O'Nesti v. Debartolo Realty Corp.

• Decision Date: 21 September 2005
• Docket Number: No. 04 MA 170.,04 MA 170.
• Citation: 163 Ohio App.3d 609,839 N.E.2d 943,2005 Ohio 5056
• Court: Ohio Supreme Court
• Parties: O'NESTI et al., Appellees, v. DeBARTOLO REALTY CORPORATION et al., Appellants.

Page 943

839 N.E.2d 943

163 Ohio App.3d 609

2005-Ohio-5056

O'NESTI et al., Appellees, v. DeBARTOLO REALTY CORPORATION et al., Appellants.

No. 04 MA 170.

Court of Appeals of Ohio, Seventh District, Mahoning County.

Decided September 21, 2005.

COPYRIGHT MATERIAL OMITTED

Timothy A. Shimko & Associates and Timothy A. Shimko, Cleveland, for appellees.

Manchester, Bennett, Powers & Ullman and Stephen T. Bolton, Youngstown; Squire, Sanders & Dempsey, L.L.P., Thomas S. Kilbane, and Steve A. Delchin, Cleveland, for appellants.

VUKOVICH, Judge.

{¶ 1} Defendants-appellants, DeBartolo Realty Corporation ("DRC") and DeBartolo Properties Management, Inc. ("DPMI"), appeal the decision of the Mahoning County Common Pleas Court, which denied their motion for summary judgment and granted the motion for summary judgment filed by plaintiffs-appellees, Gary O'Nesti and Leon Zionts. Appellants set forth multiple issues on appeal within seven assignments of error. For the following reasons, appellants' contentions are barred by res judicata or are otherwise without merit. The trial court's judgment for appellees is affirmed.

BACKGROUND

{¶ 2} In 1994, DRC implemented a Stock Incentive Plan for select employees. Deferred stock was allocated in varying amounts to various employees to be earned upon reaching certain goals. On August 6, 1996, DRC merged with a subsidiary of Simon Property Group, Inc., creating SD Property Group, Inc. Various employees ("the Agostinelli employees") immediately asked that all deferred stock originally allocated to them under the Stock Incentive Plan be distributed under the "Change in Control" provision of the Stock Incentive Plan. Appellees herein were not among the Agostinelli employees.

{¶ 3} In October 1996, the Agostinelli employees filed a complaint in the Mahoning County Common Pleas Court against DRC and DPMI for breach of contract and breach of the covenant of good faith and fair dealing. The defendants argued that upon the change in control, the employees were entitled only to the deferred stock that was earned but not yet vested. The trial court agreed, but this court reversed and entered summary judgment for the employees.

{¶ 4} We held that the plain language of the contract stated that upon a change in control, such as the August 6, 1996 merger, any unpaid Deferred Stock Award, meaning the shares originally allocated to each employee, vested and became payable regardless of whether they had been earned. Agostinelli v. DeBartolo Realty Corp. (Aug. 18, 1999), 7th Dist. No. 97CA227, 1999 WL 669518. We then remanded for determination of the defendants' counterclaims and determination of any damages. Id.

{¶ 5} On remand, the trial court disagreed with the defendants' main counterclaim and agreed with a set-off counterclaim regarding two employees. The trial court then determined damages as $16.575 per share multiplied by the number of shares originally allocated to each employee, plus ten percent prejudgment interest since August 6, 1996. Upon the employees' appeal, we agreed with this damage calculation but remanded for trial on the issue of whether premerger dividends were payable. Agostinelli v. DeBartolo Realty Corp. (Dec. 19, 2001), 7th Dist. Nos. 01CA9, 01CA10, 2001 WL 1647218. We also remanded the matter to the trial court for a determination as to the number of shares allocated to one certain employee, as the shares allocated to the remaining employees had been established by admission. We also denied the defendants' cross-appeal.

STATEMENT OF THE CASE

{¶ 6} Appellees were participants in the 1994 Stock Incentive Plan. They state that they were originally allocated 9,000 shares; they earned and later received 900 of these shares. Upon preparing for the merger, DRC sent letter agreements to the appellees, dated June 1, 1996, which detailed their terms of employment if they stayed after the merger. Both stayed through the August 6, 1996 merger. Appellee O'Nesti later resigned in January 1997, and appellee Zionts resigned in September 1998.

{¶ 7} On February 15, 2003, appellees demanded 8,100 shares that were allocated to them but never earned or paid. On April 10, 2003, they filed a complaint against DRC and DPMI. The complaint cited the Agostinelli cases and alleged that the facts, claims, and issues were identical, and thus they were entitled to judgment as a matter of law due to res judicata and collateral estoppel. They concluded that at the August 6, 1996 merger, the change-in-control clause activated, entitling them to their remaining allocated and unpaid shares. In an amended complaint, they attached the documents upon which they were basing their allegation of breach of contract: the Stock Incentive Plan with its accompanying guidelines and a letter DRC sent to the participants to inform them of their original allocation.

