J&B FLEET INDUSTRIAL SUPPLY, INC. v. RICK MILLER
CASE NO. 09 MA 173
STATE OF OHIO, MAHONING COUNTY IN THE COURT OF APPEALS SEVENTH DISTRICT
June 16, 2011
[Cite as J&B Fleet Indus. Supply, Inc. v. Miller, 2011-Ohio-3165.]
Hon. Mary DeGenaro, Hon. Gene Donofrio, Hon. Joseph J. Vukovich
CHARACTER OF PROCEEDINGS: Civil Appeal from Common Pleas Court, Case No. 08 CV 1591. JUDGMENT: Affirmed.
For Plaintiff-Appellant: Attorney Kenneth Cardinal, 758 North 15th Street, P.O. Box 207, Sebring, OH 44672
For Defendant-Appellee: Attorney Dennis Haines, Attorney Charles Oldfield, Green, Haines, Sgambati, Co., LPA, 16 Wick Avenue, Suite 400, Youngstown, OH 44501-0849
{¶1} Plaintiff-Appellant, J&B Fleet Industrial Supply, Inc. appeals the decision of the Mahoning County Court of Common Pleas overruling objections to a magistrate‘s decision and granting summary judgment in favor of Defendant-Appellee, Rick Miller in a suit for breach of contract, injunctive relief and fraud. J&B argues the trial court erred by concluding that J&B‘s contract-based claims against Miller were discharged in bankruptcy and by improperly limiting discovery. Finally, J&B argues there were genuine issues of material fact precluding summary judgment on its fraud claim, and that it pleaded the fraud claim with sufficient particularity. For the following reasons, J&B‘s assignments of error are meritless, and accordingly, the judgment of the trial court is affirmed.
Facts and Procedural History
{¶2} J&B is a corporation that supplies sundry products to commercial and industrial markets. Miller was employed by J&B as a sales agent. Prior to that, Miller worked in sales and marketing for J&B‘s competitors, where he gained expertise in the industry.
{¶3} On March 23, 2003, Miller and J&B entered into an “Independent Sales and Marketing Agreement” which had a stated term of twenty years. Among other things, Miller agreed to terminate his employment relationship with J&B and instead become an independent distributor. J&B agreed to permit Miller to use the J&B logo, signage, catalogs, and business accounts for banking purposes. J&B agreed to extend to Miller a $10,000.00 line of credit, which was secured by Miller‘s “funded account,” the retainage held by J&B from Miller‘s sales commissions when Miller was employed as a J&B sales agent. The Agreement also contained a non-compete clause which purported to limit Miller‘s right to compete with J&B for the duration of the contract and for an additional 20 years. The non-compete clause allowed J&B to conduct business in 87 out of 88 of Ohio‘s counties. It provided Miller with exclusive rights only to Franklin County, but permitted J&B to retain some existing customers. The non-compete clause further prohibited Miller from competing with J&B in 56 Ohio counties, including Stark, where Miller resides, and counties surrounding Stark.
{¶5} According to Miller, he informed J&B owner and president Louis W. diDonato1 about his bankruptcy filing. Miller also averred he had discussions with diDonato about the bankruptcy, both before he filed, and during the course of the bankruptcy proceedings. diDonato admitted that he was aware of Miller‘s financial problems, stating: “Miller did inform me that he was or would be seeking a divorce and he had debts. He expressed that he may have to file bankruptcy to rid himself of marital and personal debts. I cannot recall if he told me before March or after March, 2003.”
{¶6} Following Miller‘s bankruptcy discharge, Miller continued to perform his obligations under the Agreement. Miller did not notify J&B of the discharge. However, Miller never entered into a reaffirmation agreement with J&B.
{¶7} J&B filed a complaint against Miller for breach of contract and injunctive relief. J&B claimed that Miller breached the non-compete clause by conducting business in competition with J&B in areas prohibited by the Agreement. J&B requested that Miller be enjoined from continuing to breach the non-compete clause and prayed for damages for the breach. J&B attached an affidavit from diDonato in support of the request for an injunction.
