Supportive Solutions, L.L.C. v. Electronic Classroom of Tomorrow , 137 Ohio St. 3d 23 ( 2013 )

[Cite as Supportive Solutions, L.L.C. v. Electronic Classroom of Tomorrow, 137 Ohio St. 3d 23,
2013-Ohio-2410.]
SUPPORTIVE SOLUTIONS, L.L.C., APPELLEE, v. ELECTRONIC CLASSROOM OF
TOMORROW, APPELLANT, ET AL.
[Cite as Supportive Solutions, L.L.C. v. Electronic Classroom of Tomorrow,
137 Ohio St. 3d 23, 2013-Ohio-2410.]
Judgments—Final, appealable orders—Political-subdivision immunity––Motion
for leave to file amended answer to assert affirmative defense of political-
subdivision immunity—Denial of motion is final, appealable order—
Refusal to permit amendment to assert defense denies political subdivision
benefit of alleged immunity—R.C. 2744.02(C).
(No. 2012-0790—Submitted March 13, 2013—Decided June 12, 2013.)
APPEAL from the Court of Appeals for Cuyahoga County, Nos. 95022 and 95287,
2012-Ohio-1185.
____________________
FRENCH, J.
{¶ 1} In this appeal, we consider whether a trial court’s decision denying
a defendant leave to assert the defense of political-subdivision immunity via an
amended answer is a final, appealable order. We hold that it is because the denial
of a political subdivision’s motion for leave to file an amended answer to assert
the affirmative defense of political-subdivision immunity denies that political
subdivision the benefit of the alleged immunity pursuant to R.C. 2744.02(C).
Facts and Procedural History
{¶ 2} We gave a detailed history of this case in State ex rel. Electronic
Classroom of Tomorrow v. Cuyahoga Cty. Court of Common Pleas, 129 Ohio
St.3d 30, 2011-Ohio-626, 950 N.E.2d 149 (“ECOT I”). Here, we reiterate only
those facts necessary to our discussion of the issue now on appeal.
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{¶ 3} Appellant, Electronic Classroom of Tomorrow (“ECOT”), is an
internet-based community school, established pursuant to R.C. Chapter 3314, and
a “political subdivision” for purposes of the governmental-immunity provisions of
R.C. Chapter 2744. ECOT I at ¶ 2, 26-27; R.C. 2744.01(F). ECOT and appellee,
Supportive Solutions Training Academy, L.L.C. (“Supportive Solutions”), entered
into a series of contracts for Supportive Solutions to supply supplemental
educational services to eligible ECOT students during the 2007-2008 school year.
{¶ 4} In March 2008, Supportive Solutions sued ECOT in the Cuyahoga
County Court of Common Pleas. Supportive Solutions’ amended complaint
asserted claims for breach of implied contract, misrepresentation, negligent
misrepresentation, promissory estoppel, unjust enrichment, fraud and fraud in the
inducement, respondeat superior, and defamation. ECOT filed an answer to
Supportive Solutions’ amended complaint, as well as counterclaims for breach of
contract, misrepresentation, negligent misrepresentation, and fraud. ECOT did
not raise the affirmative defense of political-subdivision immunity in its answer.
Supportive Solutions subsequently filed a second amended complaint, adding
Lucas County Educational Service Center as a defendant and adding a claim for
tortious interference with business relations.1 ECOT filed an answer to the
second amended complaint, incorporating its earlier answer and counterclaims
and denying all additional allegations, but, again, not raising political-subdivision
immunity as an affirmative defense.
{¶ 5} In January 2010, ECOT filed a motion for partial summary
judgment, arguing, in part, that it was entitled to political-subdivision immunity,
pursuant to R.C. Chapter 2744, on many of Supportive Solutions’ claims. ECOT
also raised the issue of immunity in opposition to Supportive Solutions’ motion
for summary judgment. Supportive Solutions responded that ECOT waived any
immunity defense by not raising it in its answer. ECOT then filed a motion for
1. The trial court dismissed Lucas County Educational Service Center on immunity grounds.
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leave to file an amended answer raising political-subdivision immunity as an
affirmative defense. The trial court summarily denied ECOT’s motion for leave to
amend its answer. The court granted summary judgment to ECOT on Supportive
Solutions’ claims of fraud and intentional misrepresentation, but denied ECOT
summary judgment on the remaining claims.
