Blackwell v. Gorman

• Decision Date: 08 March 2007
• Docket Number: No. 06CV A09-12617.,06CV A09-12617.
• Parties: BLACKWELL v. GORMAN et al.
• Court: Ohio Court of Common Pleas

870 N.E.2d 1238

142 Ohio Misc.2d 50

2007-Ohio-3504

BLACKWELL v. GORMAN et al.

No. 06CV A09-12617.

Court of Common Pleas of Ohio, Franklin County.

Decided March 8, 2007.

Cooper & Elliott, L.L.C., Rex H. Elliott, Charles H. Cooper Jr., Columbus, and John C. Camillus, for plaintiff.

Bieser, Greer & Landis, L.L.P., and David C. Greer, Dayton; Williams & Connolly, L.L.P., John K. Villa, and Craig D. Singer, Washington, DC, for defendants.

FRYE, Judge.

I. Introduction

{¶ 1} In the wake of his federal conviction for insider trading of securities, Roger D. Blackwell, Ph.D., brought this legal-malpractice case against his trial lawyer Thomas O. Gorman. Also sued was Gorman's law firm of Porter, Wright, Morris & Arthur, L.L.P. ("Porter Wright").

{¶ 2} Plaintiff's criminal jury trial in the United States District Court for the Southern District of Ohio lasted five weeks. His 2005 conviction was sustained in posttrial rulings by District Judge James L. Graham and upheld on appeal. United States v. Blackwell (C.A.6, 2006), 459 F.3d 739. On February 20, 2007, the United States Supreme Court denied Blackwell's petition for a writ of certiorari. Blackwell v. United States, Supreme Court No. 06-885, ___ U.S. ___, 127 S.Ct. 1336, 167 L.Ed.2d 84. The fact that postconviction proceedings might yet be undertaken under Section 2255, Title 28, U.S. Code does not prevent the existing judgment, fully exhausted on direct appeal, from being regarded as a final resolution on the merits. 63 Ohio Jurisprudence 3d (2003), Judgments Section 351; Cully v. Lutheran Med. Ctr. (1987), 37 Ohio App.3d 64, 523 N.E.2d 531; Hapgood v. Warren (C.A.6, 1997), 127 F.3d 490, 494, fn. 3.

{¶ 3} Blackwell's complaints about his lawyers include assertions that Porter Wright misled him about its expertise in the defense of white-collar criminal cases, mishandled negotiations with the government, did a poor job trying his criminal trial, unduly pressured him into firing cocounsel experienced in criminal cases, required him to post substantial financial security for his legal fees on the eve of trial, and charged a clearly excessive legal fee, all while losing his case. Inherent in many of his arguments is the allegation that the federal judgment was wrong and that he is actually innocent of the government's charges. For its part, Porter Wright has counterclaimed, seeking over $2.7 million in unpaid fees and expenses.

{¶ 4} Following an initial conference with the court, defendants filed a motion for summary judgment on December 15, 2006. Plaintiff responded on January 12, 2007; a reply memorandum was filed on January 25.¹ Plaintiff filed a motion to supplement the factual record on February 15, 2007, which was unopposed and is hereby granted. That brings before the court fees statements memorializing legal work performed by Porter Wright after trial during the fall of 2005 and within one year prior to the filing of this suit. That legal work was contemporaneously billed to Blackwell. The professional work performed within one year prior to suit has implications for the statute-of-limitations defense asserted by defendants.

{¶ 5} Defendants seek summary judgment premised upon the one-year statute of limitations for legal-malpractice claims in Ohio, and upon arguments tied to the criminal conviction. The facts relevant to the conviction and to the statute of limitations are not genuinely disputed. (For example, the verdict forms are filed with the Singer affidavit at tab I.) Accordingly, the court has concluded that defendants' motion is properly granted in part.

II. Factual Background

{¶ 6} Prior to his conviction, Blackwell was a prominent professor at the Business School of the Ohio State University. His expertise and reputation were widely known, and he frequently was invited to serve as a director of publicly traded companies. Complaint ¶ 6-7.

{¶ 7} Blackwell's legal difficulties arose from a 1999 tender offer by the Kellogg Company. It sought to acquire the stock of Worthington Foods, a small natural-foods company headquartered in Franklin County. Blackwell was a member of the board of the target company, Worthington Foods, between 1992 and 1999. Complaint, ¶ 8. When that transaction closed, Kellogg "paid stockholders a premium over the prior trading price of Worthington Foods stock." Id. at ¶ 15. Those having foresight, or given material inside information about the potential Kellogg acquisition, profited. Therein lies the tale.

