Am. Environmental Group, Ltd. v. H.M. Miller Constr. Co. , 2014 Ohio 4681 ( 2014 )

[Cite as Am. Environmental Group, Ltd. v. H.M. Miller Constr. Co. , 2014-Ohio-4681.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 100854
AMERICAN ENVIRONMENTAL GROUP, LTD.
PLAINTIFF-APPELLEE
vs.
H.M. MILLER CONSTRUCTION CO., ET AL.
DEFENDANTS-APPELLANTS
JUDGMENT:
REVERSED AND REMANDED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-13-810811
BEFORE: E.T. Gallagher, J., Boyle, A.J., and Kilbane, J.
RELEASED AND JOURNALIZED: October 23, 2014
ATTORNEYS FOR APPELLANTS
Aaron S. Evenchik
Rick L. Amburgey
Andrew J. Natale
Frantz Ward L.L.P.
2500 Key Center
127 Public Square
Cleveland, Ohio 44114
ATTORNEYS FOR APPELLEE
Mark F. Craig
Michael P. O’Donnell
David Sporar
Brouse McDowell, L.P.A.
600 Superior Avenue, East
Suite 1600
Cleveland, Ohio 44114
EILEEN T. GALLAGHER, J.:
{¶1} Defendants-appellants, H.M. Miller Construction Co. (“H.M.M.”) and Ohio
Farmers Insurance Company (“OFIC”), collectively (“appellants”), appeal the denial of
their motion to quash subpoenas and for protective order. We find merit to the appeal,
reverse the trial court’s judgment and remand the case to the trial court for an in camera
inspection of the subpoenaed documents.
{¶2} This case arises from a construction project in the city of Fremont, Ohio
(“Fremont” or “the city”). The city planned to build a raw water reservoir and hired
H.M.M. as the general contractor for the project. Fremont also retained Arcadis, U.S.
Inc. (“Arcadis”), as the project engineer. OFIC was the surety for the payment bond on
the project.
{¶3} During construction, problems were discovered in the rock floor of the
reservoir that necessitated a change from a clay-lined reservoir to a geosynthetic-lined
reservoir. In May 2011, H.M.M. subcontracted with plaintiff-appellee, American
Environmental Group Ltd. (“AEG”), to install the geosynthetic liner. Payment and
contract disputes subsequently arose between Fremont and H.M.M., and H.M.M. failed to
pay AEG for the work it performed on the project. Ultimately, AEG filed a lien against
public funds, asserted a claim against the payment bond, and filed suit against H.M.M.,
OFIC, and Fremont in the Sandusky County Court of Common Pleas. The parties
recognized that H.M.M.’s failure to pay AEG was caused, in part, by the city’s refusal to
pay H.M.M. In June 2012, H.M.M. filed suit against Fremont in the Sandusky County
Common Pleas Court.
{¶4} In June 2012, H.M.M. and Fremont participated in mediation to review the
claims and discuss completion of the project. The parties reached an agreement in which
Fremont agreed to pay a portion of H.M.M.’s and AEG’s claims, and H.M.M. agreed to
complete the project as outlined in a “Memorandum of Understanding” between Fremont
and H.M.M.
{¶5} H.M.M. subsequently met with AEG to review the Memorandum of
Understanding and to obtain AEG’s agreement to complete the reservoir project.
Following negotations, H.M.M., AEG, and OFIC entered into a “Liquidating and Joint
Prosecution Agreement” (“Joint Prosecution Agreement”), in which they agreed to
resolve the payment dispute between them and to collectively prosecute their claims
against Fremont. The Joint Prosecution Agreement provided, in relevant part:
CONTRACTOR [H.M.M.] and SUBCONTRACTOR [AEG] agree to
jointly prosecute their respective claims relating to the project against the
Project Owner through Contractor’s existing lawsuit in the Common Pleas
Court of Sandusky County, (Case No. 12 CV 758) (“Lawsuit”) which
claims will include those of SUBCONTRACTOR. Although
SUBCONTRACTOR need not be a party to that Lawsuit to mitigate
SUBCONTRACTOR’s legal expense. CONTRACTOR consents to
sponsor SUBCONTRACTOR’s claims in the Lawsuit and all related
alternative dispute resolution procedures, with SUBCONTRACTOR’s
reasonable cooperation, in accordance with the Contract and applicable law,
subject to CONTRACTOR’s sole right to direct and manage litigation.