{¶ 6} ECOT immediately appealed the trial court’s denial of leave to file
an amended answer. Meanwhile, despite ECOT’s pending appeal, the trial court
conducted a jury trial on Supportive Solutions’ remaining claims, and the jury
returned a verdict in favor of Supportive Solutions on claims of breach of express
and implied contract and negligent misrepresentation. The trial court entered
judgment against ECOT on the jury verdict in the amount of $1,206,400, awarded
prejudgment interest, and denied ECOT’s motion for judgment notwithstanding
the verdict or for a new trial. ECOT thereafter filed a second appeal—from the
judgment on the jury verdict and the trial court’s denial of its posttrial motions.
The Eighth District Court of Appeals dismissed ECOT’s first appeal on July 30,
2010, for lack of a final, appealable order, but it subsequently reinstated that
appeal and consolidated it with ECOT’s second appeal.
{¶ 7} While its appeals were pending, ECOT filed an original action in
this court for a writ of prohibition to prevent the trial court from enforcing its
judgment and for a writ of mandamus requiring the trial court to vacate the
allegedly invalid portion of its judgment and to stay execution of any surviving
portion of the judgment without bond. We held that, whether or not the denial of
ECOT’s motion for leave to file an amended answer was a final, appealable order,
ECOT’s first appeal divested the trial court of jurisdiction to proceed with a trial
of any claim that might be subject to that defense. ECOT I, 129 Ohio St. 3d 30,
2011-Ohio-626, 950 N.E.2d 149, at ¶ 16. Accordingly, we issued a writ of
prohibition, which precluded the trial court from enforcing those portions of its
judgment that were subject to ECOT’s appeal from the denial of its motion for
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leave to amend its answer, and a writ of mandamus, which ordered the trial court
to vacate those portions of the judgment. Id. at ¶ 31. We also determined that
ECOT was entitled to a writ of mandamus compelling the trial court to stay the
surviving portion of its judgment without a bond. Id. at ¶ 30-31.
{¶ 8} Following our decision in ECOT I, the court of appeals dismissed
ECOT’s consolidated appeals. Supportive Solutions, L.L.C. v. Electronic
Classroom of Tomorrow, 8th Dist. Nos. 95022 and 95287, 2012-Ohio-1185. It
held that it lacked jurisdiction over ECOT’s appeal from the judgments entered as
a result of trial because this court had ordered the trial court to vacate those
judgments. The court of appeals also addressed whether the denial of ECOT’s
motion for leave to file an amended answer was a final, appealable order. The
court of appeals concluded that it was not, and the court dismissed ECOT’s appeal
from that order for lack of jurisdiction.
{¶ 9} This court accepted ECOT’s discretionary appeal to consider the
following proposition of law: “Any order that denies the benefit of an alleged
immunity to a political subdivision is immediately appealable pursuant to R.C.
§2744.02(C), including the denial of a motion to amend the answer to include the
defense.” 132 Ohio St. 3d 1481, 2012-Ohio-3334, 971 N.E.2d 960.
Analysis
{¶ 10} An appellate court can review only final orders, and without a final
order, an appellate court has no jurisdiction. Hubbell v. Xenia, 115 Ohio St. 3d 77,
2007-Ohio-4839, 873 N.E.2d 878, ¶ 9, citing Gen. Acc. Ins. Co. v. Ins. Co. of N.
Am., 44 Ohio St. 3d 17, 20, 540 N.E.2d 266 (1989). Generally, an order denying
leave to amend a pleading is not a final, appealable order. See Trotwood v. S.
Cent. Constr., L.L.C., 192 Ohio App. 3d 69, 2011-Ohio-237, 947 N.E.2d 1291,
¶ 54 (2d Dist.); Worthington v. Wells Fargo Bank Minnesota, N.A., 5th Dist. No.
