Kennedy v. Dottore , 2020 Ohio 3451 ( 2020 )

[Cite as Kennedy v. Dottore, 2020-Ohio-3451.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
VICKI KENNEDY, :
Plaintiff-Appellant, :
No. 108562
v. :
MARK DOTTORE, ET AL., :
Defendants-Appellees. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: June 25, 2020
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-18-902608
Appearances:
The Albert Law Firm, Steven W. Albert, Andrew S.
Peterson, and Nicholas J.M. Holland, for appellant.
Whitmer & Ehrman, L.L.C., and Robert M. Stefancin, for
appellee Mark E. Dottore and Dottore Companies, L.L.C.
Ulmer & Berne, L.L.P., Michael N. Ungar, Amanda
Martinsek, and Gregory C. Djordjevic, for appellee
William Koeblitz.
Baker & Hostetler, L.L.P., Thomas R. Lucchesi and David
L. Shively, for appellees James Loeb and Baker &
Hostetler, L.L.P.
KATHLEEN ANN KEOUGH, J.:
Plaintiff-appellant, Vicki Kennedy (“Kennedy”), appeals the trial
court’s decision dismissing her complaint for declaratory judgment and common
law fraud. For the reasons that follow, we affirm the trial court’s judgment.
This case arises out of a divorce proceeding between Kennedy and
William Koeblitz (“Koeblitz”) in the Domestic Relations Division of the Cuyahoga
County Court of Common Pleas. See Koeblitz v. Koeblitz, Cuyahoga C.P. No. DR-
04-310704. In the divorce proceeding, Koeblitz was represented by Attorney James
Loeb and Baker & Hostettler. In the early stages of the divorce case, Mark Dottore
was appointed by the domestic relations court to serve as discovery master. The
court also appointed Dottore as receiver and binding arbitrator over disputes related
to the sale and liquidation of marital assets.
In 2007, Koeblitz and Kennedy, through their respective counsel,
negotiated and executed a Separation and Settlement Agreement (“the
Agreement”). The Agreement was subsequently adopted into the parties’ divorce
decree. Pertinent to this appeal, the Agreement provides for the division of marital
property, and appoints Dottore as receiver over the couple’s real property and as a
binding decision-maker over disputes related to the sale of real property, the
couple’s children’s schooling, and the distributions from liquidation of certain
business interests.
Section 8 of the Agreement addresses “Business Interests,”
specifically Koeblitz’s interests in four different businesses. Pertinent to the
complaint, Section 8(e) of the Agreement affords Kennedy “tag along rights”
regarding the possibility of future liquidation of Koeblitz’s interest in WMK, Inc.
d.b.a. Mobility Works (“WMK”).
Section 8(e)(i) provides that “the purpose of these tag along rights is
to allow [Kennedy] to share in a declining percentage of net after tax proceeds in
excess of $579,000 realized by [Koeblitz] in the event he sells most or all of his
interest in WMK.” The tag along rights explained that Kennedy would share in the
initial 20 percent of aggregate net proceeds over $579,000 for a “liquidating event”
occurring from September 2007 to August 2012. Thereafter, Kennedy’s entitled
percentage would decline each year, with termination of her tag along rights
occurring on August 31, 2021.
Section 8(e)(iv), the subject of Kennedy’s complaint, provides that
The parties recognize that they cannot craft an agreement which
accounts for every type of transaction which may impact on the
ultimate net after-tax proceeds if any, for Wife’s tag along rights. The
purpose of this agreement is not to affect Husband’s ability to operate
the business, borrow money on its behalf, or sell or purchase assets on
behalf of the company in the normal course of its business. The parties
therefore will make a good faith effort to effectuate the intent of this
subparagraph 8(e), and agree that they shall submit any dispute
between them on any matter provided under this subparagraph to
Mark E. Dottore who shall, after consulting with both parties, make a
binding determination on the disputed matter. If Mr. Dottore is
unavailable to resolve the matter, another member of his office shall
resolve the matter, and if no such person is available and the parties
cannot agree on a substitute, the Domestic Relations Court shall
appoint an individual to resolve the matter. Husband shall provide Mr.
Dottore with prompt notice of any Liquidating Event and with audited
annual financial statements of WMK, Inc. each year to assist Mr.
Dottore in the determination of whether a liquidating event has
occurred and the amount, if any, to be paid to Wife therefrom.