{¶ 8} Once Kellogg initiated negotiations toward a possible buyout of Worthington Foods ("WF"), Blackwell and his fellow board members became privy to information about Kellogg's interest before that information became public. The government alleged in the criminal case that, in violation of obligations owed under the securities laws of the United States, Blackwell tipped inside information pertinent to the possible transaction involving WF to nine people.² Allegedly, they then bought WF stock before Kellogg's offer became public, gaining a financial premium on their stock. 459 F.3d at 749. At his criminal trial in 2005, Blackwell premised at least a part of his defense on the view that WF was subject to widespread speculation in the marketplace that a larger company might undertake a buyout and that that general awareness of the potential profit to be made in WF stock fully explained the trading in question.

{¶ 9} Allegedly, Blackwell informed Jack Kahl, "a long-time friend and business associate," that "Kellogg was going to buy out WF and that Kahl should buy WF stock." 459 F.3d at 749-750. Blackwell claims, in response in this case, that "the testimony of Jack Kahl (a witness who testified pursuant to an immunity agreement in order to avoid prison time himself)" played a large part in his conviction even though it was false. Complaint, ¶ 34-35.

{¶ 10} Blackwell's marital status is another prominent point in the story. He was married at the time of the Kellogg transaction in 1999 but had divorced by the time of his criminal trial in 2005. His ex-wife (Tina Stephan Blackwell, now remarried and called "Mrs. Lundgren" in the complaint) occupied a major role in the criminal trial. Hours after signing final separation papers in their domestic-relations case, Lundgren apparently changed testimony she had previously given under oath to the Securities and Exchange Commission ("SEC") in a civil investigation of the WF tender offer. Once a favorable witness, according to Blackwell, she became one of the government's leading witnesses against him. Id. Blackwell says his ex-wife was herself guilty of tipping family members but gained immunity from the government in exchange for her cooperation.³ Complaint, at ¶ 13-14, 17, 19; Answer, ¶ 19-20; United States v. Blackwell (Dec. 14, 2005), S.D. Ohio No. 2:04-CR-134, 2005 WL 3440880 ("Opinion, 12-14-05"), filed with the Singer affidavit in this case on December 15, 2006, at tab C, 2005 U.S. Dist. LEXIS 35939.

{¶ 11} As the Sixth Circuit summarized the record, Blackwell's ex-wife testified that "she and [Blackwell] gave her parents money to buy WF stock," that "both she and Blackwell lied to the NASD and the SEC about the tipping," and that their e-mail records were deleted and other conduct occurred to "withhold information and obscure their relationships with parties who bought WF stock." Blackwell, 459 F.3d at 750.

{¶ 12} To fully understand the complex interplay between proof at the criminal trial and plaintiff's allegations in this civil case, additional mention should be made of Lundgren's parents. According to plaintiff, they "testified before the SEC that they were not tipped by Plaintiff." Complaint, ¶ 35. However, Porter Wright "either forgot or simply failed to issue subpoenas to Tina Lundgren's parents to compel them to repeat that testimony at trial. These crucial witnesses fled to Europe during the trial and, therefore, could not be called as trial witnesses to establish that their daughter — the government's key witness — had given false testimony." Id. Thus, plaintiff now seeks to offer evidence in this malpractice case that the ultimate outcome of his federal trial would have been favorably influenced by the testimony of Lundgren's parents, who were never witnesses for any party, if only his lawyers had made it available.

{¶ 13} This illustrates the speculative nature of the actual-innocence claim, for the exact effect of the parents' hypothetical testimony and how it might have intersected with or contradicted Lundgren's testimony or affected her credibility can never truly be known. None of this ever came up before the jury. The government informed defense counsel about the parents' immunity agreement, and provided them the immunity letter shortly after Lundgren testified. Although Lundgren's parents were not government witnesses, this apparently was disclosed in order to cure any possible prejudice if the immunity arrangement were later found to constitute Brady material (see, generally, Brady v. Maryland (1963), 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215). Furthermore, the government agreed to bring Lundgren back to Columbus from New York City to testify further about the effect, if any, of her parents' immunity arrangement. Judge Graham agreed to allow the defense to recall Lundgren. For reasons not explained in this record as of yet, the defense chose not to put Lundgren back on the witness stand. On the legal issue, Judge Graham concluded (and the Sixth Circuit affirmed) that no Brady violation occurred. Opinion and Order by District Judge Graham case No. 2:04-CR-134, Nov. 18, 2005, at 18-19, 2005 WL 3113060 ("Opinion, 11-18-05"), filed with the Singer affidavit, at tab B; Blackwell, 459 F.3d at 759. The more important point, which Judge Graham pointedly recognized, was that "[d]efendants made the tactical decision not to engage in further cross-examination of Ms. Blackwell" about her parents' immunity. Opinion, 11-18-05, at 19.

{¶ 14} In short,...