10 CA 40, 2010-Ohio-4541, ¶ 30-32.
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{¶ 11} R.C. Chapter 2744, the Political Subdivision Tort Liability Act,
sets forth a comprehensive statutory scheme for the tort liability of political
subdivisions and their employees. It establishes a three-step analysis for
determining whether a political subdivision is immune from liability, starting with
a broad rule that a political subdivision is generally not liable in damages. Greene
Cty. Agricultural Soc. v. Liming, 89 Ohio St. 3d 551, 556-557, 733 N.E.2d 1141
(2000); R.C. 2744.02(A)(1). The purpose of R.C. Chapter 2744 is to preserve
political subdivisions’ fiscal integrity. Wilson v. Stark Cty. Dept. of Human
Servs., 70 Ohio St. 3d 450, 453, 639 N.E.2d 105 (1994). Consistent with that
purpose, early resolution of the immunity issue may save the parties the time,
effort, and expense of a trial and appeal. Hubbell at ¶ 25, quoting Burger v.
Cleveland Hts., 87 Ohio St. 3d 188, 199, 718 N.E.2d 912 (1999) (Lundberg
Stratton, J., dissenting). Accordingly, R.C. 2744.02(C) provides, “An order that
denies a political subdivision * * * the benefit of an alleged immunity from
liability as provided in this chapter or any other provision of the law is a final
order.” R.C. 2744.02(C) permits a political subdivision to appeal an order that
denies it the benefit of an alleged immunity under R.C. Chapter 2744, even when
the order makes no determination that there is no just cause for delay pursuant to
Civ.R. 54(B). Sullivan v. Anderson Twp., 122 Ohio St. 3d 83, 2009-Ohio-1971,
909 N.E.2d 88, syllabus.
{¶ 12} This court addressed the scope of R.C. 2744.02(C) in Hubbell, a
homeowner’s suit against the city of Xenia, arising out of a sewage backup. The
court of appeals dismissed the city’s appeal from the denial of its motion for
summary judgment for lack of a final, appealable order, where the trial court
found that questions of fact remained as to the city’s entitlement to political-
subdivision immunity. It reasoned that an order denies the benefit of an alleged
immunity only when it fully resolves the immunity issue. This court disagreed
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with that reasoning and reversed. Hubbell, 115 Ohio St. 3d 77, 2007-Ohio-4839,
873 N.E.2d 878.
{¶ 13} In accordance with established principles of statutory
interpretation, we began our analysis in Hubbell by turning to the plain language
of the statute to determine legislative intent. We stated that the General
Assembly’s use of the words “benefit” of an “alleged” immunity in R.C.
2744.02(C) illustrates that the statute is not limited to orders that finally resolve
the immunity question: “the plain language of R.C. 2744.02(C) does not require a
final denial of immunity before the political subdivision has the right to an
interlocutory appeal.” Id. at ¶ 12. Thus, even though it did not preclude the city
from proving its entitlement to immunity later, we held that the trial court’s denial
of summary judgment denied the city “the benefit of an alleged immunity” and
was, therefore, a final order under R.C. 2744.02(C). Id. at ¶ 27. “When a trial
court denies a motion in which a political subdivision or its employee seeks
immunity under R.C. Chapter 2744, that order denies the benefit of an alleged
immunity and is therefore a final, appealable order pursuant to R.C. 2744.02(C).”
Id. at syllabus. Like the statute itself, Hubbell focuses on the effect of the trial
court’s order on a party’s ability to claim immunity.
{¶ 14} Ohio courts of appeals, including the Eighth District, have applied
the reasoning of Hubbell to hold that denials of motions for judgment on the
pleadings and motions to dismiss based on political-subdivision immunity are
final orders. See, e.g., DiGiorgio v. Cleveland, 196 Ohio App. 3d 575, 2011-Ohio-
5824, 964 N.E.2d 495 (8th Dist.).
