Horenstein, Nicholson & Blumenthal, L.P.A. v. Hilgeman , 2021 Ohio 3049 ( 2021 )

[Cite as Horenstein, Nicholson & Blumenthal, L.P.A. v. Hilgeman, 2021-Ohio-3049.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
MONTGOMERY COUNTY
HORENSTEIN, NICHOLSON & :
BLUMENTHAL, L.P.A. :
: Appellate Case Nos. 28581 and 28838
Plaintiff-Appellant :
: Trial Court Case No. 2017-CV-2666
v. :
: (Civil Appeal from
JACK R. HILGEMAN, et al. : Common Pleas Court)
:
Defendants-Appellees :
...........
OPINION
Rendered on the 3rd day of September, 2021.
...........
TERRY W. POSEY, JR., Atty. Reg. No. 0078292 and MARTIN A. FOOS, Atty. Reg. No.
0065762, 109 North Main Street, Suite 500, Dayton, Ohio 45402
Attorneys for Plaintiff-Appellant, Horenstein, Nicholson & Blumenthal, L.P.A.
GEORGE D. JONSON Atty. Reg. No. 0027124 and G. TODD HOFFPAUIR, Atty. Reg.
No. 0064449, 600 Vine Street, Suite 2650, Cincinnati, Ohio 45202
Attorneys for Appellant, Craig T. Matthews
RICHARD A. BOUCHER, Atty. Reg. No. 0033614, 77 West Elmwood Drive, Suite 304,
Dayton, Ohio 45459
Attorney for Defendants-Appellees, Christopher F. Cowan and John P. Hilgeman
.............
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WELBAUM, J.
{¶ 1} This matter is before the court on two consolidated appeals following a bench
trial. The first appeal (Case No. 28581) involves the appeal of Plaintiffs/Appellants,
Horenstein, Nicholson, and Blumenthal, LLP. (“HNB”), from two judgments. The first
judgment (issued on October 22, 2019) found HNB liable to Defendants/Appellees, John
Hilgeman (“John”) and Christopher Cowan (“Chris”) (collectively “Appellees”) on their
counterclaims for defamation and false light and awarded them $200,000 in damages.1
The second judgment (issued on June 9, 2020) awarded prejudgment and post-judgment
interest to Appellees on the defamation and false light claims, and also found HNB had
engaged in frivolous conduct under R.C. 2323.51. Pursuant to that finding, the trial court
awarded Appellees attorney fees and costs.
{¶ 2} Appellant, Craig Matthews, the attorney for HNB, also appeals (in Case No.
28838) from the June 9, 2020 judgment awarding Appellees attorney fees and costs. In
this judgment, the trial court found that Matthews was also guilty of frivolous conduct
under R.C. 2323.51 and ordered him to pay attorney fees and costs to Appellees.
{¶ 3} According to HNB, the trial court erred in awarding judgment against it on the
defamation and false light claims of Appellees, in imposing attorney fees for frivolous
conduct, and in awarding prejudgment interest with respect to the defamation and false
light claims. Matthews’s position is that the trial court erred in awarding attorney fees
against him based on frivolous conduct and also erred in the amount of fees awarded.
1 Because two parties in the case (John and Jack Hilgeman) have the same last name,
we will refer to individual parties by their first names, i.e., “John,” “Jack,” and “Chris.”
Jack did not appeal from the judgment and did not file a brief. As a result, when we are
referring to John and Chris collectively, we will refer to them as “Appellees.”
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{¶ 4} In the October 22, 2019 judgment entry, the court also found in HNB’s favor
on a breach of contract claim against Defendant, Jack Hilgeman (“Jack”), and awarded
damages for the breach. In addition, the court rejected Jack’s counterclaim for
defamation and false light against HNB, as well as HNB’s claims against Jack for violation
of Ohio’s trade secrets law and fraud. Finally, at trial, the court granted the Civ.R.
41(B)(2) motion of Appellees and their law firm, Cowan and Hilgeman (C&H), to dismiss
the trade secret and fraud claims HNB made against them. None of these rulings have
been appealed, and no assignments of error have been asserted. Jack and C&H are
also not parties to the appeal.
{¶ 5} After reviewing the record, we conclude that the trial court erred by finding in
Appellees’ favor on their claims for defamation and false light. HNB’s complaint and an
affidavit filed in support of a temporary restraining order were absolutely privileged, and
Appellees’ counterclaims did not state a cause of action, because the alleged defamatory
statements bore some reasonable relation to the judicial proceeding. Furthermore, as
to statements that HNB’s attorney made in a newspaper article and in a “tweet,” even if
these statements were considered defamatory, HNB would be vicariously liable only if it
authorized or ratified the statements. However, there was no evidence that HNB did so.
{¶ 6} Furthermore, the statements in a newspaper article and in the tweet were not
defamatory as a matter of law, under the totality of the circumstances and reading the
statements in the context of the publication and how a reasonable reader would interpret
them. Accordingly, the judgment in Appellees’ favor on the counterclaims must be
reversed. In light of this conclusion, the trial court’s June 9, 2020 judgment awarding
prejudgment and post-judgment interest on the counterclaim judgment must also be
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reversed.
{¶ 7} We additionally conclude that there was competent, credible evidence to
support the trial court’s finding that HNB and Matthews engaged in frivolous conduct
concerning the trade secret and fraud claims against Appellees. However, the trial
court’s decision to assess fees from the date the complaint was filed was not supported
by competent evidence and was not based on sound reasoning. This is because under
R.C. 2323.51(A)(2)(a)(iii), parties only need minimal support for their allegations to avoid
a finding of frivolous conduct. Parties are allowed to investigate the truth of allegations
or factual contentions. However, if parties persist in relying on the allegations when they
are known to be unsupported by evidence, then they have engaged in frivolous conduct.
Here, HNB knew by September 28, 2018, that its fraud and trade secret claims against
Appellees were unsupported by the evidence, and damages were properly assessed only
after that date.
{¶ 8} Because the trial court awarded attorney fees and costs for a significantly
longer period, the award for attorney fees and costs must be reversed and remanded for
further proceedings. In addition, the trial court erred in awarding Appellees attorney fees
for work performed by Jack, who was an attorney and co-defendant, on his own claims.
HNB and Matthews were not guilty of frivolous conduct with respect to Jack.
Furthermore, the use of the word “attorney” in R.C. 2323.51 connotes an agency
relationship between two parties; therefore, fees an attorney might charge himself are not
“attorney fees.” Appellees may, however, be entitled to fees for work Jack performed
solely on their behalf for the fraud and trade secrets claims (in addition to their retained
attorney’s fees for those claims), if they can establish that they were “legally obligated” to
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pay him fees.
{¶ 9} Finally, Matthews’s arguments about the ratio the trial court applied in
awarding fees for work Jack performed on his own claims are moot, given the necessity
to reverse the attorney fee award and remand for further hearing.
{¶ 10} Accordingly, HNB’s first and third assignments of error will be sustained,
and HNB’s second assignment of error will be sustained in part and overruled in part.
Matthews’s first assignment of error will be sustained in part and overruled in part, and
Matthews’s second assignment of error will be sustained in part and overruled in part as
moot.
{¶ 11} Because certain aspects of the October 22, 2019 judgment have not been
appealed, that judgment will be affirmed in part and reversed in part. Specifically, the
October 22, 2019 judgment in favor of John Hilgeman and Christopher Cowan on their
counterclaims for defamation and false light will be reversed, and the remainder of that
judgment will be affirmed.
{¶ 12} Concerning the June 9, 2020 judgment on the post-trial motions, that
judgment will be reversed in part and affirmed in part. The judgments for prejudgment
and post-judgment interest will be reversed. However, the trial court’s judgment that
HNB and Craig Matthews engaged in frivolous conduct will be affirmed in part and
reversed in part as to the date on which the frivolous conduct began and the time from
which attorney fees may be calculated. The award of attorney fees will be reversed and
remanded for further hearing on what attorney fees may be awarded to Appellees in
connection with the claims against them that were based on trade secrets and fraud.
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I. Facts and Course of Proceedings
{¶ 13} Because a clear understanding of the factual background is important in
understanding the issues, we will outline the facts in some detail.
{¶ 14} HNB is a law firm that specializes in the following areas of legal practice:
workers’ compensation, personal injury, social security disability, and veterans’ disability.
Transcript of Proceedings (“Trial Tr.”), p. 164. During the times relevant here, HNB was
divided into three profit centers based on area of practice. Each center was really its
own business under the corporate shell, but shared certain allocated expenses like rent,
office administrator, receptionist, and so on. Id. Workers’ compensation (“WC”) and
personal injury (“PI”) cases were combined in one profit center. Id. Each center had its
own year-end profit, based on how well that center performed during the year. Id. at p.
165.
{¶ 15} Bruce Nicholson (“Bruce”) was licensed to practice law in 1977 and had
been handling WC claims for HNB and its predecessor firm since 1980. Id. at p. 162-
163. Bruce had been a shareholder with HNB since 1984, and he was solely in charge
of the WC/PI profit center until around 2010, when another WC attorney working in the
center, Fred Sommer (“Fred”), became a shareholder. Id. at p. 165 and 881.
{¶ 16} After 1984, the WC practice did very well until the economic downturn in
2008-2009, when auto plants and the shops supporting them closed. Id. at p. 168-170.
At that point, HNB decided to expand and increase its PI practice rather than referring PI
clients to other firms. Id. at p. 170. The firm also invested heavily in marketing, which
was successful, and the PI client list began to grow. Id. at 173 and 175.
{¶ 17} In May 2012, HNB hired Jack as an associate to work in both WC and PI,
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but primarily PI. Id. at p. 178 and 180. Jack had graduated from law school in 2010 and
had worked at “C&H” from 2010 to 2012. Id. at p. 180, 709, and 734. The partners in
that firm were John (Jack’s father) and Chris, who had been in practice together as C&H
since 1990. Id. at p. 834.
{¶ 18} Jack signed an employment agreement with HNB on May 18, 2012, and
then signed a second agreement on January 2, 2014. Trial Tr. at p. 180-181 and
Plaintiff’s Exs. 8 and 9.
{¶ 19} The agreements contained essentially the same provisions. Under
paragraph C, Jack agreed:
(1) To work exclusively for Employer unless prior written approval is
granted by Employer for other employment. Employee understands that
this restriction is all-encompassing and includes both full time and part time
positions, both within and outside the realm of the practice of law.
(2) To abide by all of the Cannons of Professional Responsibility and
related disciplinary rules and ethical considerations as promulgated by the
Ohio Supreme Court and all other courts and administrative agencies
before which Employee appears in his capacity as a lawyer.
(3) To work competently, professionally, and honestly as a lawyer
and to complete all assignments from Employer as reasonably directed by
Employer.
Ex. 9 at p. 1.
{¶ 20} Paragraph D of the agreement further provided that:
(1) All client files that are opened by Employee shall be the property
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of Employer.
(2) All fee agreements executed by Employee and new clients shall
be between the client and Horenstein, Nicholson & Blumenthal, LPA.
(3) Employee agrees to provide a full accounting and status report of
all files opened by Employee upon request of Employer.
(4) In the event that the employment relationship between the parties
should be terminated, the ownership of the client files shall remain with the
Employer.
Ex. 9 at p. 2-3.
{¶ 21} And finally, concerning termination of employment, the agreement stated
that:
F. This employment agreement may be terminated by either party
hereto upon written notice to the other party at least sixty (60) days prior to
the effective date of said termination.
G. In the event of the termination of this employment agreement, all
client cases and all client files shall be and shall remain the sole property of
Horenstein, Nicholson & Blumenthal. All fees generated by said cases and
by files shall be and shall remain the sole property of Horenstein, Nicholson
& Blumenthal.
Ex. 9 at p. 4.
{¶ 22} The agreements provided for an annual salary, but generally HNB also gave
associate attorneys a bonus. Trial Tr. at p. 187 and 781, and Plaintiff’s Ex. 6. In a letter
accompanying the employment offer, Bruce stated that if Jack performed well and if their
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business progressed, HNB would elevate him to a “percentage associate,” which would
allow his income to be based on the net profit of the WC/.PI center and give Jack an
incentive to grow the business. The letter also stated that this opportunity would be
considered after Jack had completed three full years with the firm, in January 2016. Id.
at p. 780-781, and Plaintiff's Ex. 6, p. 2.
{¶ 23} Beginning in 2012 and continuing each year until Jack left HNB in May
2017, the firm gave Jack a bonus, and Jack was happy with his bonuses. Id. at p. 187
and 782, and Plaintiff’s Ex. 57.
{¶ 24} As indicated, Jack was hired to help grow the PI practice, and he did so.
When Jack was hired in 2012, there were about 30 to 40 PI clients; by the time he left
HNB in May 2017, the firm had about 287 PI clients. Trial Tr. at p. 318. The PI profit
began to exceed that of the WC practice. This was primarily because the WC practice
had more overhead, due to the current employees’ length of service and the fact that HNB
had to keep servicing WC cases for many years after they were opened. Id. at p. 170-
171, 193, and 259. As a result, Jack’s bonus was increased. For example, Jack’s total
wages (including bonuses), increased substantially between 2013 and 2015
(respectively, $85,000 and $132,329.35). See Plaintiff’s Ex. 57.
{¶ 25} In December 2015, Bruce, Jack, and Fred discussed how to allocate fees.
Bruce then prepared identical 2016 employment agreements for all three parties, calling
for each of them to have an $85,000 draw, consistent with Jack’s current draw under the
2014 agreement. Id. at p. 435 and Plaintiff’s Ex. 10. Bruce sent the agreements to Fred
and Jack, noting that they had agreed to the concept that they each would have minimum
income levels, and once that level had been reached, regardless of source, additional
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profit would be divided in part based on the ratio of fees between the PI and WC practices.
Id. at Ex. 10. Bruce further noted that once they had reached a formula, the 2016
agreements would be amended. Id. Both Bruce and Fred signed the 2016 agreement,
but Jack did not. Id. at p. 438.
{¶ 26} In late February 2016, Bruce noticed that Jack had not signed the 2016
agreement and asked if they could meet to discuss it. Id. at p. 249 and Plaintiff’s Ex. 11.
Bruce and Jack then met on February 29, 2016, and discussed matters. Bruce reminded
Jack that he was still contractually bound by the 2014 agreement until a new contract was
signed. Id. at p. 250. At that point, Jack did not refuse to sign the contract; he simply
said he would think about it. Id.
{¶ 27} The following day, Bruce sent Jack an email indicating that his recollection
of the meeting was that Jack did not want to sign the agreement in its current form, but
would “get busy” with his spreadsheet and a formula and make a proposal. Id. at
Plaintiff’s Ex. 12. Bruce further said that:
As I stated many times last night, you’re doing an excellent job. I
want to do all that I can to encourage you and to help you reach your goals.
I want you to become a shareholder soon. My perspective approaching
my last couple of years at HNB is understandably quite different from your
perspective at the early stages of your career. I have been on both ends
of the compensation issue, have won some and lost some, and therefore
understand your concerns. I’m confident that you will reach your financial
goals if you continue your hard work and keep [sic] continue your
resourcefulness and energy for your job. However, regardless of your
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income level, you will never be fulfilled solely by achieving financial success.
I’ve known too many lawyers who make huge bucks and are total train
wrecks. – So much for the lecture. We will have many more discussions
and get this worked out.
Plaintiff’s Ex. 12.
{¶ 28} On August 2, 2016, Bruce sent Jack a proposal for an ownership interest in
HNB. Trial Tr. at p. 244 and Plaintiff’s Ex. 14. In the email, Bruce indicated it was a
document that he had drafted several years ago when Fred became a shareholder. The
document was also clearly marked “Draft” on every page. Id. Bruce further stated in
the email that “When this is implemented we (you, Fred, and me) must have an agreement
on sharing the net profit of our profit center as you will see when you read the agreement.”
Id. at Ex. 14. The email also said, “Assuming you agree to becoming a shareholder, I
see this happening in the first six months of 2017.” Id.
{¶ 29} In addition to requiring a profit-sharing agreement, the shareholder proposal
itself contained various conditions, including Jack’s assumption of a proportionate share
of liability of HNB, a capital contribution by Jack, disclosure of Jack’s own personal
finances and verification of such by HNB’s accountant, and a background check of Jack
to determine his legal history and financial suitability. Plaintiff’s Ex. 14, Proposal for
Ownership Interest, p. 1-2.
{¶ 30} The same day, Jack responded to Bruce’s email and told him he would
review the document and get back to him as soon as possible. Plaintiff’s Ex. 15. At the
time, it was common knowledge that Bruce anticipated retiring in 2019, and Bruce had
also told Jack this. Trial Tr. at p. 717-718. Jack did not get back to Bruce about the
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shareholder proposal. Id. at p. 286. Jack also never executed the document, nor did
he make a capital contribution. Id. at p. 284.
{¶ 31} In October 2016, Jack and Bruce discussed adding staff to the PI practice
due to volume. Id. at p. 273-274 and Plaintiff’s Ex. 17. On December 14, 2016, Bruce,
Fred, and Jack met at the Dayton Racquet Club (“DRC”) to discuss the year-end
financials, staff bonuses, and attorney bonuses. Id. at p. 455 and 789. Jack did not
have any legal authority to decide how the money was distributed, but he was invited to
the meeting. Id. at p. 455
{¶ 32} Before the meeting, Jack sent Bruce an email on December 12, 2016. In
the email, Jack asked if they could meet in January 2017 to discuss Jack’s concerns
about the future of the PI practice. See Ex. 18. In response, Bruce set a meeting for
January 9, 2017, and also asked if Jack had a proposal or plan that he could send Bruce
before the meeting. Id. Jack did not send a proposal; instead, he sent Bruce a
spreadsheet comparing net profits of the WC and PI practices. Id.
{¶ 33} During the December 14, 2016 meeting, Bruce, Fred, and Jack discussed
the fact that 2016 had been a somewhat disappointing year, and the net profit was only
$130,000. Id. at p. 455 and 721. Prior to the meeting, Bruce had decided that Jack had
done a great job that year, and they would divide the net profit by three, which he felt was
generous and equitable. Id. at p. 455. When told of this, Jack looked obviously
disappointed, and Bruce asked what was wrong. Jack then said he did not think that
was reasonable or fair; when Bruce asked what would be fair, Jack said he thought he
should get it all. Id. at p. 255-256. Bruce thought this was way out of line, and told Jack
that would not happen. Id. at p. 256.
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{¶ 34} During the meeting, there was a long discussion on how to divide bonuses.