{¶8} Miller answered and counterclaimed for fraud and breach of contract. Specifically, Miller claimed that J&B had committed fraud by failing to disclose all of its accounts as provided in the Agreement, and that Miller had relied on J&B‘s alleged misrepresentations and had been damaged therefrom. Miller also alleged that J&B had breached the non-compete clause by competing with Miller in Franklin County in contravention of the Agreement. Miler also requested an injunction prohibiting J&B from breaching the non-compete.
{¶9} In an August 5, 2008 decision, the magistrate issued a preliminary injunction, preventing both parties from breaching the non-compete clause. No objections were filed and the trial court adopted the decision.
{¶11} On March 18, 2009, the magistrate issued an order granting both parties leave to amend their pleadings. The magistrate set deadlines for filing summary judgment motions. Finally, the magistrate ruled that pending a ruling on the motion for summary judgment discovery is stayed except relating to: (1) Miller‘s affirmative defense of discharge in bankruptcy; (2) J&B‘s contention that a contract between the parties existed after the bankruptcy; and (3) violations of the court‘s previous orders.
{¶12} J&B never moved to set aside this order. Instead, despite the directives of that order, on March 20, 2009, J&B filed a motion to compel discovery. As noted in the record, this motion was improperly served on Miller‘s prior counsel. The trial court never ruled on the motion to compel.
{¶13} On March 27, 2009, the magistrate issued an amended magistrate‘s order, which was substantially the same as the March 18 order, except that it corrected misidentification of the parties and errors with dates. J&B never moved to set aside this order.
{¶14} On March 26, 2009, Miller filed an amended answer and counterclaim, in which he added the affirmative defense of discharge in bankruptcy. On April 10, 2009, J&B filed an amended complaint which added claims for fraud and estoppel, in addition to the claims for breach of contract and injunctive relief. Miller filed an answer to the amended complaint.
{¶15} Miller filed a motion for summary judgment on April 24, 2009 with regard to J&B‘s claims against him, arguing J&B‘s claims for breach оf contract and injunctive relief had been discharged in bankruptcy. Alternatively, Miller argued that the non-compete
{¶16} J&B filed a brief in opposition raising four arguments. First, J&B argued that its breach of contract and injunctive relief claims could not be barred by the bankruptcy discharge because Miller had waived the use of that defense by counterclaiming for breach of contract. Second, its claim for injunctive relief is non-dischargeable as it was a separate and distinct remedy under the Agreement which arose post-bankruptcy. Third, the non-compete clause was reasonable, and that the law cited by Miller with regard to the non-compete was inapplicable because the covenant was not made in an employment context. Fourth, there were genuine issues of material fact remaining regarding its fraud claim. J&B attached seven exhibits, five of which were pleadings contained in the record. The other two were an affidavit from diDonato and a copy of the Agreement.
{¶17} On June 12, 2009, the magistrate issued a two-sentence decision granting summary judgment against J&B for all of its claims against Miller. J&B filed a request for findings of fact and conclusions of law. Miller filed a motion to strike that request, claiming that findings of fact and conclusions of law are inappropriate where litigation has been terminated by summary judgment. The magistrate overruled Miller‘s motion to strike and ordered Miller tо submit proposed findings of fact and conclusions of law.
{¶18} On August 11, 2009, the magistrate issued a lengthier decision concluding that the bankruptcy discharge barred the claims for breach of contract and injunctive relief, and even if the claims were not barred, the non-compete was unreasonable and unenforceable. Finally, the magistrate found there were no genuine issues of material fact regarding the fraud and estoppel claims.
{¶19} J&B filed objections to the magistrate‘s decision which the trial court overruled, adopting the magistrate‘s decision in its entirety, and entering judgment for Miller on J&B‘s amended complaint.
