclaim asserting three causes of action: breach of the severance agreement by
filing the action, breach of contract and confidentiality due to appellant's disclosure of
specific agreements between the parties, and breach of fiduciary duty and appellant's
obligation of good faith and fair dealing with appellee.
{¶5} On January 19, 2011, the trial court bifurcated the declaratory judgment
action from the issues raised in the counterclaim. A bench trial on the declaratory
judgment action was held on March 3, 2011. At the close of appellant's case, appellee
moved to dismiss the complaint under Civ.R. 41(B)(2). By judgment entry filed March
Richland County, Case No. 13CA15 3
11, 2011, the trial court granted the motion and dismissed the complaint with prejudice.
On appeal, this court dismissed the appeal, finding the March 11, 2011 judgment entry
was not a final appealable order due to the pending counterclaim. Bobst v. Chem-Tech
Consultants, Inc., 5th Dist. Richland No. 11CA35, 2011-Ohio-4618.
{¶6} On remand, appellee filed a motion for partial summary judgment on
December 23, 2011. Appellant filed a motion for summary judgment on all claims set
forth in appellee's counterclaim on January 3, 2012.
{¶7} On February 27, 2012, appellant filed a voluntary dismissal of his
declaratory judgment action without prejudice.
{¶8} On April 2, 2012, the trial court granted appellee summary judgment on
the first and second causes of action of its counterclaim, finding appellant breached the
severance agreement by filing the action itself, and breached paragraph 9 of the
agreement by attaching the agreement to his declaratory judgment complaint. The trial
court awarded appellee damages in the amount of $16,000.00 for attorney fees and
expenses, and appellee no longer owed appellant any payments due him under the
shareholder agreement. The trial court determined the only remaining claim was the
third cause of action for breach of fiduciary duty. On April 10, 2012, appellee voluntarily
dismissed this claim without prejudice.
{¶9} On appeal, this court reversed, finding the April 2, 2012 judgment entry
was not a final appealable order due to appellee voluntarily dismissing the third cause of
action of the counterclaim without prejudice and otherwise than on the merits. Bobst v.
Chem-Tech Consultants, Inc., 5th Dist. Richland No. 12CA37, 2012-Ohio-5601.
Richland County, Case No. 13CA15 4
{¶10} On remand, the trial court filed a nunc pro tunc judgment entry adding
Civ.R. 54(B) language on February 4, 2013. The parties also filed a stipulation
dismissing the third cause of action of the counterclaim with prejudice on January 30,
2013.
{¶11} Appellant filed an appeal and this matter is now before this court for
consideration. Assignments of error are as follows:
I
{¶12} "THE TRIAL COURT ERRED WHEN IT GRANTED SUMMARY
JUDGMENT TO CHEM-TECH ON COUNT 1 OF ITS COUNTERCLAIM BECAUSE
SCOTT BOBST NEVER RELEASED CLAIMS THAT ACCRUED AND AROSE AFTER
HE SIGNED A SEVERANCE AGREEMENT WITH CHEM-TECH ON FEBRUARY 17,
2010. BECAUSE BOBST DID NOT FILE HIS DECLARATORY JUDGMENT ACTION
UNTIL APRIL 29, 2010, AFTER A JUSTICIABLE CONTROVERSY AROSE BETWEEN
THE PARTIES RELATING TO A LIVE NON-COMPETITION AGREEMENT, BOBST
COULD NOT, AS A MATTER OF LAW, HAVE BREACHED THE SEVERANCE
AGREEMENT BY FILING SUIT."
II
{¶13} "THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT TO
CHEM-TECH ON COUNT 2 OF ITS COUNTERCLAIM, BECAUSE ATTACHING A
REDACTED COPY OF A SEVERANCE AGREEMENT TO A LAWFUL
DECLARATORY JUDGMENT COMPLAINT WAS NOT A BREACH OF THE
SEVERANCE AGREEMENT THAT WAS SO MATERIAL AS TO WARRANT AN
AWARD OF ATTORNEY FEES AND A FORFEITURE OF A $59,000 PAYMENT
Richland County, Case No. 13CA15 5
OWED TO BOBST FOR THE RE-PURCHASE [OF] HIS SHARES IN THE COMPANY;
CHEM-TECH WAS NOT DAMAGED BY ANY ALLEGED "BREACH" AND THE FACT
THAT THE COMPANY ITSELF FILED THE ENTIRE AGREEMENT IN A PUBLIC
FILING DEMONSTRATES THAT THERE WAS NO MATERIAL BREACH BY BOBST."