Jack’s opinion was that there should be some consideration for performance-based
bonuses. Trial Tr. at p. 721-722. The meeting ended on a friendly basis, with no
specific resolution, and after the meeting, Fred told Bruce to do whatever he wanted about
the bonuses. Id. at p. 257. Fred and Bruce decided to give Jack 40%, while retaining
30% each for themselves. They hoped this would express to Jack that they wanted him
to be part of their practice, and Jack later expressed appreciation. Id.
{¶ 35} The day after the meeting, Bruce drafted a memo to Jack and Fred, stating
that he would be retiring on June 23, 2017, which was quite a bit earlier than expected.
Id. at p. 279. The initial part of the memo said that:
I appreciated our candid discussion of the financial issues last night.
I respect everyone’s honesty and point of view. Money issues are
challenging. These discussions tend to reveal the core values and
priorities of the people involved. As shown last night, our values and
priorities are different. In my opinion, this is because we are at different
states of our career, and we each have our individual needs, and there is
an inherent mistrust that is hard to avoid.
Jack’s perspective on profit sharing is obviously different from mine.
I do not expect our opinions on these issues will change. I do not foresee
the net profit of the workers’ compensation practice improving substantially
prior to my previously planned retirement date of December 31st, 2018.
Id. at p. 279-280, and Plaintiff’s Ex. 19.
{¶ 36} According to Bruce, he had been thinking for some time about retiring, and
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the decision had nothing to do with the meeting at the DRC. In this regard, Bruce noted
that the disproportion of profits between WC and PI would continue to widen and was not
within his short-term control. He hoped his retirement would “perhaps, alleviate some of
the downside pressure on the profitability of the workers’ comp practice.” Id. at p. 281
and Plaintiff’s Ex. 19. And finally, Bruce stated in the email that Jack and Fred would
“need to continue the discussion and reach agreement on how to move forward from July
1st forward.” Id. at Plaintiff’s Ex. 19.
{¶ 37} On December 15, 2016, Bruce attached the above memo to an email that
was sent to Jack and Fred, informing them of the 40/30/30 split applicable to bonuses.
See Plaintiff’s Ex. 20. On December 16, Jack sent Bruce an email expressing shock at
the decision. Trial Tr. at p. 284-285; Plaintiff’s Ex. 21, p. 1. In this email, Jack stated
that:
You have always been more than transparent with me – and a short
email response is not nearly sufficient to express my gratitude for the years
of honesty. * * * It goes without saying that I will do everything I can to help
during this transition, whether it be covering hearings, meeting with PNCs
[potential new clients], etc. Please let me know if there is anything I can
do – I will obviously communicate this to Fred, too.
Trial Tr. at p. 285-286 and 724; Plaintiff’s Ex. 21 at p. 1.
{¶ 38} Subsequently, on January 9, 2017, Bruce, Fred, and Jack met at a
restaurant. Normally, Bruce and Jack met during January to discuss the previous year;
Fred had never been part of this meeting, but elected to attend after receiving Bruce’s
resignation letter. Trial Tr. at p. 726-727. Jack was concerned about his position in the
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firm now that Bruce was retiring. Id. at p. 727. During the meeting, they rehashed
Jack’s thoughts on a compensation system that was “performance-based, efficiency-
based, volume-based, responsibility-based.” Id. at p. 728. According to Jack, it was
clear to him after this meeting that the system on allocating bonuses would not change
from the status quo. Id. at p. 729.
{¶ 39} There was a dispute, factually, about what occurred during this meeting
while Bruce left to go to the restroom. Jack testified that he inquired about what was
going to be done about the partnership that Bruce had offered to him in August; Fred
denied that Jack had been offered one. When Jack said that he had an email, Fred
stated, “No, No. You haven’t been here ten years. You haven’t been here ten years.
I had to be here ten years.” Id.
{¶ 40} Fred denied that this conversation ever occurred. According to Fred, he
and Jack talked casually, but not about the firm. Id. at p. 881. Fred also said he
explained to Jack that he wanted him to be a percentage associate so he could share in
the profits of their profit center. Fred further said that this had been the case since Bruce
and he had tried to get Jack to sign the 2016 employment agreement, which would have
allowed Jack to share in the profits. Id. at p. 882.
{¶ 41} According to Jack, Bruce and Fred told him during the January 2017
meeting that he should not want to be a partner due to the liability, and that they would
discuss it further before putting together a compensation proposal. Id. at p. 729-730.
There was no follow-up meeting after that. Jack additionally said that he asked Fred
about it every few weeks, but Fred only said he would have to think about it and that they
would get together. However, that never happened. Id. at p.731-732.
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{¶ 42} Until the day Jack left, Bruce was confident that he would be able to reach
an agreement with Jack. Bruce stated that if they had agreed on Jack’s compensation,
Jack would probably have become a shareholder. However, Jack became evasive
about it, as if he did not want to address it. Trial Tr. at p. 245. Before leaving, Jack
never provided Bruce with a proposal concerning the shareholder proposal, the buy-sell
agreement, or what financial numbers he desired. Id. at p. 266, 277, 279, 283, 287 and
767.
{¶ 43} Before and during Jack’s tenure, HNB used computer software called
“Prevail” to keep track of all activity on cases and for case management. Id. at p. 208.
However, Jack used a second record of cases to run his practice on what was called the
“N” drive, which was a drive located within the PI folder on the firm’s server. Id. at p. 145
and 211. For example, Jack had imported control sheets and kept a set of fairly complex
Excel spreadsheets on the N drive that tracked his cases. Id. at p. 427-428. Bruce was
not aware that Jack was using the N drive or that he was using it for a primary method of
case management; Bruce had no reason to monitor Jack’s activities or to know that Jack
was doing this. Id. at p. 212-213 and 238.
{¶ 44} A forensic analysis of the N drive indicated an average of 200 accesses per
month between March 2016 and December 2016, which demonstrated a “predictable file
access pattern.” In February 2017, the pattern changed “dramatically,” resulting in a
spike “with an average of 871 files accesses and a peak of nearly 1,200 accesses in
March 2017.” According to a computer networking and security expert hired by HBN,
this indicated “a targeted and systematic copy of client data files” between February and
May 5, 2017. Id. at p. 145-147, and Plaintiff’s Ex. 60, p. 35.
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{¶ 45} On March 22, 2017, Jack sent his father, John, an email, setting up a
meeting at John’s office for March 27, 2017. Jack, John, and Chris were at the meeting,
and Jack brought an agenda. Id. at p. 567; Plaintiff’s Exs. 23 and 24. The agenda was
marked “CONFIDENTIAL” and contained the following items:
1. Currently in negotiations with Fred Sommer of HNB. To the
extent unable to reach agreement, contingency plan.
2. My Practice: PI; MM; NH Negligence; Product Liability; WC.
3. Available Office – Cost to Rent? Hoglund? Improvements to
available office.
4. Staff Support.
5. Phone System.
6. Website.
7. Health Insurance.
8. Malpractice Insurance.
Id. at Plaintiff’s Ex. 24.
{¶ 46} During the meeting, John made written notes on the agenda about various
matters. Trial Tr. at p. 567. These notes included: “end April early May”; “Michelle,”
next to “Staff Support”;2 “separate phone systems”; “Chris no problem” next to “Website”;
the name of C&H’s health insurance agent, and with respect to “Malpractice Insurance,”
“500 1M, 1 M 2M, 2M 4M” (which would be the limits of malpractice policies). Id. at p.
568 and Plaintiff’s Ex. 24.
{¶ 47} Jack called his father, John, around the end of April and said that he was
2 Michelle was Jack’s paralegal at HNB.
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likely going to leave HNB because it had been a month and he had not heard anything
from Fred. He asked if there would even be room for him at C&H if he decided to leave
HNB. Trial Tr. at p. 734. On April 27, 2017, at 10:16 a.m., John received an email from
his current tenant, Robert Tadych, confirming, after conversations with John, that the
terms of the lease agreement would be changed to vacate an office suite currently being
used and to sell the furniture in exchange for a rent credit. The effective date of the lease
changes was May 1, 2017, and the office suite was the one that Jack occupied after he
went to C&H. Id. at p. 569-570, and Plaintiff’s Ex. 25.
{¶ 48} On April 27, 2017, Jack created a “mail merge” file of the PI clients at HNB
and printed it on April 29, 2017. The evidence of this was destroyed before Jack left
HNB but was later recovered through a forensic search of Jack’s desktop computer.
Trial Tr. at p. 140-142 and 148; Plaintiff’s Ex. 60, p. 14 and 31-32. Jack admitted creating
a mail merge file. He also said it was “probably accurate” that he printed labels at the
firm using his desktop computer and printer, but that he could not specifically recall doing
it. Id. at p. 602-603. Between April 6, 2017, and May 5, 2017, Jack and his paralegal
accounted for over one-half of the printing volume in the firm, although there were a dozen
users on the system. Id. at p. 148-149.
{¶ 49} On May 1, 2017, John received an email from Sampson Paper Company,
attaching a letterhead proof for new letterhead for C&H that included Jack’s name. At
3:08 p.m., John sent a reply, stating, “Looks perfect. Please expedite my offer. We
would love to have the product by the end of the week if possible.” Id. at p. 570-571 and
Plaintiff’s Ex. 26. John copied Jack with the email, and at 4:00 p.m., Jack asked John to
add both an asterisk and “Also licensed in California” to the letterhead. Id. John then
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replied to Jack on May 2, 2017 at 9:37 a.m., “Already ordered. How about the next
batch.” Id.
{¶ 50} Also on May 2, 2017, at 11:38 a.m., Jack purchased a $1,234 computer to
be sent to the offices of C&H. The shipping method was “2nd Business Day Delivery.”
Trial Tr. at p. 575 and 597, and Plaintiff’s Ex. 27. C&H did not provide Jack with a
computer. Id. at p. 576.
{¶ 51} On Thursday, May 4, 2017, at 9:06 a.m., Jack sent an email to
printpointprinting.com, stating, “Please see attached per my discussion with Janelle. I
apologize if the spelling is incorrect this morning. I would like 400 copies on a cream
colored paper.” Id. at p. 574 and Plaintiff’s Ex. 26.
{¶ 52} Also on May 4, 2017, at 10:55 a.m., John sent an email to his tenant with
an attached letter marked “confidential.” The letter concerned the new lease
arrangements. Among other things, the letter stated that “[i]t was also agreed that Jack
Hilgeman would purchase the office furniture (office desk, small table, bookcase, chairs
and shredder) in the former office for $450. I will talk to Jack about payment
arrangements and preparing a bill of sale, and he or I will contact you in the next few days
to formalize the purchase.” Id. at p. 295 and 576, and Plaintiff’s Ex. 28. The email was
copied to both Jack and Chris. Id.
{¶ 53} According to Jack, he did not make a decision to leave HNB until May 4,
2017, after a meeting he had with Fred at around 4:00 p.m. There is a dispute about
what occurred that day. At around 4:00 p.m., Jack went to Fred’s office and asked to
talk to him. Jack inquired about how the compensation system would be set up with
Bruce retiring. Fred said he had been thinking about it, but had not talked to Bruce about
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it. When Jack mentioned that he had received 40% the last year, Fred said, “Well, I think
you’re going to go down to 20 or 25 percent because that’s about what I was paid when I
was an associate here after five years.” Trial Tr. at p. 736-737. Again, according to
Jack, Fred also said that he could not guarantee that Jack would be a partner if he were
there ten years. Id. at p. 737.
{¶ 54} Fred denied discussing Jack’s future as a shareholder and how he viewed
the future division of net profits on May 4, 2017. Id. at p. 556-567. Fred characterized
the meeting as having lasted about five minutes with Jack doing 99 percent of the talking.
Id. No meeting had been scheduled, and Fred had just come back from hearings.
Fred told Jack that they would discuss finances at a later date, and that there was plenty
of time based on Bruce’s explanation that all this needed to be set up by July 1. Id. at p.
559 and 563.
{¶ 55} According to Jack, he did not make a decision on leaving the instant he
talked with Fred. Jack testified that he was a little bit in shock at the way things “all of a
sudden” were going the other way. After having a meeting with a new client at around
4:30 p.m., Jack sat in his office and said to himself, “Am I really going to quit?” Id. at p.
740-741. On May 4, Jack then printed the letters to his active clients, packaged up the
envelopes, and went home. Id. at p. 742-743 and Defendant’s Ex. G. The letter to
Jack’s clients was dated May 5, 2017, was addressed to each client individually, and bore
the letterhead of C&H, which included Jack’s name, along with those of John and Chris.
The letter also included transfer forms, and stated, in part:
I hope this letter finds you well. Please be advised that on this same
date, I accepted a partnership position with the law firm Cowan & Hilgeman
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managing its injury litigation department. Similar to my old firm, I will be
responsible for all personal injury matters handled by the firm. Cowan &
Hilgeman is located in downtown Dayton and has nearly 70 years of
combined legal experience assisting clients in all aspects of the law.
Defendant’s Ex. G.
{¶ 56} On May 5, 2017, Jack and John met for breakfast. At the time, Jack had
225-230 sealed and stamped letters in his car that were addressed to clients. Trial Tr.
at p. 601-602. At trial, Jack and John both denied that Jack told John that he was
depositing letters in the mail. Id. at p. 580-582, 602, and 743. According to John, Jack
said he was going to resign and was going to contact clients, and John said “okay.” Id.
at p. 581. After breakfast, Jack drove to the post office, mailed the letters, and then drove
to HNB’s office, where he worked the rest of the day, but did not tell anyone at the firm
what he had done. Id. at p. 602 and 743. Around 4:00 p.m., Jack went down to Fred’s
office to resign, but Fred was not there. Jack then told his paralegal, Michelle, that he
was leaving the firm. After a discussion in the parking lot, Jack offered Michelle a
position and she accepted. Id. at p. 699-701, and 744-745. Jack and Michelle then
returned to the office and packed their things. Id. at p. 745.
{¶ 57} At about 7:00 p.m. on May 5, 2017, Jack copied all the active PI client files
from the N drive to a personal storage device (a thumb drive). The files included those
of personal injury clients, employment clients, product liability clients, and nursing home
abuse clients. Jack then took the thumb drive to C&H and copied it to the new computer
he had purchased. Id. at p. 597-598 and 745.
{¶ 58} A forensic analysis of Jack’s HNB desktop computer indicated that it had
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been purged of the kinds of documents that would be consistent with continued use and
preservation of that particular computer. This was based on the “relatively small
percentage of existing files with a 2017 timestamp.” Id. at p. 135-137 and Plaintiff’s Ex.
60, p. 25 and 28-29. Jack’s email folders were also empty of content, with the last access
having been on May 5, 2017, at around 7:30 p.m. This demonstrated “a conscious effort
on behalf of an authenticated user to remove content from the Outlook data file.” Id. at
p. 139-140 and Ex. 60 at p. 29-30.
{¶ 59} The workweek at HNB ended on Friday at 5:00 p.m. Trial Tr. at p. 537. It
was common knowledge in the office that Fred did not have a “smart phone” and did not
check his email on weekends. Id. at p. 96 and 300. At the time, Bruce was also out of
the office on vacation in Arizona. The vacation had been listed on the firm’s calendar,
which was available to all attorneys and staff. In addition, the calendar listed when
people were going to be out of the office. Id. at p. 105-106, 213, and 324. Jack also
knew Bruce was in Arizona, as they had spoken about it. Id. at p. 237.
{¶ 60} At 9:45 p.m. on Friday evening, Jack sent a brief email to Fred, stating that
this email would serve as his “formal resignation, effectively immediately.” Id. at p. 299
and Plaintiff’s Ex. 31. Jack did not notify Bruce, nor did he copy him with the email. Id.
at p. 299. Fred did not learn of the resignation until he came into the office on Monday,
May 8, 2017. Id. at p. 543. Bruce first learned of the resignation slightly earlier, when
a paralegal from the firm called him at 6:00 a.m. Arizona time (9:00 a.m. Dayton time) on
Monday. Id. at p. 303-305. Bruce then called Jack, who refused to discuss details other
than to tell him to talk to Fred. During the conversation, Jack read Bruce the letter that
he was sending to clients. Id. at p. 304-305. Bruce then drafted a letter to clients and
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instructed the office to send out a mass mailing to all the PI clients. Id. at p. 303.
{¶ 61} Also on May 8, 2017, Jack, John, and Chris entered into a partnership
agreement which provided that each would pay one-third of partnership expenses and
would retain all income derived from his efforts, unless otherwise agreed. The
agreement additionally contained a provision requiring 30-day notice for a partner to
withdraw. Id. at p. 308 and 578, and Ex. 33.
{¶ 62} Bruce returned from vacation about a week after Jack resigned and
described the scene as “havoc” and a “mess.” Trial Tr. at p. 213 and p. 232. Various
paralegals and both Bruce and Fred spent considerable time dealing with the aftermath
of Jack’s departure. This related to many calls from clients, insurance companies, and
courts; the fact that files were not in order; the fact that there were unfiled documents and
checks; the failure of Jack and Michelle to keep Prevail updated; and a lack of awareness
that Jack had been using the N drive for his cases. Id. at p. 99, 100, 103-104, 211-212,
216, 218, 219-220, 233-234, 237, 427-428, 432, and 704.3 In addition, a new attorney
did not take Jack’s place at the firm until July 5, 2017. Id. at p. 66.
{¶ 63} On June 6, 2017, HNB filed a complaint against Jack, John, Chris, and
C&H. The complaint contained seven causes of action, including: (1) violation of Ohio’s
Uniform Trade Secrets Act; (2) interference with engagement agreements; (3)
interference with business relationships; (4) unjust enrichment; (5) breach of the 2012
Agreement; (6) breach of the 2014 Agreement; and (7) fraudulent concealment. All the
claims were asserted against Jack, and Counts One through Four and Seven were
3 The extent of effort required was disputed, and Jack and Michelle denied that
information could not be found. Trial Tr. at p. 691, 745, and 770.
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asserted against John, Chris, and C&H. See Complaint. On the same day, a motion
for a temporary restraining order (“TRO”) was filed, and Fred filed an affidavit in support
of the motion averring that the allegations in the complaint were true.
{¶ 64} On June 7, 2017, the trial court requested a visiting judge, and one was
appointed on June 28, 2017. On July 7, 2017, John, Chris, and C&H filed an answer
and counterclaim against HNB and a third-party complaint against Fred. See Answer,
Counterclaim, and Third-Party Complaint. The counterclaim and third-party complaint
asserted claims for defamation and false light and were based on articles that had been
published in the Dayton Daily News newspaper about a “midnight raid” that had occurred
at HNB.
