McConnell v. Bare Label Prods., Inc.

[Cite as McConnell v. Bare Label Prods., Inc., 2017-Ohio-9325.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
TRUMBULL COUNTY, OHIO
RICHARD McCONNELL, : OPINION
Plaintiff-Appellant, :
CASE NO. 2015-T-0053
- vs - :
BARE LABEL PRODUCTIONS, INC., et al. :
Defendants, :
TAMMY SCHMITT, :
Intervening Defendant-Appellee :
Civil Appeal from the Trumbull County Court of Common Pleas, Case No. 2008 CV
00278.
Judgment: Modified, reversed, and remanded.
Robert N. Farinacci, 65 North Lake Street, Madison, OH 44057 (For Plaintiff-
Appellant).
Bruce M. Broyles, 5815 Market Street, Suite 2, Youngstown, OH 44512 (For
Intervening Defendant-Appellee).
DIANE V. GRENDELL, J.
{¶1} Plaintiff-appellant, Richard McConnell, appeals the Judgment Entry of the
Trumbull County Court of Common Pleas, following this court’s remand in McConnell v.
Bare Label Prods., Inc., 11th Dist. Trumbull No. 2013-T-0050, 2015-Ohio-1206. The
issue before this court is whether a trial court must comply with the mandate of an
appellate court where the judgment is supported by a majority of judges hearing the
cause. For the following reasons, the judgment of the lower court is modified and
reversed, and this cause is remanded to the trial court for further proceedings consistent
with this opinion.
{¶2} The underlying case, originally filed on January 24, 2008, involved claims
against intervening defendant-appellee, Tammy Schmitt, for violation of R.C. 1701.37,
interference with a business relationship, breach of a fiduciary duty, and punitive
damages/attorney fees. The factual and procedural history of this case is set forth in
McConnell, 2015-Ohio-1206.
{¶3} Following trial to the court, judgment was entered against Schmitt in the
amount of $23,030 on April 9, 2013. McConnell appealed.
{¶4} After the case had been pending for twenty-three months on appeal, on
March 31, 2015, this court issued the following Judgment Entry, constituting the
mandate of this court: “The order of this court is that the judgment of the Trumbull
County Court of Common Pleas is reversed and this cause is remanded for further
proceedings consistent with the opinion.” App.R. 27 (“[a] court of appeals may remand
its * * * judgments * * * to the court below for further proceedings therein” and “[a]
certified copy of the judgment shall constitute the mandate”). In accord with Section
3(B)(3), Article IV of the Ohio Constitution, this Judgment was rendered by two judges
of this court – the second judge concurring in judgment only. Id. (“[a] majority of the
judges hearing the cause shall be necessary to render a judgment”). The third judge
concurred in part and dissented in part.
2
{¶5} Upon remand, the trial court determined that it was without “clear
directive” as to how to proceed, as “the authored opinion was not joined by enough
jurists to create a majority as to the body of its work.”
{¶6} On April 28, 2015, the trial court entered judgment against Schmitt in the
amount of $23,071 for lost profits of the business during the first six months of
operation, $23,071 for lost profits during the remaining six months of McConnell’s
employment contract; and $1 for punitive damages.
{¶7} On May 26, 2015, McConnell filed a Notice of Appeal. On appeal,
McConnell raises the following assignments of error:
{¶8} “[1.] The court erred to the prejudice of plaintiff in again finding that
appellant was not entitled to an award of statutory forfeiture damages pursuant to R.C.
1701.94 contrary to the clear directives of the reviewing court.”
{¶9} “[2.] The court erred to the prejudice of plaintiff in failing to include
significant and primary revenue sources in its calculation of lost profits contrary to the
clear directives of the reviewing court.”
{¶10} “[3.] The court erred to the prejudice of plaintiff in failing to award lost
profits beyond the term of the management agreement contrary to the clear directives of
the reviewing court.”
{¶11} “[4.] The trial court erred to the prejudice of appellant by failing to award as
damages his percentage of ownership of Club Pink’s property removed by the appellee
just prior to sale and then returned immediately thereafter contrary to the clear
directives of the reviewing court.”
3
{¶12} “[5.] The trial court erred to the prejudice of appellant by failing to award
attorneys fees to appellant and only awarding one dollar in punitive damages contrary to
the clear directives of the reviewing court.”
{¶13} In the first assignment of error, McConnell claims the trial court failed to
comply with this court’s mandate in the prior appeal to award statutory damages
pursuant to R.C. 1701.94. We agree.
{¶14} On this issue in the prior appeal, the trial court had found in favor of
Schmitt on McConnell’s claim that she violated R.C. 1701.37(C), by failing to produce
corporate records upon request. This court reversed and remanded with instructions for
“the lower court * * * to either reinstate the December 26, 2012 Judgment [awarding
McConnell statutory fines in the amount of $47,580 for violating 1701.37(C)], or, if it
finds this amount to be in error, to recalculate the amount of statutory damages to which
McConnell is entitled.” McConnell, 2015-Ohio-1206, at ¶ 38.
{¶15} Instead of complying with this court’s mandate, the trial court concluded
that the determination that Schmitt had violated R.C. 1701.37(C) was against “the
manifest weight of the direct evidence” and so would “not impose a statutory penalty.”
The court further stated that it could not “in good conscience simply revert to [the
December 26, 2012 Judgment] as suggested by the author of the appellate decision.”1
{¶16} It is well-established law that “an inferior court has no discretion to
disregard the mandate of a superior court in a prior appeal in the same case.” Nolan v.
1. The dissent states that there was “no evidence that Schmitt, as a corporate officer, was ‘charged with’
the duty to maintain the company’s financial and corporate records.” The dissent overlooks the fact that
Schmitt was treasurer for both Bare Label Productions and Masury Real Estate, i.e., the chief financial
officer for both corporations with responsibility for monitoring corporate finances and reporting to the
organizations’ members. The dissent also overlooks the fact that, after Schmitt “froze” McConnell out of
the corporations, she was the corporations’ only effective corporate officer.
