Marshall v. Cooper & Elliott

         Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-13-817284

          ATTORNEY FOR APPELLANT/CROSS-APPELLEE Michael O'Shea Lipson O'Shea Legal Group.

          ATTORNEY FOR APPELLEE/CROSS-APPELLANT John R. Christie Lewis Brisbrois L.L.P.

          BEFORE: E.A. Gallagher, P.J., E.T. Gallagher, J., and Laster Mays, J.

          JOURNAL ENTRY AND OPINION

          EILEEN A. GALLAGHER, PRESIDING JUDGE.

         {¶1} This appeal involves the trial court's ruling on a request for sanctions under Ohio's frivolous conduct statute, R.C. 2323.51, awarding third-party defendant-appellant/cross-appellee Michael Dolan $0 in attorney fees for the frivolous conduct of third-party plaintiff-appellee/cross-appellant Anthony O. Calabrese, III and his counsel, John Christie. Calabrese challenges the trial court's determination that he and Christie engaged in frivolous conduct under R.C. 2323.51. Dolan contends that the trial court erred in awarding him no attorney fees for the frivolous conduct. Finding no merit to the appeal or cross-appeal, we affirm the trial court's judgment.

         Factual and Procedural Background

         {¶2} In November 2013, Kathleen Marshall ("Marshall") filed a complaint asserting claims of breach of contract, conversion, fraud and civil conspiracy to commit fraud against Calabrese, the Calabrese Law Firm, L.L.C., Cooper & Elliott, L.L.C., Rex Elliot and Charles Cooper, Jr.^[1] Marshall alleged that her ex-husband, Timothy Marshall, had not received his proper share of attorney fees awarded in the settlement of a class action on which he had worked together with Cooper & Elliott and Dolan. Marshall claimed that there had been an agreement between Timothy Marshall, Cooper & Elliott and Dolan that any attorney fees awarded in the settlement of the class action would be split equally between them, with one-third of the award going to each and that Cooper & Elliott improperly diverted a portion of the fees due Timothy Marshall to Calabrese in order to keep the funds out of Timothy Marshall's possession during the pendency of his divorce from Marshall, depriving her of access to those funds.^[2]

         {¶3} In July 2014, Calabrese filed an answer, a counterclaim against Marshall and a third-party complaint asserting claims for breach of contract, unjust enrichment and slander against Dolan. Calabrese alleged that the parties had agreed to a four-way split of any attorney fee award - 50% to Cooper & Elliott, 25% to Calabrese and 25% to Timothy Marshall and Dolan. Calabrese sought to recover any amount Calabrese might be required to pay Marshall on her claims as contribution from Dolan as well as compensatory and punitive damages on his slander claim. Calabrese's third-party complaint did not identify the alleged defamatory statements or other facts upon which his slander claim was allegedly based.

         {¶4} Dolan filed an answer to Calabrese's third-party complaint and a counterclaim against Calabrese for fraud and tortious interference with Dolan's employment as an assistant county prosecutor for Cuyahoga County. Calabrese filed an answer denying the material allegations of Dolan's counterclaim.

         {¶5} On April 1, 2015, the trial court granted summary judgment in favor of Cooper & Elliott and Calabrese on the claims asserted in Marshall's complaint. Marshall filed for bankruptcy and Calabrese's counterclaim against her was stayed. Accordingly, all that remained for trial was Calabrese and Dolan's claims against each other. Trial was scheduled to begin on August 3, 2015. On the morning of trial, Calabrese and Dolan voluntarily dismissed their claims against one another without prejudice pursuant to Civ.R. 41(A).

         {¶6} On August 28, 2015, Dolan filed a motion for attorney fees and sanctions pursuant to Civ.R. 11 and R.C. 2323.51 against Calabrese, Christie and Christie's law firm, Stefanick & Christie, L.L.C. Dolan claimed that Calabrese and Christie had engaged in frivolous conduct under R.C. 2323.51(A)(2)(a)(ii)-(iii) by falsely alleging that Dolan was contractually obligated to pay attorney fees to Timothy Marshall despite admissions by Calabrese to the contrary, by litigating Calabrese's attorney fees claims even though Calabrese and Christie were aware that attorney fee disputes were to be arbitrated or mediated by the local bar association or the Ohio State Bar Association pursuant to Prof.Cond.R. 1.5 and because (1) the third-party complaint did not allege facts necessary to support a claim of slander, (2) Calabrese had conducted no discovery relating to his slander claim and (3) his trial brief and jury instructions contained no mention of his slander claim. In support of the motion, Dolan attached a series of email exchanges between his counsel, Michael O'Shea and Christie, in which O'Shea advised Christie of Dolan's intention to seek sanctions if Calabrese's claims against Dolan were not dismissed and otherwise indicating the terms upon which the parties would agree to resolve their dispute. Calabrese opposed the motion, arguing that the evidence at trial would have established that his claims were meritorious and that, even if he could not prevail on his claims, a "mere inability to prevail" did not constitute frivolous conduct. Calabrese disputed that he had, in fact, admitted many of the "admitted facts" referenced in Dolan's motion and claimed, with respect to his slander claim, that he would have established at trial that Dolan had "encouraged and convinced" Marshall to bring her action against Calabrese by "speaking falsehoods" about him and had also made "many oral comments" to one of Calabrese's associates in an attempt to encourage him to terminate his business relationship with Calabrese.

