Internatl. Total Servs., Inc. v. Estate of Nichols , 2019 Ohio 4572 ( 2019 )

[Cite as Internatl. Total Servs., Inc. v. Estate of Nichols, 2019-Ohio-4572.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
INTERNATIONAL TOTAL SERVICES, :
INC., ET AL.,
Plaintiffs-Appellants, :
No. 107751
v. :
ESTATE OF ROBERT NICHOLS, :
Defendant-Appellee. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: November 7, 2019
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-16-858361
Appearances:
LoPresti, Marcovy & Marotta, L.L.P., Timothy A. Marcovy,
and Thomas P. Marotta, for appellants.
Heben Law, L.L.C., and Edward J. Heben, Jr., for
appellee.
KATHLEEN ANN KEOUGH, J.:
Plaintiffs-appellants, International Total Services, Inc. (“ITS”) and
Flight Services and Systems, Inc. (“FSS”) (collectively “appellants”) appeal the trial
court’s decision granting relief from judgment in favor of defendant-appellee,
Estate of Robert Nichols (“Nichols”).1 For the reasons that follow, we affirm the
trial court’s decision.
In Internatl. Total Servs., Inc. v. Nichols, 8th Dist. Cuyahoga No.
105182, 2017-Ohio-9448 (“Nichols I”), this court set forth the relevant background
and procedural history:
ITS and FSS provide passenger services, ground handling, security and
safety services, terminal services, and charter services to different
airlines at various airports throughout the country. FSS is a wholly
owned subsidiary of ITS.
In February 2016, ITS and FSS filed a complaint against [Robert]
Nichols alleging breach of fiduciary duty and seeking enhanced
damages under the faithless servant doctrine. Nichols was FSS’s
former general manager of operations at Logan Airport in Boston,
Massachusetts. Nichols was also a minority shareholder of ITS.
ITS and FSS’s complaint essentially alleges that Nichols made false
statements about FSS, its chairman-CEO, and its president in an
affidavit he submitted in support of his former coworker, Joseph
Travers’s (“Travers”), retaliatory discharge suit in the United States
District Court for the District of Massachusetts. See Travers v. Flight
Servs. & Sys., D.Mass. No. 11-10175-GAO, 2013 U.S. Dist. LEXIS 31667
(Mar. 7, 2013). ITS and FSS attached Nichols’s affidavit to their
complaint.
In Nichols’s Civ.R. 60(B) motion, he alleges that the statements in his
affidavit were truthful and that he was illegally terminated by FSS
because he would not fire Travers. Travers was the lead class action
plaintiff in Fair Labor Standards Act litigation against FSS in
Massachusetts. In his Civ.R. 60(B) motion, Nichols reaffirmed the
validity of his affidavit. Nichols claims that appellees filed the instant
complaint in retaliation for submitting the affidavit in Travers’s
retaliation suit.
1 The Estate of Robert Nichols was substituted as the party-defendant after Robert
Nichols passed away on November 16, 2017.
In his motion, Nichols states that he had retained counsel (“original
counsel”) in the summer of 2015 to collect stock redemption money due
to him from ITS “as a result of [the] unjust termination of [his]
employment [with FSS and] pursuant to the * * * shareholder
agreement relating to the minority shareholder stock [he] owned[.]”
Nichols states that he contacted his original counsel after he was served
with appellee[s’] complaint in March 2016 and retained original
counsel to represent him in the present case.
Nichols states, and the docket reflects, that his original counsel filed a
stipulated leave to plead, and the trial court extended his answer
deadline until May 6, 2016. The trial court extended the answer
deadline once more until May 16, 2016. However, no answer and
counterclaim was filed by Nichols or by counsel on his behalf.
On May 17, 2016, appellees filed a motion for default judgment. A
default hearing was set for May 31, 2016. The docket reflects that no
response to the default motion was filed and that neither Nichols nor
counsel appeared at the scheduled default hearing. On June 1, 2016,
the trial court entered a default judgment against Nichols and in favor
of appellees in the amount of $564,912.79. The trial court’s docket
reflects that notice of the default judgment entry was sent by email to
counsel for all parties only.
