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Schafer v. Soderberg & Brenner, LLC

Court of Appeals of Ohio, Sixth District

September 13, 2013

Edmund M. Schafer, Appellant
Soderberg & Brenner, LLC, Appellee

Trial Court No. 09 CV 734 H.

Richard M. Kerger and Khary L. Hanible, for appellant.

Sarah A. McHugh and William T. Maloney, for appellee.



(¶ 1} Appellant, Edmund M. Schafer, appeals from the December 3, 2012 judgment of the Ottawa County Court of Common Pleas granting appellee, Soderberg & Brenner, LLC (hereinafter "S&B"), summary judgment and dismissing appellant's complaint. For the reasons which follow, we reverse.

(¶ 2} Schafer is a former owner and employee of Soderberg & Schafer, LLC, an accounting firm (hereinafter "S&S"). In March 2008, Schafer served notice of his intent to retire from S&S no later than August 30, 2008, and cash out his interest in the company pursuant to a buy-sell agreement. Schafer and his partners, David Soderberg and Joseph Brenner, negotiated for a time but, by August 22, 2008, Schafer became dissatisfied with the negotiations and filed suit against S&S alleging breach of fiduciary duties and sought a declaratory judgment of the rights and duties under the buy-sell agreement. He later amended his complaint to add claims for breach of contract and breach of a "no-competition" agreement. Schafer alleged that in October 2008, Soderberg and Brenner held a meeting with Schafer to terminate his employment in November 2008. Schafer agreed to withdraw rather than be fired.

(¶ 3} After Schafer filed his first suit, Soderberg and Brenner formed a new limited liability company, S&B, allegedly to avoid the buyout obligation. Brenner attested that S&B was formed after S&S had dissolved on November 5, 2008, and S&S was in the process of winding up its affairs. S&B began operation on January 1, 2009. In December 2008, S&S discontinued its operation.

(¶ 4} After creating this new entity, Schafer asserts that S&B paid its expenses from S&S funds, used the S&S facilities, equipment, address, and telephone number, continued to service the same clients, and retained the same employees with the exception of Schafer and his wife. S&B also used allegedly used the financial history of S&S to obtain a line of credit.

(¶ 5} Schafer filed a second amended complaint on December 9, 2008, asserting an additional claim of breach of the S&S buy-sell agreement, sought declaratory judgment that the "no-competition" agreement was invalid, and sought damages as a result of the breach of the buy-sell agreement.

(¶ 6} In that action, the trial court determined that Soderberg and Brenner were not personally liable to Schafer as a matter of law. A jury proceeded to find that S&S owed Schafer $540, 000. The jury also held that the buy-sell agreement did not require that a retiring partner must sign a "no-competition" agreement, Schafer did not breach the buy-sell agreement nor his duty of good faith and fair dealing, Schafer did not make performance under the buy-sell agreement impracticable, Schafer met the conditions under the buy-sell agreement for retirement, and Schafer was harmed by the breach of the buy-sell agreement by S&S. Because Schafer was deemed retired, the trial court held S&S had been dissolved and ordered Soderberg and Brenner to wind up the affairs of the company. The trial court denied the counterclaims of Soderberg and Brenner for declaratory judgment as to whether the buy-sell agreement was enforceable, whether Schafer had breached the buy-sell agreement, and whether the "no-competition" agreement was still in force.

(¶ 7} Schafer filed an appeal from the trial court's judgment asserting that the trial court erred by finding Soderberg & Brenner were not personally liable to Schafer. Upon review of the issue, we affirmed the trial court. Schafer v. Soderberg & Schafer, C.P.A.s, L.L.C., 196 Ohio App.3d 458, 2011-Ohio-4687, 964 N.E.2d 24 (6th Dist.). S&B also appealed from the trial court's decision. We found that the trial court did not abuse its discretion by refusing to declare the buy-sell agreement was unenforceable; by finding that Schafer had not violated the buy-sell agreement by giving notice of his intent to retire before he actually attained the age of retirement; and that Schafer's conduct did not amount to an anticipatory repudiation of the buy-sell agreement. We also found that the trial court did not err by submitting to the jury the issue of whether Schafer had to execute a new "no-competition" agreement before he could retire. Id.

(¶ 8} Meanwhile, Schafer filed a second lawsuit on December 8, 2009, which is the subject of this appeal, against S&B alleging that S&B was created in 2008 solely to defraud Schafer of his buy-out rights. Schafer sought to hold S&B liable as a successor entity. S&B filed two counterclaims against Schafer for declaratory judgment seeking a declaration that the company is not liable for the obligations of S&S and the company is not liable to Schafer.

(¶ 9} Both S&B and Schafer moved for summary judgment. First, S&B argued the theory of successor liability is not applicable in this case because Schafer can present no evidence that S&B is a successor company to S&S. Brenner attested that S&B is not a successor to S&S because S&B has a different ownership structure, its own Employer Identification Number, and its own operating agreement. He further attested that S&B did not acquire any substantial portion of the assets of S&S and operates as a separate and distinct legal entity. Second, S&B argued the issues raised are barred by the doctrine of res judicata because they were or could have been resolved in the first litigation.

(¶ 10} Schafer argued that he provided evidence of at least one check from D & G Focht that was made out to S&S, but was deposited in the account of S&B. The exhibit attached to the summary judgment motion, however, was merely a photocopy of a check and posting information which was not properly authenticated. Schafer also argues that Brenner's attestation that S&S funds were used to pay litigation fees evidences the use of S&S funds by S&B. Schafer asserted that he has been unable to examine all of the financial information necessary to prove his claim of fraud. Schafer further ...

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