Olympic Holding Co., L.L.C. v. Ace Ltd.

• Decision Date: 07 May 2009
• Docket Number: No. 2008-0200.,2008-0200.
• Citation: 122 Ohio St.3d 89,909 N.E.2d 93,2009 Ohio 2057
• Parties: OLYMPIC HOLDING COMPANY, L.L.C., et al., Appellees, v. ACE LIMITED et al.; ACE Capital Title Reinsurance Company, Appellant.
• Court: Ohio Supreme Court

909 N.E.2d 93

122 Ohio St.3d 89

2009-Ohio-2057

OLYMPIC HOLDING COMPANY, L.L.C., et al., Appellees, v. ACE LIMITED et al.; ACE Capital Title Reinsurance Company, Appellant.

No. 2008-0200.

Supreme Court of Ohio.

Submitted December 16, 2008.

Decided May 7, 2009.

Carpenter, Lipps, & Leland, L.L.P., Michael H. Carpenter, Jeffrey A. Lipps, and Katheryn M. Lloyd, Columbus, for appellee.

Porter, Wright, Morris & Arthur, L.L.P., Kathleen M. Trafford, James D. Curphey, Jay A. Yurkiw, Columbus, and L. Bradfield Hughes; and Wollmuth, Maher & Deutsch, L.L.P., Fredrick R. Kessler, and William A. Maher, for appellant.

Bricker & Eckler, L.L.P., Kurtis A. Tunnell, Anne Marie Sferra, Columbus, and Vladimair P. Belo, urging reversal for amici curiae, Ohio Manufacturers Association and Ohio Chemistry Technology Counsel.

LUNDBERG STRATTON, J.

I. Introduction

{¶ 1} The primary question before the court is whether the breach of a promise to execute an agreement justifies using promissory estoppel to remove the agreement from the statute of frauds. Ancillary to this question is whether a joint agreement can impose fiduciary duties absent compliance with the statute of frauds. We answer both questions in the negative. Accordingly, we reverse the judgment of the court of appeals.

II. Facts

{¶ 2} Appellant, ACE Capital Title Reinsurance Company ("ACE"), is a title reinsurance company located in New York. ACE is owned by several companies located in Bermuda ("Ace Group"). Appellees Sutton Land Services, L.L.C., Title First Agency, Inc., and Title Midwest, Inc. ("title agencies") are title insurance companies located in New York, Ohio, and Kansas respectively. Appellee Olympic Holding Company, L.L.C., a Delaware company located in Columbus, was created by the title agencies in preparation for the proposed joint agreement herein to hold the stock of Olympic Title Insurance Company ("OTIC").

{¶ 3} ACE approached the title agencies with a proposal to create a joint venture that would "revolutionize the title insurance industry by creating a new and unique system of title insurance and reinsurance of national scope."¹ ACE envisioned a new integrated system of title insurance and reinsurance that consisted of a residential real estate component (policy coverage up to $1,000,000) and a commercial real estate component (policy coverage over $1,000,000).

{¶ 4} The plan called for the title agencies to acquire OTIC, an Ohio title insurer. The title agencies would then use OTIC to underwrite title insurance policies that the title agencies issued for residential transactions. OTIC would reinsure these transactions through ACE. Meanwhile, ACE would issue title insurance policies for commercial transactions. OTIC would reinsure these transactions up to $100,000; ACE would provide the balance of the reinsurance.

{¶ 5} Before the plan could be implemented, the title agencies had to acquire OTIC, and the acquisition required approval by the Ohio Department of Insurance. Additionally, ACE would have to apply with the Ohio Department of Insurance to sell direct title insurance.

{¶ 6} In early 2003, the parties began negotiating by exchanging draft "term sheets" in an attempt to reach a consensus on the "general business terms" of the agreement. Each page of the term sheet contained the following disclaimer: "NOT AN OFFER OF INSURANCE."

{¶ 7} In March 2003, the title agencies, through Sutton Land Services, initiated the acquisition of OTIC by sending OTIC a letter of intent to acquire. Thereafter, Sutton and the other two title agencies formed Olympic Holding Company, L.L.C. (referred to collectively as the "Olympic Group"), for the purpose of acquiring OTIC.

{¶ 8} From August 2003 through November 2003, ACE and the Olympic Group exchanged nine drafts of a proposed reinsurance agreement. The reinsurance agreement sought to define the obligations of the parties (ACE and OTIC) regarding issuing and underwriting direct title insurance and reinsurance for residential real estate deals. Each of these drafts contained contract-disclaimer language that provided:

{¶ 9} "This document is intended for discussion purposes only. Neither this document nor any other statement (oral or otherwise) made at any time in connection herewith is an offer, invitation or recommendation to enter into any transaction. Any offer would be made at a later date and subject to contract, satisfactory documentation and market conditions." (Emphasis added.)

