2015 Ohio 2928
Ohio Ct. App.2015Background
- Washington purchased 19 of 30 McDonald's from Covelli under an Aug 18, 1998 Purchase and Sale Agreement that included a piracy and nondisclosure clause with liquidated damages ($500/day for managers, $200/day for others) and closing occurred Sept 22, 1998.
- Plaintiff alleged piracy of 14 employees and sought injunctive relief after Oct 1998 filing.
- Parties answered and counterclaimed for interference with business relationships and asserted third-party beneficiary status under the Franchise Agreement.
- On Oct 20, 1998 the parties entered a stipulated preliminary injunction restricting poaching; a magistrate later awarded civil contempt damages of $7,500.
- Trial proceedings spanned 2004–2011, with a magistrate’s later findings and a 2013 trial-court judgment adopting those findings.
- This appeal challenges (I) the cut-off for damages under the injunction and (II) damages awarded for third-party beneficiary rights under the Franchise Agreement; the court remands on I and affirms/denies on II.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the stipulated injunction limit damages under the piracy clause? | Washington argues the injunction did not novate or cap the piracy damages. | Covelli contends the injunction curtailed damages to the period specified in the injunction. | Assignment I granted; injunction did not novate; remand to assess damages for 14 employees within 3/6 month periods. |
| Was Covelli a third-party beneficiary under the Franchise Agreement and entitled to damages? | Washington argues Covelli cannot recover as a third-party beneficiary. | Covelli contends he is an intended beneficiary under Section 14 of the Franchise Agreement. | Assignment II denied; Covelli upheld as intended beneficiary; damages under Section 2.22 affirmed. |
Key Cases Cited
- Nationwide Mutual Fire Insurance Co. v. Guman Brothers Farm, 73 Ohio St.3d 107 (Ohio 1995) (de novo review of contract interpretation standard)
- Children’s Medical Center v. Ward, 87 Ohio App.3d 504 (2nd Dist.1993) (contract interpretation; de novo review on issues of law)
- Kostelnik v. Helper, 96 Ohio St.3d 1 (Ohio 2002) (elements of a contract (offer, acceptance, consideration, etc.))
- Hines v. Amole, 4 Ohio App.3d 263 (Ohio 1982) (third-party beneficiary who is contemplated by the contract)
- Laverick v. Children’s Hosp. Med. Ctr. of Akron, 43 Ohio App.3d 201 (Ohio 1988) (third-party beneficiary rights require contemplation by the contract parties)
- James v. Sky Bank, 2012-Ohio-3883 (Ohio 2012) (entitlement damages must be proven with reasonable certainty)
- Gardner v. Oxford Oil Co., 2013-Ohio-5885 (Ohio 2013) (novations require clear, definite intent and each contract element)
- Chitlik v. Allstate Ins. Co., 34 Ohio App.2d 193 (Ohio 1973) (third-party beneficiary concept in Ohio)