2020 Ohio 117
Ohio Ct. App.2020Background
- Teresa Lawless was treasurer of the Lawrence County ESC under a five‑year contract (2013–2018) containing: a duty‑to‑defend clause, a leave‑time clause (pay for accumulated sick/vacation on separation), and a severance clause (pay for unpaid balance if terminated early).
- Auditor of State performed a special audit of ESC, issued findings for recovery against Lawless (approx. $38,493) and criticized large performance incentives paid to treasurer and superintendent; ESC placed Lawless on paid administrative leave and later terminated her under R.C. 3319.16.
- Lawless sued the Board for breach of the duty‑to‑defend, leave‑time, and severance clauses; the Board counterclaimed for breach, fraud, and breach of fiduciary duty.
- Trial court: granted summary judgment to Lawless on liability for leave‑time and severance claims (denying Board summary judgment); jury awarded Lawless ~$359,944 and Board $1,370 on counterclaims; court later granted Board summary judgment on duty‑to‑defend claim.
- On appeal the Fourth District: affirmed duty‑to‑defend ruling for the Board; held severance clause violates public policy (unenforceable) and reversed Lawless’s recovery on it; reversed grant of summary judgment to Lawless on leave‑time liability and remanded for further proceedings; otherwise affirmed.
Issues
| Issue | Plaintiff's Argument (Lawless) | Defendant's Argument (Board) | Held |
|---|---|---|---|
| Duty to defend clause | Special audit constituted an "action brought against" Lawless triggering duty to defend; Board failed to defend her. | Audit was an entity audit of the ESC under statutory authority, not an "action brought against" Lawless; duty not triggered. | Court: Duty not triggered; audit was not an action brought against the treasurer. Judgment for Board affirmed. |
| Severance‑pay clause (pay unpaid balance if terminated) | Clause is part of contract and entitles Lawless to unpaid balance upon termination. | Clause violates public policy by rewarding a terminated public employee and undermining fiscal integrity; unenforceable. | Court: Clause violates public policy (inconsistent with fiscal integrity and principles like unemployment exclusion); clause unenforceable. Lawless’s recovery reversed; summary judgment for Board on that claim. |
| Leave‑time clause (pay for unused sick/vacation on separation) | Clause valid; she is entitled to pay for accrued/unused leave; summary judgment on liability appropriate. | Clause is illusory, unconscionable, a penalty, or Lawless failed to perform so she cannot recover. | Court: Clause does not violate public policy, is not a penalty, nor illusory; however, genuine issues of fact exist about Lawless’s substantial performance—so summary judgment for Lawless on liability reversed and remanded. |
| Motions to stay/continuance and motion for new trial (newly discovered evidence) | (Board) Trial should have been delayed until auditor completed audits; post‑trial rescission of awards and repayments justify new trial. | (Lawless) Audit timing and post‑trial events are not newly discovered facts; delaying harms finality. | Court: Denials were not abuse of discretion. Post‑trial events (rescission/repayment) occurred after trial and are not newly discovered evidence for Civ.R.59(A)(8). |
Key Cases Cited
- Williams v. Ormsby, 131 Ohio St.3d 427, 966 N.E.2d 255 (Ohio 2012) (elements of contract and consideration; courts may decide adequacy of consideration issue).
- Cincinnati City School Dist. Bd. of Edn. v. Conners, 132 Ohio St.3d 468, 974 N.E.2d 78 (Ohio 2012) (public‑policy exception to freedom to contract; framework for evaluating whether contract terms offend public policy).
- Arbino v. Johnson & Johnson, 116 Ohio St.3d 468, 880 N.E.2d 420 (Ohio 2007) (legislature is ultimate arbiter of public policy).
- Boone Coleman Constr., Inc. v. Piketon, 145 Ohio St.3d 450, 50 N.E.3d 502 (Ohio 2016) (distinguishing liquidated damages from unenforceable penalties; question of law reviewed de novo).
- Tzangas, Plakas & Mannos v. Ohio Bur. of Emp. Servs., 73 Ohio St.3d 694, 653 N.E.2d 1207 (Ohio 1995) (rationale for unemployment exclusion for employees discharged for just cause).
- Krischbaum v. Dillon, 58 Ohio St.3d 58, 567 N.E.2d 1291 (Ohio 1991) (prima facie evidence does not require a particular verdict; it supports but does not compel a verdict).
- Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St.3d 352, 884 N.E.2d 12 (Ohio 2008) (procedural and substantive unconscionability factors).