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Horstman v. Fanning

Court of Appeals of Ohio, Third District, Putnam

June 24, 2019

TED HORSTMAN ET AL., PLAINTIFFS-APPELLEES,
v.
DAVID FANNING, DEFENDANT-APPELLANT.

          Appeal from Putnam County Common Pleas Court Trial Court No. 17 CV 102

          Richard M. Kerger and Kimberly A. Conklin for Appellant

          Bruce Comly French for Appellees

          OPINION

          PRESTON, J.

         {¶1} Defendant-appellant, David Fanning ("Fanning"), appeals the October 24, 2018 judgment of the Putnam County Court of Common Pleas. For the reasons that follow, we affirm.

         {¶2} This case stems from a business dispute between plaintiffs-appellees, Ted and Rick Horstman ("Ted" and "Rick") (collectively the "Horstmans"), Fanning, and a fourth individual, Vincent Snell ("Snell"). Ted, Rick, Fanning, and Snell were members of Ultimate Systems, Ltd. ("Ultimate Systems"), an Ohio limited liability company that produced colorized rubber materials and end-user products such as rubber flooring. (See Doc. No. 48, Snell's Sept. 13, 2018 Depo., Ex. B). Each held a 25 percent member interest in Ultimate Systems. (Id.). In 2013, a plan was devised to "freeze" Snell out of Ultimate Systems. (See Oct. 19, 2018 Tr. at 8). Robert Honigford ("Honigford"), Ultimate Systems's chief financial officer and corporate attorney, was the "mouthpiece" of the scheme to acquire Snell's interest in Ultimate Systems. (Id. at 8-9). In late 2013, Snell's 25 percent interest in Ultimate Systems was "eliminated in exchange for a payment of $525, 000" based upon a valuation provided by an accounting firm hired by Honigford. (Doc. No. 48, Snell's Sept. 13, 2018 Depo., Ex. B). The acquisition of Snell's interest in Ultimate Systems was accomplished in conjunction with a merger between Ultimate Systems and RDT Manufacturing, LLC ("RDT"), an entity owned equally by Ted, Rick, and Fanning, with RDT as the surviving entity. (Id.). In 2014, the assets of RDT, along with the assets of other entities owned by the Horstmans and Fanning, were sold to a subsidiary of Accella Performance Materials, Inc. ("Accella") for $40 million. (Id.); (Doc. No. 19, Ted's Jan. 25, 2018 Depo. at 8-9).

         {¶3} Soon after the Accella transaction was consummated, Snell, through Lynx Services, Ltd. ("Lynx"), a company he had previously formed to hold his interest in Ultimate Systems, filed a complaint against the Horstmans and Fanning in the United States District Court for the Northern District of Ohio alleging that the plan to freeze him out of Ultimate Systems violated Ohio law. (See Oct. 19, 2018 Tr. at 8-9); (See Doc. No. 28, Ex. A). Honigford was later added as a defendant to the federal lawsuit. (See Doc. No. 28, Ex. A).

         {¶4} In late September 2016, Snell was subjected to deposition in Columbus, Ohio. The Horstmans and Fanning were present at Snell's deposition; Honigford was not. (See Oct. 19, 2018 Tr. at 11, 37). On September 30, 2016, the second day of Snell's deposition, Snell, Fanning, and the Horstmans met privately to discuss the possibility of settling the federal lawsuit. (Id. at 11). (See Sept. 30, 2016 Tr. at 3). Eventually, Snell, Fanning, and the Horstmans agreed that Lynx would dismiss the federal lawsuit in exchange for $4.5 million. (Oct. 19, 2018 Tr. at 11, 37). That day, the parties recited the general terms of their settlement agreement into the record. (Sept. 30, 2016 Tr. at 3-5). Later, the parties executed a "Global Settlement Agreement and General Release" providing that Lynx would dismiss the federal lawsuit with prejudice in exchange for $4.5 million, $3 million of which was due on or before November 15, 2016 and $1.5 million of which was due on or before April 30, 2017. (Doc. No. 21, Ex. G). Neither the settlement agreement as recited into the record nor the written settlement agreement specify who was responsible for paying what percentage of the $4.5 million. According to the Horstmans and Snell, the Horstmans were to be responsible for paying $1.5 million each, Fanning was to pay $1.5 million, and Honigford was not to pay any part of the $4.5 million. (See Doc. No. 21, Ex. E); (See Oct. 19, 2018 Tr. at 13-14, 21-23). According to Fanning, however, he never agreed to contribute a specific sum toward the $4.5 million settlement, and he did not agree that Honigford should not have to pay at all. (See Fanning Affidavit at 4).

         {¶5} After the parties adopted the written settlement agreement, the Horstmans each paid $1.5 million to Lynx.[1] Subsequently, on or about April 22, 2017, Fanning advised the Horstmans that he did not intend to pay Lynx the remaining $1.5 million. (Doc. Nos. 1, 7). As a result, the Horstmans decided to split the remaining $1.5 million payment evenly, with Ted and Rick each paying Lynx an additional $750, 000. (Oct. 19, 2018 Tr. at 16).

         {¶6} On June 22, 2017, the Horstmans filed a complaint in the trial court against Fanning requesting a judgment for $1, 501, 748.73 plus interest.[2] (Doc. No. 1). On August 4, 2017, Fanning filed his answer to the Horstmans' complaint. (Doc. No. 7).

         {¶7} On March 26, 2018, the Horstmans filed a motion for summary judgment. (Doc. No. 21). On April 24, 2018, Fanning filed a memorandum in opposition to the Horstmans' motion for summary judgment as well as a cross-motion for summary judgment. (Doc. No. 28). On May 7, 2018, the Horstmans filed a memorandum in opposition to Fanning's cross-motion for summary judgment. (Doc. No. 29). On May 9, 2018, Fanning filed a brief in reply to the Horstmans' memorandum in opposition to his cross-motion for summary judgment. (Doc. No. 31).

         {¶8} Following a May 10, 2018 hearing on the motions for summary judgment, the trial court partially granted the Horstmans' motion for summary judgment. (Doc. No. 33). First, the trial court found that the Horstmans and Fanning "agreed to the settlement amount and incorporated that agreement on the record and as a future written settlement agreement" but that "[t]he settlement agreement was silent as to the contribution amounts as it would pertain to any of the parties." (Id.). The trial court concluded that the Horstmans had established that "an agreement to pay a settlement in the Federal case does exist." (Id.). In essence, the trial court concluded that the only issue in dispute was the precise amount of money Fanning would be required to pay toward the $4.5 million settlement. (See id.). Consequently, the trial court denied the Horstmans' motion for summary judgment in part so that the parties could "be heard on the matter as to contribution." (Id.). Finally, the trial court denied Fanning's cross-motion for summary judgment in its entirety. (Id.).

         {¶9} On October 19, 2018, a bench trial was held to determine the sole "remaining issue before the Court" which was "the allocation of contribution on [the Horstmans'] Complaint for Money Damages." (Doc. No. 56). On October 24, 2018, the trial court entered judgment for the Horstmans in the amount of $1.5 million. (Id.).

         {¶10} Fanning filed a notice of appeal on November 21, 2018. (Doc. No. 64). He raises one assignment of error for our review.

         Assignment of Error

         The trial court's judgment is against the manifest weight of ...


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