Sworak v. Great Lakes Recreational Vehicle Assn. , 2021 Ohio 4309 ( 2021 )


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  • [Cite as Sworak v. Great Lakes Recreational Vehicle Assn., 
    2021-Ohio-4309
    .]
    COURT OF APPEALS OF OHIO
    EIGHTH APPELLATE DISTRICT
    COUNTY OF CUYAHOGA
    PETER SWORAK,                                         :
    Plaintiff-Appellee,                   :
    No. 110137
    v.                                    :
    GREAT LAKES RECREATIONAL
    VEHICLE ASSN., ET AL.,                                :
    Defendants-Appellants.                :
    JOURNAL ENTRY AND OPINION
    JUDGMENT: AFFIRMED
    RELEASED AND JOURNALIZED: December 9, 2021
    Civil Appeal from the Cuyahoga County Common Pleas Court
    Case No. CV-19-925882
    Appearances:
    Law Offices of Warner Mendenhall, Warner Mendenhall,
    and Logan Trombley, for appellee.
    Law Offices of James J. Collum, L.L.C., and James J.
    Collum, for appellant Great Lakes Recreational Vehicle
    Association.
    Plakas Mannos, Edmond J. Mack, Maria C. Klutinoty
    Edwards, and Brandon W. McHugh, for appellants
    Robert Pastore, Robert Moore, Scott Miller and Jennifer
    Radel.
    SEAN C. GALLAGHER, P.J.:
    Great Lakes Recreational Vehicle Association, Robert Pastore, Robert
    Moore, Scott Miller, and Jennifer Radel1 (collectively “GLRVA”) appeal the trial
    court’s decision denying GLRVA’s motion seeking sanctions against Peter Sworak,
    filed under R.C. 2323.51. For the following reasons, we affirm.
    GLRVA is an industry trade association, organized as a nonprofit
    organization that promotes the recreational vehicle industry in northeast Ohio
    through support of local dealers and general advocacy. One of its functions involved
    the annual Ohio RV Supershow, which used to be hosted at the I-X Center in
    Cleveland, Ohio. Local dealers comprise the general membership of GLRVA. There
    are 12 such members.
    Sworak is an owner of Camper Care, an RV dealership located in
    Rootstown, Ohio. Camper Care was a member of GLRVA until mid-2020 and
    Sworak had served on the GLRVA board for 15 years. At the end of 2017, Sworak
    accused GLRVA of violating its code of conduct by knowingly taking a product line
    from Camper Care at a board meeting. That matter was litigated in Portage County,
    with Sworak claiming success.      Sworak believed that the incident soured his
    relationship with the president of GLRVA, Pastore, who then orchestrated
    pretextual actions to remove Sworak and ultimately Camper Care from GLRVA.
    1All of the individually named defendants were named in their official capacity
    under GLRVA’s corporate structure.
    GLRVA has four members of the board of trustees, who volunteer
    their time. Until 2018, the board members, including Sworak, maintained long
    tenures without running for reelection to their positions. According to GLRVA, it
    was then decided to start replacing the individual board members, so that other
    members of GLRVA would have the opportunity to sit on the board, starting with
    the longest tenured trustee first. Sworak was the first to be replaced through a
    general vote of the GLRVA members.
    Approximately eight months after Sworak was replaced and the new
    board member sworn in, a general membership meeting was held to discuss the then
    upcoming Supershow being held at the I-X Center. There were two options being
    proposed dealing with GLRVA advertising expenditures. GLRVA would either
    spend the funds on television advertising or use the funds as a credit to the member’s
    floor space purchases from the I-X Center for the 2020 Supershow. Ten of the
    twelve general members were present for the voting, but only seven voted — four in
    favor of the credit option and three in favor of the advertising.
    The second issue resolved at the meeting involved picking the floor
    space for the Supershow. The previous year, GLRVA implemented a new method
    on the spacing issue. The members present voted in favor of GLRVA using the
    previous system that had been used for approximately 20 years because the newer
    method produced conflicts and spacing issues among the membership. The board
    accepted the votes and proceeded based on the chosen directions.
    In November 2019, Sworak filed the underlying action, claiming the
    board of trustees violated its fiduciary duties by removing Sworak from his position
    as a trustee and creating policies that harmed the smaller dealer-members of
    GLRVA. According to Sworak, GLRVA refused to provide any details about the
    decision to remove him as a member of the board of trustees and the removal
    precluded him from nominating himself for the board in the future. Sworak also
    questioned GLRVA’s meeting minutes and financial transparency.             He had
    previously requested meeting minutes for GLRVA general meetings but was told
    GLRVA lacked the records. Further, GLRVA would provide its members access to
    only one financial statement at the annual meeting for five minutes while rejecting
    other members’ requests to inspect the books.
