Allied Industrial Scrap, Inc. v. OmniSource Corporation

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 15a0011p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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ALLIED INDUSTRIAL SCRAP, INC., ┐
Plaintiff-Appellant, │
│
│ No. 14-3403
v. │
>
│
OMNISOURCE CORPORATION, │
Defendant-Appellee. │
┘
Appeal from the United States District Court
for the Northern District of Ohio at Youngstown.
No. 4:10-cv-02092—John R. Adams, District Judge.
Decided and Filed: January 21, 2015
Before: MERRITT, STRANCH, and DONALD, Circuit Judges.
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COUNSEL
ON BRIEF: F. Timothy Grieco, ECKERT SEAMANS CHERIN & MELLOTT, LLC,
Pittsburgh, Pennsylvania, for Appellant. Cathleen M. Shrader, BARRETT & MCNAGNY LLP,
Fort Wayne, Indiana, for Appellee.
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OPINION
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MERRITT, Circuit Judge. The otherwise victorious plaintiff-appellant in this diversity
case appeals the district court’s ruling that a unilateral fee-shifting clause for attorney’s fees was
unenforceable under Ohio law as a matter of public policy. The district court relied on a
previous published opinion from this Court in Scotts Co. v. Central Garden & Pet Co., 403 F.3d
781 (6th Cir. 2005), that held that the Ohio Supreme Court would not enforce similar fee-shifting
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No. 14-3403 Allied Indus. Scrap v. OmniSource Corp. Page 2
clauses. Three years after the Scotts case, the Ohio Supreme Court in Wilborn v. Bank One
Corp., 906 N.E.2d 396 (Ohio 2009), made it clear that it would enforce such unilateral or one-
sided fee-shifting contract provisions. Therefore, we must reverse.
In this case, the plaintiff offered to sell approximately 3 million pounds of scrap copper to
the defendant. The defendant negotiated the core terms of the sale but did not object to the
following fee-shifting provision: “In the event purchaser shall default in his obligations
hereunder, purchaser shall be liable for [the plaintiff]’s costs of collection, including attorney’s
fees.” The contract that includes this clause was negotiated between two experienced and
sophisticated commercial entities. There was no duress. The parties were on an equal footing.
There was no statute or other specific public policy that would invalidate a fee-shifting provision
in a multi-million-dollar contract for the sale of copper scrap. A jury trial determined that the
defendant defaulted on its obligation under the contract.
It is elementary that in diversity we must apply the law of the state’s highest court. In
Wilborn, the Ohio Supreme Court upheld a one-sided, fee-shifting contract for attorney’s fees in
favor of a bank in connection with a home-equity loan agreement. As Wilborn explains, Ohio
generally applies the “American rule” in which each party bears its own litigation costs, but
under Ohio law contracts may shift the costs of litigation, including attorney’s fees. 906 N.E.2d
at 400–01. There are exceptions that prevent parties from contracting around statutory public
policy determinations. See, e.g., id. at 402 (prohibiting fee shifting that conflicted with
foreclosure laws); State v. Taylor, 10 Ohio 378, 380–81 (1841) (denying attorney’s fees that
operated to evade usury statutes). Wilborn makes it clear that when not confronted with a direct
statutory conflict, Ohio law will generally give effect to such fee-shifting provisions when there
is no duress.
We therefore reverse the district court’s summary judgment order invalidating the fee-
shifting clause and remand with instructions to determine the fair, just, and reasonable value of
the attorney’s fees specifically provided for in the contract.