Doran v. Heartland Bank , 112 N.E.3d 355 ( 2018 )

[Cite as Doran v. Heartland Bank, 2018-Ohio-1811.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
Justin S. Doran et al., :
Plaintiffs-Appellees/ :
Cross-Appellants,
: No. 16AP-586
v. (C.P.C. No. 16CV-06-5401)
:
Heartland Bank, (REGULAR CALENDAR)
:
Defendant-Appellant/
Cross-Appellee. :
DECISION
Rendered on May 8, 2018
On brief: Vorys, Sater, Seymour and Pease LLP, Natalie M.
McLaughlin, Nelson D. Cary and Daniel J. Clark, for
appellees/cross-appellants. Argued: Natalie M. McLaughlin.
On brief: Meyer & Kerschner, Ltd., Michael D. Stultz, and
Christopher C. Camboni; Ice Miller LLP, and Paul L Bittner,
for appellant/cross-appellee. Argued: Michael D. Stultz.
On brief: Cooper & Elliott, LLC, and Rex H. Elliott, as amicus
curiae.
APPEAL from the Franklin County Court of Common Pleas
HORTON, J.
{¶ 1} Defendant-appellant/cross-appellee, Heartland Bank ("Heartland" or
"appellant"), and plaintiffs-appellees/cross-appellants, Justin S. Doran ("Doran") and
Columbus First Bank ("Columbus First" or collectively the "appellees"), appeal from a
July 18, 2016 decision and entry of the Franklin County Court of Common Pleas. Appellees
have filed a motion to dismiss on the grounds of mootness. For the reasons that follow, we
dismiss the appeal as moot.
No. 16AP-586 2
I. FACTS AND PROCEDURAL HISTORY
{¶ 2} In light of our resolution of this matter, we will briefly summarize the facts.
Doran worked for another bank for eight years and was trained as a commercial loan officer
prior to starting work for Heartland on February 4, 2013. Several weeks after starting
employment, Heartland requested Doran sign an employment agreement that had non-
compete and non-solicitation covenants. As he had already resigned from his previous job
and been working at Heartland for several weeks, he decided to sign the agreement.
{¶ 3} As time went on, Doran became one of Heartland's top commercial loan
officers. In February 2015, Doran was invited to participate in Heartland's performance
driven retirement plan. The performance-based retirement plan consists of (1) a bank-
funded investment for the employee, and (2) a life insurance policy for the employee. The
banking industry commonly calls these benefits Bank-Owned Life Insurance plans or
"BOLIs." Doran's BOLI also had one year non-compete and non-solicitation restrictions
on his employment after separating from Heartland. It was Heartland's intention for the
BOLI plan restrictions to take the place of the restrictions in Doran's employment
agreement. Doran signed the BOLI plan.
{¶ 4} In May 2016, Doran decided to take a job with Columbus First. Doran
resigned on May 4, 2016 and requested that Heartland release him from his non-compete
restriction. Doran's anticipated start date with Columbus First was May 19, 2016. Shortly
before that date, Heartland sent letters to Doran and Columbus First, threatening to pursue
all available remedies contending that the employment of Doran by Columbus First was in
violation of Doran's BOLI plan and that Columbus First had tortiously interfered with
Doran's contract with Heartland. In response, Columbus First delayed Doran's start date,
but did not rescind its offer of employment. Columbus First attempted to resolve the
dispute to no avail.
{¶ 5} As such, Doran remained out of work. Without a resolution in sight, Doran
and Columbus First decided to file for declaratory relief so a court could determine whether
the restrictions were enforceable. On June 7, 2016, Doran and Columbus First filed their
complaint, seeking a declaratory judgment concerning the enforceability of the non-
compete and non-solicitation restrictions contained in the BOLI plan. On June 21, 2016,
Heartland filed its answer and counterclaim seeking an order declaring that (1) the BOLI
No. 16AP-586 3
agreement was valid and restricts Doran from working at Columbus First until
May 10, 2017, (2) Doran breached the employment agreement and BOLI plan, and (3)
Columbus First wrongfully induced Doran to breach said agreements.
