O'Nesti v. DeBartolo Realty Corp.

• Decision Date: 28 March 2007
• Docket Number: No. 2005-2093.,2005-2093.
• Citation: 2007 Ohio 1102,862 N.E.2d 803,113 Ohio St.3d 59
• Parties: O'NESTI et al., Appellees, v. DeBARTOLO REALTY CORPORATION et al., Appellants.
• Court: Ohio Supreme Court

862 N.E.2d 803

113 Ohio St.3d 59

2007-Ohio-1102

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

No. 2005-2093.

Supreme Court of Ohio.

Submitted November 14, 2006.

Decided March 28, 2007.

Timothy A. Shimko & Associates Co., L.P.A., Timothy A. Shimko, and David A. Welling, Cleveland, for appellees.

Squire, Sanders & Dempsey, L.L.P., Thomas S. Kilbane, Robin G. Weaver, and Steven A. Delchin, Cleveland, for appellants.

O'CONNOR, J.

{¶ 1} This appeal requires this court to establish the parameters that apply when a plaintiff who was not a party to an earlier suit seeks to use the result of that suit to prevail against a defendant who was also the defendant in the former suit. Specifically, we are called upon to determine whether Ohio recognizes offensive claim preclusion or embraces the wait-and-see analysis for purposes of claim or issue preclusion. We determine that because appellees, Gary O'Nesti and Leon Zionts, are not in privity with the plaintiffs in an earlier lawsuit, they cannot bar appellants, DeBartolo Realty Corporation and DeBartolo Property Management, Inc., from presenting additional defenses, that offensive claim preclusion is disfavored in Ohio, and that the "wait and see" analysis is not applicable to claim preclusion.

Facts

{¶ 2} In 1994, DeBartolo Realty Corporation instituted a stock incentive plan for some of its employees. Each eligible employee was entitled to receive a different number of shares of stock if DeBartolo met certain annual goals. Possession of the shares earned was delayed by a three-year vesting period. In 1996, DeBartolo merged with a subsidiary of Simon Properties Group, Inc., creating a new entity called SD Property Group, Inc. Immediately after the merger, several employees requested that DeBartolo distribute all the deferred stock allocated to them under the stock incentive plan pursuant to the "Change in Control" provision of the plan. DeBartolo refused, arguing that possession of the stock had not vested. Those employees ("the Agostinelli plaintiffs") filed suit against DeBartolo in October 1996 in Mahoning County Court of Common Pleas for breach of contract and breach of the covenant of good faith and fair dealing. On appeal from the trial court's grant of summary judgment to DeBartolo, the Seventh District Court of Appeals determined that the stock that had been allocated to the employees had vested upon the change in control and reversed the judgment of the trial court, awarding the stock to the Agostinelli plaintiffs. Agostinelli v. DeBartolo Realty Corp. (Aug. 18, 1999), 7th Dist. No. 97CA227, 1999 WL 669518.

{¶ 3} In 2003, after the proceedings in Agostinelli ended, Gary O'Nesti and Leon Zionts, employees of DeBartolo who had not joined in the original suit, demanded the shares that had been allocated to them that they had never received. O'Nesti and Zionts filed suit that same year, seeking judgment for the value of the shares of stock allocated to them. They argued that the facts, claims, and issues in Agostinelli were identical to those in the new action. Both sides filed motions for summary judgment, with O'Nesti and Zionts arguing that they were entitled to judgment as a matter of law based upon res judicata and collateral estoppel. The trial court awarded summary judgment in favor of O'Nesti and Zionts.

{¶ 4} The Seventh District affirmed, holding that claim preclusion barred DeBartolo from raising defenses (such as novation and waiver) that were not but could have been raised in the Agostinelli suit. O'Nesti v. DeBartolo Realty Corp., 163 Ohio App.3d 609, 2005-Ohio-5056, 839 N.E.2d 943. The court specifically stated that "a defendant should raise all applicable defenses in an initial action in order to avoid the bar in a subsequent action." Id. at ¶ 13, citing Johnson's Island, Inc. v. Danbury Twp. Bd. of Trustees (1982), 69 Ohio St.2d 241, 244-246, 23 O.O.3d 243, 431 N.E.2d 672. The court held that O'Nesti and Zionts were in privity with the Agostinelli plaintiffs by virtue of their mutuality of interests, including their shared employment with DeBartolo and their participation in the stock incentive plan. Id. at ¶ 20.

{¶ 5} This court accepted jurisdiction in order to clarify Ohio law in regard to the use of claim preclusion by plaintiffs and the applicability of the "wait and see" factor to claim preclusion. Central to our discussion of both of those issues is the question of whether appellees are in privity with the Agostinelli plaintiffs.