{¶20} For ease of analysis, J&B‘s seven assignments of error will be addressed out of order and will be grouped together by subject matter. In its fourth and fifth assignments of error, J&B contends:
{¶21} “The trial court erred in issuing a stay of full discovery which would establish the reasonableness of the mutual non-сompete clause which each sought to enforce by injunctive relief in the respective pleadings.”
{¶22} “The trial court erred by terminating pre-trial discovery regarding fundamental issues in the litigation based solely upon an affirmative defense in order to expedite the conclusion of the case.”
{¶23} J&B specifically takes issue with two magistrate‘s orders, one dated March 18, 2009 and the other March 27, 2009. Substantively, both orders are the same in that they granted both parties leave to amend pleadings and file motions for summary judgment. Both orders include the following language:
{¶24} “Pending a decision on the motion for summary judgment, discovery herein is stayed, except that discovery relating to the following:
{¶25} “1.) Defendant‘s affirmative defense of discharge in bankruptcy.
{¶26} “2.) Plaintiff‘s contention that a contract between the parties existed after the bankruptcy;
{¶27} “3.) Violations of this Court‘s previous Order.”
{¶28} The only changes to the March 27, 2009 order (which was labeled “Amended Magistrate‘s Order“) involved correcting typographical errors regarding dates and party names (i.e., changing “plaintiff” to “defendant.“)
{¶29} J&B argues these orders prevented further discovery regarding the reasonableness of the non-compete clause, and the limited scope contravenes the Civil Rules, which provide for liberal discovery on “any matter, not privileged, which is relevant to the subject matter involved in the pending action.”
{¶31} “Any party may file a motion with the court to set aside a magistrate‘s order. The motion shall state the moving party‘s reasons with particularity and shall be filed not later than ten days after the magistrate‘s order is filed. The pendency of a motion to set aside does not stay the effectiveness of the magistrate‘s order, though the magistrate or the court may by order stay the effectiveness of a magistrate‘s order.”
{¶32} If a party does not move to set aside a magistrate‘s order, that party waives a challenge to that order on appeal. Nettle v. Nettle, 9th Dist. No. 25001, 2010-Ohio-4638, at ¶13, citing Crawford, supra. See, also, Spier v. Spier, 7th Dist. No. 05 MA 26, 2006-Ohio-1289, at ¶55-57 (discussing a prior version of
{¶33} Moreover, J&B never moved for additional time to complete discovery pursuant to
{¶34}
{¶35} J&B argues that Exhibit F of its Brief in Opposition to Summary Judgment, an affidavit from diDonato, was its attempt to comply with
{¶36} Because J&B failed to move to set aside the magistrate‘s discovery orders, and because it failed to avail itself of the procedures contained in
Summary Judgment due to Bankruptcy Discharge
{¶37} J&B‘s first, second and third assignments of error assert:
{¶38} “The trial court erred in granting summary judgment based upon Appellee‘s certification of discharge in bankruptcy because there continues to exist a genuine issue of fact as to the effectiveness of said discharge to the Appellee/Defendant‘s indebtedness to this Appellant.”
{¶39} “Plaintiff/Appellant‘s claims for relief are not barred by Appellee‘s 2003 bankruptcy discharge since Appellee counterclaimed for breach and injunctive relief thereby waiving the effectiveness of this affirmative defense.”
{¶41} An appellate court reviеws a trial court‘s summary judgment decision de novo, applying the same standard used by the trial court. Ohio Govt. Risk Mgt. Plan v. Harrison, 115 Ohio St.3d 241, 2007-Ohio-4948, 874 N.E.2d 1155, at ¶5. A motion for summary judgment is properly granted if the court, viewing the evidence in a light most favorable to the party against whom the motion is made, determines that: (1) there are no genuine issues as to any material facts; (2) the movant is entitled to a judgment as a matter of law; and (3) the evidence is such that reasonable minds can come to but one conclusion and that conclusion is adverse to the opposing party.
