Auth v. Indus. Physical Capability Servs., Inc.
2017 Ohio 1268
| Ohio Ct. App. | 2017Background
- IPCS, a corporation using a mathematical model developed by Dr. Thomas Gilliam, issued ownership interests to Richard Auth in 2010 (totaling 45%) after Auth provided capital and marketing support; Gilliam retained 55%.
- In 2012 the parties executed a shareholder buy/sell agreement and corporate actions naming Gilliam president and Auth vice-president/director.
- A dispute arose in 2014; Auth sued IPCS and Gilliam alleging contract breach, fiduciary breaches, need for accounting, and that IPCS owned the mathematical model. IPCS and Gilliam filed counterclaims/cross-claims asserting Gilliam owned the model and seeking rescission and damages.
- IPCS admitted in part Gilliam’s ownership allegations and executed a technology license with Gilliam’s LLC, licensing the model and providing royalties to Gilliam’s entity.
- Discovery stalled because IPCS withheld materials claiming attorney-client privilege and work-product protection; Auth sought production under shareholder-fiduciary and crime-fraud exceptions and argued IPCS waived privilege by disclosing to Gilliam.
- The trial court ordered production after in camera review, concluding IPCS waived privilege by disclosure to Gilliam whose interests were adverse to IPCS; IPCS appealed and Auth cross-appealed.
Issues
| Issue | Auth's Argument | IPCS/Gilliam's Argument | Held |
|---|---|---|---|
| Whether withheld communications were protected by attorney-client privilege/work-product | Auth: shareholder-fiduciary and crime-fraud exceptions apply; he needs materials and privilege waived because of adverse interests | IPCS: communications are privileged; Gilliam as corporate agent is within privilege; no continuing duty to produce | Affirmed the trial court’s production order; appellate court presumed regularity because IPCS failed to include privileged materials in record and therefore affirmed on waiver grounds |
| Whether disclosure to majority shareholder (Gilliam) waived IPCS privilege | Auth: disclosure to Gilliam (adverse to IPCS) waived privilege so Auth (45% owner) may obtain materials | IPCS: Gilliam acted as company agent; disclosure to him did not waive company privilege; court erred treating him as stranger | Appellate court declined to review merits (materials absent from record) and presumed trial court acted regularly; affirmed production based on waiver |
| Whether shareholder-fiduciary or crime-fraud exceptions justified production | Auth: exceptions apply to overcome privilege and work-product doctrines | IPCS: exceptions do not apply; privilege and protection remain | Appellate court did not address merits of these exceptions because record lacked the documents; affirmed order on procedural grounds (record incomplete) |
| Whether IPCS had a continuing duty to withhold privileged communications throughout litigation | Auth: IPCS cannot indefinitely withhold where exceptions or waiver apply | IPCS: has right to maintain privilege and work-product | Court below ordered production during litigation; appellate court affirmed due to IPCS’s failure to file materials in record, so production stands |
Key Cases Cited
- No authorities with official reporter citations appear in the appellate opinion’s discussion that are suitable for Bluebook reporter citation listing. The court relied on Ohio appellate rules and unpublished/appellate decisions in the record to support the procedural holding (presumption of regularity where record is incomplete).