Ohio Community School Consultants, LTD., et al., Plaintiffs-Appellees, v. Lincoln Preparatory Academy, Inc., Defendant-Appellee, [HA Lincoln Park, LLC, Intervening Defendant-Appellant].
No. 19AP-301 (C.P.C. No. 18CV-8454)
IN THE COURT OF APPEALS OF OHIO TENTH APPELLATE DISTRICT
Rendered on March 10, 2020
2020-Ohio-890
Ohio Community School Consultants, LTD., et al., Plaintiffs-Appellees, : : : v. : : Lincoln Preparatory Academy, Inc., Defendant-Appellee, : : [HA Lincoln Park, LLC, Intervening Defendant-Appellant]. :
No. 19AP-301
(C.P.C. No. 18CV-8454)
(ACCELERATED CALENDAR)
D E C I S I O N
Rendered on March 10, 2020
On brief: Dinsmore & Shohl, LLP, Karen S. Hockstad, and Vladimir P. Belo, for appellees Ohio Community School Consultants, LTD and Brian Adams, Receiver. Argued: Vladimir P. Belo.
On brief: Barnes & Thornburg LLP, C. David Paragas, Kevin R. McDermott, Jeanine Kerridge, and Paul N. Garinger, for intervening appellant. Argued: Kevin R. McDermott.
APPEAL from the Franklin County Court of Common Pleas
BRUNNER, J.
{¶ 1} Intervening defendant-appellant, HA Lincoln Park, LLC (“HA Lincoln“), appeals from a judgment of the Franklin County Court of Common Pleas entered on April 9, 2019. In its decision, the trial court denied HA Lincoln‘s motion to intervene in a receivership action that plaintiffs-appellees, Ohio Community School Consultants, LTD (“OCSC“) and MMB Business Enterprises, Inc. (“MMB“), had commenced against
I. FACTS AND PROCEDURAL BACKGROUND
{¶ 2} The identification of the parties and their relationships to one another is helpful to our discussion of the issues presented in this matter. According to the amended complaint OCSC and MMB filed October 8, 2018, and amended on October 9, 2018,1 commencing the underlying receivership action, OCSC is an Ohio limited liability company that serves as the fiscal officer of community schools throughout Ohio. MMB is the sole member of OCSC. Brian Adams is the shareholder and president of MMB; he also is a certified public accountant and fiscal officer for many community schools in Ohio. Attached as an exhibit to the complaint was Adams’ resumé, which indicates that he has been the president and CEO of MMB and OCSC since January 1990. Lincoln Prep is a non-profit corporation and community school for which the “[p]laintiff remains the fiscal officer.” (Oct. 8, 2018 Compl. at ¶ 4.2) HA Lincoln was the operator of Lincoln Prep.
{¶ 3} Lincoln Prep closed on June 30, 2018. The members of Lincoln Prep‘s board of directors resigned, and the board was dissolved. The complaint states that, at the time the underlying receivership action was filed, there was no sponsor or operator affiliated with Lincoln Prep, and “Plaintiff, through Brian Adams, [was] the only representative remaining to assist with the final dispositions of assets for [Lincoln Prep].” (Compl. at ¶ 11.) Although the complaint initially avers “there is one lawsuit in which [Lincoln Prep] is currently involved in Franklin County, Ohio,” it subsequently references multiple lawsuits, stating that “decisions regarding the lawsuits cannot be made without the appointment of [Adams] as Receiver for [Lincoln Prep], giving him authority to resolve the one pending lawsuit and then distribute the remaining funds and assets of [Lincoln], if any, to [Ohio Department of Education] consistent with
{¶ 4} The next day, on October 9, 2018, OCSC and MMB filed a motion for the appointment of Adams as receiver for Lincoln Prep. They asked that Adams “be authorized to hire and pay legal counsel to manage the pending lawsuit and act on [Lincoln Prep‘s] behalf in the resolution of such claims.” (Mot. for Receiver at 1.)
{¶ 5} On October 28, 2018, the trial court signed off on a decision and entry that had been prepared by legal counsel for OCSC and MMB granting the motion for appointment of receiver and an order appointing Adams as receiver. The trial court‘s decision and order stated that Adams had authority to do the following:
- Take all actions pursuant to and in accordance with
R.C. 3314.074 ; - Hire and pay legal counsel to manage pending lawsuits and act on [Lincoln Prep‘s] behalf in resolution of such claims;
- Pursue claims on behalf of [Lincoln Prep] against those legal persons who may owe [Lincoln Prep] money;
- Take all actions in accordance with
Loc. R. 66.06 .
(Oct. 28, 2018 Decision & Entry at 1.)
{¶ 6} On November 6, 2018, HA Lincoln filed a motion for reconsideration and a motion to intervene in the receivership action. HA Lincoln moved to intervene in the receivership by right under
{¶ 7} On November 20, 2018, OCSC and MMB file a memorandum opposing the motion to intervene and an alternative memorandum opposing the motion for reconsideration. HA Lincoln replied on November 27, 2018.