{¶ 10} Each draft also provided:

{¶ 11} "This Agreement may be executed in any number of counterparts, and by the parties on separate counterparts, but will not be effective until each party has executed at least one counterpart." (Emphasis added.)

{¶ 12} Each draft also referred to a "Capital Support Agreement." On October 8, 2003, ACE circulated an initial draft of the capital-support agreement, which required the Olympic Group to maintain a minimum amount of capital for OTIC.

{¶ 13} Finally, each draft of the reinsurance agreement also required OTIC to enter into agreements with an agency that would write title-insurance policies for residential transactions, subject to ACE's approval. On November 13, 2003, ACE circulated an "initial draft" of the "Model Agency Agreement" to Olympic Group. However, no agency agreement was ever executed by the parties.

{¶ 14} A commercial reinsurance agreement was discussed by the parties, but none was ever completed.

{¶ 15} On November 10, 2003, ACE submitted its application to the Ohio Department of Insurance to become licensed to sell title insurance.

{¶ 16} On November 6, 2003, the Olympic Group submitted its application to the Ohio Department of Insurance seeking approval to acquire OTIC. In support of its application, the Olympic Group attached an August 2003 draft of the residential reinsurance agreement. The draft was not executed. It had no contract-disclaimer language or capital-support provision.

{¶ 17} On December 2, 2003, the Ace Group announced a $1 billion initial public offering ("IPO"). ACE assured the Olympic Group that the IPO would not endanger the joint agreement and in fact could help it.

{¶ 18} After obtaining approval from the Ohio Department of Insurance, the Olympic Group closed on the acquisition of OTIC on December 29, 2003. That same week, ACE's chief operating officer became aware that ACE would not go forward with the joint agreement. On January 2, 2004, ACE informed the Olympic Group that ACE would probably be spun off and that it was unlikely to proceed with the proposed reinsurance agreement.

{¶ 19} The day after learning of ACE's cancellation, the Olympic Group signed and sent its own draft of the residential reinsurance agreement to ACE for signature. ACE refused to execute the agreement.

{¶ 20} In January 2004, the Olympic Group filed a multicount complaint against ACE and the Ace Group. The trial court dismissed the Bermuda-based Ace Group for lack of personal jurisdiction, and the Olympic Group then voluntarily dismissed the complaint.

{¶ 21} In 2006, the Olympic Group refiled the complaint against ACE and Ace Group. The trial court again dismissed the Ace Group. The complaint alleged ten causes of action, including breach of a joint-venture agreement, breach of fiduciary duty, promissory estoppel, negligent misrepresentation, tortious interference with a contractual relationship, tortious interference with a business relationship, and fraud. The title agencies sought specific performance of the joint-venture agreement and damages, including punitive damages.

{¶ 22} ACE filed a motion for summary judgment claiming that the agreement did not comply with the statute of frauds, R.C. 1335.05. The Olympic Group argued that promissory estoppel removed the agreements from the statute of frauds.

{¶ 23} The trial court held that promissory estoppel did not remove this agreement from the statute of frauds, and therefore, the Olympic Group could not use promissory estoppel to bar ACE from asserting the statute of frauds as an affirmative defense to Olympic Group's breach-of-contract claims. Because the trial court could find no agreement that complied with the statute of frauds, it granted summary judgment in favor of ACE as to specific performance and on Olympic Group's breach-of-contract, breach-of-fiduciary-duty, and negligent-misrepresentation claims. However, the court held that the Olympic Group's claim of promissory estoppel, seeking detrimental-reliance damages, survived summary judgment, as did its claims for tortious interference with contractual and business relationships.

{¶ 24} On appeal, the court of appeals dismissed Olympic Group's assignments of error pertaining to promissory estoppel and fraud for lack of a final, appealable order. Olympic Holding Co. v. ACE Ltd., Franklin App. No. 07AP-168, 2007-Ohio-6643, 2007 WL 4340276, ¶ 62. After examining Olympic Group's remaining assignments of error, the court of appeals affirmed the trial court's judgment in part and reversed it in part. Id. at ¶ 102.

{¶ 25} The court of appeals reversed the trial court's summary judgment in favor of ACE on the Olympic Group's breach-of-contract claim and breach-of-fiduciary-duty claim. Olympic Holding Co., 2007-Ohio-6643, 2007 WL 4340276, ¶ 103. With regard to the contract claims, the court of appeals held that there were genuine issues of material fact as to whether the parties had reached an agreement and that ACE had promised that it would execute the agreement after the Olympic Group acquired OTIC. Id. at ¶ 11. The court, determining that ACE had never intended to go through with its promise, further held that "[u]nder these circumstances, it is appropriate to allow appellants to assert the equitable doctrine of promissory estoppel," and therefore, ACE "should be equitably estopped from using the affirmative defense of the statute of frauds because of a misrepresentation to supply signed written memoranda of the parties' agreements." Id....