In 2018, both Koeblitz and Dottore informed Kennedy that WMK,
Inc. was undergoing a “liquidating event.” Pursuant to Section 8(e)(i), Kennedy
would be entitled to an 8% share in the aggregate net proceeds following Koeblitz’s
initial $579,000 of those net proceeds. According to Kennedy, Dottore advised her
“that the tag-along section of the Agreement could result in a range of different
payment amounts * * * with the potential outcomes varying by a substantial amount
of money.” (Complaint, ¶ 43.)
In August 2018, Kennedy filed a complaint in the Cuyahoga County
Common Pleas, General Division, seeking a declaratory judgment that the
provisions of the Agreement granting authority to Dottore are void due to fraud,
unconscionability, and as against public policy, against defendants, Mark Dottore,
Attorney James Loeb, Baker & Hostetler, L.L.P., Dottore Companies, L.L.C., and
William Koeblitz (collectively “appellees”). The complaint also raised a common law
fraud claim against Loeb, Dottore, Dottore Companies, and Koeblitz.
In her complaint, Kennedy challenged the validity of Section 8(e) and
sought a declaratory judgment that the provision is void based on fraud,
unconscionability, and as against public policy. She further pleaded common law
fraud, contending that she was fraudulently induced to enter into the Agreement by
Dottore, Loeb, and Koeblitz. According to Kennedy, the defendants held Dottore
out as an “unbiased and neutral decisionmaker” when “unbeknownst to [Kennedy]
at the time” that the Agreement was being negotiated, Dottore “was
contemporaneously represented by * * * Loeb and Baker & Hostetler, L.L.P., the
same lawyer who also represented [Koeblitz], in at least one unrelated matter.” She
claimed in her complaint that the defendants had a “duty to disclose [Dottore’s]
personal interest in a favorable resolution for [Koeblitz]” but failed to do so.
Kennedy claimed she did not become aware of this fraud until 2018. According to
Kennedy, Dottore was “significantly involved” in negotiating the “tag along rights.”
And because of his involvement, she was damaged because she relied on his
purported neutrality when she agreed to the marital division of property pertaining
to Koeblitz’s business assets.
In response, the appellees each separately moved to dismiss the
complaint. Dottore and Dottore Companies, L.L.C. (the “Dottore Defendants”) filed
a Civ.R. 12(B)(1) and (6) motions, contending that the trial court lacked subject-
matter jurisdiction and that Kennedy failed to state a claim upon which relief may
be granted. Koeblitz, Loeb, and Baker & Hostetler also moved to dismiss under
Civ.R. 12(B)(6).
The trial court granted the motions to dismiss. The court specifically
found that it lacked jurisdiction over Kennedy’s complaint because it was an
impermissible, collateral attack on the divorce decree. The court determined that
Kennedy’s appropriate remedy would have been to file a Civ.R. 60(B) motion in the
domestic relations court. The court alternatively determined that Kennedy failed to
plead her fraud claim with particularity as required by Civ.R. 9(B). Specifically, the
court found that Kennedy failed to specify both the time and place where the alleged
misrepresentations were made to her, and failed to identify the legal duty the
appellees were under to disclose Loeb’s representation to Dottore as a receiver in an
unrelated domestic relations matter.
Kennedy now appeals raising three assignments of error.
I. Civ.R. 12(B)(1) Motion to Dismiss — Lack of Jurisdiction
In her first and second assignments of error, Kennedy contends that
that the trial court erred in dismissing her complaint pursuant to Civ.R. 12(B)(1).
Specifically, she contends that the court erred in holding that the common pleas
court, general division, lacked subject matter jurisdiction over her claims for fraud
and declaratory judgment because the general division gained exclusive jurisdiction
over the claims once her complaint was filed in the general division. Additionally,
Kennedy argues that the trial court erred in its determination that her claims
constitute an impermissible collateral attack on a final judgment.
We review a Civ.R. 12(B)(1) motion to dismiss for lack of subject
matter jurisdiction de novo. Rheinhold v. Reichek, 8th Dist. Cuyahoga No. 99973,
2014-Ohio-31, ¶ 7. When ruling on a Civ.R. 12(B)(1) motion, the trial court must
determine whether a plaintiff has alleged any cause of action that the court has
authority to decide. Id. “The trial court is not confined to the allegations of the
complaint when determining its subject-matter jurisdiction pursuant to a Civ. R.
