pq.h': 1737^ 222-j.^769 gsjohn f. haviland carla j. morman bieser, greer & landis, llp 400...

^^^^^^ .

IN THE SUPREME COURT OF OHIO

PAUL L. SACKSTEDER, et al. * CASE NO. ^

Plaintiffs-Appellees,

v.

JEFFREY S. SENNEY, et al.

Defendants-Appellants.

On Appeal from the MontgomeryCounty Court of Appeals, Second

* Appellate District

Court of AppealsCase No. CA 024993

T.C. Case No. 2010 CV 01913^

MEMORANDUM IN SUPPORT OF JURISDICTION OF APPELLANTSJEFFREY S. SENNEY, PAUL E. ZIMMER, ANDREW C. STORAR, GERALD L.

MCDONALD AND PICKREL, SCHAEFFER & EBELING CO., LPA

Neil F. Freund (OH12183)(COUNSEL OFRECORD)Lindsay r^. .i ohn-son (OH7 7 753)FREUND, FREEZE & ARNOLDFifth Third Center .1 South Main Street, Suite 1800Dayton, OH 45402-2017Phone: (937) 222-2424Fax: (937) 222-5369PQ.h': 1737^ 222-J.^769

E-Mail: callison e,ffalaw.comE-Mail:liohnson ,ffalaw.com

Counsel for Defendants-AppellantsJeffrey S. Senney, Paul E. Zimmer,Andrew C. Storar, Gerald L. McDonald,and Pickêl, Schaeffer and Ebeling Co., L.

John J. Mueller (0012101)JOHN J. MUELLER, LLC632 V^ne Stre^t, Suite 800Cincinnati, Ohio 45202-2441Phone: (513) 621-2441Fax: (513) 621-2550E-mail: johnjmueller(a21e a lmalpractice.net

Counselfo^ Plaintiffs-Appellees

Gs fj^.isLi^0^ ^ 3 2012

CLER^ ^F ÔîR^°SUPRE^lE GÛRT_OF ^Î

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FREUND,FREEZE & ARNOLDA Legal Professional Association

John F. HavilandCarla J. MormanBIESER, GREER & LANDIS, LLP400 PNC Center6 North Main StreetDayton, Ohio 45402L(a^b^llaw.comcjm(a^b^llaw.com

Counselfor DefendantsTeresa A. Ambos, Nicole R. Brumbaugh,Barry Staff, Inc., and Douglas J. Barry, Jr.

Victoria A. FlinnQuintin F. LindsmithBRICKER & ECKLER LLP100 South Third StreetColumbus, OH 43215vflinn(a_^bricker. com^lindsmith(a,bricker.com

Counselfor Defendant-AppellantJerome M. Buening, J>^.


TABLE OF CONTENTS

Pa^e

EXPLANATION OF WHY THIS IS A CASE OF PUBLIC AND GREATGENERAL INTEREST .................................................................................

STATEMENT OF THE CASE AND FACTS ......... ... ......... ......... ... ...... .... .. ........4

Statement of the Case . . . .. . .. . .. . . . . . .. . .. . . . . . . .. . . .. . .. .. . . . . . .. . .. . . . . . . . .. . . . . . . .. . .. . . .. . .......4

Statement of Facts ... ................ ..................... .................. ... ............. ..........5

ARGUMENT IN SUPPORT OF PROPOSITIONS OF LAW ....................................8

Proposition of Law No. I

In Ohio, to properly state a claim for relief and survive a motion to dismisspursuant to Ohio Civ.R. 12(B)(6), a plaintiff must establish his claims areplausible, rather than speculative or merely possible. (Bell Atlantic Corp. v.Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) andAshcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009),adopted and followed) . ... ... ...... ...... ......... ... ... ......... ... ... ... ......... ..........8

Proposition of Law No. II

In Ohio, to properly state a claim for relief and survive an Ohio Civ.R. 12(B)(6)motion to dismiss, a plaintiff alleging legal malpractice claims must set forthsufficient facts as to each required element in order to establish his claims areplausible rather than speculative or merely possible . ......... ......... .... ....... .... ........13

CONCLUSION ............................................................................................15

CERTIFICATE OF SERVICE ........................................................................16

APPENDIX ................................................................................................17

Appx. Pa^e

Opinion of the Montgomery County Court of Appeals (Sept. 28, 2012) . . . . . . . . . . . . . . . . .. . . . . . . . . ...1

Final Entry of the Montgomery County Court of Appeals ( Sept. 28, 2012) . .. .. . .. . . . . . . . . . . . . ....42

FREUND, FREEZE & ARNOLDA Legal ProFessional Association

EXPLANATION OF WHY THIS IS A CASE OF PUBLIC ANDGREAT GENERAL INTEREST

Predictability in the law and its consistent and uniform application by all courts across the

State of Ohio, in each of the eighty-eight counties and twelve appellate districts, is the very

bedrock of Ohio's judicial system. This system cannot be said to be fair or impartial when the

law being applied in some courts differs markedly from the law applied in others. When the law

is applied differently or inconsistently based upon a court's locality in the state, litigants perceive

the legal system to be unfair and unjust. The judiciary and members of the Bar view the law as

unstable and fickle due to the inability to predict how the law will be applied in cases today as

well as in the fizture. Faced with such uncertainty, businesses and professionals shy away from

engaging in commerce in Ohio, and Ohio's citizens lose faith that the judicial system can fairly

resolve and dispose of their legal disputes. It is for these reasons that consistent, fair and

uniform application of the law throughout Ohio is a matter of public and great general interest.