{¶ 6} The trial court subsequently set the declaratory judgment hearing for July 11,
2016. The hearing lasted two and one-half days, and included numerous witnesses,
concluding on July 13, 2016. On July 18, 2016, the trial court issued its judgment entry and
found the following:
In light of the foregoing, the Court finds the restraints and
resulting hardships on Doran with respect to the non-compete
restriction exceed those which are reasonable to protect
Heartland's legitimate business interests. * * * The Court
therefore strikes the non-compete clause in Doran's BOLI
agreement, which agreement itself provides that
"unenforceable provisions may be stricken."
With respect to the non-solicitation restriction in Doran's BOLI
agreement — since Heartland's position is that the restrictive
covenants in the BOLI agreements were meant to replace the
ones in the Employee Agreements — the Court finds the
restriction is overly broad and vague. However, rather than
striking that clause, the Court finds it best to modify the same.
***
Having stricken the non-compete clause, the Court finds
Heartland's Counterclaims, which are based on the terms of the
stricken non-compete restriction, fail as a matter of law.
Id. at 17-19.
{¶ 7} On August 16, 2016, Heartland filed a notice of appeal and, on
August 24, 2016, Doran and Columbus First filed a notice of cross-appeal.
{¶ 8} Also, on August 16, 2016, Heartland moved the trial court for a stay of the
declaratory judgment entered in this case pending appeal. On August 24, 2016, the trial
court granted the stay but stated that "[t]he stay shall go into effect upon the posting of a
supersedeas bond in the amount of $100,000.00." (Order of Stay of Declaratory Jgmt.
Pending Appeal.) On September 13, 2016, Heartland moved the trial court for approval of
the bond. Attached to the motion was the proposed appeal bond with Heartland as the
principal and Westfield Insurance Company as the surety. On October 26, 2016, the trial
court denied Heartland's motion for approval of the bond and specifically stated "[h]aving
No. 16AP-586 4
reviewed [Heartland's] Motion for Court Approval of Bond and the surety bond attached
thereto, the Court hereby DENIES the same. Defendant shall post the $100,000 amount
with the Clerk of Court as bond." (Oct. 26, 2016 Entry Denying Defendant's Mot. for Court
Approval of Bond.) Our review of the record and the trial court's docket shows that the
$100,000 amount was never posted with the clerk of court. As such, the stay never went
into effect.
{¶ 9} On April 25, 2017, appellees filed a motion to dismiss for lack of subject-
matter jurisdiction claiming that the appeal is moot. On April 28, 2017, we stated that the
motion to dismiss shall be submitted to the court as the court determines the merits of this
appeal. (Journal Entry at 1.)
II. ASSIGNMENTS OF ERROR
{¶ 10} Heartland assigns the following errors:
[I.] The trial court erred when it failed to apply the Raimonde
v. Van Vlerah test to the non-competition covenant at issue in
this case.
[II.] The trial court erred when it applied irrelevant factors
under the Raimonde v. Van Vlerah test to the non-competition
covenant at issue in this case.
{¶ 11} Doran and Columbus First assign the following errors:
[I.] The Trial Court erred in deciding to modify, rather than
strike, the vague and overbroad non-solicitation restriction
contained in the Performance Driven Retirement Plan
Agreement.
[II.] The Trial Court's modification of the non-solicitation
restriction contained in the Performance Driven Retirement
Plan Agreement fails to cure the overbreadth and vagary of that
restriction to make it enforceable.
III. MOTION TO DISMISS
{¶ 12} Before addressing the assignments of error, we must first address appellees'
motion to dismiss. In Swan Super Cleaners, Inc. v. Franklin Cty. Bd. of Commrs., 10th
Dist. No. 17AP-185, 2017-Ohio-8978, ¶ 14, quoting Grove City v. Clark, 10th Dist. No.
