ROBERT BERRY v. JAMES LUPICA, ET AL.
No. 95393
Court of Appeals of Ohio, EIGHTH APPELLATE DISTRICT, COUNTY OF CUYAHOGA
July 14, 2011
2011-Ohio-3462
[Vacated opinion. Please see 2011-Ohio-5381.] Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-613669
BEFORE: Stewart, J., Blackmon, P.J., and Celebrezze, J.
JUDGMENT: AFFIRMED, AS MODIFIED
ATTORNEYS FOR APPELLANT
Christopher M. DeVito
Alexander J. Kipp
Morganstern, MacAdams & DeVito Co., LPA
623 West St. Clair Avenue
Cleveland, OH 44113-1204
ATTORNEYS FOR APPELLEES
Kris H. Treu
William H. Falin
Michael J. Kahlenberg
Moscarino & Treu, LLP
The Hanna Building, Suite 630
1422 Euclid Avenue
Cleveland, OH 44115
MELODY J. STEWART, J.:
{¶ 1} Plaintiff-appellant, Robert Berry, brought suit against his supervisor, defendant-appellee, James Lupica, and their employer, defendant-appellee Wachovia Securities, alleging that Wachovia breached an agreement to pay the full amount of an arbitration award between Berry and his former employer, Merrill Lynch. Wachovia counterclaimed, alleging that Berry had breached an agreement that he would compensate Wachovia for certain amounts that it advanced to Merrill Lynch in partial satisfaction of Berry‘s obligation under the arbitration award. A jury ruled against Berry on all of his
I
{¶ 2} Berry worked for Merrill Lynch as a financial advisor before being hired by Wachovia (he was actually hired by First Union Corporation, which was taken over by Wachovia, which in turn was taken over by Wells Fargo, but the parties have agreed to use the name “Wachovia” in this litigation, so we use it too). The terms of Berry‘s employment agreement with Merrill Lynch contained a noncompetition agreement. When Berry started working for Wachovia, Merrill Lynch claimed that he did so in violation of the noncompetition agreement; Berry claimed that Merrill Lynch made defamatory statements about him regarding the violation of the noncompetition agreement. Berry and Merrill Lynch took their dispute to binding arbitration before the National Association of Securities Dealers (“NASD“). An NASD panel ruled in favor of Merrill Lynch on its claims against Berry and awarded it $250,000. The NASD panel also found for Berry on his defamation claim against Merrill Lynch and awarded him $125,000 in damages.
{¶ 4} “As we discussed attached is the award I received from Merrill Lynch. Please place this check on deposit with First Union Corporation to offset the interest due on our contract. The $125,000 is to be returned on demand. Thank you for your consideration and cooperation.”
{¶ 5} The branch manager forwarded the check to the Wachovia legal department and the check was deposited into a Wachovia account dedicated to legal settlements. Berry later demanded to have the check returned to him, but Wachovia refused to return it.
{¶ 6} Berry brought this action raising a number of claims that collectively accused Wachovia of breaching the agreement to hold Berry‘s Merrill Lynch proceeds and produce them on demand. Wachovia counterclaimed, arguing that Berry breached a settlement agreement under which he would set-off the $250,000 Wachovia paid to Merrill Lynch by delivering to Wachovia the $125,000 he received from Merrill Lynch — Wachovia would pay the remaining $125,000 of the arbitration award as a courtesy to Berry. It claimed as damages the attorney fees it expended or would be required to expend in enforcing the settlement.
{¶ 7} At trial, the issue was whether the parties had an agreement that the proceeds from the $125,000 Merrill Lynch award to Berry should be applied as a set-off
II
A
{¶ 9} The court must issue a directed verdict when, “after construing the evidence most strongly in favor of the party against whom the motion is directed, [the court] finds that upon any determinative issue reasonable minds could come to but one conclusion upon the evidence submitted and that conclusion is adverse to such party ***.” See
B
{¶ 10} The statute of frauds is set forth in
C
{¶ 12} Berry next argues that the court should have directed a verdict on statute of limitations grounds. He maintains that the parties did not reduce their settlement agreement to writing, so the six-year statute of limitations for oral contracts began to run in April 2002, when he appealed from the arbitration award and otherwise sought to vacate the award.
{¶ 13}
D
{¶ 15} Finally, Berry complains that the court should have granted judgment notwithstanding the verdict because the alleged settlement agreement between him and Wachovia was not truly a settlement agreement because the parties were not adversaries in the NASD arbitration.
{¶ 16} It is true that the parties were not adversaries in the NASD arbitration (Merrill Lynch and Berry were the adversaries), but that fact has no bearing on whether Berry and Wachovia reached an agreement on how they would handle the payment of Merrill Lynch‘s arbitration award. The right of parties to form contracts is general unless specifically prohibited by law or prevented by reason of fixed public policy. Pittsburgh, Cincinnati, Chicago & St. Louis Ry. Co. v. Kinney (1916), 95 Ohio St. 64, 115 N.E. 505, paragraph one of the syllabus. To the extent that the parties differed on the
III
{¶ 17} Berry next raises issues relating to the award of attorney fees as damages for the breach of the settlement. He maintains that under the American Rule of attorney fees, which states that the prevailing party in a legal action may not, in the absence of statutory authority, recover attorney fees, the court could not allow Wachovia to recover its legal fees as compensatory damages.