Nowhere is this uniform and fair application of the law more critically important than at the

commencement of litigation when the adequacy of a complaint is first challenged and

determined. Knowing what rules govern the adequacy of pleadings is essential to a fair and

efficient administration of justice, for both plaintiffs and defendants.

The propositions of law presented in this case address the standard for pleading a cause

of action in a legal malpractice complaint pursuant to Ohio Civ.R. 8(A)(1). This case raises

issues of public and great general interest as litigation in Ohio's courts begins with the filing of a

pleading. Complaints are oftentimes followed by claims being joined in other pleadings such as

counterclaims, cross-claims, or third-party complaints. In order for these pleadings to state a

legal claim for relief, Ohio's Civ.R. 8(A)(1) requires "a short and plain statement of the claim

showing that the party is entitled to relie£" Because Ohio's Rule 8(A)(1) was patterned after

FREUND, FREEZE & ARNOLDA Legal Professional Association

Fed.Civ.R. 8(a)1 Ohio adopted the "no set of facts" standard set forth in Conley v. Gibson, 355

U.S. 41, 47, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957) as the test for judging the adequacy of the

complaint at the motion to dismiss stage. See O'Brien v. Universit^Communit^Tenants Union,

Inc., 42 Ohio St.2d 242, 327 N.E.2d 753 (1975), syllabus. But Ohio should join the movement

away from the "no set of facts" standard and adopt the "plausibility" standard now enforced in

federal courts. The "plausibility" standard is being embraced in a growing number of other

jurisdictions across the country.

The Supreme Court of the United States abandoned Conle,y's "no set of facts" standard

noting that "this famous observation has earned its retirement" and "[t]he phrase is best forgotten

as an incomplete, negative gloss on an accepted pleading standard." Bell Atlantic Corporation v.

Twombly, 550 U.S. 544, 563, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). In adopting the new

"plausibility" standard, the Twombly Court observed that "a plaintiff's obligation to provide the

`grounds' of his `entitle[ment] to relief requires more than labels and conclusions, and a

formulaic recitation of the elements of a cause of action will not do" and "[f)actual allegations

must be enough to raise a right to relief above the speculative level." Id. at 554. A complaint

does not suffice if it tenders "naked assertion[s]" devoid of "further factual enhancement." Id., at

557. See also, Ashcroft v. Iqbal, 556 U.S. 662, 677-678, 129 S.Ct. 1937, 173 L.Ed.2d 868

(2008)(further amplifying and applying the Twombly "plausibility" standard). As the Twombly

Court noted, when plaintiffs "have not nudged their claims across the line from conceivable to

plausible, their complaint must be dismissed." 550 U.S. at 570.

In this case, the Second Appellate District rejected the "plausibility" standard. App. Op.

¶¶38-39, Apx. pp. 16-17. It did so despite the recognition that other courts across the State have

1Fed.R.Civ.P. 8(a)(2) requires a pleading to contain "a short and plain statement of theclaim showing that the pleader is entitled to relief."

2


adopted the new standard. App. Op. ¶¶39-46, Apx. pp. 17-19. In fact, as demonstrated herein, it

is clear that several appellate districts in Ohio have all implemented and adopted the

"plausibility" standard based upon a recognition that Twombly has abandoned the old,

antiquated "no set of facts" standard in Conley. But other appellate courts have further confused

the law by citing the Twombl /y Iqbal "plausibility" standard alongside the Conley "no set of

facts" standard in the same opinion. Failing to account for the qualitative difference between the

two standards only compounds the confusion and uncertainty about Ohio's pleading standards.

One reason the Second Appellate District was hesitant to join its sister appellate courts in

implementing the Twombly "plausibility" standard was expressed by Judge Fain in his

concurring opinion: "The Twombly line of cases has no application to the rules of pleading in

Ohio courts unless and until the Supreme Court of Ohio incorporates the principles set forth in

those cases in its interpretation of the Ohio rules of pleading." App. Op. ¶106 (Fain, J., concur),

Apx. pp. 39-40. This Court should welcome the opportunity to clarify the confusion and

uncertainty brought on by the prevailing inconsistent treatment of Twombly and I^c bal

throughout Ohio. In doing so, this Court will resolve the intra-district conflict as to whether

Ohio continues to adhere to the "no set of facts" pleading standard, or is in accord with the

federal courts and other jurisdictions which have embraced the Twombly/Iqbal "plausibility"

standard.

