CARNEGIE COMPANIES, INC. v. SUMMIT PROPERTIES, INC., et al.
C.A. No. 25622
IN THE COURT OF APPEALS NINTH JUDICIAL DISTRICT
March 28, 2012
2012-Ohio-1324
CARR, Presiding Judge.
STATE OF OHIO, COUNTY OF SUMMIT ss: APPEAL FROM JUDGMENT ENTERED IN THE COURT OF COMMON PLEAS COUNTY OF SUMMIT, OHIO CASE No. CV 2008 02 1852
DECISION AND JOURNAL ENTRY
Dated: March 28, 2012
CARR, Presiding Judge.
{1} Appellant, Summit Properties (“Summit“), appeals the judgment of the Summit County Court of Common Pleas, which ordered it to pay the attorney fees for appellee, Carnegie Companies, Inc. (“Carnegie“), in its prosecution of its motion to disqualify counsel. This Court affirms.
I.
{2} Carnegie and Summit sued one another over issues arising out of a land deal. Before the trial court had the opportunity to address any substantive issues underlying the complaint and counterclaim, Carnegie filed a motion to disqualify opposing cоunsel in which it further requested an award of attorney fees. After an evidentiary hearing, the trial court granted the motion to disqualify and determined that Carnegie was entitled to an award of attorney fees based on bad faith demonstrated by the law firm of Ulmer & Berne, L.L.P. Summit appealed. This Court affirmed the trial court‘s order disqualifying Ulmer & Berne. Carnegie Cos., Inc. v. Summit Properties, Inc., 183 Ohio App.3d 770, 2009-Ohio-4655 (9th Dist.). We dismissed the appeal in part for lack of a final, appealable order, however, inasmuch as it challenged the award of attorney fees in the absence of а specific monetary award. Id.
{3} While the appeal was pending, Carnegie moved this Court for an award of appellate attorney fees and costs pursuant to
{4} Subsequently, Carnegie moved the trial court for a hearing on the amount of the award of attorney fees to which the trial court determined it was entitled based on Ulmer & Berne‘s bad faith. Summit opposed the motion, arguing that the issue of attorney fees was moot pursuant to the law of the case doctrine. Carnegie filed a reply in support of its motion and Summit filed a sur-reply.
{5} On February 25, 2010, the parties filed a joint stipulation of partial dismissal, dismissing the underlying substantive claims, preserving only the issue of the award of attorney fees for further trial court consideration. On August 30, 2010, the parties filed a joint stipulation as to the reasonableness of the amount of attorney fees and expenses expended by Carnegie to prosecute its motion for disqualification. The stipulаtion expressly reserved unto Summit the right to appeal the trial court‘s finding of sanctionable misconduct in its November 26, 2008
{6} On September 3, 2010, Carnegie moved the trial court for entry of judgment in its favor, asserting that it was entitled to an award of attorney fees and expenses pursuant to the November 26, 2008 order in the amount to which the parties had stipulated. Summit quickly filed a memorandum in oppositiоn, asserting that the parties’ stipulation as to the reasonableness of the amount of attorney fees and expenses expended by Carnegie did not constitute a concession by Summit that Carnegie was legally entitled to such an award. On September 21, 2010, the trial court issued an order granting judgment in favor of Carnegie against Summit and Ulmer & Berne, jointly and severally, in the stipulated amount of $79,856.26. Summit has appealed, raising three assignments of error for review.
II.
ASSIGNMENT OF ERROR I
THE TRIAL COURT ERRED TO THE PREJUDICE OF SUMMIT AND ULMER BY FINDING “BAD FAITH” ON THE PART OF ULMER IN FAILING TO VOLUNTARILY WITHDRAW FROM THE REPRESENTATION OF SUMMIT IN CASE NO. CV 2008 02 1852 SINCE NO CLAIM OF “BAD FAITH” WAS MADE BY CARNEGIE PRIOR TO THE COURT‘S DETERMINATION.
