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Pipino v. Norman

Court of Appeals of Ohio, Seventh District, Mahoning

December 12, 2017

SAMUEL D. PIPINO ET AL., PLAINTIFFS-APPELLEES/ CROSS-APPELLANTS,
v.
FORREST NORMAN ET AL., DEFENDANTS-APPELLANTS/ CROSS-APPELLEES.

         Civil Appeal from the Court of Common Pleas of Mahoning County, Ohio Case No. 13 CV 3187

          For Plaintiffs-Appellees/Cross Appellants: Atty. Mark A. Hanni, Atty. Jason Small.

          For Defendants-Appellants/Cross Appellees: Atty. Stephen E. Walters, Atty. James O'Connor, Atty. Brian D. Sullivan Reminger Co., L.P.A. Atty. Thomas E. Dover, Atty. Melanie R. Irvin, Atty. Colleen Mountcastle, Gallagher Sharp, LLP

          Hon. Carol Ann Robb Hon. Gene Donofrio Hon. Cheryl L. Waite Judges.

          OPINION

          ROBB, P.J.

         {¶1} This case presents an appeal and a purported cross-appeal. Gallagher Sharp (the law firm) appeals the decision of the Mahoning County Common Pleas Court granting summary judgment to Samuel D. Pipino et al. (the clients) on the law firm's quantum meruit counterclaim. The trial court held the quantum meruit claim was not sustainable as the parties' agreement set forth the fees. The law firm points to a Supreme Court precedent stating termination of the attorney-client relationship and the accompanying contingency agreement does not preclude the attorney from recovering the reasonable value of services rendered prior to discharge, whether the termination was with or without just cause. The law firm states the claim for recovery of fees is not on the prior contract and the terms of a "stipulation" allegedly attached to the contract were in dispute. We conclude the clients were not entitled to judgment as a matter of law on the quantum meruit counterclaim. Accordingly, the entry of summary judgment for the clients on the law firm's counterclaim is reversed, and the counterclaim is remanded for further proceedings.

         {¶2} The clients appeal the trial court's grant of summary judgment to the law firm and Attorney Forrest A. Norman on the clients' legal malpractice claim. The trial court held the clients' settlement in the underlying case after termination of the attorney-client relationship was fatal to the malpractice claim. The court also found a waiver principle applicable due to the settlement. The clients contend the attorney's negligence diminished the value of their underlying case or at least caused damages from loss of use of the money during the delay. The issue is whether there was any evidence the attorney's negligence proximately caused damages after taking into consideration a settlement was entered in the underlying case after the attorney was terminated. For the reasons explained infra, we hereby uphold the grant of summary judgment entered against the clients on their legal malpractice claim.

         STATEMENT OF THE CASE

         {¶3} The clients filed a complaint alleging legal malpractice against Attorney Norman and the law firm where he was employed. A counterclaim was filed seeking recovery of attorneys' fees under the doctrine of quantum meruit. The underlying case involved the clients' dissatisfaction with investments made by First Merit Bank in the clients' trust portfolios from 2007 through 2009. The clients instructed the bank to make safe and conservative investments. The bank suggested exchange-traded funds (ETFs); the clients consented while reiterating their instructions as to safe and conservative investments. The bank invested in ETFs; at least one of the ETFs was comprised of derivatives (was leveraged) rather than merely stocks. When the $2 million beginning balance incurred $1.29 million in losses, the clients instructed the bank to sell the investments.

         {¶4} In 2010, the clients hired Attorney Norman of Gallagher Sharp to represent them in a breach of fiduciary duty suit against the bank and certain bank employees. Attorney Apelis, a partner at Gallagher Sharp, assisted Attorney Norman. The agreed compensation was a one-third contingency fee plus expenses. Attorney Norman filed a complaint on behalf of the clients against the bank and the bank's employees, resulting in Pipino v. Onuska, Mah. Cty. C.P. No. 10CV3548. The case was voluntarily dismissed on April 4, 2012, after the trial court refused to extend a previously-extended discovery deadline. Private mediation with the bank proceeded in November 2012, after which the bank filed a declaratory judgment action against the clients in Cuyahoga County. The clients filed a counterclaim. The clients also attempted to refile the Mahoning County lawsuit against the bank, but the court dismissed this action due to the pending Cuyahoga County case.

