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MD Acquisition, LLC v. Myers

Court of Appeals of Ohio, Tenth District

September 5, 2013

MD Acquisition, LLC, Plaintiff-Appellee/ [Cross-Appellant],
v.
Martin L. Myers, Defendant-Appellant/ [Cross-Appellee]. MD Acquisition, LLC et al, Plaintiffs-Appellees,
v.
Martin L. Myers et al., Defendants-Appellees, (Pet Brands, Inc., Defendant-Appellant.)

APPEALS from the Franklin County Court of Common Pleas (C.P.C. No. 05CVH-09-10556)

Squire, Sanders LLP, John R. Gall, Aneca E. Lasley, Heather L. Stutz, and Christopher R. Haas, for appellee MD Acquisition, LLC.

Taft Stettinius & Hollister LLP, Stephen C. Fitch, Joseph C. Pickens, and Celia M. Kilgard, for appellant Pet Brands, Inc.

DECISION

CONNOR, J.

(¶ 1} These consolidated appeals are brought from the same judgment of the Franklin County Court of Common Pleas. Broadly put, the case arises out of the sale of a closely-held business and subsequent violations of the contractual agreements governing that sale.

(¶ 2} Martin Designs, Inc., now insolvent, was in the business of licensing brand names and images for commercial use. In 2003, Martin L. Myers was the sole owner and, the record strongly suggests, the essential creative force and managerial presence in the company. In 2003, Myers negotiated a sale of 70 percent of Martin Designs to MD Acquisition, LLC ("MDA"), a company formed by new investors to undertake the purchase. Myers retained a 25 percent personal ownership stake and reserved 5 percent for two other key Martin Designs employees. In connection with the sale, Myers and MDA executed a stock purchase agreement, a stockholders' agreement, and an executive employment agreement pursuant to which Myers continued as president of Martin Designs after the sale.

(¶ 3} Soon after the sale, the investors in MDA and Martin Designs learned that Myers, while continuing to operate Martin Designs under his employment agreement, had founded and promoted a new company, Pet Brands, Inc., which operated in a related field. They believed that this represented a diversion from Myers' duty to devote his talents to Martin Designs, pursuant to his executive employment agreement, as well as an appropriation of certain business opportunities in direct violation of the purchase agreements governing the sale of Martin Designs.

(¶ 4} This lawsuit began in 2005 with a complaint filed by plaintiffs MDA and Martin Designs naming Myers and Pet Brands as defendants. The complaint specified actions for recision, breach of contract, and misappropriation of trade secrets against Myers, and claims of tortious interference with contractual relations and unjust enrichment against Pet Brands. In 2007, the court of common pleas granted Pet Brands' motion for judgment on the pleadings in the tortious interference claim. The plaintiffs thereafter dismissed their unjust enrichment claim against Pet Brands, and the action proceeded to trial solely on the plaintiffs' claims against Myers.

(¶ 5} As the case was about to go to the jury Martin Designs moved for a directed verdict against Myers on Count 3 of the complaint, which alleged breach of the sale agreements through Myers' misappropriation of business opportunity. Through the same motion, Martin Designs also asked the court to grant an equitable remedy in the form of a constructive trust over shares of Pet Brands owned by Myers. The court granted the directed verdict as to liability but, after some hesitation, reserved judgment on the request for a constructive trust. The court has yet to explicitly rule on that issue as of the time of appeal.

(¶ 6} The jury then returned verdicts against Myers on all remaining claims, awarding over $5 million in favor of MDA and $7 million in favor of Martin Designs. Immediately after the jury verdicts, Martin Designs filed a motion for injunctive relief seeking to freeze the assets of Pet Brands and Myers while awaiting the court's ruling on the proposed constructive trust. Under contested circumstances that present the basis for Pet Brands' appeal in this case, the trial court eventually granted the requested injunction.

(¶ 7} The trial court entered judgment reflecting the partial directed verdict and jury verdicts on March 1, 2011. Myers then filed a motion for judgment notwithstanding the verdict, or in the alternative for a new trial. The trial court rendered judgment denying these motions on April 5, 2011, forming the final appealable order that incorporates the preceding orders in the case and constitutes the basis for this appeal. Timely notices of appeal were filed from this order, which for unknown reasons was not journalized properly by the clerk. The court then re-entered the final order on May 5, 2012, during the pendency of this appeal, with the parties stipulating that this reflects the court's judgment of April 5, 2011. Although the notices of appeal based on the April 5, 2011 unjournalized order were arguably premature under these circumstances, we have gone forward with the appeal under the rule applied in Am. Chem. Soc. v. Leadscope, Inc., 10th Dist. No. 08AP-1026, 2010-Ohio-2725, reversed in part on other grounds, 133 Ohio St.3d 366, 2012-Ohio-4193, causing the premature notice of appeal to relate forward to journalization of the eventual final order.

(¶ 8} Myers filed an appeal from the trial court's judgment under case No. 11AP-390. MDA cross-appealed under the same case number seeking to reverse the trial court's judgment of dismissal in favor of Pet Brands. Pet Brands filed a separate notice of appeal under case No. 11AP-412, seeking relief from the injunction granted by the trial court. Myers soon there after entered personal bankruptcy proceedings, staying all appeals. On October 5, 2011, the bankruptcy trustee voluntarily dismissed Myers' appeal, and the consolidated appeals returned to the active docket upon expiration of the bankruptcy stay. On November 1, 2011, Martin Designs, which itself had filed bankruptcy in 2008, filed a "notice of non-participation" indicating that it would not participate in the appeal, and requested to be removed from the service list.

(¶ 9} After these reductions in participating parties, the present appeal presents two active parties and two issues: defendant-appellant, Pet Brands, contests the trial court's imposition of an injunction intended to preserve the status quo of Pet Brands' assets and ownership, and plaintiff-appellee/cross-appellant, MDA, seeks to reverse the trial court's judgment on the pleadings in favor of Pet Brands on the tortious interference claim. We first address MDA's cross-appeal, which presents the following sole assignment of error:

THE TRIAL COURT ERRED IN ITS DECISION AND ENTRY OF MARCH 15, 2007, WHICH GRANTED JUDGMENT ON THE PLEADINGS AGAINST PLAINTIFF MD ACQUISITION, LLC ON ITS TORTIOUS ...

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