{7} Summit argues that the trial court erred by awarding attorney feеs to Carnegie on the basis of Ulmer & Berne‘s bad faith because Carnegie did not make a claim of bad faith and Summit, therefore, did not have notice of the need to defend against such a claim. This Court declines to address the substantive merits of this argument because Summit failed to raise the issue below.
When reviewing arguments on appeal, this Court cannot consider issues that are raised for the first time on appeal. The Ohio Supreme Court has stated that other than issues of subject matter jurisdiction, “reviewing courts do not consider questions not presented to the court whose judgment is sought to be reversed.” Goldberg v. Indus. Comm., 131 Ohio St. 399, 404 (1936). It is well established that “an appellate court need not consider an error which a party complaining of the trial court‘s judgment could have called, but did not call, to the trial court‘s attention at a time when such error could have been avoided or corrected by the trial court.” State v. Williams, 51 Ohio St.2d 112, 117 (1997).
Harris v. Akron, 9th Dist. No. 24499, 2009-Ohio-3865, ¶ 9.
{9} Here, once this Court disposed of Summit‘s first appeal, the trial court regained jurisdiction over the case. We clearly stated that the issue of the propriety of an award of attorney fees and expense for legal work performed on behalf of Carnegie in the prosecution of its motion for disqualification before the trial court was not final. Carnegie, 2009-Ohio-4655, at ¶ 19 and 65. Accordingly, the November 26, 2008 order finding bad faith by Ulmer & Berne and granting an award of attorney fees was merely interlocutory and the trial court was free to reconsider or modify it. Simkanin v. Simkanin, 9th Dist. No. 22719, 2006-Ohio-762, ¶ 7 (recognizing that
{10} Although Summit continued to oppose the entry of an award of attorney fees for Carnegie after the resolution of the first appeal, it did so only on the basis of arguments that such an award was barred by the law of the case doctrine and that the evidence did not support a finding of bad faith. Summit never opposed the entry of such an award for the reason that it had no notice of the need to defend against a claim of bad faith. By failing to raise any argument before the trial court that Carnegie had failed to allege bad faith so that Summit had no notice of its need to defend against such a claim, Summit forfeited its right to raise this argument for the
ASSIGNMENT OF ERROR II
THE TRIAL COURT ERRED TO THE PREJUDICE OF SUMMIT AND ULMER BY FAILING TO FOLLOW THE LAW OF THE CASE.
{11} Summit argues that the trial court erred by awarding attorney fees and expenses to Carnegie based on the law of the case doctrine. This Court disagrees.
{12} “The law of the case doctrine ‘provides that the decision of a reviewing cоurt in a case remains the law of that case on the legal questions involved for all subsequent proceedings in the case at both the trial and reviewing levels.‘” Neiswinter v. Nationwide Mut. Fire Ins. Co., 9th Dist. No. 23648, 2008-Ohio-37, ¶ 10, quoting Nolan v. Nolan, 11 Ohio St.3d 1, 3 (1984). Ultimately, “the doctrine of law of the case precludes a litigant from attempting to rely on arguments at a retrial which were fully pursued, or available to be pursued, in a first appeal. New arguments are subject to issue preclusion, and are barred.” Hubbard ex rel. Creed v. Sauline, 74 Ohio St.3d 402, 404-405 (1996).
{13} Summit argues that this Court‘s order denying Carnegie‘s request for appellate attorney fees is dispositive of the issue of whether Carnegie is entitled to attorney fees for work performed in the trial court in the prosecution of its motion for disqualification. Summit attempts to bolster its argument by asserting that the issue of Carnegie‘s entitlement to attorney fees was fully resolved in appellate case number 24553 because this Court declined to find that Summit‘s first appeal was frivolous.