On October 13, 2016, Nichols filed a motion for relief from judgment
pursuant to Civ.R. 60(B) through new counsel. In the body of this
motion, Nichols states that he last spoke with his original counsel on
May 16, 2016. At that time, original counsel told Nichols he would file
an answer and counterclaim on Nichols’s behalf. Nichols further states
that after this conversation, original counsel did not respond to his
communications and that in September 2016, he contacted and
retained new counsel because he had not received any response from
original counsel for several months. Nichols claims he assumed his
original counsel had been diligently working on the instant matter and
he was unaware of the status of the case until new counsel informed
him of the fact that a default judgment had been entered against him.
Nichols did not file an affidavit in support of his motion, but attached
to his motion the federal court docket of the Travers litigation.
Upon receipt of Nichols’s motion for relief from default judgment, the
trial court set a deadline for ITS and FSS to respond. ITS and FSS
responded to Nichols’s motion and the trial court denied the motion
without holding a hearing the following day.
Id. at ¶ 2-10.
Nichols appealed the trial court’s decision. In Nichols I, this court
concluded that “Nichols’s grounds for relief from judgment appear on the face of
the record, and therefore, the trial court should have granted Nichols’s motion for
relief from judgment as a matter of law.” Id. at ¶ 22. However, this court also
concluded that “the trial court erred in denying Nichols’s motion for relief from
judgment without any evidentiary hearing.” Id. at ¶ 30.2 The judgment was
reversed and the case was remanded to the trial court.
Following remand, the trial court conducted an evidentiary hearing
on August 14 and September 5, 2018, where Nichols (1) asked the court to take
judicial notice of the court’s own docket as evidence of his original counsel’s
inexcusable neglect of the case, and (2) presented two affidavits of Robert Nichols
that were prepared and executed prior to his death. Appellants objected to the
admission of the affidavits on the grounds that they were hearsay and no exception
existed to warrant their admission. The trial court excluded the affidavits, but
agreed to take judicial notice of its own docket. Based solely on the court’s docket,
the trial court granted Nichols’s Civ.R. 60(B) motion for relief from judgment. The
court stated:
2 In State ex rel. Estate of Nichols v. Russo, 8th Dist. Cuyahoga No. 107508, 2018-
Ohio-3416, ¶ 9, 16, 18, this court noted that arguably these passages from Nichols I create
an ambiguity in the decision. Nevertheless, this court dismissed Nichols’s claims for writs
of prohibition and mandamus because Nichols had an adequate remedy at law — an
evidentiary hearing would be held and he could appeal from that resulting judgment. Id.
at ¶ 12-13, 16, 18.
[The court is] going to accept the docket, because that’s a public record,
and clearly shows that [original counsel] was not doing his job. So, I
will grant the 60(B), but the affidavits are excluded. This is solely on
the docket. * * * [T]he docket does show inexcusable neglect. It’s hard
to look at the docket and not know that [original counsel] was not doing
anything on the case.
(Tr. 39, Sept. 5, 2018 hearing.)
Appellants now appeal, raising as their sole assignment of error that
the trial court erred in granting Nichols’s motion for relief from judgment pursuant
to Civ.R. 60(B)(5).
We review a trial court’s decision on a motion for relief from
judgment for an abuse of discretion. Bank of N.Y. v. Elliot, 8th Dist. Cuyahoga
Nos. 97506 and 98179, 2012-Ohio-5285, ¶ 25. The term “abuse of discretion”
implies that the court’s attitude was unreasonable, arbitrary, or unconscionable.
Blakemore v. Blakemore, 5 Ohio St. 3d 217, 219, 450 N.E.2d 1140 (1983).
To prevail on a motion for relief from judgment, the movant must
demonstrate that: (1) the party has a meritorious defense or claim to present if the
relief is granted; (2) the party is entitled to relief under one of the grounds stated
in Civ.R. 60(B)(1)-(5); and (3) the motion is made within a reasonable time. GTE
Automatic Elec. v. ARC Industries, 47 Ohio St. 2d 146, 351 N.E.2d 113 (1976),
paragraph two of the syllabus. The movant must satisfy all three of these
requirements to obtain relief. State ex rel. Richard v. Seidner, 76 Ohio St. 3d 149,
151, 666 N.E.2d 1134 (1996).
Appellants contend that the trial court erred in granting Nichols’s
Civ.R. 60(B) motion because none of the GTE factors were satisfied. Specifically,
appellants contend that Nichols presented no evidence during the evidentiary
hearing satisfying his burden of proving that (1) relief from judgment was
warranted pursuant to Civ.R. 60(B)(5); (2) the motion was timely; and (3) he has
a meritorious defense.