This case is also worthy of review because of its great general interest and implications

for members of Ohio's legal Bar. Due to the reputational and professional harm that

unsupported and baseless allegations cause when made publicly in a civil complaint for

negligence and wrongdoing, this Court has recognized there are civil causes of action which

require closer scrutir.y of the complaint at the motion t® dismiss stage of the litigation. See, ^,

Byrd v. Faber, 57 Ohio St.3d 56, 565 N.E.2d 584 (1991); Mitchell v. Lawson Milk Co., 40 Ohio

3


St.3d 190, 532 N.E.2d 753 (1988). Closer scrutiny of pleadings setting forth claims against

Ohio's attorneys for legal malpractice is equally warranted. The adoption of the Twombl. /y Ic^bal

"plausibility" standard in this legal malpractice case is especially appropriate because of the

complaints' glaring deficiencies under Civ.R. 8(A)(1). The Plaintiffs-Appellees' complaints

offer nothing more than "labels and conclusions" and "a formulaic recitation of the elements of a

cause of action" for legal malpractice and breaches of fiduciary duties. The accusations of

damages are factually unsupported, speculative, and Plaintiffs-Appellees have "not nudged their

claims across the line from conceivable to plausible."

For these reasons, this Court should accept jurisdiction over this case to clarify Ohio's

pleading standards, in general,, and those applicable to claims for legal malpractice in particular.

STATEMENT OF THE CASE AND FACTS

Statement of the Case

This case arises out of a voluntary decision to sell a failing staffing services business

venture located in Dayton, Ohio. Plaintiffs-Appellees Paul L. Sacksteder and Circle Business

Services, Inc., d/b/a EXTRAhelp Staffing Services (collectively "EXTRAhelp") allege a variety

of tort and contract claims against ten (10) different parties, including the Defendants-

Appellants, Jeffrey S. Senney, Paul E. Zimmer, Andrew C. Storar, Gerald L. McDonald and

Pickrel, Schaeffer & Ebeling Co., LPA (collectively "PS&E") following EXTRAhelp's sale of

the company and its assets to non-party Belcan Services Group, II ("Belcan"), another temporary

staffing company located in Dayton, Ohio. EXTRAhelp alleges it was represented by the PS&E

attorneys during this sale and that the attorneys were negligent in that representation.

PS&E moved the trial court to dismiss EXTRAhelp's Amended Complaint arguing that

the Amended Complaint fails to set forth facts as to each e1_ement o_f EXTRAhelps's claims

against PS&E such that they are plausible rather than merely possible. Instead, EXTR.Ahelp's

4


Amended Complaint contains only basic and conclusory allegations unaccompanied by specific,

non-speculative facts. EXTRAhelp's unsupportive, speculative, and conclusory allegations do

not meet the pleading requirements set forth by the Supreme Court of the United States in Bell

Atlantic Cor^ v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) and Ashcroft

v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

The trial court agreed and entered a Decision and Entry sustaining the motions to dismiss

of PS&E and the other defendants holding that Twombly and I^c bal require Ohio plaintiffs to

allege "enough facts to state a claim to relief that is plausible on its face." Trial Court Decision

and Entry, Dec. 12, 2011, p. 2. EXTRAhelp appealed the trial court's decision to the Second

Appellate District which reversed in part, and affirmed in part, the trial court's decision. The

Second District reversed the dismissal of the claims against PS&E based upon its express

rejection of the "plausibility" standard established in Twombly and ^bal. The Second District

held that when deciding a motion to dismiss under Ohio Civ.R. 12(B)(6), it is not bound by

decisions of the Supreme Court of the United States that do not involve federal statutory or

constitutional law.

Statement of Facts

Following EXTRAhelp's sale of the business and assets to non-party Belcan,

EXTRAhelp filed suit alleging that PS&E's representation was negligent and proximately caused

damages to EXTRAhelp when it was forced to sell its business and assets to Belcan, rather than

to Defendants Douglas Barry and Barry Staff (collectively "Barry Staff'). Prior to the sale,

EXTRAhelp had utilized attorneys from PS&E to provide legal services on an "as-needed" basis,

including Defendant-Appellant Andrew C. Storar ("Attorney Storar"). Defendant-Appellant

Jeffrey S. Ser.ney ("Attorney Senney") - also an attorney at PS^E - had also _represented Barry

Staff. Attorney Senney sent a letter to EXTRAhelp disclosing that he represented an unnamed

5


party interested in purchasing EXTRAhelp. Barry Staff's identity as the interested purchaser

was later revealed to EXTRAhelp. After receiving the letter from Attorney Senney, Plaintiff-

Appellee Paul L. Sacksteder ("Sacksteder"), the principal of EXTRAhelp, contacted Attorney

Storar who advised him there was a potential conflict of interest with respect to Attorney Senney

representing Barry Staff in the potential sales transaction when Attorney Storar may be

representing EXTRAhelp. Attorney Storar advised Sacksteder he could consent to waive the

conflict of interest, which Sacksteder eventually did on behalf of himself and EXTR.Ahelp.

EXTRAhelp claims Attorney Storar failed to explain the risks associated with such conflicting

representations. Sacksteder admits he willingly disclosed EXTRAhelp's trade secrets to Barry

Staff during his voluntary and unilateral discussions about the potential sale but blames the

PS&E attorneys for not advising him properly beforehand.

