Leroy v. Allen, Yurasek & Merklin

• Decision Date: 18 July 2007
• Docket Number: No. 2005-1593.,No. 2005-1926.,2005-1593.,2005-1926.
• Citation: 872 N.E.2d 254,114 Ohio St.3d 323,2007 Ohio 3608
• Parties: LeROY et al., Appellants and Cross-Appellees, v. ALLEN, YURASEK & MERKLIN et al., Appellees and Cross-Appellants.
• Court: Ohio Supreme Court

872 N.E.2d 254

114 Ohio St.3d 323

2007-Ohio-3608

LeROY et al., Appellants and Cross-Appellees, v. ALLEN, YURASEK & MERKLIN et al., Appellees and Cross-Appellants.

No. 2005-1593.

No. 2005-1926.

Supreme Court of Ohio.

Submitted April 3, 2007.

Decided July 18, 2007.

Buckingham, Doolittle & Burroughs, L.L.P., Charles E. Ticknor III, Thomas J. Bonasera, and Paul Giorgianni, Columbus, for appellants and cross-appellees.

Porter, Wright, Morris & Arthur, L.L.P., Anthony R. McClure, and Joseph W. Ryan Jr., Columbus, for appellees and cross-appellants.

Volkema Thomas, L.P.A., Frederick M. Morgan Jr., and Michael S. Miller, Columbus; and Paul W. Flowers Co., L.P.A. and Paul W. Flowers, Cleveland, urging affirmance for amicus curiae Ohio Academy of Trial Lawyers.

Eugene P. Whetzel, Columbus; and Lane Alton & Horst, L.L.C., Alvin E. Mathews Jr., Rick E. Marsh, and Amy J. Ervin, Columbus, urging reversal for amicus curiae Ohio State Bar Association.

O'CONNOR, J.

{¶ 1} This appeal presents two distinct issues involving whether a complaint in a legal-malpractice action filed by plaintiffs who are outside the attorney-client relationship states cognizable claims. For the reasons that follow, we hold that the complaint under consideration does state valid claims, but under only one of the two grounds endorsed by the court of appeals. Consequently, we affirm in part and reverse in part the judgment of the court of appeals.

Background

{¶ 2} Mary Elizabeth Behrens died on May 1, 2002. Mary Elizabeth Behrens was the matriarch of the Behrens family and had been the principal shareholder in Marysville Newspapers, Inc., a closely held corporation, which publishes two local newspapers in Union County and which is the part owner of another corporation that prints newspapers in Union and nearby counties.

{¶ 3} Plaintiffs-appellants and cross-appellees, Julie Behrens LeRoy and Mary Behrens Miller, are the surviving daughters of Mary Elizabeth Behrens. Dan Behrens is the third surviving child of Mary Elizabeth Behrens. As of October 2001, Mary Elizabeth Behrens (63 shares), Dan Behrens (30 shares), Julie LeRoy (30 shares), and Mary Miller (20 shares) jointly owned Marysville Newspapers, Inc.

{¶ 4} In November 2001, Mary Elizabeth Behrens's former will was replaced by a new one. In December 2001, all of Mary Elizabeth Behrens's stock in Marysville Newspapers was transferred to her grandson Kevin Behrens (Dan Behrens's son). LeRoy and Miller were not advised of these developments until after Mary Elizabeth Behrens had died.

{¶ 5} In December 2002, LeRoy and Miller filed a legal-malpractice complaint in the Union County Court of Common Pleas against defendants-appellees and cross-appellants, Allen, Yurasek & Merklin, David F. Allen, and Stephen J. Yurasek, for legal services performed by defendants regarding the preparation of the November 2001 will and the December 2001 transfer of the stock. The complaint alleged that in November 2001, Mary Elizabeth Behrens was suffering from numerous physical ailments and dementia, that Dan Behrens had "orchestrated" the execution of the new will, that Dan and Kevin Behrens had "orchestrated" the transfer of the stock, that defendants had improperly served simultaneously as counsel for Mary Elizabeth Behrens, Dan Behrens, Kevin Behrens, and Marysville Newspapers, that defendants had colluded with Dan and Kevin Behrens to impose undue pressure upon Mary Elizabeth Behrens regarding the will, and that defendants had failed to competently advise Mary Elizabeth Behrens regarding the will.

{¶ 6} LeRoy and Miller asserted that based on the allegations, defendants had breached legal duties to provide services in a reasonable and competent manner, unimpeded by conflicts of interest. LeRoy and Miller sought compensatory and punitive damages and other relief through one count sounding in negligence and one count sounding in breach of contract.

{¶ 7} LeRoy and Miller's complaint specifically asserted that their claims were not barred by the holding in Simon v. Zipperstein (1987), 32 Ohio St.3d 74, 512 N.E.2d 636. In Simon, this court confirmed that "an attorney may not be held liable by third parties as a result of having performed services on behalf of a client, in good faith, unless the third party is in privity with the client for whom the legal services were performed, or unless the attorney acts with malice." Id. at 76, 512 N.E.2d 636, citing Scholler v. Scholler (1984), 10 Ohio St.3d 98, 10 OBR 426, 462 N.E.2d 158, paragraph one of the syllabus.