{¶6} The litigation between H.M.M. and Fremont remained unresolved, and
H.M.M. and Freemont participated in a second mediation in October 2012. The parties
were unable to resolve their dispute at this mediation. Consequently, Fremont filed suit
against the project engineer at Arcadis in the Sandusky County Court of Common Pleas.
This case was assigned to the same judge as other litigation arising from the Fremont
reservoir project.
{¶7} In an effort to settle all the litigation, Fremont, Arcadis, H.M.M., and another
construction company participated in a third mediation in January 2013 (“the Global
Mediation”). H.M.M. invited AEG to attend the mediation, but AEG declined. H.M.M.
and Fremont resolved their dispute at the mediation, and Fremont paid H.M.M. a lump
sum of $6.75 million to settle all claims. Although AEG claimed it was entitled to
almost $1 million, H.M.M. only paid AEG $144,622. As a result, AEG filed a complaint
against appellants in the Cuyahoga County Common Pleas Court, asserting claims for (1)
breach of contract, (2) a declaratory judgment declaring that H.M.M.’s payment under the
Joint Prosecution Agreement was not properly calculated under the terms of that
agreement, and (3) a claim against the payment bond for the reservoir project.
Appellants answered the complaint and asserted two counterclaims for declaratory
judgment declaring (1) that H.M.M. properly paid AEG in full under the Joint
Prosecution Agreement, and (2) that OFIC is not obligated to pay any additional amounts
to AEG under the payment bond.
{¶8} In September and October 2013, AEG issued subpoenas duces tecum to
Fremont and Arcadis, neither of whom are parties to this case. AEG served appellants
with notice of the subpoenas. In November 2013, appellants filed a motion to quash the
subpoenas, or in the alternative, for protective order on the basis that the documents
sought by AEG constituted privileged mediation communications under R.C. 2710.01 et
seq.
{¶9} In an order denying the motion to quash, the trial court stated:
Insofar as the motion is for a protective order, the issue is not yet justiciable
because I cannot assess whether the claimed privilege applies to any of the
documents without knowing what the documents are.
* * *
Therefore, once the plaintiff gets the documents it must produce a complete
copy of them to the defendants. Once the defendants review the
documents, they are welcome to file another motion for protective order to
prevent plaintiff from using privileged mediation communications in
discovery or at trial and to “claw back” any such communications. The
motion should include a request for an in camera inspection of the
documents at issue.
In the meantime, until the privilege is decided, the plaintiff’s counsel is
prohibited from sharing with the plaintiff, consulting experts, and other
witnesses, any documents received in response to the subpoenas.
Appellants now appeal from this judgment.
Final Appealable Order
{¶10} As a threshold matter, we must determine whether the appeal is properly
before us. Pursuant to R.C. 2505.03(A), the jurisdiction of courts of appeals is limited to
the review of final orders, judgments, or decrees. State ex rel. Bd. of State Teachers
Retirement Sys. of Ohio v. Davis, 113 Ohio St.3d 410, 2007-Ohio-2205, 865 N.E.2d 1289,
¶ 44. We must therefore determine whether the trial court’s judgment denying
appellants’ motion to quash and for protective order was a final, appealable order.
{¶11} Discovery orders are generally considered interlocutory and are not
immediately appealable. Walters v. The Enrichment Ctr. of Wishing Well, Inc., 78 Ohio
St.3d 118, 120-121, 676 N.E.2d 890 (1997). However, certain discovery orders may be
final, appealable orders if they satisfy the conditions set forth in R.C. 2505.02(A)(4) for
provisional remedies. Appellants contend the trial court’s judgment constitutes a
provisional remedy that is immediately appealable.
{¶12} R.C. 2505.02(A)(3) defines “provisional remedy” as “a proceeding ancillary
to an action, including, but not limited to * * * discovery of privileged matter.” An order
that grants or denies a provisional remedy is only a final, appealable order if both of the
following apply:
(a) The order in effect determines the action with respect to the provisional
remedy and prevents a judgment in the action in favor of the appealing
party with respect to the provisional remedy.
(b) The appealing party would not be afforded a meaningful or effective
remedy by an appeal following final judgment as to all proceedings, issues,
claims, and parties in the action.