Effectiveness of Bankruptcy Discharge
{¶42} J&B argues that summary judgment was improper because there is a genuine issue of material fact regarding the effectiveness of the bankruptcy discharge with respect to J&B‘s contract-based claims. Specifically, J&B argues that Miller‘s debts are excepted from the bankruptcy discharge because they were fraudulently incurred. Miller counters that this argument has been waived because J&B failed to raise it in its brief in opposition to Miller‘s motion for summary judgment.
{¶44} The Bankruptcy Code, defines a debt as a “liability on a claim.”
{¶45} “(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputеd, legal, equitable, secured, or unsecured; or
{¶46} “(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.”
{¶47} The United States Supreme Court held a “right to payment” means “nothing more nor less than an enforceable obligation * * *.” FCC v. NextWave Personal Communications, Inc. (2003), 537 U.S. 293, 303, 123 S.Ct. 832, 154 L.Ed.2d 863
{¶48} A creditor is defined as, inter alia, an “entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor[.]”
{¶49} A discharge in bankruptcy under
{¶50} There are statutory exceptions to discharge listed in
{¶51} “(a) A discharge under
{¶52} “(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by--
{¶53} “(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor‘s or an insider‘s financial condition[.]”
{¶54} To establish a prima facie case under
{¶55} There is nothing in the record demonstrаting that Miller made a material misrepresentation to J&B, either prior to or after entering into, the Agreement. To the contrary, Miller averred that he told J&B‘s owner about his divorce, resulting financial downturn and that he planned to file bankruptcy. J&B‘s president diDonato admitted: “Miller did inform me that he was or would be seeking a divorce and that he had debts. He expressed that he may have to file bankruptcy to rid himself of marital and personal debts.” Thus, the uncontroverted evidence establishes that J&B had full knowledge of Miller‘s shaky financial circumstances.
{¶56} J&B cites to Ohio Finance Co. v. Greathouse (1947), 64 Ohio Law Abs. 1, 110 N.E.2d 805, which is factually distinguishable. In Ohio Finance, the creditor presented evidence that the debtor submitted a written credit application that contained materially false information about the debtor‘s financial condition, which was relied upon
{¶57} That Miller failed to list J&B as a creditor in his bankruptcy does not constitute fraud either. The failure to list a debt in a no-asset Chapter 7 bankruptcy petition does not affect its dischargeability. In re Madaj (C.A.6, 1998), 149 F.3d 467, 469-470 (holding that unscheduled debt owed by Chapter 7 debtors was discharged in no-asset case, even though creditors did not learn of case until after entry of discharge order and noting that the law in this area is “counter-intuitive.“) Moreover, “a debt is either fraudulent or not depending on the debtor‘s actions and intent in incurring the debt in the first instance. An otherwise innocently incurred debt * * * dоes not suddenly become a fraudulently incurred debt when the debtor fails to list it.” Id. at 471 (parenthetical example omitted).
{¶58} Finally, Miller‘s failure to notify J&B after-the-fact about the discharge and its legal effect on the parties’ contract does not constitute fraud. A party may voluntarily comply with an obligation after a bankruptcy discharge.
{¶59} A Chapter 7 no-asset debtor does not have the duty to notify his creditors of a discharge and its legal ramifications. In re Madaj, supra. Further, J&B was, at the very least, on notice that Miller might file bankruptcy and could have consulted counsel as to
Waiver of Bankruptcy Discharge Defense
{¶60} First, J&B argues Miller waived his bankruptcy discharge defense by counterclaiming for breach of contract and injunctive relief. In other words, Miller cannot assert that J&B‘s claims for breach of the Agreement and injunctive relief were discharged in bankruptcy while at the same time claiming J&B breached the Agreement. Miller counters that this argument has been waived on appeal for failure to raise it in J&B‘s objections to the magistrate‘s decision.
