State of Ohio ex rel. Attorney General [Michael DeWine] v. Mastergard et al.
No. 14AP-1024 (C.P.C. No. 07CV-9803)
IN THE COURT OF APPEALS OF OHIO TENTH APPELLATE DISTRICT
February 23, 2016
2016-Ohio-660
BROWN, J.
(REGULAR CALENDAR)
D E C I S I O N
Rendered on February 23, 2016
On brief: Michael DeWine, Attorney General, and Melissa Wright, for plaintiff-appellee. Argued: Melissa Wright
On brief:
On brief: Tyack, Blackmore, Liston & Nigh Co., L.P.A., James P. Tyack, and Ryan L. Thomas, for appellee Daniel Sechriest. Argued: James P. Tyack
APPEAL from the Franklin County Court of Common Pleas
BROWN, J.
{¶ 1} This is an appeal by movants-appellants, Manitou Helton, Danna Rogers, Michael Feltner, Melissa Feltner, Samuel Brisco, Lisa McKibben, and Beulah Daniel (collectively “appellants“), from a decision and entry of the Franklin County Court of Common Pleas denying appellants’
{¶ 2} The following background facts are essentially undisputed, and drawn primarily from the trial court‘s decision and entry denying appellants’
{¶ 3} In general, the consent judgment declared that the defendants had engaged in practices that violated several provisions of the foregoing laws, and enjoined them from future violations of CSPA and HSSA. The decree conditionally enjoined Sechriest from engaging in the home improvement industry, and required him to notify the attorney general at least 90 days in advance of soliciting any Ohio consumer or engaging in the business of effecting consumer transactions in the home improvement business in Ohio as a supplier. The consent judgment ordered defendants to provide restitution in the amount of $28,938.50 to the attorney general to distribute to specific consumers listed in exhibits attached to the consent judgment; further, the payment of civil penalties and attorney fees, which totaled $350,000.00, was suspended on the condition of Sechriest‘s compliance with all other provisions of the decree.
{¶ 4} Appellants were not a party to the 2007 lawsuit or the 2010 consent judgment. On June 5, 2014, appellants filed with the trial court a
{¶ 5} Both the attorney general and Sechriest filed responses to appellants’ motion, disputing appellants’ ability to invoke
{¶ 6} On appeal, appellants set forth the following assignment of error for this court‘s review:
THE TRIAL COURT ERRED IN DENYING MOVANTS’
CIV.R. 71 MOTION.
{¶ 7} Under their single assignment of error, appellants argue that the trial court erred in denying their motion under
{¶ 8}
When an order is made in favor of a person who is not a party to the action, he may enforce obedience to the order by the same process as if he were a party; and, when obedience to an order may be lawfully enforced against a person who is not a party, he is liable to the same process for enforcing obedience to the order as if he were a party.
{¶ 9} Whether appellants have standing under the provisions of
{¶ 11} The Supreme Court of Ohio has adopted “an ‘intent to benefit’ test * * * to decide whether a third party is an intended or incidental beneficiary.” Fed. Ins. Co. v. Fredericks, Inc., 2d Dist. No. 26230, 2015-Ohio-694, ¶ 39, quoting Hill at 40. Specifically, in Hill at 40, the Supreme Court held in relevant part:
In Norfolk & Western Co. v. United States (C.A. 6, 1980), 641 F. 2d 1201, 1208, the United States Court of Appeals for the Sixth Circuit, applying Ohio law, explained the “intent to benefit” test, a test used to determine whether a third party is an intended or incidental beneficiary:
“* * * Under this analysis, if the promisee * * * intends that a third party should benefit from the contract, then that third party is an ‘intended beneficiary’ who has enforceable rights under the contract. If the promisee has no intent to benefit a third party, then any third-party beneficiary to the contract is merely an ‘incidental beneficiary,’ who has no enforceable rights under the contract.
“* * * [T]he mere conferring of some benefit on the supposed beneficiary by the performance of a particular promise in a contract [is] insufficient; rather, the performance of that promise must also satisfy a duty owed by the promisee to the beneficiary.”