{14} The parties expended great time and effort to address an issue that is quite simple. This Court declined to address the substantive merits оf the issue of Carnegie‘s entitlement to an
ASSIGNMENT OF ERROR III
THE DECISION THAT ULMER ACTED WITH DISHONEST PURPOSE, MORAL OBLIQUITY, CONSCIOUS WRONGDOING OR FRAUDULENT MOTIVE IS AGAINST THE MANIFEST WEIGHT OF THE EVIDENCE. THE TRIAL COURT THUS ERRED TO THE PREJUDICE OF SUMMIT AND ULMER.
{15} Summit argues that the trial court‘s finding that Ulmer & Berne acted in bad faith is against the manifest weight of the evidence. This Court disagrees.
{16} In determining whether the trial court‘s decision is or is not supported by the manifest weight of the evidence, this Court applies the civil manifest weight of the evidence standard set forth in C.E. Morris Co. v. Foley Const. Co., 54 Ohio St.2d 279 (1978), syllabus, which holds: “Judgments supported by some competent, credible evidence going to all the essential elements of the case will not be reversed by a reviewing court as being agаinst the manifest weight of the evidence.” The Ohio Supreme Court has clarified that:
[W]hen reviewing a judgment under a manifest-weight-of-the-evidence standard, a court has an obligation to presume that the findings of the trier of fact are correct. Seasons Coal Co., Inc. v. Cleveland, 10 Ohio St.3d 77, 80-81 (1984). This presumption arises because the trial judge had the opportunity “to view the witnesses and observe their demeanor, gestures and voice inflections, and use these observations in weighing the credibility of the proffered testimony.” Id. at 80. “A reviewing court should not reversе a decision simply because it holds a different opinion concerning the credibility of the witnesses and evidence submitted before the trial court. A finding of an error in law is a legitimate ground for reversal, but a difference of opinion on credibility of witnesses and evidence is not.” Id. at 81.
State v. Wilson, 113 Ohio St.3d 382, 2007-Ohio-2202, ¶ 24.
{17} A finding of bad faith must be predicated upon a finding that Ulmer & Berne acted in a manner evidencing more than mere bad judgment or negligence; rather, the attorneys must have acted with a dishonest purpose, moral obliquity, consciоus wrongdoing, an actual intent to mislead or deceive, or in breach of a known duty premised on an ulterior motive or ill will in the nature of fraud. Hoskins v. Aetna Life Ins. Co., 6 Ohio St.3d 272, 276 (1983). Accord State v. Whalen, 9th Dist. No. 08CA009317, 2008-Ohio-6739, ¶ 9.
{18} This Court has thoroughly set out the factual and procedural background in our prior decision. Carnegie, 2009-Ohio-4655, at ¶ 2-15. For context, we briefly restate the relevant background.
{19} Carnegie had used the legal services of Ulmer & Berne in regard to environmental matters arising out of properties in which it had an interest since 1994. In June 2007, Carnegie contacted Ulmer & Berne regarding an environmental concern arising out of its interest in acquiring a рroperty referred to as the Frontier Shopping Center. Bob Karl of Ulmer & Berne reviewed some documents for Carnegie at that time and informed Carnegie that he would need additional information before reaching a conclusion. Ulmer & Berne sent a bill to Carnegie for that discussion. In early February 2008, Carnegie sent the additional information to Mr. Karl in
{20} Summit owned an office building in Twinsburg, Ohio. In August 2007, Paul Pesses, prеsident of Carnegie, contacted Stuart Laven, an Ulmer & Berne attorney who was representing Summit in regard to the potential sale of that property. Summit and Carnegie entered into a contract for the sale of the property, but Carnegie later rescinded the agreement and demanded the return of its earnest money. In February 2008, after Summit refused, Carnegie sued Summit and Summit counterclaimed alleging, in part, fraud. Carnegie was represented by attorneys from the law firm of Miller Goler Faeges LLP, while Mr. Lavеn of Ulmer & Berne continued to represent Summit. Attorneys from Miller Goler spoke several times with attorneys from Ulmer & Berne, informing them of the conflict of interest created by that firm‘s concurrent representation of both Carnegie and Summit, and requesting their voluntary withdrawal. Miller Goler followed up with a letter demanding Ulmer & Berne‘s voluntary withdrawal from further representation, but Ulmer & Berne refused. Carnegie then formally moved for disqualification of Ulmer & Berne because its attorneys were continuing to represent Carnegie in the Frontier matter while representing Summit in a matter directly adverse to Carnegie. The trial court disqualified Ulmer & Berne from further representation of Summit in this matter, and this Court affirmed.
