Gallagher v. Cochran ( 2020 )

[Cite as Gallagher v. Cochran, 2020-Ohio-4917.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
WILLIAM J. GALLAGHER, :
Plaintiff-Appellant, :
No. 109081
v. :
EDWARD W. COCHRAN, ET AL., :
Defendants-Appellees. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED IN PART, REVERSED IN PART,
AND REMANDED
RELEASED AND JOURNALIZED: October 15, 2020
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-18-908626
Appearances:
Deborah L. Mack, for appellant.
Koehler Fitzgerald L.L.C., Christine M. Cooper and Shawn
M. McGraw; and Edward W. Cochran, for appellees.
MARY EILEEN KILBANE, J.:
Plaintiff-appellant, William J. Gallagher (“Gallagher”), appeals the
decision of the trial to grant the summary judgment motion of the defendant-
appellee, Edward W. Cochran (“Cochran”), as to all five of his claims. Gallagher
argues that the trial court erred and that there are genuine issues of material fact.
For the reasons that follow, we find that two of Gallagher’s five claims survive the
motion for summary judgment. We accordingly affirm in part, reverse in part, and
remand.
This case concerns Gallagher’s attempt to recoup over $500,000
dollars, money that he loaned to Barker Products Company (“Barker Products”)
while he was employed there. Barker Products was an electroplating company that
provided national services. Cochran is a business investor who purchased the assets
of Barker Products and formed Cleveland Plating. Gallagher alleges that Cochran
offered him employment and an equity stake with Cleveland Plating so that he could
be repaid over time. Cochran alleges that he made no such agreement and that
Cleveland Plating did not inherit the liabilities of Barker Products.
This case includes numerous narrative threads and many contested
facts. For ease of discussion, we begin with Gallagher’s entry into Barker Products.
Facts
After resigning from Ashland University as its Track & Field coach in
2005, Gallagher joined Barker Products at the behest of his friend Benjamin Dagley,
(“Dagley”). Gallagher had no previous business experience, having worked as the
head coach at Ashland for twenty-five years. Despite that, Dagley, who was an
athlete at Ashland, wanted to bring Gallagher in to perform managerial tasks.
Gallagher began work as a general manager implementing various procedures and
performing administrative tasks for the company.
In 2007, Barker Products began to experience severe financial
problems. Dagley had wholly leveraged Barker Products with Chase Bank, its
secured lender, and Barker Products was in need of capital to address its financial
concerns. Gallagher, at Dagley’s request, loaned Barker Products over $400,000
over a period of years. He has not been repaid and as of 2014, the interest on his
loans in addition to the principal equaled $511,850.
Sometime in early 2014, Barker Product’s accountant, Brian Mackert
(“Mackert”) reached out to Dagley and Gallagher informing them that he knew of a
potential investor, Cochran, with whom Mackert had worked previously. Cochran
was an experienced business person who had success purchasing failing companies.
According to Dagley’s affidavit, Mackert had introduced Cochran to Dagley in 2007;
Mackert informed Dagley that Cochran had made millions from various deals in
which Mackert had assisted Cochran.
On behalf of Cochran, Mackert invited Gallagher and two other
Barker Products employees, Elba and Diane Wade, to meet Cochran at Cochran’s
house on September 9, 2014. Dagley was not invited. At the meeting, Cochran
questioned Gallagher and the Wades about Barker Products, and specifically asked
about Gallagher’s debt. According to Gallagher, Cochran told the group that he was
interested in purchasing or investing in the company. Cochran asserts in his
affidavit that no contract was made and that he only listened to what the group had
to say. In fact, Cochran alleges that it was Gallagher and the Wades who led the
discussion.
Following the meeting on September 9, 2014, Cochran asked Mackert
to schedule another meeting for the next day, September 10, 2014. At Cochran’s
behest, Mackert invited Gallagher, the Wades, and Dagley to meet with Cochran at
Crop Bistro, Cochran’s Ohio City Restaurant.
At this meeting, Cochran asked more questions of the group and,
according to Gallagher, Cochran indicated that he had decided to purchase or invest
in the company. Cochran told the group that he was going to invest in Barker and
that the management team would keep their jobs there. He stated that he wanted
60% equity in the company and that the remaining 40% would be divided up
however the Barker Products team wanted. Cochran allegedly asked Gallagher to
negotiate with Barker Products suppliers to try and secure a reduction in debt and
better credit terms in advance of new ownership. Cochran left the team to figure out
the equity terms, which Mackert would memorialize and pass on to Cochran.
Cochran disputes that he was the one making proposals and
requesting Gallagher’s assistance; Cochran alleges that, much like at the September
9th meeting, he merely listened to what the Barker Products team had to say. He
states that he received an equity ownership proposal from the group after the
meeting, but that it was the Barker Products team who proposed it. However, in his
deposition, he references being involved in the equity discussion, though he stated
it was a hypothetical. The Barker team clearly took the discussions with Cochran
seriously as they worked with Mackert to prepare a proposal for Cochran’s review.