{¶61}
{¶62} “(ii) Specificity of objection. An objection to a magistrate‘s decision shall be specific and state with particularity all grounds for objection. * * *”
{¶63} “(iv) Waiver of right to assign adoption by court as error on appeal. Except for a claim of plain error, a party shall not assign as error on appeal the court‘s adoption of any factual finding or legal conclusion, whether or not specifically designated as a finding of fact or conclusion of law under
{¶64} A careful reading of the objections reveals that J&B did not argue that Miller waived the bankruptcy discharge defense vis-a-vis his counterclaim for breach and injunctive relief.
{¶65} Thus, J&B waives review of this argument on appeal absent a showing of plain error.
{¶67} “A party may set forth two or more statements of a claim or defense alternately or hypothetically, either in one count or defense or in separate counts or defenses. When two or more statements are made in the alternative and one of them if made independently would be sufficient, the pleading is not made insufficient by the insufficiency of one or more of the alternative statements. A party may also state as many separate claims or defenses as he has regardless of consistency and whether based on legal or equitable grounds. All statements shall be made subject to the obligations set fоrth in Rule 11.”
{¶68} Thus, a party may raise counterclaims that are inconsistent with defenses. The fact that Miller counterclaimed for breach of the Agreement, while simultaneously asserting that J&B‘s claim for breach of the Agreement was discharged in bankruptcy does not mean that Miller waived the bankruptcy discharge defense. See, e.g., CommuniCare, Inc. v. Wood Cty. Bd. of Commrs. 161 Ohio App.3d 84, 2005-Ohio-2348, 829 N.E.2d 706, at ¶21 (concluding that neither the timing of the pleading of a defense nor the existence of claims potentially inconsistent with that defense compelled a finding of waiver since alternative pleading is permitted under
Estoppel of Bankruptcy Discharge Defense
{¶69} J&B next argues that summary judgment was improper because either promissory or equitable estoppel applies to prevent Miller from asserting the bankruptcy discharge defense. Miller counters that J&B waived this argument by failing to raise it in its brief in opposition to the motiоn for summary judgment, or in its objections to the magistrate‘s decision.
{¶70} J&B did amend its complaint to include a “claim” for estoppel, after Miller amended his answer to include the bankruptcy discharge defense. J&B did not specify which type of estoppel or how it was to be employed. However, in the language of the
{¶71} Count Four, entitled “Estoppel” states in relevant part:
{¶72} “30. MILLER, at all material times alleged in Count One, Count Two and Count Three, has materially, economically and сommercially gained an advantage against J&B competing in the restrictive market place as set forth in the AGREEMENT.
{¶73} “31. For over five (5) years MILLER has mislead, [sic] induced, encouraged and fraudulently misrepresented to J&B the AGREEMENT was in full force and effect and MILLER received all the benefits that derived therefrom.
{¶74} “32. MILLER should be estopped from repudiating the AGREEMENT after five (5) years of receiving the benefits therefrom to the detriment of J&B.
{¶75} “33. MILLER should be estopped from alleging a discharge in bankruptcy after having received all the benefits of the AGREEMENT.”
{¶76} Notably, in its brief in opposition to Miller‘s motion for summary judgment, J&B did not argue that Miller should be equitably estopped from asserting the bankruptcy discharge defense. And in its objections, J&B merely made a blanket statement that its “fraud and estoppel claims raise genuine issues of material fact.” J&B nеither explained specifically what facts were in dispute nor argued that Miller should be equitably estopped from asserting the bankruptcy defense. Thus, J&B waived its estoppel argument on appeal and we are constrained to review for plain error only.
{¶77} ” ’ “A prima facie case for equitable estoppel requires a plaintiff to prove four elements: (1) that the defendant made a factual misrepresentation; (2) that it is misleading; (3) [that it induced] actual reliance which is reasonable and in good faith; and (4) [that the reliance caused] detriment to the relying party.” ’ ” Helman v. EPL Prolong, Inc. (2000), 139 Ohio App.3d 231, 246, 743 N.E.2d 484 (Seventh District), quoting Doe v. Blue Cross/Blue Shield of Ohio (1992), 79 Ohio App.3d 369, 379, 607 N.E.2d 492.
