Ohio Fresh Eggs, LLC v. Smith & Kramer, P.C.
| Decision Date | 21 July 2021 |
| Docket Number | 2:20-cv-5267 |
| Court | U.S. District Court — Southern District of Ohio |
| Parties | Ohio Fresh Eggs, LLC, et al., Plaintiffs, v. Smith & Kramer, P.C., et al., Defendants. |
JOLSON MAGISTRATE JUDGE
Plaintiffs Ohio Fresh Eggs, LLC and Ohio Investments Co., LLC bring this legal malpractice action against their former legal counsel located in Iowa - the law firm of Smith & Kramer, P.C. and attorneys William Sidney Smith and Jan Mohrfield Kramer. Defendants allegedly failed to ensure that several lease agreements, into which Ohio Fresh entered as lessor in 2011 contained all of the necessary terms. Because the agreements lacked provisions requiring the lessee to comply with certain environmental emissions standards, plaintiff alleges that it faces potential indemnification obligations arising from the costs and penalties that the lessee has or will incur in cooperating with the United States Environmental Protection Agency to bring itself into compliance.
This matter is before the court on defendants' motion to dismiss. Defendants argue that the malpractice claim is time-barred under the applicable one-year statute of limitations. For the reasons stated below, the motion to dismiss is denied.
In the late 1990s and early 2000s, non-party Buckeye Egg Farm operated egg production facilities in Croton, Marseilles and Mt. Victory, Ohio. The facilities were the subject of an EPA action brought in 2003 in the United States District Court for the Northern District of Ohio. See United States of America v. Buckeye Egg Farm, L.P., et al., No 3:03-cv-7681 (N.D. Ohio).
The EPA action against Buckeye ended in a Consent Decree in 2004.[1]See Doc. 9-5. Among the many obligations imposed, Buckeye agreed to pay a substantial civil penalty and perform work and make upgrades to the facilities to bring them into compliance with specific emissions standards.
At the time the Consent Decree was issued, it was known that Ohio Fresh was in the process of purchasing all three of the Buckeye facilities. The Consent Decree stated that Buckeye was selling the facilities to Ohio Fresh and provided that the transactions would be “conditioned upon Ohio Fresh's agreement to undertake the obligations required by this Decree . . . and to impose these same obligations upon any subsequent transferees of these properties.” Id. at PAGEID 121. The Decree further provided that the United States would be a third-party beneficiary to the purchase agreements between Buckeye and Ohio Fresh and that it could enforce the requirement that Ohio Fresh and subsequent transferees of the properties would comply with the obligations required by the Decree.
The Consent Decree also provided as follows: “Any purchase and sale agreement or lease or other instrument of conveyance for the Buckeye Locations shall contain a notice that the Buckeye Location at issue is the subject of this Consent Decree . . . .” Id. at PAGEID 122.
According to the complaint, defendants served as legal counsel for Ohio Fresh during the process of Ohio Fresh purchasing the egg facilities. Buckeye and Ohio Fresh entered into two separate Purchase Agreements. See Docs. 9-3, 9-4. Both Agreements provided, in a section entitled “Environmental Liabilities, ” that the “Purchaser will assume all operational and capital improvement commitments under the consent decree” issued in the EPA suit. See Doc. 9-3 at PAGEID 68; Doc. 9-4 at PAGEID 99.
Buckeye and Ohio Fresh also executed a “United States as Third Party Beneficiary Agreement.” Doc. 9-7. That document acknowledged that the transfer of ownership of the egg facilities was “conditioned upon Ohio Fresh's agreement to undertake the obligations required by [the Consent] Decree . . . and to impose these same obligations upon any subsequent transferees.” Id. at PAGEID 192. It further provided that the “United States is a third-party beneficiary of this Agreement under which Buckeye assigns its responsibilities under the Consent Decree to Ohio Fresh and Ohio Fresh accepts those obligations.” Id. at PAGEID 193. “Buckeye and Ohio Fresh agree to impose these same obligations upon any subsequent transferees of these properties, including provisions for the United States to be a third-party beneficiary of the assumption of obligations by the subsequent transferee.” Id.
The complaint alleges that Ohio Fresh decided to “exit the egg business” in 2011. Doc. 1 at ¶ 13. Ohio Fresh retained defendants to negotiate a lease of the facilities to Trillium Holdings LLC. Ohio Fresh and Trillium executed several lease agreements, each entitled “Master Agreement, ” in 2011. See Docs. 9-8, 9-9. According to the complaint, defendants drafted the Master Agreements.
The complaint further alleges that the Master Agreements failed to include all of the provisions they were supposed to have contained. The Master Agreements allegedly did not provide Trillium with notice of the Consent Decree, nor did the Agreements impose the Consent Decree's obligations on Trillium.
On July 10, 2018, Trillium notified Ohio Fresh that the EPA was considering taking action against Trillium for failing to comply with the Consent Decree.[2] Trillium stated that it would assert a claim for indemnification under the Master Agreements against Ohio Fresh. Trillium contended that it was not given notice of the Consent Decree by Ohio Fresh and that the Master Agreements did not require Trillium to comply with the obligations of the Consent Decree.
Ohio Fresh alleges that defendants' failure to include the required provisions concerning the Consent Decree in the Master Agreements constitutes a breach of defendants' duty to exercise the knowledge, skill and ability ordinarily possessed and exercised in a reasonably diligent manner by members of the legal profession similarly situated. Ohio Fresh further alleges that defendants' breach of duty has caused it damages that include the following costs arising from its indemnification obligations to Trillium: ongoing attorney fees, costs and expert fees in defending against the position of the EPA; costs in installing, reinstalling and repairing emission control devices and implementing emission control plans; and possible stipulated penalties under the Consent Decree.
Ohio Fresh originally filed this suit on July 9, 2019. It voluntarily dismissed the suit without prejudice on October 8, 2019. Ohio Fresh refiled the suit on October 7, 2020.
The complaint asserts causes of action for negligence, breach of fiduciary duty and breach of contract. As will be discussed below, the court will treat each of these claims as one for legal malpractice. Defendants have filed a motion to dismiss in which they argue that the malpractice claim is time-barred and that, alternatively, the complaint fails to state a claim for malpractice.
Fe deral Rule of Civil Procedure 8(a) requires that a pleading contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). When considering a motion under Rule 12(b)(6) to dismiss a pleading for failure to state a claim, a court must determine whether the complaint “contain[s] sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A court should construe the complaint in the light most favorable to the plaintiff and accept all well-pleaded material allegations in the complaint as true. Iqbal, 556 U.S. at 679; Erickson v. Pardus, 551 U.S. 89, 93-94 (2007); Twombly, 550 U.S. at 555-56.
Despite this liberal pleading standard, the Iqbal, 556 U.S. at 678; see also Twombly, 550 U.S. at 555, 557 (). The plaintiff must provide the grounds of his entitlement to relief “rather than a blanket assertion of entitlement to relief.” Twombly, 550 U.S. at 556 n.3. Thus, “a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.” Iqbal, 556 U.S. at 679.
When the complaint does contain well-pleaded factual allegations “a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Iqbal, 556 U.S. at 679. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 678. Though “[s]pecific facts are not necessary, ” Erickson, 551 U.S. at 93, and though Rule 8 “does not impose a probability requirement at the pleading stage, ” Twombly, 550 U.S. at 556, the factual allegations must be enough to raise the claimed right to relief above the speculative level and to create a reasonable expectation that discovery will reveal evidence to support the claim. Iqbal, 556 U.S. at 678-79; Twombly, 550 U.S. at 555-56. This inquiry as to plausibility is ...
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