III
{¶14} "EVEN ASSUMING, ARGUENDO, THAT BOBST BREACHED THE
SEVERANCE AGREEMENT UNDER EITHER COUNT 1 OR COUNT 2 OF CHEM-
TECH'S COUNTERCLAIM, THE TRIAL COURT ERRED IN AWARDING CHEM-TECH
ATTORNEY'S FEES BECAUSE: (A) THE SEVERANCE AGREEMENT DOES NOT
EXPRESSLY PROVIDE FOR ANY AWARD OF ATTORNEY FEES IN THE EVENT OF
BREACH; AND (B) IT AWARDED A MONETARY JUDGMENT BASED ONLY ON
CONCLUSORY AFFIDAVITS OVER BOBST'S OBJECTION."
IV
{¶15} "THE TRIAL COURT ERRED IN FAILING TO DISMISS THE
COUNTERCLAIMS WITH PREJUDICE BECAUSE THE BOBST CLAIM WAS A RIPE
CLAIM FOR DECLARATORY JUDGMENT THAT HAD NOT BEEN RELEASED."
V
{¶16} "THE COURT BELOW ERRED IN HOLDING THAT "BENEFITS"
SUBJECT TO FORFEITURE UNDER § 9 OF THE SEVERANCE AGREEMENT
INCLUDES MONEY OWED TO A SHAREHOLDER UNDER § 3 OF THE AGREEMENT
FOR THE REASON THAT § 2 ESSENTIALLY LIMITED THE TERM "BENEFITS" TO
PAYMENT FOR SERVICES RENDERED AS AN EMPLOYEE AND NOT MONEY
OWED FOR THE REPURCHASE OF SHARES OF STOCK."
Richland County, Case No. 13CA15 6
{¶17} Appellant's assignments of error challenge the trial court's granting of
summary judgment to appellee.
{¶18} Summary Judgment motions are to be resolved in light of the dictates of
Civ.R. 56. Said rule was reaffirmed by the Supreme Court of Ohio in State ex rel.
Zimmerman v. Tompkins, 75 Ohio St.3d 447, 448, 1996-Ohio-211:
Civ.R. 56(C) provides that before summary judgment may be
granted, it must be determined that (1) no genuine issue as to any
material fact remains to be litigated, (2) the moving party is entitled to
judgment as a matter of law, and (3) it appears from the evidence that
reasonable minds can come to but one conclusion, and viewing such
evidence most strongly in favor of the nonmoving party, that conclusion is
adverse to the party against whom the motion for summary judgment is
made. State ex. rel. Parsons v. Fleming (1994), 68 Ohio St.3d 509, 511,
628 N.E.2d 1377, 1379, citing Temple v. Wean United, Inc. (1977), 50
Ohio St.2d 317, 327, 4 O.O3d 466, 472, 364 N.E.2d 267, 274.
{¶19} As an appellate court reviewing summary judgment motions, we must
stand in the shoes of the trial court and review summary judgments on the same
standard and evidence as the trial court. Smiddy v. The Wedding Party, Inc., 30 Ohio
St.3d 35 (1987).
Richland County, Case No. 13CA15 7
I
{¶20} Appellant claims the trial court erred in granting summary judgment to
appellee on the first cause of action of the counterclaim. We agree.
{¶21} The first cause of action sought recovery of amounts expended and for
other unspecified damages including attorney's fees due to appellant filing the
declaratory judgment action in violation of paragraphs 5, 6, and 12 of the Severance
Agreement and General Release of Claims executed by the parties on February 17,
2010.
{¶22} In his declaratory judgment action filed April 29, 2010, appellant sought a
declaration that the severance agreement superseded or merged a previously signed
Confidentiality and Non-Competition Agreement and a Shareholder Agreement, both
effective January 1, 2003. The declaratory judgment complaint specifically requested
the following in pertinent part:
WHEREFORE Plaintiff asks the Court for a Declaratory Judgment
as follows:
1. That a complete copy of the Severance Agreement (Exhibit A)
can be filed herein without violation of the Agreement itself.
