Horenstein, Nicholson & Blumenthal, L.P.A. v. Hilgeman
| Decision Date | 03 September 2021 |
| Docket Number | 28838,Nos. 28581,s. 28581 |
| Citation | 178 N.E.3d 71 |
| Parties | HORENSTEIN, NICHOLSON & BLUMENTHAL, L.P.A., Plaintiff-Appellant v. Jack R. HILGEMAN, et al., Defendants-Appellees |
| Court | Ohio Court of Appeals |
TERRY W. POSEY, JR., Atty. Reg. No. 0078292 and MARTIN A. FOOS, Atty. Reg. No. 0065762, 109 North Main Street, Suite 500, Dayton, Ohio 45402, Attorneys for Plaintiff-Appellant, Horenstein, Nicholson & Blumenthal, L.P.A.
GEORGE D. JONSON Atty. Reg. No. 0027124 and G. TODD HOFFPAUIR, Atty. Reg. No. 0064449, 600 Vine Street, Suite 2650, Cincinnati, Ohio 45202, Attorneys for Appellant, Craig T. Matthews.
RICHARD A. BOUCHER, Atty. Reg. No. 0033614, 77 West Elmwood Drive, Suite 304, Dayton, Ohio 45459, Attorney for Defendants-Appellees, Christopher F. Cowan and John P. Hilgeman.
{¶ 1} This matter is before the court on two consolidated appeals following a bench trial. The first appeal (Case No. 28581) involves the appeal of Plaintiffs/Appellants, Horenstein, Nicholson, and Blumenthal, LLP. ("HNB"), from two judgments. The first judgment (issued on October 22, 2019) found HNB liable to Defendants/Appellees, John Hilgeman ("John") and Christopher Cowan ("Chris") (collectively "Appellees") on their counterclaims for defamation and false light and awarded them $200,000 in damages.1 The second judgment (issued on June 9, 2020) awarded prejudgment and post-judgment interest to Appellees on the defamation and false light claims, and also found HNB had engaged in frivolous conduct under R.C. 2323.51. Pursuant to that finding, the trial court awarded Appellees attorney fees and costs.
{¶ 2} Appellant, Craig Matthews, the attorney for HNB, also appeals (in Case No. 28838) from the June 9, 2020 judgment awarding Appellees attorney fees and costs. In this judgment, the trial court found that Matthews was also guilty of frivolous conduct under R.C. 2323.51 and ordered him to pay attorney fees and costs to Appellees.
{¶ 3} According to HNB, the trial court erred in awarding judgment against it on the defamation and false light claims of Appellees, in imposing attorney fees for frivolous conduct, and in awarding prejudgment interest with respect to the defamation and false light claims. Matthews's position is that the trial court erred in awarding attorney fees against him based on frivolous conduct and also erred in the amount of fees awarded.
{¶ 4} In the October 22, 2019 judgment entry, the court also found in HNB's favor on a breach of contract claim against Defendant, Jack Hilgeman ("Jack"), and awarded damages for the breach. In addition, the court rejected Jack's counterclaim for defamation and false light against HNB, as well as HNB's claims against Jack for violation of Ohio's trade secrets law and fraud. Finally, at trial, the court granted the Civ.R. 41(B)(2) motion of Appellees and their law firm, Cowan and Hilgeman (C&H), to dismiss the trade secret and fraud claims HNB made against them. None of these rulings have been appealed, and no assignments of error have been asserted. Jack and C&H are also not parties to the appeal.
{¶ 5} After reviewing the record, we conclude that the trial court erred by finding in Appellees’ favor on their claims for defamation and false light. HNB's complaint and an affidavit filed in support of a temporary restraining order were absolutely privileged, and Appellees’ counterclaims did not state a cause of action, because the alleged defamatory statements bore some reasonable relation to the judicial proceeding. Furthermore, as to statements that HNB's attorney made in a newspaper article and in a "tweet," even if these statements were considered defamatory, HNB would be vicariously liable only if it authorized or ratified the statements. However, there was no evidence that HNB did so.
{¶ 6} Furthermore, the statements in a newspaper article and in the tweet were not defamatory as a matter of law, under the totality of the circumstances and reading the statements in the context of the publication and how a reasonable reader would interpret them. Accordingly, the judgment in Appellees’ favor on the counterclaims must be reversed. In light of this conclusion, the trial court's June 9, 2020 judgment awarding prejudgment and post-judgment interest on the counterclaim judgment must also be reversed.