4
Nolan, 11 Ohio St. 3d 1, 462 N.E.2d 410 (1984), syllabus; Calvaruso v. Calvaruso, 9th
Dist. Summit No. 21781, 2004-Ohio-1877, ¶ 30. “[T]he rule is necessary to ensure
consistency of results in a case, to avoid endless litigation by settling the issues, and to
preserve the structure of superior and inferior courts as designed by the Ohio
Constitution” Nolan at 3; State ex rel. Potain v. Mathews, 59 Ohio St. 2d 29, 32, 391
N.E. 343 (1979) (“[t]he [Ohio] Constitution does not grant to a court of common pleas
jurisdiction to review a prior mandate of a court of appeals”).
{¶17} It is equally well-established that “[a] judge shall comply with the law.”
(Emphasis sic.) Jud.Cond.R. 1.1; Disciplinary Counsel v. O’Neill, 103 Ohio St. 3d 204,
2004-Ohio-4704, 815 N.E.2d 286, ¶ 10 (“[b]y refusing to comply with the mandate of an
appellate court, respondent violated [a] basic judicial duty”).
{¶18} The trial court justified the violation of its judicial duty on the grounds that
“[t]he opinion from the Appellate Court was not a majority opinion,” but, “[r]ather, it was
authored by one jurist” while “[a]nother jurist concurred in the judgment only.” In doing
so, the court misconstrued what constituted this court’s judgment and what constituted
this court’s opinion. The opinion is a “written statement explaining [the court’s] decision
in a given case.” Black’s Law Dictionary 1125 (8th Ed.2004). The court’s opinion is
distinct from its judgment which is “[a] court’s final determination of the rights and
obligations of the parties in a case.” Id. at 858. The opinion in the 2015 McConnell
appeal was unsupported by a majority of the judges, but the judgment did have the
support of a majority of judges. The fact that the opinion lacked precedential value did
not absolve the inferior court in the case from abiding by this court’s judgment.
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{¶19} The first assignment of error is with merit. The trial court’s April 28, 2015
Judgment Entry is reversed with respect to the denial of statutory damages. Based on
the record, judgment is entered in favor of McConnell in the amount of $47,580 on
Count I of the Amended Complaint (Violation of O.R.C. §1701.37 by Defendant
Schmitt).
{¶20} In the second and third assignments of error, McConnell challenges the
trial court’s award of lost profits on remand.
{¶21} In the prior appeal, this court held as follows with respect to lost profits:
McConnell presented sufficient evidence of Club Pink’s profitability
to merit an award of lost profits beyond his seven-month period of
employment. * * * Given the totality of the evidence, the trial court
should have fashioned an appropriate remedy to compensate
McConnell, not only for lost shareholder profits during his period of
employment, but also for the period after his employment, during
which he remained a 49% shareholder.
McConnell’s losses as a 49% owner of Masury Real Estate * * *
were demonstrated with reasonable certainty. * * * McConnell is
entitled to $35,770, representing his share of the rents * * *.
McConnell, 2015-Ohio-1206, at ¶ 45-46.
{¶22} On remand, the trial court partially complied with this court’s mandate.
The court awarded McConnell $23,071 “for lost profits during his operation of the club,”
and $23,071 “for lost profits for the remaining six months under his employment
contract.”
{¶23} The trial court did not, however, award McConnell lost profits from Masury
Real Estate. Rather, the court construed this court’s judgment that “McConnell is
entitled to $35,770, representing his share of the rents” as “dicta” which it “decline[d] to
follow.”
6
{¶24} As noted above, this court’s judgment was supported by a majority of the
judges and the trial court is without discretion to disregard it.
{¶25} The second and third assignments of error are with merit. The trial court’s
April 28, 2015 Judgment Entry is reversed with respect to future lost profits from Masury
Real Estate. Based on the record, judgment is entered in favor of McConnell in the
amount of $35,770 representing “[o]ne-half (1/2) of the rental monies collected or
entitled to be collected by Masury Real Estate, Inc.” See page 9 of the Amended
Complaint.
{¶26} In the fourth and fifth assignments of error, McConnell contends the trial
court did not enter a proper award of punitive damages in accordance with this court’s
previous decision.
{¶27} In the prior appeal, this court held as follows with respect to punitive
damages:
On remand, the trial court should fashion an award of punitive
damages, taking into consideration McConnell’s testimony
regarding attorney fees and the removal of property and equipment
from the club building.
McConnell, 2015-Ohio-1206, at ¶ 51; also id. at ¶ 49 (“[p]unitive damages may [be]
awarded based on a claim of breach of fiduciary duty where there is a demonstration of
‘actual malice’”).
{¶28} The trial court made a pretense of complying with this court’s judgment,
stating, “in review of the evidence presented, * * * the Appellate Court is correct.”
Thereupon, the court “award[ed] McConnell $1.00 (ONE DOLLAR) in punitive damages
against Schmitt after taking into consideration the totality and credibility of the
evidence.”
7
{¶29} The trial court’s purported compliance with this court’s judgment may best
be described as facetious. Again, we note that a judge has the obligation to recuse
himself when his impartiality might reasonably be questioned. State v. Watkins, 2d Dist.
Clark No. 10CA0088, 2011-Ohio-2979, ¶ 12 (finding that a judge’s impartiality could
reasonably be questioned where “the trial court judge was unable to reconcile his views
with our prior decision”).
{¶30} In the interests of facilitating judicial economy, preventing further injustice,
and obtaining a timely, fair, and final determination, it is the order of this court that this
matter be remanded to the administrative judge for reassignment to another judge of the
court of common pleas.