{21} The trial court premised its finding that Ulmer & Berne acted in bad faith in refusing to withdraw on the following preliminary findings. The existence of a conflict of interest in Ulmer & Berne‘s representation of both Carnegie and Summit “was readily apparent” even before Carnegie formally raised the issue by filing its motion for disqualification. Once aware of the conflict of interest, Ulmer & Berne took action to ensure that there was no internal
{22} This Court concludes that a law firm that is aware it is representing a client in a matter which is directly adverse to the interests of another of its current clients, yet appears to act to conceal evidence of the adverse representation, is acting with a dishonest purpose, conscious wrongdoing, and in breach of a known duty premised on an ulterior motive. A refusal to withdraw from representation of a seemingly more important or lucrative client under such circumstances evidences an ulterior motive to put firm revenue and/or prestige above the interests of other clients. We further conclude that a firm which is aware of its representation of directly adverse clients in separate matters, yet seeks a waiver of the conflict directly from one client despite the firm‘s knowledge that the client is represented by counsel from another firm, is acting in bad faith. By bypassing opposing counsel, the firm acts with a dishonest purpose,
{23} In our prior decision, this Court has already concluded that the manifest weight of the evidence supports the trial court‘s determination that Ulmer & Berne had an existing attorney-client relationship with Carnegie prior to that firm‘s representation of Summit in the Carnegie-Summit matter. Carnegie, 2009-Ohio-4655, ¶ 29. Moreover, we concluded that Ulmer & Berne did not do anything to terminate its relationship with Carnegie before it commenced its representation of Summit against Carnegie in the Twinsburg property matter. Id.
{24} At the hearing, Michael Goler of Miller Goler testified that he has been generаl primary counsel for Carnegie since 1994, although he knew that Carnegie uses other law firms for various specific legal matters. He testified that he had a conversation with Mr. Laven on January 22, 2008, to make him aware that Ulmer & Berne had a conflict of interest in representing Summit against Carnegie because of Ulmer & Berne‘s current representation of Carnegie in a separate matter. Mr. Goler testified that he spoke with Mr. Laven several times regarding the conflict of interest and that, “despite many diffеrent attempts” over several months to get Ulmer & Berne to voluntarily withdraw from further representation of Summit, Ulmer & Berne refused. Mr. Goler testified that he initially raised the issue privately, in a low key manner, so as to avoid the expense of litigating the issue of disqualification and avoid the potential embarrassment to Ulmer & Berne.
{26} Mr. Pesses testified that Ulmer & Berne first notified him in mid-April 2008, that there might be a problem or conflict of interеst with regard to the firm‘s representation of Carnegie. He testified that Mr. Karl called him between April 11 and 14, 2008, to suggest that he would like Carnegie to sign a conflict waiver before Mr. Karl performed any additional work on the Frontier matter. Mr. Pesses testified that Ulmer & Berne‘s ethic attorney, Mr. Schulz, left a voice mail message for him on April 15, 2008, regarding the conflict waiver notwithstanding Ulmer & Berne‘s knowledge that Miller Goler was representing Carnegie in the Summit matter. Mr. Schulz left his message for Mr. Pesses after Ulmer & Berne would have received Ms. Michelson‘s letter demanding Ulmer & Berne‘s withdrawal from representation of Summit. Mr. Pesses testified that he felt “violated” by Ulmer & Berne‘s actions, specifically the firm‘s attempt to obtain his conflict waiver so the firm could continue to represent Carnegie in the Frontier matter while the firm at the same time was accusing Carnegie of fraud in the Carnegie-Summit matter. Mr. Pesses admitted that he knew Ulmer & Berne ran a conflict check in regard to the Frontier matter, but he testified that Mr. Karl informed him that the check was оnly run on the sellers of the Frontier property, not on Carnegie.