On September 10, 2014, Gallagher initially asked to be treated as a
debtholder rather than have an equity share. The Wades, Dagley, and Mackert
agreed to his request. However, after Mackert passed this along to Cochran,
Cochran rejected that idea and allegedly told Mackert that Gallagher would have to
recoup his debt through an equity share. Mackert shared this information with
Gallagher.
On September 11, 2014, Gallagher spoke with Dagley and the Wades
and they agreed that Gallagher would own 33.45% of the company through an equity
share, the Wades 6.55% and Dagley zero, consistent with their individual debt with
the company. Gallagher shared this plan with Mackert, who stated he would pass it
along to Cochran. Mackert told Gallagher that Cochran would agree to this plan
because Cochran merely wanted his 60% share and did not care how the other 40%
was divided.
On September 22, 2014, Mackert and Cochran submitted a letter to
Chase Bank. The letter stated in part: “Pursuant to a re-organization and or [sic]
restructuring of Barker Products Inc. I, Edward Cochran, would like to extend the
following offer * * *.” In the letter, Cochran offered to satisfy the current debt of
Barker Products, as well as satisfy the mortgage. Cochran asked Dagley to sign the
letter to give the offer some legitimacy; Dagley complied, believing that he was to be
part of the Barker Products team moving forward. Chase Bank did not accept the
offer, however.
There is some dispute as to what actually happened with the letter to
Chase Bank. In his deposition Cochran is inconsistent; he states that Dagley did not
sign the letter on September 22, 2014, but signed the letter later. He insists,
however, that Dagley was only a part of the process to add legitimacy to the offer.
Dagley, who had participated in the meeting on September 10 — where the Barker
Products team had divided up the proposed equity share — believed that the deal
with Chase Bank was consistent with this plan.
On the same day that Cochran was attempting to purchase Barker
Products directly from Chase Bank without involving Gallagher or the Wades,
Gallagher received a phone call from Mackert. Mackert told Gallagher that that
Barker Products had an overdue bill with The Illuminating Company and that the
electrical company had threatened to shut off the electricity unless $10,000 was
immediately paid. Mackert asked that Gallagher help out the company. Elba Wade,
the production manager, also called Gallagher asking him to make the payment.
Gallagher wrote the check, and Wade drove to his house to pick it up. Gallagher
made this payment assuming he would be paid back by his employer. However,
Gallagher has not been paid by Barker Products since September 10, 2014, and he
has not received another paycheck from the company.
At this point, both Gallagher and Cochran suggest that there was no
further communication between the two. In a letter submitted by Gallagher, sent in
January 2015, Gallagher asks Cochran whether the Barker Products team is still in
Cochran’s plans. Gallagher emphasized that the group was enthused by Cochran’s
strategy to purchase Barker Products. Cochran never replied.
Meanwhile, having failed in his initial attempt, Cochran was pursuing
different avenues to acquire Barker Products. In October 2014, Mackert introduced
Cochran to Kevin Crawford, a customer of Barker Products. Cochran and Crawford
decided to purchase Barker and rename it Cleveland Plating. Crawford, Cochran,
and Chase Bank came to an agreement where the duo would purchase Barker
Products’ assets in a secured party sale and purchase the Barker Products property
during a foreclosure sale.
On February 23, 2015, Crawford and Cochran formed Cleveland
Plating. On March 13, 2015, Cochran, on behalf of Cleveland Plating, executed a Bill
of Sale for $85,000 to purchase the assets of Barker Products. On March 16, 2015,
the following Monday, Cleveland Plating began operating at the property under a
lease agreement with Barker Products.
Around this time, Gallagher, who was aware of the sale, reached out
via email to both Cochran and Crawford asking about his future employment with
the company. Crawford responded that he looked forward to meeting with
Gallagher and discussing his role with the company. Gallagher states that this
meeting never occurred.
Gallagher alleges he was in the dark as to his ultimate fate until
November 27, 2015, when Gallagher spoke with Mackert. At that point Gallagher
was informed he was not a part of either the ownership group or the management
team of Cleveland Plating, formerly Barker Products. He proceeded to file suit.
Procedural History
Gallagher originally filed suit in Wayne County on March 6, 2015,
against Dagley. On June 26, 2015, Gallagher won a judgment against Dagley for
$1,019,200.00. Gallagher has been unable to collect the full amount from Dagley
and is involved in several ongoing actions against him in Wayne County. As a result,
Dagley was still a named party in the above action.
On December 14, 2015, Gallagher sought leave to amend the
complaint, having become aware of the operations of Cleveland Plating. Gallagher
named Cleveland Plating, Crawford, Cochran, Mackert, and the Wades as
defendants. The case was transferred to Cuyahoga County on August 4, 2017, after
a lengthy period of discovery, including several depositions, having already occurred
under Wayne County’s jurisdiction. On June 22, 2018, Gallagher filed a motion to
dismiss his claims against Dagley without prejudice. That motion was granted. The
case continued until November 13, 2018, when Gallagher filed a notice of dismissal
without prejudice of all his claims against Cleveland Plating, Cochran, and
Crawford.