R.C. 2505.02(B)(4)(a) and (b).
{¶13} This court has held that an order for the production of privileged
information is a provisional remedy. Johnson v. Univ. Hosps. of Cleveland, 8th Dist.
Cuyahoga No. 80117, 2002 Ohio App. LEXIS 1428, * 17 (Mar. 28, 2002). In this case,
AEG sought production of documents generated during the mediation of two separate
lawsuits. Subject to certain limitations, communications exchanged in mediation are
confidential and are neither discoverable nor admissible. R.C. 2710.03; Akron v. Carter,
190 Ohio App.3d 420, 427, 2010-Ohio-5462, 942 N.E.2d 409 (9th Dist.). Appellants’
motion to quash and for protective order sought to prevent production of documents that
are potentially subject to the mediation privilege. Thus, the trial court’s order granted a
provisional remedy under R.C. 2505.02(A)(3).
{¶14} Next, we must determine whether the disclosure of the documents would
conclusively determine the action with regard to those materials. R.C. 2505.02(B)(4)(a).
Obviously, once the information is disseminated to AEG, it is no longer confidential.
Appellants would be prevented from a judgment in their favor regarding the provisional
remedy at the close of trial. See R.C. 2505.02(B)(4)(a). Therefore, the trial court’s
order meets the finality requirement set forth in R.C. 2505.02(B)(4)(a).
{¶15} Finally, we must determine whether appellants would have a meaningful
remedy by way of appeal following final judgment on all issues, claims, and parties.
R.C. 2505.02(B)(4)(b). If appellants are required to disclose privileged information,
there exists no meaningful or effective remedy should the discovery order have been in
error because once the information has been disclosed, there is no way to undo the
disclosure. Although the disclosure was limited to AEG’s counsel, it still constitutes
disclosure to a third party who is not a holder of the privilege. Therefore, appellants
have met the requirement set forth in R.C. 2505.02(B)(4)(b).
{¶16} Accordingly, we find the trial court’s judgment is a final, appealable order.
Standard of Review
{¶17} Discovery disputes are generally reviewed under an abuse of discretion
standard. Tracy v. Merrell Dow Pharmaceuticals, Inc., 58 Ohio St.3d 147, 151-152, 569
N.E.2d 875 (1991). However, “if the discovery issue involves an alleged privilege * * *
it is a question of law that must be reviewed de novo.” Ward v. Summa Health Sys., 128
Ohio St.3d 212, 2010-Ohio-6275, 943 N.E.2d 514, ¶ 13, citing Med. Mut. of Ohio v.
Schlotterer, 122 Ohio St.3d 181, 2009-Ohio-2496, 909 N.E.2d 1237. Because this
appeal involves the discovery of allegedly privileged documents, we apply a de novo
standard of review. Id.Mediation Privilege
{¶18} In their sole assignment of error, appellants argue the trial court erred in
denying their motion to quash and for protective order. They contend the trial court
should have granted the motion because the requested documents are privileged.
{¶19} The party seeking to exclude documents bears the burden of demonstrating
that the documents are confidential or privileged. Eberhard Architects L.L.C., v.
Schottenstein, Zox & Dunn Co., 8th Dist. Cuyahoga No. 99867, 2013-Ohio-5319, ¶ 14,
citing Covington v. MetroHealth Sys., 150 Ohio App.3d 558, 2002-Ohio-6629, 782
N.E.2d 624, ¶ 24 (10th Dist.). Merely claiming the information is privileged is
insufficient to sustain this burden. Id., citing Ro-Mai Industries v. Manning Props., 11th
Dist. Portage No. 2009-P-0006, 2010-Ohio-2290, ¶ 28.
{¶20} In this case, appellants asserted that AEG’s subpoenas duces tecum sought
documents from Arcadis and Freemont that were privileged under Ohio’s Uniform
Mediation Act, R.C. 2710.01, et seq. R.C. 2710.07 provides that “mediation
communications are confidential to the extent agreed by the parties or provided by other
sections of the Revised Code.” Ohio’s Uniform Mediation Act also expressly recognizes
that “a mediation communication is privileged * * * and is not subject to discovery or
admissible in evidence * * * unless [the privilege is] waived or precluded as provided in
section 2710.04 Revised Code.” R.C. 2710.03(A). The statute recognizes waiver only
if the privilege “is expressly waived by all mediation parties and by * * * [the] mediator
[in regard to a mediation communication of the mediator] * * * [or] the nonparty
participant [in regard to his/her mediation communication].” R.C. 2710.04(A).