    In April 2020, GLRVA sent a letter to Sworak’s counsel of record
    threatening sanctions for the filing of the complaint. In addition, Camper Care’s
    membership in GLRVA was terminated by the board based on “several years” of
    alleged violations of GLRVA’s bylaws and code of conduct committed by Sworak.
    GLRVA offered Sworak a hearing at which he and his counsel presented evidence in
    his defense.
    In October 2020, Sworak voluntarily dismissed his complaint against
    GLRVA. Within the statutory time frame, GLRVA filed a motion for sanctions under
    R.C. 2323.51 against Sworak. The trial court denied the motion, and this appeal
    followed. After oral argument was originally set, GLRVA filed a motion to stay the
    proceedings. Sworak had refiled his complaint in the Summit County Common
    Pleas Court, and GLRVA represented that the parties had reached a “settlement in
    principle” that obviated the need to proceed on this appeal. In accordance with
    GLRVA’s request and Loc.App.R. 20, the matter was temporarily stayed to no avail.
    As a result, we will address the arguments as presented.
    In the first assignment of error, GLRVA claims the trial court erred by
    denying its motion for sanctions without a hearing.
    Under R.C. 2323.51, a trial court may award attorney fees to a party
    aggrieved by frivolous conduct in a civil action. Grimes v. Oviatt, 
    2019-Ohio-1365
    ,
    
    135 N.E.3d 378
    , ¶ 18 (8th Dist.). Frivolous conduct is defined under R.C. 2323.51 as
    conduct that “obviously” serves merely to harass or maliciously injure another party
    to the civil action or appeal or is for another improper purpose; is not warranted
    under existing law, cannot be supported by a good faith argument for an extension,
    modification, or reversal of existing law, or cannot be supported by a good faith
    argument for the establishment of new law; and consists of allegations or other
    factual contentions that have no evidentiary support or, if specifically so identified,
    are not likely to have evidentiary support after a reasonable opportunity for further
    investigation or discovery. The decision to grant or deny sanctions under R.C.
    2323.51 is well within the sound discretion of the trial court. Bikkani v. Lee, 8th
    Dist. Cuyahoga No. 89312, 
    2008-Ohio-3130
    , ¶ 30. An appellate court will not
    reverse a trial court’s decision either granting or denying sanctions absent finding
    an abuse of discretion. Grimes at ¶ 20. We are mindful, however, that “simply
    advancing a losing argument does not amount to frivolous conduct.” Musial Offices,
    Ltd. v. Cuyahoga Cty., 8th Dist. Cuyahoga No. 108810, 
    2021-Ohio-2325
    , ¶ 20.
    As a general rule, the trial court is not required to hold a hearing
    before denying a motion for sanctions “when the court determines, upon
    consideration of the motion and in its discretion, that [the motion] lacks merit.”
    Pisani v. Pisani, 
    101 Ohio App.3d 83
    , 88, 
    654 N.E.2d 1355
     (8th Dist.1995).
    However, courts have found that a trial court abuses its discretion when it arbitrarily
    denies a motion for sanctions. Bikkani at ¶ 31. This court has held that a trial court
    abuses its discretion by denying a motion for sanctions without a hearing if either
    the “record clearly evidences frivolous conduct” or “an arguable basis exists for an
    award of sanctions.” 
    Id.
     Further, concluding that a party engaged in frivolous
    conduct in and of itself is insufficient to support an award of attorney fees under the
    statute. Bikkani at ¶ 28. The court “must also determine whether the frivolous
    conduct adversely affected the party moving for attorney fees.”             
    Id.,
     citing
    Stohlmann v. Hall, 
    158 Ohio App.3d 499
    , 
    2004-Ohio-5219
    , 
    817 N.E.2d 118
    , ¶ 8 (8th
    Dist.).   “[T]he party seeking R.C. 2323.51 attorney’s fees must affirmatively
    demonstrate that he or she incurred additional attorney’s fees as a direct,
    identifiable result of defending the frivolous conduct in particular.” 
    Id.,
     citing
    Stohlmann and Wiltberger v. Davis, 
    110 Ohio App.3d 46
    , 54, 
    673 N.E.2d 628
     (10th
    Dist.1996).
    GLRVA maintains that the filing of the complaint constituted
    frivolous conduct because the trial court lacked jurisdiction to consider the first
    count of the complaint that was a “clearly a disguised” quo warranto action over
    which only the Ohio Supreme Court and a court of appeals has jurisdiction. R.C.