{¶ 65} On July 7, 2017, Jack, John, Chris, and C&H (“Defendants”) also filed a
motion to dismiss and/or stay all proceedings pending arbitration. The motion was based
on the contention that Prof.Cond.R. 1.5(f) required HNB to submit fee disputes to
arbitration. In addition, Defendants filed a Civ.R. 12(B)(6) motion to dismiss, and HNB
responded to both motions.
{¶ 66} During an August 3, 2017 TRO hearing, the parties agreed to submit an
order, but failed thereafter to agree on one. As a result, on August 23, 2017, the trial
court filed an order referring the attorney fee dispute part of the case to mediation or
arbitration before the Dayton Bar Association (“DBA”) in accordance with Prof.Cond.R.
1.5 and the Rules and Procedures of the Dayton Bar Association for Resolution for Fee
Disputes and Withdrawals. See Order (Aug. 23, 2017), p. 1. The court further ordered
that any fees that had been collected or would be collected from clients who had entered
into discussions with Jack before August 6, 2017, should be given to John Ruffalo, DBA
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counsel, for deposit in an interest-bearing account. Id. at p. 1-2. In addition, the court
stayed all other matters, including the tort and contract claims, until receipt of Ruffalo’s
report and further court order. Id. at p. 3.
{¶ 67} The arbitration was held on March 6, 2018, and a decision was issued on
March 15, 2018. Defendants then filed a motion asking the court to confirm the
arbitration award. Motion to Confirm (Mar. 19, 2018). HNB responded with a motion to
vacate the award, alleging that the arbitrators had exceeded their authority. Motion to
Vacate (Apr. 2, 2018), p. 2. Defendants then responded to this motion and also asked
the court to order that the arbitration decision be sealed. On April 6, 2018, the court
ordered that Ex. D (the arbitration decision), which had been attached to HNB’s motion
to vacate, be sealed. Ultimately, on April 20, 2018, the court confirmed the arbitration
award and also granted Defendant’s motion to strike HNB’s motion to vacate. After this
decision, a number of motions were filed, including HNB’s motion asking the court to
reconsider its decision on the motion to strike.
{¶ 68} As a result, the court issued an order on June 6, 2018, resolving the pending
motions. See Order on Pending Motions. The court rejected reconsideration of its
decision to vacate HNB’s motion, because HNB had violated the page limits on motions
and had also violated the DBA Committee’s confidentiality provisions for resolving
disputes. Id. at p. 1. The court then granted HNB’s motion to resume proceedings, but
noted that discovery would only be allowed on the fifth, sixth, and seventh claims
(breaches of the 2012 and 2014 agreements and fraudulent concealment), as well as the
punitive damages claims, because, in the court’s opinion, the arbitration decision had
resolved HNB’s first four claims for relief. Id. at p. 2.
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{¶ 69} On June 15, 2018, Jack filed an answer as well as a counterclaim and third-
party complaint against Fred, asserting claims of defamation and false light. HNB and
Fred then filed answers to the counterclaims and third-party complaints of all Defendants.
In August 2018, all Defendants filed motions for summary judgment, but Jack’s motion
was filed separately. Appellees’ motion for summary judgment did not address the
counterclaims; they only asked for judgment regarding the fifth, sixth, and seventh counts
of the complaint.
{¶ 70} All Defendants filed amended summary judgment motions on October 31,
2018, again with Jack filing separately; on the same day, HNB filed a summary judgment
motion. After responses were filed, the trial court granted Jack’s motion in part and
denied it in part; likewise, the court granted HNB’s summary judgment motion in part and
denied it in part. See Orders Addressing Motions for Summary Judgment (Dec. 31,
2018). Specifically, the court concluded that Jack had violated the notice provision of
the contract. In addition, the court restored the trade secrets claim and also concluded
that issues of fact existed concerning that claim. The court, however, granted Jack
summary judgment on the seventh claim for relief, concluding that this claim involved
negligence, conversion, and estoppel. Order Addressing Plaintiffs’ Motion for Summary
Judgment, p. 2.
{¶ 71} On January 31, 2019, Defendants appealed from the trial court’s summary
judgment order, and HNB cross-appealed on February 8, 2019. However, the appeal
was dismissed for lack of a final appealable order on May 9, 2019, and the case was
returned to the trial court. See Horenstein, Nicholson, and Blumenthal, LPA v. Hilgeman,
2d Dist. Montgomery No. 28285 (Decision & Final Judgment Entry, May 9, 2019).
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{¶ 72} Before the appeal was taken, the trial court had set trial for August 19, 2019.
On August 13, 2019, Defendants filed a motion asking the court to clarify the claims set
for trial. On the same day, they also asked the court to rule on the previously-filed
summary judgment motions of John, Chris, and C&H. HNB then responded to these
motions.
{¶ 73} On August 19, 2019, the trial court filed an amended order noting that the
claims remaining for trial were the breach of contract claims against Jack, the
misappropriation of trade secrets and fraud claims (Count Seven) against all defendants,
and the counterclaims and third-party claims for defamation and false light against HNB
and Fred. See Amended Order (Aug. 19, 2019), p. 2.4 The court then held a five-day
bench trial beginning on August 19, 2019, and ending on August 23, 2019. At the end
of HNB’s case, the court dismissed the trade secret and fraud claims against John, Chris,
and C&H. Trial Tr. at p. 680 and 684. In addition, the court dismissed the breach of
contract claim in Count Five based on the 2012 contract, finding that it was superseded
by the 2014 contract. Id. at 680.
{¶ 74} After the trial, both sides filed post-trial briefs. The court then issued its
Findings of Fact, Conclusions of Law and Judgment. Judgment (Oct. 22, 2019). The
court found in Jack’s favor on the trade secrets claim and against him on the breach of
contract claim. Further, the court found in favor of John and Chris on the defamation
and false light claims against HNB, but not against Fred. The court also rejected Jack’s
claims for defamation and false light against HNB and Fred.
4 Concerning Count Seven, the court changed its mind and decided that it stated a claim
for fraud, rather than conversion, estoppel, and negligence.
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{¶ 75} The court awarded HNB $21,672 in damages for economic loss, but
deducted the amount the firm would have had to pay Jack and his paralegal during the
time in question, for a total award of $12,911. Finally, the court awarded John and Chris
$200,000 plus court costs on the defamation and false light claims. No damages were
awarded to C&H, as it was regarded as a nonentity.
{¶ 76} On October 22, 2019, HNB filed a notice of appeal from the court’s
judgment. The appeal was then docketed as Case No. 28581. The trial court also filed
an order on November 4, 2019, clarifying that the award to John and Chris was a lump
sum judgment to be divided equally. See Order Clarifying Judgment.
{¶ 77} While the case was on appeal, Appellees filed a motion in the trial court on
November 5, 2019, seeking prejudgment and post-judgment interest. They also filed a
motion on November 20, 2019, asking the trial court to award them attorney fees and
costs/expenses. The motion was based on R.C. 2323.51 and requested attorney fees,
costs, and expenses against both HNB and its counsel, Craig Matthews.
{¶ 78} On November 25, 2019, John, Jack, and C&H filed a motion to dismiss the
appeal in Case No. 28581 for lack of a final appealable order, because the trial court had
not decided the post-judgment motions. We concluded that a final appealable order did
exist, but elected to remand the case so that the court could resolve the pending post-
judgment matters. See Horenstein, Nicholson, and Blumenthal, LPA v. Hilgeman, 2d
Dist. Montgomery No. 28581 (Decision & Entry, Jan. 29, 2020).
{¶ 79} The trial court subsequently set a hearing on the motions for May 20, 2020.
After the hearing, the court filed a judgment entry granting John and Chris prejudgment
interest on $200,000 at the statutory rate from September 28, 2018; post-judgment
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interest at the statutory rate; attorney fees in the amount of $152,548.40; and necessary
expenses of $10,053. The court awarded the attorney fee and cost sanctions against
both HNB and Matthews. See Order Granting Interest and Fees (June 9, 2020).
{¶ 80} On July 1, 2020, Matthews filed a notice of appeal from the court’s decision,
and the appeal was docketed as Case No. 28838. HNB filed an amended notice of
appeal in the existing appeal (Case No. 28581) on July 1, 2020. We consolidated the
appeals on August 28, 2020.
{¶ 81} With the above facts in mind, we turn to the assignments of error that the
parties have presented. For purposes of convenience, we will consider the assignments
of error out of order.
II. Defamation and False Light
{¶ 82} HNB’s First Assignment of Error states that:
The Trial Court Erred in Awarding an Affirmative Judgment on the
Defamation and False Light Claims.
{¶ 83} Before we consider this assignment of error, we note that the only parties
to the appeal are Appellants HNB and Matthews and Appellees John and Chris. Jack
did not appeal either the damages judgment against him or the denial of his defamation
and false light claims. Additionally, John and Chris did not appeal from the judgment in
favor of Fred on their defamation and false light claims. Finally, C&H did not appeal any
of the trial court’s judgments.
A. Admission of Evidence
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{¶ 84} Under this assignment of error, HNB first contends that the defamation and
false light claims should have failed on the merits because no evidence was admitted
about the content of the alleged defamatory articles. In response, Appellees argue, first,
that we should not consider this issue because HNB failed to comply with App.R. 12 and
App.R. 16. In this regard, Appellees note that the title of the first assignment of error
pertains to sufficiency while the claim is whether the trial court erred by admitting
evidence. We would suggest that if the only evidence to support a judgment has been
improperly admitted, the judgment would not be based on sufficient evidence.
{¶ 85} Turning to the merits of the argument, HNB contends that Defendant’s Ex.
Q, which demonstrated the content of the alleged defamation or untrue statements, was
not identified by any witness and was not self-authenticating under Evid.R. 901(A).
{¶ 86} The rule “is well established that a trial court's decision to admit evidence is
an evidentiary determination within the broad discretion of the trial court and subject to
review on an abuse-of-discretion standard.” State v. Morris, 132 Ohio St.3d 337, 2012-
Ohio-2407, 972 N.E.2d 528, ¶ 19. The abuse of discretion must also create “material
prejudice.” State v. Noling, 98 Ohio St.3d 44, 2002-Ohio-7044, 781 N.E.2d 88, ¶ 43,
citing State v. Issa, 93 Ohio St.3d 49, 64, 752 N.E.2d 904 (2001). An abuse of discretion
“ ‘implies that the court's attitude is unreasonable, arbitrary or unconscionable.’ ”
(Citations omitted.) Blakemore v. Blakemore, 5 Ohio St.3d 217, 219, 450 N.E.2d 1140(1983). “[M]ost instances of abuse of discretion will result in decisions that are simply
unreasonable, rather than decisions that are unconscionable or arbitrary.” AAAA Ents.,
Inc. v. River Place Community Urban Redevelopment Corp., 50 Ohio St.3d 157, 161, 553
N.E.2d 597 (1990). “A decision is unreasonable if there is no sound reasoning process
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that would support that decision.” Id.{¶ 87} Defendant’s Ex. Q was an article allegedly published on the website of the
Dayton Daily News (“DDN”) on June 12, 2017. HNB is correct in stating that no witness
specifically identified this exhibit, and the trial court noted this fact. Trial Tr. at p. 873.
However, the court chose to admit the exhibit because Jack referred to the article during
his testimony. Id.{¶ 88} Evid.R. 901(A) provides that “[t]he requirement of authentication or
identification as a condition precedent to admissibility is satisfied by evidence sufficient
to support a finding that the matter in question is what its proponent claims.” One way
this can be established is “[t]estimony that a matter is what it is claimed to be.” Evid.R.
901(B)(1).
{¶ 89} While there was no specific testimony at trial that Ex. Q was “what it is
claimed to be,” Jack identified a similar exhibit (Defendant’s Ex. R) as a screenshot of the
twitter account of Mark Govaki, who worked at the time for the DDN. Trial Tr. at p. 772.
The “tweet” said “Attorney sued for ‘weekend raid’ of clients, joining new firm,” and it had
an incomplete link to an article at daytondailynews.com. Id. at Ex. R. The tweet was
accompanied by a picture that Jack identified as being a picture of him, and Jack identified
the picture as one that Govaki had placed next to the first article he wrote immediately
after the complaint was filed. Id. at p. 772 and 774.
{¶ 90} Other testimony established that four articles were published: the first was
on June 12, 2017; a second, after John and Chris filed their answer and counterclaim; a
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third in August 2017, and a fourth in April 2018. Id. at p. 818-819 and 859.5
{¶ 91} Jack also identified Defendant’s Ex. U as a screenshot he took of opposing
counsel’s (Matthews’s) Twitter feed, dated June 14, 2017. Id. at p. 777. The tweet said
“Our client is esteemed law firm exploited in weekend raid of clients, by trusted associate.”
The tweet also contained the following statements, with a link to daytondailynews.com:
Attorney sued for alleged ‘weekend raid’ of clients, joining . . .
A local attorney who allegedly conducted a ‘weekend raid’ of his firm’s
clients and their information has been sued in Montgomery County
Common Pleas.
Mydaytondailynews.com.
(Emphasis sic.) Defendant’s Ex. U.
{¶ 92} These exhibits contained the same headlines as the article depicted in Ex.
Q, The author, Govaki, was also the same author of the article in Ex. Q. In view of the
above testimony and evidence, while the better practice would have been to have a
witness specifically identify Ex. Q, the evidence was sufficient to conclude that Ex. Q was
inferentially identified as what it was claimed to be.
{¶ 93} Even if this were otherwise, Evid.R. 902 provides that “Extrinsic evidence
of authenticity as a condition precedent to admissibility is not required in certain
situations.” Among these are “[p]rinted materials purporting to be newspapers or
periodicals, including notices and advertisements contained therein.” Evid.R. 902(6).
{¶ 94} In this context, HNB argues that while newspaper articles may be self-
5 No evidence was presented about the content of the three articles that followed the first,
other than that they may or may not have had a picture of Jack accompanying the article.
Trial Tr. at p. 818-819.
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authenticating, the rule generally only considers print newspapers, not websites, and the
“likelihood that a newspaper will be forged . . . is remote.” HNB Brief, p. 12, quoting Staff
Notes to Evid.R. 902(6). HNB does not suggest why an article on a newspaper’s website
is any more likely to be forged than a printed article. And, in fact, we were able to locate
the same article as Ex. Q on the Dayton Daily News website. See https://
www.daytondailynews.com/news/crime--law/attorney-sued-for-alleged-weekend-raid-
clients-joining-new-firm/JgcdZkREo6UhlWHJxhwlVP/ (accessed July 8, 2021).
{¶ 95} Law in the specific context of printouts from internet websites as self-
authenticating is sparse, but some federal courts “have considered the ‘distinctive
characteristics’ of the website in determining whether a document is sufficiently
authenticated.” Ciampi v. City of Palo Alto, 790 F.Supp.2d 1077, 1091 (N.D.Cal. 2011),
citing Premier Nutrition, Inc. v. Organic Food Bar, Inc., No. SACV 06-0827 AG (RNBx),
2008 WL 1913163, at *6 (C.D.Cal. Mar. 27, 2008), and Perfect 10, Inc. v. Cybernet
Ventures, Inc., 213 F.Supp.2d 1146, 1153-1154 (C.D.Cal.2002), abrogated on other
grounds, as noted in Fabian Perez Art Publishing LLC v. Las Brujas Inc., 2015 WL
11430871, at *4 (C.D.Cal.2015).
{¶ 96} In Ciampi, the court allowed admission of printouts where the articles
contained “sufficient indicia of authenticity, including distinctive newspaper and website
designs, dates of publication, page numbers, and web addresses.” Id. But see Specht
v. Google Inc., 758 F.Supp.2d 570, 582 (E.D.Ill.2010) (“a printout from a website does not
require the same work or expense as a printed publication, and as an electronic file, it
can be easily manipulated. It lacks the same degree of authenticity as its printed
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counterpart.”).6
{¶ 97} Here, Defendant’s Ex. Q contained a URL that led to the article in question,
as well as the date of printing, indicia identifying the Dayton Daily News as the source,
and links to other local stories in the Dayton area. Moreover, as noted, our own internet
search using the URL in Ex. Q found the same article.
{¶ 98} Accordingly, we conclude that the trial court did not abuse its discretion in
admitting Ex. Q into evidence.
B. Privilege Relating to Legal Proceedings
{¶ 99} HNB also contends that Defendants’ defamation and false light claims were
barred by the absolute privilege that attaches to statements made during judicial
proceedings.
{¶ 100} The trial court’s decision appears to have found defamation due to the
allegations in the complaint (which were based on “information and belief”), coupled with
the fact that Fred’s affidavit in support of the motion for a TRO swore that the allegations
in the complaint were true. Judgment (Oct. 22, 2019), at p. 14-15. In this regard, the
court concluded that the allegations in the complaint were “entirely false, totally
unsupported by probable cause, and made with reckless disregard of the truth.” Id. at p.
15. This conclusion was based on these facts: “Cowan and John Hilgeman practice law
together, but are not true partners. They share office expenses, but each is responsible
for his own clients and each derives income from those respective clients. When Jack
6We disagree with the observation in Specht. A printout is not an electronic file that can
be manipulated, and unless someone hacks into a newspaper’s website (which is
unlikely), we see no way that the content of a published article could be altered.
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Hilgeman joined them, it was on the same basis. Neither Cowan, nor John Hilgeman,
nor the firm of Cowan and Hilgeman profited from Jack Hilgeman’s clients or client lists.”
Id.
{¶ 101} Although the court recognized that an absolute privilege attaches to
statements made during judicial proceedings, the court concluded that HNB waived this
privilege by transmitting the alleged defamatory material to a reporter.7 Although there
was no direct evidence of this fact, the court relied on these facts: (1) a picture of Jack
accompanied the article and could only have come from within the firm; (2) Bruce
incorrectly stated in responding to a request for admissions that the picture was available
on the internet; and (3) although the reporter may have possibly found the complaint in a
routine sweep of courthouse filings, it was “more probable that the Complaint was
supplied by counsel for Plaintiff, given his propensity to go public between the short time
period between the filings and the tweet, or the Plaintiff.” Id. at p. 19. This latter
statement was based on the court’s prior factual finding that HNB’s counsel tweeted out
two days after the complaint and TRO were filed that “ ‘Our client . . . exploited in weekend
raid of clients by trusted associate.’ ” Id. at p. 16.