{¶ 12} In considering whether appellants had standing to seek enforcement of the consent judgment, the trial court in this case analyzed two Ohio cases involving consent decrees, Save the Lake and McDowell v. Toledo, 6th Dist. No. L-10-1229, 2011-Ohio-1842. Under the facts in Save the Lake, the attorney general filed a complaint against the city of Hillsboro (“the city“) for alleged violations of an Ohio EPA order, asserting that the city had violated the order by discharging sewage and industrial waste into a creek. In 1988, the city and attorney general entered into a consent decree, requiring the city to comply with state and federal laws designed to protect waters. In 2003, Save the Lake Association (“the appellant“), an Ohio non-profit corporation, filed a complaint to enforce the consent order, alleging that its members were being adversely affected by the city‘s failure to comply with the consent decree. The city subsequently filed a motion to dismiss, asserting that the appellant lacked standing. The appellant responded that it had standing to enforce the consent decree pursuant to
{¶ 13} In Save the Lake, the appellate court looked to federal law regarding consent decrees in determining whether the appellant had standing to enforce the 1988
{¶ 14} Under the facts of McDowell, the appellant, city of Toledo (“the city“), was a party to a consent judgment in 1992 following a lawsuit initiated by four individuals who lived within the city and who claimed the city‘s failure to provide them with notice before shutting off their water had deprived them of a property interest. The consent decree obligated the city to provide certain rights to recipients of its water services, including non-property owners, and also included a permanent injunction in favor of Ruby McDowell. Approximately 20 years later, Kyle Tate and the Toledo Fair Housing Center, both non-parties to the 1992 consent judgment, filed an emergency motion to enforce the consent judgment, pursuant to
{¶ 15} The city appealed the trial court‘s ruling, arguing that Tate could not meet the burden of showing he was an intended third-party beneficiary. In McDowell, the court held that Tate was entitled to enforce the consent judgment, citing language from the 1992 consent judgment “that provides rights for persons other than the late Ruby McDowell and obligates the city to provide notice and options to continue water services to individuals such as Tate.” Id. at ¶ 22. The court in McDowell further noted that the city, in order to comply with the consent judgment, “adopted the terms of the judgment entry when it revised its administrative regulations shortly thereafter, essentially mirroring the terms of the [consent judgment].” Id. at ¶ 27. Thus, the court found, if the consent judgment “had been intended to apply only to the original parties to the lawsuit in 1992, the city would not have incorporated identical terms into the Toledo Municipal Code as it did.” Id.
{¶ 16} In the case before us, the trial court found the facts of the case sub judice to be “more similar to Save the Lake than to McDowell,” and determined that appellants were “not intended third-party beneficiaries with standing to enforce the Consent Judgment under
{¶ 17} In reviewing the language of the consent judgment in the instant case, the trial court found “no rights-creating language for the public at large or for future customers.” The trial court also considered the following provisions of the consent judgment with respect to enforcement rights:
19. IT IS FURTHER ORDERED that any violation of the Orders set forth in Paragraphs (1) through (16) above shall constitute contempt.
20. IT IS FURTHER ORDERED that in the event the Ohio Attorney General must initiate legal action or incur any costs to compel Defendants to abide by this Consent Judgment, upon proof of the violation, Defendants shall be liable to the Ohio Attorney General for any such costs associated with proving that violation, including, but not limited to, a reasonable sum for attorneys’ fees.
21. Failure of the Attorney General to timely enforce any term, condition, or requirement of this Consent Judgment shall not provide, nor be construed to provide, Defendants a defense for noncompliance with any term of this Consent Judgment or any other law, rule, or regulation; nor shall it stop or limit the Attorney General from later enforcing any term of this Consent Judgment or seeking any other remedy available by law, rule, or regulation.
22. IT IS FURTHER ORDERED that, upon Defendants’ failure to comply with the provisions of this Consent Judgment, the Ohio Attorney General may enforce payment of the amounts set forth in Paragraphs (17) and (18) and that the Defendants agree that such obligations are non-dischargeable penalties and should be treated as such in any subsequent bankruptcy filing.
