Cohen v. Dulay
2017 Ohio 6973
| Ohio Ct. App. | 2017Background
- PEI Liquidation, Inc. (formerly Patio Enclosures) became majority-owned by an ESOP after a series of transactions culminating in a 2006 purchase of the remaining shares from longtime CEO Schneider; PEI thereafter experienced multi-year operating losses and ceased operations in 2010.
- Cohen was appointed receiver in PEI’s voluntary dissolution and sued former board members in 2014 alleging: (1) breach of fiduciary duty; (2) aiding/abetting breaches; (3) waste; (4) deepening insolvency/wrongful prolongation of corporate existence; and (5) breach of fiduciary duty owed to creditors.
- Defendants moved (initially under Civ.R. 12) and later for summary judgment; the trial court granted summary judgment in favor of Defendants, ruling Counts 1 and 5 time-barred under R.C. 2305.09 and dismissing Counts 2–4 as not cognizable under Ohio law.
- On appeal, Cohen argued the discovery rule (for fraud-based fiduciary breaches), equitable tolling/adverse domination, and that some alleged post-transaction failures to act were timely; Defendants argued claims were time-barred and some causes of action are not viable under Ohio law.
- The appellate court affirmed dismissal of aiding/abetting, waste, and deepening insolvency as independent causes of action but reversed and remanded in part because the trial court had not considered Cohen’s equitable-tolling/adverse-domination arguments and other tolling-related issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether breach-of-fiduciary-duty claims are governed by the discovery rule under R.C. 2305.09 (fraud accrual) | Cohen: claims premised on fraud; discovery rule applies so suit is timely | Defendants: Cohen failed to plead fraud with Civ.R. 9(B) particularity; discovery rule inapplicable and limitations accrued when breaches occurred | Court: Discovery rule inapplicable because complaint did not plead fraud with required particularity under Civ.R. 9(B) |
| Whether the trial court was bound by its earlier denial of Defendants’ Civ.R. 12 motions (law of the case) | Cohen: denial of Civ.R. 12 estops later summary-judgment ruling that claims are time-barred | Defendants: earlier interlocutory rulings not controlling; summary judgment involves different standards | Court: Law of the case does not prevent trial court from revisiting nonfinal interlocutory rulings; no error in revisiting accrual/date-of-accrual issue |
| Whether equitable tolling/adverse domination or other tolling doctrines prevent the statute-of-limitations bar | Cohen: tolling/adverse domination apply; trial court failed to address these arguments | Defendants: claims are untimely; no tolling applies | Court: Trial court did not rule on these tolling theories; appellate court remanded for trial court to address tolling/adverse-domination and related timely-act arguments in first instance |
| Whether aiding/abetting, waste, and deepening insolvency are cognizable independent causes of action under Ohio law | Cohen: asserted these as separate counts tied to 2006 transaction and 2009 failures to secure financing | Defendants: such claims are not independent causes under Ohio law or are duplicative of fiduciary-duty claims | Court: Aiding/abetting/participation claim not recognized; waste and deepening insolvency are redundant to breach-of-fiduciary-duty and properly dismissed as independent counts |
Key Cases Cited
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102 (1996) (summary-judgment de novo standard)
- Murphy v. Reynoldsburg, 65 Ohio St.3d 356 (1992) (nonmoving party view of facts and doubts resolved in favor of nonmovant)
- Dresher v. Burt, 75 Ohio St.3d 280 (1996) (summary-judgment burden-shifting framework)
- Cundall v. U.S. Bank, 122 Ohio St.3d 188 (2009) (fraud and breach-of-fiduciary-duty claims governed by R.C. 2305.09 and subject to discovery rule when fraud is pleaded and discovered)
- Nolan v. Nolan, 11 Ohio St.3d 1 (1984) (law-of-the-case doctrine limits and scope)
- Love v. Port Clinton, 37 Ohio St.3d 98 (1988) (statute-of-limitations inquiry looks to true nature of claim)