{¶ 102} However, this particular factual finding was incorrect. The complaint was
7 In their brief, Appellees argue that HNB waived the privilege by failing to raise it in its
answer to the counterclaims. Appellees’ Brief, p. 14-15. However, HNB discussed the
matter during the bench trial. Trial Tr. at 908-912. When Appellees responded, they
objected that the matter had not been raised during witness examination but did not
mention affirmative defenses. Appellees further suggested, not as a bar, but as a legal
position, that HNB was incorrect in maintaining that pleadings “cannot be used as claims
for defamation.” Id. at p. 943. In addition, the trial court’s waiver decision was not based
on waiver of an affirmative defense. We therefore conclude that the issue was properly
raised and before the court, which was well-acquainted with the issues after three years
of litigation, and also conducted a bench trial.
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filed on June 6, 2017; the DDN article was published on June 12, 2017; and the tweet
occurred on June 14, 2017, two days after the article appeared. See Defendants’ Exs.
D and U. Furthermore, much attention was paid at trial to the fact that Jack’s picture
accompanied the article and to where the picture came from, and so on. We find this
irrelevant. Assuming that HNB provided the picture, it was equally likely that the reporter
asked for a picture to accompany the article. Since the complaint (and the article) were
primarily about Jack, it is reasonable that a reporter would want a picture.
{¶ 103} In addition, the picture was not of either John or Chris and had little
relevance to their defamation and false light claims. There was nothing untruthful about
the picture; it was simply a photo.
{¶ 104} “ ‘In Ohio, defamation occurs when a publication contains a false
statement “made with some degree of fault, reflecting injuriously on a person's reputation,
or exposing a person to public hatred, contempt, ridicule, shame or disgrace, or affecting
a person adversely in his or her trade, business or profession.’ ” Am. Chem. Soc. v.
Leadscope, Inc., 133 Ohio St.3d 366, 2012-Ohio-4193, 978 N.E.2d 832, ¶ 77, quoting
Jackson v. Columbus, 117 Ohio St.3d 328, 2008-Ohio-1041, 883 N.E.2d 1060, ¶ 9.
(Other citation omitted.) “ ‘To establish defamation, the plaintiff must show (1) that a
false statement of fact was made, (2) that the statement was defamatory, (3) that the
statement was published, (4) that the plaintiff suffered injury as a proximate result of the
publication, and (5) that the defendant acted with the requisite degree of fault in publishing
the statement.’ ” Id., quoting Pollock v. Rashid, 117 Ohio App.3d 361, 368, 690 N.E.2d
903 (1st Dist.1996).
{¶ 105} Plaintiffs in defamation cases may fall within one of four classifications:
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private persons, public officials, public figures, or limited purpose public figures. Talley
v. WHIO TV-7, 131 Ohio App.3d 164, 169, 722 N.E.2d 103 (2d Dist.1998). In the case
before us, there was no indication that John and Chris were anything other than private
persons.
{¶ 106} “In Ohio, in a case involving a private person who was allegedly defamed
in a statement about a matter of public concern, the plaintiff ‘has the burden of proving
both that the statement was false and [that] the defendant was at least negligent in
publishing it.’ ” Anderson v. WBNS-TV, Inc., 158 Ohio St.3d 307, 2019-Ohio-5196, 141
N.E.3d 192, ¶ 8, quoting Dale v. Ohio Civil Serv. Emps. Assn., 57 Ohio St.3d 112, 114,
567 N.E.2d 253 (1991). “Moreover, the negligence must be proved by clear and
convincing evidence.” Id., citing Lansdowne v. Beacon Journal Pub. Co. 32 Ohio St.3d
176, 180, 512 N.E.2d 979 (1987).8 See also Dale at 114; McPeek v. Leetonia Italian-
Am. Club, 174 Ohio App.3d 380, 2007-Ohio-7218, 882 N.E.2d 450, ¶ 11 (7th Dist.).
{¶ 107} As indicated, the judgment against HNB was also based on false light,
which was recognized as an actionable tort in Ohio in 2007. Welling v. Weinfeld, 113
Ohio St.3d 464, 2007-Ohio-2451, 866 N.E.2d 1051, ¶ 61. The elements of this tort are
as follows:
One who gives publicity to a matter concerning another that places
the other before the public in a false light is subject to liability to the other
8 In Anderson, the court noted that while Lansdowne was not a majority opinion, “a year
after it was decided, a majority of the court acknowledged that the clear-and-convincing-
evidence standard set forth in Lansdowne was the appropriate standard of proof.”
Anderson, 158 Ohio St.3d 307, 2019-Ohio-5196, 141 N.E.3d 192, at ¶ 8, citing Oney v.
Allen, 39 Ohio St.3d 103, 106, 529 N.E.2d 471 (1988), fn. 2.
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for invasion of privacy if (a) the false light in which the other was placed
would be highly offensive to a reasonable person and (b) the actor had
knowledge of or acted in reckless disregard as to the falsity of the publicized
matter and the false light in which the other would be placed. (Restatement
of the Law 2d, Torts (1977), Section 652E, adopted.)
Id. at syllabus.
{¶ 108} The Supreme Court of Ohio did not articulate a standard of proof, but “[t]he
Restatement's use of the language ‘knowledge or ... reckless disregard as to the falsity’
reflects the view taken by the Supreme Court of the United States in Time, Inc. v. Hill,
385 U.S. 374, 389-90, 87 S.Ct. 534, 542-43, 17 L.Ed.2d 456, 467-68 (1967).” Colbert v.
World Pub. Co., 1987 OK 116, 747 P.2d 286, 290 (1987). Accord Talley v. Time, Inc.,
923 F.3d 878, 895 (10th Cir.2019).
{¶ 109} In Hill, the court held that “the constitutional protections for speech and
press preclude the application of the New York statute to redress false reports of matters
of public interest in the absence of proof that the defendant published the report with
knowledge of its falsity or in reckless disregard of the truth.” Hill at 387-388.
{¶ 110} In Welling, the Supreme Court of Ohio further elaborated on the elements
of false light, stating that:
First, the statement made must be untrue. Second, the information
must be “publicized,” which is different from "published":
“ ‘Publicity,' as it is used in this Section, differs from ‘publication,’ as
that term is used * * * in connection with liability for defamation.
‘Publication,’ in that sense, is a word of art, which includes any
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communication by the defendant to a third person. ‘Publicity,’ on the other
hand, means that the matter is made public, by communicating it to the
public at large, or to so many persons that the matter must be regarded as
substantially certain to become one of public knowledge. The difference is
not one of the means of communication, which may be oral, written or by
any other means. It is one of a communication that reaches, or is sure to
reach, the public.” Restatement of the Law 2d, Torts, Section 652D,
Comment a.
Another element of a successful false-light claim is that the
misrepresentation made must be serious enough to be highly offensive to
a reasonable person:
Welling, 113 Ohio St.3d 464, 2007-Ohio-2451, 866 N.E.2d 1051, at ¶ 52-54.
{¶ 111} HNB contends that the trial court erred because statements made in
judicial proceedings are absolutely privileged. In this regard, the Supreme Court of Ohio
has said that:
As a matter of public policy, under the doctrine of absolute privilege
in a judicial proceeding, a claim alleging that a defamatory statement was
made in a written pleading does not state a cause of action where the
allegedly defamatory statement bears some reasonable relation to the
judicial proceeding in which it appears.
Surace v. Wuliger, 25 Ohio St.3d 229, 495 N.E.2d 939 (1986), at syllabus. See also
Reister v. Gardner, Ohio Slip Opinion No. 2020-Ohio-5484, ___ N.E.3d ___, ¶ 10
(affirming the court’s “long-established rule that the litigation privilege provides absolute
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immunity from civil suits for defamatory statements made during and relevant to judicial
proceedings” (Emphasis sic.)).
{¶ 112} In Surace, the court stated that the rule applies to both parties and non-
parties, even if the nonparty is deprived of a remedy, stressing that “public policy
necessitates free and unencumbered exchange of statements in judicial proceedings in
order to assist courts in the truth-seeking process.” Id. at 234. The court went on to
emphasize that:
“Although the result may be harsh in some instances and a party to
a lawsuit may possibly be harmed without legal recourse, on balance, a
liberal rule of absolute immunity is the better policy, as it prevents endless
lawsuits because of alleged defamatory statements in prior proceedings.
Sufficient protection from gross abuse of the privilege is provided by the fact
that an objective judge conducts the judicial proceedings and that the judge
may hold an attorney in contempt if his conduct exceeds the bound of legal
propriety or may strike irrelevant, slanderous or libelous matter.”
Id., quoting Justice v. Mowery, 69 Ohio App.2d 75, 77, 430 N.E.2d 960 (10th Dist.1980).
{¶ 113} This absolute privilege also applies to witnesses (such as Fred), who “must
be permitted to testify without fear of consequences. Freedom of speech in a judicial
proceeding is essential to the ends of justice.” Willitzer v. McCloud, 6 Ohio St.3d 447,
449, 453 N.E.2d 693 (1983).
{¶ 114} In responding to HNB’s argument, Appellees contend that providing a
complaint to a newspaper has no reasonable connection to judicial proceedings and
therefore was not privileged. This somewhat misconstrues the issue, however. The
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trial court concluded that these allegations in the complaint, coupled with Fred’s affidavit
attesting to their truth, were defamatory. Judgment (Oct. 22, 2019), at p. 14-15. The
allegations in question, as recited by the court, accused John and Chris of “ ‘actively
assisting and participating in a weekend raid of information contained in the Firm’s
confidential files,’ and of ‘enjoying the ill-begotten fruits’ of this unlawful behavior as well
as the ‘willful and malicious appropriation of trade secrets.’ ” Id. at p. 14. Our initial
inquiry, therefore, is focused on the complaint and affidavit, and whether an actionable
claim existed in that regard.
{¶ 115} Having reviewed the complaint and affidavit, it is unquestionable that the
allegations bore a reasonable relation to the judicial proceeding, which was brought on
the basis of breach of contract, interference with businesses and contractual
relationships, trade secrets, and fraud, all relating to Jack’s departure from HNB and
joining John and Chris at C&H. Whether those claims ultimately succeeded was
irrelevant; the alleged defamatory statements were reasonably related to the proceeding
under any interpretation, and, therefore, were absolutely privileged.
{¶ 116} In concluding that HNB could, nonetheless, be held liable, the trial court
relied on out-of-state authority, which held that transmitting defamatory material to a
reporter either is not subject to the litigation privilege or waives it. See Judgment at p.
18, citing Bochetto v. Gibson, 580 Pa. 245, 860 A.2d 67 (2004), and Helena Chem. Co.
v. Uribe, 149 N.M. 789, 2011-NMCA-060, 255 P.3d 367 (Ct.App. 2011) (Helena I). 9
Appellees concede that they have been unable to find Ohio authority allowing for such a
9The decision in Helena was reversed on appeal to the New Mexico Supreme Court.
See Helena Chem. Co. v. Uribe, 2012-NMSC-021, 281 P.3d 237 (2012) (Helena II).
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waiver. Appellee’s Brief at p. 18.
{¶ 117} In Bochetto, an attorney (Bochetto) was sued for legal malpractice based
on two real estate cases that he lost while representing Pickering Hunt (“Pickering”).
Bochetto at 248-249. After filing the malpractice complaint, Pickering’s attorney, Gibson,
faxed a copy of the complaint to a reporter, who then wrote an article about the complaint
that was published in a local legal publication. Id. at 249. The article also included
statements from both Bochetto and Gibson concerning the lawsuit. Id. at 249, fn.6.
{¶ 118} After the article was published, Bochetto sued Gibson and his law firm for
defamation, and the defendants then filed a motion for summary judgment, based on
absolute privilege. The trial court granted summary judgment for the defendants,
concluding that Gibson’s act of sending the complaint was protected by absolute privilege
because Gibson sent it after the complaint was filed. Id. at 249-250. On further appeal,
the trial court’s judgment was affirmed, and Bochetto then appealed to the Pennsylvania
Supreme Court. Id. at 250.
{¶ 119} In a very brief opinion, the Pennsylvania Supreme Court concluded that
while the complaint was protected by absolute privilege, this privilege can be lost through
“overpublication.” Id. at 253, citing Pawlowski v. Smorto, 403 Pa.Super. 71, 81, 588 A.2d
36 (1991). The court then held that Gibson’s act of sending the complaint to a reporter
was a “republication,” which “was an extrajudicial act that occurred outside of the regular
course of the judicial proceedings and was not relevant in any way to those proceedings.”
Id.{¶ 120} Other jurisdictions disagree. For example, in the decision of the New
Mexico Supreme Court in Helena II, the court held that “statements made by litigants or
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their attorneys to the press after the lawsuit has been filed are absolutely privileged if the
statements are a repetition or an explanation of the allegations in the pleading.” Helena
II at ¶ 2.10 In that case, a chemical company filed a defamation complaint against an
attorney and her client, alleging that defamatory comments were made during a public
meeting held ten months before suit was filed against the company and in a press
conference the attorney held the day after suit was filed. Id. at ¶ 5, 7, and 8. The trial
court granted summary judgment for the defendants, applying absolute privilege.
However, the court of appeals reversed, because the statements “were made in the
presence of the press, who did not have a relationship to or interest in the judicial
proceeding.” Id. at ¶ 10, citing Helena I, 149 N.M. 789, 2011-NMCA-060, 255 P.3d 367,
at ¶ 33.
{¶ 121} Regarding post-filing statements, the Supreme Court of New Mexico
rejected the lower court’s opinion that “republishing, repeating, or explaining a complaint
that was filed in good faith” removes the absolute privilege. In this regard, the court
stressed that:
“In the age of digital communication, it is illogical to protect
allegations in a publicly filed complaint but not repetition or explanation of
those same allegations outside the courthouse. Allegations of interest to
the public or even to a single competitive industry will inevitably reach
interested parties, and an explanation limited to the scope of the complaint
only narrows the potential harm of statements that would be defamatory but
10 In addition, the court held that litigation statements are absolutely privileged in certain
circumstances, which the court found present in the case before it. Helena II at ¶ 2.
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for the privilege.”
Helena II at ¶ 30, quoting PowerDsine, Inc. v. AMI Semiconductor, Inc., 591 F.Supp.2d
673, 684 (S.D.N.Y.2008).
{¶ 122} The court further stressed that “ ‘[t]he harm resulting to a defamed party
from delivery of pleadings in a lawsuit to the news media could demonstratively be no
greater than if the news media found the pleadings on their own’ and ‘advising the media
that a lawsuit has been filed, including a basic description of the allegations, has no
practical effect different from providing the pleadings to the media.’ ” Id. at ¶ 32, quoting
Dallas Indep. School Dist. v. Finlan, 27 S.W.3d 220, 229 (Tex. App.2000).11
{¶ 123} Sound policy reasons exist for both positions on this issue. For the
reasons discussed in Helena II, removing the privilege for simply transmitting a complaint
and explaining the litigation would undermine the policy supporting the litigation privilege,
especially when the information disclosed is a matter of public record anyway. On the
other hand, extending an absolute privilege too far beyond the litigation process also
poses issues.
{¶ 124} Because the Supreme Court of Ohio has not ruled on this point, we are
left to anticipate what the court might do. For this analysis, we turn to the decision of the
Ohio Supreme Court in Am. Chem. Soc., 133 Ohio St.3d 366, 2012-Ohio-4193, 978
N.E.2d 832. In that case, a dispute arose between a chemical abstract company (a
11 In a very recent decision, the Texas Supreme Court settled a split in lower court cases
and disapproved of the position taken in Finlan. Landry's, Inc. v. Animal Legal Defense
Fund, ___ S.W.3d ___, 2021 WL 2021130, *8 (Tex. S.Ct. May 21, 2021). In doing so,
the court noted that “[t]he widely adopted rule in other American jurisdictions is that neither
the judicial-proceedings privilege nor attorney immunity protects attorneys who publicize
to the media or to others unconnected with the proceeding allegations that would have
been privileged within the proceeding.” Id. at *8, fn. 13.
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division of the American Chemical Society [“ACS”]) and its former employees over
whether the employees had improperly used code that had been created while they
worked at the company developing software. Id. at ¶ 2-6. When negotiations were at
an impasse, ACS filed suit against the former employees and Leadscope (the company
they had formed). Id. at ¶ 7.
{¶ 125} On the day the litigation was filed, a legal administration manager and
another manager at ACS circulated a memorandum to all its employees explaining that
the lawsuit had been filed and instructing employees not to comment on the matter during
the litigation. Id. Ten days later, an article appeared in a local business newspaper.
“The article quoted ACS's outside counsel as follows: ‘Our motivation in filing suit is to
acquire back the protected information that they took from us.’ The article described
both the allegations in the complaint and Leadscope's response, including a statement
from [one of the former employees] that the lawsuit ‘has no merit’ and a quote from
Leadscope's counsel that ‘[t]he timing of this lawsuit [days before Leadscope was to close
a venture-capital deal] speaks volumes as to its invalidity.’ ” Id. at ¶ 8.
{¶ 126} Although the litigation was originally filed in federal court, ACS dismissed
the action and refiled in state court. In responding to the complaint, the defendants filed
a counterclaim based on various grounds, including defamation. Id. at ¶ 9-10. A jury
trial then resulted in a judgment against ACS on its claims and a judgment in favor of the
defendants on some of their counterclaims (tortious interference, unfair competition and
defamation). Id. at ¶ 15. The court of appeals then affirmed the judgment. Id. at ¶ 16.
On further appeal, the Supreme Court of Ohio reversed the part of the appellate judgment
upholding the defamation judgment against ACS and the damage award on that
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judgment. Id. at ¶ 95.
{¶ 127} In discussing the defamation claim, the court did not specifically address
the republication issue as articulated in Helena II and Finlan. After noting the elements
of defamation, the court commented that “ ‘[i]t is for the court to decide as a matter of law
whether certain statements alleged to be defamatory are actionable or not.’ ” Am. Chem.
Soc., 133 Ohio St.3d 366, 2012-Ohio-4193, 978 N.E.2d 832, at ¶ 78, quoting Yeager v.
Local Union 20, Teamsters, Chauffeurs, Warehousemen & Helpers of Am., 6 Ohio St.3d
369, 372, 453 N.E.2d 666 (1983). The court then said that “ ‘[i]n determining whether a
statement is defamatory as a matter of law, a court must review * * * the totality of the
circumstances’ and by ‘read[ing] the statement[ ] * * * in the context of the entire
[publication] to determine whether a [reasonable] reader would interpret [it] as
defamatory.’ ” Id. at ¶ 79, quoting Mann v. Cincinnati Enquirer, 1st Dist. Hamilton No. C-
09074, 2010-Ohio-3963, ¶ 12. (Other citations omitted.)