{28} Although he testified that he alerted the firm‘s ethics attorney and Mr. Laven as soon as he became aware of a potential conflict based on the firm‘s new business reports, Mr. Karl admitted that he did not try to contact Mr. Pesses until April 11, 2008, when he left a message indicating he would need Carnegie to execute a conflict waiver so he could continue working on the Frontier matter. He denied knowing anything about Miller Goler‘s April 9, 2008 letter to Ulmer & Berne informing the firm that Carnegie would never waive a conflict and that it was demanding that the firm withdraw from further representation of Summit in the Carnegie-Summit matter.
{30} Mr. Laven testified that he did not bother to run a conflict check on the Carnegie-Summit matter until mid-December 2007, when the deal fell apart. He testified that he only runs a conflict check if he is involved in a “substantial” matter where the parties will be adverse. Before the “controversy erupted” on December 17, 2007, Mr. Laven worked on and billed for the Carnegie-Summit matter under the “constantly open file” for Summit, which he always uses before a case becomes “a real significant matter.” He conceded that other attorneys at the firm would not know about Ulmer & Berne‘s involvement with a client unless a new file is opened. He admitted he did not open the new file until March 3, 2008.
{31} Mr. Laven testified that he saw that Mr. Karl had opened a new file on Carnegie in March 2008. He further testified that he responded to Miller Goler‘s April 9, 2008 letter demanding Ulmer & Berne‘s withdrawal from representation of Summit in the Carnegie-Summit matter by asking Miller Goler to identify the specific open matter and specific attorneys at Ulmer
{32} Based on our review of the reсord, there was competent, credible evidence to support the trial court‘s finding that Ulmer & Berne acted in bad faith in failing to voluntarily withdraw from its representation of Summit in the Carnegie-Summit matter. Both Mr. Karl and Mr. Laven delayed opening new matters when they began representing Carnegie and Summit, respectively, despite previous discussions indicating they were aware of each other‘s involvement with those clients. Both knew of the other‘s involvement with their respective clients but failed to acknowledge the conflict situation, even after Miller Goler made several informal attempts to get Ulmer & Berne to voluntarily withdraw. Instead, two attorneys from Ulmer & Berne, including the firm‘s ethics attorney, contacted the president of Carnegie directly, bypassing Carnegie‘s counsel of record from Miller Goler, in efforts to obtain a conflict waiver so Ulmer & Berne could continue to represent Summit.
{33} The trial court was is the best position to judge the credibility of the witnesses. Seasons Coal Co., Inc., 10 Ohio St.3d 77 at 80. It declined to believe Mr. Laven‘s testimony that he did not open a new Summit matter becausе he believed the Carnegie-Summit matter would be resolved easily. There is competent, credible evidence to demonstrate that Mr. Laven delayed opening a new Summit file because he wished to continue representing Summit although he was aware that there was a conflict situation. The trial court further declined to believe Mr. Karl‘s testimony that he did not recognize Carnegie as a current client. There was competent, credible evidence to demonstrate that Mr. Laven inquired regarding Carnegie, that Mr. Karl denied
III.
{34} Summit‘s assignments of error are overruled. The judgment of the Summit County Court of Common Pleas is affirmed.
Judgment affirmed.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy of this journal entry shall constitute the mandate, pursuant to
Immediately upon the filing hereof, this document shall constitute the journal entry of judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the period for review shall begin to run.
DONNA J. CARR
FOR THE COURT
MOORE, J.
WHITMORE, J.
CONCUR
APPEARANCES:
ORVILLE L. REED, III, Attorney at Law, for Appellant.
JAMES A. DEROCHE, Attorney at Law, for Appellant.
DEBORAH MICHELSON, Attorney at Law, for Appellee.
