J. Fox Demoisey, & Demoisey Law Office, PLLC v. Ostermiller, 2014-CA-001827-MR
| Decision Date | 06 May 2016 |
| Docket Number | NO. 2014-CA-001827-MR,NO. 2014-CA-001864-MR,2014-CA-001827-MR,2014-CA-001864-MR |
| Parties | J. FOX DEMOISEY, AND DEMOISEY LAW OFFICE, PLLC APPELLANTS/CROSS-APPELLEES v. PETER L. OSTERMILLER APPELLEE/CROSS-APPELLANT |
| Court | Kentucky Court of Appeals |
TO BE PUBLISHED
APPEAL FROM JEFFERSON CIRCUIT COURT
The Jefferson Circuit Court dismissed the abuse of process claim without prejudice on the ground that it was premature because Infocon's malpractice action against DeMoisey was still pending at the appellate level; it granted summary judgment to Ostermiller on the tortious interference with contractual relations and tortious interference with prospective business relations/business advantage claims on the basis that there was not a valid fee agreement in place between DeMoisey and Infocon and, therefore, no contract to support the tortious interference claims.
DeMoisey has appealed asserting that the circuit court erred in entering summary judgment on the tortious interference claims. Ostermiller filed a cross-appeal asserting that the circuit court should have dismissed the abuse of process claim with prejudice because it is time-barred. Upon careful review of the record and applicable legal authority, we AFFIRM in part as related to the tortious interference claims, REVERSE in part as related to the abuse of process claim, andREMAND to the circuit court with instructions to dismiss the abuse of process claim with prejudice.2
I. BACKGROUND
J. Fox DeMoisey is an attorney licensed to practice law in the Commonwealth of Kentucky. In the early 1990s, DeMoisey began representing Infocon Systems, Inc., a software solutions corporation focused on facilitating business transactions. Infocon is wholly controlled by Deepak Nijhawan, its President, and Robert Keith Hughes, its Vice President.3
In approximately 1998, Infocon began doing business with Exact Software North America, Inc. ("Exact").4 Infocon was a reseller of Exact's software. Problems developed between Exact and Infocon around 2002. Ultimately, in the spring of 2003, Exact sued Infocon in the Marion County, Ohio, Court of Common Pleas. Asserting an action on account, Exact claimed that Infocon owed it $143,031.77 in unremitted payments from sales of Exact's software to Infocon's customers. Infocon removed Exact's suit to the United States District Court, Northern District of Ohio in Toledo, on the basis of diversity jurisdiction. Infocon also counterclaimed for breach of contract, fraud andintentional interference with the contract and asserted several affirmative defenses to the collection action.
Infocon engaged DeMoisey, along with local Ohio counsel, John Carey and Bob Bohmer, to represent it in connection with the Exact dispute. At this time, Infocon did not have the financial wherewithal to pay its counsel an hourly fee. Initially, it was agreed in return for his legal services, DeMoisey would receive a one-third interest in a company called Alocam.5 As the Exact litigation proceeded, Alocam's net value diminished, causing doubt as to how DeMoisey would be compensated. It is unclear exactly how the relationship evolved from there, but, as stated by the federal district court, at some point it became "firmly set in the minds of Hughes and DeMoisey, at least, an understanding that DeMoisey would receive one-third of the results of the litigation." Exact Software N.A., Inc. v. Infocon, Inc., No. 3:03CV7183, 2012 WL 1142476, at *8 (N.D. Ohio Apr. 4, 2012). Sometime around late 2004 or early 2005, approximately two years into the Exact litigation, DeMoisey drafted and delivered a fee agreement converting his one-third interest in Alocam to a contingency fee for one-third of any recovery from Exact. Hughes and Nijhawan deny ever signing any fee agreement with DeMoisey. A signed agreement has never been produced.6
The Exact litigation dragged on for several years.7 On February 28, 2007, Infocon and Exact participated in a mediation of their lawsuit at the Seelbach Hotel in Louisville, Kentucky. As recounted by the federal district court presiding over the dispute, this mediation culminated in a tentative settlement being reached between the parties:
On February 28, 2007, Infocon and Exact participated in a mediation of their lawsuit. Mr. Patel, head of Exact's Dutch operations, and Mr. Kent, head of Exact's North American operations, attended, along with their attorney, as did DeMoisey and Infocon's principals, Deepak Nijhawan and Robert Hughes. Patel and Kent had to leave fairly shortly after the mediation started. Just before they did so, Kent and Hughes went to the restroom together. When they came out, Hughes announced that the case had been settled for $4 million. Patel stated that Nijhawan and Kent would have to go to Dallas to finalize the settlement.