{¶ 128} In this context, the Supreme Court of Ohio concluded that the
memorandum to ACS employees was not defamatory as a matter of law and was not
actionable because it simply directed employees not to discuss the litigation and
distributing a memo to employees on an important legal matter was reasonable. Id. at
¶ 81. The court then considered whether the published article was defamatory as a
matter of law. Id. at ¶ 81-86.
{¶ 129} In this vein, the court held that the statements in the article were not
defamatory as a matter of law and reversed the court of appeals ”to the extent it held
otherwise.” Id. at ¶ 86. The supporting reasons included the following items: (1) the
article “contained a balanced report of both parties' arguments and defenses”; (2) “[t]he
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alleged defamatory statements made by ACS's outside counsel in the article pertained to
ACS's intent in filing the lawsuit”; (3) the newspaper “gave the parties an opportunity to
comment on the case and, in fact, both parties took advantage of that opportunity”; (4)
“The first sentence of the article states that ACS is ‘alleging [that Leadscope and its
founders] used proprietary information to form and operate their business.’ Thus, a
reasonable reader would understand that ACS's counsel's statements were a quick
summary of the case and ACS's allegations”; and (5) “the lawsuit was not under seal, and
the complaint was available to the public. The public has a legitimate, constitutionally
protected interest in judicial proceedings, and the article provided information to educate
and inform the public about the case.” Id. at ¶ 81-86.
{¶ 130} While the court held that the statements were not defamatory as a matter
of law, it went on to consider the fact that ACS was held liable for comments of its outside
counsel. The court noted that this was a matter of first impression. Am. Chem. Soc.,
133 Ohio St.3d 366, 2012-Ohio-4193, 978 N.E.2d 832, at ¶ 87. This is of significance in
the case before us. As in Am. Chem. Soc., the defamation claim here has been asserted
only against the client (HNB), not against either HNB’s outside counsel or the newspaper
that published the article.
{¶ 131} In deciding to reverse the defamation judgment against the client, the
Supreme Court of Ohio made the following observations:
Although we have not confronted the discrete issue here, courts
outside of Ohio have done so. The better reasoned opinions hold that a
client may be vicariously liable for its attorney's torts only if the client
authorized or ratified the conduct. See, e.g., Givens v. Mullikin, 75 S.W.3d
-48-
383, 394-396 (Tenn.2002) (an insurer and an insured may be held
vicariously liable for the tortious acts or omissions of an attorney hired to
defend the insured if the attorney's tortious actions were directed,
commanded, or knowingly authorized by the insurer or by the insured);
Chisler v. Randall, 124 Kan. 278, 259 P. 687, 690 (Kan.1927) (“The client
is not responsible for unauthorized defamatory communications made by
his attorney”); Green Acres Trust v. London, 142 Ariz. 12, 18-19, 688 P.2d
658 (Ariz.App.1983), vacated in part on other grounds, 141 Ariz. 609, 688
P.2d 617 (1984) (a client was not liable for defamation when there was an
absence of any evidence of either authorization or ratification of the
attorneys' statements); Arigno v. Murzin, Conn.Super.Ct. No.
CV960474102S, 2001 WL 1265404, *9 (Oct. 2, 2001) (a client was
vicariously liable for an attorney's statements that went beyond reading
charges against the opposing party because the client apparently
authorized the statements).
We agree. Based on the foregoing authority, we hold that a client is
vicariously liable for its attorney's defamatory statements only if the client
authorized or ratified the statements. To hold otherwise would wreak
havoc on the bench and bar, as well as clients.
We make clear that Ohio law imposes no blanket prohibition on an
attorney's communications to the media. Attorneys and their clients retain
a panoply of First Amendment rights and are free to speak to the public
about their claims and defenses provided that they do not exceed the
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contours of protected speech and ethical rules that impose reasonable and
necessary limitations on attorneys' extrajudicial statements. See
Prof.Cond.R. 3.6 (“A lawyer who is participating or has participated in the
investigation or litigation of a matter shall not make an extrajudicial
statement that the lawyer knows or reasonably should know will be
disseminated by means of public communication and will have a substantial
likelihood of materially prejudicing an adjudicative proceeding in the
matter”). Thus, while we do not muzzle an attorney representing a party in
a proceeding, attorneys are not given carte blanche to defame others under
the guise of litigation.
Am. Chem. Soc., 133 Ohio St.3d 366, 2012-Ohio-4193, 978 N.E.2d 832, at ¶ 88-90.
{¶ 132} While the court did not use the words “waiver,” “republication,” or
“overpublication,” the opinion in Am. Chem. Soc. does dictate the approach to be followed
here. Attorneys are permitted to make statements to outside sources like a newspaper,
and a client’s liability for such is limited. Am. Chem. Soc. says nothing about providing
a copy of a complaint to a reporter or other outside source, but given the court’s
statements, it is hard to imagine that this would be prohibited. As noted, clerks’ offices
contain public records that anyone can access, unless records are filed under seal.
{¶ 133} Applying Am. Chem Soc. here, the first issue is whether the statements in
the Dayton Daily News article were defamatory as a matter of law. In this regard, the
article stated, in pertinent part, as follows:
Attorney sued for alleged “weekend raid” of clients, joining new firm
***
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A local attorney who allegedly conducted a “weekend raid” of his
firm's clients and their information has been sued in Montgomery County
Common Pleas Court.
The law firm of Horenstein, Nicholson & Blumenthal (HN&B) charge
that Jack R. Hilgeman sent an email of resignation at 8:45 p.m. on Friday,
May 5, 2017.
“During the ensuing hours, Hilgeman secretly conducted a ‘weekend
raid’ of information contained in the firm's confidential files, copying the
firm's confidential data onto his own devices,” the complaint alleges.
“Hilgeman then hurriedly and without notice or consent of the firm,
used the firm's confidential information to contact the firm's clients for the
purpose of inducing them to leave the firm and retain Hilgeman.”
***
Hilgeman allegedly convinced his paralegal - who had knowledge of
the filing system with court information - to join him at Cowan & Hilgeman.
HN&B characterized that firm's name as fictitious because they
claim there is no business by that name listed by the Ohio Secretary of
State.
***
“I see this as a story of greed and deception and how an attorney
used the Code of Professional Responsibility to facilitate wrongdoing,” said
attorney Craig Matthews, who is representing HN&B. “My client is a long-
established, highly reputable firm. Their primary focus was protecting the
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legal interests of their clients. That is their professional duty.
“Knowing they would honor that duty and not do anything to disrupt
their client's cases, the defendant was able to raid the firm after hours.”
***
The court filing also includes a motion for a temporary restraining
order and preliminary injunction against Hilgeman, who started at HN&B in
2012.
That motion seeks to “immediately freeze all tangible and intangible
property that came into his possession during the employment of Jack
Hilgeman with the firm and provide a full and complete accounting of all
transactions they have undertaken involving the firm's clients since his
sudden and abrupt departure.”
A woman who answered the phone Friday at Cowan & Hilgeman said
she spoke to Jack Hilgeman, and that, “he said he had no comment at this
time.”
The complaint said Hilgeman never expressed any displeasure at
work. A copy of Hilgeman's contract included with the complaint
includes language that said either side is supposed to give a 60-day
notice to end the contract.
***
The firm alleges Hilgeman instead of using the software system he
was supposed to, put the client information into “spreadsheets he
maintained on folders which he could readily copy.”
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The complaint also said that shortly after joining Cowan & Hilgeman,
he “began to harvest settlement proceeds from the cases he had taken” and
left HN&B in “chaos.”
Defendants include Hilgeman, Christopher Cowan, John P.
Hilgeman and Cowan & Hilgeman because they allegedly “participated in
the conduct above and now enjoy the ill-begotten fruits.”
The case was assigned to Judge Mary Kate Huffman, who
immediately requested to be disqualified and have an out-of-county visiting
judge assigned “due to numerous conflicts with the parties involved.”
(Emphasis added.) Defendants’ Ex. Q at p. 1-3.
{¶ 134} Considering the totality of the circumstances and reading the statements
in the context of the publication and how a reasonable reader would interpret them, we
conclude that the article was not defamatory as a matter of law. First, almost every
sentence in the article either quotes the complaint or uses the word “alleged” or similar
terms to describe what the complaint was about. The statements of HNB’s counsel
(Matthews) pertained to HNB’s intent in filing the lawsuit. Reasonable readers,
therefore, would understand that the statements summarized the case and HNB’s
allegations.
{¶ 135} Furthermore, while the article did not recite the Defendants’ point of view,
the article was published on June 12, 2017, before the Defendants had filed any
statements or pleadings in court. Moreover, when Jack was contacted at C&H’s firm
phone number, he declined to comment. Jack could have presented a contrary point of
view, but chose not to do so. Finally, the lawsuit was not filed under seal, meaning that
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the complaint was available to the public.
{¶ 136} Regarding Matthews’s tweet of June 14, 2017, we conclude that this
statement also was not defamatory as a matter of law. The tweet simply stated “Our
client is esteemed law firm exploited in weekend raid of clients, by trusted associate,” and
it provided a link to the newspaper article. Defendants’ Ex. U. Thus, the tweet included
nothing more than what was stated in the article. Additionally, the tweet referred only to
Jack, not to Chris or John. Jack was the “trusted associate.”
{¶ 137} We note, too, the trial court’s finding that Jack was not defamed or placed
in a “false light” by the newspaper article, because the statements were “somewhat false,
but substantially true.” (Emphasis added.) Judgment (Oct. 22, 2019), at p. 20. And,
the C&H firm was dismissed as a “nonentity.” Moreover, Matthews’s comments in the
article were not made about John or Chris; he only referred to “an attorney” in the singular
(meaning Jack) and to the weekend raid by the defendant (again in the singular and a
clear reference to Jack).
{¶ 138} Even if Matthews’s comments had been defamatory, Appellees failed to
establish that HNB authorized or ratified his statements. No evidence was presented
that HNB authorized Matthews to make the statement in the article or to tweet or provide
a link to the article. In addition, there was no evidence that HNB ratified Matthews’s
statements after the fact. Appellees could have questioned both Bruce and Fred about
this, but they failed to do so.
{¶ 139} The only evidence that was elicited from HNB witnesses was that Bruce
hired Matthews because Jack refused to deposit the personal injury fees in an
independent trust account, but instead insisted on keeping them in his own trust account,
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which Bruce found unacceptable. Trial Tr. at p. 412 and 498. The mere fact that a client
has hired an attorney does not mean that the client is vicariously liable for what the
attorney happens to say, absent, as Am. Chem. Soc. said, evidence of authorization to
make the statement or ratification of such. We have searched the record strenuously,
and there was simply no evidence on this point.
{¶ 140} The trial court appears to have imputed Matthews’s statements and
actions simply as an agent for HNB. Judgment at p. 19. However, that is not what the
Supreme Court of Ohio has mandated. The client must authorize or ratify the making of
the defamatory statement, which would require evidence pertinent to those points.
Moreover, as we have pointed out, the trial court’s facts about the “short period of time
between the filings and the tweet” were incorrect. See id. at p. 19.
{¶ 141} Appellees’ “false light” claim suffered from the same infirmities.
Concerning this claim, the trial court concluded that “in leaking the complaint to the Dayton
Daily News, Plaintiff acted in reckless disregard of the truth in placing Chris Cowan and
John H. Hilgeman in a false light and thereby waived the privileged status that this
document, used properly in the judicial process, would otherwise have had.” Id. at p. 20.
{¶ 142} As we read the decision in Am. Chem. Soc., the absolute privilege for the
complaint and affidavit barred the false light claim. Compare Lasater v. Vidahl, 2012-
Ohio-4918, 979 N.E.2d 828, ¶ 13 (9th Dist.) (“allegations of criminal activity to police
officers and [defendant’s] letter to a magistrate are entitled to absolute privilege from civil
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liability for false light invasion of privacy”).12 As indicated, the complaint and affidavit
were absolutely privileged and were matters of public record. From the perspective of
the allegations made here, there was little difference here between the defamation and
false light claims.
{¶ 143} Furthermore, even if there had been a difference, Appellees would have
been required to prove that HNB authorized or ratified the “leaking” of the complaint.13
There was simply no proof that HNB did this. Much time was devoted at trial to the
picture of Jack that accompanied the DDN article and who may have furnished the picture.
However, we consider this an irrelevant fact. The picture was not defamatory; it merely
accompanied an article that was almost completely about Jack.
{¶ 144} Appellees could have called the reporter to testify as to who furnished him
with the complaint or brought it to his attention. Jack, who also filed a counterclaim for
defamation and false light, stated that he chose not to subpoena the reporter. Trial Tr.
at p. 777. In addition, Appellees did not call the reporter to testify. They were entitled
12Other Ohio authority has held that statements to police officers enjoy only qualified
immunity. See Thomas v. Murry, 8th Dist. Cuyahoga No. 109287, 2021-Ohio-206, ¶ 56-
57 (distinguishing its approach of qualified immunity from the Ninth and Fourth Districts,
which allow absolute immunity). These inconsistent approaches are irrelevant here,
however, as this lawsuit does not involve pre-litigation statements.
13 By making this statement, we are not stating that providing a copy of a complaint to a
news source is actionable in Ohio. We find nothing in Am. Chem. Soc. to indicate that
this is the case. If the reporter had simply downloaded the complaint in a “routine
sweep,” as the trial court mentioned, there would be no basis for a false light or
defamation claim, given the absolute privilege for judicial proceedings. We fail to see
how simply handing a copy of the same complaint to a reporter would be any more
actionable. In this regard, see Pincus v. Pincus, 2018-Ohio-5231, 127 N.E.3d 393, ¶ 36
(8th Dist.) (judgment on the pleadings granted based on absolute privilege where
defendants’ counsel provided complaint in prior case to the media and also commented
on purpose in filing that complaint against the allegedly defamed parties).
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not to do that, but they had the burden of proving their case. E.g., Welling, 113 Ohio
St.3d 464, 2007-Ohio-2451, 866 N.E.2d 1051, at ¶ 61 (recognizing false light as a tort
and establishing required elements); Dale, 57 Ohio St.3d at 114, 567 N.E.2d 253(discussing injured party’s burden of proof in defamation actions).
{¶ 145} As a final matter in this context, the trial court applied a legally incorrect
standard by finding that Appellees proved all the elements of a defamation claim “by a
preponderance of the evidence.” Judgment at p. 20. The standard for a defamation
claim is that a defendant’s negligence must be proved by clear and convincing evidence.
Anderson, 158 Ohio St.3d 307, 2019-Ohio-5196, 141 N.E.3d 192, at ¶ 8, citing
Lansdowne, 32 Ohio St.3d at 180, 512 N.E.2d 979. In contrast, the trial court here never
mentioned “clear and convincing evidence” other than noting that its finding was not
based on this standard. Judgment at p. 20.
{¶ 146} For this reason, even if the above discussion were incorrect, the
defamation judgment would have to be reversed. Furthermore, the trial court applied
only a preponderance of evidence finding to the false light claim. Id. at p. 21. While the
court used words like “reckless disregard” in its findings, it specifically stressed that its
findings were “based on the preponderance of evidence standard and not the clear and
convincing standard.” Id.
{¶ 147} We have not found a specific discussion in Ohio state cases about the
burden of proof of false light. However, federal courts and courts in other states have
applied a “clear and convincing” standard. E.g., Machleder v. Diaz, 801 F.2d 46, 56 (2d
Cir.1986); Peoples Bank & Tr. Co. of Mountain Home v. Globe Internatl. Pub., Inc., 978
F.2d 1065, 1068 (8th Cir.1992), fn. 2 (interpreting Arkansas law); Ashby v. Hustler
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Magazine, Inc., 802 F.2d 856, 860 (6th Cir.1986) (interpreting Kentucky law); Parson v.
Farley, 800 Fed.Appx. 617, 623 and fn. 2 (10th Cir.2020) (interpreting Oklahoma law);
Vachani v. Yakovlev, 2016 WL 7406434, *6 (N.D. Cal.2016) (applying California law);
Mishak v. Serazin, N.D.Ohio No. 1:17CV1543, 2018 WL 747106, *10 (N.D.Ohio 2018);
Wal-Mart Stores, Inc. v. Lee, 348 Ark. 707, 742, 74 S.W.3d 634 (2002); Durando v. Nutley
Sun, 209 N.J. 235, 257, 37 A.3d 449 (2012); Dodrill v. Arkansas Democrat Co., 265 Ark.
628, 639, 590 S.W.2d 840 (1979); Found. for Behavioral Resources v. W. E. Upjohn
Unemp. Trustee Corp., 332 Mich.App. 406, 413, 957 N.W.2d 352 (2020) (“malice is an
element of false-light invasion of privacy, regardless of whether the plaintiff is a public or
private figure”). But see Graboff v. Colleran Firm, Civil Action No. 10-1710, 2013 WL
1286662, *3 (E.D.Pa. Mar. 28, 2013) (jury was instructed under a preponderance of
evidence standard.); Dadd v. Mt. Hope Church, 486 Mich. 857, 780 N.W.2d 763 (2010)
(stating, without discussion, that “the trial court properly instructed the jury on false light
invasion of privacy, which included an instruction that ‘plaintiff must prove by a
preponderance of the evidence that the defendant must have known or acted in reckless
disregard of the falsity of the information and the false light in which the plaintiff would be
perceived.”)
{¶ 148} Regardless of the standard applied, the decision in the case before us
added confusion by specifically stating that the court was not applying the clear and
convincing standard. Nonetheless, this error was harmless because we have already
concluded that, under the circumstances of this case, absolute privilege applied to both
the defamation and false light claims.
{¶ 149} In light of the conclusion that absolute privilege applied and the failure of
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Appellees to prove that HNB authorized or ratified Matthews’s statements, the defamation
and false light judgments in favor of Appellees must be reversed.
C. Truth of the Statements
{¶ 150} HNB's next argument is that the defamation and false light claims fail
because the published statements were true. Specifically, the article contained in Ex. Q
referred to each statement as “alleged” or words to that effect, which was a truthful
presentation. In other words, the article did not indicate that any statements in the
complaint were true; it simply indicated what the alleged claims were – and this, in fact,
was true. Based on our prior discussion, we agree.
