New Wembley L.L.C. v. Klar

[Cite as New Wembley L.L.C. v. Klar, 2022-Ohio-4250.]
IN THE COURT OF APPEALS OF OHIO
ELEVENTH APPELLATE DISTRICT
GEAUGA COUNTY
NEW WEMBLEY LLC, CASE NO. 2022-G-0007
Plaintiff-Appellant,
Civil Appeal from the
- vs - Court of Common Pleas
JASON KLAR,
Trial Court No. 2021 P 000349Defendant-Appellee.
OPINION
Decided: November 28, 2022
Judgment: Reversed and remanded
Kerri L. Keller, Brouse McDowell, 388 South Main Street, Suite 500, Akron, OH 44311
(For Plaintiff-Appellant).
Todd M. Haemmerle, Maia E. Jerin and Chloe C. DeAngelis, Gallagher Sharp, LLP,
1215 Superior Avenue, 7th Floor, Cleveland, OH 44114 (For Defendant-Appellee).
CYNTHIA WESTCOTT RICE, J.
{¶1} Appellant, New Wembley, LLC (“New Wembley”), appeals the January 24,
2022 judgment of the Geauga County Court of Common Pleas granting the motion for
judgment on the pleadings filed by appellee, Jason Klar. For the reasons set forth herein,
the judgment is reversed and remanded.
{¶2} New Wembley is a company that operates a tennis club (“The Wembley
Club”). Mr. Klar is the Chief Executive Officer of Capstone Construction Company, LLC
(“Capstone”). Non-party Timothy Steffen was Capstone’s President. At the time of the
filing of the complaint, Mr. Klar owned 70 percent of Capstone, while a non-party, Timothy
Steffen, owned the remaining 30 percent.
{¶3} In August 2016, New Wembley entered into a contract with Capstone for
the construction of a new tennis facility and other related improvements to The Wembley
Club. Mr. Steffen signed the contract on behalf of Capstone. The total cost of the project
was $1,434,240 and was to be completed by March 31, 2017. Mr. Steffen managed the
project.
{¶4} Capstone stopped working on the project in mid-2019, though a large
portion of the work remained to be completed at that time. New Wembley alleges that
the work which was completed was defective and deficient, and that the cost of finishing
the project was significantly increased due to Mr. Steffen’s “fraud, misrepresentations,
actions, and inactions.”
{¶5} In July 2019, New Wembley filed a complaint against Mr. Steffen in the
Cuyahoga County Court of Common Pleas alleging fraud and misrepresentation. Mr.
Steffen subsequently filed a Chapter 7 bankruptcy. Because New Wembley’s claims
were non-dischargeable, it filed an adversary proceeding against Mr. Steffen in the United
States Bankruptcy Court.
{¶6} In August 2020, New Wembley filed a complaint against Capstone for
breach of contract and declaratory relief in the Cuyahoga County Court of Common Pleas.
New Wembley asserts that discovery and the deposition of Mr. Steffen failed to reveal
that Mr. Klar was Mr. Steffen’s business partner.
{¶7} After further investigation, New Wembley deposed Mr. Klar in April 2021.
New Wembley alleges that during the deposition, it learned of facts that gave rise to and
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supported claims against Mr. Klar, which it did not know when it filed its cases against Mr.
Steffen and Capstone. Specifically, New Wembley learned that Mr. Steffen was a
minority owner of Capstone, that he was an employee under an employment agreement,
that it was in his capacity as an employee that he was managing The Wembley Club
project, and that Mr. Klar was responsible for delegating the responsibility for the project.
New Wembley also learned that Mr. Klar was almost completely uninvolved with The
Wembley Club project and did not supervise Mr. Steffen.
{¶8} In June 2021, New Wembley filed a complaint against Mr. Klar alleging
negligent hiring, retention, and supervision arising from Mr. Klar’s role in hiring Mr. Steffen
to work for Mr. Klar’s company, Capstone Construction Company, LLC. This complaint,
the dismissal of which is the subject of the instant appeal, was filed in the Geauga County
Court of Common Pleas, not the Cuyahoga County Court of Common Pleas as the two
previous cases had been filed, because Mr. Klar resides in Geauga County. In its
complaint, New Wembley specifically alleged that Mr. Klar knew or should have known
that Capstone was defaulting on its obligations and that Mr. Klar relied on Mr. Steffen
despite “obvious signs” that Mr. Steffen should not have been retained.