On December 19, 2018, Gallagher filed suit in Cuyahoga County
against Cochran and Cleveland Plating alleging five claims:
Cochran and Cleveland Plating are liable to Gallagher for the sum of
$511,850 that was loaned for the benefit of Barker. (Claim One)
Cochran and Cleveland Plating breached their agreement to repay
Gallagher through an equity position. Gallagher is also owed $10,000
for the money he advanced to Barker to pay the electrical bill. (Claim
Two)
Cochran and Mackert, as Cochran’s agent, promised Gallagher
employment at Cleveland Plating and an equity ownership interest.
Through their actions they also fraudulently misrepresented
themselves to Gallagher and he reasonably relied on their promises.
(Claim Three)
Cleveland Plating is the successor in interest of Barker Products and
Cochran is liable to Gallagher as a result. (Claim Four).
Cochran and Cleveland Plating are liable to Gallagher for civil
conspiracy. (Claim Five).
Gallagher also alleges that Mackert was Cochran’s agent in each of his
claims.
On January 23, 2019, the defendants filed their joint answer denying
the material allegations of the complaint and raised affirmative defenses, among
them a statute of frauds defense. On July 12, 2019, Cochran filed a motion for
summary judgment. Gallagher responded on August 12, 2019, and Cochran filed a
reply brief on August 21, 2019. On July 22, 2019, Gallagher filed a motion for
summary judgment for liability only. Cochran filed a brief in opposition on August
20, 2019, and Gallagher filed a reply brief on August 30, 2019.
On September 9, 2019, the trial court granted Cochran’s motion for
summary judgment and denied Gallagher’s motion for summary judgment. From
that judgment entry, Gallagher appeals the granting of Cochran’s motion for
summary judgment.
He has provided one assignment of error.
Assignment of Error
The trial court erred as a matter of law and pursuant to Rule 56 of the
Ohio Rules of Civil Procedure in granting Appellees’ Motion as there is
a genuine issue of material fact regarding Appellees’ Motion and
Appellees are not entitled to Judgment as a matter of law.
Standard of Review
We review an appeal from summary judgment under a de novo
standard of review. Grafton v. Ohio Edison Co., 77 Ohio St. 3d 102, 105, 671 N.E.2d
241 (1996); Zemcik v. LaPine Truck Sales & Equip. Co., 124 Ohio App. 3d 581, 585,
706 N.E.2d 860 (8th Dist.1998).
Pursuant to Civ.R. 56, summary judgment is appropriate when:
[t]here is no genuine issue of material fact; the moving party is entitled
to judgment as a matter of law; and reasonable minds can come to but
one conclusion and that conclusion is adverse to the nonmoving party,
said party being entitled to have the evidence construed most strongly
in his favor.
Horton v. Harwick Chem. Corp., 73 Ohio St. 3d 679, 653 N.E.2d 1196 (1995),
paragraph three of the syllabus.
The party moving for summary judgment bears the burden of
showing that there is no genuine issue of material fact and that it is entitled to
judgment as a matter of law. Dresher v. Burt, 75 Ohio St. 3d 280, 292-293, 662
N.E.2d 264 (1996).
Once the moving party satisfies its burden, the nonmoving party “may
not rest upon the mere allegations or denials of the party’s pleadings, but the party’s
response, by affidavit or as otherwise provided in this rule, must set forth specific
facts showing that there is a genuine issue for trial.” Civ.R. 56(E); Mootispaw v.
Eckstein, 76 Ohio St. 3d 383, 385, 667 N.E.2d 1197 (1996). Doubts must be resolved
in favor of the nonmoving party. Murphy v. Reynoldsburg, 65 Ohio St. 3d 356, 358-
359, 604 N.E.2d 138 (1992).
At the outset, we note that Gallagher is only appealing the granting of
Cochran’s summary judgment motion and is not appealing the denial of his own
motion for summary judgment. Many of Cochran’s arguments in his brief were
responsive only to whether Gallagher’s motion for summary judgment should have
been denied. As those arguments are not at issue, we will not address them.
Instead, our task is to determine whether the moving party, Cochran,
met his burden of showing that there are no genuine issues of material fact and that
he is entitled to judgment as a matter of law. After careful consideration we find that
Cochran did not meet that burden as to all of Gallagher’s claims.
Analysis
The Statute of Frauds
We will begin with a discussion of the statute of frauds and explain
why material facts exist that lead us to the conclusion that the statute does not
automatically grant Cochran victory.
R.C. 1335.05 contains Ohio’s Statute of Frauds. The statute provides,
in relevant part:
No action shall be brought whereby to charge the defendant, upon a
special promise, to answer for the debt, default, or miscarriage of
another person * * * or upon an agreement that is not to be performed
within one year from the making thereof; unless the agreement upon
which such action is brought, or some memorandum or note thereof, is
in writing and signed by the party to be charged therewith or some
other person thereunto by him or her lawfully authorized.
Stated plainly, when applied to this case, Cochran cannot have
promised to pay Barker Product’s debts to Gallagher unless Cochran or Cleveland
Plating agreed to that in writing. Neither party suggests that Cochran did agree to
assume Barker Products’ debts in writing. Cochran argues as a result that all of
Gallagher’s claims against him fail. However, Gallagher’s claims allege not that
Cochran agreed to pay him directly, but that Gallagher was promised an equity stake
in the company or employment to reimburse him for his debts. As a result, the
statute of frauds debt provision is not implicated.