Claim Preclusion

{¶ 6} The doctrine of res judicata encompasses the two related concepts of claim preclusion, also known as res judicata or estoppel by judgment, and issue preclusion, also known as collateral estoppel. Grava v. Parkman Twp. (1995), 73 Ohio St.3d 379, 381, 653 N.E.2d 226. Claim preclusion prevents subsequent actions, by the same parties or their privies, based upon any claim arising out of a transaction that was the subject matter of a previous action. Fort Frye Teachers Assn., OEA/ NEA v. State Emp. Relations Bd. (1998), 81 Ohio St.3d 392, 395, 692 N.E.2d 140. Where a claim could have been litigated in the previous suit, claim preclusion also bars subsequent actions on that matter. Grava, 73 Ohio St.3d at 382, 653 N.E.2d 226.

{¶ 7} Issue preclusion, on the other hand, serves to prevent relitigation of any fact or point that was determined by a court of competent jurisdiction in a previous action between the same parties or their privies. Fort Frye, 81 Ohio St.3d at 395, 692 N.E.2d 140. Issue preclusion applies even if the causes of action differ. Id.

{¶ 8} Contrary to the argument expressed in the brief of O'Nesti and Zionts, only claim preclusion is relevant to this suit. The facts show that O'Nesti and Zionts sought a judgment based on the outcome of the Agostinelli suit, and also sought to bar DeBartolo from raising certain defenses on the ground that it could have raised those defenses in the Agostinelli suit. As these defenses were not litigated in Agostinelli, issue preclusion is inapplicable. The thrust of O'Nesti and Zionts's argument is that DeBartolo is barred by claim preclusion from raising any defenses.

{¶ 9} For claim preclusion to apply, the parties to the subsequent suit must either be the same or in privity with the parties to the original suit. Johnson's Island, 69 Ohio St.2d at 244, 23 O.O.3d 243, 431 N.E.2d 672. Privity was formerly found to exist only when a person succeeded to the interest of a party or had the right to control the proceedings or make a defense in the original proceeding. Whitehead v. Gen. Tel. Co. (1969), 20 Ohio St.2d 108, 114, 49 O.O.2d 435, 254 N.E.2d 10, overruled in part on other grounds, Grava, 73 Ohio St.3d 379, 653 N.E.2d 226. An interest in the result of and active participation in the original lawsuit may also establish privity. Id. Individuals who raise identical legal claims and seek identical rather than individually tailored results may be in privity. Brown v. Dayton (2000), 89 Ohio St.3d 245, 248, 730 N.E.2d 958. This court has since stated that privity is a somewhat amorphous concept in the context of claim preclusion. Kirkhart v. Keiper, 101 Ohio St.3d 377, 2004-Ohio-1496, 805 N.E.2d 1089, ¶ 8, citing Brown, 89 Ohio St.3d at 248, 730 N.E.2d 958. A "mutuality of interest, including an identity of desired result," might also support a finding of privity. Brown at 248, 730 N.E.2d 958. Mutuality, however exists only if "the person taking advantage of the judgment would have been bound by it had the result been the opposite. Conversely, a stranger to the prior judgment, being not bound thereby, is not entitled to rely upon its effect under the claim of res judicata or collateral estoppel." Johnson's Island, 69 Ohio St.2d at 244, 23 O.O.3d 243, 431 N.E.2d 672.

{¶ 10} Applying these general rules, this court has determined that privity exists when a government official is sued in his individual and in his official capacity. Kirkhart, 101 Ohio St.3d 377, 2004-Ohio-1496 805 N.E.2d 1089, syllabus. Privity also exists between an association and its individual members when the members are liable by law for a judgment against the association. State ex rel. Clinton Mut. Ins. Assn. v. Bowen (1937), 132 Ohio St. 583, 8 O.O. 565, 9 N.E.2d 494. But some basic relationships, even including that of a mother and minor child, have been held not to establish privity. Johnson v. Norman (1981), 66 Ohio St.2d 186, 190, 20 O.O.3d 196, 421 N.E.2d 124; Whitehead, 20 Ohio St.2d 108, 116, 49 O.O.2d 435, 254 N.E.2d 10.

{¶ 11} Appellees share two characteristics with the Agostinelli plaintiffs: they were employed by the same company, and they were subject to the same stock incentive plan. That is the sum of their commonalities. O'Nesti and Zionts seek individually tailored results — a judgment for the value of the stock that each claimed was due to each of them — and not a general result, such as the blanket enforcement of the stock incentive plan. O'Nesti and Zionts did not actively participate in or have any control over the Agostinelli suit. There are no facts showing a special relationship between appellees and the Agostinelli plaintiffs that would allow appellees to enjoy the benefit of the judgment rendered in the earlier action while preventing DeBartolo from raising defenses unique to them. Furthermore, as our additional discussion of related issues below will demonstrate, this is not a situation in which it is appropriate to relax traditional standards of privity.

{¶ 12} The relationship between co-employees subject to the same employment-related contract, without more, does not establish privity. We hold that plaintiffs who are employees of the same employer and who have each signed an employment-related contract with the employer are not in privity for the purpose of claim preclusion if each employee is entitled to different benefits under the contract. Accordingly, privity simply does not exist, and appellees...