{¶9} Mr. Klar responded with a motion for a more definite statement, which the
court granted over New Wembley’s objection. New Wembley then filed an amended
complaint. Mr. Klar answered and moved for judgment on the pleadings. New Wembley
filed a reply and opposed the motion. The trial court granted Mr. Klar’s Civ.R. 12(C)
motion for judgment on the pleadings without explanation.
{¶10} New Wembley now appeals, assigning one error for our review, which
states:
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{¶11} The trial court erred by granting Appellee Jason Klar’s Civ.R. 12(C)
motion for judgment on the pleadings.
{¶12} “‘Under Civ.R. 12(C), dismissal is appropriate where a court (1) construes
the material allegations in the complaint, with all reasonable inferences to be drawn
therefrom, in favor of the nonmoving party as true, and (2) finds beyond doubt, that the
plaintiff could prove no set of facts in support of his claim that would entitle him to relief.
* * * Thus, Civ.R. 12(C) requires a determination that no material factual issues exist and
that the movant is entitled to judgment as a matter of law.” (Citations omitted.) Wilson v.
McCormack, 11th Dist. Ashtabula No. 2016-A-0039, 2017-Ohio-5510, ¶14, quoting State
ex rel. Midwest Pride IV, Inc. v. Pontious, 75 Ohio St.3d 565, 570 (1996). “A Civ.R. 12(C)
motion for judgment on the pleadings presents only questions of law, and a determination
of the motion is restricted solely to the allegations in the pleadings.” Francis v. Northeast
Ohio Neighborhood Health Services, Inc., 8th Dist. Cuyahoga No. 110322, 2021-Ohio-
3928, ¶11, Peterson v. Teodosio, 34 Ohio St.2d 161, 166 (1973). “Accordingly, our
standard of review is de novo.” Wilson, supra, citing Oko v. Lake Erie Corr. Inst., 175
Ohio App.3d 341, 2008-Ohio-835, ¶15 (11th Dist.).
{¶13} New Wembley alleges the trial court erred in two specific ways: (1) by
finding that New Wembley’s claims were barred by the two-year statute of limitations for
negligent hiring, negligent supervision, and negligent retention; and (2) by finding that it
failed to state a claim against Mr. Klar because its claims were based on Mr. Klar’s role
as a shareholder or officer of Capstone. We address each contention in turn.
{¶14} Application of the Discovery Rule
{¶15} It is undisputed that New Wembley’s claims for negligent hiring, negligent
supervision, and negligent retention were subject to a two-year statute of limitations
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pursuant to R.C. 2305.10(A). See, e.g., Keisler v. FirstEnergy Corp., 6th Dist. Ottawa No.
OT-04-055, 2006-Ohio-476, ¶27. “Generally, a cause of action accrues and the statute
of limitations begins to run at the time the wrongful act was committed.” Mattlin Holdings,
L.L.C. v. First City Bank, 189 Ohio App.3d 213, 2010-Ohio-3700, ¶7 (10th Dist.), citing
Collins v. Sotka, 81 Ohio St.3d 506 (1998). “For certain types of cases, a discovery rule
applies, and the statute of limitations does not begin to run until the plaintiff discovers or,
through the exercise of reasonable diligence, should have discovered a possible cause
of action.” Mattlin Holdings, supra, citing Doe v. Archdiocese of Cincinnati, 109 Ohio
St.3d 491, 2006-Ohio-2625.
{¶16} The discovery rule has been extended to cases involving negligent hiring,
retention, and/or supervisions claims. See Lisboa v. Tramer, 8th Dist. Cuyahoga No.
97526, 2012-Ohio-1549, ¶24. The Eighth District in Lisboa found that because the statute
of limitations begins to accrue when “the injury or loss to person or property occurs,”
pursuant to R.C. 2305.10(A), it is subject to the discovery rule.
{¶17} We agree with the application of the discovery rule to negligent hiring,
retention, and supervision claims. The Supreme Court has found that the discovery rule
is an exception created to avoid the unconscionable result in circumstances where an
injured party’s right to recovery may be barred by the statute of limitations before he is
even aware of its existence. Flagstar Bank, F.S.B. v. Airline Union’s Mtge. Co., 128 Ohio
St.3d 529, 2011-Ohio-1961, ¶13, citing O'Stricker v. Jim Walter Corp., 4 Ohio St.3d 84(1983). That is the factual situation that New Wembley now brings.