{¶31} The fourth and fifth assignments of error are with merit. The trial court’s
April 28, 2015 Judgment Entry is reversed with respect to punitive damages and this
cause is remanded with instructions for the lower court, upon reassignment, to comply
with this court’s prior decision, i.e., to “fashion an award of punitive damages, taking into
consideration McConnell’s testimony regarding attorney fees and the removal of
property and equipment from the club building.” Furthermore, on remand and
reassignment, a hearing is to be held to determine the amount of attorney fees and
litigation expenses incurred by McConnell in the course of these proceedings.
{¶32} In cases such as this, where the lower court judge indicates that he “in
good conscience” cannot follow the appellate court’s judgment on remand, the Ohio
Supreme Court and Ohio appellate courts have recognized the authority of the appellate
court to order the assignment of another judge to hear the case on remand. Columbus
v. Hayes, 68 Ohio App. 3d 184, 189, 587 N.E.2d 939 (10th Dist.1990) (“[s]ince the trial
8
judge has made it perfectly clear that he does not intend to follow the mandate of this
court, it is apparent that any further proceedings in which he participates will prejudice
the appellant”); United States v. Snyder, 235 F.3d 42, 48 (1st Cir.2000) (“when a judge
proves unable to put aside his personal convictions in order to carry out the law * * *,
then recusal is of course warranted”); Nolan, 11 Ohio St. 3d at 3, 462 N.E.2d 410
(“where at a rehearing following remand a trial court is confronted with substantially the
same facts and issues as were involved in the prior appeal, the court is bound to adhere
to the appellate court’s determination of the applicable law”). Here the lower court
judge’s comments and token punitive award of one dollar further evidence the judge’s
unwillingness to follow the judgment of the appellate court on remand.
{¶33} The dissent states that the trial court was entitled to exercise “free reign”
on remand because “the lead opinion was not joined by a majority of the appellate
judges hearing the case” and, so, “did not control,” or “dictate the proceedings on
remand.”
{¶34} Note that the situation in the prior appeal with respect to the positions
taken by members of the panel is not unusual. A similar situation existed in State v.
Victor, 11th Dist. Geauga Nos. 2014-G-3220 and 2014-G-3241, 2015-Ohio-5520. In
Victor, this court’s judgment was that “judgment of the Chardon Municipal Court is
reversed and the matter is remanded for further proceedings consistent with this opinion
* * * [s]pecifically, upon remand, appellant must be afforded a new trial wherein she is to
be represented by counsel, unless she makes a knowing, intelligent, and voluntary
waiver thereof.” Id. at ¶ 37. As in this case, this court’s opinion was not supported by a
majority of the panel. One judge dissented. The other judge (Wright, J.), who writes a
9
scathing dissent in this matter, concurred in judgment only, declining to “regale” the
other members of the panel and the litigants before the court with his “relevant insight”
or “heretofore undisclosed knowledge of why the lead opinion is right albeit for
alternative reasons.”
{¶35} We question whether that judge who concurred in judgment only believed
the Chardon Municipal Court had free reign on remand to disregard this court’s
decision. Could the municipal court have re-convicted Ms. Victor without counsel and/or
a knowing, intelligent, and voluntary waiver if the court, in “good conscience,” felt unable
to comply with the mandate of this court? We also question if all lower courts receiving
cases on remand from divided appellate panels enjoy similar reign to act according to
the dictates of conscience rather than the judgment of the superior court.
{¶36} The cases cited by the dissent do not support his unique “free reign”
theory of proceeding on remand. They stand for the unremarkable proposition that a
plurality opinion does not constitute controlling law. Kraly v. Vannewkirk, 69 Ohio St. 3d
627, 633, 635 N.E.2d 323 (1994). To the extent that these cases cited by the dissent
are relevant at all, they support the conclusion that this court’s prior judgment states the
law of this case. State v. Weaver, 4th Dist. Ross No. 93CA1944, 1995 WL 117608, 4
(Mar. 6, 1995) (“[w]hile Judge Grey has previously voted otherwise, he has concurred in
judgment only, so there is no majority opinion, only a decision which reverses the result
in this case”) (emphasis sic); Tahoe-Sierra Preservation Council Inc. v. Tahoe Regional
Planning Agency, 34 F. Supp. 2d 1226, 1248 (D.Nev.1999) (“there was no majority
opinion in TSPC I as to why the dismissal of those particular claims was being upheld *
* *[,] [n]onetheless, the dismissal of these claims is the law of the case”).
10
{¶37} The precedential value of the opinion is not the relevant issue in the
present case. Rather, the issue is the trial court’s willful failure to abide by the judgment
of a superior court duly supported by a majority of judges hearing the case.
Furthermore, it is noted that the trial court’s ambivalence and confusion regarding the
law in this matter has cost the litigants excess time and fees in obtaining a resolution to
their dispute.2
{¶38} For the forgoing reasons, the Judgment of the Trumbull County Court of
Common Pleas is modified. In addition to the $23,071 already awarded “for lost profits
during [McConnell’s] operation of the club,” and $23,071 already awarded “for lost
profits for the remaining six months under his employment contract,” McConnell is
awarded the following:
$47,580 for the violation of R.C. 1701.37 by Defendant Schmitt; and
$35,770 for lost profits from Masury Real Estate.
{¶39} The judgment of the lower court is reversed with respect to the award of
punitive damages and this cause remanded with instructions, upon reassignment, to
hold a hearing to determine the amount of reasonable attorney fees and costs incurred
by McConnell in the course of this litigation. Finally, it is the order of this court that this
matter be remanded to the administrative judge of the Trumbull County Court of
Common Pleas for reassignment to another judge of the court of common pleas. The
clerk of courts is instructed to serve the administrative judge of the Trumbull County
2. This dissent is properly concerned with how time could be “better served” in the resolution of this
appeal. One suggestion would be for the judges on the panel, particularly the dissenting judge, to act on
the appeal so as to ensure its release within the 210-day period prescribed by the Rules of
Superintendence. Sup.R. 40(A)(2) and (3).