2. That the Severance Agreement (Exhibit A) has eliminated
Exhibits B and C as binding agreements
3. That Plaintiff is free to engage in his field of employment
provided Plaintiff does not violate the express written terms of the
Severance Agreement (Exhibit A).
Richland County, Case No. 13CA15 8
4. Alternatively, Plaintiff asks the Court for a determination that
residential environmental and safety services are not prohibited by the
Non-Compete Agreement (Exhibit B) and that Plaintiff may work for
business clients except those with whom Chem-Tech had provided
environmental or safety engineering services during Plaintiff's
employment.
{¶23} Paragraphs 5, 6, and 12 of the severance agreement, attached to
appellant's declaratory judgment complaint as Exhibit A, states the following:
5. Release and Covenant Not to Sue by Scott Bobst.
In consideration for the promises and payments contained herein,
Scott Bobst, on behalf of himself and his successors and assigns and any
person or entity whose claim may arise by and/or through him, hereby:
A. RELEASES, REMISES, and FOREVER DISCHARGES any and
all claims, actions, causes of action, demands, damages, judgments,
grievances, promises, debts, offsets, liabilities, and recoupments of any
nature or kind whatsoever, however arising, whether at law or in equity,
direct or indirect, which he now has or hereafter may have or claim to
have against Chem-Tech Consultants, Inc., and any of its officers,
members, shareholders, employees, insurers, attorneys, agents, heirs,
predecessors, successors, and assigns as a result of any and all actions
relating to his employment by Chem-Tech Consultants, Inc. or shareholder
Richland County, Case No. 13CA15 9
status with Chem-Tech Consultants, Inc., whether known or unknown to
him that occurred prior to the date of this Agreement, including, but not
limited to, any claims arising out of any employment contract, Shareholder
Agreement or other agreement (express or implied), policies, procedures
or practices of Chem-Tech Consultants, Inc., state or federal statute
(including all state and federal employment discrimination laws, including,
but not limited to, Ohio Revised Code Section 4101.17, Ohio Revised
Code Sections 4112.01 et seq., the federal Age Discrimination in
Employment Act, and Title VII of the Civil Rights Act of 1964), local
ordinances or common law;
B. SHALL FOREVER REFRAIN from bringing and suit, lawsuit,
claim, cause of action, grievance, or other legal action of any kind against
Chem-Tech Consultants, Inc. and any of its officers, employees, insurers,
attorneys, agents, heirs, predecessors, successors, and assigns arising
out of any actions relating to his employment by Chem-Tech Consultants,
Inc. or shareholder status with Chem-Tech Consultants, Inc., whether
known or unknown to him that occurred prior to the date of this
Agreement, including, but not limited to, any claims arising out of any
employment contract, Shareholder Agreement or other agreement
(express or implied), policies, procedures or practices of the Employer,
state or federal statute (including all state and federal employment
discrimination laws, including, but not limited to, Ohio Revised Code
Section 4101.17, Ohio Employment Act, and Title VII of the Civil Rights
Richland County, Case No. 13CA15 10
Act of 1964), local ordinances or common law; provided however, that
nothing in this provision shall preclude any claim that hereafter may arise
by virtue of a breach of an undertaking or promise set forth in this
Agreement or actions that occurred after the date of this Agreement. Also
excluded from this Severance Agreement and General Release are claims
which, by law, cannot be waived, including the right to file a charge;
Employee/Shareholder is waiving, however, his right to any monetary
recovery (including any obligation for any costs, expenses and attorneys'
fees) should he or any agency pursue any such claims.
6. Unknown Claims.
Employee/Shareholder intends that this Agreement is final and
complete and therefore shall bar each and every claim, demand and
cause of action specified herein, whether known or unknown to him at the
time of execution of this Agreement. As a result, Employee/Shareholder
acknowledges that he might later discover pre-existing claims or facts in
addition to or different from those which he now knows or believes to exist
with respect to the subject matters of this Agreement and which, if known
or suspected at the time of executing this Agreement, may have materially
affected this settlement. Nevertheless, Employee/Shareholder hereby
waives any right, claim, or cause of action that might arise as a result of
such different or additional claims or facts.
