Accu-Check Instrument Serv., Inc. v. Sunbelt Business Advisors of Cent. OhioAccu-Check Instrument Serv., Inc. v. Sunbelt Business Advisors of Cent. Ohio
Law Offices of Daniel R. Mordarski LLC, and Daniel R. Mordarski; Einstein & Poling, LLC, and Dianne D. Einstein, for appellee.
Reminger Co., LPA, and Jason Winter, for appellants.
APPEALS from the Franklin County Court of Common Pleas.
BROWN, J.
{¶1} In this consolidated case, Sunbelt Business Advisors of Central Ohio (individually “SBACO“); SBACO, LLC (referred to individually as “SBACO, LLC,” and collectively with SBACO as “Sunbelt,” for ease of reference); and William C. Eves, Jr. (individually “Eves“), defendants-appellants (sometimes referred to collectively as “appellants“), appeal the judgment of the Franklin County Court of Common Pleas, in which the court entered judgment in favor of Accu-Check Instrument Service, Inc. (“Accu-Check“), plaintiff-appellee.
{¶2} Robert and Carol Vaughan own a business, Accu-Check. Sunbelt locates buyers for business owners seeking to sell their businesses. In February 2004, the Vaughans contacted Bill Smith, a broker at Sunbelt, for the purpose of finding a buyer for Accu-Check. Smith told the Vaughans that all potential buyers would first sign a confidentiality agreement before any discussions regarding the purchase of Accu-Check. Another broker at Sunbelt, Eves, represented Colm O‘Driscoll (“O‘Driscoll“), who desired to purchase Accu-Check. Eves had O‘Driscoll execute the required confidentiality agreement. After O‘Driscoll received financial information regarding Accu-Check,
{¶3} In November 2006, Robert Vaughan learned that Kristin O‘Driscoll had told someone about the potential sale of the business. Word of the sale circulated to others, which Vaughan claimed resulted in the loss of business and the loss of a key employee.
{¶4} On May 22, 2007, Accu-Check filed an action against SBACO and O‘Driscoll, alleging breach of the confidentiality agreement. Accu-Check claimed SBACO breached its agreement with Accu-Check by failing to have Kristin O‘Driscoll sign a confidentiality agreement, and Colm O‘Driscoll breached his confidentiality agreement by disclosing confidential information to his wife Kristin. On August 20, 2007, SBACO filed an answer to the complaint and cross-claim against O‘Driscoll.
{¶5} On December 24, 2007, Accu-Check filed an amended complaint, adding Kristin O‘Driscoll as a defendant. On December 27, 2007, Accu-Check filed a second amended complaint, which merely added exhibits inadvertently not attached to the amended complaint. SBACO never filed answers to the amended complaints.
{¶6} On December 5, 2008, days before trial was scheduled to start, Accu-Check filed a motion for default judgment against SBACO. On December 10, 2008, SBACO filed a motion for leave to file answer to amended complaint instanter and an answer to amended complaint. Counsel for SBACO argued that his failure to file an answer to the second amended complaint had been the result of excusable neglect. Counsel for SBACO indicated he had recently returned from an extended leave due to a serious medical condition, and a legal secretary in his office had been using an illegal
{¶7} On December 12, 2008, Accu-Check voluntarily dismissed its claims without prejudice against Colm and Kristin O‘Driscoll. Also on December 12, 2008, the trial court denied SBACO‘s motion for leave to file an answer instanter. On the same day the trial was to begin, December 15, 2008, the trial court conducted a hearing on Accu-Check‘s motion for default judgment and granted the motion. The court issued an entry of default on December 16, 2008.
{¶8} A damages only hearing commenced December 15, 2008. At the close of evidence, Accu-Check moved to amend the pleadings to conform to the evidence to include a claim for breach of fiduciary duty and a claim for punitive damages, which the trial court granted. After deliberations, on December 19, 2008, the jury awarded Accu-Check $1,000,000 in compensatory damages based upon the breach of the non-disclosure agreement, and $750,000 in punitive damages, plus attorney fees, the total of which was to be determined at a later hearing.
{¶9} On March 20, 2009, Accu-Check filed a motion to add Eves and SBACO, LLC, as defendants. On April 20, 2009, the trial court granted Accu-Check‘s motion to add Eves and SBACO, LLC, as new-party defendants. Also on April 20, 2009, the court issued a decision granting Accu-Check $700,000 in attorney fees and $18,936.54 in itemized expenses. On April 23, 2009, the trial court issued a final judgment against SBACO; SBACO, LLC; and Eves in the amount of $2,482,029.80, which included post-judgment interest. Sunbelt appeals the judgment of the trial court, asserting the following assignments of error:
- The punitive damages award is void as a matter of law.