{¶ 7} We additionally conclude that there was competent, credible evidence to support the trial court's finding that HNB and Matthews engaged in frivolous conduct concerning the trade secret and fraud claims against Appellees. However, the trial court's decision to assess fees from the date the complaint was filed was not supported by competent evidence and was not based on sound reasoning. This is because under R.C. 2323.51(A)(2)(a)(iii), parties only need minimal support for their allegations to avoid a finding of frivolous conduct. Parties are allowed to investigate the truth of allegations or factual contentions. However, if parties persist in relying on the allegations when they are known to be unsupported by evidence, then they have engaged in frivolous conduct. Here, HNB knew by September 28, 2018, that its fraud and trade secret claims against Appellees were unsupported by the evidence, and damages were properly assessed only after that date.
{¶ 8} Because the trial court awarded attorney fees and costs for a significantly longer period, the award for attorney fees and costs must be reversed and remanded for further proceedings. In addition, the trial court erred in awarding Appellees attorney fees for work performed by Jack, who was an attorney and co-defendant, on his own claims. HNB and Matthews were not guilty of frivolous conduct with respect to Jack. Furthermore, the use of the word "attorney" in R.C. 2323.51 connotes an agency relationship between two parties; therefore, fees an attorney might charge himself are not "attorney fees." Appellees may, however, be entitled to fees for work Jack performed solely on their behalf for the fraud and trade secrets claims (in addition to their retained attorney's fees for those claims), if they can establish that they were "legally obligated" to pay him fees.
{¶ 9} Finally, Matthews's arguments about the ratio the trial court applied in awarding fees for work Jack performed on his own claims are moot, given the necessity to reverse the attorney fee award and remand for further hearing.
{¶ 10} Accordingly, HNB's first and third assignments of error will be sustained, and HNB's second assignment of error will be sustained in part and overruled in part. Matthews's first assignment of error will be sustained in part and overruled in part, and Matthews's second assignment of error will be sustained in part and overruled in part as moot.
{¶ 11} Because certain aspects of the October 22, 2019 judgment have not been appealed, that judgment will be affirmed in part and reversed in part. Specifically, the October 22, 2019 judgment in favor of John Hilgeman and Christopher Cowan on their counterclaims for defamation and false light will be reversed, and the remainder of that judgment will be affirmed.
{¶ 12} Concerning the June 9, 2020 judgment on the post-trial motions, that judgment will be reversed in part and affirmed in part. The judgments for prejudgment and post-judgment interest will be reversed. However, the trial court's judgment that HNB and Craig Matthews engaged in frivolous conduct will be affirmed in part and reversed in part as to the date on which the frivolous conduct began and the time from which attorney fees may be calculated. The award of attorney fees will be reversed and remanded for further hearing on what attorney fees may be awarded to Appellees in connection with the claims against them that were based on trade secrets and fraud.
{¶ 13} Because a clear understanding of the factual background is important in understanding the issues, we will outline the facts in some detail.
{¶ 14} HNB is a law firm that specializes in the following areas of legal practice: workers’ compensation, personal injury, social security disability, and veterans’ disability. Transcript of Proceedings ("Trial Tr."), p. 164. During the times relevant here, HNB was divided into three profit centers based on area of practice. Each center was really its own business under the corporate shell, but shared certain allocated expenses like rent, office administrator, receptionist, and so on. Id. Workers’ compensation ("WC") and personal injury ("PI") cases were combined in one profit center. Id. Each center had its own year-end profit, based on how well that center performed during the year. Id. at p. 165.
{¶ 15} Bruce Nicholson ("Bruce") was licensed to practice law in 1977 and had been handling WC claims for HNB and its predecessor firm since 1980. Id. at p. 162-163. Bruce had been a shareholder with HNB since 1984, and he was solely in charge of the WC/PI profit center until around 2010, when another WC attorney working in the center, Fred Sommer ("Fred"), became a shareholder. Id. at p. 165 and 881.
{¶ 16} After 1984, the WC practice did very well until the economic downturn in 2008-2009, when auto plants and the shops supporting them closed. Id. at p. 168-170. At that point, HNB decided to expand and increase its PI practice rather than referring PI clients to other firms. Id. at p. 170. The firm also invested heavily in marketing, which was successful, and the PI client list began to grow. Id. at 173 and 175.
{¶ 17} In May 2012, HNB hired Jack as an associate to work in both WC and PI, but primarily PI. Id. at p. 178 and 180. Jack had graduated from law school in 2010 and had worked at "C&H" from 2010 to 2012. Id. at p. 180, 709, and 734. The partners in that firm were John (Jack's father) and Chris, who had been in practice together as C&H since 1990. Id. at p. 834.
{¶ 18} Jack signed an employment agreement with HNB on May 18, 2012, and then signed a second agreement on January 2, 2014. ...
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