11
Court of Common Pleas with a copy of this court’s judgment and opinion. Costs to be
taxed against the appellee.
COLLEEN MARY O’TOOLE, J., concurs,
THOMAS R. WRIGHT, J., dissents with a Dissenting Opinion.
_______________________________________
THOMAS R. WRIGHT, J., dissents with a Dissenting Opinion.
{¶40} I agree with the trial court’s conclusion that McConnell’s prior appeal did
not produce a majority opinion. One jurist wrote the lead opinion reversing and
remanding while a second jurist concurred in judgment only without written opinion. I
concurred in part and dissented in part and wrote separately explaining the bases for
my opinion. McConnell v. Bare Label Prods., Inc., 11th Dist. Trumbull No. 2013-T-0050,
2015-Ohio-1206, ¶54-61. I agreed in part with the lead opinion on one of the three
issues previously before us, but otherwise dissented.
{¶41} Article IV, Section 3(B)(2) of the Ohio Constitution, “Organization and
jurisdiction of court of appeals,” bestows upon Ohio appellate courts the authority to
“review and affirm, modify, or reverse judgments or final orders of the courts of record
inferior to the court of appeals within the district * * *.” Furthermore, “[a] majority of the
judges hearing the cause shall be necessary to render a judgment.” Ohio Const. Article
IV, Section 3(B)(3).
12
{¶42} A “concurring opinion agrees with the judgment of the majority. It might
agree with the reasoning as well, but often a concurring opinion will express different [or
additional] reasons for the same result.” The Supreme Court of Ohio Writing Manual,
153 (2d Ed.2013). Black’s Law Dictionary defines a concurrence as “agreement;
assent” or “[a] separate written opinion explaining such a vote.” 309 (8th Ed.2004).
{¶43} Judgment is defined as “[a] court’s final determination of the rights and
obligations of the parties in a case.” Black’s Law Dictionary, 858 (8th Ed.2004). App.R.
12(A), “Determination,” provides in part,
{¶44} “(1) On an undismissed appeal from a trial court, a court of appeals shall
do all of the following:
{¶45} “(a) Review and affirm, modify, or reverse the judgment or final order
appealed;
{¶46} “(b) Determine the appeal on its merits on the assignments of error set
forth in the briefs under App.R. 16, the record on appeal under App.R. 9, and, unless
waived, the oral argument under App.R. 21;
{¶47} “(c) Unless an assignment of error is made moot by a ruling on another
assignment of error, decide each assignment of error and give reasons in writing for its
decision.”
{¶48} The jurist concurring in judgment only did not provide an opinion
explaining the basis for her decision. Thus, she agreed solely with the lead opinion’s
judgment, i.e., reverse and remand, but not with the reasoning delineated in the
opinion. The Supreme Court of Ohio Writing Manual, 2d Edition 2013, explains that
“[a]n opinion concurring in judgment only is meant to convey that the writing judge
13
agrees with the result (affirm, reverse, etc.) but not with the reasoning of the majority
opinion.”
{¶49} Typically, an inferior court is not permitted to disregard the mandate of a
superior court in a prior appeal in the same case whether the decision is correct or
incorrect. Nolan v. Nolan, 11 Ohio St. 3d 1, 3-4, 462 N.E.2d 410 (1984); Farm Credit
Servs. of Mid-Am. PCA v. Pertuset, 2014-Ohio-1289, 10 N.E.3d 769, ¶8; State ex rel.
Sharif v. McDonnell, 91 Ohio St. 3d 46, 48, 741 N.E.2d 127 (2001); Hopkins v. Dyer, 104
Ohio St. 3d 461, 2004-Ohio-6769, 820 N.E.2d 329, ¶15. “[T]he decision of a reviewing
court in a case remains the law of that case on the legal questions involved for all
subsequent proceedings in the case at both the trial and reviewing levels. * * *
{¶50} “* * *
{¶51} “In pursuit of these goals, the doctrine functions to compel trial courts to
follow the mandates of reviewing courts. * * * Thus, where at a rehearing following
remand a trial court is confronted with substantially the same facts and issues as were
involved in the prior appeal, the court is bound to adhere to the appellate court's
determination of the applicable law. * * * Moreover, the trial court is without authority to
extend or vary the mandate given.” (Citations omitted.) Id.
{¶52} However, our divided opinion issued after McConnell’s first appeal left the
trial court with no majority opinion to follow making the law of the case doctrine
inapplicable. State v. Weaver, 4th Dist. Ross No. 93CA1944, 1995 Ohio App. LEXIS
1018, at *11 (Mar. 6, 1995) (noting that an opinion that is joined by a concurrence in
judgment only does not produce a majority opinion); Tahoe-Sierra Pres. Council, Inc. v.
Tahoe Reg'l Planning Agency, 34 F. Supp. 2d 1226, 1247-1248 (D.Nev.1999)
14
(recognizing that the subsequent federal appellate court did not follow the prior
appellate decision since there was no majority opinion on the issue because one judge
concurred in part and another dissented); Cox v. Steffes, 161 N.C.App. 237, 245, 587
S.E.2d 908 (2003), fn1 (noting that the court of appeals lacked a majority opinion since
one judge concurred in the result only and the other judge dissented). The Supreme
Court of Oklahoma has addressed this issue in a different context and found where “a
majority of three panel members of the Court of Civil Appeals is required for a majority
decision. * * * Concurring-in-result and concurring-in-judgment votes may not be
counted as votes to form a majority opinion.” (Emphasis added.) Estate of Brown v.
Brown, __ P.3d __, 2013 OK 102, *1.
{¶53} Because the second appellate judge in McConnell’s prior appeal
concurred in judgment only without drafting a separate opinion, the majority only agreed
that the cause was to be reversed and remanded. “[A]n opinion concurring in the
judgment is the functional equivalent of a dissent from the * * * reasoning even if it
represents agreement with the result reached in the case.” James F. Spriggs II &
David R. Stras, Explaining Plurality Decisions, 99 Geo. L.J. 515, 520 (2011). And
because the lead opinion was not joined by a majority of the appellate judges hearing
the case, it did not control the proceedings on remand. Ohio Constitution Article IV,
Section 3(B)(3). Accordingly, we must examine the issues raised in McConnell’s
second appeal anew.