{¶ 151} A false statement has been defined “as a statement that ‘sets forth matters
which are not true,’ or ‘[s]tatements without grounds in truth or fact.’ * * * A statement is
not a ‘false statement’ if, even though it is misleading and fails to disclose all relevant
facts, the statement has some truth in it.” Serv. Emp. Internatl. Union Dist. 1199 v. Ohio
Elections Comm., 158 Ohio App.3d 769, 2004-Ohio-5662, 822 N.E.2d 424, ¶ 18 (10th
Dist.), quoting In re Pirko, 44 Ohio App.3d 3, 5, 540 N.E.2d 329 (10th Dist.1988).
Notably, the news article did not say the allegations were true; in fact, the very nature of
an allegation is that it may be disputed.
{¶ 152} In addition, while Appellees make much of Fred’s TRO affidavit verifying
that the allegations in the complaint were true, the affidavit was never mentioned in the
DDN article or the tweet; the affidavit was simply filed as part of the judicial action, was
reasonably related to the issues raised, and was absolutely privileged as part of the
proceeding. The Supreme Court of Ohio has stressed that “[w]hile the imposition of an
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absolute privilege in judicial proceedings may prevent redress of particular scurrilous and
defamatory allegations that tend to harm the reputation of the person defamed, a contrary
rule, in our view, would unduly stifle attorneys from zealously advancing the interests of
their clients in possible violation of the Code of Professional Responsibility, and would
clog court dockets with a multitude of lawsuits based upon alleged defamatory statements
made in other judicial proceedings.” Surace, 25 Ohio St.3d at 235, 495 N.E.2d 939.
{¶ 153} Based on the preceding discussion, HNB’s First Assignment of Error is
sustained. The October 22, 2019 judgment of the trial court will be reversed as to the
judgment on the counterclaims, and the court will be instructed to enter judgment in favor
of HNB on those claims. In all other respects, the judgment will be affirmed.
III. Prejudgment Interest
{¶ 154} HNB’s third assignment of error states that:
The Trial Court Improperly Awarded Prejudgment Interest.
{¶ 155} After the post-judgment hearing, the trial court granted Appellees
prejudgment interest on their $200,000 defamation and false light judgment, at the
statutory rate from September 28, 2018, because HNB did not make a good faith attempt
to settle the case. The motion for prejudgment interest granted pursuant to R.C.
1343.03(C)(1).
{¶ 156} In awarding prejudgment interest, the court commented that on August 12,
2019, in the court’s presence, Appellees had offered to dismiss their counterclaims in
exchange for HNB’s dismissal of the claims against them. The court stressed that HNB’s
attorney had rejected the offer “on the spot.” Order Granting Defendants’ Motions for
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Pre- and Post-Trial Interest and Attorney Fees (June 9, 2020), p. 2. The court then
observed that, at the latest, by September 18, 2018, HNB failed to act in good faith in
proceeding against Appellees. Id. at p. 2-3. The basis for this conclusion was that by
then, HNB had taken the depositions of John, Chris, and Jack, and had learned that John
and Chris had not assisted Jack with his personal injury practice and had not received
any portion of Jack’s revenue after he joined C&H. Id. at p. 3-4.
{¶ 157} R.C. 1343.03(C)(1) allows an award of prejudgment interest “[i]f, upon
motion of any party to a civil action that is based on tortious conduct, that has not been
settled by agreement of the parties, and in which the court has rendered a judgment,
decree, or order for the payment of money, the court determines at a hearing held
subsequent to the verdict or decision in the action that the party required to pay the money
failed to make a good faith effort to settle the case and that the party to whom the money
is to be paid did not fail to make a good faith effort to settle the case * * *.”
{¶ 158} Because the June 9, 2020 judgment awarding damages to Appellees will
be reversed, no prejudgment interest will be statutorily due. Accordingly, the third
assignment of error is sustained, and on remand, the trial court will not award prejudgment
interest. And, although not specifically raised in an assignment of error, the grant of post-
judgment interest under R.C. 1343.03(B) is also no longer warranted, and the trial court
will be ordered to proceed accordingly in that regard as well.
IV. Frivolous Conduct Award
{¶ 159} HNB’s second assignment of error states that:
The Trial Court Improperly Awarded Frivolous Conduct Damages.
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{¶ 160} Similarly, Matthews’s first assignment of error states that:
The Trial Court Erred in Awarding R.C. 2323.51 Attorney Fees to
Cowan and Hilgeman Against Matthews.
{¶ 161} Matthews’s second assignment of error also provides that:
Even Had Cowan and Hilgeman Proved Matthews Engaged in
Frivolous Conduct, the Trial Court Erred in the Amount of Attorney Fees and
Expenses Awarded.
{¶ 162} Because these assignments of error raise related arguments, we will
discuss them together. HNB argues that it had no reason to settle the defamation and
false light claims against it because it objectively believed in good faith that it was not
liable due to the absolute privilege for statements made during litigation. HNB further
argues that Appellees failed to present evidence at the hearing that HNB’s conduct was
frivolous and that an insufficient evidentiary record at trial of a case is not enough to
establish frivolous conduct.
{¶ 163} Matthews argues that motions for frivolous conduct must be decided on
evidence presented at the hearing, not on evidence submitted with the motion or that is
in the trial court record. In this regard, Matthews notes that Appellees did not present
any evidence at the hearing other than evidence concerning the attorney fees
themselves. Matthews further argues that the trial court should not have awarded fees
for Jack’s defense of himself, and that the ratio the court applied was also improper.
{¶ 164} In response, Appellees argue that they were forced to defend themselves
for several years against claims they had engaged in sneaky and dishonest behavior.
They also note that the trial court found, in dismissing the trade secret and fraud claims,
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that there was no evidence implicating them in these matters. They further argue that,
because trial courts may take judicial notice of the proceedings in the immediate case, no
further evidence was required.
{¶ 165} As noted, the trial court concluded that HNB and Matthews had engaged
in frivolous conduct and awarded attorney fees to Appellees, and against HNB and
Matthews, in the amount of $152,548.50, plus necessary expenses of $10,053. In
particular, the court stated that it was making its finding under R.C. 2323.51(A)(2)(a)(ii),
which pertains to “ ‘allegations or other factual contentions that have no evidentiary
support.’ ” Order (June 9, 2020), at p. 4.14
{¶ 166} R.C. 2323.51(B)(1) provides that “any party adversely affected by frivolous
conduct may file a motion for an award of court costs, reasonable attorney's fees, and
other reasonable expenses incurred in connection with the civil action or appeal.” As
pertinent here, “frivolous conduct” is defined as:
(a) Conduct of an inmate or other party to a civil action, * * * or of the
inmate's or other party's counsel of record that satisfies any of the following:
***
(iii) The conduct consists of allegations or other factual contentions
that have no evidentiary support or, if specifically so identified, are not likely
to have evidentiary support after a reasonable opportunity for further
investigation or discovery.
R.C. 2323.51(A)(2)(a)(iii).
14 The wording in question is actually found in R.C. 2323.51(A)(2)(a)(iii), and we will refer
to that subsection during our discussion.
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{¶ 167} “The award of attorney fees may be equal to or less than, but may not
exceed, the attorney fees that were reasonably incurred by the aggrieved party.” Foland
v. Englewood, 2d Dist. Montgomery No. 22940, 2010-Ohio-1905, ¶ 65, citing R.C.
2323.51(B)(3). “The court may order the sanction to be paid by a party, a party's counsel
of record, or both.” Id. citing R.C. 2323.51(B)(4).” In addition, “[t]he party seeking
sanctions under R.C. 2323.51 bears the burden of establishing the costs incurred in
connection with the frivolous conduct and reasonable attorney fees that it incurred.” Id.
at ¶ 66, citing In re Verbeck's Estate, 173 Ohio St. 557, 559, 184 N.E.2d 384 (1962).
{¶ 168} The legal standard of review depends on whether a court is reviewing legal
or factual decisions. Namenyi v. Tomasello, 2d Dist. Greene No. 2013-CA-75, 2014-
Ohio-4509, ¶ 19-20. Decisions of law are reviewed de novo, while in cases involving
R.C. 2323.51(A)(2)(a)(iii), trial courts must “make factual determinations which are given
deference so long as there is competent, credible evidence to support those findings.”
Stremmel v. Demmery, 2d Dist. Miami No. 2016-CA-18, 2017-Ohio-5500, ¶ 21, citing
John Breen v. Total Quality Logistics, 10th Dist. Franklin No. 16AP-3, 2017-Ohio-439,
¶ 11. Consequently, one issue we must decide is whether competent, credible evidence
supported the trial court’s decision.
{¶ 169} Before doing so, however, we must first consider Matthews’s argument
that the court erred by failing to hold an evidentiary hearing on whether frivolous conduct
occurred.
A. Requirement of Evidentiary Hearing
{¶ 170} While R.C. 2323.51(B) allows courts to award fees, R.C. 2323.51(B)(2)
contains certain requirements before the court can do so. First, the court must set “a
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date for a hearing to be conducted in accordance with division (B)(2)(c) of this section, to
determine whether particular conduct was frivolous, to determine, if the conduct was
frivolous, whether any party was adversely affected by it, and to determine, if an award is
to be made, the amount of that award.” R.C. 2323.51(B)(2)(a). Second, the court must
send notice of the hearing date to all parties and counsel accused of frivolous conduct
and to the affected parties. R.C. 2323.51(B)(2)(b).
{¶ 171} Third, under R.C. 2323.51(B)(2)(c), the court then:
Conducts the hearing described in division (B)(2)(a) of this section in
accordance with this division, allows the parties and counsel of record
involved to present any relevant evidence at the hearing, including evidence
of the type described in division (B)(5) of this section, determines that the
conduct involved was frivolous and that a party was adversely affected by
it, and then determines the amount of the award to be made.
{¶ 172} The evidence R.C. 2323.51(B)(5) refers to includes “an itemized list or
other evidence of the legal services rendered, the time expended in rendering the
services,” and “an itemized list or other evidence of the costs and expenses that were
incurred in connection with that action or appeal and that were necessitated by the
frivolous conduct, including, but not limited to, expert witness fees and expenses
associated with discovery.” R.C. 2323.51(B)(5)(a) and (b).
{¶ 173} We have previously held that some requirements in R.C. 2323.51(B)(2)
may be waived. Whitt v. Whitt, 2d Dist. Greene No. 2003-CA-82, 2004-Ohio-5285, ¶ 18.
{¶ 174} As noted earlier, Appellees filed a motion on November 20, 2019, seeking
an award of attorney fees and costs/expenses against both HNB and its counsel, Craig
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Matthews. Attached to the motion were the affidavits of Richard Boucher (Appellees’
attorney), and Jack, outlining their legal credentials. Also attached were billing records
between June 6, 2017, and November 20, 2019, and a statement of expenses between
August 28, 2018, and September 9, 2019. Exs. B and C, respectively.
{¶ 175} On December 5, 2019, HNB asked the court to stay the hearing on the
attorney fee request until after the pending appeal was resolved, as the court had
previously done with the other post-judgment motions that were filed. The court did not
rule on this motion. As noted, we chose not to dismiss the appeal but remanded the
case on January 29, 2020, so the trial court could resolve all pending post-judgment
motions.
{¶ 176} Subsequently, on February 27, 2020, the trial court filed an order setting a
schedule for prejudgment interest and attorney fees. The court set the following
deadlines: March 20, 2020, for identifying experts; April 20, 2020, for deposing expert
witnesses; and May 20, 2020, for a hearing on the motions. Id. at p. 2. A further entry
was filed setting the hearing for May 20, 2020 at 1:30 p.m. The court thus complied with
R.C. 2323.51(B)(2)(a) by setting a hearing. The court also complied with R.C.
2323.51(B)(2)(b), as the hearing notice was sent to all the parties, including Matthews.
{¶ 177} On March 2, 2020, HNB substituted Martin Foos and Terry Posey as
counsel in place of Matthews. Due to the Covid-19 emergency, the time for taking
depositions was extended, and on April 27, 2020, Appellees sent Matthews notices of
depositions being taken of Jack and of their expert, Jeff Ireland, on April 29, 2020. They
also sent Appellees’ responses to discovery requests and the hearing notice for the
attorney fee hearing.
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{¶ 178} Subsequently, on May 14, 2020, HNB filed a prehearing brief, setting out
its position on the fee award. The document did not specifically discuss frivolous
conduct, but it set out amounts by which any potential fee award should be reduced.
Then, on May 15, 2020, George Johnson entered an appearance as counsel for
Matthews. However, Matthews never filed any motions or responses concerning
Appellees’ motion for attorney fees.
{¶ 179} On May 20, 2020, the court held a hearing on all post-judgment motions,
with all relevant parties and their counsel present. At the beginning of the hearing,
Appellees’ counsel notified the court of various stipulations to which he and HNB had
agreed. These stipulations were primarily that the experts (Ireland for Appellees and
Thomas Green for HNB) were qualified, and that Ex. A was a true copy of a fee agreement
between Appellees and their counsel, Richard Boucher. Transcript of Proceedings
(Hearing on Post-Trial Motions) (“Motion Tr.”), p. 3-4. Matthews’s counsel made no
comments at this time.
{¶ 180} Furthermore, HNB, Matthews, and Matthews’s counsel did not object to
the form of the hearing, nor did they mention that they wished to call witnesses or provide
evidence pertaining to frivolous conduct. Instead, HNB’s counsel simply stated that HNB
had filed a prehearing brief to give the court the legal guidance it needed and that HNB
intended “to present opposing evidence, which was always going to be the case.” Id. at
p. 6.
{¶ 181} The only witnesses at the hearing were Ireland, Green, and Jack. Ireland
and Green discussed what they had reviewed in preparation for their opinions, the fees
that had been charged, whether the fees were properly attributed to the fee request, and
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whether the fees were reasonable. Id. at p. 8-46 and 58-89. Jack primarily testified
about his billing, including amounts for trial court proceedings, appeal, and the arbitration.
Id. at p. 47-58.
{¶ 182} There was limited testimony about whether settlement discussions
occurred. Id. at p. 56-58 (Jack) and p. 77-80, and 86 (Green). At the end of the
testimony, the parties elected to address prejudgment and post-judgment interest in oral
argument rather than factually, i.e., by evidence. Id. at p. 99-102. Matthews’s counsel
asked about submitting a post-trial brief, but the court said that it would instead give him
any time he needed to address matters during oral argument. Id. at p. 101-102.
{¶ 183} During its closing argument, HNB stated: “We have not presented extra
testimony beyond what is already in the record because we didn’t feel you needed to
have all this extra about what is frivolous and what isn’t. The record has already been
made, you know, you can make that decision.” Motion Tr. at p. 113-114.
{¶ 184} When Matthews’s counsel made his oral statement, he stressed that
neither HNB nor Appellees presented evidence about Matthews’s frivolous conduct. He
also noted the lack of testimony by HNB concerning its desire to dismiss claims against
Appellees, i.e., that HNB had wanted to dismiss claims but that Matthews had talked HNB
out of doing so. Id. at p. 120. In addition, Matthews’s counsel pointed out that the only
independent conduct the court had mentioned was Matthews’s tweet, which related to
defamation and false light, but had “nothing to do with the frivolous conduct.” Id. at p.
121.
{¶ 185} Given these statements, Matthews’s counsel was not arguing that he
wanted to present evidence; he was simply stating there was no evidence against
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Matthews for purposes of awarding attorney fees. Since Matthews never asked the court
to present evidence, we conclude that he waived this point and that the trial court did not
err by failing to comply with the evidentiary requirement in R.C. 2323.51(B)(2)(c). Whitt,
2d Dist. Greene No. 2003-CA-82, 2004-Ohio-5285, at ¶ 18. See also Shields v.
Englewood, 172 Ohio App.3d 620, 2007-Ohio-3165, 876 N.E.2d 972, ¶ 45-50 (2d Dist.).
{¶ 186} Furthermore, given the statements that HNB’s counsel made during the
hearing, we also conclude that HNB waived its argument that Appellees had failed to
present evidence about frivolous conduct during the hearing. Whether the evidence of
record sufficiently supported the frivolous conduct finding, however, is a different issue.
B. Evidence of Frivolous Conduct.
{¶ 187} As noted, the factual issue here is whether competent, credible evidence
supported the trial court’s decision. Stremmel, 2d Dist. Miami No. 2016-CA-18, 2017-
Ohio-5500, at ¶ 21. In this regard, the trial court’s decision stated, in pertinent part:
Frivolous conduct is defined at subsection (ii) as “allegations or other
factual contentions that have no evidentiary support.” The test is whether
no reasonable lawyer would have brought the action in light of existing law.
Pitcher v. Waldman, 1st Dist. No. G160245, 2016-Ohio-5491. * * *
Plaintiff alleged in the Complaint and Affidavit in support of its Motion
for a Temporary Restraining Order that John Hilgeman and Christopher
Cowan “used the firms trade secrets,” that their use was “willful and
malicious,” that they “secretly and in a manner inconsistent with the norms
of legal professionals, secretly and hurriedly procured the breach of many
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of the firm’s agreements,” and “were active participants . . . in carrying out
the weekend raid . . .” (of the firms client files.) These allegations stood
until Plaintiff rested at trial and the Court dismissed the Complaint against
John Hilgeman and Christopher on Defendants’ Rule 41 Motion, ruling that
“each and every allegation against them was totally lacking in proof and
made with reckless disregard of the truth.” The hearing on May 20, 2020
resulted in no suggestion that the Court’s during-the-trial finding was
erroneous nor that the conduct of Plaintiff and its Counsel was other than
“frivolous” and motivated by ill will.
Order (June 9, 2020), at p. 4-5.
{¶ 188} As a preliminary point, the trial court’s decision was incorrect on some
factual grounds. The allegation that Defendants “secretly and in a manner inconsistent
with the norms of legal professionals, secretly and hurriedly procured the breach of many
of the firm’s [engagement] agreements” did not remain in the case until being dismissed
at trial. In fact, these statements were contained in Count Two of the Complaint and
were no longer part of the case after the arbitration proceeding ended in March 2018.
See Order Confirming Arbitration Award and Order on Pending Motions (noting that the
first four counts of the complaint were resolved by the arbitration decision), and Trial Tr.
at p. 23-24. Although the court later changed its mind and let HNB proceed on its trade
secret claim (Count One) against John, Jack, and Chris, this ruling did not extend to Count
Two.15
15 We are aware that the Complaint contains the stock phrase “Plaintiff incorporates all
of the allegations above as if fully rewritten herein,” in connection with the counts that
followed Count Two. See Complaint at ¶s 45, 49, 51, 53, and 55. However, the
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{¶ 189} In analyzing R.C. 2323.51(A)(2)(a)(iii), the Tenth District Court of Appeals
observed that it “is similar to the language in Fed.R.Civ.P. 11(b)(3), which states that, by
presenting a pleading to the court, an attorney or unrepresented party certifies that ‘the
factual contentions have evidentiary support or, if specifically so identified, will likely have
evidentiary support after a reasonable opportunity for further investigation or discovery.’ ”
Carasalina, L.L.C. v. Bennett, 10th Dist. Franklin No. 14AP-74, 2014-Ohio-5665, ¶ 32.