{¶79} ” ‘Waiver by estoppel “exists when the acts and conduct of a pаrty are inconsistent with an intent to claim a right, and have been such as to mislead the other party to his prejudice and thereby estop the party having the right from insisting upon it.” ’ National City Bank v. Rini, 162 Ohio App.3d 662, 2005-Ohio-4041, 834 N.E.2d 836, at ¶24, citing Mark-It Place Foods, Inc. v. New Plan Excel Realty Trust, 156 Ohio App.3d 65, 2004-Ohio-411, 804 N.E.2d 979, at ¶57. ‘Waiver by estoppel allows a party‘s inconsistent conduct, rather than a party‘s intent, to establish a waiver of rights.’ Id.” Merriner at ¶99.
{¶80} Miller is not equitably estopped from asserting the bankruptcy discharge defense. As discussed, supra, a party may voluntarily comply with its obligations under a discharged contract, but absent a reaffirmation agreement, that compliance does not create a new enforceable obligation.
{¶81} Moreover, Miller did not misrepresent his financial situation to J&B. To the contrary, diDonato admitted he knew about Miller‘s financial problems, including the possibility of a bankruptcy filing. diDonato chose not to take any action on this knowledge, such as consult legal counsel regarding the potential ramifications. Rather, he stated he considered this Miller‘s “personal business.” Miller did not mislead J&B to its prejudice by continuing to comply with the contract post-discharge. Therefore, the trial court did not commit error, let alone plain error.
{¶82} Regarding, J&B‘s promissory estoppel argument which was never raised in the trial court, this “is a quasi-contractual concept where a court in equity seeks to prevent injustice by effectively creating a contract where none existed by supplying the element of consideration when necessary. The device is not available to override the terms of an express contract where one exists.” TLC Healthcare Servs., L.L.C. v. Enhanced Billing Servs., L.L.C., 6th Dist. No. L-08-1121, 2008-Ohio-4285, at ¶24, citing Telxon Corp. v. Smart Media of Delaware, Inc., 9th Dist. No. 22098, 2005-Ohio-4931, ¶58. Here there is
Bankruptcy Discharge of Claim for Injunctive Relief
{¶83} J&B next argues that the trial court erred by determining that its claim for injunctive relief was barred by the bankruptcy discharge, because it is separate from the claim for damages and therefore survives the discharge. Again, Miller counters this argument has been waived. Because this argument was not raised in the objections to the magistrate‘s decision, it is reviewable for plain error only.
{¶84} The trial court‘s decision regarding the dischargeability of the injunctive relief was erroneous. As aforementioned, a “claim” is defined by the Bankruptcy Code as, inter alia, the “right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an еquitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.”
{¶85} In Ohio v. Kovacs, 469 U.S. 274, 105 S.Ct. 705, 83 L.Ed.2d 649 (1985), the United States Supreme Court addressed the issue of whether a state-court injunction ordering the clean-up of an environmental site was discharged under
{¶86} In U.S. v. Whizco, Inc. (C.A.6, 1988), 841 F.2d 147, the Sixth Circuit, relying on Kovacs, held that a coal mine operator‘s Chapter 7 bankruptcy discharged the operator‘s obligation to reclaim a mine site to the extent that fulfilling the obligation to reclaim the site would force the operator to spend money, but to the extent the operator could comply without spending money, the operator‘s obligation to comply was not discharged. Id. at 150-151.
{¶87} Building on this law, the Sixth Circuit Kennedy v. Medicap Pharmacies, Inc. (C.A.6, 2001), 267 F.3d 493 held that a creditor‘s right to an injunction for breach of a
{¶88} “In this case, compliance with an injunction would not require the expenditure of money. The Kennedys would simply be required to cease operating the pharmacy in violation of the franchise agreement. Looking at the substance of the equitable relief sought, it is clear that Medicap was not seeking the payment of money. Medicap‘s right to equitable relief does not, therefore, equate to being a claim.