{¶ 15} Here, the court of appeals acknowledged Hubbell, but held that
Hubbell’s “broad interpretation” of R.C. 2744.02(C) does not encompass motions
for leave to file an amended answer raising political-subdivision immunity. 2012-
Ohio-1185, at ¶ 15. The court distinguished “dispositional-type motions, i.e.,
Civ.R. 12(B)(6) motions to dismiss, Civ.R. 12(C) motions for judgment on the
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pleadings, and Civ.R. 56 motions for summary judgment,” from other motions
and reasoned that Hubbell was not intended to be read so broadly as to “open the
door for political subdivisions to challenge all adverse rulings potentially
affecting [an] immunity defense with an immediate appeal.” Id. at ¶ 16.
{¶ 16} The court of appeals held that the order denying ECOT leave to
amend its answer did not deny the benefit of an alleged immunity, because it
“made no determination about immunity.” Id. at ¶ 20. That reasoning directly
conflicts with our statement in Hubbell that R.C. 2744.02(C) is not limited to
orders that determine the merits of a claimed immunity defense and our holding
that a denial of summary judgment on immunity grounds is final under R.C.
2744.02(C), even though it does not determine entitlement to immunity. Justice
Pfeifer, dissenting in Hubbell, expressed concern regarding that component of the
majority opinion: “The key word in R.C. 2744.02(C) is ‘denies.’ Certainly, [the
city] cannot claim that its assertion of immunity has been denied, that it has been
foreclosed from further asserting and proving its alleged immunity at the trial
level.” Id. at ¶ 37 (Pfeifer, J., dissenting). According to the Hubbell majority,
however, an order may deny the benefit of an alleged immunity under R.C.
2744.02(C) even if it does not foreclose the political subdivision from asserting
and proving immunity.
{¶ 17} Unlike in Hubbell, the trial court’s denial of leave for ECOT to
amend its complaint determines ECOT’s entitlement to immunity and precludes a
finding of immunity in this case. Statutory immunity, including political-
subdivision immunity, is an affirmative defense, and it is waived if not raised in a
timely fashion. Turner v. Cent. Local School Dist., 85 Ohio St. 3d 95, 98, 706
N.E.2d 1261 (1999). In Turner, at 98, we stated that “as a matter of course, a
properly pleaded answer should * * * include[] the statutory-immunity defense
* * * because, in most cases, the [Political Subdivision Tort Liability] Act could
provide a complete defense.” We noted that the possibility of waiver makes it
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“extremely important and prudent” to plead all defenses as early as possible. Id.
at 99. ECOT agrees that absent leave to amend its answer, it will be deemed to
have waived its immunity defense. Thus, the trial court’s ruling forecloses ECOT
from enjoying the benefit of the alleged immunity.
{¶ 18} The court of appeals justified its interpretation of Hubbell by
referring to the waiver rule discussed in Turner: “We find that no caveat or niche
has yet been carved out giving a political subdivision an exception to the waiver
provision of the Civil Rules.” 2012-Ohio-1185, ¶ 18. In Turner, we held that the
trial court abused its discretion by granting the political-subdivision defendant
leave to amend its answer and assert a statutory-immunity defense. Therefore, we
held, the defendant waived that defense. We based our holding, however, on the
merits of the motion for leave. There, the defendant moved for leave to amend its
answer on remand, after the reversal of summary judgment in its favor on another
ground, almost three years after the commencement of the action, and without
explanation for its failure to assert the affirmative defense sooner. We noted that
the defendant’s delay forced the plaintiffs to expend time and money to oppose
the defendant’s first motion for summary judgment in the trial court and on
appeal, including a request for discretionary jurisdiction in this court. Id. at 99.
{¶ 19} There is no dispute that the waiver rule applies to a political
subdivision, just as it applies to other defendants, or that a political subdivision
waives its statutory-immunity defense, just like other affirmative defenses, if it
does not timely assert it. See Turner at 97-98. Nothing in Turner, however,
suggests that the doctrine of waiver precludes a trial court, in other circumstances,
from granting leave to amend pursuant to Civ.R. 15(A). Indeed, we stated in
Turner that the defendant “should have attempted to amend its answer to include
the immunity defense prior to its initial motion for summary judgment.” Id. at 99.