The court further observed that while R.C. 2323.51 is a statute rather than a rule, both
R.C. 2323.51 and Fed.R.Civ.P. 11 “sanction the same behavior: asserting a claim lacking
(or not likely to have) evidentiary support.” Id. Given this similarity, Carasalina looked
to federal authority for help in interpreting R.C. 2323.51(A)(2)(a)(iii). Id.{¶ 190} The particular sources consulted were the 1993 Advisory Committee
Notes for Fed.R.Civ.P. 11. Id. at ¶ 34. These notes state, in relevant part, that:
[S]ometimes a litigant may have good reason to believe that a fact is true or
false but may need discovery, formal or informal, from opposing parties or
third persons to gather and confirm the evidentiary basis for the allegation.
Tolerance of factual contentions in initial pleadings by plaintiffs or
defendants when specifically identified as made on information and belief
does not relieve litigants from the obligation to conduct an appropriate
investigation into the facts that is reasonable under the circumstances; it is
not a license to join parties, make claims, or present defenses without any
factual basis or justification. Moreover, if evidentiary support is not
allegations in question clearly related only to the claim in Count II (breach of the firm’s
engagement agreements with clients).
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obtained after a reasonable opportunity for further investigation or
discovery, the party has a duty under the rule not to persist with that
contention. Subdivision (b) does not require a formal amendment to
pleadings for which evidentiary support is not obtained, but rather calls upon
a litigant not thereafter to advocate such claims or defenses.
The certification is that there is (or likely will be) “evidentiary support”
for the allegation, not that the party will prevail with respect to its contention
regarding the fact. That summary judgment is rendered against a party
does not necessarily mean, for purposes of this certification, that it had no
evidentiary support for its position. On the other hand, if a party has
evidence with respect to a contention that would suffice to defeat a motion
for summary judgment based thereon, it would have sufficient “evidentiary
support” for purposes of Rule 11.
{¶ 191} Having reviewed the Advisory Committee Notes, the Tenth District Court
of Appeals concluded that “a party only needs minimal evidentiary support for its
allegations or factual contentions in order to avoid a frivolous conduct finding. If a party
makes an allegation or factual contention on information or belief, then the party must
have the opportunity to investigate the truth of that allegation or factual contention.
However, if a party persists in relying on that allegation or factual contention when no
evidence supports it, then the party has engaged in frivolous conduct under R.C.
2323.51(A)(2)(a)(iii).” Carasalina, 10th Dist. Franklin No. 14AP-74, 2014-Ohio-5665, at
¶ 36.
{¶ 192} Furthermore, courts have said that “[a]n attorney's knowledge, however,
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is not relevant to whether frivolous conduct has occurred. R.C. 2323.51 employs an
objective standard in determining whether a party or its attorney has engaged in frivolous
conduct.” Southard Supply, Inc. v. Anthem Contractors, Inc., 10th Dist. Franklin No.
16AP-545, 2017-Ohio-7298, ¶ 29, citing State ex rel. Striker v. Cline, 130 Ohio St.3d 214,
2011-Ohio-5350, 957 N.E.2d 19, ¶ 21. “Thus, a court does not look to what the party
or its attorney knew or believed in deciding whether the conduct at issue is frivolous. * * *
The plain language of R.C. 2323.51(A)(2)(a)(iii) requires a court to consider whether
evidence existed to support the allegations or factual contentions in question, not whether
the party or attorney knew of that evidence.” (Citations omitted.) Id.{¶ 193} The Supreme Court of Ohio has also stressed that egregious conduct must
be involved, and that “[f]rivolous conduct is not proved merely by winning a legal battle or
by proving that a party's factual assertions were incorrect.” State ex rel. DiFranco v. S.
Euclid, 144 Ohio St.3d 571, 2015-Ohio-4915, 45 N.E.3d 987, ¶ 15, citing Ohio Power Co.
v. Ogle, 4th Dist. Hocking No. 12CA14, 2013-Ohio-1745, ¶ 29-30. Accord Hamlin v.
Bosse, 2d Dist. Miami No. 2017-CA-26, 2018-Ohio-2657, ¶ 14. “ ‘ “[A] claim is frivolous
if it is absolutely clear under the existing law that no reasonable lawyer could argue the
claim.” ’ ” DiFranco, quoting Ohio Power at ¶ 30. (Other citation omitted.)
{¶ 194} Based on our review of the evidence, and for the reasons previously
discussed, we find competent, credible evidence to support the trial court’s finding that
HNB and Matthews engaged in frivolous conduct concerning the trade secret and fraud
claims against John and Chris. We agree with the trial court that the frivolous conduct
began on September 28, 2018. However, the court’s decision to assess fees from the
date the complaint was filed was not supported by competent evidence and was not
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based on sound reasoning.
{¶ 195} HNB’s trade secret claim was based on a belief that its client list and work
product (WC and PI checklists) were proprietary and/or privileged. Trial Tr. at p. 175,
176, 199-201, 204, 207, 393, 394, 396, 397, 402, 406, 526, and 905, and Plaintiff’s Ex.
8. The fraud claims were based on Jack’s departure from HNB and the manner in which
it was executed, including Jack’s immediate move to C&H and actions taken by Appellees
to assist in the move. Trial Tr. at p. 139-141, 151, 160, 230, 289, 335, 415, 417, 421,
536, 538, 543, 549, 567, 568, 604, 733, 734, 886, 887, 896, 897, 898, and 902.16
{¶ 196} Notably, the court’s January 3, 2019 Order overruling HNB’s summary
judgment motion in part (and restoring the trade secrets claim) stated that client lists were
arguably trade secrets under R.C. 1336.61, and that there was “a question whether
Defendant [Jack] Hilgeman appropriated, as defined at Section 1336.61(B)(1), those
documents.” Order Addressing Plaintiff’s Motion for Summary Judgment (Dec. 31,
2018), at p. 3.
{¶ 197} Appellees did not file a motion for summary judgment on the merits of
either the trade secret or fraud claims. Instead, their position was that the trade secrets
claim was barred by the arbitration decision, and that the fraud claim (the seventh claim
for relief) was not a fraud claim, but involved claims for negligence, estoppel, and
conversion, which were barred under Ohio law. See Motion of John Hilgeman and
16 This is not to say that HNB prevailed on these points; we are simply noting that
testimony was given and arguments were made.
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Christopher Cowan for Summary Judgment (Aug. 9, 2018), p. 2-3.17
{¶ 198} In its attorney fee decision, the trial court did not find that, under existing
law, no reasonable lawyer could argue the trade and fraud secret claims when the
complaint was filed. It is true that the court concluded, in dismissing John and Chris as
defendants at the end of HNB’s case, that the claims against them were not factually
established. Trial Tr. at p. 627 and 680-681. However, this was a factual failure of
proof. Ultimately, the court also found that HNB’s efforts to retain trade secrecy were
insufficient, and that Jack, while breaching the contract, did not commit fraud. Judgment
(Oct. 22, 2019), at p. 5 and 7. Again, these were failures of factual proof.
{¶ 199} As noted, after complaints are filed, litigants are given some latitude to
conduct discovery and investigate. However, where “a party persists in relying on that
allegation or factual contention when no evidence supports it, then the party has engaged
in frivolous conduct under R .C. 2323.51(A)(2)(a)(iii).” Carasalina, 10th Dist. Franklin
No. 14AP-74, 2014-Ohio-5665, at ¶ 36. Thus, HNB and Matthews engaged in frivolous
conduct if a reasonable lawyer would not have persisted in maintaining the claims against
Appellees after investigating and conducting discovery.
{¶ 200} In its decision on prejudgment interest and attorney fees, the trial court
awarded prejudgment interest from September 28, 2018, because HNB was aware by
then that there was no evidentiary support for its position concerning the claims against
Appellees. Order (June 9, 2020), at p. 2-3. This was after HNB took the depositions of
Appellees in September 2018. Id. at p. 3. Although prejudgment interest is no longer
17 This motion was filed before HNB took John and Chris’s depositions. Appellees also
filed an amended summary judgment motion on October 31, 2018, raising the same
points.
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warranted due to our decision on the defamation and false light counterclaims, there was
still competent, credible evidence in the record to indicate that by September 28, 2018,
reasonable lawyers would no longer have argued that Appellees had committed fraud
and trade secret violations. Accordingly, we agree that by September 28, 2018, HNB
and Matthews had engaged in frivolous conduct. Thus, while awarding attorney fees
back to the date of the filing of the complaint was unwarranted, fees could be awarded
from this date forward.
C. Amount of Fees Awarded
{¶ 201} The final issue concerns the amount of fees awarded. HNB has included
this issue in its general assignment of error regarding frivolous conduct. In contrast,
Matthews has framed it as his second assignment of error, which, as noted, states that:
Even Had Cowan and Hilgeman Proved Matthews Engaged in
Frivolous Conduct, the Trial Court Erred in the Amount of Attorney Fees and
Expenses Awarded.
{¶ 202} Concerning the amount of fees awarded, HNB argues that the trial court
erred in failing to deduct fees for work Jack performed in his own defense. Matthews
agrees and adds that the court should not have assessed fees that would have been
incurred even if Appellees had not been sued. Despite the fact that the attorney fee
award is being reversed in part, we will address these points, because the trial court will
need to consider attorney fees on remand.
{¶ 203} The trial court awarded the following amounts of fees, calculated from the
date the complaint was filed:
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(1) Attorney fees of $168,348.40 minus the following items: $3,577
(fees for Jack defending himself), $10,053 (fees for the arbitration), and
$2,190 (for appeals), or a total of $152,528.40.
(2) Necessary expenses in the amount of $10,053.
Order (June 9, 2020), at p. 7-8.
{¶ 204} As a preliminary point, the trial court’s award of necessary expenses was
incorrect. During the post-judgment hearing, Appellees presented a total of $168,
348.40 in attorney fees and $10,577.95 in costs and expenses, including payment of
expert witness fees for Appellees’ expert. Motion Tr. at p. 14-15, and Supplemental
Application for Attorneys’ Fees (May 22, 2020), Exs. B and C. The $168,348.40 amount
included $10,053 in fees incurred for arbitration, and HNB’s expert testified that the
arbitration fees should not be included. Motion Tr. at p. 66. As indicated above, the trial
court agreed and deducted that amount from the attorney fees. However, the court then
added the same amount back in for “necessary expenses.” This was clearly erroneous
and did not reflect the correct amount of costs and expenses ($10,577.95) shown on the
Supplemental Application.
{¶ 205} Turning now to the appropriate amount of fees, any fees awarded should
have begun, at the earliest, with items beginning after September 28, 2018, because that
is when HNB and Matthews no longer had a reasonable basis for their claims against
Appellees. Those fees start on page 26 of Ex. B of the Supplemental Application. For
the same reason, any award for costs or expenses should have begun after September
28, 2018. There were further limitations, however.
{¶ 206} In situations that do not involve contingent fees, R.C. 2323.51(B)(3)(b)
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provides that “[t]he amount of an award made pursuant to division (B)(1) of this section
that represents reasonable attorney's fees shall not exceed, and may be equal to or less
than * * * the attorney's fees that were reasonably incurred by a party.” (Emphasis
added.) In Southard, the Tenth District Court of Appeals stated that: “R.C. 2323.51(B)(3)
allows the trial court to award an amount ‘equal to or less than’ the fees ‘reasonably
incurred.’ Thus, a trial court has the discretion to award reasonable attorney fees that
fall short of the total amount of fees reasonably incurred. See Scott v. Namath, 10th Dist.
No. 16AP-64, 2016-Ohio-5532, ¶ 30-32 (holding that R.C. 2323.51 affords trial courts the
discretion to reduce awards of reasonable attorney fees all the way down to zero).”
Southard, 10th Dist. Franklin No. 16AP-545, 2017-Ohio-7298, at ¶ 45.
{¶ 207} To decide the amount of fees, courts “must use the lodestar method of
calculating fees set forth in Bittner v. Tri-County Toyota, Inc., 58 Ohio St.3d 143 (1991).”
Id., citing State ex rel. Bell v. Madison Cty. Bd. of Commrs., 139 Ohio St.3d 106, 2014-
Ohio-1564, 9 N.E.3d 1016, ¶ 21. The lodestar is “the reasonable hourly rate multiplied
by the number of hours worked.” Phoenix Lighting Group, L.L.C. v. Genlyte Thomas
Group, L.L.C., 160 Ohio St.3d 32, 2020-Ohio-1056, 153 N.E.3d 30, ¶ 1.
{¶ 208} In Phoenix, the Supreme Court of Ohio reaffirmed Bittner “to the extent
that it held that a lodestar can be modified.” However, the court also modified Bittner to
hold that “the lodestar is presumptively reasonable and that enhancements to the lodestar
should be rarely granted and allowed only when the prevailing party has presented
evidence that enhancement is necessary to provide reasonable compensation, that is, if
the lodestar does not take into consideration any factor that may be properly considered
in determining a reasonable fee.” Id. at ¶ 2, citing Perdue v. Kenny A. ex rel. Winn, 559
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U.S. 542, 130 S.Ct. 1662, 176 L.Ed.2d 494 (2010).
{¶ 209} In explaining this point, the Supreme Court of Ohio commented that its
“holding in Bittner – that a court may modify a fee calculation based on the application of
the factors set forth in what is now Prof.Cond.R. 1.5(a) – established the lodestar as an
‘ “initial estimate” ’ of a reasonable fee. * * * But nearly all of those factors are included as
part of the hourly fee used to calculate the lodestar. * * * Thus, the factors in Prof.Cond.R.
1.5(a), including the results obtained, are subsumed within the lodestar; they do not
enhance the lodestar.” (Citations omitted.) Id. at ¶ 16-17.
{¶ 210} In addition, the court stressed that Bittner should not be viewed as allowing
modification as a matter of course and that “any modification must be accompanied by a
rationale justifying the modification.” Id. at ¶ 20.
{¶ 211} Because the fees must be those “reasonably incurred,” we do not think all
the fees incurred after September 28, 2018 should have been awarded. This is because
the finding of frivolous conduct applied only to Appellees (John and Chris), not Jack. The
claims against Jack, whether ultimately successful or not, were not frivolous, and no
attorney fees should have been awarded for defending those claims or for prosecution of
Jack’s counterclaim for defamation. Likewise, Appellees were not entitled to recover
attorney fees that were incurred in pursing their counterclaims for defamation and false
lights. They did not prevail on these claims and attorney fees, therefore, were not
“reasonably incurred” in this regard.
{¶ 212} Turning to the issue of whether attorney fees could be awarded for Jack’s
time, the trial court appears to have agreed with HNB and Matthews that Jack could not
be awarded fees for time he spent representing his own interests. Specifically, the court
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did deduct part of the fees Jack spent defending the claims against him, or for his “pro
se” work as an attorney. This is evident from the following statement of the court:
The more intriguing part of Defendants’ Motion for Attorney Fees is
that portion, $25,040, wherein Defendant Jack Hilgeman, an attorney,
seeks the recovery of attorney fees for his assistance in defending the four
claims against his father and Christopher Cowan and in asserting the
defamation and false light claims against the Plaintiff law firm. In support
of the argument that the recovery of Jack Hilgeman’s attorney fees should
not be recovered, Plaintiff says that there was no Entry of Appearance
signed by Jack Hilgeman, that the memorialization of the fee agreement
signed by all three Defendants failed to mention any co-representation by
Jack Hilgeman, and that he billed in ten-minute increments, a provision not
contained in the fee agreement between counsel and the represented
parties. Nevertheless, while the form may be lacking, the substance of the
legal relationship between Jack Hilgeman and the other Defendants was
there. Simply put, there were five claims against all defendants and two
counterclaims. The sole claim that applied to Jack Hilgeman, the breach
of contract claim, was the one claim wherein he represented himself in pro
se status. 6/7 of Jack Hilgeman’s fees were in defense of the claims
against the other Defendants or in the assertion of the false light claims
against Plaintiff. Therefore, he is entitled to 6/7 of $25,040 or as otherwise
stated, an attorney fee of $21,463.
(Emphasis added.) Order (June 9, 2020), at p. 7-8. This amount was included in the
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total amount of attorney fees ($152,528.40) that the trial court awarded. Id. at p. 8-9.
{¶ 213} The trial court’s analysis, however, was confusing and was not supported
by sound reasoning. Specifically, HNB asserted seven counts in the complaint. Adding
the two counterclaims asserted against HNB made 9 claims in total. Before trial began,
three of HNB’s claims had been removed, meaning that four claims (not five) remained.18
This, plus the two counterclaims, added up to six claims (not seven). And, Jack was still
representing himself solely on two claims (Counts Five and Six for breach of contract).
{¶ 214} Even if this were otherwise, the court’s reasoning was incorrect. The
court awarded Jack 6/7 of the $25,040 in attorney fees, based on the fact that the sole
claim on which Jack represented himself pro se (the breach of contract claim), consisted
of only one-seventh of the case. Order, at p. 8.
{¶ 215} However, HNB’s expert expressly stated that the $25,040 deduction in
fees (or 125.2 hours of time) was for work Jack did on his own claims and that he did not
include with this amount Jack’s defense of the other defendants or in asserting the
counterclaims. Motion Tr. at p. 65. In this regard, the expert stated that Jack spent 77.2
hours (or $15,440 worth of fees) in exclusively representing John and Chris. Id. at p. 67
and Hearing Ex. 13, Item 5. Ultimately, the expert added the $15,440 amount to the
attorney fees that Chris and John might appropriately be awarded for frivolous conduct.
Id. at p. 68-70.
{¶ 216} The trial court’s entry was also confusing in that it clearly awarded Jack
6/7 of the $25,040, rather than awarding it to the persons who were affected by the
18 The claims that no longer existed were breach of the firm’s engagement interests,
interference with business relationships, and unjust enrichment (Counts Two, Three, and
Four of the Complaint).
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frivolous conduct. The text of the order quoted above noted that Jack was seeking his
own attorney fees for his efforts, and the court’s finding was that Jack [“he”] was entitled
to these fees. However, the frivolous conduct finding was only in favor of Appellees,
John and Chris, not Jack. Jack would not be entitled to recover any attorney fees for
work on his own case, as neither HNB nor Matthews had engaged in frivolous conduct
with respect to his claims. And Appellees would not have been entitled to recover for
Jack’s work on his own claims, as those were not fees that they “reasonably incurred.”