12. Breach of Severance Agreement.
Richland County, Case No. 13CA15 11
In the event Employee/Shareholder breaches any of the rights and
obligations under this Agreement or as otherwise imposed by law,
Employer shall be entitled to recover the benefits paid to
Employee/Shareholder under this Agreement and to obtain any and all
other relief provided by law or equity.
{¶24} In its nunc pro tunc judgment entry filed February 4, 2013, the trial court
found the following:
Under this Court's ruling in the Judgment Entry of March 11, 2011,
defendant is now entitled to summary judgment on the First Cause of
Action of its Counterclaim. As this Court has already ruled, plaintiff's filing
of his Complaint in this case was, itself, a breach of the Severance
Agreement. This Court has already twice considered and rejected
plaintiff's arguments on this issue.
{¶25} In its March 11, 2011 judgment entry dismissing the declaratory judgment
action with prejudice, the trial court found the following:
Initially, the Court finds that Exhibit F, the Severance Agreement,
was intended by the parties to be, and, in fact, is an enforceable and
binding agreement between the parties. Indeed, this has been stipulated
by the parties to this action and supported by the evidence. The Court
Richland County, Case No. 13CA15 12
has now also reviewed and construed that Severance Agreement and,
having done so, finds that, under its clear terms, Plaintiff had no right to
bring this action, that it was improvidently brought and that the Complaint
was filed in contravention and violation of the terms of the Severance
Agreement. The very terms of the Severance Agreement and Release,
Exhibit F, itself preclude Plaintiff from bringing this action at all. For these
reasons and upon the facts and the law, Plaintiff has shown no right to
relief and the Court finds dismissal of the Complaint appropriate under
Rule 4(B)(2).
{¶26} Of particular importance is the language in paragraph 5(A) and (B),
respectively: "as a result of any and all actions relating to his employment with Chem-
Tech Consultants, Inc. or shareholder status***whether known or unknown to him that
occurred prior to the date of this Agreement" and "nothing in this provision shall
preclude any claim that hereafter may arise by virtue of a breach of this undertaking or
promise set forth in the Agreement or actions that occurred after the date of this
Agreement."
{¶27} R.C. Chapter 2721 governs declaratory judgments. R.C. 2721.03 pertains
to construction and validity of instrument and states the following:
Subject to division (B) of section 2721.02 of the Revised Code, any
person interested under a deed, will, written contract, or other writing
constituting a contract or any person whose rights, status, or other legal
Richland County, Case No. 13CA15 13
relations are affected by a constitutional provision, statute, rule as defined
in section 119.01 of the Revised Code, municipal ordinance, township
resolution, contract, or franchise may have determined any question of
construction or validity arising under the instrument, constitutional
provision, statute, rule, ordinance, resolution, contract, or franchise and
obtain a declaration of rights, status, or other legal relations under it.
{¶28} R.C. 2721.04 pertains to contract and states: "Subject to division (B) of
section 2721.02 of the Revised Code, a contract may be construed by a declaratory
judgment or decree either before or after there has been a breach of the contract."
{¶29} Appellant's declaratory judgment action asked if the 2003 agreements
were still in effect given the following integration clause in the severance agreement:
16. Entire Agreement.
This Agreement embodies the entire agreement and understanding
of the Parties with regard to the subject matter contained herein. There
are no restrictions, promises, representations, warranties, covenants, or
undertakings other than those expressly set forth or referred to herein.
{¶30} We find the complaint raises a justiciable issue that requires an
interpretation of the severance agreement as to the validity of the 2003 agreements.
Further, the severance agreement acknowledged the right of the parties to sue for a
breach of that agreement. The declaratory judgment statute specifically allows for
Richland County, Case No. 13CA15 14
anticipatory breaches of contract calling upon the equity powers of the trial court to
resolve an anticipatory breach.
{¶31} Upon review, we conclude the trial court erred in granting summary
judgment to appellee on its first cause of action of the counterclaim and awarding
appellee $16,000.00. The first cause of action of the counterclaim is hereby dismissed.
{¶32} Assignment of Error I is granted.
II
{¶33} Appellant claims the trial court erred in granting summary judgment to
appellee on the second cause of action of the counterclaim as attaching the parties'
agreements to the declaratory judgment action was not a breach of the confidentially
and non-disclosure covenant of the agreement. We agree in part.
