RICHARD J. AUTH Appellee/Cross-Appellant
INDUSTRIAL PHYSICAL CAPABILITY SERVICES, INC. Appellant/Cross-Appellee and THOMAS B. GILLIAM Defendant
FROM JUDGMENT ENTERED IN THE COURT OF COMMON PLEAS COUNTY OF
SUMMIT, OHIO CASE No. CV 2015 01 0446
B. SCHOMER, DAVID J. LEWIS, MICHELE MORRIS, and TERRY J.
EVANS, Attorneys at Law, for Appellant/Cross-Appellee.
JEFFREY T. HEINTZ, LOUISE M. MAZUR, BRIDGET A. FRANKLIN, and
LAURA F. FRYAN, Attorneys at Law, for
C. WEISENSELL, Attorney at Law, for Defendant.
DECISION AND JOURNAL ENTRY
S. CALLAHAN J.
Appellant/Cross-Appellee, Industrial Physical Capability
Services, Inc. ("IPCS"), appeals from the judgment
of the Summit County Court of Common Pleas. Additionally,
Appellee/Cross-Appellant, Richard Auth, appeals from the
court's judgment. This Court affirms.
IPCS is a corporation that performs physical capability
testing for companies who want to assess the capabilities of
potential and current employees. Dr. Thomas Gilliam formed
IPCS in 1998 and created the mathematical model that the
corporation uses to conduct its assessments. Dr. Gilliam
operated IPCS and acted as its president and sole owner until
2010. By that time, however, IPCS was struggling financially.
To secure additional capital, Dr. Gilliam approached his
friend, Auth, and the two agreed that Auth would invest in
the company in exchange for an ownership interest.
Dr. Gilliam and Auth memorialized their investment agreement
in two letters of understanding, signed April 29, 2010, and
October 17, 2010. Pursuant to the first letter, Auth agreed
to provide IPCS with marketing assistance and a line of
credit in exchange for a 25% ownership interest in the
corporation. Pursuant to the second letter, Auth agreed to
provide IPCS with an additional line of credit in exchange
for another 20% ownership interest in the corporation. The
second letter also provided that Auth would "become CEO
[of IPCS] with the same compensation * * * and benefits as
[Dr.] Gilliam once cash flow permits." There is no
dispute that, as a result of the letters of understanding,
Auth became a 45% owner of IPCS while Dr. Gilliam retained a
55% ownership interest.
In 2012, IPCS consulted with a law firm that prepared a
shareholder buy/sell agreement for the corporation. Dr.
Gilliam and Auth ultimately executed the agreement in October
2012 along with a joint action that ratified several
resolutions for the corporation. The buy/sell agreement
addressed a variety of issues related to the
corporation's stock, including issues pertaining to its
transferability and repurchase. Meanwhile, the joint action
established that IPCS would have two directors, Dr. Gilliam
and Auth. The joint action also named Dr. Gilliam and Auth as
the corporation's president and vice president,
At some point in 2014, Dr. Gilliam and Auth experienced a
rift. The rift caused IPCS to hire a different law firm to
represent its corporate interests. Meanwhile, both Dr.
Gilliam and Auth retained separate counsel for themselves.
Their inability to resolve the rift that arose between them
ultimately led to the filing of this lawsuit.
Auth initiated the current lawsuit by filing a complaint
against both Dr. Gilliam and IPCS. Auth claimed that (1) IPCS
breached the contract that it had with him pursuant to the
letters of understanding, (2) Dr. Gilliam breached his
fiduciary duties as IPCS' majority shareholder, (3) he
was entitled to an accounting of IPCS' business records
and financial information, and (4) he was entitled to
declaratory judgment on a variety of issues. A portion of his
claims revolved around the mathematical model that IPCS used
to serve its clients. He alleged that Dr. Gilliam had only
recently claimed to own the mathematical model himself, such
that it was never IPCS' property. Auth asked the court to
declare, among other things, that IPCS owned the mathematical
IPCS responded to Auth's complaint and filed several
counterclaims against him. IPCS claimed that (1) Auth
breached their contract, as memorialized in the letters of
understanding, (2) Auth breached his fiduciary duties to
IPCS, and (3) it was entitled to declaratory judgment on a
variety of issues. A portion of IPCS' claims revolved
around its contention that Auth had conspired with the
corporation's former counsel to draft a buy/sell
agreement that favored him personally. IPCS asked the court
to rescind both the buy/sell agreement and the letters of
understanding. It also asked the court to make a declaration
regarding the mathematical model that it used in its
operations. IPCS asked the court to declare that Dr. Gilliam
was the owner of the mathematical model.
Dr. Gilliam responded separately to Auth's complaint. He
too filed several counterclaims against Auth, but he also
filed several cross-claims against IPCS. With regard to his
counterclaims, he alleged that (1) Auth breached his
fiduciary duties to IPCS and Dr. Gilliam, (2) he was entitled
to rescission of the buy/sell agreement, and (3) he was
entitled to declaratory judgment on a variety of issues.
Meanwhile, he asserted cross-claims against IPCS based on his
assertion that he owned the mathematical model it used in its
operations. Dr. Gilliam alleged that IPCS owed him damages