Chandler & Assoc., Inc. v. America's Healthcare Alliance, Inc.

• Decision Date: 11 December 1997
• Docket Number: Nos. 71325,71832,Nos. 71325 and 71832,s. 71325,s. 71325 and 71832
• Parties: CHANDLER AND ASSOCIATES, INC. et al. Appellants, v. AMERICA'S HEALTHCARE ALLIANCE, INC. et al., Appellees. *
• Court: Ohio Court of Appeals

Page 572

125 Ohio App.3d 572

709 N.E.2d 190

CHANDLER AND ASSOCIATES, INC. et al. Appellants, v. AMERICA'S HEALTHCARE ALLIANCE, INC. et al., Appellees. ^*

Nos. 71325, 71832.

Court of Appeals of Ohio,

Eighth District, Cuyahoga County.

Nos. 71325 and 71832.

Decided Dec. 11, 1997.

Weston, Hurd, Fallon, Paisley & Howley, L.L.P., and William H. Baughman, Jr., Cleveland; Conway, Marken, Wyner, Kurant & Kern and Peter Turner, Cleveland, for appellants.

Robert P. DeMarco, Cleveland, for appellees.

ROCCO, Judge.

Chandler and Associates, Inc. ("C & A") and Primary Health Services, Inc. ("PHS") appeal from two judgments of the common pleas court. On August 27, 1996, the court, pursuant to jury verdict, found in favor of Daniel J. Stypula on his counterclaims for breach of contract and tortious interference with business relationships, and awarded him compensatory and punitive damages. On December 18, 1996, the court awarded him prejudgment interest on those damages. We affirm the judgments as modified.

C & A provides administrative services to businesses with self-funded employee medical insurance plans. PHS is a managed care provider, i.e., a "PPO," which contracts with medical providers, such as hospitals, physicians, and radiologists, for the provision of medical services. C & A and PHS are owned by Arthur W. Chandler.

In May, 1990, Chandler hired Stypula as the Director of Large Group Marketing for C & A and as an independent broker for PHS. At the time of hire, Stypula was the sole proprietor of his own business, Benefit Concept Consultants which Chandler permitted him to continue operating. Chandler agreed to pay Stypula a base salary, plus commissions, on the fees paid to C & A and PHS by business clients Stypula procured. Chandler further promised to pay such commissions to Stypula, so long as his clients remained "on the books." C & A paid these commissions directly to Stypula, while PHS paid the commissions to Benefit Concept Consultants.

During the subsequent three years, Stypula procured a number of clients for C & A and/or PHS, many of which considered him their broker, and earned a substantial annual gross income from commissions. In 1992, Chandler discharged Stypula from his director position with C & A. However, Chandler retained him as an independent broker for both C & A and PHS, and permitted Stypula to maintain an office on their premises. Although Stypula was an independent broker and no longer an employee of C & A, C & A and PHS continued to pay the same commissions to him and Benefit Concept Consultants.

On July 26, 1993, Stypula and others formed their own PPO, America's Healthcare Alliance, Inc., under the tradename of America's Workers' Compensation Alliance ("AWCA"). Although a PPO, AWCA executed no access contracts with medical providers for provision of health care services, since Stypula and others formed AWCA merely as a means of sharing commissions and protecting their personal assets. Thereafter, Stypula, acting in his capacity as an independent broker for C & A and PHS, while actually doing business as AWCA, continued to market the services of C & A and PHS. However, Stypula did not tell Chandler that he had formed AWCA.

On August 13, 1993, Stypula sent a marketing letter to Compensation Consultants, Inc. ("CCI"), in which he claimed that AWCA had access to numerous medical providers. Following this, he arranged a meeting with representatives from CCI, Richard Alkire and Ted Miller, having obtained the prior approval of PHS's President, William Daley, Jr. On August 27, 1993, Stypula met personally with CCI representatives. At this meeting, he marketed PHS's services and, with the approval of Daley, gave the CCI representatives a copy of PHS's medical provider booklet.

Shortly thereafter, Chandler learned that Stypula had formed AWCA and had participated in the meeting with CCI representatives. Chandler then concluded that Stypula had engaged in deceptive trade practices and was unfairly competing with C & A and PHS. On October 7, 1993, C & A and PHS commenced the instant case. On October 21, 1993, Chandler wrote letters to Stypula's clients, notifying them that Stypula was "no longer a broker authorized to place business with Chandler & Associates, Inc., Primary Health Services, Inc., or any of our affiliates."