12(B)(1) motion to dismiss, and it may consider material pertinent to such inquiry
without converting the motion into one for summary judgment.” Southgate Dev.
Corp. v. Columbia Gas Transm. Corp., 48 Ohio St.2d 211, 358 N.E.2d 526 (1976),
paragraph one of the syllabus.
Although some defendants did not move for dismissal for lack of
subject matter jurisdiction, the court was permitted to dismiss the case against all
parties on its own initiative. “Whenever it appears by suggestion of the parties or
otherwise that the court lacks jurisdiction of the subject matter, the court shall
dismiss the action.” Civ.R. 12(H)(3). Lack of subject matter jurisdiction may be
raised sua sponte by the court at any stage of the proceedings. State ex rel. Bond v.
Velotta, 91 Ohio St.3d 418, 419, 746 N.E.2d 1071 (2001).
In this case, Kennedy maintains that once the divorce decree was
finalized, both the general division and the domestic relations division obtained
concurrent jurisdiction over the decree, and that when she filed her declaratory
judgment and fraud actions in the general division, that venue obtained exclusive
jurisdiction over the complaint. Accordingly, Kennedy maintains that it was error
for the trial court to dismiss the complaint for lack of subject matter jurisdiction.
Additionally, she contends that because her complaint alleges fraud, she can
collaterally attack the divorce decree in the general division.
R.C. 3105.011 confers jurisdiction on the court of common pleas,
including its domestic relations division, to determine all domestic relations
matters. Division of marital property is relief granted in domestic relations matters.
R.C. 3105.171. A division of domestic relations for the court of common pleas of
Cuyahoga County has been established by R.C. 2301.03(L)(1). That section provides
that the domestic relations judges “shall have all the powers relating to all divorce,
dissolution of marriage, legal separation, and annulment cases, except in cases that
are assigned to some other judge of the court of common pleas for some special
reason.” Id. Accordingly, the Domestic Relations Division of the Cuyahoga County
Court of Common Pleas has exclusive jurisdiction over divorce cases.
Kennedy contends that her complaint for declaratory judgment is a
permissible collateral attack because the Agreement was procured by fraud, and
therefore, is void.
Collateral attacks on judgments conceivably can be mounted in either
the court that issued the judgment or in a different court, as they involve any new
“proceeding” not encompassed within the proceeding in which the original
judgment was entered. Ohio Pyro, Inc. v. Ohio Dept. of Commerce, 115 Ohio St.3d
375, 2007-Ohio-5024, 875 N.E.2d 550, ¶ 20. Kennedy’s complaint, however, does
not involve a new proceeding not encompassed within the divorce proceeding;
rather, it directly correlates to the divorce proceeding, and seeks to declare a final
judgment void. If her action is successful, however, Kennedy would be reinvoking
the jurisdiction of the domestic relations division because the decree would
potentially no longer be a final judgment and the division of marital assets would be
undecided. See Weyandt v. Davis, 112 Ohio App.3d 717, 679 N.E.2d 1191 (9th Dist.
1996) (complaint for declaratory judgment properly dismissed based upon a
determination that a declaratory judgment would not terminate the uncertainty or
controversy).
Moreover, the Ohio Supreme Court affirmed the “longstanding
principle” of Ohio jurisprudence “that final judgments are meant to be just that--
final.” Ohio Pyro at ¶ 22. Such judgments, in the ordinary course of events, are
subject to direct attack through appeal by the parties to the litigation. Id. “For these
reasons, it necessarily follows that collateral or indirect attacks are disfavored and
that they will succeed only in certain very limited situations.” Id. The Ohio Supreme
Court has identified two such “very limited situations” as “when the issuing court
lacked jurisdiction or when the order was the product of fraud (or of conduct in the
nature of fraud).” Id. at ¶ 23.
A collateral attack on a final judgment challenges the “fundamental
validity of the previous judgment” and involves “the same considerations that come
into play when considering whether a particular judgment is void or voidable.” Id.
at ¶ 25. “When a judgment was issued without jurisdiction or was procured by fraud,
it is void and is subject to collateral attack. * * * But in the absence of those
fundamental deficiencies, a judgment is considered ‘valid’ (even if it might perhaps
have been flawed in its resolution of the merits of the case) and is generally not
subject to collateral attack.” Id.