Cochran also argues more specifically that Gallagher’s first claim fails
under the statute because those claims cannot be completed in a year. We disagree.
In Gallagher’s first claim he alleges that Cochran promised him he
would be repaid over time through employment and an equity share. It is possible
for an equity sharehold to be given to a person or to reach the required value in less
than a year, therefore the statute of frauds is not implicated. The question of
employment requires slightly more analysis.
Gallagher was promised a lifetime contract by Dagley to work at
Barker Products. Cochran argues that Gallagher is asserting Cochran also offered
him a lifetime contract, or at least that Cochran agreed to continue employing
Gallagher on his lifetime contract. Cochran argues that this supposed oral contract
would therefore be void under the statute of frauds. However, neither Gallagher’s
complaint nor his affidavit imply that he is alleging Cochran offered him a lifetime
position, merely that he offered him a position at Barker Products. Rather than
decide whether a lifetime contract fails under the statute of frauds, we instead can
say definitively that a period of employment can be completed within a year. The
statute of frauds does not bar Gallagher’s claim for breach of contract.
We find that the statute of frauds does not bar any part of the
complaint. All other claims concern legal theories not bound up in the statute of
frauds. We will next proceed through each claim to determine whether there are
genuine issues of material fact. For ease of discussion, we will first examine the
question of agency.
Mackert as an agent
At the heart of much of Gallagher’s complaint is the theory that
Mackert bound Cochran and Cleveland Plating into an agreement to employ
Gallagher moving forward as well as provide him an equity share in the company to
repay his debts.
Agency law is well settled. In order for an individual to be an agent,
there must be an express, implied, or an apparent grant of authority by the principal.
Master Consol. Corp. v. Bancohio Natl. Bank, 61 Ohio St. 3d 570, 574, 575 N.E.2d
817 (1991). In this case, there are no issues of fact as to whether Cochran, the
principal, expressly or implicitly authorized Mackert to be his agent; Gallagher has
also not provided any evidence to suggest that sort of agreement exists. However,
there are questions of fact as to whether Mackert had apparent authority.
The common law doctrine of apparent authority is a form of agency,
that focuses on the third party’s understanding:
Even if no actual authority has been given, the principal may be held
liable if the principal appeared to give authority to the agent [apparent
authority]. A principal may be liable to a third party for the acts of the
principal’s agent, even though the agent had no actual authority, if the
principal has by his words or conduct caused the third party to
reasonably believe that the agent had the requisite authority to bind the
principal.
Miller v. Wick Bldg. Co., 154 Ohio St. 93, 95-96, 93 N.E.2d 467 (1950).
The test for apparent authority is whether the complaining party, in
this case Gallagher, “acting as a reasonable person, would believe the agent had
authority based on all the circumstances.” Young v. Internatl. Bhd. of Locomotive
Engineers, 114 Ohio App. 3d 499, 506, 683 N.E.2d 420 (8th Dist.1996), citing
Shaffer v. Maier, 68 Ohio St. 3d 416, 419, 627 N.E.2d 986 (1994).
We look then to the circumstances surrounding Gallagher, Mackert,
and Cochran:
Mackert introduced Cochran to Gallagher as someone who he had done
multiple deals with and someone with deep pockets. Mackert implied
that he had been a significant part of Cochran’s success on previous
deals.
Mackert worked as an accountant for Barker Products and did some
personal accounting for Gallagher. He then seemed to shift towards
working more towards furthering Cochran’s interests.
Cochran asked Mackert to set up meetings on September 9, 2014 and
September 10, 2014, with Gallagher and other team members from
Barker Products.
Cochran left Mackert alone with Gallagher, the Wades, and Dagley with
instructions to discuss dividing up their equity shares of the company.
Gallagher, the Wades, and Dagley discussed how best to divide the
company Cochran would purchase with Mackert.
Mackert communicated the initial equity plan with Cochran where
Gallagher would be a debt holder; Cochran rejected that plan and
Mackert informed Gallagher of that fact.
Mackert then conveyed to Cochran Gallagher’s new suggestion that
Gallagher be an equity holder. He told Gallagher that Cochran would
agree to the new plan because Cochran did not care about how the
Barker team divided up their 40% share.
Mackert asked Gallagher to pay the Illuminating Company $10,000
dollars to ensure Barker Products stayed in business, something that
Gallagher believed would help Cochran.
Mackert now acts as an accountant for Cleveland Plating.
Based on these facts alone it is clear that there are genuine issues of
material fact as to whether Gallagher, as a “reasonable person”, would believe that
Mackert was acting as Cochran’s agent “based on all the circumstances” involving
Cochran and Mackert. With that in mind, we turn to the claims themselves.
The First Claim
Gallagher’s first claim alleges that Cochran or Mackert, as Cochran’s
agent, promised him that he would be repaid over time. As we stated previously this
claim survives the statute of frauds because Gallagher is referring to a) a promise of
employment and b) a promise of an equity shareholder position. Gallagher is not
referring to a strict repayment of another’s debt that would violate the statute.