An affirmative defense is not deemed waived when the defendant raises the
defense “by motion before pleading pursuant to Civ.R. 12(B), affirmatively in a
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responsive pleading under Civ.R. 8(C), or by amendment under Civ.R. 15.”
(Emphasis added.) State ex rel. Plain Dealer Publishing Co. v. Cleveland, 75
Ohio St. 3d 31, 33, 661 N.E.2d 187 (1996). Were a defendant not entitled to avoid
waiver by raising an affirmative defense in an amendment to the pleadings, there
would have been no need in Turner to review the order allowing the amendment
for an abuse of discretion.
{¶ 20} The court of appeals’ discussion of waiver relates not to the
question of R.C. 2744.02(C)’s applicability but to the merits of ECOT’s motion
for leave to amend its answer. Whether the trial court abused its discretion in
denying ECOT’s motion for leave to file an amended answer is a distinct question
from whether the trial court’s order denying that motion is immediately
appealable. The right to appeal under R.C. 2744.02(C) hinges on the effect of the
trial court’s order, and rightly or wrongly decided, the trial court’s denial of leave
had the effect of depriving ECOT of its alleged immunity defense.
{¶ 21} In support of its holding, the court of appeals expressed concern
that expanding Hubbell could lead to abuse by political subdivisions delaying the
assertion of a timely immunity defense. 2012-Ohio-1185, ¶ 16-17. We have
explicitly rejected the use of judicial policy preferences to override valid
legislation, however. Hubbell, 115 Ohio St. 3d 77, 2007-Ohio-4839, 873 N.E.2d
878, at ¶ 22. Thus, neither our notions of public policy nor those of the appellate
court establish a basis for a refusal to apply R.C. 2744.02(C) as written.
{¶ 22} Although the issue is beyond the scope of its proposition of law,
which concerns only the finality of the trial court’s denial of leave to amend its
answer, ECOT urges this court to further hold that the trial court abused its
discretion by denying its motion for leave and that ECOT is entitled to immunity
as a matter of law. The court of appeals has not considered whether the denial of
ECOT’s motion for leave to amend its answer amounts to an abuse of discretion,
and neither the court of appeals nor the trial court has considered whether ECOT
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would be entitled to summary judgment on the ground of statutory immunity had
it been permitted to raise that defense in an amended answer. We decline to
decide those issues before the lower courts have the opportunity to address them
in the first instance.
Conclusion
{¶ 23} The trial court’s denial of ECOT’s motion for leave to file an
amended answer to raise the affirmative defense of political-subdivision
immunity precluded ECOT from enjoying the benefits of the alleged immunity.
The court of appeals therefore possessed jurisdiction to determine ECOT’s appeal
of that order pursuant to R.C. 2744.02(C). Accordingly, we reverse the dismissal
of ECOT’s appeal from the denial of its motion for leave to file an amended
answer, and we remand this matter to the court of appeals for resolution of
ECOT’s appeal.
Judgment reversed
and cause remanded.
O’CONNOR, C.J., and O’DONNELL, KENNEDY, and O’NEILL, JJ., concur.
PFEIFER and LANZINGER, JJ., dissent.
____________________
LANZINGER, J., dissenting.
{¶ 24} I respectfully dissent and would affirm the judgment of the Eighth
District Court of Appeals. Interpreting R.C. 2744.02(C) to allow an immediate
appeal of a trial court’s order denying a motion for leave to file an amended
answer is, I believe, an unwarranted extension of Hubbell v. Xenia, 115 Ohio
St.3d 77, 2007-Ohio-4839, 873 N.E.2d 878.
{¶ 25} The Hubbell majority accepted the idea that an order denying the
city of Xenia summary judgment on grounds of immunity was an appealable
order, despite the fact that the order did not completely resolve the immunity
question between the parties. The Hubbell majority held that “[w]hen a trial court
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denies a motion in which a political subdivision or its employee seeks immunity
under R.C. Chapter 2744, that order denies the benefit of an alleged immunity”
and is therefore appealable under R.C. 2744.02(C). Id. at syllabus. In my view,
to be a final, appealable order under this statute, the order must be a final
disposition of the immunity defense. I believe Hubbell to have been wrongly
decided, and at the very least, it should be confined to its facts.