On October 29, 1993, Chandler wrote a letter to Stypula, in which Chandler terminated Stypula's authority to act as C & A's and PHS's broker, and ceased the payment of commissions to him, both effective as of the date AWCA was incorporated. Subsequently, Chandler informed Stypula's clients that neither C & A nor PHS would conduct any direct business with Stypula or pay him any further commissions. In addition, C & A and PHS obtained an injunction against Stypula, enjoining him from representing himself and AWCA as affiliates of C & A and PHS, and sent copies of this injunction to his clients. As a result of Chandler's October 1993 actions, some of Stypula's clients were eventually forced to cease doing business with him in order to maintain their contracts with C & A and PHS. However, CCI subsequently entered into a contract for PHS's services.

In their complaint, C & A and PHS alleged unfair competition, misappropriation of trade secrets, deceptive trade practices, breach of fiduciary duty, and tortious interference with contractual relationships, for which they sought compensatory and punitive damages. Stypula counterclaimed, alleging breach of contract to pay him commissions, as long as his clients remained on C & A's & PHS's books, deceptive trade practices, and tortious interference with business relationships.

Upon cross-motions for summary judgment, the court granted partial summary judgment to Stypula, dismissing C & A's and PHS's entire complaint against Stypula, and the case proceeded to trial on Stypula's contract and tort counterclaims. C & A and PHS moved for a directed verdict on these claims, which the court denied. At the close of all the evidence, the case was submitted to a jury, which found in favor of Stypula.

The court awarded Stypula compensatory and punitive damages, totaling $1,350,000 plus costs against PHS and $450,000 plus costs against C & A, based upon the testimony of an expert witness, an economist, Dr. John F. Burke, Jr. Four months later, the court awarded Stypula prejudgment interest of $97,273.12 against PHS and $32,424.37 against C & A.

C & A and PHS now appeal raising fourteen assignments of error for our review. We shall consider related assignments together and review them in an order that promotes clarity and continuity.

I

The twelfth assignment of error challenges the court's summary judgment grant to Stypula on PHS's claim of deceptive trade practices, and states:

"The trial court committed prejudicial error in granting summary judgment for defendant Daniel Stypula on plaintiff Primary Health Services, Inc.'s Ohio Deceptive Trade Practices Act Claim because genuine issues of material fact existed as to whether Daniel Stypula's representations to Compensation Consultants, Inc. caused a likelihood of confusion or misunderstanding regarding the affiliation of American Workers' Compensation Alliance, Inc. with Primary Health Services, Inc."

Civ.R. 56(C) states in part:

"Summary judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence in the pending case, and written stipulations of fact, if any, timely filed in the action, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. * * * A summary judgment shall not be rendered unless it appears from such evidence or stipulation and only therefrom, that reasonable minds can come to but one conclusion and that conclusion is adverse to the party against whom the motion for summary judgment is made, such party being entitled to have the evidence or stipulation construed most strongly in his favor."

In their summary judgment motion, C & A and PHS contended that Stypula, by sending the August 13, 1993 letter to CCI and, subsequently, meeting with its representatives, "passed off" the services of PHS as those of AWCA and, in so doing, likely caused confusion regarding the lack of affiliation between the two PPO's. Although C & A and PHS admitted that they incurred no monetary damages due to Stypula's actions, they argued that such passing off constituted a deceptive trade practice, entitling them to an award of attorney fees.

In his own summary judgment motion, Stypula urged that he did not engage in deceptive trade practices. He contended that he represented himself to CCI as not only the owner of his own business, AWCA, but also as the broker for C & A and PHS. He further urged that he marketed to CCI the services of only PHS, that he obtained CCI as his own client, and that CCI, as a result of his marketing, later contracted with PHS.

The Ohio Deceptive Trade Practices Act, R.C. Chapter 4165, controls the resolution of this issue and provides in part:

"A person engages in a deceptive trade practice when, in the course of his business, vocation, or occupation, he:

"(A) Passes off goods or services as those of another;

"* * *

"(C) Causes likelihood of confusion or misunderstanding as to affiliation, connection, or association with, or certification by, another[.]" R.C. 4165.02.

"The court may award reasonable attorneys' fees to the prevailing party. * * * Costs for attorneys' fees may be assessed against a defendant if the court finds that the defendant has willfully engaged in the trade practice knowing it to be deceptive." R.C. 4165.03.

When adjudicating claims arising under the Ohio Deceptive Trade Practices Act, Ohio courts shall apply the same analysis applicable to claims commenced under analogous federal law. Cesare v. Work (1987), 36 Ohio App.3d 26, 520 N.E.2d 586; Cincinnati Sub-Zero...