We initially note that in Nichols I, this court determined that the trial
court record alone was sufficient to warrant the grant of Nichols’s Civ.R. 60(B)
motion for relief from judgment. Nichols I, 8th Dist. Cuyahoga No. 105182, 2017-
Ohio-9448, at ¶ 22 (“We find, however, that Nichols’s grounds for relief from
judgment appear on the face of the record, and therefore, the trial court should have
granted Nichols’s motion for relief from judgment as a matter of law.”). This court
determined that Nichols’s petition set “forth operative facts demonstrating that he
has a meritorious defense.” Id. at ¶ 23. This court also determined that the record
demonstrated that Nichols “made his motion for relief from judgment within a
reasonable time.” Id. at ¶ 29. Finally, this court concluded that “the actions of
Nichols’s original counsel amount to inexcusable neglect and are of the
extraordinary nature that fall within the scope of Civ.R. 60(B)(5).” Id. at ¶ 27.
Accordingly, because the trial court on remand stated that it granted
Nichols’s motion only considering its own record, which was the same record that
this court considered in Nichols I, it could be argued that our previous
determination regarding Nichols’s motion is the law of the case. See Hopkins v.
Dyer, 104 Ohio St. 3d 461, 2004-Ohio-6769, 820 N.E.2d 329 ¶ 15 (law-of-the-case
doctrine provides that the decision of a reviewing court in a case remains the law of
that case on the legal questions involved for all subsequent proceedings); Nolan v.
Nolan, 11 Ohio St. 3d 1, 3, 462 N.E.2d 410 (1984) (“where at a rehearing following
remand a trial court is confronted with substantially the same facts and issues as
were involved in the prior appeal, the court is bound to adhere to the appellate
court’s determination of the applicable law”). Notwithstanding the application of
this doctrine, the record supports the trial court’s decision and we find no abuse of
discretion.
I. Meritorious Defense
In addressing the first element of the GTE test, we find that Nichols
has presented a meritorious defense. Appellants filed a complaint against Nichols
asserting causes of action for breach of fiduciary duty and faithless servant.
Nichols contends that appellants’ complaint was filed outside the relevant statute
of limitations for a breach of fiduciary duty cause of action, and that the faithless
servant cause of action does not exist in Ohio but rather, is a remedy for breach of
fiduciary duty. Additionally, he contends that he owed no fiduciary duty to
appellants because he was no longer their employee, and even if he did owe a duty
to appellants, his affidavit, which appellants attached to their complaint and rely
on to support their cause of action, contained truthful statements. Appellants
contend that Nichols did not satisfy this element of the GTE test because he did
not provide substantial evidence to support his claims of a meritorious defense.
A defense is meritorious “if it is not a sham and when, if true, it states
a defense in part or in whole to the cause of action set forth.” Rowe v. Metro.
Property & Cas. Ins. Co., 8th Dist. Cuyahoga No. 73857, 1999 Ohio App. LEXIS
1942, 12 (Apr. 29, 1999), citing Brenner v. Shore, 34 Ohio App. 2d 209, 215, 297
N.E.2d 550 (10th Dist.1973). The moving party is not required to show that his
defense will be successful. CB Group v. Starboard Hospitality, L.L.C., 8th Dist.
Cuyahoga No. 93387, 2009-Ohio-6652, ¶ 17, citing Morgan Adhesives Co. v.
Sonicor Instrument Corp., 107 Ohio App. 3d 327, 334, 668 N.E.2d 959 (9th
Dist.1995).
Based on the defenses raised by Nichols, which involve two purely
legal questions — statute of limitations and whether a cause of action is recognized
in Ohio — we find that Nichols presented facts sufficient to support a valid defense
to the claims made by appellants. The success of Nichols’s defense is irrelevant;
rather, if the legal defenses are true, they provide a defense in whole or part to
appellants’ complaint. Nichols has, therefore, set forth meritorious defenses to
satisfy the first element of the GTE test. Moreover, this court in Nichols I found
that Nichols’s allegations that his “statements contained in his affidavit are truthful
and were made after FSS had terminated his employment * * * constitute a
meritorious defense to the claims in [appellants’] complaint, which are based
entirely upon their allegation that Nichols’s affidavit is untruthful.” Nichols I at
¶ 23.