{¶ 18} As Berry notes, Ohio adheres to the rule that “a prevailing party in a civil action may not recover attorney fees as a part of the costs of litigation.” Wilborn v. Bank One Corp., 121 Ohio St.3d 546, 2009-Ohio-306, 906 N.E.2d 396, at ¶7. However, attorney fees are allowed as compensatory damages when the fees are incurred as a direct result of the breach of a settlement agreement. See Raymond J. Schaefer, Inc. v. Pytlik, 6th Dist. No. OT-09-026, 2010-Ohio-4714, ¶34; Tejada-Hercules v. State Auto. Ins. Co., 10th Dist. No. 08AP-150, 2008-Ohio-5066, ¶10. The rationale behind the exception for allowing attorney fees expended as a result of enforcing a settlement agreement is that “any fees incurred after the breach of the settlement agreement were relevant to the
{¶ 19} The legal fees awarded in this case were the measure of compensatory damages directly related to Wachovia‘s need to enforce the settlement agreement. The court did not err by awarding Wachovia its attorney fees as compensatory damages.
IV
{¶ 20} Berry‘s primary argument, raised in various assignments of error, is that the jury‘s finding that a contract existed between him and Wachovia relating to the payment of Merrill Lynch is against the manifest weight of evidence.
{¶ 21} It is a basic principle of appellate review that judgments supported by competent, credible evidence going to all the material elements of a case must not be reversed as against the manifest weight of the evidence. C.E. Morris Co. v. Foley Constr. Co. (1978), 54 Ohio St.2d 279, 376 N.E.2d 578, syllabus; Gerijo, Inc. v. Fairfield, 70 Ohio St.3d 223, 226, 1994-Ohio-432, 638 N.E.2d 533. We therefore indulge every reasonable presumption in favor of the trial court‘s judgment, Season‘s Coal Co. v. Cleveland (1984), 10 Ohio St.3d 77, 80, 461 N.E.2d 1273, and to the extent that the evidence is susceptible to more than one interpretation, we construe it consistently with the jury‘s verdict. Ross v. Ross (1980), 64 Ohio St.2d 203, 414 N.E.2d 426.
{¶ 22} Berry premised his complaint on two grounds: (1) that the Wachovia branch manager who recruited Berry told him that Wachovia “would take care of
{¶ 23} The evidence conflicted on whether Wachovia would indemnify Berry in the event he received an adverse arbitration ruling. Wachovia‘s branch manager recalled that at the time he recruited Berry, he offered to pay Berry‘s legal expenses, but had no recollection that he had agreed to pay for any damages. And the attorney who represented Wachovia in the arbitration said that when preparing the Berrys for their testimony in the arbitration, they told him that Wachovia “had not agreed to pay them for any awards.” On the other hand, Berry‘s wife (who herself was recruited by Wachovia from Merrill Lynch and was a party to the arbitration), testified at the arbitration hearing that Wachovia had not used the word “indemnify” with her, but also said that even though she had no discussion with Wachovia about indemnification, she understood from industry practice that Wachovia would pay any arbitration awards.
{¶ 24} Berry points to testimony from both parties that firms in the financial services industry that recruited a broker from another firm would typically pay both legal fees and damages associated with any claims based on that recruitment. With that practice in mind, he takes Wachovia‘s silence on the issue of indemnity as a proof that it intended to adhere to the industry practice of reimbursing any damages awarded against
{¶ 25} What is merely “typical” or “practice” in a heavily-regulated field like the financial services industry is not necessarily binding in the absence of a specific rule or regulation. To be binding, an industry custom must be so well known, uniform, long established, and generally acquiesced in as to induce a belief that the parties contracted with reference to it, nothing appearing in their contract to the contrary. See, e.g., Fidelity Mtge. v. Bruno Airport Industry (Dec. 10, 1981), 2d Dist. No. 1544, citing Restatement of the Law 2d, Contracts (1981), Section 221.