{¶18} In O’Stricker, the Supreme Court had held that “[w]hen an injury does not
manifest itself immediately, the cause of action does not arise until the plaintiff knows or,
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by the exercise of reasonable diligence should have known, that he had been injured by
the conduct of defendant, for purposes of the statute of limitations contained in R.C.
2305.10.” O’Stricker, supra, at paragraph two of the syllabus. (Emphasis added.)
{¶19} In Hervey v. Normandy Dev. Co., 66 Ohio App.3d 496, 498 (11th Dist.1990),
this court found the facts of the case to be distinguishable from those in O’Stricker. In
Hervey, this court addressed a similar argument to the case at bar in regard to a plaintiff
seeking to recover for injuries sustained by formaldehyde emissions within her mobile
home. This court determined that because the plaintiff both knew of the injury, its cause,
and “knew or should have known that there was a manufacturer of component parts” but
failed to identify the specific manufacturer at fault until after the statute of limitations has
run. Id.{¶20} However, the facts in Hervey are distinguishable from those in the case at
bar. In Hervey, the plaintiff knew that some manufacturer was responsible for her injuries
but failed to determine exactly which manufacturer before the statute of limitations had
run. Here, New Wembley knew of its injury and of Mr. Steffen’s involvement in 2017.
Accepting the facts pleaded as true, it did not learn that Mr. Steffen was an employee or
that Mr. Klar was in any way involved with Capstone or Mr. Steffen until 2020.
{¶21} Importantly, however, the discovery rule states that “the cause of action
does not arise until the plaintiff knows or, by the exercise of reasonable diligence should
have known, that he had been injured by the conduct of defendant * * * .” (Emphasis
added.). O’Stricker, supra. Thus, there remains a question of fact as to whether New
Wembley should have discovered Mr. Klar’s involvement earlier. Doe v. Robinson, 6th
Dist. Lucas No. L-07-1051, 2007-Ohio-5746, ¶17, (“Often, the application of a statute of
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limitations involves a mixed question of law and fact.”) Because this is a question of
material fact, we agree with New Wembley that it would be erroneous to grant judgment
on the pleadings based on the statute of limitations and discovery rule. However, our
discussion does not end there.
{¶22} Sufficiency of the Pleadings as to Mr. Klar’s Personal Liability
{¶23} We turn now to New Wembley’s second argument: whether the trial court
erred finding that it failed to state a claim against Mr. Klar because its claims were based
on Mr. Klar’s role as a shareholder or officer of Capstone. We find that New Wembley
sufficiently pleaded facts to establish it was pursuing negligent hiring, retention, and/or
supervision claims against Mr. Klar personally, as Mr. Steffen’s employer.
{¶24} Generally, “a complaint is only required to contain ‘(1) a short and plain
statement of the claim showing that the party is entitled to relief, and (2) a demand for
judgment for the relief to which the party claims to be entitled.’” Francis, supra, at ¶12,
quoting Civ.R. 8(A) and Tennant v. Huntington Natl. Bank, 8th Dist. Cuyahoga No.
108993, 2020-Ohio-4063, ¶15. “‘[A] plaintiff is not required to prove his or her case at the
pleading stage. * * * [A]s long as there is a set of facts, consistent with the plaintiff’s
complaint, which would allow the plaintiff to recover, the court may not grant a defendant’s
motion to dismiss.’” Francis, supra, quoting York v. Ohio State Hwy. Patrol, 60 Ohio St.3d
143, 144-145 (1991).
{¶25} However, “[i]n order to survive a motion for judgment on the pleadings, a
negligent hiring/retention claim ‘must plead operative facts with particularity.’” Erickson
v. Mgt. & Training, 11th Dist. Ashtabula No. 2012-A-0059, 2013-Ohio-3864, ¶40 quoting
Byrd v. Faber, 57 Ohio St.3d 56 (1991), syllabus. “‘The mere incantation of the elements
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of a negligent hiring claim, i.e., the abstract statement that the [employer] knew or should
have known about the employee’s criminal or tortious propensities, without more, is not
enough to enable a plaintiff to survive a motion to dismiss for failure to state a claim.’”