    2733.03.    “A quo warranto action is ‘“the proper and exclusive remedy for
    determining the legal right of an officer of an incorporated nonprofit association to
    hold office.’”” Kirby v. Oatts, 
    2020-Ohio-301
    , 
    151 N.E.3d 1083
    , ¶ 18 (2d Dist.),
    quoting State ex rel. Gmoser v. Village at Beckett Ridge Condominium Owners’
    Assn., Inc., 
    2016-Ohio-8451
    , 
    82 N.E.3d 464
    , ¶ 15 (12th Dist.), and Carlson v.
    Rabkin, 
    152 Ohio App.3d 672
    , 
    2003-Ohio-2071
    , 
    789 N.E.2d 1122
    , ¶ 35 (1st Dist.).
    We need not get into the intricacies of quo warranto actions.
    On this point, GLRVA relies on Kirby, in which the panel affirmed the
    trial court’s dismissal of an action based on the lack of jurisdiction to provide quo
    warranto relief. In that case, however, the Second District panel distinguished cases
    in which a plaintiff seeks to remove a trustee, which is the hallmark of a quo
    warranto action, from those in which the trial court determines that the trustee was
    properly removed under the controlling bylaws or other regulations. Id. at ¶ 23,
    citing N. Dayton First Church of God v. Berger, 2d Dist. Montgomery No. 18171,
    
    2000 Ohio App. LEXIS 4964
     (Oct. 27, 2000). The latter is within the trial court’s
    jurisdictional purview. The Kirby panel ultimately concluded that the plaintiff’s
    claims included the removal of a trustee, which could be remedied only through a
    writ of quo warranto within either the Ohio Supreme Court or the appellate court’s
    exclusive jurisdiction.
    That conclusion, however, was fact-dependent.         As the Second
    District expressly noted, each claim must be evaluated based on the nuances of the
    claims advanced and relief sought. Sworak sought a declaration that he was
    improperly removed from his position as a member of the board, similar to the
    claims discussed in N. Dayton First Church of God in which the trial court’s decision
    declaring the validity of the removal was affirmed, and in part, absent the improper
    removal, Sworak would be eligible to nominate himself for a new board position. At
    the least, there is a colorable claim sustaining the trial court’s jurisdiction in this
    case. Although the trial court arguably lacked jurisdiction over an aspect of the
    complaint, not all the relief sought fell under the ambit of a quo warranto action. In
    light of that, it cannot be concluded that Sworak lacked a good faith belief that the
    trial court possessed jurisdiction over claims and remedies asserted in the first count
    of the complaint.
    In addition, GLRVA claims that Sworak lacked any evidentiary
    support for his claims advanced in Counts Two and Three of the complaint. The
    second count included a claim for declaratory relief seeking a declaration that the
    policies adopted by GLRVA discriminated against the smaller dealer-members of
    the association. The third count of the complaint alleged that GLRVA improperly
    and unlawfully maintained its financial and ministerial records in violation of
    R.C. 1702.15.
    Frivolous conduct under R.C. 2323.51(A)(2)(a) for the purposes of the
    factual component of a claim, “is judged under an objective, rather than a subjective
    standard and must involve egregious conduct.” (Internal citation omitted.) State
    ex rel. DiFranco v. S. Euclid, 
    144 Ohio St.3d 571
    , 
    2015-Ohio-4915
    , 
    45 N.E.3d 987
    ,
    ¶ 15, citing State ex rel. Striker v. Cline, 
    130 Ohio St.3d 214
    , 
    2011-Ohio-5350
    , 
    957 N.E.2d 19
    , ¶ 21. A party cannot base the claim of frivolous conduct upon merely
    providing a winning theory over the dispute or proving the opposing party’s factual
    assertions were incorrect. 
    Id.,
     citing Ohio Power Co. v. Ogle, 4th Dist. Hocking No.
    12CA14, 
    2013-Ohio-1745
    , ¶ 29-30 (“‘A party is not frivolous merely because a claim
    is not well-grounded in fact. * * * [R.C. 2323.51] was designed to chill egregious,
    overzealous, unjustifiable, and frivolous action. * * * [A] claim is frivolous if it is
    absolutely clear under the existing law that no reasonable lawyer could argue the
    claim’”), and Hickman v. Murray, 2d Dist. Montgomery No. CA-15030, 
    1996 Ohio App. LEXIS 1028
    , 5 (Mar. 22, 1996).