When Sacksteder voluntarily began unilateral conversations with Barry, Sacksteder knew

Attorney Senney represented Barry and Barry Staff. Sacksteder unilaterally provided his contact

information to these competitors. Plaintiffs-Appellees do not allege this exchange of information

was done upon the advice of PS&E or that PS&E was aware Sacksteder, on his own and without

notice to PS&E, met with and discussed confidential information and the proposed transaction

with Barry Staff and its owner. Plaintiffs-Appellees do not claim PS&E had any involvement in

Sacksteder's actions or his negotiations with Barry Staff. During one of their pre-transaction

conferences, Sacksteder and Barry discussed and agreed to permit PS&E to represent both Barry

Staff, on the one side of the transaction, and EXTRAhelp, on the other.

Sometime in early March 2009 Plaintiffs-Appellees claim Barry advised Sacksteder that

Barry, Barry Staff, Attorney Senney and PS&E saw "problems" with the proposed transaction

concerning EXT1ZAhelp's business and assets and that Attorney Senney and PS&E advised

Barry Staff to terminate negotiations with Sacksteder, to abandon any plans to purchase

6


EXTRAhelp's business and assets, and to hold no further discussions with Sacksteder.

Approximately seven to fourteen days later, Sacksteder and EXTRAhelp entered into

negotiations with non-party Belcan for the purchase of EXTRAhelp's business and assets. In the

same month, on or about March 25, 2009 Sacksteder voluntarily sold to Belcan EXTRAhelp's

business and assets. Plaintiffs-Appellees did not attach to their Amended Complaint the asset

purchase agreement or otherwise allege that they suffered damages due to the sale of

EXTRAhelp to Belcan as opposed to Barry Staff.

Plaintiffs-Appellees do not allege they were forced to sell EXTRAhelp's business and

assets to Belcan. They do not allege that but for the conduct of any PS&E attorney the proposed

sale between EXTRAhelp and Barry Staff would have gone through without any problems.

Likewise, they do not allege that the information acquired by Barry and/or Barry Staff

concerning EXTRAhelp's business and assets was incorrect information.

The Amended Complaint is silent as to why Barry Staff was concerned with the potential

purchase of EXTRAhelp, whether the information Barry Staff acquired was initially disclosed by

Sacksteder himself, or whether the information that concerned Barry Staff was public

knowledge, available by a simple public records search or other run-of-the-mill due diligence

investigation. Sacksteder does not allege any PS&E attorney somehow improperly acquired

information about EXTRAhelp. Sacksteder admits he was the source of the information Barry

acquired regarding EXTRAhelp and that Sacksteder did not indicate to PS&E that he planned to

disseminate this information.

Although Plaintiffs-Appellees allege the PS&E attorneys were negligent, they fail to

allege how any action or inaction on the part of these attorneys proximately caused any damages,

especially where Sacksteder himself voluntarily divul_ged the ve_ry information he claims caused

the sale to "fall through." Plaintiffs-Appellees' Amended Complaint contains no factual

7


allegations that establish it is plausible the sale would have occurred but for the transfer of this

alleged confidential and proprietary business information by Sacksteder himself. The pleading

likewise fails to establish it is plausible that the PS&E Defendants-Appellants caused the

dissemination of allegedly protected information. Despite being given two opportunities to

properly state a plausible claim with factual allegations to provide support for their claims,

Plaintiffs-Appellees were unable to remedy the shortcomings of their conclusory, speculative,

and unsupported allegations. Specifically, as to the legal malpractice claims, Plaintiffs-

Appellees failed to establish any plausible entitlement to damages.

This Court should accept jurisdiction of this case to review Ohio law governing pleading

standards in light of Twombly and ^bal and its application by Ohio Appellate Courts.

ARGUMENT IN SUPPORT OF PROPOSITIONS OF LAW

Proposition of Law No. I:

In Ohio, to properly state a claim for relief and survive a motion to dismisspursuant to Ohio Civ.R. 12(B)(6), a plaintiff must establish his claims areplausible, rather than speculative or merely possible. (Bell Atlantic Corp. v.Twombly, 550 U.S. 544,127 S.Ct. 1955,167 L.Ed.2d 929 (2007) and Ashcroft v.

Igbal, 556 U.S. 662,129 S.Ct. 1937,173 L.Ed.2d 868 (2009), adopted and followed).

This proposition of law affords this Court the opportunity to provide guidance on Ohio's

pleading standard and instruct lower courts how to rule on a motion to dismiss when the

complaint fails to allege a right of recovery that is plausible, as opposed to merely possible.

