Prof'l Sols. Ins. Co. v. Novak L.L.P., 108839
| Decision Date | 08 October 2020 |
| Docket Number | No. 108839,108839 |
| Citation | 2020 Ohio 4829 |
| Parties | PROFESSIONAL SOLUTIONS INSURANCE COMPANY, Plaintiff-Appellee/Cross-Appellant, v. NOVAK L.L.P, ET AL., Defendants-Appellants/Cross-Appellees. |
| Court | Ohio Court of Appeals |
Civil Appeal from the Cuyahoga County Court of Common Pleas
Appearances:
The Sweeney Law Firm, L.L.C., and Sean M. Sweeney, for appellee and cross-appellant.
Sammon Law, L.L.C., and Colin P. Sammon; Novak L.L.P., and William J. Novak, for appellants and cross-appellees.
{¶ 1} Defendant-appellant/cross-appellee Novak, Pavlik & Deliberato, L.L.P. ("Novak") appeals from the final judgment and order entered following jury verdicts in favor of plaintiff-appellee/cross-appellant Professional Solutions Insurance Company ("PSIC") on a breach of contract claim.1 PSIC cross-appeals from that same judgment. For the reasons that follow, we affirm in part, vacate in part, and remand for proceedings consistent with this opinion.
{¶ 2} This case stems from an underlying legal malpractice lawsuit against Novak. In Skoda Minotti Co. v. Novak, Pavlik & Deliberato, L.L.P., Cuyahoga C.P. No. CV-13-810085 ("Skoda litigation"), Skoda Minotti Company ("Skoda") sought payment from Novak on an allegedly unpaid invoice for expert witness services rendered by Skoda for Novak's client, Robert Smith ("Smith").2 Smith, who was also a named defendant, filed a third-party complaint against Novak and Novak's former associate, Scott Perlmuter ("Perlmuter"), based upon legal malpractice. Novak filed a cross-claim against Smith for payment of the invoice.
{¶ 3} Novak submitted the legal malpractice claim to PSIC for defense under its lawyer's professional liability policy ("insurance policy"). Under the terms of the insurance policy, PSIC retained Gallagher Sharp L.L.P. ("Gallagher Sharp") who provided Novak's defense throughout the course of the Skoda litigation. Per Section I of the insurance policy, PSIC agreed to pay Gallagher Sharp's legal fees in excess of Novak's deductible provision, which totaled $10,000.
{¶ 4} Prior to trial, the trial court dismissed Smith's claims against Novak and its former associate on a motion for judgment on the pleadings. The Skoda litigation resulted in a jury verdict against Novak in the amount of $20,347 for Skoda's expert witness fees and in favor of Novak for Smith's indemnity and contribution claims in the amount of $15,184.53. Smith appealed the trial court's decision to grant Novak and Perlmuter's motion for judgment on the pleadings, and Novak appealed the verdict against it. PSIC refused to represent Novak on appeal as it related to the verdict but defended the Smith claim on appeal. On Smith's appeal, we upheld the trial court's award of $15,184.53 to Novak. Skoda Minotti Co. v. Novak, Pavlik & Deliberato, L.L.P., 8th Dist. Cuyahoga No. 101964, 2015-Ohio-2043. Novak eventually settled the appeal of the verdict for $17,000.
{¶ 5} According to Section IV, Subsection 3 of the insurance policy, Novak contracted to pay Gallagher Sharp a deductible amounting to the first $10,000 incurred in legal bills during the Skoda litigation. Gallagher Sharp submitted three invoices to Novak, totaling $10,000, for services rendered on the Skoda litigation.PSIC also requested Novak satisfy payment of its deductible. Novak refused to pay the $10,000 deductible.3
{¶ 6} Pursuant to Section VII, Subsection 16 of the insurance policy, on July 17, 2016, PSIC paid Gallagher Sharp the $10,000 deductible owed by Novak. PSIC then retained the Sweeney Law Firm ("Sweeney") and the firm pursued recovery of the deductible from Novak and the firm's partners. No resolution was reached and Sweeney filed a lawsuit, on behalf of PSIC, against Novak and the partners on August 18, 2016, raising three causes of action: breach of contract, unjust enrichment, and declaratory judgment. The declaratory judgment action requested the court to declare the partners "insureds" under the PSIC policy and, therefore, find them jointly and severally liable to PSIC for the deductible and additional outside expenses, including attorney fees, incurred in prosecuting the action.