II. Civ.R. 60(B)(5) — Inexcusable Neglect of Original Counsel
The general rule is that the neglect of a party’s attorney will be
imputed to the client for the purposes of Civ.R. 60(B)(1). GTE, 47 Ohio St. 2d at 153,
351 N.E.2d 113. This rule, however, “does not preclude the possibility that in an
appropriate case other factors may also be present that entitle a party to relief under
other sections of Civ.R. 60(B).” Id.
Civ.R. 60(B)(5) allows a court to relieve a party from a final
judgment for “any other reason justifying relief from that judgment.” This court
has held that Civ.R. 60(B)(5) is an appropriate ground to seek relief from a final
judgment when asserting that counsel was grossly ineffective, abandoned his
representation, and counsel’s neglect was inexcusable. See, e.g., Rowe, 8th Dist.
Cuyahoga No. 73857, 1999 Ohio App. LEXIS 1942 (an attorney’s failure to appear
and represent his client is inexcusable neglect and under Civ.R. 60(B)(5) would
constitute other grounds justifying relief); Hewitt v. Hewitt, 8th Dist. Cuyahoga
Nos. 71098 and 73448, 1998 Ohio App. LEXIS 5317 (Nov. 5, 1998) (failing to file a
timely answer and attend a divorce hearing was inexcusable neglect); Render v.
Belle, 8th Dist. Cuyahoga No. 93181, 2010-Ohio-2344 (inexcusable neglect found
where attorney failed to notify client of court dates or case developments and the
client was unaware that his attorney failed to attend court dates or respond to
motions).
Inexcusable neglect is different from the ordinary “simple lapses and
technical failures” contemplated in Civ.R. 60(B)(1). It is, rather, a matter of
“extraordinary nature, which is the purview of Civ.R. 60(B)(5).” Whitt v. Bennett,
82 Ohio App. 3d 792, 797, 613 N.E.2d 667 (2d Dist.1992). While the court may find
the party responsible for some measure of the failures, “fault should not
automatically be imputed when an attorney has grossly neglected a diligent client’s
case and misleads the client to believe that his interests are being properly
handled.” Id. at 798.
Nichols asserts that he is entitled to relief under Civ.R. 60(B)(5)
because the conduct of his original counsel goes beyond mere mistake,
inadvertence, or excusable neglect. He contends that his original counsel’s neglect
was inexcusable for failing to (1) file an answer even after receiving leave to plead
by opposing counsel and an extension by the trial court, (2) respond to appellants’
motion for default judgment, (3) appear at the default hearing, and (4) notify him
of these case developments, including that a one-half million dollar judgment was
rendered against him.
Appellants contend that the trial court abused its discretion in
granting Nichols’s motion because Nichols failed to present any testimony or
evidentiary material to support his motion and verify that his original counsel’s
actions constituted inexcusable neglect. Specifically, appellants assert that without
the testimony of Nichols’s original counsel or Nichols, no explanation existed why
counsel failed to file the answer, respond to the default motion, or attend the
default hearing. Additionally, appellants maintain that the docket contained
insufficient information for the trial court to rely on that would explain why
Nichols’s original counsel did not perform these responsibilities.
We initially note that by the time the Civ.R. 60(B) hearing was
conducted, Robert Nichols had passed away, and his affidavit in support of his
Civ.R. 60(B) motion had been objected to by appellants and excluded by the trial
court. Moreover, the trial court permitted the scope of the deposition of Robert
Nichols to include only those matters related to the complaint filed in the case, and
not any counterclaims or third party claims. Accordingly, any “testimony” from
Nichols was likely unavailable.
Appellants rely on the proposition that ‘“[i]f the movant files a
motion for relief from judgment and it contains allegations of operative facts which
would warrant relief under [Civ.R.] 60(B), the trial court should grant a hearing to
take evidence and verify these facts before it rules on the motion.”’ (Emphasis
added.) Coulson v. Coulson, 5 Ohio St. 3d 12, 16, 448 N.E.2d 809 (1983), quoting
Adomeit v. Baltimore, 39 Ohio App. 2d 97, 105, 316 N.E.2d 469 (8th Dist.1974).
Appellants contend that Nichols presented no evidence to verify the facts in his
motion, and that the record contained insufficient evidence for the trial court to
rely on in granting Nichols’s motion. We disagree.