{¶54} The four cases on point find there was no majority opinion to follow. Citing
no case law to the contrary, the majority attempts to find authority for its position in the
15
foregoing, but its parenthetical holdings only bolster its unfortunate misunderstanding of
what concur in judgment only means.
{¶55} McConnell first argues that the trial court erroneously held that he was not
entitled to an award of statutory forfeiture damages under R.C. 1701.94 and that its
decision was beyond the scope of its authority on remand. He alleges that the trial
court should have found that Schmitt was a corporate officer charged with keeping
corporate records since we previously directed the trial court to either reinstate the
December 26, 2012 judgment entry governing statutory fines or recalculate the resulting
damages.
{¶56} The lead opinion does not dictate the proceedings on remand. Thus, we
review the trial court's interpretation and application of the statute de novo and
independently review the trial court's legal decisions without deference. Red Ferris
Chevrolet, Inc. v. Aylsworth, 9th Dist. Wayne No. 07CA0072, 2008-Ohio-4950, ¶4; State
v. Consilio, 9th Dist. Summit No. 22761, 2006-Ohio-649, ¶4.
{¶57} “[W]hen construing a statute, we first must look to the plain language of its
provisions[,]" and read the words and phrases in context and according to grammatical
rules and common usage. Morgan v. Community Health Partners, 9th Dist. Lorain No.
12CA010242, 2013-Ohio-2259, ¶33, citing Hewitt v. L.E. Myers, 134 Ohio St. 3d 199,
2012-Ohio-5317, 981 N.E.2d 795, ¶16. If a statute is clear and unambiguous, a court
must apply it as written. Id.
{¶58} R.C. 1701.94(B) states: “If any officer charged with one of the duties
specified in division (A) of this section fails to perform such duty after written request by
any shareholder, the officer shall be subject to a forfeiture of one hundred dollars, and
16
to the further forfeiture of ten dollars for every day that such default continues,
beginning in cases under paragraphs (1), (2), (3), and (4) of division (A) on the same
respective days as are provided for in division (A), which amount shall be paid to each
shareholder making such request. The right of each shareholder to enforce any such
forfeiture is in addition to all other remedies.” (Emphasis added.) R.C. 1701.94(A)
provides that a corporation that fails to maintain and produce certain corporate records
can be subjected to these same forfeiture provisions.
{¶59} To be “charged” with a duty means that one has been “entrust[ed] with a
responsibility, duty, or obligation.” Webster’s II New College Dictionary, 188 (1999).
Thus, in order for McConnell to recover from Schmitt under R.C. 1701.94(B), he was
required to establish first that she was an officer charged with a duty under the statute
and second, that she failed to perform the duty after receiving a written request from a
shareholder to produce the records.
{¶60} McConnell first sought the corporation’s records in January 2008.
However, the trial court found that Schmitt was not “charged with” the duty to maintain
the company’s financial and corporate records, a conclusion supported by the record,
as enumerated in its judgment entry:
{¶61} “However, the Court shall review the appropriate measure of damages as
instructed for the statutory violation.
{¶62} “In doing so, the Court finds there is absolutely no evidence in the record
to suggest the burden of maintaining the corporate records was to rest solely on the
shoulders of Schmitt. The Shareholders Agreement executed between Schmitt and
McConnell is silent as to this task. R.C. 1701.37(B) states: ‘[i]f any officer charged with
17
one of the duties specified in division (A) *** fails to perform such duty after written
request ***, the officer shall be subject to forfeiture of one hundred dollars ***.’
{¶63} “The predicate to this penalty provision is ‘any officer charged with *** the
duties ***.’ (Emphasis added.) After an additional thorough review of the record in this
matter, the Court finds there is no evidence that Schmitt was so charged with that duty
of corporate record keeping.
{¶64} “Furthermore, the evidence in the record suggests quite the opposite.
Schmitt was to be a silent partner. She deposited the capital, including the building, to
run the business. It was McConnell who was in charge of the operations and the day-
to-day (or night-to-night) business.’
{¶65} “McConnell described their arrangement as follows: ‘I pretty much was
responsible for everything as far as the management, the hiring and firing of everybody,
ordering the supplies, getting the kitchen opened, remodeling of the building[.] I was
responsible for and did all of the work. *** She [Schmitt] didn’t want anybody to know
she was involved in an adult nightclub.’
{¶66} “McConnell continued to describe the partnership: ‘*** I took care of
running the club and managing the club, and she would put up the money. *** I would
get fifty percent, she would get fifty percent, of the profits.’
{¶67} “To suggest otherwise would be against the manifest weight of the direct
evidence before this Court. Therefore, the Court finds the penalty section of R.C.
1701.37 is not applicable as the prerequisite component has not been met. Without any
evidence that it was the duty to Schmitt to maintain those records, this Court will not
impose a statutory penalty for the failure to do so.”
18
{¶68} The factual findings and a plain reading of the statute dictate that
McConnell’s first assignment of error lacks merit. The lead opinion fails to apply the
statute as written, and instead imposes a duty where none is established.
{¶69} This very issue was before this court in the first appeal. The trial court did
not award statutory damages for reasons unrelated to whether Schmitt was charged
with the duty to maintain the books. The trial court, therefore, did not determine
whether Schmitt was so charged.
{¶70} In the first appeal, the lead and I agreed that the trial court’s reason for not
awarding statutory damages was in error. However, it should be abundantly obvious
that unless Schmitt was charged with bookkeeping duties, statutory damages are
impermissible. And so I said that, on remand, the trial court would have to determine
whether Schmitt was given bookkeeping duties and take it from there. The lead opinion
failed to acknowledge the conditional nature of the statute and the need for a factual
finding even when pointed out. The lead opinion did not address the “charged with”
issue, but instead ordered the trial court to award statutory damages regardless.