{¶ 26} Although Wachovia‘s in-house attorney acknowledged the “normal” practice whereby an investment firm would make a recruit whole for any arbitration award stemming from that recruitment, he testified that Wachovia would not make any promises to indemnify recruited brokers during the recruitment stage. Such a promise, said in-house counsel, could expose Wachovia to potential liability for interfering with business relations. The attorney who represented Wachovia at the arbitration agreed, noting that in preparation for the arbitration, he specifically asked the Berrys whether Wachovia agreed to indemnify them in order to prepare for a possible line of questioning from Merrill Lynch. He said he did so because a promise of indemnity by Wachovia could have raised the spectre of interference with a contract resulting from Wachovia‘s recruitment of the Berrys. So even though Wachovia might “normally” make a broker
{¶ 27} Berry cites to evidence showing that two other employers recruited by Wachovia were promised that Wachovia would reimburse them for any arbitration award entered against them stemming from their recruitment. This evidence actually supports the jury‘s verdict because it shows that if Wachovia had the intention to reimburse Berry, it would have told him that from the outset. To the extent that Wachovia did reimburse some brokers that it recruited but not Berry, suggests that Wachovia did not adhere to any industry practice — not that it deliberately ignored the practice only in this case. Wachovia‘s in-house counsel testified that most cases involving the recruitment of brokers ended with a settlement prior to arbitration and that Wachovia would pay the settlement. But paying to settle an arbitration before the fact is not the same as paying an after-the-fact arbitration award where the broker is found personally liable for the award. So to the extent that Wachovia paid an arbitration claim for other employees does not establish a binding practice that could be applied to Berry‘s case.
{¶ 28} Other evidence supports the conclusion that Wachovia had no understanding that it would reimburse Berry for all of the Merrill Lynch arbitration award. At the close of the arbitration, the Wachovia branch manager spoke with the attorney who represented Wachovia at the arbitration, saying that Berry made a demand
{¶ 29} The jury also heard evidence from which it could conclude that Berry agreed to turn over the $125,000 he received from Merrill Lynch in consideration of Wachovia‘s $250,000 payment to Merrill Lynch. A few weeks after the arbitration award, the branch manager sent in-house counsel an email stating that Berry was “very appreciative of our settlement to [sic] $125,000.” A later email from the arbitration attorney recounted how he had spoken with Berry‘s arbitration attorney over the logistics of handling the various awards, stating that Berry‘s attorney had the “understanding that [Wachovia] has agreed to pay half the award against the brokers.” When Berry turned over his Merrill Lynch check to Wachovia, the branch manager noted, “this is the $125,000 check for the Spencer/Berry settlement.”
{¶ 31} The jury could find the totality of the evidence credibly established that Wachovia understood that it would pay the $250,000 Merrill Lynch award as a courtesy to Berry, but that Berry would remit the $125,000 he received from Merrill Lynch. The jury could also find that the parties did not have an agreement to adhere to any industry practice of reimbursement. It follows that the jury‘s verdict was not against the manifest weight of the evidence and that the court did not err by refusing to grant judgment notwithstanding the verdict or a new trial on the same grounds.
V
{¶ 32} The jury awarded Wachovia attorney fees totaling $432,000. Berry complains that Wachovia only presented evidence that it had expended $133,691 in
{¶ 33} In its closing argument, Wachovia asked the jury to “return an award *** for $133,691 which is the amount of the fees and expenses we‘ve incurred in defending the case.” This amount was supported by billing statements and Berry does not question either the hourly rate charged by Wachovia‘s attorneys or the number of hours worked.
{¶ 34} During its deliberations, the jury asked the court: “are we able to award more to the defense above the requested legal fees?” and “can the defense get punitive damages?” When considering the questions, the court noted that there had been no claim for punitive damages. It also told the parties that “[Wachovia] certainly can‘t get more than the requested legal fees, so that‘s the answer to that.” The jury awarded $432,000.
{¶ 35} In response to Berry‘s motion for judgment notwithstanding the verdict on the issue of attorney fees, Wachovia argued that the $133,691 it asked for at trial reflected only the fees and costs up to the second day of trial and that the jury knew that “additional fees and expenses would be incurred” based on testimony that there had been “time that hasn‘t been billed yet.” It claimed that by the close of trial, its attorney fees were $163,758. Including post-trial motion practice, the total amount rose to $171,268.
{¶ 36} In a contract case, the general measure of damages is the amount necessary to place the nonbreaching party in the position it would have been in had the breaching
{¶ 37} Berry argues that the jury‘s desire to impose more damages than had been proven, along with its request to impose punitive damages even though they were not requested, shows that it was prejudiced against him.
{¶ 38}
{¶ 39} Although the damages awarded were excessive in relation to that requested and proven at trial, we are unable to conclude that they were so grossly disproportionate as to shock sensibilities and require a new trial. It may be an understatement to say that the jury did not take a liking to Berry‘s position in this case — its desire to award punitive damages was proof enough of its enmity toward him. But it is important in a case like this to differentiate damages from liability. As we have recounted, there was more than enough competent, credible evidence to support the jury‘s finding that Berry breached his settlement agreement with Wachovia. We are confident that any prejudice shown by the jury‘s damages award did not influence its finding that Berry breached the agreement. The court did not err by refusing to order a new trial on liability grounds.
{¶ 40} We therefore sustain this assignment of error in part on grounds that Wachovia failed to offer evidence sufficient to justify the amount of damages awarded by the jury. The damage award is modified to $133,691 — the amount of damages that Wachovia requested and proved at trial.
Judgment affirmed, as modified.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the Cuyahoga County Court of Common Pleas to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure.
MELODY J. STEWART, JUDGE
PATRICIA ANN BLACKMON, P.J., and
FRANK D. CELEBREZZE, JR., J., CONCUR