Maas v. Maas

• Decision Date: 04 November 2020
• Docket Number: NO. C-190536,C-190536
• Citation: 161 N.E.3d 863,2020 Ohio 5160
• Parties: Joseph R. MAAS, Individually and Derivately on behalf of JTM Provisions Company, Inc., Plaintiff-Appellee, v. Anthony A. MAAS, John T. Maas, Jr., Jerome T. Maas, Gregory J. Sykes, John Sullivan, James F. Berding, and JTM Provisions Company, Inc., Defendants-Appellees.
• Court: Ohio Court of Appeals

161 N.E.3d 863

2020 Ohio 5160

Joseph R. MAAS, Individually and Derivately on behalf of JTM Provisions Company, Inc., Plaintiff-Appellee,

v.Anthony A. MAAS, John T. Maas, Jr., Jerome T. Maas, Gregory J. Sykes, John Sullivan, James F. Berding, and JTM Provisions Company, Inc., Defendants-Appellees.

NO. C-190536

Court of Appeals of Ohio, First District, Hamilton County.

Date of Judgment Entry on Appeal: November 4, 2020

Stites & Harbison PLLC, William G. Geisen, Andrew J. Poltorak and Cassandra L. Welch, for Plaintiff-Appellant.

Vorys, Sater, Seymour and Peas LLP, Victor A. Walton, Jr., Jacob D. Mahle and Jessica K. Baverman, Cincinnati, for Defendants-Appellees Anthony A. Maas, John T. Maas, Jr., and Jerome T. Maas.

Frost Brown Todd LLC, Ali Razzaghi and Ryan W. Goellner, Cincinnati, for Defendants-Appellees Gregory J. Sykes, John Sullivan and James F. Berding.

Santen & Hughes and Brian P. O'Connor, Cincinnati, for Defendant-Appellee JTM Provisions Company, Inc.

OPINION.

Winkler, Judge.

{¶1} Plaintiff-appellant Joseph R. Maas ("Joe"), individually and derivatively on behalf of JTM Provisions Company, Inc., ("JTM") appeals the decision of the Hamilton County Court of Common Pleas granting summary judgment in favor of the officers, shareholders and directors of JTM on his claims for breach of fiduciary duty and minority-shareholder oppression. We find no merit in his three assignments of error, and we affirm the trial court's judgment.

I. Facts and Procedure

{¶2} JTM is a closely held, family-owned, food-processing business based in Harrison, Ohio. It originated as a butcher shop and delicatessen operated by the shareholders' parents and has transformed into a business with a national presence. Currently, it is equally owned and controlled by Joe and his three brothers: defendants-appellees Anthony T. Maas ("Tony"), John T. Maas, Jr., ("Jack") and Jerome T. Maas ("Jerry") (collectively "the shareholders"). All four shareholders also sit on JTM's board of directors.

{¶3} Each of the four shareholders has played a role in JTM's growth from a small family enterprise to a national supplier of food products to restaurants, schools, and government entities. Tony is the president and chief executive officer of the company. Jack is the chairman of the board of directors and was involved in sales and marketing, although he has stepped away from those duties. Jerry is a vice-president and focused on business development and special projects. Until recently, Joe was also a vice-president and focused on facilities management.

{¶4} Defendants-appellees Gregory Sykes, James Berding, and John Sullivan are independent directors of JTM (collectively "outside directors"). All are experienced businessmen and directors. They have been full voting members of the board of directors since 2013. JTM added the outside directors, who were not family members or employees, to bring differing perspectives and help ensure sound decision-making.

{¶5} Joe has long been at odds with his brothers, especially Tony, about the way the business is run. Woven through the complaint are Joe's various claims that Tony is domineering and controlling and forces out anyone who questions his demands. In Joe's view, Tony's volatile leadership style results in the board of directors consistently voting with Tony, leading to a six to one outcome, with Joe being the lone dissenting vote. Joe claims that the board lacks independence and that it acquiesces to Tony's demands.

{¶6} The other shareholders and the outside directors counter that Joe has brought forth a litany of meritless complaints about the way JTM is managed and that those complaints have increased in recent years. They claim that he has become relentlessly adversarial toward the company and his fellow directors.

{¶7} The outside directors' response is that they actively participate in board meetings, engage in discussion and debate, and ask questions. They gather information and build consensus before voting on a resolution. They also contend that each time Joe has complained, they have reviewed and investigated his complaints. The complaints were either found to be unproven or the board adopted corrective measures.

{¶8} On November 9, 2017, Joe filed a complaint naming as defendants the company, the shareholders, and the outside directors. Count one was a direct claim for minority-shareholder oppression. Counts two through four were breach-of-fiduciary-duty claims. Joe's allegations involved three distinct matters: (1) JTM's plant and freezer expansion; (2) excessive and self-serving charitable giving programs; and (3) self-dealing and gross mismanagement by Tony.