{¶71} On the merits, the trial court is inarguably right.
{¶72} The law of the case “doctrine is considered to be a rule of practice rather
than a binding rule of substantive law and will not be applied so as to achieve unjust
results.” Hawley v. Ritley, 35 Ohio St. 3d 157, 160, 519 N.E.2d 390 (1988); New York
Life Ins. Co. v. Hosbrook, 130 Ohio St. 101, 106, 196 N.E.2d 888 (1935).
{¶73} As things stand, Schmitt will be whacked with statutory fines for not
producing books she was not required to keep. A court cannot utilize the law of the
case doctrine “as an instrument of oppression and injustice.” Gohman v. St. Bernard,
19
111 Ohio St. 726, 731, 156 N.E. 291 (1924). Thus, the justice or injustice of the prior
decision remains material but unaddressed.
{¶74} Moreover, as pointed out in McConnell’s brief, the prior judgment entry
that the lead opinion in Bare Label Productions, I sought to reinstate on remand
awarded statutory damages against the dissolved corporations, not Schmitt.
McConnell, 2015-Ohio-1206, at ¶17, 38.
{¶75} McConnell’s second assigned error states the trial court failed to include
significant revenue sources in its calculation of lost profits contrary to the clear directive
of our prior decision. He specifically challenges the trial court’s finding that Club Pink’s
dance revenue was too speculative to calculate, and as such it was unable to assess
lost profits from lap dances.
{¶76} Again, because we failed to produce a majority opinion, the trial court was
not bound by the lead opinion on remand. Ohio Constitution Article IV, Section 3(B)(3);
State v. Weaver, 4th Dist. Ross No. 93CA1944, 1995 Ohio App. LEXIS 1018, at *11
(Mar. 6, 1995). However, both of the writing judges agreed that the trial court
misconstrued McConnell’s testimony in finding that the club’s net profits were $3,500
per month. Instead, he testified that the club’s monthly expenses were $3,500. Thus,
two of the three appellate court judges agreed on this narrow issue. McConnell, supra,
at ¶43; McConnell, supra, at ¶58 (concur in part, dissent in part). Thus, on remand the
trial court had to reassess its lost profit award in McConnell’s favor.3
3. The lead opinion and my dissent did not, however, agree with the scope of the trial court’s authority on
remand in fashioning the award. The lead opinion provided specific directives to the trial court on remand
whereas my concurring in part and dissenting in part opinion found that the recalculation of lost profits
was within the trial court’s discretion as the trier of fact. The third appellate judge did not indicate any
reasoning or opinion. Thus, we failed to provide a majority opinion directing the trial court’s actions on
remand.
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{¶77} A plaintiff has the burden to prove lost profits as damages in a breach of
contract case, and proof of lost profits must be reasonably certain and not based on
speculation. Kinetico, Inc. v. Indep. Ohio Nail Co., 19 Ohio App. 3d 26, 30, 482 N.E.2d
1345 (8th Dist.1984) citing Battista v. Lebanon Trotting Assn., 538 F.2d 111, 119
(C.A.6, 1976). “[S]ufficiency is a test of adequacy. Whether the evidence is legally
sufficient to sustain a verdict is a question of law.” Eastley v. Volkman, 132 Ohio St. 3d
328, 2012-Ohio-2179, 972 N.E.2d 517, ¶11, quoting State v. Thompkins, 78 Ohio St. 3d
380, 386, 678 N.E.2d 541 (1997). If the evidence presented at trial is susceptible to
more than one interpretation, we are bound to uphold the trial court’s decision. Estate
of Barbieri v. Evans, 127 Ohio App. 3d 207, 211, 711 N.E.2d 1101 (9th Dist.1998).
{¶78} On remand the trial court concluded that the dance revenue was too
speculative to include in its analysis, stating: “McConnell did not provide any numbers
or credible evidence whatsoever to support the dance revenue. Susak’s testimony was
likewise speculative. Furthermore, it was not clear that Susak’s knowledge of the dance
revenue was derived from first-hand knowledge as he was a self-described door and
maintenance man. * * * In addition, the Court finds the general testimony regarding the
door and dance numbers were not credible and were not based on any evidence
whatsoever other than the self-serving testimony * * *.”
{¶79} However, the trial court did find that the club’s weekly gross income was
$4,650, which “equates to monthly gross revenue of $20,150. Less the monthly
expenses of $5,500, the total monthly net was $14,650. * * * After expenses of $5,500
per month, the Court finds the monthly net profit was $14,650. McConnell ran the club
21
for six months. Six months of a monthly net profit at $14,650 equals $87,900.
McConnell is entitled to 49% of this profit; or $43,071.”
{¶80} After reducing this amount by the $20,000 for Schmitt’s initial investment,
the trial court awarded McConnell $23,071 for lost profits the first six months and
another $23,071 for the remaining six months under his employment contract based in
part on McConnell’s statement that he personally expected to earn $50,000 in profits
the first year of business.
{¶81} Thus, the trial court awarded McConnell an additional $23,071 for lost
profits for the six months remaining under his contract for a total lost profit award of
$46,142. Contrary to McConnell’s claims, the trial court was not required to award lost
profits for lap dances in light of the limited evidence before it, and as such, his second
assignment lacks merit.
{¶82} McConnell’s third assignment of error has two sub-arguments. First he
claims the trial court erred in failing to award him lost profits for the period of time
beyond the expiration of his management agreement. The lead opinion instructed the
trial court to compensate McConnell “not only for lost shareholder profits during his
period of employment, but also for the period after his employment, during which he
remained a 49% shareholder.” (Emphasis added.) Id. at ¶45. McConnell claims he
was not awarded any lost profits for the time period after the expiration of his
management agreement during which he remained a 49% shareholder and the club
continued to exist, consistent with our prior opinion. Again, the trial court was not
obligated to follow the directives of the lead opinion.