Civ.R. 8(A)(1) requires a complaint contain "a short and plain statement of the claim

showing that the party is entitled to relief." The language in Ohio's Civ.R. 8(A)(1) was modeled

after Federal Civ.R. 8(a). Historically, this Court has followed federal case law interpreting the

federal rules when Ohio's rules are similarly worded. State ex rel. Fire Marshal v. Curl, 87 Ohio

St.3d 568, 571, 722 N.E.2d 73 (1999). The pleading requireme_n_t u_nder Fed.R.Civ.P, 8(a) and

Civ.R. 8(A) are virtually identical. Vagas v. City of Hudson, 9th Dist. App. No. 24713, 2009-

8


Ohio-6794, ¶13, fn. 1. Given this history, Ohio should follow the trend and move away from the

"no set of facts" standard toward the Twombly "plausibility" standard adopted in a pair of very

recent decisions from the Supreme Court of the United States streamlining the standard for

determining a complaint's sufficiency. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127

S.Ct. 1955, 167 L.Ed.2d 929 (2007) and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173

L.Ed.2d 868 (2009). Ohio plaintiffs should be required to plead facts demonstrating a plausible

right to relief in order to survive a motion to dismiss.

Under Twombly and Igbal, a court applying the "plausibility standard must first separate

factual allegations from mere conclusory statements, giving the alleged facts a presumption of

truth while disregarding the legal conclusions, which are not entitled to this presumption." Iqbal

at 1949-1950 (quoting Twombly at 555-557). After setting aside the plaintiff's legal

conclusions, the court must then review the facts alleged and determine whether they alone "give

rise to an entitlement to relief." ^bal at 1950; Twombly at 557-558. The alleged facts must be

sufficient "to raise a right to relief above the speculative level" and nudg[e] [plaintiff's] claims

across the line from conceivable to plausible." Twombly at 555, 570. "A pleading that offers

`labels and conclusions' or a`formulaic recitation of the elements of a cause of action will not

do.' Nor can a complaint survive dismissal if it tenders `naked assertions' devoid of `further

factual enhancement."' Iqbal at 1959-1950 (quoting Twombly at 555, 557).

At least four Ohio appellate courts have adopted this federal law. In Vagas v. City of

Hudson, the Ninth Appellate District relied upon the federal standard in affirming the trial

court's dismissal of plaintiffs' complaint for failure to allege sufficient facts, noting that

"although Twombly refers to the federal rules and the Ohio rules are applicable here, the

pleading requirements under Fed.R.Civ.P. 8(a) and [Ohio] Civ.IZ. 8(A) are virtually identical.

9


Additionally, the Ohio rule was based on the federal rule." Vagas at ¶ 13, n.l(citing the 1970

staff notes to Ohio Civ.R. 8).

Likewise, the Eighth District has adopted Iqbal/Twombly when determining a motion to

dismiss for a failure to state a claim, noting:

The prior analysis was shifted by recent Supreme Court decisions addressing thefederal notice pleading standard in Fed.Civ.R. 8, upon which Ohio's Civ.R. 8pleading requirement is based. The court held that bald legal conclusions did notconstitute a well-pled complaint. In order to survive a motion to dismiss, thecomplaint must offer factual support for the legal conclusions drawn within. ***Based on the above Ohio case law, plaintiffs must only show some set of factsthat would entitle them to relief. *** The Supreme Court has clarified the federalnotice pleading standard - to survive a motion to dismiss, sufficient facts beyonda mere speculative level must be pled.

Snowville Subdivision Joint Venture Phase I et al. v. Home Savings & Loan of Youn^stown,

Ohio, 8th Dist. App. No. 96675, 2012-Ohio-1342, ¶¶9-10(citing ^bal at 1949 and Twombly at

555). See also Digiorgio v. City of Cleveland, 8th Dist. No. 95945, 2011-Ohio-5878 at ¶49

(citing I^c bal and Twombly); Parsons v. Greater Cleveland Regional Transit Authority, 8th Dist.

App. No. 93523, 2010-Ohio-266, ¶11(citing Twombly); Fink v. Twentieth CenturX Homes, Inc.,

et al., 8th Dist. App. No. 94519, 2010-Ohio-5486, ¶24(citing Twombly); Williams v. Ohio

Edison, 8th Dist. App. No. 92840, 2009-0hio-5702 at ¶15(citing Twombly); Gallo v. Westfield

National Ins., 8th Dist. App. No. 91893, 2009-Ohio-1094, ¶9(citing Twombly).

In citing Twombly, the Eleventh District also held:

While a complaint attacked by a Civ.R. 12(B)(6) motion to dismiss does not needfactual allegations, the plaintiff's obligation to provide the grounds for hisentitlement to relief requires more than conclusions, and a mere recitation of theelements of a cause of action without factual enhancement will not suffice.

Hoffinan v. Fraser, l lth Dist. App. No. 2010-G-2975, 2011-Ohio-2200, ¶21.

Further, the Fifth District has relied upon Iqbal in holding that "a legal conclusion cannot

be accepted as true for purposes of ruling on a motion to dismiss." Cirotto v. Heartbeats of

10


Licking County, Sth Dist. App. No. 10-CA-21, 2010-Ohio-4238, ¶18 (citing I^cbal). The Fifth

District has also relied upon Twombly in finding the claims set forth in the complaint must be

plausible, rather than merely conceivable. See Bumpus v. Lloyd Ward, P.C., Sth Dist. App. No.

2012-CA-5, 2012-0hio-4674, ¶12.