01AP-1369, 2002-Ohio-4549, ¶ 11, quoting Culver v. Warren, 84 Ohio App. 373, 393 (11th
Dist.1948), we stated:
No. 16AP-586 5
" 'Actions or opinions are described as "moot" when they are or
have become fictitious, colorable, hypothetical, academic or
dead. The distinguishing characteristic of such issues is that
they involve no actual genuine, live controversy, the decision of
which can definitely affect existing legal relations. * * * "A moot
case is one which seeks to get a judgment on a pretended
controversy, when in reality there is none, or a decision in
advance about a right before it has been actually asserted and
contested, or a judgment upon some matter which, when
rendered, for any reason cannot have any practical legal effect
upon a then-existing controversy." ' "
{¶ 13} Where a question before a court has become moot, the jurisdiction of the
court is lost because "the courts of Ohio have long recognized that a court cannot entertain
jurisdiction over a moot question. It is not the duty of a court to decide purely academic or
abstract questions." James A. Keller, Inc. v. Flaherty, 74 Ohio App. 3d 788, 791 (10th
Dist.1991). "When a case is deemed moot, the defending party is entitled to a dismissal as
a matter of right." Lund v. Portsmouth Local Air Agency, 10th Dist. No. 14AP-60, 2014-
Ohio-2741, ¶ 6, citing United States v. W.T. Grant Co., 345 U.S. 629, 632 (1953).
{¶ 14} In appellees' motion to dismiss, they argue that when a contract is no longer
enforceable due to the expiration of a time period specified in the contract, any suit seeking
a declaratory judgment regarding the scope of the contract is moot. At issue in this case is
the enforceability of non-competition and non-solicitation clauses in Doran's employment
contract with Heartland. Under the terms of the contract, both of those clauses were subject
to a one year "restricted period" defined as "the one-year period immediately after the
Executive's Disability or Separation from Service." (Jgmt. Entry at 6.) Doran's employment
was separated on May 9, 2016. Appellees argue that the restrictive period ended on May 9,
2017, bringing any contractual non-compete or non-solicitation obligation Doran may owe
to Heartland to an end and, as such, the case became moot and this court is deprived of
subject-matter jurisdiction.
{¶ 15} Heartland Bank raises two arguments in opposition to appellees' motion to
dismiss. First, Heartland argues that there is a live controversy because if the trial court's
declaratory judgment is reversed, its counterclaims for tortious interference and breach of
contract will be revived, even if the contract term has expired.
No. 16AP-586 6
{¶ 16} As an initial matter, Heartland did not appeal the dismissal of its
counterclaims by the trial court. Where an appellant fails to mention counterclaims in its
assignments of error, and has failed to discuss the counterclaim in briefing, those claims
are not subject to review by the court of appeals. United States Bank v. Malyuk, 8th Dist.
No. 101472, 2015-Ohio-2385, ¶ 9-14. See also App.R. 16 (requiring appellant to set forth
the assignments of error presented for review and to state the relief sought).
{¶ 17} In addition, prior to the trial court's judgment, Doran did not work for
Columbus First. On July 18, 2016, the trial court ruled that the non-compete restriction is
unenforceable. The trial court required Heartland to post $100,000 as a supersedeas bond
in order to stay its judgment. Heartland failed to post the requisite bond. As such, the trial
court's judgment has remained effective during the pendency of this appeal. Blood v.
Nofzinger, 162 Ohio App. 3d 545, 2005-Ohio-3859 (6th Dist.), ¶ 21, quoting State v. Suchy,
6th Dist. No. L-02-1243, 2003-Ohio-3457, ¶ 27 (finding a " 'judgment remains effective
unless stayed pursuant to Civ.R. 62, reversed or vacated on appeal, App.R. 12, or
superseded by another judgment' "). See also R.C. 2505.09 (holding "an appeal does not
operate as a stay of execution until a stay of execution has been obtained pursuant to the
Rules of Appellate Procedure or in another applicable manner, and a supersedeas bond is
executed by the appellant to the appellee").
{¶ 18} Doran did not breach the contract and Columbus First did not tortiously
interfere with the contract during the pendency of the appeal as they both lawfully complied
with an effective judgment of the trial court. After May 9, 2017, any claim for breach of
contract or tortious interference is moot as a contract cannot not be breached or tortiously
interfered with after it expires.