         {¶5} The clients say they terminated Attorney Norman on March 26, 2013 and used other attorneys at the law firm; the law firm states other attorneys at the law firm took over the case when Attorney Norman left the firm. The clients terminated the law firm's representation in July 2013 and hired a new attorney. On September 18, 2013, the clients settled the case against the bank, and the Cuyahoga County suit was dismissed.

         {¶6} In November 2013, the clients filed the within legal malpractice action against Attorney Norman and Gallagher Sharp (for vicarious liability). The complaint claimed Attorney Norman committed legal malpractice by: failing to complete discovery, interview an expert witness, and prepare for trial in the Mahoning County action against the bank, all necessitating voluntary dismissal; disobeying the clients' instruction to immediately refile the suit in Mahoning County, while assuring the clients venue would not be lost; and agreeing to schedule mediation with the bank instead of immediately refiling the suit without first consulting with the clients. Regarding the Cuyahoga County suit, the clients complained Attorney Norman failed to engage in discovery and scheduled their depositions in contravention of their instructions that they not be deposed until the bank provided discovery.

         {¶7} The quantum meruit counterclaim filed by Attorney Norman and the law firm asked for the reasonable value of legal services and advanced expenses. The counterclaim pointed out: the action against the bank was filed in 2010; the bank's efforts to remove the suit to federal court were successfully opposed; upon remand to state court, there was extensive discovery conducted; interrogatories and requests for production were served on the bank; responses were submitted to the bank's interrogatories, requests for production, and requests for admissions; experts were engaged; numerous court appearances were made; motions to compel discovery were filed and defended; the clients elected to voluntarily dismiss due to an impasse in discovery; and mediation lasted for several hours, after which the clients rejected a settlement offer. After the Cuyahoga County action was filed, the action was defended, a counterclaim was filed, discovery was conducted (with multiple depositions), and a motion to compel discovery was filed on behalf of the clients.

         {¶8} On April 20, 2015, Attorney Norman and the law firm filed a motion for summary judgment on the clients' legal malpractice claim. They asserted: the alleged discovery omissions in the original action that was voluntarily dismissed did not harm the case against the bank; instead of completing discovery in the second action and taking the case to trial, the clients settled with the bank; the clients waived their malpractice claim by settling the underlying case, citing the Eighth District's Sawchyn v. Westerhaus case; loss of venue in one county is not a basis for malpractice; proximate cause was lacking as there was no showing the alleged negligence caused a loss since nothing prohibited the clients from taking their case against the bank to trial; and the underlying case required expert testimony on the standard of care for a financial professional, but the clients failed to provide an expert report by the deadline in order to prove their "case within a case."

         {¶9} An affidavit was provided to confirm the clients failed to provide an expert report on the bank's breach of fiduciary duty in the underlying case. In addition, the affidavit of Attorney Apelis attested: extensive discovery was conducted in both cases; a financial expert was retained in both cases; Attorney Norman left the firm on March 26, 2013; the court in Cuyahoga County ordered the clients to submit to deposition over objection after non-party depositions had been taken; and no discovery deadlines were set in the Cuyahoga County case at the time the law firm was terminated. The motion also pointed to Mr. Pipino's deposition testimony where he vaguely stated he lost three years and his case was hurt by not getting discovery.

         {¶10} On May 5, 2015, the clients responded to the motion for summary judgment as to their legal malpractice claim. A reply in support of the motion for summary judgment was filed on July 1, 2015. The clients then received leave to file a cross-motion for summary judgment on the quantum meruit counterclaim filed against them.

         {¶11} On August 18, 2015, the clients filed a motion for summary judgment on the counterclaim, arguing the existence of the express contract nullified the quasi-contractual quantum meruit claim. They cited to Mr. Pipino's deposition at page 51, where he said he told Attorney Norman when he hired him that he would not agree to a settlement unless they recovered all of their losses (as he would rather take the case to trial); he said Attorney Norman advised he would have to check with the law firm's partners and called him later to say he received their approval. The clients suggested a quasi-contractual quantum meruit claim would have been nullified by a written agreement, noting an attorney is to have the client sign a written contingency fee agreement pursuant to Rule of Professional Conduct 1.5. The clients alternatively argued the elements of a quantum meruit claim could not be established because there was no benefit conferred and the equities do not favor recovery for services rendered due to the malpractice committed.