{¶9} The shareholders filed a motion to dismiss count one of Joe's complaint for minority-shareholder oppression. The trial court granted the motion because the allegations of the complaint did not demonstrate that Joe had suffered individual harm separate and distinct from any injury to the corporation. Nevertheless, the court dismissed count one of the complaint without prejudice. It stated that Joe could seek leave to amend his complaint, "but he must submit the type of facts that support a minority shareholder direct action."

{¶10} Over a year later, Joe filed a motion for leave to amend his complaint. His proposed amended complaint contained additional allegations in support of count one, which had previously been dismissed by the trial court. The court denied the motion stating that the amendment would be futile. It stated, "The facts in Plaintiff's proposed first amended complaint do not describe the kind of facts required for a minority suppression action. There are no unique facts that are distinct to Plaintiff but rather a complaint that alleges only facts that implicate the profitability of the corporation." The court later permitted Joe to file an amended complaint, with the caveat that count one had been dismissed.

{¶11} Subsequently, the other shareholders and the outside directors filed motions for summary judgment on the remaining counts of Joe's complaint. The trial court granted those motions. On September 5, 2019, the court journalized a final judgment entry granting judgment in favor of the defendants and dismissing the action with prejudice. This appeal followed.

II. Breach of Fiduciary Duty

{¶12} Joe presents three assignments of error for our review. In his first assignment of error, he contends that the trial court erred in granting the shareholders' and outside directors' motions for summary judgment. He argues that material issues of fact existed for trial on his claims for breach of fiduciary duty, that the trial court disregarded his evidence, and that the trial court improperly applied the business-judgment rule. This assignment of error is not well taken.

A. Standard of Review for Summary Judgment

{¶13} An appellate court reviews a trial court's ruling on a motion for summary judgment de novo.

Grafton v. Ohio Edison Co. , 77 Ohio St.3d 102, 105, 671 N.E.2d 241 (1996) ; Chateau Estate Homes, LLC v. Fifth Third Bank , 2017-Ohio-6985, 95 N.E.3d 693, ¶ 10 (1st Dist.). Summary judgment is appropriate if (1) no genuine issue of material fact exists for trial, (2) the moving party is entitled to judgment as a matter of law, and (3) reasonable minds can come to but one conclusion and that conclusion is adverse to the nonmoving party, who is entitled to have the evidence construed most strongly in his or her favor. Temple v. Wean United, Inc. , 50 Ohio St.2d 317, 327, 364 N.E.2d 267 (1977) ; Chateau Estate Homes at ¶ 10. The trial court has an absolute duty to consider all pleadings and evidentiary material when ruling on a motion for summary judgment. It should not grant summary judgment unless the entire record shows that summary judgment is appropriate. Greene v. Whiteside , 181 Ohio App.3d 253, 2009-Ohio-741, 908 N.E.2d 975, ¶ 23 (1st Dist.).

{¶14} The moving party bears the initial burden of informing the court of the basis for its motion and demonstrating the absence of any genuine issues of material fact. Dresher v. Burt , 75 Ohio St.3d 280, 282-293, 662 N.E.2d 264 (1996) ; Taft, Stettinius & Hollister, LLP v. Calabrese , 2016-Ohio-4713, 69 N.E.3d 72, ¶ 10 (1st Dist.). Once the moving party has met its burden, the nonmoving party has a reciprocal burden to set forth specific evidentiary facts showing the existence of a genuine issue for trial. Dresher at 293, 662 N.E.2d 264 ; Columbia Dev. Corp. v. Krohn , 1st Dist. Hamilton No. C-130842, 2014-Ohio-5607, 2014 WL 7277755, ¶ 17. The nonmoving party cannot rest on conclusory allegations or self-serving interpretations of the evidence presented. Dresher at 293, 662 N.E.2d 264 ; Zang v. Cones , 2015-Ohio-2530, 34 N.E.3d 955, ¶ 43 (1st Dist.).

{¶15} The mere existence of factual disputes between the parties does not necessarily preclude summary judgment. Only disputes over genuine factual matters that affect the outcome of the suit will properly preclude summary judgment. Factual disputes that are irrelevant should not stop the entry of judgment as a matter of law. Smith v. A.B. Bonded Locksmith, Inc. , 143 Ohio App.3d 321, 326, 757 N.E.2d 1242 (1st Dist.2001) ; Thompson v. Eiler , 1st Dist. Hamilton No. C-990634, 2000 WL 864444,*3 (June 30, 2000).

B. Corporate Officers' Fiduciary Duties

{¶16} To maintain a claim for breach of a fiduciary duty, the plaintiff must prove (1) the existence of a duty arising from a fiduciary relationship; (2) a failure to observe the duty; and (3) an injury proximately resulting from that failure. Strock v. Pressnell , 38 Ohio St.3d 207, 527 N.E.2d 1235 (1988) ; Troja v. Pleatman , 2016-Ohio-7683, 65 N.E.3d 809, ¶ 8 (1st Dist.). Joe brought breach-of-fiduciary-duty claims against two distinct groups, the shareholders, who are also officers and directors of the corporation, and the outside directors.

{¶17} As to the officers of the corporation, R.C. 1701.641(B) provides,

An officer shall perform the officer's duties to the corporation in good faith, in a

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