Twombly and/or Igbal have been followed by several state courts including the Arizona

Court of Appeals, the Delaware Court of Chancery, the D.C. Court of Appeals, the Florida

District Court of Appeals, the Massachusetts Supreme Court and Court of Appeals, the

Minnesota Court of Appeals, the Michigan Court of Appeals, the Nebraska Supreme Court, the

New Mexico Supreme Court, the South Dakota Supreme Court, the Tennessee Court of Appeals,

and the West Virginia Court of Appeals. 2

The status of the Supreme Court of the United States' holdings in Twombly and Icdbal has

left attorneys, judges, and litigants in the State of Ohio confused and uncertain regarding the

standard for judging the sufficiency of a complaint and other pleadings. This inconsistency in

2 See e.^., Phoenix Enters LLC v. Shirley Hi ng_way Distrib. Ctr. LLC, 2007 Bankr. LEXIS 3072(Bankr. D.D.C. Sept. 10, 2007); Braillard v. Maricopa County, 224 Ariz. 481, 232 P.3d 1263,2010 Ariz. App. LEXIS 86 (Ariz. Ct. App. 2010); Meso Scale Dia^nostics, LLC v. RocheDia restios, 2011 Del. Ch. LEXIS 61 (Del. Ch. Apr. 8, 2011); Miaro- s±rategy, Tnc v. Acac'aaResearch Corp., 2010 Del. Ch. LEXIS 254 (Del. Ch. Dec. 30, 2010); Nichols v. Chrysler GroupLLC, 2010 Del. Ch. LEXIS 251 (Del. Ch. 29, 2010); Narrowstep, Inc. v. Onstream Media Corp.,2010 Del Ch. LEXIS 250 (Del. Ch. Dec. 22, 2010); Jackson v. Minter, 2011 Del. Super. LEXIS115 (Del. Super. Ct. Mar. 17, 2011); Mazza v. Housecraft, LLC, 18 A.3d 786, 2011 D.C. App.LEXIS 215 (D.C. 2011); D.C. ex rel. Bates v. Mortgage Elec. Re:;istration Sys., 2012 D.C.Super. LEXIS 6(2012); MYD Marine Distrib. v. Int'1 Paint Ltd., 76 So. 3d 42, 2011 Fla. App.LEXIC 1 Q(A27, 36 Fla, L, wPekl y L^ 2724 (Fla, T^ict, C't, App, 4th Dist= 201 11; Hawkeve

Foodservice Distrib. v. Iowa Educators Corp., 812 N.W.2d 600, 2012 Iowa Sup. LEXIS 17(Iowa 2012); Morrissey v. New Eng^. Deaconess Ass'n, 458 Mass. 580, 940 N.E.2d 391, 2010Mass. LEXIS 941 (2010); Cornell v. Collin^s, 2011 Mass. App. Unpub. LEXIS 467 (Mass. App.Ct. Feb. 28, 2011); Christensen v. Cox, 2012 Mass. Super. LEXIS 234 (Mass. Super. Ct. July 25,2012); Duncan v. State, 284 Mich. App. 246, 774 N.W.2d 89, 2009 Mich. App. LEXIS 1380(2009); Romero v. Philip Morris Inc., 2010 NMSC 35, 148 N.M. 713, 242 P.3d 280 (N.M.2010); Gruhlke v. Sioux Empire Fed. Credit Union, 2008 SD 89, 756 N.W.2d 399, 2008 S.D.LEXIS 127 (2008); Hermosa Holdingts Inc. v. Mid-Tennessee Bone & Joint Clinic, P.S., 2009Tenn. App. LEXIS 282 (Tenn. Ct. App. Mar. 16, 2009); and Robinson v. Pack, 223 W.Va, 828,679 S.E.2d 660, 2009 W. Va. LEXIS 59 (2009).

11


Ohio appellate law must be clarified with the adoption of the standard set forth in Twombly and

Iqbal in order to provide defendants with fair notice of the nature of the action and to permit trial

courts to fully evaluate a plaintiff's complaint to ensure plaintiff's claims are plausible, as

opposed to merely possible.

Under the facts of the instant case, EXTRAhelp's Amended Complaint does not satisfy

the Twombly/Iqbal standard because it fails to establish that relief is plausible on its face. The

Amended Complaint fails to demonstrate Plaintiffs-Appellees suffered any damages proximately

caused by PS&E's alleged negligence. Their claims are unsupported and speculative and cannot

survive a motion to dismiss under the Twombl^qbal standard.

Adoption of the standard set forth in Twombly and ^bal will reduce the exorbitant cost

of litigation by establishing a fair procedural safeguard to weed out unsupported, speculative,

and weak claims prior to discovery. These were precisely the concerns the Supreme Court of the

United States espoused in Twombly and ^bal. The same concerns at the forefront of the

rationale in Twombly and .I^c bal exist in the State of Ohio as well.

In fact, adopting and applying the standard set forth in Twombly and I^c bal benefits both

Ohio plaintiffs and defendants alike. Requiring a plaintiff to provide grounds for his entitlement

to relief that are plausible forces him to take a detailed look at his case at the time of filing to

prevent false reliance that the claims are supported and plausible when they, in fact, are not. The

courts' and the parties' time and resources will be conserved. Requiring a plaintiff to provide

more than just rampant speculation at the initial pleading stage will streamline litigation.