{¶ 26} In a well-reasoned opinion, this court unanimously held that the
denial of a Civ.R. 12(B)(6) motion to dismiss is not a final, appealable order.
State Auto. Mut. Ins. Co. v. Titanium Metals Corp., 108 Ohio St. 3d 540, 2006-
Ohio-1713, 844 N.E.2d 1199. So too here we should recognize that the court did
not finally determine the issue of immunity adversely to a party, giving rise to an
appealable order under R.C. 2744.02(C). In this case, the trial court simply did
not grant leave to Electronic Classroom of Tomorrow (“ECOT”) to file an
amended answer. There was no “denial” on the merits of an immunity defense.
Therefore, R.C. 2744.02(C) does not apply.
{¶ 27} As the court of appeals recognized, political subdivisions are
subject to the same civil rules as are other litigants. Civ.R. 8(C) requires that in a
responsive pleading, a party “set forth affirmatively * * * any other matter
constituting an avoidance or affirmative defense,” which includes the defense of
political-subdivision immunity. Here, the case commenced in March 2008, and
ECOT filed answers to the amended complaint and the second amended
complaint without asserting the affirmative defense of political subdivision
immunity. A codefendant raised the immunity defense in a motion to dismiss in
January 2009. See State ex rel. Electronic Classroom of Tomorrow v. Cuyahoga
Cty. Court of Common Pleas, 129 Ohio St. 3d 30, 2011-Ohio-626, 950 N.E.2d
149, ¶ 5. But not until a year later did ECOT attempt to raise the immunity issue
in a motion for partial summary judgment. It was not until Supportive Solutions
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argued that ECOT had waived the immunity defense that ECOT attempted to
obtain leave to file an amended answer.
{¶ 28} Civ.R. 15(A) allows for amendment of pleadings by leave of court
and provides that “[l]eave of court shall be freely given when justice so requires.”
I would hold that ECOT waived its right to raise the immunity defense in this
case, just as we held in a case in which the motion to amend the answer came
after reversal of summary judgment on appeal, almost three years after the case
was filed and four months before the trial. Turner v. Cent. Local School Dist., 85
Ohio St. 3d 95, 98-99, 706 N.E.2d 1261 (1999).
{¶ 29} A trial court's decision to grant or deny a party leave to amend a
pleading is reviewed on the standard of abuse of discretion. Wilmington Steel
Prods., Inc. v. Cleveland Elec. Illum. Co., 60 Ohio St. 3d 120, 122, 573 N.E.2d
622 (1991). An abuse of discretion connotes more than an error of law or of
judgment; it implies that the court's attitude is unreasonable, arbitrary, or
unconscionable. Blakemore v. Blakemore, 5 Ohio St. 3d 217, 219, 450 N.E.2d
1140 (1983), citing State v. Adams, 62 Ohio St. 2d 151, 157, 404 N.E.2d 144
(1980).
{¶ 30} If the majority is correct that denial of leave to file an amended
answer under these circumstances is immediately appealable, then the only issue
is whether the trial court acted unconscionably in denying leave. Furthermore, if
ECOT was deprived of its defense, it was because of its own inactivity, not a
denial by the court.
{¶ 31} The majority states that R.C. 2744.02(C) focuses on the effect of
the trial court’s order on a party’s ability to claim immunity. If that is accurate,
then potentially any adverse intermediate order is subject to interlocutory appeal
in a case in which immunity may be claimed. This matter has been in litigation
for over five years and now is to be remanded to the court of appeals for a
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piecemeal review that will cause further delay and expense to both parties.
Certainly this cannot be what the General Assembly intended.
PFEIFER, J., concurs in the foregoing opinion.
____________________
Demer & Marniella, L.L.C., John A. Demer, and James A. Marniella; and
Paul W. Flowers Co., L.P.A., and Paul W. Flowers, for appellant.
Davis & Young and Kurt D. Anderson, urging reversal for amicus curiae,
Ohio Association of Civil Trial Attorneys.
________________________
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