22
{¶83} Furthermore, the lead opinion arising from McConnell’s prior appeal notes
that Schmitt provided the pertinent evidence establishing these damages. She testified
that Club Pink was open for a total of three years. Thus, it was open for two years
beyond McConnell’s one-year management agreement. Schmitt confirmed that the club
was open seven nights in the beginning, but for the last year it was only open three
nights per week. She confirmed that the club attempted to operate five nights per week
after she terminated McConnell, but that it was not sustainable. However, and as found
by the trial court on remand, there was no evidence reflecting the number of patrons
admitted per night during this time period, and there was nothing introduced evidencing
the amount of money earned by the club after the expiration of McConnell’s
management agreement. Schmitt never testified about the revenue generated.
Accordingly, his first sub-argument lacks merit because McConnell did not establish lost
profits beyond the expiration of his management agreement.
{¶84} McConnell’s second sub-argument claims the trial court acted contrary to
our prior lead opinion based on its failure to award him 49 percent of the real estate
lease payments owed by Club Pink to Masury Real Estate. The prior lead opinion on
this issue concludes that McConnell “is entitled to $35,770, representing his share of the
rents ([$88,000 - $15,000] x 0.49).” Id. at ¶46. My concurrence in part and dissent in
part disagreed, and thus the trial court had free reign.
{¶85} Upon reviewing the evidence, the trial court concluded:
{¶86} “Any damages for lost profits from Masury Real Estate were not
sufficiently proven at the trial in this matter and are indeed too remote to speculate.
23
Therefore, the Court finds McConnell did not meet his burden of proof as to any lost
profits due to him for future lost profits from Masury Real Estate.”
{¶87} Accordingly, the trial court did not err and was within its discretion in
concluding that McConnell did not meet his burden of proof. Thus, McConnell’s second
sub-argument under his third assignment of error lacks merit and his third assigned
error lacks merit in its entirety.
{¶88} McConnell’s fourth assignment of error claims the trial court erred by
failing to award him 49 percent of the value of the personal property that Schmitt
removed from the club prior to the sale of the building. Specifically, he alleges that
Schmitt wrongfully removed bar furniture and kitchen appliances and equipment in
advance of the auction thereby greatly reducing the price obtained.
{¶89} Schmitt initially purchased the property in 2004 for Bare Label, including
all of its contents, for approximately $15,000. The building had been a VFW hall, and
Schmitt’s purchase included the existing kitchens and “all the equipment.” McConnell
described her purchase as a “turnkey business without a liquor license.”
{¶90} According to Bare Label’s appointed receiver, this same real property,
including the personal property contained therein, had a total estimated value of
$36,600 in advance of the auction in 2009. Schmitt purchased the property at auction
for $17,500 in 2009. McConnell filed an objection to the sale based on Schmitt’s
removal of the personal property from the building. The trial court nevertheless
confirmed the sale. McConnell, supra, at ¶9-11. The proceeds from the sale, minus
various expenses, were deposited with the court in escrow.
24
{¶91} “The elements of a conversion claim include (1) plaintiff's ownership or
right to possession of the property at the time of conversion; (2) defendant's conversion
by a wrongful act or disposition of plaintiff's property rights; and (3) damages. If the
defendant came into possession of the property lawfully, the plaintiff must prove two
additional elements to establish conversion: (1) that the plaintiff demanded the return of
the property after the defendant exercised dominion or control over the property; and (2)
that the defendant refused to deliver the property to the plaintiff.” (Citations omitted.)
6750 BMS, L.L.C. v. Drentlau, 8th Dist. Cuyahoga No. 103409, 2016-Ohio-1385, 62
N.E.3d 928, ¶28. “To prevail on a claim of conversion, the plaintiff must prove by a
preponderance of the evidence that the defendant wrongfully exercised dominion and
control over the plaintiff's property to the exclusion of, or inconsistent with, the plaintiffs'
rights.” Lanzalaco v. Lanzalaco, 8th Dist. Cuyahoga No. 97767, 2012-Ohio-4053, 976
N.E.2d 309, ¶31, citing Joyce v. Gen. Motors Corp., 49 Ohio St. 3d 93, 96, 551 N.E.2d
172 (1990).
{¶92} “The measure of damages in a conversion action is the value of the
converted property at the time it was converted.” Allied Erecting & Dismantling Co., Inc.
v. City of Youngstown, 151 Ohio App. 3d 16, 2002-Ohio-5179, 783 N.E.2d 523, at ¶62,
quoting Tabar v. Charlie's Towing Serv., Inc., 97 Ohio App. 3d 423, 428, 646 N.E.2d
1132 (1994). “An award of damages must be shown with a reasonable degree of
certainty and in some manner other than mere speculation, conjecture, or surmise.”
Elias v. Gammel, 8th Dist. Cuyahoga No. 83365, 2004-Ohio-3464, at ¶25. Damages
are not speculative when they can be “computed to a fair degree of probability.” Allied,
supra, at ¶65.
25
{¶93} “In assessing whether a [decision] is against the manifest weight of the
evidence, this Court examines the entire record, ‘“weighs the evidence and all
reasonable inferences, considers the credibility of witnesses, and determines whether in
resolving conflicts in the evidence, the [trier of fact] clearly lost its way and created such
a manifest miscarriage of justice that the [verdict] must be reversed and a new trial
ordered.”’ [State v. Thompkins, 78 Ohio St. 3d 380, 387, 678 N.E.2d 541 (1997)]
quoting State v. Martin, 20 Ohio App. 3d 172, 175, 485 N.E.2d 717 (1st Dist.1983). In
other words, we review the verdict to determine whether the [trier of fact] lost its way in
concluding that ‘the greater amount of credible evidence, offered in a trial, [supported]
one side of the issue rather than the other.’ (Emphasis in original.) Thompkins at 387,
678 N.E.2d 541.” Cromer v. Children's Hosp. Med. Ctr. of Akron, 2016-Ohio-7461, 64
N.E.2d 1018, ¶12 citing Eastley v. Volkman, 132 Ohio St. 3d 328, 2012-Ohio-2179, 972
N.E.2d 517, ¶17.
