Developers Diversified Realty v. Coventry Real Estate Fund II, L.L.C.
2012 Ohio 1056
Ohio Ct. App.2012Background
- DDR and CREA formed Coventry II with DDR as property manager and 20% equity; CREA sourced 80%.
- Coventry II owned 10 properties via 11 LLCs; DDR had exclusive management and leasing authority.
- Management agreements allowed termination for cause or without cause; cause required fraud or willful misconduct per contract terms.
- Coventry II terminated DDR for cause in 2009 and sued in New York; DDR sought declaratory relief in Ohio to invalidate the termination.
- Trial court granted a TRO to preserve DDR’s status as manager pending litigation and later granted summary judgment for DDR.
- The Court of Appeals affirmed, holding the termination for cause lacked fraud/willful misconduct and was a contract breach.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether DDR’s conduct constitutes fraud or willful misconduct justifying a for-cause termination | Coventry II argues DDR’s fraud/willful misconduct breached the contract and justified termination. | DDR contends conduct is not fraud or willful misconduct; it’s a non-for-cause breach within contract terms. | For-cause termination not proven; breach alone not fraud/willful misconduct. |
| Whether DDR’s relationship with Oxford and related disclosures support fraud | Coventry II asserts nondisclosure of Oxford constitutes fraud and increases costs to Coventry II. | No duty to disclose Oxford contract; management agreement authorizes DDR to procure services and credit discounts. | No disclosure duty; no fraud; Oxford arrangement described as contract-based relief, not tort fraud. |
| Whether the Oxford 3% surcharge and rebates constitute fraudulent overcharges | Coventry II claims the 3% surcharge and DDR’s 75% share defrauded Coventry II. | Evidence shows budgets reflected the program; rebates and costs lacked proven increased expense to Coventry II. | Insufficient evidence of fraud; no derived injury shown; constitutes contract issue. |
| Whether the Ohio court should stay/dismiss in light of the New York action | New York action should control; Ohio action should be stayed/dismissed. | Concurrent actions may proceed; forum non conveniens not warranted; parallel proceedings acceptable. | Court did not abuse discretion; no need to stay/dismiss. |
| Whether the temporary restraining order was proper | TRO was appropriate to preserve status quo pending merits. | TRO was ancillary to declaratory relief and moot once judgment issued. | TRO ruling not reversible; affirmed as moot after judgment. |
Key Cases Cited
- Textron Fin. Corp. v. Nationwide Mut. Ins. Co., 115 Ohio App.3d 137 (9th Dist. 1996) (breach of contract cannot by itself constitute fraud)
- Gaines v. Preterm–Cleveland, Inc., 33 Ohio St.3d 54 (Ohio 1987) (elements of fraud require justifiable reliance and injury)
- Brenner v. Cuyahoga Cty. Dept. of Children & Family Servs., 2009-Ohio-1253 (8th Dist. 2009) (willful misconduct involves intentional deviation from duty)
- Hoppel v. Greater Iowa Corp., 68 Ohio App.2d 209 (9th Dist. 1980) (jurisdictional priority does not bar interstate actions; forum considerations apply)
- Chambers v. Merrell-Dow Pharmaceuticals, Inc., 35 Ohio St.3d 123 (Ohio 1988) (forum non conveniens intrinsic discretionary authority)
- Info. Leasing Corp. v. Jaskot, 151 Ohio App.3d 549 (1st Dist. 2003) (contractual forum selection and Ohio jurisdiction interaction)
- Carlin v. Mambuca, 96 Ohio App.3d 500 (8th Dist. 1994) (contract interpretation and forum considerations in Ohio)