{¶34} Paragraph 9 of the severance agreement states the following:
9. Confidentiality and Nondisparagement.
The parties agree that they and their respective officers,
employees, agents, heirs, successors, assigns, and attorneys shall keep
the fact of and the terms of this Agreement confidential except to the
extent any party makes disclosures to his or its accountants, attorneys, or
spouse (and, in the case of Employer, its employees or agents on a need-
to-know basis only), and whom the parties agree to also instruct to keep
such confidential, and to the extent that any party is compelled to make
disclosures to any federal, state, or other regulatory agency, or to the
extent otherwise required by law. Each party also specifically agrees to
Richland County, Case No. 13CA15 15
refrain from making any negative or critical remarks about the other party
to any third parties.
Employee/Shareholder specifically agrees and acknowledges that
this provision is a significant part of the consideration for Employer to
enter in to this Agreement and that without Employee/Shareholder's
agreement to this provision, Employer would not be willing to enter in to
this Agreement. Therefore, Employee/Shareholder's breach of this
provision shall result in the immediate forfeiture and cessation of any and
all further benefits payable hereunder to Employee/Shareholder by
Employer.
{¶35} Appellee argues "the fact of and the terms of" the severance agreement
preclude the attachment of the agreement to the declaratory judgment complaint.
Appellee's Brief at 30.
{¶36} Civ.R. 10(D)(1) states: "When any claim or defense is founded on an
account or other written instrument, a copy of the account or written instrument must be
attached to the pleading. If the account or written instrument is not attached, the reason
for the omission must be stated in the pleading."
{¶37} At the bottom of the first page of the severance agreement attached to the
declaratory judgment complaint is a handwritten note that states, "$ amounts and
Exhibit 1 redacted." Exhibit 1 was the Shareholder Agreement which was also attached
to the declaratory judgment complaint, but the financial terms attached thereto were
redacted. Except for some nonspecific references under paragraph 2, "Salary and
Richland County, Case No. 13CA15 16
Benefits," and the specific dollar amount redacted under paragraph 3, "Shareholder
Buy-Out," the agreement is generally generic. We note appellee also published the
severance agreement and the shareholder agreement with its motion for partial
summary judgment filed December 23, 2011, and included the redacted financial terms
attached to the shareholder agreement.
{¶38} In its nunc pro tunc judgment entry filed February 4, 2013, the trial court
found the filing of the severance agreement (without noting the redactions) was a
violation of the agreement. As a result, the trial court forfeited any payments due
appellant after April 29, 2010, the date of the filing of the complaint. Although the trial
court was correct in finding the filing was a technical violation of the agreement, no
evidence was presented as to the damages resulting from the technical breach.
Therefore, under a summary judgment standard, there remains a genuine issue of
material fact as to what damages, if any, resulted from the breach of the confidentiality
provision in the severance agreement.
{¶39} Apart from the technical breach, this assignment of error poses the issue
of whether trial courts in Ohio will bar the prosecution of legitimate claims. In other
words, can the mandates of Civ.R. 10(D)(1) be supplanted by a boilerplate
confidentiality provision? We note the severance agreement in fact acknowledges the
right to pursue its enforcement in paragraphs 5 and 6. One can only theorize how such
enforcement can be effectuated without attaching the agreement to a complaint.
{¶40} Appellee's own cavalier attachment of the agreements to its motion for
partial summary judgment points to the fact that the agreements are an initial, relevant,
and necessary part of the litigation. How else is the Ohio Constitution, Article I, Section
Richland County, Case No. 13CA15 17
16 to be fulfilled? The counter-argument is that the agreements could have been
placed under seal with the complaint in order to comply.
{¶41} As we noted, the severance agreement absent the redactions is very
boilerplate, and one can only theorize as to what damages could have resulted from its
publication.
{¶42} Assignment of Error II is granted in part.
III, IV, V
{¶43} Based upon our decision in Assignments of Error I and II, these
assignments are moot.
{¶44} The judgment of the Court of Common Pleas of Richland County, Ohio is
hereby affirmed in part and reversed in part.
By Farmer, P.J.
Wise, J. and
Delaney, J. concur.
SGF/sg 723