Adoption of the Twombly/Iqbal standard is a well-balanced approach for determining whether a

complaint should survive a motion to dismiss and proceed to discovery.

12


Pronosition of Law No. II:

In Ohio, to properly state a claim for relief and survive an Ohio Civ.R. 12(B)(6)motion to dismiss, a plaintiff alleging legal malpractice claims must set forthsufficient facts as to each required element in order to establish his claims areplausible rather than speculative or merely possible.

This proposition of law affords this Court the opportunity to instruct lower courts to

apply the Twombl^qbal standard in cases alleging claims of legal malpractice. It further

provides this Court the chance to once again distinguish cases alleging legal malpractice claims

from those alleging other negligence claims.

A legal malpractice plaintiff is a unique litigant. Immediately upon filing a lawsuit

alleging legal malpractice, the plaintiff instantly tarnishes the lawyer-defendant's reputation,

often causing him to lose professional opportunities and potential clients - all before the

defendant-lawyer can even answer the complaint or conduct any discovery in an effort to defend

himself. Often, the legal malpractice plaintiff s filing has the effect of forever damaging the

lawyer-defendant's career even if the lawsuit is later dismissed or disposed of on motion. By

adopting the Twombl /^qbal "plausibility" standard, a legal malpractice plaintiff's complaint

should be scrutinized closely and the plaintiff should be required to plead facts in his complaint

demonstrating his claims are plausible, not merely possible.

The Twombly defendants had similar concerns when faced with a class action litigation

filed by their telephone/internet subscribers, or customers. The majority in Twombly believed

that requiring allegations to "reach the level" suggesting wrongdoing was the best way to avoid

potentially expensive discovery in cases where there was doubt that evidence to support a claim

would be discovered. Twombly favored requiring a showing of "plausibility" at the pleading

stage in order to take early precautions to avoid meritless litigation.

13


Like the defendants in Twombly, Ohio legal malpractice defendants deserve to know

their accuser's allegations are more than bald, speculative, and unsupported assertions at the

outset of the case. This position is especially compelling when one considers the immediate

damage a lawyer suffers upon the mere filing of a legal malpractice complaint against him.

Like the facts underpinning Twombly, where the Supreme Court of the United States

recognized there was an obvious alternative explanation for the complained-of-conduct, there

can be countless explanations for a less-than-optimal legal result which forms the basis for a

plaintiff's legal malpractice Complaint. However, as this Court has stressed in many previous

legal malpractice cases - claims brought against lawyers are different and deserve greater

scrutiny. See Paterek v. Peterson & Ibold, 118 Ohio St.3d 503, 2008-Ohio-2790, 890 N.E.2d

316 ("in an attorney-malpractice case, proof of collectability of the judgment due to the

malpractice is an element of the plaintiff's claim against the attorney"), Environmental Network

Corp. v. Goodman Weiss Miller, LLP, 119 Ohio St.3d 209, 2008-Ohio-3833, 893 N.E.2d 173

("when a plaintiff premises a legal malpractice claim on the theory that he would have received a

better outcome if his attorney had tried the underlying matter to conclusion rather than settled it,

the plaintiff must establish that he would have prevailed in the underlying matter and that the

outcome would have been better than the outcome provided by the settlement"), and National

Union Fire Insurance Co. v. Wuerth, 122 Ohio St.3d 594, 2009-Ohio-3601, 913 N.E.2d 939.

Further, unlike other negligence claims, claims against a lawyer require expert testimony

to establish the standard of care and a breach of that standard. Krahn v. Kinney, 43 Ohio St.3d

103, 538 N.E.2d 1058 (1989); McInnis v. Hyatt Legal Clinics, 10 Ohio St.3d 112, 461 N.E.2d

1295 (1984); Burke v. Gammarino, 108 Ohio App.3d 138, 143-144, 670 N.E.2d 295 (lst Dist.

1995).

14


Ohio legal malpractice plaintiffs must plead facts sufficient to demonstrate each element

of their legal malpractice claims is plausible in order to survive a motion to dismiss. To hold

otherwise is to permit speculative, unsupported claims to continue, resulting in unnecessary legal

fees, only to have these claims dismissed later by dispositive motion, long after the lawyer

defendant's reputation has been irreparably damaged, his legal malpractice premiums increased,

and prospective clients lost.

This Court made significant strides in clarifying legal malpractice law in Ohio in the

above-cited decisions. This case now gives this Court yet another opportunity to do so.

Twombly and Iclbal have been adopted by Ohio appellate courts and should likewise be adopted

by this Court establishing another procedure safeguard to prevent speculative, unsupported

allegations against lawyers in this state.