         {¶12} The September 1, 2015 response to the motion for summary judgment on the counterclaim cited to the Supreme Court's Fox and Reid cases, which held attorneys' fees can be recovered through quantum meruit where a contractual relationship (whether express or implied) was terminated (whether with or without just cause). The law firm and attorney argued the disputed terms of a contingency fee agreement are irrelevant after the relationship is prematurely terminated. They also stated the quality of work is a distinct issue which could relate to the reasonable value of services rendered but which would not bar the quantum meruit action. They set forth itemized evidence of 1, 061.4 hours of work with hourly rates for each item, totaling $143, 714, plus $20, 706.63 in expenses.

         {¶13} More than one year later, on September 12, 2016, the trial court granted both summary judgment motions in separate entries, resulting in the disposal of the entire case. Both entries stated there was no just reason for delay. See Civ.R. 54(B).

         {¶14} In granting the clients' motion for summary judgment on the counterclaim, the court held: "the agreement between Plaintiff and Defendants set forth their agreement with respect to fees. As such, no quantum meruit claim is sustainable." The law firm filed a timely notice of appeal from this entry on October 11, 2016.

         {¶15} In separately granting the motion for summary judgment filed by the attorney and the law firm on the clients' legal malpractice claim, the court held: "the acceptance of the settlement agreement by Plaintiff, which included a release provision, is fatal to the present claims submitted by Plaintiff. Moreover, the 8th District Court holding in Westerhaus, is applicable to the facts in the case at bar." The clients filed what they termed a notice of cross-appeal from this entry on October 17, 2016.

         Preliminary Issue as to Notice of Cross-Appeal

         {¶16} App.R. 3(C)(1) provides: "Cross Appeal Required. A person who intends to defend a judgment or order against an appeal taken by an appellant and who also seeks to change the judgment or order or, in the event the judgment or order may be reversed or modified, an interlocutory ruling merged into the judgment or order, shall file a notice of cross appeal within the time allowed by App.R. 4." Compare App.R. 3(C)(2) ("Cross Appeal and Cross-Assignment of Error Not Required. A person who intends to defend a judgment or order appealed by an appellant on a ground other than that relied on by the trial court but who does not seek to change the judgment or order is not required to file a notice of cross appeal or to raise a cross-assignment of error.").

         {¶17} Here, the clients' appeal of the entry of summary judgment on their legal malpractice claim is not the defense of the judgment appealed by the law firm; they are not seeking to change the judgment appealed by the law firm or seeking to change an interlocutory order that merged with the final judgment in the event the final judgment (appealed by the law firm) is reversed. Rather, they are appealing a different final judgment in the case. Accordingly, the clients should have filed a separate notice of appeal, which would have been assigned its own case number, rather than a notice of cross-appeal.

         {¶18} This situation is similar to the situation in this court's Estate of Pizzoferrato case, where the trial court issued two judgment entries on the same day. One entry overruled party A's exception to a final account; party A filed a notice of appeal from this entry. The other entry granted judgment for party B in his concealment action; party B filed a notice of cross-appeal from this separate entry (as he contested the amount of his recovery). We stated: "As a preliminary matter, it must be noted that [party B] should have filed a separate appeal in this matter and not a notice of cross-appeal. His claims do not fall within the purview of a true cross-appeal, since he is appealing an issue arising from a judgment entry wholly separate and distinct from the entry referred to in appellant's notice of appeal." In re Estate of Pizzoferrato, 190 Ohio App.3d 123, 2010-Ohio-4848, 940 N.E.2d 1018, ¶ 14 (7th Dist.). We then exercised our discretion to proceed in spite of this issue.

         {¶19} We explained this was permissible because the mistitled notice of cross-appeal was filed within the time for filing a direct appeal under App.R. 4(A), implying the extra time provided for multiple appeals or cross-appeals was not available in the appeal from two separate final entries. Id. at ¶ 15. Notably, App.R. 4(B)(1) applies to qualifying multiple appeals as well as cross-appeals. Specifically, the rule provides: "Multiple or Cross Appeals. If a notice of appeal is timely filed by a party, another party may file a notice of appeal within the appeal time period otherwise prescribed by this rule or within ten days of the filing of the first notice of appeal." App.R. 4(B)(1).

         {¶20} This division requires reference to the time requirements in App.R. 4(A). For instance, "a party who wishes to appeal from an order that is final upon its entry shall file the notice of appeal required by App.R. 3 within 30 days of that entry." App.R. 4(A)(1). See also App.R. 4(A)(2) ("a party who wishes to appeal from an order that is not final upon its entry but subsequently becomes final--such as an order that merges into a final order entered by the clerk or that becomes final upon dismissal of the action--shall file the notice of appeal required by App.R. 3 within 30 days of the date on which the order becomes final.").