{¶89} “Nor is the requested injunction an alternative tо the right of payment. The Medicap franchise agreement is governed by Iowa law. Iowa law, therefore, determines the nature of Medicap‘s remedies arising from the Kennedys’ breach. See Butner v. United States, 440 U.S. 48, 54-55, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979). Under Iowa law, damages may be awarded in addition to an injunction for breach of a covenant not to compete. An injunction, however, is designed to avoid irreparable injury and may issue only when the party seeking it has no adequate remedy at law. Presto-X-Company v. Ewing, 442 N.W.2d 85, 89 (Iowa 1989).” Kennedy at 497-498.
{¶90} Similarly, Ohio law allows for the award of damages in addition to an injunction for breach of a covenant not to compete. See, e.g., Mesarvey, Russell & Co. v. Boyer (July 30, 1992), 10th Dist. No. 91AP-974 at *5 (“Equitable relief and damages are not necessarily mutually exclusive remedies. But, where damages will adequately compensate an injured party for a harm suffered, equitable relief is not appropriаte.“)
{¶91} J&B‘s request for an injunction “barring Miller from engaging in acts prohibited by the Agreement,” is not a claim that was discharged by the bankruptcy. Looking to the “substance of the equitable relief sought” the injunction itself does not require the payment of money.
{¶92} The trial court‘s analysis focused on whether J&B‘s amended complaint also sought damages for breach of the non-compete in concluding the claim for injunctive relief was discharged. The proper perspective is whether the result of granting the injunction itself necessarily causes the debtor to incur costs, not whether there is also a separate claim for damages. Thus, the trial court erroneously concluded that the claim
{¶93} “A non-compete clause prohibits a former employee from working in competition with his former employer and amounts to a restraint of trade, so these clauses will be enforced only to the extent that the restraints imposed are reasonably necessary to protect the employer‘s legitimate business interests. Brentlinger Enterprises v. Curran (2001), 141 Ohio App.3d 640, 645, citing Raimonde v. Van Vlerah (1975), 42 Ohio St.2d 21, 25-26. ‘A covenant restraining an employee from competing with his former employer upon termination of employment is reasonable if the restraint is no greater than is required for the protection of the employer, does not impose undue hardship on the employee, and is not injurious to the public.’ Raimonde at paragraph two of the syllabus. The factors to consider when deciding whether a noncompete clause is reasonable include: 1) the absence or presence of limitations as to time and space, 2) whether the employee represents the sole contact with the customer, 3) whether the employee is possessed with confidential information or trade secrets, 4) whether the covenant seeks to eliminate competition which would be unfair to the employer or merely seeks to eliminate ordinary competition, 5) whether the covenant seeks to stifle the inherent skill and experience of the employee, 6) whether the benefit to the employer is disproportional to the detriment to the employee, 7) whether the covenant operates as a bar to the employee‘s sole means of support, 8) whether the employee‘s talent which the employer seeks to suppress was actually developed during the period of employment, and 9) whether the forbidden employment is merely incidental to the main employment. Id. at 25.” Alan v. Andrews, 7th Dist. No. 06 MA 151, 2007-Ohio-2608, at ¶40.