{¶ 8} Appellants raised various defenses in their answer, which will be discussed. In January 2004, appellees filed a motion for summary judgment on the grounds of res judicata, collateral estoppel, and stare decisis, all based upon the prior Agostinelli suits. Appellees asked for $16.575 per share plus ten percent prejudgment interest since August 6, 1996, as we approved in Agostinelli; they did not seek pre-merger dividends as originally requested in their complaint.

{¶ 9} In April 2004, appellants responded and filed a cross-motion for summary judgment on the grounds of novation, modification, a lack of a Deferred Stock Award creating outstanding shares, statute of limitations, waiver and estoppel, and laches, and an alternative argument concerning the amount of prejudgment interest available. On July 1, 2004, the trial court granted summary judgment in favor of appellees and denied appellants' summary judgment motion. On July 20, 2004, the trial court filed a nunc pro tunc entry (to add the word "no" before "genuine issues of material fact"). Appellants filed a timely notice of appeal.

ASSIGNMENT OF ERROR NO. ONE

{¶ 10} Appellants set forth seven assignments of error, the first of which provides:

{¶ 11} "The trial court erred in granting plaintiff's motion for summary judgment based upon the inapplicable doctrines of res judicata, collateral estoppel, and stare decisis."

{¶ 12} The doctrine of res judicata consists of two related concepts: claim preclusion (formerly called res judicata) and issue preclusion (formerly called collateral estoppel). Grava v. Parkman Twp. (1995), 73 Ohio St.3d 379, 381, 653 N.E.2d 226. The doctrine of claim preclusion provides that a valid, final judgment rendered upon the merits bars all subsequent actions between the parties or their privies based upon any claims arising out of the transaction or occurrence that was the subject matter of the previous action. Ft. Frye Teachers Assn. v. State Emp. Relations Bd. (1998), 81 Ohio St.3d 392, 395, 692 N.E.2d 140. Thus, claim preclusion generally disallows relitigation of a cause of action that was or could have been litigated in the prior action. Grava v. Parkman Twp. at 382, 653 N.E.2d 226 (defining transaction as common nucleus of operative facts).

{¶ 13} The doctrine has also been applied to defenses. Thus, courts have held that a defendant should raise all applicable defenses in an initial action in order to avoid the bar in a subsequent action. Johnson's Island, Inc. v. Danbury Twp. Bd. of Twp. Trustees (1982), 69 Ohio St.2d 241, 244-246, 23 O.O.3d 243, 431 N.E.2d 672 (holding that the doctrine of res judicata is applicable to defenses that could have been raised in a prior action). See, also, Italiano v. Commercial Fin. Corp., 148 Ohio App.3d 261, 2002-Ohio-3040, 772 N.E.2d 1215, at ¶ 29, 34, 35.

{¶ 14} According to the doctrine of issue preclusion, a fact or a point that was actually and necessarily litigated and was determined by a court of competent jurisdiction may not be relitigated in a subsequent action between the same parties or their privies, even where the cause of action is different from the one in the prior suit. Ft. Frye, 81 Ohio St.3d at 395, 692 N.E.2d 140.

{¶ 15} Both doctrines contain the element of mutuality of parties. This previously meant that claim preclusion and issue preclusion could only be used where both parties would be mutually estopped by the judgment. The doctrine of mutuality extends not only to identical parties but also those in privity with a prior party. Privity was the start of the relaxation of the mutuality rule. Many courts around the country have since eliminated the mutuality requirement entirely, allowing a stranger to use the doctrine to bar a prior party in many circumstances. See Goodson v. McDonough Power Equip., Inc. (1983), 2 Ohio St.3d 193, 196, 2 OBR 732, 443 N.E.2d 978.

{¶ 16} Rather than totally abolish the requirement of mutuality, Ohio has greatly broadened its definition of privity. Kirkhart v. Keiper, 101 Ohio St.3d 377, 2004-Ohio-1496, 805 N.E.2d 1089, ¶ 8. See, also, Hicks v. De La Cruz (1977), 52 Ohio St.2d 71, 6 O.O.3d 274, 369 N.E.2d 776. Ohio requirements are not so strict as to require a contractual, beneficiary, or successive relationship. Brown v. Dayton (2000), 89 Ohio St.3d 245, 248, 730 N.E.2d 958.

{¶ 17} In fact, mere "mutuality of interest," including an identity of a desired result, can create privity. Id. For instance, where the parties whose relationship was at issue all referred to themselves as resident-taxpayers and sought disallowance of an ordinance, the Supreme Court has found privity for purposes of the claim-preclusion aspect of res judicata. Id.

{¶ 18} Appellants claim that there is not a sufficient identity of interests between the Agostinelli plaintiffs and appellees herein. Appellees respond that they are in fact in privity with the Agostinelli plaintiffs and make various comparisons. They were all employees of the same company. They were all participants in the same Stock Incentive Plan with the same Change in Control clause at issue due to a merger. They all sought...