{¶ 8} On April 9, 2019, the trial court entered judgment denying HA Lincoln‘s motion to intervene under both
{¶ 9} HA Lincoln timely appealed the trial court‘s decision on May 6, 2019.
II. ASSIGNMENTS OF ERROR
{¶ 10} HA Lincoln presents for our review two assignments of error:
- The trial court erred by finding that the interests of Appellant HA Lincoln Park, LLC (“HA Lincoln Park“) as a creditor of Defendant-Appellee Lincoln Preparatory Academy, Inc. (“Lincoln Prep“) were too speculative to support intervention as a matter of right under
Civ. R. 24(A) . - The trial court erred by finding that the existing parties to the receivership would be unduly delayed and inconvenienced if HA Lincoln Park was permitted to intervene under
Civ. R. 24(B) .
III. LAW AND DISCUSSION
A. Jurisdiction
{¶ 11} As a preliminary matter, we address whether we have jurisdiction to hear HA Lincoln‘s appeal.
{¶ 12}
(A) Intervention of right.
Upon timely application anyone shall be permitted to intervene in an action: (1) when a statute of this state confers an unconditional right to intervene; or (2) when the applicant claims an interest relating to the property or transaction that is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant‘s ability to protect that interest, unless the applicant‘s interest is adequately represented by existing parties.
(B) Permissive intervention.
Upon timely application anyone may be permitted to intervene in an action: (1) when a statute of this state confers a conditional right to intervene; or (2) when an applicant‘s claim or defense and the main action have a question of law or fact in common. When a party to an action relies for ground of claim or defense upon any statute or executive order administered by a federal or state governmental officer or agency or upon any regulation, order, requirement or agreement issued or made pursuant to the statute or executive order, the officer or agency upon timely application may be permitted to intervene in the action. In exercising its discretion the court shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties.
(C) Procedure.
A person desiring to intervene shall serve a motion to intervene upon the parties as provided in
Civ.R. 5 . The motion and any supporting memorandum shall state the grounds for intervention and shall be accompanied by a pleading, as defined inCiv.R. 7 (A) , setting forth the claim or defense for which intervention is sought. The same procedure shall be followed when a statute of this state gives a right to intervene.
{¶ 13} OCSC and MMB argue that HA Lincoln has failed to establish that the trial court‘s denial of the motion to intervene is a final appealable order. OCSC and MMB rely on the Supreme Court of Ohio‘s ruling in Gehm v. Timberline Post & Frame, 112 Ohio St.3d 514, 2007-Ohio-607, that a trial court‘s denial of a motion to intervene is a final appealable order “only if a fact-dependent statutory analysis under
{¶ 14} But the Supreme Court, in the first paragraph of Gehm, establishes the limited nature of the holding in that case: “We hold that the denial of a motion to intervene, when the purpose for which intervention was sought may be litigated in another action, does not affect a substantial right that determines the action and prevents the judgment.” Id. at ¶ 1. The Court concluded that “the denial of the motion in this case is not a final appealable order sufficient to establish jurisdiction for appellate review.” Id.
{¶ 15} HA Lincoln moved to intervene in the receivership under
{¶ 16} With respect to its motion to intervene under
{¶ 17} With respect to its motion to intervene permissively under
{¶ 18} In addition to arguments made by HA Lincoln and our findings based on
{¶ 19} Based on our review of the record of the underlying matter, we find that HA Lincoln has established that the trial court‘s denial of the motion to intervene is a final appealable order jurisdictionally sufficient for appellate review.
B. Standard of Review
{¶ 20} An appellate court reviews a trial court‘s denial of a motion to intervene for an abuse of discretion. State ex rel. Merrill v. Ohio Dept. of Natural Resources, 130 Ohio St.3d 30, 2011-Ohio-4612, ¶ 41. An abuse of discretion occurs when a trial court‘s discretionary judgment is unreasonable, arbitrary, or unconscionable. State ex rel. McCann v. Delaware Cty. Bd. of Elections, 155 Ohio St.3d 14, 2018-Ohio-3342, ¶ 12; State v. Meek, 10th Dist. No. 16AP-549, 2017-Ohio-9258, ¶ 23. As Justice O‘Donnell of the modern Supreme Court of Ohio has opined, ” ‘[a] court abuses its discretion when its ruling is founded on an error of law or a misapplication of law to the facts.’ ” Independence v. Office of the Cuyahoga Cty. Executive, 142 Ohio St.3d 125, 2014-Ohio-4650, ¶ 49 (O‘Donnell, J., dissenting), quoting Doe v. Natl. Bd. of Med. Examiners, 199 F.3d 146, 154 (3d Cir.1999). Absent an abuse of discretion on the part of the common pleas court, this Court may not substitute its judgment for that of the common pleas court. Pons v. State Medical Bd., 66 Ohio St.3d 619, 621 (1993), citing Lorain City School Dist. Bd. of Edn. v. State Emp. Relations Bd., 40 Ohio St.3d 257, 260-61 (1988).