         {¶7} On March 28, 2016, the trial court held the first of two hearings on Dolan's motion for attorney fees and sanctions. A transcript of the hearing is not part of the record on appeal.

         {¶8} On May 6, 2016, the trial court issued a journal entry granting Dolan's motion for attorney fees and sanctions against Calabrese and Christie pursuant to R.C. 2323.51.^[3] The trial court found that Calabrese and Christie had engaged in frivolous conduct under R.C. 2323.51(A)(2)(a)(i) and (ii) by filing and maintaining fee dispute claims despite their "clear knowledge of the law" that Calabrese was obligated under Prof. Cond.R. 1.5 to arbitrate or mediate any fee dispute with the local bar association or the Ohio State Bar Association. The court indicated that Calabrese and Christie's "deliberate decision to ignore Calabrese's obligation to follow the law and Rules of Professional Conduct" constituted "bad faith, " "serve[d] an improper purposes including needless litigation" and "showed a lack of a good faith argument in law." The trial court further found that Calabrese and Christie had engaged in frivolous conduct under R.C. 2323.51(A)(2)(a)(i), (iii) and (iv) by filing and maintaining a slander claim that was "not supported by credible evidence" and that Calabrese and Christie "demonstrated no intent on pursuing." The trial court found that Dolan had been adversely affected by the frivolous conduct and indicated that a further hearing would be scheduled "to determine what sanctions are to be awarded to [Dolan]."

         {¶9} The hearing on the amount of sanctions to be awarded Dolan was held on August 15, 2016. O'Shea testified^[4] that he had spent 87.6 hours from July 18, 2014 through August 10, 2016 defending the third-party complaint and pursuing sanctions relating to same.^[5] In support of his testimony, O'Shea submitted time sheets identifying the tasks he had performed and the time spent on each. No hourly rate was listed on the time sheets. O'Shea also testified regarding his background and expertise in litigation matters and indicated that, in his experience, a $275 hourly rate was "reasonable" and "very normal" for an attorney in Cuyahoga County for legal work of this type.

         {¶10} O'Shea further testified that he had no written fee agreement with Dolan to represent him on the third-party complaint, had never had any discussions with Dolan about what his hourly rate or fees would be and had not yet billed Dolan for any of the work he had performed on the case. He explained that he had a long-term personal and professional relationship with Dolan and that pursuant to an "arrangement" with Dolan, what amount, if any, Dolan paid O'Shea for his work on this matter would be determined at some point in the future based upon the outcome of the sanctions motion and the collectibility of Calabrese and Christie. As he explained:

It's not a contingency fee case.

I will disclose to the Court that in fact Mr. Dolan and I have an arrangement where he has not had to pay me a penny for the representation to date that I have; we were going to wait to see how we do relative to the sanctions matter here and then determine if the Court makes such a ruling the collectibility factor of both Mr. Christie and Mr. Calabrese.

         {¶11} O'Shea further explained that although he ultimately expected to bill Dolan for all the legal work he performed in this matter, if Dolan received even a nominal sanctions award, he expected to "write off a significant portion of his fees:

Q. I want to make sure I understood your testimony earlier. Mr. Dolan [has] never gotten a bill for this matter?

A. Yes.

Q. And if the Judge were to award one dollar in sanctions, would Mr. Dolan get a bill?

A. Yeah.

Q. And would that bill consist of the 80-some-odd hours that you're asking this Court to award?

A. The bill itself absolutely would.

Q. But you would write off a significant portion of it, would you not, sir?

A. It depends. I would think so, Mr. Christie, to be honest with you because he's a friend of mine, but I don't believe Mr. Dolan would allow me to write all of that off; he's that kind of guy.

THE COURT: Now, you said that you were - I was a little unclear on the impact of this Court's ruling on ...