    In this case, GLRVA’s claim that Sworak engaged in frivolous conduct
    is entirely premised on its demonstration that Sworak’s factual allegations were
    incorrect. Unlike in other cases in which the conduct was demonstrated to be
    egregious by multiple acts of misconduct that exceeded the bounds of zealous
    advocacy, see, e.g., Lakeview Holding (OH), L.L.C. v. Haddad, 8th Dist. Cuyahoga
    No. 98744, 
    2013-Ohio-1796
    , ¶ 19 (repeated failure to serve court filings and the
    submission of an invalid preliminary judicial report, among other issues,
    demonstrated egregious behavior to warrant a hearing on the frivolous conduct
    motion), in this case, GLRVA’s claims are limited to accusing Sworak of having
    advanced allegations that could be deemed to be without merit based on review of
    GLRVA’s evidentiary submissions.
    In essence, GLRVA is claiming that because it was entitled to
    summary judgment based on the submission of undisputed evidence, the claims in
    the complaint are also frivolous. “Filing a complaint without evidentiary support,
    however, does not become frivolous conduct under the law when no evidentiary
    support is uncovered by investigation or discovery. The conduct is frivolous only
    when the expectation of finding such evidence is not reasonable.” Resources for
    Healthy Living, Inc. v. Haslinger, 6th Dist. Wood No. WD-10-073, 
    2011-Ohio-1978
    ,
    ¶ 31.
    GLRVA’s claims are insufficient to satisfy the frivolous conduct
    standard without allegations of egregious or persistent misbehavior or a
    demonstration that discovery would not have produced any evidence supporting
    Sworak’s claims, which alluded to retaliatory behavior instigated by the GLRVA
    president based on Sworak’s success in the 2017 civil litigation. Simply asserting
    that a plaintiff’s claims can be disproven does not rise to the type of behavior that
    necessitates a court to conduct a hearing for frivolous conduct.
    And regardless, GLRVA’s claim that it provided Sworak access to the
    association’s financial records according to its bylaws is unfounded. On this point,
    GLRVA argues that Sworak’s factual assertions were demonstrably false as of the
    filing of the complaint because no general member has the right to examine
    GLRVA’s financial records. Under R.C. 1702.15, “[s]ubject to limitations prescribed
    in the articles or the regulations upon the right of members of a corporation to
    examine the books and records, all books and records of a corporation, * * * may be
    examined by any member * * *.” Members of the corporation, therefore, have a right
    to examine financial records unless the bylaws provide limitations.
    GLRVA maintains that under its bylaws, it need only provide
    members abstracts of financial reports generated by the treasurer during a
    membership meeting. In its motion for sanctions, and again in this appeal, GLRVA
    claims that Section VII of its bylaws, defining the treasurer’s responsibility as a
    member of the board of trustees, limits a member’s ability to request to examine the
    books and records of GLRVA as is permitted under R.C. 1702.15. Section VII of the
    bylaws provides:
    The Treasurer, assisted by the Executive Director, shall be responsible
    for proper records of the financial transactions and condition of the
    association and shall furnish regular reports to the Board of Trustees,
    as well as abstracts of these reports at the Annual Meeting and, upon
    request, other membership meetings. Working with the Treasurer, the
    Board may at any time order an independent certified audit or a lesser
    form of review of the books and records of the association. Copies shall
    be furnished to each trustee and reviewed at the next Board of Trustees
    meeting.
    Thus, Section VII of GLRVA’s bylaws sets forth the treasurer’s responsibilities but
    does not unambiguously set forth limitations upon a member’s right to examine
    GLRVA’s financial records under R.C. 1702.15. It cannot be concluded that the
    above provision of GLRVA’s bylaws restricts Sworak’s right to examine the
    corporation’s financial records per se. As a result, Sworak’s complaint seeking to
    force GLRVA to permit the examination of its financial records cannot be deemed
    frivolous. Upon the documentation presented by GLRVA, there were colorable
    issues regarding a member’s right to examine financial records.
    Having demonstrated a colorable basis to support the filing of the
    complaint in this action, it cannot be concluded that Sworak engaged in frivolous
    conduct based on the arguments presented. As a result, we affirm the decision of
    the trial court denying GLRVA’s motion for sanctions.
    Judgment affirmed.
    It is ordered that appellee recover from appellants costs herein taxed.
    The court finds there were reasonable grounds for this appeal.
    It is ordered that a special mandate issue out of this court directing the
    common pleas court 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.
    SEAN C. GALLAGHER, PRESIDING JUDGE
    EILEEN A. GALLAGHER, J., and
    LISA B. FORBES, J., CONCUR