Arthur Young & Co. v. Kelly

• Decision Date: 28 June 1990
• Docket Number: No. 89AP-711,89AP-711
• Citation: 588 N.E.2d 233,68 Ohio App.3d 287
• Court: Ohio Court of Appeals
• Parties: ARTHUR YOUNG & COMPANY, Appellee, v. KELLY, Appellant.

Page 287

68 Ohio App.3d 287

588 N.E.2d 233

ARTHUR YOUNG & COMPANY, Appellee, v. KELLY, Appellant.

No. 89AP-711.

Court of Appeals of Ohio, Tenth District, Franklin County.

Decided June 28, 1990.

Carlile, Patchen, Murphy & Allison, Alan F. Berliner and Jay F. McKirahan; and Scott Univer, for appellee.

Bradley & Farris Co., L.P.A., Philip R. Bradley and Robert H. Stoffers, for appellant.

REILLY, Presiding Judge.

This is an appeal from a judgment of the Franklin County Court of Common Pleas finding defendant, David Kelly, in contempt for violating a preliminary injunction. The merits of the preliminary injunction were previously reviewed by this court in Arthur Young & Co. v. Kelly (Apr. 28, 1988), No. 87AP-800, unreported, 1988 WL 41069.

Plaintiff is a large national accounting firm. Defendant was employed as an accountant at plaintiff's Columbus office. Defendant joined the firm in 1984 and eventually was promoted to principal status within the firm. On May 21, 1987, the firm informed defendant this his employment was going to be terminated in several weeks. About two weeks later, defendant approached the firm to seek a release from a restrictive employment covenant that he had signed while at the firm. The covenant reads:

"You agree that you will not * * * for a period of two years after the termination of this agreement, directly or indirectly solicit or provide, without the consent of the firm, any professional services such as those provided by the firm for anyone who was a client of the firm anytime during the 12 months prior to your leaving the firm and for whom you provided any service as an employee of the firm during the prior five years. * * * " However, plaintiff did not release defendant, but instead filed suit in the common pleas court on July 17, 1987. Plaintiff's amended complaint sought injunctive relief, an accounting, and damages for defendant's alleged breaches. Specifically, plaintiff alleged that defendant breached the restrictive covenant, that he breached his fiduciary duty not to compete with the firm and that he unfairly competed with the firm.

After issuance of this preliminary injunction, defendant appealed to this court and sought a stay of the injunction. His initial application for a stay was refused because defendant had not first applied to the trial court for a stay. This court granted defendant's second application for a stay on October 27, 1987 after he was denied a stay by the trial court.

Pending appeal of the preliminary injunction, on November 6, 1987, plaintiff filed a motion for defendant to show cause why he should not be held in contempt of court for alleged violations of the preliminary injunction.

On April 28, 1988, this court ruled on the appeal of the preliminary injunction. In our decision, we modified the preliminary injunction and reversed the judgment of the trial court in part. This court found that plaintiff had failed to show irreparable harm at the preliminary injunction hearing as to the clients then retained by defendant because those clients had submitted affidavits stating that they no longer wanted services from plaintiff and would seek services from another firm if they were prohibited from retaining defendant. Arthur Young & Co., supra. We noted that defendant admitted soliciting some clients from plaintiff, but we said that injunctive relief was inappropriate as to those clients because plaintiff had an adequate remedy at law in the form of damages, if any, that it could prove as a result of those breaches. After stating that the principal purpose of the preliminary injunction should have been to maintain the status quo pending determination of the underlying action, we wrote:

"Although there is no evidence of irreparable harm from past breaches in the record on appeal, the trial court properly granted the preliminary injunction in order to prevent any future solicitation, given the fact that appellant admitted to soliciting Arthur Young clients in contravention of the restrictive covenant. The purpose of the preliminary injunction, unique to the facts presented by this case, should be to maintain the status quo as of July 17, 1987, the date the complaint was filed, and guard against the potential for any possible future solicitation causing irreparable harm to appellee. * * * "

On remand, the trial court changed the wording of the injunction by inserting that the purpose of its injunction was to maintain the status quo.

After this, on July 1, 1988, the trial court conducted proceedings on the contempt motion. At the close of the hearing, the court indicated that it would hold an evidentiary hearing on the contempt motion. Thereafter, the court filed an entry indicating that plaintiff's affidavits established a prima facie showing that defendant should appear to show cause why he should not be found in contempt.

The evidentiary hearing on the contempt motion was held on July 22, 1988. However, instead of deciding the matter at the close of the hearing, the trial judge took the matter under advisement. But, before the court could act, the trial judge was defeated in the judicial election. The case was transferred to a successor judge.