{¶ 19} Secondly, Heartland cites Trim-Line of Toledo v. Carroll, 6th Dist. No. L-86-
176 (Feb. 25, 1987), in support of its argument that the restrictive covenants cannot expire
while they are litigated, and should be prospectively extended in the event that this court
reverses the trial court's declaratory judgment ruling. Trim-Line is inapposite here.
{¶ 20} In that case, the employee signed a two-year non-compete covenant.
However, immediately after leaving the appellant's employ, up until the time of the Sixth
District Court of Appeal's decision which was almost two years later, the employee had
directly competed against the employer. Unlike this case, the former employer sought
No. 16AP-586 7
injunctive relief to enjoin the employee from violating his non-compete restriction. The
Sixth District found the non-compete clause to be enforceable, but reduced the restrictive
time period from two years to one year. In addition, since the employee immediately
competed against the former employer, the court held that it would be inequitable for the
employee to evade the force of any injunction by using "litigation as a delay tactic." Id. at 5.
As a result, the one-year period was to be enforced prospectively.
{¶ 21} In the instant case, Doran and Columbus First complied with an effective
judgment entry that was never stayed, and Heartland never sought injunctive relief. The
current case is a declaratory judgment action that asked the trial court to determine
whether the non-compete and non-solicit covenants were valid. Those restrictions expired
on May 9, 2017. As such, Heartland cannot seek injunctive relief because a party must file
for an injunction prior to the expiration of the restrictions. See Cynergies Consulting, Inc.
v. Wheeler, 8th Dist. No. 90225, 2008-Ohio-3362, ¶ 25-29.
{¶ 22} In cases for declaratory judgment regarding a provision in a contract, the case
becomes moot when, according to the terms of the contract, the contractual provision
expires. In Harkai v. Scherba Industries, 9th Dist. No. 02CA0007-M, 2003-Ohio-366, the
court stated:
An action must be dismissed as moot unless it appears that a
live controversy exists. Lorain Cty. Bd. of Commrs. v. United
States Fire Ins. Co. (1992), 81 Ohio App. 3d 263, 266-67, 610
N.E.2d 1061. * * * Moreover, no injunctions were issued
enjoining operation of the restrictive covenant. As such, the
covenant has expired; a covenant not to compete that expires
by its own terms moots requests to enforce such an agreement.
National Sanitary Supply Co. v. Wright (1994), 644 N.E.2d
903, 906 (stating that the issue of enjoining past employee
from competition had become moot once the covenant not to
compete had expired); In re Talmage (N.D.Ohio 1988), 94 B.R.
451, 453-54 (finding that a court is not able to specifically
enforce a covenant not to compete after it expired by its own
terms).
{¶ 23} In addition, other Ohio courts have held likewise. See Ashtabula Cty. Joint
Voc. School v. O'Brien, 11th Dist. No. 2004-A-0092, 2006-Ohio-1794, ¶ 31 -38 (holding
that declaratory judgment action was moot at the time of the expiration of the contract);
and Manchester Edn. Assn. v. Manchester Local School Dist. Bd. Of Edn., 9th Dist. No.
No. 16AP-586 8
12481 (Aug. 20, 1986) ("[t]he negotiated agreement in effect at the time of the trial court's
decision expired by its own terms on August 31, 1985, thereby rendering this appeal moot.
We therefore dismiss the appeal").
{¶ 24} Since the non-compete and non-solicitation covenants are the subject of the
parties' assignments of error, and said provisions expired on May 9, 2017, any judgment of
this court would not have any impact on a genuine, live controversy. As such, the parties'
assignments of error are moot and this matter is dismissed for lack of jurisdiction.
IV. DISPOSITION
{¶ 25} Having determined that all of the assignments of error are rendered moot,
we hereby dismiss this appeal for lack of jurisdiction.
Appeal dismissed.
BROWN, P.J. and LUPER SCHUSTER, J., concur.
_________________