We find that there are still genuine issues of material fact as to this
claim. Gallagher alleges that Cochran and Mackert promised him employment and
an equity share. Cochran alleges that it was Gallagher who made proposals asking
for equity and employment. Whether these promises exist, who made them, and
whether they are binding promises are some of the questions we are left with from
the record as to this claim. These are questions for the finder of fact. Accordingly,
we find that this claim survives.
The Fourth Claim: Successor in Interest
As we stated above, there are genuine issues of fact as to whether
Mackert was an agent for Cochran. If Mackert was Cochran’s agent, then Mackert
may have bound Cochran and Cleveland Plating into impliedly agreeing to assume
liability through the equity shareholder plan.
In general, the purchaser of a corporation’s assets is not liable for the
debts and obligations of the seller corporation. Welco Indus., Inc. v. Applied Cos.,
67 Ohio St. 3d 344, 346, 617 N.E.2d 1129 (1993). There are, however, exceptions to
this general rule:
1) the buyer expressly or impliedly agrees to assume such liability; 2)
the transaction amounts to a de facto consolidation or merger; 3) the
buyer corporation is merely a continuation of the seller corporation; or
4) the transaction is entered into fraudulently for the purpose of
escaping liability.
Flaugher v. Cone Automatic Machine Co., 30 Ohio St. 3d 60, 62, 507 N.E.2d 331
(1987).
There are also factual questions as to whether Cochran’s actions
implied that he would assume such liability.
As with the testimony regarding agency, both Gallagher and Cochran
present competing affidavits. When confronted with competing affidavits we are
cognizant of a court’s role in reviewing summary judgment motions. See Telecom
Acquisition Corp. I v. Lucic Ents., 2016-Ohio-1466, 62 N.E.3d 1034, ¶ 93 (8th Dist.).
(“When trial courts choose between competing affidavits and testimony, they
improperly determine credibility and weigh evidence contrary to summary
judgment standards.”), citing Finn v. Nationwide Agribusiness Ins. Co., 3d Dist.
Allen No. 1-02-80, 2003-Ohio-4233, ¶ 39. These competing affidavits alone prove
that there are still genuine issues of material fact as to this question. The narratives
offered to this court are incompatible; they also suggest that Cochran could have
bond Cleveland Plating to be a successor in interest of Barker Products.
When Gallagher first met Cochran, Cochran’s plan was purportedly
to purchase Barker Products and be a 60% shareholder. According to Gallagher,
Cochran had two separate meetings with the Barker Products team. At the second
meeting on September 10, 2014, Cochran told the team that he would be a 60%
shareholder and that he did not care how the rest of the 40% share was divided
amongst Gallagher, the Wades, and Dagley. Gallagher, through Mackert, initially
proposed that he be treated as a debtholder rather than an equity partner. Cochran,
through Mackert, informed Gallagher that a debtholder plan would not work, and
that an equity shareholder position would. With this in mind, Gallagher, the Wades,
and Dagley proposed a plan to Mackert where they would be equity shareholders
and divided the 40% percent as instructed. Again, because of Dagley’s debts, he was
to have a zero percent share, while the Wades and Gallagher divided up the 40%
share. That plan was passed along to Cochran through Mackert.
Following this meeting, Cochran attempted to “satisfy the debt of
Barker Products” and pay Chase Bank. To that end, he had Dagley sign a letter
indicating that both parties wanted this to happen. Cochran’s actions at this point
were completely consistent with Gallagher’s understanding that Cochran would be
funding Barker Products and that Gallagher and the Wades would receive an equity
share following his takeover of the company from Dagley.
Cochran states that he never agreed to that plan. He also states
correctly that he was unsuccessful in satisfying the debt of Barker Products and
instead purchased its assets and formed Cleveland Plating. However, Cochran’s
actions in attempting to satisfy the debt of Barker Products with Chase Bank are
consistent with Gallagher’s understanding of the equity share proposal that stems
from the September 10, 2014 meeting. Gallagher avers that he was promised he
would be repaid and that he would be a part of Barker Product’s future. Cochran’s
actions seemed to indicate that this was true, and that his ownership of Barker
Products would include an equity ownership stake for Gallagher. It is certainly true
that Cochran pivoted to a new plan in October 2014, one that did not seem to involve
Gallagher, but by that time Cochran’s actions in September — including the
potential promises made — may have already implicitly bond Cochran and
Cleveland Plating to Barker Products’ liability.
As a result of Cochran’s actions, we are left questioning whether
Cochran did bind Cleveland Plating; those questions are for the finder of fact to
decide.
Deposition
Also informing our decision as to the material fact questions
regarding Mackert and the successor theories are the strange circumstances
surrounding the deposition of Elba Wade in this case.
Cochran is a licensed attorney in the state of Ohio. During the course
of the proceedings, Cochran has at various stages put himself out as a pro se litigant.
However, during the deposition of Elba Wade on November 1, 2016, the following
exchange was elicited where Wade stated that he believed Cochran, his boss, was
also his attorney. Mr. Halligan represented Gallagher at that time, and Mr. Connick
was an attorney who at times represented the Wades and Cochran.
Q. [Halligan]: Did you meet Mr. Cochran in preparation for today’s
deposition?