{¶ 8} The complaint alleged that special circumstances existed justifying departure from Simon's general rule, including that conflicts of interest were present that made defendants' representation improper, that defendants had acted in bad faith, and that defendants had colluded with Dan and Kevin Behrens. In an attempt to invoke the privity exception of Simon, the complaint also alleged that Mary Elizabeth Behrens, as "majority shareholder" of Marysville Newspapers, owed a fiduciary duty to LeRoy and Miller as minority shareholders.

{¶ 9} Defendants moved to dismiss the complaint under Civ.R. 12(B)(6), arguing that Simon controlled, that LeRoy and Miller had no standing to sue them for legal malpractice under its holding, and that LeRoy and Miller had not met any of Simon's exceptions. On December 6, 2004, the trial court dismissed all of LeRoy and Miller's claims.¹ The trial court gave no specific reasons for its decision other than referring generally to defendants' motion to dismiss.

{¶ 10} Upon LeRoy and Miller's appeal, the court of appeals reversed on two different grounds, holding that LeRoy and Miller had succeeded in stating claims under two different exceptions to Simon's general rule sufficient to overcome dismissal of their claims pursuant to Civ.R. 12(B)(6). In finding Simon's privity exception satisfied, the court of appeals held that Mary Elizabeth Behrens, as majority shareholder in Marysville Newspapers, owed a fiduciary duty to LeRoy and Miller, as minority shareholders, and that therefore LeRoy and Miller were in privity with her for purposes of the stock transfer. LeRoy v. Allen, Yurasek & Merklin, 3d Dist. No. 14-04-49, 2005-Ohio-3516, 2005 WL 2064144, ¶ 17; see, also, opinion on reconsideration, 162 Ohio App.3d 155, 2005-Ohio-4452, 832 N.E.2d 1246, ¶ 18.² In finding Simon's malice exception satisfied, the court of appeals held that LeRoy and Miller's complaint included allegations of the special circumstances of conflict of interest and collusion that were sufficient to state a valid claim. Id. at ¶ 21-22.

{¶ 11} LeRoy and Miller moved for reconsideration in the court of appeals, based on concerns that the court of appeals' initial decision was ambiguous as to whether a portion of the trial court's order of dismissal would stand. Prior to the court of appeals' ruling on that motion, LeRoy and Miller appealed to this court based on the same concerns, and defendants cross-appealed from the court of appeals' determination that LeRoy and Miller had stated valid claims under Simon. This court accepted the appeal and the cross-appeal as case No. 2005-1593. 108 Ohio St.3d 1411, 2006-Ohio-179, 841 N.E.2d 317.

{¶ 12} In the interim, the court of appeals granted LeRoy and Miller's motion for reconsideration, vacated its initial decision, and issued a new decision with minor clarifications that satisfied LeRoy and Miller's concerns. 162 Ohio App.3d 155, 2005-Ohio-4452, 832 N.E.2d 1246. Defendants appealed to this court from the court of appeals' decision on reconsideration. This court accepted that appeal of defendants as case No. 2005-1926, granted defendants' motion to consolidate case Nos. 2005-1593 and 2005-1926, 108 Ohio St.3d 1435, 2006-Ohio-421, 842 N.E.2d 61, and ordered that the parties combine the briefing of the two cases. This court later ordered, sua sponte, that the parties were to file their merit briefs according to the alignment of the parties in case No. 2005-1593. 108 Ohio St.3d 1463, 2006-Ohio-594, 842 N.E.2d 536.

{¶ 13} The end result of this sequence of events is that LeRoy and Miller are nominally designated as "appellants and cross-appellees" under both case numbers even though they no longer take issue with any aspect of the court of appeals' judgment — due to that court's decision to grant reconsideration, to vacate its initial opinion, and to issue the modified opinion on reconsideration. Moreover, although defendants are nominally listed as "appellees and cross-appellants," it is only defendants who continue to maintain that the judgment of the court of appeals should be reversed.

Analysis

{¶ 14} Because the trial court dismissed all claims under Civ.R. 12(B)(6), that rule's standards govern our consideration. In order to sustain dismissal of a complaint under Civ.R. 12(B)(6) for failure to state a claim upon which relief may be granted, it must appear beyond doubt that the plaintiff can prove no set of facts in support of the claim that would entitle the plaintiff to relief. Doe v. Archdiocese of Cincinnati, 109 Ohio St.3d 491, 2006-Ohio-2625, 849 N.E.2d 268, ¶ 11. The allegations of the complaint must be construed as true. Maitland v. Ford Motor Co., 103 Ohio St.3d 463, 2004-Ohio-5717, 816 N.E.2d 1061, ¶ 11. Furthermore, the complaint's material allegations and any reasonable inferences drawn therefrom must be construed in the nonmoving party's favor. Kenty v. Transamerica Premium Ins. Co. (1995), 72 Ohio St.3d 415, 418, 650 N.E.2d 863.

{¶ 15} In Scholler, 10 Ohio St.3d 98, 10 OBR 426, 462 N.E.2d 158, this court recognized that attorneys have a qualified immunity from liability to third parties for acts or omissions concerning the representation of a client, holding at paragraph one of the syllabus that "[a]n attorney is immune from liability to third persons arising from his performance as an attorney in good faith on behalf of, and with the knowledge of his client, unless such third person is in...