Erickson, supra, quoting Byrd, supra. “A well-pled complaint must include, however,
factual allegations going to each element of the claim, and conclusory statements without
any supporting factual allegations are insufficient.” Stevens v. Little Stars Early Learning
Ctr., L.L.C., 8th Dist. Cuyahoga No. 110602, 2022-Ohio-380, ¶35 citing Hendrickson v.
Haven Place, Inc., 8th Dist. Cuyahoga No. 100816, 2014-Ohio-3726, ¶27.
{¶26} To make out a claim for negligent hiring and retention, a plaintiff must show
“(1) the existence of an employment relationship, (2) the employee’s incompetence, (3)
the employer’s actual or constructive knowledge of such incompetence, (4) the
employer’s act or omission causing plaintiff’s injuries, and (5) the employer’s negligence
in hiring or retaining the employee as the proximate cause of plaintiff’s injuries.’” Evans
v. Akron Gen. Med. Ctr., 9th Dist. Summit No. 28340, 2018-Ohio-3031, ¶261. Mr. Klar
asserts that New Wembley failed to plead sufficient facts to establish the first element,
i.e., that Klar employed Steffen. We disagree.
{¶27} In its amended complaint, New Wembley states that Mr. Steffen is an
employee of Capstone and that Mr. Klar was Mr. Steffen’s employer. The amended
complaint specifically states, “[i]t is Defendant’s conduct and his role as an employer that
is at issue in this case, i.e., Defendant is responsible for allowing Steffen to commit
1. On appeal to the Ohio Supreme Court, the court declined to the adopt this test for the purpose of
answering the certified questions on appeal. Evans v. Akron Gen. Med. Ctr., 163 Ohio St.3d 284, 2020-
Ohio-5535, ¶5. However, the Court affirmed the Ninth District's decision by answering the questions based
on the appellate court’s application and analysis of the test. Id. at ¶5, 15.
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various torts and/or for failing to prevent that through his negligent hiring, supervision,
and retention of Steffen.” Thus, we find that New Wembley sufficiently pleaded the first
element of a claim for negligent hiring, retention, and/or supervision.
{¶28} We also find New Wembley sufficiently pleaded all the remaining elements
of negligent hiring, retention, and supervision. As to the second and third elements, the
employee’s incompetence and employers’ knowledge of the employee’s incompetence,
New Wembley alleges, “[u]pon information and belief, Steffen lacked the qualifications,
experiences, skills and/or abilities to be employed in the role in which Capstone employed
him, and Defendant either knew or should have known this.” Specifically, it alleges that
Steffen failed to secure necessary contractors, failed to oversee the project, committed
fraud, made material misrepresentations, and performed defective work. It also alleges
that Mr. Klar knew or should have known that Capstone was defaulting on its obligations
due to Mr. Steffen’s actions and inactions.
{¶29} In support of the fourth element, the employer’s act or omission caused
injury, New Wembley alleges that Mr. Klar was uninvolved in the project, did not supervise
Mr. Steffen in his capacity as an employee for Capstone. It states, “[h]ad Defendant
exercised reasonable care in the hiring, supervision, and retention of Steffen, New
Wembley’s damages would have been avoided.”
{¶30} Finally, as to the fifth element, New Wembley states that Mr. Klar’s conduct
in failing to exercise reasonable care hiring, supervising, and retaining Mr. Steffen, makes
him a proximate cause of New Wembley’s injury. New Wembley alleges in excess of
$25,000 in damages. We find the amended complaint was sufficiently well-pleaded to
overcome judgment on the pleadings.
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{¶31} Because we disagree with Mr. Klar’s contention that all of New Wembley’s
allegations were based on his role as shareholder or officer of Capstone, we need not
address Mr. Klar’s argument that New Wembley failed to plead sufficient facts to pierce
the corporate veil. New Wembley brought its claims against Mr. Klar personally for his
own allegedly negligently tortious conduct. See, e.g., Evans, supra, 2018-Ohio-3031, ¶33
(An action for “negligent hiring, supervision, and retention is based on a theory of direct
liability * * *.”).
{¶32} In light of the foregoing, the judgment of the Geauga County Court of
Common Pleas is reversed and remanded.
THOMAS R. WRIGHT, P.J.,
MARY JANE TRAPP, J.,
concur.
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