Nichols alleged that his original counsel misled him to believe that
this matter was being properly handled. He also alleged that his original counsel
never notified him of the default hearing or the entry of default, resulting in a one-
half million dollar judgment against him. Additionally, he asserted that his
original counsel did not return his repeated attempts to contact him.
We find that the docket and the court’s record sufficiently support
Nichols’s allegations that his original counsel’s conduct amounted to inexcusable
neglect. First, the docket shows that all case notifications were directed to original
counsel and not to Nichols. Additionally, the docket reflects that no answer to the
complaint was ever filed, despite original counsel receiving a stipulation from
appellants’ counsel and an extension by the trial court to file an answer.
Original counsel’s neglect of the case was readily apparent to
appellants’ counsel because appellants’ counsel relied on assertions made by
Nichols’s original counsel about filing an answer in the case. As explained by
appellants’ counsel in its own motion for relief from judgment filed April 27, 2016,
counsel received a call from Nichols’s original counsel the day before the answer
was due. Nichols’s original counsel requested a leave to plead until May;
appellants’ counsel agreed. Nichols’s original counsel stated he would file a
stipulation for leave to plead, which would then moot appellants’ obligation to file
a motion for default. However, original counsel did not file the stipulation until
after the deadline for a motion for default judgment, and the trial court dismissed
appellants’ complaint for failure to prosecute. Appellants sought relief from
judgment claiming that they relied on original counsel’s representations that he
would file a timely stipulation for leave to plead; relief was granted. Appellants
obtained relief based on their reliance on original counsel’s assurances, but
according to appellants, Nichols is not entitled to relief based on similar
assurances. We decline to share in appellants’ view and find that the record
undoubtedly supports the trial court’s decision — it was not an abuse of discretion
to rely on its own record.
Our consideration of the trial court’s decision is guided by the fact
that it is well recognized that the law generally does not favor default judgments
and that cases should be decided on their merits whenever possible. Russo v.
Fonseca, 8th Dist. Cuyahoga No. 98527, 2012-Ohio-5714, ¶ 28, citing Wilson v.
Lee, 172 Ohio App. 3d 791, 2007-Ohio-4542, 876 N.E.2d 1312, ¶ 15 (2d Dist.). Thus,
“‘[w]here timely relief is sought from a default judgment and the movant has a
meritorious defense, doubt, if any, should be resolved in favor of the motion to set
aside the judgment so that cases made be decided on their merits.’” Id. at ¶ 28,
quoting GTE, 47 Ohio St. 2d 146, 351 N.E.2d 113, at paragraph three of the syllabus.
Moreover, original counsel’s inexcusable neglect caused a one-half
million dollar default judgment to be rendered against his client on an alleged
breach of fiduciary duty complaint where it is averred that the statute of limitations
expired prior to the filing of the complaint. This court has said that it “share[s] the
preference, particularly where large sums of money are at issue, for deciding cases
upon their merits instead of by default.” Russo at ¶ 29, citing Young v. Walker,
8th Dist. Cuyahoga No. 49972, 1986 Ohio App. LEXIS 5283 (Jan. 16, 1986).
Accordingly, Nichols demonstrated he was entitled to relief because
his original counsel’s conduct amounted to inexcusable neglect.
III. Timeliness
Finally, Civ.R. 60(B)(5) requires that a motion made under the rule
be made within a reasonable time. We find that Nichols’s Civ.R. 60(B) motion was
filed within a reasonable time; it was filed approximately four months following
the court’s decision ordering a default judgment. Counsel stated at the hearing
that Nichols was not aware of the default hearing, having never received notice,
and that he did not become aware of the judgment against him until new counsel
discovered the default. Accordingly, the motion was filed within a reasonable time.
Based on the foregoing, the trial court did not abuse its discretion in
granting Nichols’s Civ.R. 60(B) motion for relief from judgment. The record and
the court’s own docket reflect that (1) Nichols has set forth a meritorious defense,
(2) sufficient operative facts are alleged that entitle him to relief under Civ.R.
60(B)(5), and (3) the motion for relief was made within a reasonable time.
Accordingly, the assignment of error is overruled.
Judgment affirmed.
It is ordered that appellee recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said 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.
KATHLEEN ANN KEOUGH, JUDGE
FRANK D. CELEBREZZE, JR., P.J., and
RAYMOND C. HEADEN, J., CONCUR