In this case, Kennedy does not contend that the domestic relations
court lacked jurisdiction to enter the divorce decree; rather, she contends that the
Agreement, specifically Section 8(e), was procured by fraud, thus rendering it void
and subject to collateral attack. And as a result, she requests that the divorce decree
also be declared void to the extent necessary to afford the relief requested.
An agreement is void when a party has been fraudulently prevented
from knowing that he or she signed the agreement or its contents, i.e., fraud in the
factum. Berry v. Javitch, Block & Rathbone, L.L.P., 127 Ohio St.3d 480, 2010-Ohio-
5772, 940 N.E.2d 1265, ¶ 24. An agreement is merely voidable, however, when a
party alleges fraud or misrepresentation as to the facts inducing the party to sign the
agreement, i.e., fraud in the inducement. Id.In her complaint, Kennedy alleged that the Agreement, specifically,
Section 8(e)(iv), was procured by material misrepresentations by the appellees that
Dottore was unbiased and a neutral decision-maker. She claimed that Dottore had
an undisclosed conflict of interest because Attorney Loeb and Baker & Hostetler
represented Dottore in a separate legal action that was pending at the time the
Agreement was negotiated. According to Kennedy, this conflict of interest renders
invalid the specific portions of the Agreement designating Dottore as binding
decisionmaker because Dottore was biased and not a neutral party. Kennedy alleges
that the undisclosed conflict and misrepresentations induced her into signing the
Agreement and not understanding its contents.
Kennedy’s claim is based on fraud in the inducement because she
contends that the defendants fraudulently misrepresented facts to induce her into
agreeing to Dottore acting as the receiver in this matter. As the trial court correctly
noted, Kennedy’s allegations go to the merits of the judgment, challenging
specifically Section 8(e) and her tag along rights, and do not challenge the
fundamental validity of the divorce decree itself. See Cart v. Fed. Natl. Mtge. Assn.,
11th Dist. Ashtabula No. 2011-A-0059, 2012-Ohio-2241, ¶ 68. Accordingly, because
Kennedy alleges fraud in the inducement, which if true, would render the divorce
decree voidable, the appropriate relief was through a Civ.R. 60(B) filed in the
domestic relations division of the common pleas court.
In Keen v. Keen, 157 Ohio App.3d 379, 2004-Ohio-2961, 811 N.E.2d
565 (2d Dist.), the Second District considered a similar issue like the one before this
court in this matter. In Keen, wife filed a declaratory judgment action in the general
division of the court of common pleas, seeking an accounting of husband’s
retirement benefits and a declaration of her rights to a portion of them. Those
benefits were not included in the parties’ 1978 dissolution decree. The trial court
dismissed the case for lack of jurisdiction. On appeal, the court affirmed the trial
court holding that wife’s claims for relief in her complaint were “a collateral attack”
on the decree of dissolution because the relief sought “would necessarily vacate or
modify the relief that was granted by the domestic relations division” with respect
to the ownership of husband’s retirement benefits. Id. at ¶ 13. The court determined
that the relief was only available in the domestic relations division, not the general
division. Id. at ¶ 14. Accordingly, the Keen court found that wife’s only avenue for
relief was through a Civ.R. 60(B) motion filed in the court’s domestic relations
division. “Such relief is available where consent or mutuality did not exist when the
parties entered into the separation agreement underlying the dissolution decree
because of fraud or material mistake or misrepresentation.” Id. at ¶ 15, citing In re
Williams, 81 Ohio St.3d 239, 690 N.E.2d 535 (1998).
Much like in Keen, Kennedy’s relief is in the domestic relations court
through a Civ.R. 60(B) motion. Accordingly, the trial court properly dismissed
Kennedy’s complaint for lack of subject matter jurisdiction, finding that her
complaint was an impermissible collateral attack on the divorce decree. Kennedy’s
first and second assignments of error are overruled.
II. Dismissal Pursuant to Civ.R. 12(B)(6)
Kennedy contends in her third assignment of error that the trial court
erred in dismissing her complaint pursuant to Civ.R. 12(B)(6) because her common
law fraud claim was pleaded with particularity.