{¶94} Although the agreement between Miller and J&B is not the typical employer-employee non-competition agreement as it involves a post-employment contract, the Raimonde factors still apply. See, e.g., Century Business Servs., Inc. v. Urban, 179 Ohio App.3d 111, 2008-Ohio-5744, 900 N.E.2d 1048, at ¶25 (applying
{¶95} The burden is on the former employer to prove the restraint is reasonable and the agreement is valid. Gen. Medicine, P.C. v. Manolache, 8th Dist. No. 88809, 2007-Ohio-4169, at ¶18. While Miller came forward with evidence and arguments why the clause was unreasonable, J&B presented no evidence in support of the clause and did not rebut the arguments Miller made in his motion fоr summary judgment. Instead, J&B chose to argue that it was unable to complete discovery on this issue. However, as discussed earlier, J&B did not move to set aside the magistrate‘s orders limiting discovery, nor did it avail itself of the procedures contained in
{¶96} Further, the court correctly determined the non-compete is unreasonable and therefore unenforceable based on the Raimonde factors. First, there are significant time and place restrictions in the non-compete. It prohibits Miller from competing with J&B for the 20 year term of the Agreement, plus 20 additional years thereafter. It also prohibits Miller from competing in 56 of Ohio‘s 88 counties while prohibiting J&B from competing only in Franklin County, except for some existing accounts. Notably, Miller was prohibited from competing in Stark, his county of residence, and all contiguous counties. Further, the non-compete seeks to eliminate ordinary competition, and stifle Miller‘s sales and marketing skills and experience, much of which Miller had developed prior to his employment with J&B.
{¶97} Moreover, the benefit to J&B is grossly disproportionate to the benefit to Miller. J&B asserts the non-compete should be enforced because the parties bargained for it and because Miller received valuable consideration in the form of a line of credit to support his fledgling business. This argument fails considering: (1) the line of credit was secured by Miller‘s “funded account,” the retainage held by J&B from Miller‘s sales commissions when Miller was employed as a J&B sales agent; and (2) the parties’ relatively unequal bargaining power. Finаlly, the non-compete operates as a bar to
{¶98} Although the trial court incorrectly concluded that the claim for injunctive relief was discharged in bankruptcy, that determination does not rise to the level of plain error. Rather, this constitutes harmless error in light of the trial court‘s correct determination that the non-compete was unreasonable and therefore unenforceable. Accordingly, J&B‘s third assignment of error is meritless.
Fraud
{¶99} J&B‘s sixth and seventh assignments of error assert:
{¶100} “The trial court erred in granting summary judgment on the fraud claim and incidental issues thereto based upon disputed affidavit testimony which turned on credibility.”
{¶101} “The trial court erred in granting summary judgment because even though pleadings may be vague Appellee Miller has notice of the matters of which J&B complains and strict application of rule requiring pleading оf fraud with particularity could service no useful purpose.”
{¶102}
{¶103} Turning first to the specificity of J&B‘s fraud claim, as Miller points out, the trial court‘s adverse ruling on J&B‘s fraud claim was on the merits, not for a lack of specificity as required by
{¶104} Turning to the merits, the trial court correctly granted summary judgment on the fraud claim. There is nothing in the record demonstrating that Miller made a material misrepresentation to J&B, either prior to or after entering into, the Agreement. Rather, Miller averred that he told J&B‘s owner about his divorce, resulting financial downturn and that he planned to file bankruptcy. diDonato admitted that Miller had informed him he was or would be seeking a divorce, that he had debts, and that he may file bankruptcy. Moreover, as discussed above, the fact that Miller failed to list J&B as a creditor in his bankruptcy does not сonstitute fraud. See In re Madaj at 471. Finally, Miller‘s failure to notify J&B after-the-fact about the discharge and its legal effect on the parties’ contract does not constitute fraud. A party may voluntarily comply with its obligations under a discharged contract, but that compliance does not create a new enforceable obligation. J&B was, at the very least, on notice that Miller might file bankruptcy and could have consulted counsel as to the legal effect of a bankruptcy discharge. Because J&B cannot prove justifiable reliance, J&B‘s sixth and seventh assignments of error are meritless.
{¶105} In conclusion, J&B‘s assignments of error are meritless. Many of J&B‘s arguments were not raised at the proper time in the trial court and are therefore waived absent plain error. First, because J&B failed to move to set aside the magistrate‘s discovery orders, and because it failed to avail itself of the procedures contained in
Donofrio, J., concurs.
Vukovich, J., concurs.