A. [Wade]: Yes.
Q. [Halligan]: Did you have discussions with him?
A. [Wade]: Yes.
Q. [Halligan]: Did you deem him to be your lawyer when you’re having
those discussions?
A. [Wade]: Yes.
MR. CONNICK: Objection.
Q. [Halligan]: You did?
MR. HALLIGAN: So now he’s stating, Mr. Cochran, that you represent
him as well.
MR. CONNICK: No. Here, let me clarify. Mr. Cochran is representing
himself. I’m also representing Mr. Cochran and I’m representing the
Wades.
MR. HALLIGAN: I understand that.
MR. CONNICK: That’s attorney - client privilege and we also have a
defense agreement in place, so...
MR. HALLIGAN: I’d like to see the defense agreement.
MR. CONNICK: It’s not a written agreement. It’s one that’s in place
between us orally. If you want us to put it in writing, I can put it into
writing and it will be privileged and you won’t see it anyway.
Q. [Halligan]: Elba [Wade], you met Mr. Cochran, when you met with
him he wasn’t acting as your lawyer, was he?
MR. CONNICK: Objection.
MR. HALLIGAN: What do you mean objection?
MR. CONNICK: You’re asking him to discuss what is confidential
attorney-client privilege.
MR. HALLIGAN: That’s not true.
MR. CONNICK: Yes, it is. And I’m instructing him not to answer the
question.
MR. HALLIGAN: He just said he’s pro se, he’s not representing
anybody else. Therefore, his conversations with Elba are not privileged.
MR. CONNICK: His conversations with me in the room are all
privileged and Elba’s not talking about any conversations that were had
between me, him, Diane and Ed Cochran that were held at one time,
it’s not happening.
As Elba Wade was a witness to the alleged promises Gallagher said
Cochran made, his discussions with Cochran are material. Gallagher’s inability to
gather information from Wade about these discussions suggests that additional fact-
finding still needs to be done in this case. And, while not dispositive, the potential
gamesmanship on display casts a substantial shadow over much of the facts we are
presented with in this record. We find that summary judgment is not appropriate
as to claims one and four.
Claim Two: Unjust Enrichment
We find that Cochran has met his burden at there are no genuine
issues of material fact as to this claim.
Unjust enrichment occurs where “‘a person has and retains money or
benefits which in justice and in equity belong to another.’” Smith v. Vaughn, 174
Ohio App. 3d 473, 2007-Ohio-7061, 882 N.E.2d 941, ¶ 10 (1st Dist.), quoting
Johnson v. Microsoft Corp., 106 Ohio St. 3d 278, 2005-Ohio-4985, 834 N.E.2d 791,
¶ 20. The purpose of an unjust enrichment claim is not to compensate the plaintiff
for loss or damage suffered by the plaintiff, but to enable the plaintiff to recover the
benefit he has conferred on the defendant under circumstances in which it would be
unjust to allow the defendant to retain it. Johnson, at ¶ 21, citing Hughes v.
Oberholtzer, 162 Ohio St. 330, 335, 123 N.E.2d 393 (1954). Restitution is the
remedy provided upon proof of unjust enrichment “to prevent one from retaining
property to which he is not justly entitled.” Keco Industries, Inc. v. Cincinnati &
Suburban Bell Tel. Co., 166 Ohio St. 254, 256, 141 N.E.2d 465 (1957); see also Santos
v. Ohio Bur. of Workers’ Comp., 101 Ohio St. 3d 74, 2004-Ohio-28, 801 N.E.2d 441,
¶ 11 (restitution [is] available as the remedy for an unjust enrichment of one party at
the expense of another), citing Restatement of the Law, Restitution, Section 9
(1937).
To prevail on a claim for unjust enrichment, a plaintiff must prove by
a preponderance of the evidence that: (1) the plaintiff conferred a benefit upon the
defendant, (2) the defendant had knowledge of such benefit, and (3) the defendant
retained that benefit under circumstances in which it would be unjust for him to
retain that benefit. Johnson at ¶ 20, citing Hambleton v. R.G. Barry Corp., 12 Ohio
St.3d 179, 183, 465 N.E.2d 1298 (1984).
Gallagher is alleging that he conferred a benefit on Cochran and
Cleveland Plating through his loan to Barker Products as well as his paying the
$10,000 electrical bill. However, by Gallagher’s own admission, his loans to Barker
Products were made before Cochran attempted to purchase Barker. As a result, it
cannot be said that Gallagher conferred a benefit on Cochran when he loaned money
to Barker Products under different ownership.
Likewise, his $10,000 payment to the Illuminating Company was
done to benefit Barker Products, which was not yet owned by Cochran. Mackert told
Gallagher that the payment was required to keep Barker afloat; Mackert never stated
that the payment was to benefit Cochran. Gallagher states that he made the payment
under the belief he would be paid back through the promise of employment or
through his equity share. However, Gallagher’s belief that Cochran would
compensate him for a payment to Barker Products does not mean that Gallagher
conferred a benefit on Cochran, or that Cochran retained that benefit. Therefore
this payment cannot qualify under a theory of unjust enrichment either.