{¶ 18} The trial court found that the above provisions “do not give express enforcement authority to third-parties like the Movants,” nor is it “implied therein that non-parties may enforce it.” The court also noted that appellants “were not parties to that action or the Consent Judgment,” nor were they “identified, by name or specific class” in the consent judgment. Further, while various exhibits attached to the consent judgment “identified over 40 individuals who were owed restitution or the release of mechanics’ liens by Sechriest,” none of the appellants in the instant action were among the consumers listed in those exhibits. Upon consideration of the consent judgment, the trial court held that “[t]he benefit conferred upon Ohio consumers generally by the Attorney General‘s exercise of police powers against Mr. Sechriest and his companies under the CSPA is incidental and indirect rather than intentional.”
{¶ 19} As indicated, the trial court found the instant action more analogous to Save the Lake than McDowell. In Save the Lake, the court relied in part on federal case law recognizing a “distinction between incidental ‘public at large’ beneficiaries and intended beneficiaries.” Id. at ¶ 16. Upon
{¶ 20} In Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 750 (1975), the United States Supreme Court held that “a consent decree is not enforceable directly or in collateral proceedings by those who are not parties to it even though they were intended to be benefited by it.” Some federal courts have interpreted the holding in Blue Chip Stamps as creating “a presumption that third parties who stand to benefit from consent judgments are merely incidental beneficiaries.” Frangos v. Bank of Am., N.A, D.N.H. No. 13-cv-472-PB (July 24, 2014). In this respect, the Sixth Circuit Court of Appeals has “rejected the intended beneficiary exception because ‘the plain language of Blue Chip indicates that even intended third-party beneficiaries of a consent decree lack standing to enforce its terms.’ ” Biovail Corp. Internatl. v. Hoechst Aktiengesellschaft, 49 F.Supp.2d 750, 763 (D.N.J.1999), quoting Aiken v. Memphis, 37 F.3d 1155, 1168 (6th Cir.1994).
{¶ 21} Other federal courts, in the context of applying
{¶ 22} While some federal courts have held that intended third-party beneficiaries may sue to enforce a consent decree, those same courts have been reluctant to apply this exception to consent decrees “resulting from actions brought by the government.” Hodges at 1508. Rather, the general rule is that ” ‘only the Government can seek enforcement of its consent decrees; therefore, even if the Government intended its consent decree to benefit a third party, that party could not enforce it unless the decree so provided.’ ” Id., quoting Beckett v. Air Line Pilots Assn., 995 F.2d 280, 288 (D.C.Cir.1993). See also Rafferty v. NYNEX Corp., 60 F.3d 844, 849 (D.C.Cir.1995) (“Unless a government consent decree stipulates that it may be enforced by a third party beneficiary, only the parties to the decree can seek enforcement of it.“). Such interpretation “derives from a general contract principle that third party beneficiaries of a government contract generally are assumed to be merely incidental beneficiaries, and may not enforce the contract absent clear intent to the contrary.” Hodges at 1509. See also SEC v. Prudential Secs., 136 F.3d 153, 158 (D.C.Cir.1998) (“the reason that courts are more loath to allow third parties to enforce consent decrees when the government is involved is that, because the government usually acts in the general public interest, third parties are presumed to be incidental beneficiaries“).
{¶ 23} Based on this court‘s de novo review, we find no error with the trial court‘s finding that appellants were not intended third-party beneficiaries under the language of the consent judgment. Here, it is undisputed that appellants were not parties to the 2007 lawsuit or the subsequent consent judgment. Under the terms of the consent judgment, the defendants were liable to various individual consumers, the names of which appear in exhibits attached to that decree, for “consumer restitution” and/or the release of mechanics’ liens; no appellants, however, are named as consumer beneficiaries in either the consent judgment or the attached exhibits. Moreover, the enforcement provisions of the consent judgment do not give enforcement authority to third parties; rather, as noted by the trial court, the enforcement rights provided in the decree “contemplate enforcement only by the Attorney General.” As also observed by the trial court, “portions of the relief sought by [appellants] are available only to the Attorney General under
{¶ 24} Accordingly, because appellants were not intended third-party beneficiaries of the consent judgment, the trial court did not err in its determination that they lacked standing to enforce the decree. Based on the foregoing, appellants’ single assignment of error is overruled, and the judgment of the Franklin County Court of Common Pleas is hereby affirmed.
Judgment affirmed.
KLATT and HORTON, JJ., concur.
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