Exact Software N.A., Inc., supra, 2012 WL 1142476, at *3.
A few days later, on March 2, 2007, DeMoisey met with Nijhawan and Hughes to discuss the approach they should take while in Dallas. Hughes and Nijhawan told DeMoisey that they each wanted to net $1 million. Hughes confirmed that they wanted DeMoisey to get the same amount for his fee. Thisapparently led to a discussion among the three concerning how much each would need to gross before taxes to net a million dollars each. DeMoisey explained his fee would be taxed as ordinary income whereas theirs would be taxed at the capital gains rate. DeMoisey also recommended paying his associate, Jonathan Breitenstein, and local counsel, Carey, bonuses out of the settlement. To accomplish a net of $1 million to each of the three of them and give something to Breitenstein and Carey as bonuses, DeMoisey recommended settling for $5.3 or $5.4 million instead of the $4 million they had discussed at the mediation.
This conversation did not sit well with Nijhawan and Hughes. Apparently, they perceived DeMoisey's suggestion as an attempt to get more than a one-third contingency fee. While this may not have been DeMoisey's intent, Nijhawan and Hughes clearly thought DeMoisey was overreaching. What followed next was a breakdown in communication. This litigation is the result of that breakdown and its aftermath.
The Dallas trip was scheduled for March 12, 2007. On March 7, 2007, Hughes and Nijhawan opened a new checking account in the name of Infocon. At some point, they also contacted Peter L. Ostermiller about representing them for the purpose of disputing DeMoisey's fee.8 On March 12, 2007, Hughes and Nijhawan flew to Dallas where they met with the executive officers of Exact's parent Dutch company, Exact Holding NV. At the Dallas conference, Hughes, Nijhawan and Exact agreed to a settlement of $4 milliondollars, the same sum they had discussed the prior month at the Seelbach Hotel. Before returning to Louisville, Hughes and Nijhawan called Ostermiller from the airport in Dallas to report that they had settled the Exact matter. On March 15, 2007, Ostermiller sent Infocon an engagement letter. In part, the letter set forth that Ostermiller had been engaged "regarding any potential attorney's fees and expense dispute between Infocon Systems, Inc., and its counsel, Fox DeMoisey, and issues related directly thereto."
Sometime thereafter, Ostermiller referred Hughes and Nijhawan to Scott P. Zoppoth, another Louisville attorney. On or about July 7, 2007, Hughes and Nijhawan retained Zoppoth relative to "the preparation, and/or review of the settlement documents regarding the resolution of [the] lawsuit involving Exact Software of North America." Neither Hughes nor Nijhawan told DeMoisey that they had retained Ostermiller or Zoppoth.
At the request of the parties, the federal district court had stayed the Exact litigation until August 2007, so that the parties could work on a possible settlement. In late July 2007, with a status report coming due in federal court, DeMoisey contacted Exact and requested a final written confirmation of the settlement agreement. On July 31, 2007, Exact's counsel advised DeMoisey that a settlement agreement was complete and would be forwarded immediately to him. DeMoisey and Exact's counsel then advised the federal district court that their settlement agreement was final. The federal district court entered an order thesame day acknowledging the settlement and ordering that any disputes regarding the terms of the settlement were to be submitted to the court for final adjudication.
After receiving and reviewing the written settlement agreement, DeMoisey forwarded Exact's counsel the specifics of his office's IOLTA,9 attorney escrow account and wiring instructions for the settlement payment. However, shortly thereafter, Exact's counsel contacted DeMoisey and said that Exact would need to "push back" the payment until late August.10 This aroused some concern and suspicion with DeMoisey. DeMoisey asked his associate to do some research into Exact. As a result of his research, DeMoisey's associate discovered Exact NV's T-1 Securities and Exchange Commission Report. The report, dated July 26, 2007, alarmed DeMoisey because it indicated that no settlement had been reached in the Exact litigation.11
On August 7, 2007, Hughes advised DeMoisey that he had edited and revised the settlement...
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