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Weckel v. Cole Russell Architects

Court of Appeals of Ohio, First District, Hamilton

September 8, 2017

FREDERIC C. WECKEL, Plaintiff-Appellant,
v.
COLE RUSSELL ARCHITECTS, Defendant-Appellee.

         Civil Appeal From: Hamilton County Court of Common Pleas Trial No. A-0407805

          Tobias, Torchia & Simon and David Torchia, for Plaintiff-Appellant.

          Keating Muething & Klekamp PLL and Kasey L. Bond, for Defendant-Appellee.

          OPINION

          Mock, Presiding Judge.

         {¶1} Plaintiff-appellant Frederic C. Weckel appeals the decision of the Hamilton County Court of Common Pleas denying his motion to enforce a settlement agreement between him and defendant-appellee Cole Russell Architects ("Cole Russell"). We find no merit in Weckel's sole assignment of error, and we affirm the trial court's judgment.

         I. Facts and Procedure

         A. A Settlement Agreement

         {¶2} The record shows that Weckel had been a managing principal of Cole Russell, a national architectural practice located in Cincinnati. In March 2004, Cole Russell terminated Weckel's employment. Weckel brought suit against his former employer for breach of fiduciary duty and wrongful termination. In January 2008, the parties entered into a settlement agreement.

         {¶3} Under the terms of that agreement, Weckel was to sell his shares of Cole Russell stock to the firm's employee stock ownership plan ("ESOP"), rather than redeeming them as provided for in the shareholder agreement. In exchange, Weckel agreed to end his lawsuit against Cole Russell.

         {¶4} The agreement further provided: "The ESOP purchase of Weckel's stock is contingent on the professional opinion of an independent adviser who must approve the ESOP's purchase of Weckel's shares." The purpose of this provision was to protect the ESOP trustee. The trustee was David Arends, who was also the president and chief executive officer of Cole Russell. An independent adviser was necessary because of the potential of a conflict of interest, although the parties did not anticipate any problems obtaining approval.

         B. Potts Appointed Independent Advisor

         {¶5} Cole Russell hired Thomas Potts to serve as the independent advisor. Potts then retained attorney Ben Wells to advise him in his role as independent fiduciary. Arends had previously hired Wells to represent him in his capacity as the ESOP trustee. Potts also hired ComStock Valuation Advisers ("ComStock") to review the sale of Weckel's stock to the ESOP and to determine the value of that stock. Cole Russell cooperated with Potts and ComStock and provided requested documents and information.

         {¶6} ComStock sent Potts a "draft fairness opinion" in which it determined that the "consideration to be paid by the ESOP" for Weckel's shares of stock was appropriate and that the transaction was "fair and reasonable to the ESOP from a financial point of view." The transaction appeared to be moving forward and the parties exchanged various drafts and revisions of the settlement agreement. Potts stated that most of his work was completed as of late April 2008.

         C. Cole Russell Learns About Licensing Issues Related to the ESOP

         {¶7} On April 17, 2008, Arends and Joe Stephens, Cole Russell's chief financial officer, attended a conference about ESOPs. They were surprised to learn that having an ESOP violated the licensing requirements for architects in some states. Neither of them had been on the board of directors at the time the ESOP was implemented. At that time, the board had only determined that the ESOP would not violate Ohio law.

         {¶8} Wells, who was the attorney for Cole Russell's ESOP, researched the licensing issue. His research confirmed that the ESOP presented licensing issues in some states for two reasons. First, several states did not permit an architectural firm to be a general business corporation (as opposed to a professional corporation), and Cole Russell needed to be a general corporation to have an ESOP. Second, several states required that a certain percentage of the shares of an architectural firm must have been held by a licensed architect, and Cole Russell's ESOP held ...


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