- The trial court committed reversible error when it refused to allow SBACO to file an answer to Accu-Check‘s Second Amended Complaint instanter and, instead, entered a default judgment against SBACO.
{¶10} Eves also appeals the judgment of the trial court, asserting the following assignments of error:
- The trial court‘s April 20, 2009, Decision Granting Plaintiff‘s Motion To Add William C. Eves And SBACO, LLC As A Party Defendant was unfairly prejudicial as to Eves.
- The trial court‘s April 23, 2009, Final Judgment Entry granting Accu-Check judgment as to William C. Eves is void as a matter of law.
{¶11} We will address Sunbelt‘s second assignment of error first. Sunbelt argues in its second assignment of error that the trial court erred when it denied its motion for leave to file an answer to Accu-Check‘s second amended complaint instanter and, instead, entered a default judgment against it. Accu-Check filed its motion for default judgment pursuant to
(A) Entry of judgment
When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules, the party entitled to a judgment by default shall apply in writing or orally to the court therefor[.]
{¶12} Sunbelt filed its motion for leave to file answer to the second amended complaint instanter under the authority of
(B) Time: extension
When by these rules or by a notice given thereunder or by order of court an act is required or allowed to be done at or within a specified time, the court for cause shown may at any
time in its discretion * * * (2) upon motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect[.]
{¶13} Thus, a trial court may grant a defendant‘s motion for leave to file an answer upon a showing of excusable neglect. Faith Elec. Co. v. Kirk (May 10, 2001), 10th Dist. No. 00AP-1186. A trial court has broad discretion to grant or deny a motion for leave to file an untimely answer, and the court‘s judgment will not be reversed on appeal absent a showing of an abuse of that discretion. Miller v. Lint (1980), 62 Ohio St.2d 209, 214. The trial court‘s discretion in this matter, however, is not unlimited, but requires a determination as to whether the neglect was excusable or inexcusable. Id. In making this determination, the Supreme Court of Ohio has stated that the trial court must take into consideration all the surrounding facts and circumstances, and courts must be mindful of the admonition that cases should be decided on their merits, where possible, rather than procedural grounds. Marion Prod. Credit Assn. v. Cochran (1988), 40 Ohio St.3d 265, 271. Generally, default judgments are disfavored. Suki v. Blume (1983), 9 Ohio App.3d 289, 290. Granting a default judgment, analogous to granting a dismissal, is a harsh remedy that should be imposed only when the actions of the defaulting party create a presumption of willfulness or bad faith. Haddad v. English (2001), 145 Ohio App.3d 598, 603.
{¶14} Although excusable neglect cannot be defined in the abstract, the test for excusable neglect under
{¶15} In the present case, in its decision denying SBACO‘s motion for leave to file an answer to the second amended complaint, the trial court found that the circumstances outlined by SBACO‘s counsel did not constitute excusable neglect. The court stated that SBACO‘s failure to seek leave to answer until almost one year after the complaint was amended and until after Accu-Check applied for default judgment was not the result of excusable neglect. The court further reasoned that it appeared that SBACO failed to monitor its obligations in the litigation for an extended period of time even after counsel‘s health issues had passed.
{¶16} After a review of the record, we find the trial court abused its discretion when it denied SBACO‘s motion for leave to file an answer to the second amended complaint. In its motion, SBACO indicated that, at the time of the filing of the amended complaints, counsel for SBACO had been unable to work full-time due to a serious illness that lasted several months and required counsel to take powerful pain medications. After returning to full-time work, counsel discovered that a legal secretary had not performed properly, or not at all, her job responsibilities as directed by counsel. Counsel stated that it was not until the first week of December 2008 that, while reviewing the court docket sheet, he saw that amended complaints had been filed. The legal secretary had failed to
{¶17} Thereafter, counsel began drafting the motion for leave to file an answer to the second amended complaint, as well as the answer to the second amended complaint. Before completing these documents, on Monday, December 8, 2008, counsel discovered a copy of the motion for default judgment filed by Accu-Check, which had been faxed to his office after the close of business on Friday, December 5, 2008.