This court’s review of a motion to dismiss pursuant to Civ.R. 12(B)(6)
is also under a de novo standard. Perrysburg Twp. v. Rossford, 103 Ohio St.3d 79,
2004-Ohio-4362, 814 N.E.2d 44, ¶ 5. In resolving a Civ.R. 12(B)(6) motion, a court
is confined to the allegations contained in the complaint and, as an appellate court,
we must independently review the complaint to determine if dismissal was
appropriate. McGlone v. Grimshaw, 86 Ohio App.3d 279, 285, 620 N.E.2d 935 (4th
Dist.1993). A complaint cannot be dismissed unless it appears beyond all doubt
from the complaint that the plaintiff can prove no set of facts entitling him to
recovery. O’Brien v Univ. Community Tenants Union, Inc., 42 Ohio St.2d 242, 245,
327 N.E.2d 753 (1975).
It is well settled that “when a party files a motion to dismiss for failure
to state a claim, all the factual allegations of the complaint must be taken as true and
all reasonable inferences must be drawn in favor of the nonmoving party.” Byrd v.
Faber, 57 Ohio St.3d 56, 60, 565 N.E.2d 584 (1991), citing Mitchell v. Lawson Milk
Co., 40 Ohio St. 3d 190, 192, 532 N.E.2d 753 (1988). While the factual allegations
of the complaint are taken as true, “[u]nsupported conclusions of a complaint are
not considered admitted * * * and are not sufficient to withstand a motion to
dismiss.” State ex rel. Hickman v. Capots, 45 Ohio St.3d 324, 544 N.E.2d 639(1989), citing Schulman v. Cleveland, 30 Ohio St.2d 196, 198, 283 N.E.2d 175(1972), and Mitchell at 193. Moreover, “‘[l]egal conclusions, deductions, or opinions
couched as factual allegations are not given a presumption of truthfulness.’”
Williams v. U.S. Bank Shaker Square, 8th Dist. Cuyahoga No. 89760, 2008 Ohio
1414, ¶ 9, quoting Crane & Shovel Sales Corp. v. Bucyrus-Erie Co., 854 F.2d 802,
810 (6th Cir.1988).
In order for her fraud claim to survive a Civ.R. 12(B)(6) motion to
dismiss, Kennedy had to allege the following: (1) a representation or, where there is
a duty to disclose, omission of a fact, (2) which is material to the transaction at hand,
(3) made falsely, with knowledge of its falsity, or with such utter disregard and
recklessness as to whether it is true or false that knowledge may be inferred, (4) with
the intent of misleading another into relying upon it, (5) justifiable reliance upon the
representation or concealment, and (6) a resulting injury proximately caused by the
reliance. Cohen v. Lamko, Inc., 10 Ohio St.3d 167, 462 N.E.2d 407 (1984). The
absence of any one of these elements of fraud is fatal to recovery. Westfield Ins. Co.,
v. HULS Am., Inc., 128 Ohio App.3d 270, 714 N.E.2d 934 (10th Dist.1998).
The trial court determined that Kennedy failed to plead her fraud
claim with particularity as required by Civ.R. 9(B). Specifically, the court found that
Kennedy failed to specify both the time and place where the alleged
misrepresentations were made to her, and failed to identify the legal duty the
appellees were under to disclose Loeb’s representation of Dottore as a receiver in an
unrelated domestic relations matter. We agree with the trial court and further find
that Kennedy failed to specify how Dottore’s actions induced her into executing the
Agreement. We additionally find that Kennedy failed to allege a resulting injury
proximately caused by her reliance on such misrepresentations.
In this case, Kennedy alleged in her complaint that based on
appellees’ misrepresentations about Dottore’s neutrality, she entered into an
agreement with terms “less favorable than she would have otherwise secured.”
(Complaint, ¶ 102-103.) Additionally, she alleged that the division of Koeblitz’s
business assets would have been “presumptively equal” as marital property, and
thus she “suffered damages of up to or exceeding 42% of the value received by
Koeblitz.” (Complaint ¶ 105, 107.) However, this allegation does not particularize
how Dottore’s alleged bias as a receiver in distributing future marital assets
proximately caused her injury, especially because her alleged injury was present
when the divorce decree was finalized.
Accordingly, we find that the trial court did not err in alternatively
dismissing Kennedy’s complaint pursuant to Civ.R. 12(B)(6). Her third assignment
of error is overruled.
Judgment affirmed.
It is ordered that appellees recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment
into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27
of the Rules of Appellate Procedure.
KATHLEEN ANN KEOUGH, JUDGE
ANITA LASTER MAYS, P.J., and
MICHELLE J. SHEEHAN, J., CONCUR