{¶ 21} Finally, we note that
Civ.R. 24(A) )
{¶ 22} To intervene as a matter of right under
{¶ 23} In Duryee v. PIE Mut. Ins. Co., 10th Dist. No. 98AP-535, *5-6 (Dec. 1, 1998), this Court stated:
” ‘*** While no uniform definition of “interest” for purposes of
Civ.R. 24(A) exists, an assessment of interest involves a realistic appraisal * * * of the immediacy of the interest of such a would be intervenor. Chaos would result if every citizen “interested” in the outcome * * * were permitted to intervene * * *. The interest of the intervenor must be more particularly in the subject matter of the lawsuit.’ ” Fairview General Hosp., supra, at 831, quoting Rollins Cablevue, Inc. v. Saienni Enterprises (D.Del. 1986), 115 F.R.D. 484, 487. Accordingly, in Paine, Webber, Jackson & Curtis, Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (D.Del. 1983), 564 F. Supp. 1358, where the proposed intervenors’ only claimed interest in the patent litigation was the potential loss of business to a competitor if the patent was found to be valid, the court found ” ‘this interest, without any factual support, is too speculative and therefore not a direct interest to satisfy Rule 24(a)(2).’ ” (Citations omitted.) See, also, Fairview General Hosp., supra (finding an interest that “in the event Fairview is granted permission to operate a Level III NICU at its hospital, University‘s NICU Level III unit may lose business and/or the cost of the health care in the area will increase” to be too speculative and not directly related to the legal issue of declaratory judgment concerning applicability of certificate of need legislation).
{¶ 24} The trial court relied on our holding in Duryee to find that HA Lincoln had not established it was entitled to intervene as a matter of right under
{¶ 25} Having independently reviewed the record, examined the briefs, listened to oral arguments, and applied the relevant law, we determine that there is sufficient evidence in the record to support the trial court‘s decision on intervention as of right under
{¶ 26} Accordingly, HA Lincoln‘s first assignment of error is overruled.
D. Second Assignment of Error
{¶ 27} HA Lincoln argues the trial court erred by finding that the existing parties to the receivership would be unduly delayed and inconvenienced if HA Lincoln was permitted to intervene and seek permissive intervention under
{¶ 28}
{¶ 29} The record of the underlying matter indicates that HA Lincoln shares questions of law and fact in common with OCSC and MMB, the latter two who filed for receivership for the sole purpose of allowing Adams to continue the related action involving HA Lincoln in the White Hat Management case. The trial court stated that the receivership could be unduly delayed by allowing HA Lincoln access to Lincoln Prep‘s legal bills in the underlying matter. The trial court may control discovery in such a case but it does not need to exclude HA Lincoln from permissive intervention in the receivership to do so. That is, the trial court may address its concerns by applying a remedy suggested by HA Lincoln, to wit: requiring that legal bills be redacted to protect attorney client communications and attorney work product. See Appellant‘s Brief at 26.
{¶ 30} HA Lincoln offers the following argument in favor of permissive intervention:
As the receivership now stands, counsel for Lincoln Prep in the Underlying Lawsuit has been allowed to represent the receiver, a star witness and statutory representative of Lincoln Prep during periods at issue in the Underlying Lawsuit, but HA Lincoln Park was not permitted to intervene to protect substantial sums owed to it that are acknowledged in Lincoln Prep‘s sworn financial statements but now disclaimed by that same receiver and same counsel.
Forcing Adams and counsel for the receivership and the Underlying Lawsuit to be accountable for their oversight of the assets of Lincoln Prep will not unduly delay the receivership–it will allow HA Lincoln Park to protect its interests as a substantial, acknowledged creditor of Lincoln Prep. Of course, if Adams and his counsel do not want to be held accountable, the solution also is simple–appoint a truly neutral, disinterested receiver who does not have anything to hide, or any stake in the Underlying Lawsuit.
(Appellant‘s Brief at 26-27.)
{¶ 31} Examining HA Lincoln‘s argument for permissive intervention within the context of the Supreme Court‘s dictate that
IV. CONCLUSION
{¶ 32} Based on the foregoing reasons, we overrule HA Lincoln‘s first assignment of error but sustain its second assignment of error. The judgment of the Franklin County Court of Common Pleas is affirmed in part, reversed in part, and we remand for further proceedings consistent with this decision.
Judgment affirmed in part; reversed in part; cause remanded.
BEATTY BLUNT, J., concurs.
SADLER, P.J., concurs in part and dissents in part.
{¶ 33} I agree with the majority opinion‘s conclusion that the trial court‘s denial of HA Lincoln‘s motion to intervene in this receivership action constitutes a final, appealable order under
{¶ 34} First, unlike the majority, I would limit the conclusion regarding the final, appealable order to
{¶ 35} Second, I cannot say, on the facts of this case, that the trial court abused its discretion in denying HA Lincoln‘s
{¶ 36} In this case, HA Lincoln is not yet a judgment creditor entitled to a possible distribution under
{¶ 37} Therefore, I would find the trial court did not err in denying HA Lincoln‘s