{¶ 7} Novak and the partners filed an answer and counterclaim on January 24, 2017, alleging breach of contract and tortious interference with a contract. Novak and the partners also presented a claim for breach of fiduciary duty in their May 19, 2017 amended answer and counterclaim. On October 27, 2017, PSIC filed a motion for summary judgment as to Count I of the complaint. The trial court denied this motion.
{¶ 8} On November 27, 2017, Novak requested leave to file a second amended answer that incorporated an affirmative defense of recoupment and setoffand sought to modify the counterclaim. On December 7, 2017, the trial court denied Novak's motion as untimely because the matter was already scheduled for trial and the amended pleadings would prejudice PSIC.
{¶ 9} On January 29, 2018, both parties filed multiple motions in limine. The court granted Novak's motion in limine that precluded Novak from calling PSIC's counsel as a witness at trial. The trial court also granted Novak's motion in limine that precluded PSIC from introducing evidence or questioning about unrelated lawsuits to show that Novak was previously sued by legal malpractice insurance carriers.
{¶ 10} On February 1, 2018, Novak and the partners filed a motion for partial judgment on the pleadings that argued the insurance policy's outside expense provision was unenforceable under Ohio law. The court denied this motion. On February 5, 2018, Novak and the partners filed a motion for partial judgment on the pleadings that argued the partners were not personally liable for damages under the insurance policy and, therefore, were improperly joined in the action. The trial court journalized its opinion and journal entry on February 15, 2018, and thereby granted the February 5, 2018 motion in part and denied it in part. Specifically, the trial court found that the partners could not be held personally liable for the debts of the partnership. However, they were found to be proper parties to the lawsuit and were not dismissed from the action.
{¶ 11} A bifurcated trial began on February 13, 2018. Following PSIC's presentation of its case, Novak and the partners were granted a motion for directedverdict as to PSIC's claim of unjust enrichment. Novak and the partners' oral motion for leave to amend the counterclaim to conform to the evidence pursuant to Civ.R. 15(B) was denied. PSIC's motion for directed verdict on Novak's counterclaims for tortious interference and breach of fiduciary duty as it related to Novak's relationship with Vicky Vance was granted on February 20, 2018. On February 21, 2018, the jury returned a verdict against Novak on the breach of contract claim, in the amount of $10,000, and against Novak on its counterclaims. The trial court denied Novak and the partners' oral motions for new trial and mistrial.
{¶ 12} On February 22, 2018, the second portion of the trial began, which addressed the insurance policy's outside expense provision ("OEP"). Pursuant to the OEP, PSIC sought reimbursement for legal expenses that it incurred when collecting Novak's deductible. The jury rendered a verdict on February 23, 2018, in favor of PSIC and against Novak in the amount of $103,379 for reimbursement of outside expenses, or the amounts incurred by PSIC to recover payment of the deductible.
{¶ 13} On March 9, 2018, PSIC filed motions for prejudgment and postjudgment interest. On March 21, 2018, Novak filed a motion for judgment notwithstanding the verdict and a motion for new trial that the trial court denied on April 4, 2018.
{¶ 14} On April 9, 2018, Novak filed with this court a motion for an emergency stay and an expedited alternative writ in State ex rel. Novak v. Ambrose,8th Dist. Cuyahoga No. 107028, 2018-Ohio-2951, challenging the trial court's jurisdiction to proceed to judgment. Due to that filing, the trial court held PSIC's motions for prejudgment and postjudgment interest in abeyance until the court had a final order on the writ. We determined that the trial court had subject-matter jurisdiction to hear the underlying case against the partners and the Ohio Supreme Court affirmed that ruling in State ex rel. Novak, L.L.P. v. Ambrose, 156 Ohio St.3d 425, 2019-Ohio-1329, 128 N.E.3d 209.
{¶ 15} On April 11, 2019, PSIC filed a motion for issuance of a final order and the trial court provided a corresponding journal entry that was journalized on June 26, 2019. Within that opinion and journal entry, the trial court granted PSIC's prejudgment and postjudgment motions. As to Count III of the complaint — the declaratory-judgment action — the trial court found that the partners were not liable, under either R.C. 1776.36 or the insurance policy, for the debts of their former partnership and, therefore, found in favor of the partners on PSIC's declaratory judgment claim. PSIC's motion to lift the stay was granted on May 23, 2019, and the case was returned to the trial court's active docket.
{¶ 16} On July 9, 2019, Novak filed a motion to stay execution of judgment, without bond, and requested an oral hearing. Novak filed a timely appeal on July 24, 2019. On July 25, 2019, the trial court's journal entry noted Novak's appeal and stated that the case was stayed and removed from the court's active docket.
{¶ 17} Novak raised these nine assignments of error on appeal:
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