As we made clear above, there are still questions of fact as to whether
Cochran inherited these debts as a successor in interest. We are simply stating that
there are no questions of fact as to the unjust enrichment claim. The court correctly
awarded summary judgment as to claim two.
Claim Three: Fraudulent Misrepresentation
In claim three, Gallagher alleges that Cochran, and Mackert as
Cochran’s agent, knowingly made false promises to him regarding his employment
and equity ownership with Barker/Cleveland Plating and that he relied on those
promises to his detriment.
The elements of fraudulent misrepresentation are:
1) a representation or, where there is a duty to disclose, concealment of
a material fact; 2) the fact is material to the transaction at hand; 3) the
representation was made falsely, with knowledge of its falsity, or with
such utter disregard and recklessness as to whether it is true or false
that knowledge may be inferred; 4) the representation was made with
the intent of misleading another into relying upon it; 5) justifiable
reliance upon the representation or concealment; and 6) a resulting
injury proximately caused by the reliance.
Burr v. Bd. of Cty. Commrs., 23 Ohio St. 3d 69, 491 N.E.2d 1101 (1986); Cohen v.
Lamko, Inc., 10 Ohio St. 3d 167, 462 N.E.2d 407 (1984).
Gallagher argues that Cochran, and Mackert as Cochran’s agent,
represented that they would employ Gallagher and that he would be an equity
partner. Gallagher argues that they made these promises knowing them to be false,
and that the promises were made so that Gallagher would rely on them. Gallagher
argues that he justifiably relied on these promises, and as a result of his reliance
sustained money damages for $521,850 — the original amount loaned to Dagley
with interest and the $10,000 paid to the Illuminating Company. We find that there
are no genuine issues of material fact as to the elements of fraudulent
misrepresentation.
First, Gallagher loaned Dagley money well before Cochran allegedly
made an offer of employment and equity ownership to him. Therefore, he cannot
have relied upon Cochran’s promises in loaning the money to Dagley. The only
damages Gallagher could have possibly sustained as a result of Cochran or Mackert’s
promises was the $10,000 payment to the Illuminating Company. However, by
Gallagher’s own admission, Mackert called Gallagher and asked him to make the
payment so that Barker Products would not lose its electricity. According to
Gallagher, Mackert did not mention the promise of employment at all. Cochran did
not own the company at this point and Gallagher was still employed by Barker
Products as then constituted. Nowhere in Gallagher’s affidavit is there a clear causal
link between Cochran’s promises and his decision to pay the electrical bill.
As a result, we find that there are no genuine issues of material fact
and that Cochran is entitled to summary judgment as a matter of law as to claim
three.
Claim Five: Civil Conspiracy
Gallagher alleges that Cochran and Cleveland Plating conspired to
deprive him of $521,850 and that the company and Cochran acted in a manner to
avoid the liabilities they owed him. At this juncture, Gallagher seems to have largely
abandoned this claim, not even mentioning it through the course of his appellate
brief. Nevertheless, we will address it here and find that there is no issue of material
fact and that this claim fails as a matter of law.
Civil conspiracy is tort where “a malicious combination of two or
more persons to injure another in person or property, in a way not competent for
one alone, resulting in actual damages.” Williams v. Aetna Fin. Co., 83 Ohio St. 3d
464, 475, 700 N.E.2d 859 (1998), quoting Kentz v. Transamerica Premium Ins. Co.,
72 Ohio St. 3d 415, 419, 650 N.E.2d 863 (1995). However, when all the alleged
coconspirators are members of the same corporate entity, there are not two separate
“people” to form a conspiracy. See Bays v. Canty, 330 Fed. Appx. 594, 594 (6th
Cir.2009); Ohio Vestibular & Balance Ctrs., Inc. v. Wheeler, 2013-Ohio-4417, 999
N.E.2d 241, ¶ 28-30 (6th Dist.), citing Kerr v. Hurd, 694 F. Supp. 2d 817, 834 (S.D.
Ohio 2010), explaining that a corporation cannot conspire with its own agents or
employees.
Here, Gallagher has not alleged any facts that rebut Cochran’s
argument that he is entitled to summary judgment on this claim. Cochran and
Cleveland Plating cannot be coconspirators because they are part of the same
corporate entity.
Conclusion
We find that there are no genuine issues of material fact as to
Gallagher’s second, third, and fifth claims for relief, and that Cochran is entitled to
judgment as a matter of law.
We find that genuine issues of material fact remain as to Gallagher’s
first and fourth claims and that the trial court erred in granting summary judgment
as to those claims.
We remand to the trial court consistent with this opinion.
It is ordered that appellees and appellant split costs.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said 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.
MARY EILEEN KILBANE, JUDGE
ANITA LASTER MAYS, P.J., CONCURS;
FRANK D. CELEBREZZE, JR., J., CONCURS IN PART AND DISSENTS IN PART
WITH A SEPARATE OPINION
FRANK D. CELEBREZZE, JR., J., CONCURRING IN PART AND DISSENTING IN
PART:
I respectfully concur in part and dissent in part with the majority
opinion. I do not agree that genuine issues of material fact remain with regard to
Gallagher’s breach of contract claim (First Claim), and I would affirm the judgment
of the trial court with regard to that claim.