         {¶21} Construing the Pizzoferrato holding and reading App.R. 4(B)(1) in conjunction with App.R. 4(A), it would appear the ten-day alternative in App.R. 4(B)(1) cannot be used to extend the time for filing a second notice of appeal in the same lower court case where the second notice of appeal is filed from a separate final judgment entered in the case. In other words, the multiple appeals referred to in App.R. 4(B)(1) are multiple appeals from the same final judgment (or appeals from orders that became final due to the same final judgment) not multiple appeals from separate final entries in the same case. Although the clients' notice of appeal at first glance appears to have relied on the ten-day alternative, there is an issue with the court's judgment and the clerk's docket which would make the clients' appeal timely as a direct appeal from the final judgment.

         {¶22} That is, the notice of cross-appeal was filed within the time for filing an original appeal because the trial court's judgment entry failed to instruct the clerk to serve the parties and the clerk never noted service in the docket. "When the court signs a judgment, the court shall endorse thereon a direction to the clerk to serve upon all parties not in default for failure to appear notice of the judgment and its date of entry upon the journal." Civ.R. 58(B). "Within three days of entering the judgment upon the journal, the clerk shall serve the parties in a manner prescribed by Civ.R. 5(B) and note the service in the appearance docket." Id. "In a civil case, if the clerk has not completed service of the order within the three-day period prescribed in Civ.R. 58(B), the 30-day periods referenced in App.R. 4(A)(1) and 4(A)(2) begin to run on the date when the clerk actually completes service." App.R. 4(A)(3). Consequently, as was the case in Pizzoferrato, the clients' appeal was filed within the time for filing an original appeal from the judgment being appealed, without resort to the ten-day alternative in App.R. 4(B)(1).

         {¶23} In sum, this court will exercise our discretion to proceed with the case in its current state, as we did in Pizzoferrato. We are effectively sua sponte amending the clients' notice of cross-appeal into a notice of appeal by eliminating the word "cross" from the title of the notice.

         SUMMARY JUDGMENT

         {¶24} Summary judgment can be granted when there remains no genuine issue of material fact and reasonable minds can only conclude the moving party is entitled to judgment as a matter of law. Civ.R. 56(C). The movant has the initial burden to show there is no genuine issue of material fact. Byrd v. Smith, 110 Ohio St.3d 24, 2006-Ohio-3455, 850 N.E.2d 47, ¶ 10, citing Dresher v. Burt, 75 Ohio St.3d 280, 294, 662 N.E.2d 264 (1996). The non-moving party then has a reciprocal burden. Id. The non-movant's response, by affidavit or as otherwise provided in Civ.R. 56, must set forth specific facts showing there is a genuine issue for trial and may not rest upon mere allegations or denials in the pleadings. Civ.R. 56(E).

         {¶25} The court is to consider the evidence and all reasonable inferences to be drawn from the evidence in the light most favorable to the non-movant. See, e.g., Jackson v. Columbus, 117 Ohio St.3d 328, 2008-Ohio-1041, 883 N.E.2d 1060, ¶ 11. Any doubts are to be resolved for the non-movant. Leibreich v. A.J. Refrig., Inc., 67 Ohio St.3d 266, 269, 617 N.E.2d 1068 (1993). A trial court "may not weigh the proof or choose among reasonable inferences." Dupler v. Mansfield Journal Co., 64 Ohio St.2d 116, 121, 413 N.E.2d 1187 (1980). Still, "[t]he material issues of each case are identified by substantive law." Byrd, 110 Ohio St.3d 24 at ¶ 12. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Id., quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

         {¶26} Civ.R. 56 must be construed in a manner that balances the right of the non-movant to have a jury try claims that are adequately based in fact with the right of the movant to demonstrate, prior to trial, that the claims have no factual basis. Byrd,110 Ohio St.3d 24 at ¶ 11, citing Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). We consider the propriety of granting summary judgment de novo. Comer v. Risko,106 Ohio St.3d 185, 2005-Ohio-4559, 833 N.E.2d 712, ¶ 8. Under a de novo standard of review, we review the case independently and give no deference to the trial court's decision. See, e.g., Diley Ridge Med. Ctr v. ...


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