Eventually, the successor judge ruled on the matter, over defendant's objection. The court reviewed the transcripts of the contempt hearing and post-hearing memoranda and found defendant in contempt for violations of the original preliminary injunction and of the preliminary injunction as modified.

The journal entry and order finding defendant in contempt, states, at paragraph six of the Conclusions of Law, that: "Defendant violated the Court's Orders by performing services for at least Hallet, Masheter, Webster and Priest." Pursuant to R.C. 2727.12, the trial court fined defendant $200, and further ordered defendant to pay plaintiff's legal fees incurred for prosecution of the motion. Further, the court ordered defendant to account for all fees billed or paid in connection with plaintiff's former clients that defendant performed services for on or after July 17, 1987. Finally, the court ordered defendant to post a $25,000 bond to " * * * secure the damages assessed under rulings 4 and 5(B) and (C) in the Decision of May 1, 1989." The bond thus secured the attorney fees and damages for prosecuting the contempt and attorney fees awarded as discovery sanctions on a previous ruling. Whereupon, defendant appealed to this court.

Defendant advances the following assignments of error:

"I. The present trial court (Judge Stratton) erred as a matter of law and abused her discretion by finding Defendant-Appellant, David Kelly, in contempt of court, in that: (a) Judge Stratton did not preside over the contempt hearing; (b) Judge Stratton issued her decision based upon the transcript of the contempt hearing; (c) Mr. Kelly specifically objected to Judge Stratton's review of the transcript of the contempt hearing, in lieu of presiding over the hearing.

"II. The former trial court (Judge Letts) erred as a matter of law and abused his discretion by requiring Mr. Kelly to prove he was not in contempt of court, thus requiring Mr. Kelly to bear the burdens of proof and going forward at the July 22, 1988 contempt hearing.

"III. The present trial court (Judge Stratton) erred as a matter of law and abused her discretion by finding Mr. Kelly in contempt of court.

"IV. The present trial court (Judge Stratton) erred as a matter of law and abused her discretion in assessing contempt of court damages which were measured by 'all fees billed and/or paid by any clients formerly with plaintiff for whom defendant performed services on or subsequent to July 17, 1987, until a date within thirty (30) days from this order'; and Judge Stratton further erred as a matter of law and abused her discretion by requiring Mr. Kelly to post 'an additional bond of $25,000 to secure the damages.' "

Before addressing defendant's four assignments of error, it is necessary to note some important principles of the law of contempt which bear upon the analysis herein.

The Supreme Court, in Windham Bank v. Tomaszczyk (1971), 27 Ohio St.2d 55, 56 O.O.2d 31, 271 N.E.2d 815, paragraph one of the syllabus, wrote:

"Contempt of court is defined as disobedience of an order of a court. It is conduct which brings the administration of justice into disrespect, or which tends to embarrass, impede or obstruct a court in the performance of its functions."

It is long established that " * * * [t]he power of contempt is inherent in a court, such power being necessary to the exercise of judicial functions * * *." Denovchek v. Bd. of Trumbull Cty. Commrs. (1988), 36 Ohio St.3d 14, 15, 520 N.E.2d 1362, 1364; State v. Local Union 5750 (1961), 172 Ohio St. 75, 15 O.O.2d 133, 173 N.E.2d 331; Hale v. State (1896), 55 Ohio St. 210, 45 N.E. 199. Hence, the power to punish for contempt is said " * * * to exist independently from express constitutional provision or legislative enactment. * * * " Cincinnati v. Cincinnati Dist. Council 51 (1973), 35 Ohio St.2d 197, 202, 64 O.O.2d 129, 132, 299 N.E.2d 686, 691. Although the Supreme Court of Ohio had repeatedly intimated that it is " * * * highly doubtful that the General Assembly may properly limit the power of a court to punish for contempt * * *," Cincinnati, supra, at 207, 64 O.O.2d at 135, 299 N.E.2d at 694, the General Assembly at least may prescribe procedure in indirect contempt cases.

"Proceedings in contempt are sui generis in the law. They bear some resemblance to suits in equity, to criminal proceedings and to ordinary civil actions; but they are none of these. Contempt proceedings are means through which the courts enforce their lawful orders. * * * " Cincinnati, supra, at 201-202, 64 O.O.2d at 132, 299 N.E.2d at 691. See J. Fox, The History of Contempt of Court (1972); Beal, Contempt of Court, Civil and Criminal (1908), 21 Harv.L.Rev. 161.

In accordance with these principles, it is particularly...