Reister v. Gardner
149 N.E.3d 112
Ohio Ct. App.2019Background:
- Certified Steel Stud Association (Delaware nonprofit) published material allegedly disparaging ClarkDietrich; ClarkDietrich claimed lost projects and millions in revenue.
- ClarkDietrich sued the Association; after an 11-week trial, a jury awarded ClarkDietrich $49.5M, $43M apportioned to the Association.
- The Association lacked sufficient assets; ClarkDietrich sought assignment of fiduciary claims against the Association's directors and then requested a receiver to pursue those claims; court appointed John Reister as receiver for that limited purpose.
- Receiver sued directors William Gardner and Edward Slish for breach of fiduciary duty for rejecting a near-end-of-trial settlement offer and opposing a motion to dismiss, alleging those decisions caused the $43M loss.
- Gardner and Slish moved for judgment on the pleadings, arguing the litigation privilege (and business-judgment rule) shielded them; the trial court granted judgment on the pleadings in their favor and dismissed their indemnification counterclaims.
- On appeal, the Twelfth District affirmed judgment on the pleadings, holding the litigation privilege immunized the directors' litigation-related actions; one judge dissented arguing the privilege was overbroad for fiduciary-duty claims against directors.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether judgment on the pleadings was improper for breach-of-fiduciary claims | Reister: directors breached duties by rejecting settlement/opposing dismissal, causing $43M loss | Gardner/Slish: litigation privilege (and business-judgment rule) bar liability for litigation-related decisions | Affirmed: litigation privilege bars the claim; judgment on the pleadings proper |
| Whether litigation privilege covers actions (not only statements) and settlement negotiation conduct | Reister: privilege limited, does not shield directors from fiduciary-duty claims based on strategic litigation decisions | Defendants: privilege extends to actions and settlement-related conduct reasonably related to the proceeding | Held: privilege protects actions reasonably related to the proceeding, including settlement decisions |
| Whether dismissal of directors' indemnification counterclaims was error | Gardner: entitled to indemnification for defense costs from Association | Receiver/Trial court: Receiver lacked authority to authorize indemnification; Delaware statutory indemnification procedures (Chancery) control | Held: dismissal affirmed; indemnification issue not properly before trial court under receiver's limited mandate and Delaware procedure |
| Whether trial court erred by denying Gardner's motion to dismiss for lack of personal jurisdiction | Gardner: Ohio court lacked personal jurisdiction | Trial court/appellate: jurisdictional challenge rendered moot by affirmance on privilege grounds | Held: issue moot after affirmance |
Key Cases Cited
- Surace v. Wuliger, 25 Ohio St.3d 229 (Ohio 1986) (absolute privilege for defamatory statements in pleadings if reasonably related to the proceeding)
- Hecht v. Levin, 66 Ohio St.3d 458 (Ohio 1993) (reiterating absolute litigation privilege for statements reasonably related to judicial proceedings)
- Jackson v. BellSouth Telecommunications, 372 F.3d 1250 (11th Cir. 2004) (absolute immunity applies to acts during litigation so long as they relate to the proceeding)
- Arochem Internatl., Inc. v. Buirkle, 968 F.2d 266 (2d Cir. 1992) (settlement communications may be privileged when related to litigation)
- Petty v. Gen. Accident Fire & Life Assurance Corp., 365 F.2d 419 (3d Cir. 1966) (negotiation of settlement treated as part of a judicial proceeding for privilege purposes)