Therefore, whether Jack, as an attorney and party defendant, was entitled to fees for his
pro se work, was irrelevant.
{¶ 217} Even if it were relevant, we agree with the reasoning in DiPaolo v. Moran,
277 F.Supp.2d 528 (E.D. Pa.2003), a case that was cited by Matthews in his brief and
reply brief. Matthews Brief, p. 9-10 and 13; Matthews Reply Brief, p. 9. Appellees did
not address the issues raised in that case.
{¶ 218} In DiPaolo, the plaintiff was a township police officer who had been fired
for refusing to answer questions during an investigation of his involvement in a peeping
tom incident. Id. at 529. He then filed suit against 15 defendants, including an attorney
(Morris) and the attorney’s law firm, alleging various state and federal constitutional
violations of his rights. Id. Morris and the law firm were included due to actions they
had taken as counsel for the township. Id.
{¶ 219} During the litigation, Morris filed a motion for sanctions under Fed.R.Civ.P.
11 and 28 U.S.C. 1927, which the court granted against the plaintiff and his attorney. Id.
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at 530.19 After the plaintiff dismissed the action, the court considered several issues,
including whether pro se litigant attorneys can “recover attorneys’ fees under Rule 11 or
§ 1927 for self-representation.” Id. at 531. In discussing the matter, the court
concluded, at the outset, that the attorney could not recover fees for representing himself,
“[b]ecause the language of both Rule 11 and § 1927 implies 1) an attorney-client
relationship and 2) the accumulation of fees, both of which are absent when an attorney
represents himself.” Id. at 534.
{¶ 220} In considering whether fees could be allowed for the time the attorney
spent defending the law firm rather than himself, the court noted that:
Of the three Circuit Courts of Appeals that have addressed whether
pro se attorney litigants may receive fees as a result of the sanctionable
conduct of an opponent, two have held that the terms contained in Rule 11
and § 1927 – or similar statutes – bar pro se attorney litigants from receiving
fees for self-representation. In Massengale v. Ray, 267 F.3d 1298 (11th
Cir.2001), the Eleven Circuit Court of Appeals held that “[b]ecause a party
proceeding pro se cannot have incurred attorneys' fees as an expense, a
district court cannot order a violating party to pay a pro se litigant a
reasonable attorney's fee as part of a sanction.” Id. at 1302-03.
Moreover, it stated that “ ‘[t]he word “attorney” generally assumes some kind
of agency (that is, attorney/client) relationship. The fees a lawyer might
19 28 U.S.C. 1927 provides that “[a]ny attorney or other person admitted to conduct cases
in any court of the United States or any Territory thereof who so multiplies the proceedings
in any case unreasonably and vexatiously may be required by the court to satisfy
personally the excess costs, expenses, and attorneys' fees reasonably incurred because
of such conduct.”
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charge himself are not, strictly speaking, “attorney's fees.” ’ ” Id. at 1303(quoting Ray v. U.S. Dep't of Justice, 87 F.3d 1250, 1251 n. 2 (11th
Cir.1996).
(Footnote omitted.) Id. at 535.
{¶ 221} DiPaolo also noted a decision involving Fed.R.Civ.P. 37 sanctions, in
which the Federal Circuit Court of Appeals had held that “ ‘one cannot “incur” fees payable
to on[e]self, fees that one is not obliged to pay.’ ” Id., quoting Pickholtz v. Rainbow
Technologies, Inc., 284 F.3d 1365, 1375 (Fed.Cir.2002). Also quoting Massengale, the
Federal Circuit Court of Appeals in Pickholtz had focused on the fact that “ ‘the word
“attorney” connotes an agency relationship between two parties (client and attorney),
such that fees a lawyer might charge himself are not “attorney fees.” ’ ” Id., quoting
Pickholz at 1375.
{¶ 222} Concerning the third appellate decision, which was from the Ninth Circuit
Court of Appeals, DiPaolo declined to follow that decision, which had upheld an award of
attorney fees to pro se attorneys under the Civil Rights Act of 1964. Id., discussing Ellis
v. Cassidy, 625 F.2d 227 (9th Cir.1980). The first reason was that while Ellis “articulated
many public policy reasons in support of its holding – all of which were well-reasoned –
the court never addressed the implication of the statutory term ‘attorney.’ ” Id. at 535-
536. In addition, the court questioned Ellis’s continued validity in view of the decision of
the United States Supreme Court in Kay v. Ehrler, 499 U.S. 432, 111 S.Ct. 1435, 113
L.Ed.2d 486 (1991), which “did analyze that term in the context of an award of attorneys’
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fees to a pro se attorney plaintiff pursuant to 42 U.S.C. § 1988.” Id. at 536.20
{¶ 223} In Kay, the United States Supreme Court rejected an attorney’s request
for attorney fees for representing himself. The court noted that “the word ‘attorney’
assumes an agency relationship.” Kay at 435. In this context, the court noted the
definition of “attorney” in Webster’s Dictionary and other dictionaries, including Black’s
Law Dictionary, as a person “ ‘who is legally appointed by another to transact business
for him,” and “ ‘[a]n agent or substitute, or one who is appointed and authorized to act in
the place or stead of another.’ ” Id. at 436, fn. 6, quoting Webster's New Collegiate
Dictionary 73 (1975), and Black's Law Dictionary 128 (6th Ed. 1990).
{¶ 224} While the Supreme Court concluded that Congress likely “contemplated
an attorney-client relationship as the predicate for an award under § 1988,” the court did
not rely solely on this ground. Instead, the court discussed other reasons why attorney
fees should not be granted to pro se attorneys who represent themselves. To this point,
the court stressed that:
Even a skilled lawyer who represents himself is at a disadvantage in
contested litigation. Ethical considerations may make it inappropriate for
him to appear as a witness. He is deprived of the judgment of an
independent third party in framing the theory of the case, evaluating
alternative methods of presenting the evidence, cross-examining hostile
20 The Ninth Circuit Court of Appeals did subsequently conclude that Ellis was no longer
good law in light of the decision in Kay. This was based on Kay’s broad sweep and the
fact that “some of the policy considerations discussed in Kay would be served by
encouraging independent counsel for defendants.” Elwood v. Drescher, 456 F.3d 943,
947 (9th Cir.2006), abrogated on other grounds, Citizens for Free Speech, LLC v. Cty. of
Alameda, 953 F.3d 655, 658 (9th Cir.2020).
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witnesses, formulating legal arguments, and in making sure that reason,
rather than emotion, dictates the proper tactical response to unforeseen
developments in the courtroom. The adage that “a lawyer who represents
himself has a fool for a client” is the product of years of experience by
seasoned litigators.
A rule that authorizes awards of counsel fees to pro se litigants –
even if limited to those who are members of the bar – would create a
disincentive to employ counsel whenever such a plaintiff considered himself
competent to litigate on his own behalf. The statutory policy of furthering
the successful prosecution of meritorious claims is better served by a rule
that creates an incentive to retain counsel in every such case.
(Footnotes omitted.) Kay, 499 U.S. at 437-38, 111 S.Ct. 1435, 113 L.Ed.2d 486.
{¶ 225} After discussing the Kay decision and the Circuit Court cases, the court in
DiPaolo held that while the attorney was “not entitled to fees generated as result of
defending himself, * * * he may be entitled to incremental fees incurred as a result of
defending his law firm. Put simply, by representing his law firm, Morris created an
attorney-client relationship, thereby diminishing, if not eviscerating, the primary reasoning
for the above cited circuit court cases.” (Footnote omitted.) DiPaolo, 277 F.Supp.2d at
536. In a footnote, the court stressed, however, that this would “require evidence
concerning the owners, directors, and officers of the law firm and its fee arrangement with
Morris, if any, related to this action.” Id. at 536, fn. 11.
{¶ 226} We agree with the approach in Kay and DiPaolo. We have already noted
the similarity between Fed.R.Civ.P. 11 and R.C. 2323.51. And, like 28 U.S.C. 1927. R.C.
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2323.51(B)(3)(b) refers to an award of “attorney's fees that were reasonably incurred.”
See also 42 U.S.C. 1988 (allowing a prevailing party to obtain “a reasonable attorney's
fee as part of the costs”).
{¶ 227} We have also indicated that Jack was not entitled to any fees incurred in
defending himself because there was no frivolous conduct finding in his favor. However,
in view of the above discussion, Appellees also were not entitled to any attorney fees for
Jack’s actions in defending himself. As a result, we agree that the trial court erred in
including the $21,463 amount that Jack expended on his own claims in the attorney fees
that were awarded.
{¶ 228} Appellees, however, may be entitled to fees for Jack’s actions in
representing them on the fraud and trade secret claims. Because this case is being
remanded for consideration of the appropriate amount of attorney fees (which could
include fees HNB’s expert attributed to Jack’s representation solely of Appellees), the
court and parties are directed to Marshall v. Cooper & Elliott, 2017-Ohio-4301, 82 N.E.3d
1205 (8th Dist.), which considered the meaning of “incur” as used in R.C. 2323.51(B)(1).
{¶ 229} In Marshall, the trial court had awarded $0 to a party claiming attorney fees
because the party “failed to establish that he ‘incurred’ any obligation to pay any legal
fees in this matter.” Id. at ¶ 28. In reviewing the matter, the Eighth District Court of
Appeals observed that “the trial court's decision to award [the client] Dolan $0 in legal
fees was not, as Dolan contends, based simply on the fact that there were no prior billings
or ‘written fee agreement’ between Dolan and O'Shea [Dolan’s attorney], but rather,
based on the finding that there was no fee agreement of any kind between O'Shea and
Dolan that would legally obligate Dolan to pay any legal fees for O'Shea's work in this
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matter.” Id. at ¶ 29.
{¶ 230} After considering the meaning of “incur” and other related terms in Black’s
Legal Dictionary, the court concluded that “legal fees are ‘incurred’ under R.C.
2323.51(B)(1) and R.C. 2323.51(B)(3)(b) when a party has a legal obligation to pay them
or otherwise becomes legally accountable for them, regardless of whether the fees have
been or will be paid.” Id. at ¶ 31. Among other things, the court distinguished Grove v.
Gamma Ctr., 3d Dist. Marion No. 9-14-29, 2015-Ohio-1180, and Mikhael v. Gallup, 9th
Dist. Summit No. 22992, 2006-Ohio-3917, because the attorney in each case “indicated
that he would not ‘collect’ on or would ‘write off’ a debt that the client would otherwise be
legally obligated to pay.” Marshall at ¶ 36. In contrast, in Marshall:
O'Shea's testimony established not only that he had no written fee
agreement with Dolan and had never billed Dolan for any of the work he
performed on the case but also that he had no oral fee agreement
whatsoever with Dolan. Although O'Shea claimed to have an
“arrangement” with Dolan pursuant to which, the amount, if any, Dolan paid
O'Shea would be determined at some point in the future, he testified that he
had never had any discussions with Dolan about what his fees would be.
Thus, this case does not involve a lawyer's decision not to “collect” or to
“write off” fees that would otherwise be owed. In this case the trial court
found that Dolan failed to establish that he had a legal obligation to pay any
attorney fees in the first instance.
Marshall, 2017-Ohio-4301, 82 N.E.3d 1205, at ¶ 37.
{¶ 231} At the post-judgment hearing, there was no testimony indicating that
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Appellees actually incurred, i.e., were legally obligated to pay attorney fees to Jack. The
affidavit that Jack submitted in connection with the Application for Attorneys’ Fees stated
only that Jack served as co-counsel in conjunction with Richard Boucher. Application
for Attorneys’ Fees and Costs (Nov. 20, 2019) Ex. A, Hilgeman Affidavit, ¶ 3. However,
as the trial court noted, Jack never entered an appearance as co-counsel, nor was any
evidence presented to show that Appellees entered into a fee agreement with Jack. The
affidavits submitted with the fee application also said nothing about Appellees' legal
obligation to pay Jack for his time. And at the hearing, Jack did not discuss any legal
obligation or arrangement; he simply testified that he was never a pro se attorney, that he
was “associated with Richard Boucher's office,” and that he “didn't file a notice of
appearance as a pro se counsel.” Motion Tr. at p. 50.
{¶ 232} The above facts do not address the issue of whether Appellees were
“legally obligated” to pay Jack attorney fees. We express no opinion on the specific
amount of fees to be awarded; we are simply pointing out factors that should be
considered.
{¶ 233} As a final matter, Matthews has also challenged the ratio of fees the trial
court used. First, Matthews contends that the trial court erred in including the defamation
and false light claims in its ratio, because the judgment on those claims did not warrant
an award of attorney fees. Matthews also suggests what a more appropriate ratio would
be. However, since the defamation and false light judgment is being reversed, this
argument is moot as to those claims. Furthermore, the “ratio” the trial court used is
irrelevant, since we have concluded that Appellees cannot collect any fees that Jack
incurred in defending himself. This would include his fees for defending against the
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breach of contract claims, the fraud claim, and the trade secret claim, and in prosecuting
the counterclaims for defamation and false light. As indicated, Appellees may potentially
recover for Jack’s fees for defending them in connection with the trade secret and fraud
claims.
{¶ 234} As a final point, we note that the Supreme Court of Ohio has disapproved
of “block billing” and has indicated that it will no longer accept fee applications “that
include block-billed time entries.” State ex rel. Harris v. Rubino, 156 Ohio St.3d 296,
2018-Ohio-5109, 126 N.E.3d 1068, ¶ 7. Block billing consists of “ ‘lumping multiple tasks
into a single time entry.’ ” Id. at ¶ 6, quoting Tridico v. Dist. of Columbia, 235 F.Supp.3d
100, 109 (D.D.C.2017). In the Supplemental Application for Attorneys’ Fees, there were
some instances of this practice. E.g., Supplemental Application (May 22, 2020), p. 33
(entries for 11/11/18, 11/12/18, 11/13/18, and 11/14/18), and p. 41 (entry for 7/19/19,
drafting of three motions). This, again, is a point to be considered in awarding fees on
remand.
{¶ 235} Based on the preceding discussion, HNB’s second assignment of error is
sustained in part and is overruled in part, Matthews’s first assignment of error is sustained
in part and is overruled in part, and Matthews’s second assignment of error is sustained
in part and is overruled in part as moot.
V. Conclusion
{¶ 236} HNB’s first and third assignments of error are sustained, and HNB’s
second assignment of error is sustained in part and is overruled in part. Matthews’s first
assignment of error is sustained in part and is overruled in part, and Matthews’s
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second assignment of error is sustained in part and overruled in part as moot.
{¶ 237} Because certain aspects of the October 22, 2019 judgment have not been
appealed, that judgment is affirmed in part and reversed in part. Specifically, the October
22, 2019 judgment in favor of John Hilgeman and Christopher Cowan on counterclaims
for defamation and false light and against HNB is reversed, and the remainder of that
judgment is affirmed.
{¶ 238} Concerning the June 9, 2020 judgment on the post-trial motions, that
judgment is reversed in part and affirmed in part. The judgments of prejudgment and
post-judgment interest are reversed. However, the court’s judgment that HNB and Craig
Matthews engaged in frivolous conduct is affirmed in part and reversed in part as to the
date on which the frivolous conduct began and the time from which attorney fees may be
calculated. The award of attorney fees is reversed and remanded for further hearing on
what attorney fees may be awarded to Appellees in connection with the claims against
them that were based on trade secrets and fraud.
.............
TUCKER, P.J., concurs.
HALL, J., concurs in part and dissents in part:
{¶ 239} I agree with my colleagues that the filing of the complaint, though
containing false and otherwise defamatory material with respect to John Hilgeman and
Christopher Cowan, was absolutely privileged and therefore could not be the basis for the
award of damages. However, I disagree that the directing of the complaint to the news
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and tweeting the false information was also shielded from liability. Therefore, I dissent in
part and would affirm the damage award and the corresponding prejudgment interest
award of the trial court. In my opinion, to hold otherwise allows a party to place materially
false or even scurrilous information in a complaint, cause republication or dissemination,
and then hide behind the cloak of the absolute privilege applicable to judicial proceedings.
{¶ 240} Here, the trial court directed attention to the record: “[o]ne only need look
to the testimony of Fred Sommers to view the totality of the evidence against John
Hilgeman and Chris Cowan and conclude that each and every allegation against them
was totally lacking in proof and made with reckless disregard for the truth. (See Transcript,
Pg.521-540).” Judgment (Oct. 22, 2019), at p. 20. That testimony supported the trial
court’s conclusions that the allegations of the complaint, with respect to Appellees John
and Chris were “entirely false” and “totally unsupported by probable cause.” The
complaint falsely stated that these attorneys misappropriated trade secrets, converted
assets of the HNB firm, and were “active participants” in and facilitated the “weekend raid”
of the HNB office and files. They did none of those things. These statements were further
authorized by HNB when HNB shareholder Fred Sommer signed an affidavit, filed at the
same time as the complaint, stating that “I have reviewed the factual allegations contained
in the Complaint and confirm they are true and correct.”
{¶ 241} The trial court found, as a matter of fact, that HNB’s “agent” disseminated
the false information to the newspaper and publically tweeted about it. In my opinion the
case of Bochetto v. Gibson, 580 Pa. 245, 860 A.2d 67 (2004) supports the notion that the
act of sending the complaint to a reporter was a “republication” that “was an extrajudicial
act that occurred outside of the regular course of the judicial proceedings and was not
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relevant in any way to those proceedings.” Id. at 73. See also Landry's, Inc. v. Animal
Legal Defense Fund, 64 Tx.Sup.Ct. 1047, __ S.W.3d __, 2021 WL 2021130 (May 21,
2021). Therefore I would affirm the trial court’s judgment as to damages for defamation
and false light.
{¶ 242} Nonetheless, I agree with my colleagues that the trial court determined
that the litigation became frivolous September 28, 2018. Had the trial court concluded
that the frivolous conduct began with the filing of the complaint, I would find that such a
conclusion was supported by the record and not an abuse of discretion. But because
the trial court determined that the frivolous conduct began September 28, 2018, the award
of attorney fees and costs must be revisited consistent with the majority opinion.
Copies sent to:
Terry W. Posey, Jr.
Martin A. Foos
George D. Jonson
G. Todd Hoffpauir
Richard A. Boucher
Craig Matthews
Hon. Timothy S. Hogan, Visiting Judge