{¶18} Counsel indicated in his motion for leave to file an answer to the second amended complaint that it was only after recovering from his illness and returning to full-time practice that he discovered the secretary‘s job failures. Attached to the motion for leave was an affidavit from the secretary‘s mother, a paralegal at another law office, who averred that during the time of counsel‘s illness, her daughter was taking the illegal drug “ecstasy” while working. She further averred that she had tried to “clean up the mess” her daughter had made, and what she found was a “disaster.” She stated legal documents were misfiled or misplaced on a consistent basis, which made addressing problems with files extremely difficult. As of December 10, 2008, she had still been unable to clean up the “disaster” even though both she and counsel had made diligent efforts to identify the problems with the files and correct the same. She stated that she took her daughter for evaluation and treatment for her drug problem.
{¶19} In his motion for leave, counsel for SBACO further indicated that it was not until the legal secretary was fired that he fully understood the extent of the problems with the files. Despite the diligent efforts of him and his new staff members over the course of several months, given the large volume of active case files, many of the problems caused by the legal secretary‘s acts were not immediately discovered.
{¶20} We find these circumstances constituted “excusable neglect” within the meaning of that phrase in
{¶21} Furthermore, the final judgment in this case was over $2,500,000. This court has acknowledged that courts in Ohio have adhered to the observation of the federal courts that matters involving large sums of money should not be determined by default judgments if it can reasonably be avoided. See Estate of Orth v. Inman, 10th Dist. No. 99AP-504, 2002-Ohio-3728, ¶30, citing United States v. Williams (D.C.Ark.1952), 109 F.Supp. 456, 461. See also Colley v. Bazell (1980), 64 Ohio St.2d 243, 247, fn. 5. Given SBACO‘s filing of an answer to the original complaint, its active participation in the litigation over a long period, the absence of any flagrant disregard for the rules, and the lack of any prejudice in allowing leave to file an answer to the second amended complaint, we find this principle compelling under the circumstances here.
{¶22} We also note SBACO‘s motion for leave was not filed until after Accu-Check had already filed its motion for default judgment. It is true that such is typically a factor militating against the granting of leave to file. See Marion Prod. at 272 (“of great importance, is the fact that the [plaintiffs] failed to file their motion for default until after [defendant] pointed out the lack of a reply in its motion * * * for leave to file a reply instanter. * * * Until a motion for default is filed, it is presumed that the complaining party is not entitled to a default judgment, which fact serves to enlarge the discretion of the trial court to allow a delayed responsive pleading“). However, SBACO‘s motion for leave explained that its counsel had just recently discovered the failure to file an answer and had actually been working on an answer and motion for leave at the time Accu-Check filed its motion for default judgment. Thus, the fact that SBACO filed its motion for leave after Accu-Check filed its motion for default judgment is less significant under these circumstances.
{¶23} Finally, we note Accu-Check argues that this court should not be permitted to review the trial court‘s entry denying leave to file an answer and the entry granting a default judgment because Sunbelt failed to identify these entries in its notice of appeal, in which it referenced only the trial court‘s final judgment dated April 23, 2009. Although
{¶24} For the foregoing reasons, we find the trial court abused its discretion when it denied SBACO‘s motion for leave to file an answer to Accu-Check‘s second amended complaint. Given this finding, we also find the trial court erred when it granted default judgment to Accu-Check based upon Sunbelt‘s failure to plead, pursuant to
{¶25} Sunbelt argues in its first assignment of error that the trial court‘s punitive damages award was void as a matter of law. As we have sustained Sunbelt‘s second assignment of error, and the judgment must be reversed and the matter remanded to permit Sunbelt to file an answer to Accu-Check‘s second amended complaint, any
{¶26} As to Eves’ assignments of error, Eves argues in his first assignment of error that the trial court‘s April 20, 2009 decision granting Accu-Check‘s motion to add Eves and SBACO, LLC, as party defendants was unfairly prejudicial as to Eves. Eves argues in his second assignment of error that the trial court‘s April 23, 2009 final judgment entry granting Accu-Check judgment as to Eves is void as a matter of law. Given our reversal of the trial court‘s final judgment, as discussed in Sunbelt‘s second assignment of error above, we therefore also reverse the final judgment as it pertains to the addition of Eves and SBACO, LLC, as party defendants. The trial court‘s decision to permit the addition of these parties was based, in part, upon
{¶27} Accordingly, we do not address Sunbelt‘s first assignment of error, its second assignment of error is sustained, and Eves’ first and second assignments of error are sustained. Therefore, the judgment of the Franklin County Court of Common Pleas is reversed, and this matter is remanded to that court for proceedings consistent with this decision.
Judgment reversed;
cause remanded with instructions.
FRENCH, P.J., and CONNOR, J., concur.
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