{¶21} For practitioners in the area of mediation, the expectation of confidentiality
and the privilege afforded mediation communication is critical to the success of
mediation. Disregarding the privilege contained under Ohio’s Uniform Mediation Act
not only contravenes well-established law, but it also threatens the vitality of mediation.
Therefore, where there is evidence of privileged mediation communications, a trial court
should not order the release of such privileged communications, even if disclosure is
limited to the opposing party’s counsel.
{¶22} The record contains evidence that AEG’s subpoenas duces tecum seek
documents from Arcadis and Fremont that were privileged under Ohio’s Uniform
Mediation Act. In fact, AEG even acknowledged in its response in opposition to
H.M.M. and OFIC’s motion to quash and motion for a protective order that it was seeking
“certain information about the mediation.” Although AEG did not attend the mediation,
its position was simply that it should be entitled to the mediation communications on the
grounds that (1) “AEG is a party to [the mediation] by virtue of having its claims
sponsored by HMM,” (2) AEG was invited to attend the mediation, and (3) AEG’s claims
were allegedly compromised in excess of $700,000 at the mediation. But these stated
reasons are not exceptions to privilege under Ohio’s Uniform Mediation Act. See R.C.
2710.05. Nor does AEG claim that any of the exceptions apply.
{¶23} Further, it is apparent from the trial court’s order that the trial court also
recognized that a privilege exists in at least some of the requested documents. Notably,
the trial court did not outright deny H.M.M.’s motion to quash and motion for a protective
order. Instead, the trial court limited the release of the documents to AEG’s counsel
only. The trial court believed that any harm in releasing privileged documents to AEG’s
counsel could be remedied later through the filing of another motion for a protective
order and a “claw back” of the privileged documents. This solution violates Ohio’s
Uniform Mediation Act.
{¶24} Some of the documents AEG seeks by subpoena may not be subject to the
mediation privilege. In order to separate privileged from unprivileged material, the trial
court should have conducted an in camera inspection of the records to make that
determination, prior to the release of the documents. See Csonka-Cherney v.
Arcelormittal Cleveland, Inc., 8th Dist. Cuyahoga No. 100128, 2014-Ohio-836, ¶ 16
(when there is a dispute over whether certain documents are privileged, “a court should
conduct an in camera inspection of those records to make that determination”).
{¶25} Further, H.M.M.’s failure to produce a privilege log earlier is not fatal to the
protection of the privileged documents at issue. Id. Indeed, H.M.M. did not possess
the documents they seek to have protected — the motion to quash related to AEG’s
subpoenas propounded upon party participants to the mediation but non-parties to the
present lawsuit. Thus, because the privileged documents are possessed by non-parties
that H.M.M. has no control over, the failure to produce a privilege log is understandable
in this case. Moreover, had H.M.M. not objected to the production of the documents
(prior to obtaining a privilege log), the non-parties may have released the privileged
documents, leaving H.M.M. with no recourse.
{¶26} The trial court’s attempt to mitigate the damage caused by the disclosure of
confidential records by limiting the release of the documents only to AEG’s counsel is
insufficient to protect the privileged documents. Once privileged information is
disclosed, there is no way to undo the disclosure. Therefore, we conclude that the trial
court abused its discretion in ordering the release of all the requested documents,
including those that fall within the ambit of a mediation communication.
{¶27} Our decision does not make a determination on whether the contractual
relationship between AEG and H.M.M. moots the issue of privilege altogether. AEG
concedes in its brief that “[t]he issue of who is a mediation party is not addressed in the
trial court’s decision and is not properly before this Court.”
{¶28} Accordingly, the sole assignment of error is sustained.
{¶29} Judgment reversed and case remanded to the trial court to conduct an in
camera inspection of the subpoenaed documents.
It is ordered that appellant recover of appellee costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to the common pleas court to carry this
judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
EILEEN T. GALLAGHER, JUDGE
MARY J. BOYLE, A.J., and
MARY EILEEN KILBANE, J., CONCUR