Gallagher alleges that Cochran and Mackert, as Cochran’s agent,
promised him employment and an equity share in the new company. The majority
determined that genuine issues of material fact remain as to whether these promises
were exchanged, who made them, and whether they were binding.
To succeed on a breach of contract claim, a party must prove the
existence of a contract, that party’s performance under the contract, the opposing
party’s breach, and resulting damage. See On Line Logistics, Inc. v. Amerisource
Corp., 8th Dist. Cuyahoga No. 82056, 2003-Ohio-5381, ¶ 39. I do not believe that
Gallagher demonstrated that the parties entered into an agreement upon which a
breach of contract claim could be based.
The formation of a contract requires a bargain in which there is a
manifestation of mutual assent, which “ordinarily takes the form of an offer or
proposal by one party followed by an acceptance by the other party or parties.”
Harmon v. Philip Morris, Inc., 120 Ohio App. 3d 187, 190, 697 N.E.2d 270 (8th
Dist.1997), citing Restatement of the Law 2d, Contracts, Sections 22 and 71.
“[M]anifestation of assent may be made wholly or partly by written or spoken words,
or by other acts or the failure to act.” Precision Concepts Corp. v. Gen. Emp. & Triad
Personnel Servs., 10th Dist. Franklin No. 00AP-43, 2000 Ohio App. LEXIS 3322, 5
(July 25, 2000), citing McSweeney v. Jackson, 117 Ohio App. 3d 623, 631, 691
N.E.2d 303 (4th Dist.1996).
For a valid and enforceable contract, there must be an offer by one
party and the acceptance of that offer by another party. Alliant Food Servs. v.
Powers, 8th Dist. Cuyahoga No. 82189, 2003-Ohio-4193, ¶ 26, citing Camastro v.
Motel 6 Operating, L.P., 11th Dist. Trumbull No. 2000-T-0053, 2001 Ohio App.
LEXIS 1936 (Apr. 27, 2001). “‘[F]or there to be a proper offer and acceptance,
parties to a negotiation must have a meeting of the minds.’” Id., quoting Gall v.
Trumbull Mem. Hosp., 11th Dist. Trumbull No. 99-T-0102, 2000 Ohio App. LEXIS
3053 (July 7, 2000). Parties entering into a contract “must have a distinct and
common intention which is communicated by each party to the other.” McCarthy,
Lebit, Crystal & Haiman Co., L.P.A. v. First Union Mgt., Inc., 87 Ohio App. 3d 613,
622 N.E.2d 1093 (8th Dist.1993). Consequently, “[i]f the minds of the parties have
not met, no contract is formed.” Id.
The alleged promises between the parties occurred at the September
2019 meetings between Gallagher, Cochran, and several other Barker Products
employees. In its recitation of facts, the majority notes that the parties dispute who
was making proposals at the meetings regarding Cochran’s purchase of the company
and the division of the remaining equity in the company. At first blush, this would
seem to demonstrate the existence of a genuine issue of material fact. However,
regardless of who was making proposals, Gallagher acknowledges that he and the
other Barker Products employees ultimately presented a formal proposal to Cochran
through Mackert. The initial proposal was rejected by Cochran because Gallagher
asked to be treated as a debtholder. The proposal was then changed to give
Gallagher an equity share. This revised proposal was given to Mackert who stated
that he would pass it along to Cochran. The majority notes that “Mackert told
Gallagher that Cochran would agree to this plan because Cochran merely wanted his
60% share and did not care how the other 40% was divided.”
There is no evidence in the record as to what Cochran’s reaction to the
revised proposal was, and this is where the problem lies. “It is axiomatic that the
formation of a contract is dependent upon both offer and acceptance and that silence
in response to an offer does not generally indicate assent.” Univ. Hosps. of
Cleveland v. Lynch, 96 Ohio St. 3d 118, 2002-Ohio-3748, 772 N.E.2d 105, ¶ 62, citing
1 Corbin on Contracts, Sections 3.18 and 3.28 (Rev.Ed.1993); see also Morganstern,
Macadams & Devito Co., L.P.A. v. Hilliard Bldg. Partnership, 8th Dist. Cuyahoga
No. 79407, 2001 Ohio App. LEXIS 5514 (Dec. 13, 2001) (noting that “silence in
response to an offer will not constitute an acceptance of an offer, especially if the
relationship between the parties justifies an expectation of a reply”), citing Richard
A. Berjian, D.O., Inc. v. Ohio Bell Tel. Co., 54 Ohio St. 2d 147, 375 N.E.2d 410 (1978).
Even assuming arguendo that Mackert was acting as Cochran’s agent,
there is a very significant difference in Mackert stating his belief that Cochran would
accept the proposal versus Cochran actually conveying his acceptance. Clearly, both
sides understood that Mackert was to take the revised proposal back to Gallagher,
which would render Mackert’s words of reassurance insufficient to establish
acceptance.
Gallagher simply has not presented any evidence that Cochran,
through Mackert or on his own, accepted the terms of the revised proposal, and thus,
no agreement was ever formed between the parties. There are no genuine issues of
material fact as to the breach of contract claim, and respectfully, I would affirm the
judgment of the trial court with regard to that claim.