{¶94} McConnell contends he established his conversion claim via
uncontroverted evidence and that the trial court’s denial of this claim is against the
manifest weight of the evidence. I disagree. Although the trial court did not delineate its
reasoning for rejecting McConnell’s conversion claim, the evidence supports the
conclusion that he failed to establish this claim via credible evidence. A trial court has
broad discretion upon determining the credibility of evidence. State v. DeHass, 10 Ohio
St.2d 230, 227 N.E.2d 212 (1967), paragraph one of the syllabus (holding that "the
weight to be given the evidence and the credibility of the witnesses are primarily for the
trier of the facts.")
26
{¶95} First, McConnell did not establish that the personal property that Schmitt
removed belonged to him at the time of the conversion. Instead, McConnell testified
that the furniture and kitchen equipment removed belonged to the company. Second,
McConnell failed to offer specific evidence identifying the personal property that Schmitt
removed. Although McConnell generally identified the missing items as including bar
stools, tables and chairs, and kitchen appliances and coolers, he did not provide any
details outlining what property was scheduled to be included in the sale. He likewise did
not offer evidence establishing the condition or quality of the missing items.
{¶96} Third, McConnell failed to establish the value of the items converted with a
reasonable degree of certainty. He estimated the total value of the missing items at
$34,000. This figure included all of the items that McConnell and Schmitt added to the
business as well as the equipment that came with the purchase of this former VFW hall.
McConnell explained that his estimate was based on his experience in purchasing bar
furniture and used kitchen appliances in the past. However, he offered no breakdown of
this estimate or detailed price list. He likewise did not offer expert opinion or any
independent documentation supporting his broad opinion as to the value of the property.
Furthermore, McConnell’s estimated value vastly differed with the receiver’s estimate
that all of the real and personal property had a combined estimated value of $36,000.
{¶97} Thus, McConnell’s fourth assignment is meritless because the trial court’s
decision is not against the manifest weight of the evidence.
{¶98} McConnell’s fifth and final assignment alleges the trial court erred in failing
to award him attorney fees and in awarding him only one dollar in punitive damages.
27
{¶99} The decision to award punitive damages is within a trial court’s discretion
and is permissible in a breach of fiduciary duty case upon a showing of actual malice.
Hastings v. J.E. Scott Corp., 2d Dist. Miami No. 2003 CA 32, 2004-Ohio-1821, ¶39;
Blair v. McDonagh, 177 Ohio App. 3d 262, 2008-Ohio-3698, 894 N.E.2d 377, ¶65 (1st
Dist.). "‘Actual malice, necessary for an award of punitive damages, is (1) that state of
mind under which a person's conduct is characterized by hatred, ill will or a spirit of
revenge, or (2) a conscious disregard for the rights and safety of other persons that has
a great probability of causing substantial harm.’” Id. quoting Preston v. Murty, 32 Ohio
St.3d 334, 336, 512 N.E.2d 1174 (1987).
{¶100} “The amount of punitive damages rests largely within the discretion of the
finder of fact. Villella v. Waikem Motors, Inc. (1989), 45 Ohio St. 3d 36, 40, 543 N.E.2d
464. An award of punitive damages will generally not be overturned unless it bears no
rational relationship or is grossly disproportionate to the amount of compensatory
damages awarded such that the award appears to be the result of passion or prejudice.”
(Citation omitted.) Davis v. Sun Ref. & Mktg. Co., 109 Ohio App. 3d 42, 60, 671 N.E.2d
1049 (2d Dist.1996).
{¶101} McConnell does not argue that the trial court’s punitive damage award
lacks a rational relationship or that it is grossly disproportionate to the amount of
compensatory damages in this case. Instead, he claims a greater award was warranted
in light of the overwhelming evidence of Schmitt’s vindictiveness, spite, and malice.
{¶102} However, the trial court considered McConnell’s testimony regarding
attorney fees and Schmitt’s removal of equipment from the building and took “into
consideration the totality and credibility of the evidence.” Thereafter, it awarded
28
McConnell one dollar in punitive damages. This minimal punitive damage award was
apparently based on the trial court’s concern as to the nominal amount of proof
establishing McConnell’s claims. The trial court noted concern throughout its decision
that his testimony was self-serving and unsubstantiated. Consequently, the trial court
did not abuse of discretion upon awarding only one dollar in punitive damages. Id.
{¶103} Last, the directives by the lead opinion relative to damages following the
first appeal were untenable in light of the overwhelming number of unresolved factual
issues.
{¶104} Contrary to the majority’s conclusion, the trial court did not defy what it
believed to be a binding appellate decision. Instead, it conscientiously considered the
hand it was dealt, and concluded that the splintered opinion did not constitute a binding
majority. The trial court spells out its conclusion to this effect in the first paragraph of its
decision.
{¶105} Based on its conclusion that there was no majority opinion, with which I
agree, the trial court then proceeded to address the issues on remand consistent with
the law, not the lead opinion.
{¶106} The majority finds that the trial court was defiant and disobedient. The
trial court, however, provided a good faith basis for its actions. That the trial court
highlighted fatal flaws in the lead opinion was unavoidable. While there is room for
disagreement on this issue, the majority’s conclusion that the trial court was derelict is
unnecessary and unwarranted.
29
{¶107} This court has now issued a majority opinion. And the trial court is now
duty bound to follow the majority opinion, however flawed. There is no reason to
believe the trial court will not do so. Accordingly, this case need not be reassigned.
{¶108} I dissent.
30