CONCLUSION

For the foregoing reasons, the PS&E Defendants-Appellants respectfully request this

Court accept jurisdiction of this case in order to resolve an intra-appellate district conflict

concerning pleading standards in Ohio and to likewise establish an additional procedural

safeguard to ensure plaintiff's alleged legal malpractice claims are plausible, as opposed to

merely possible or speculative. ^

Resp ctful submitted,Neil . Fxe d. Counsel of Record

^ntisay 1VI. Johns^H77753)FREUND, FREEZE & ARNOLD

COUNSEL FOR DEFENDANTS-APPELLANTS JEFFREY S. SENNEY,PAUL E. ZIMMER, ANDREW C. STORAR,GERALD L. MCDONALD, ANDPICKREL, SCHAEFFER AND EBELINGCO., L.P.A.

15


CERTIFICATE OF SERVICE ^l a'

I hereby certify that a true and accurate copy of the foregoing was served thisday of November, 2012, via regular U.S. mail, postage prepaid, upon the following:

John J. MuellerJohn J. Mueller, LLC632 Vine Street, Suite 800Cincinnati, Ohio 45202-2441johnimueller(a^le ag_lmalpractice.net

Counselfo^ Plaintiffs-Appellees

John F. HavilandCarla J. MormanBieser, Greer & Landis, LLP400 PNC Center6 North Main StreetDayton, Ohio 45402j^b^llaw.comcjm(a^b^llaw.com

Counselfor DefendantsTeresa A. Ambos, Nicole R. Brumbaugh and Barry Staff, Inc.,and Douglas J Barry, Jr.

Victoria A. FlinnQuintin F. LindsmithBRICKER & ECKLER LLP100 South Third StreetColumbus, OH 43215vflinn(a,bricker. com^lindsmith(a^bricker.com

Counsel for Defendant AppellantJerome M. Buening, Jr.

16


COUNSEL FOR DEFENDANTS-APPELLANTS JEFFREY S. SENNEY, PAULE. ZIMMER, ANDREW C. STORAR,GERALD L. MCDONALD, AND PICKREL,SCHAEFFER AND EBELING CO., L.P.A.

APPENDIX

17


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Gf^^.C^^si`^^r : aLittiTS(;l,r;^.^: ^r

M(^^ i GDi i^^Y Ca. ^^f10

IN THE C4URT OF APPEALS FOR MONTG{7MERY COUNTY, OH10

PAUL L. SACKSTEDER, et al,

Plaintiffs-AppeAants

v.

JEFFREY S. SENNEY, et al.

Defenda nts-Appellees

OPINtC3N

C,A. CASE NC}. 24993

T.C. Nt^. 10CV1913

(Civil appeal fromCornmon Pleas Courk}

Rendered on the 28th day of Septernber , 2fl12.

JC}HN J. MUELLER, Atty. Reg. No. 0012101, fi32 Vine Street, Sui#e $00, Cincinnati, C^hio452fl2

Attorney for Plaintiffs-Appellan#s, Paul L. Sacksteder and Circle Business Services,Inc., dba EXTRAhelp Staffing Services

NEIL F. FREUND, Atty. Reg. No. 0012183 and LiNDSAY M. JOHNSON, Atty. Reg. No.00777$3, Fifth Third Center, 1 South Main Street, Suite 1$00, Day#on, ^Jhio 4^402

Attorneys for Defendants-AppelEees, Jeffrey S. Senney, Paul E. îrnmer, AndrewC. Storar, Gerald L. McDonald and Pickrel, Schaeffer & Ebeling Co., LPA

JC}HN F. HAVILAND, Atty. Reg. No. 4Q29599 and GARLA J. MORMAN, Atty. Reg. No.0067062, 400 PNC Center, 6 North Main Street, Dayton, ^hio 46402

Attorneys for Defendants-Appellees, Barry Staff, Inc., Dauglas J. Barry, Jr., TeresaAmbos and Nicole Brumbaugh

QUINT^N F. LINDSMITH, Atty. Reg. No. 001$327 and VICTC7RIA A. FLINN, Atty. Reg.

THE COURT OF APPEALS QF QHtOSECtJIîD APPEI.LATE AISTRICT

APPENDIX PAGE NO. 1

2

No. 0085713, 100 South Third Street, Columbus, Ohio 43215Attorneys for Defendant ;4ppellee, Jerome M. Buening, Jr.

FRCÊLiCH, J.

{¶ 1} Paul Sacksteder and Circle Business Services, Inc., dba EXTRAheip Staffing

Services, appeal from a judgment of the Montgomery County Court of Common Pleas,

which dismissed their complaint pursuant to Civ. R. 12(B)(6) for failure to state a claim.

{¶ 2} For the reasons discussed below, the judgment of the trial court will be

reversed in part and affirmed in part.

6. Facts and Procedurai F:istoiy

{¶ 3} In March 2010, Sacksteder and EXTRAhelp filed a complaint against the law

firm Pickerel, Schaeffer a^ ad Ebelin^g, Co., LPA, and severaE of its attorney er^ployeesi

Jeffery Senney, Paui Zirnmer, Andrew Storar, and Geraid McDonald, alleging iegal

i.t'.C'.J....:.+..^; f3;;l•t TL.u I......Ê 6"L -lj= :"e'u^v.+ê ti'L.FF Fd 'Fi:ia^r3F'TîiF-^ ^Fii^Y^

4.^ .-., .,i:.-_.^ ^ .t -^ h r.e ^ L. . ..i f iF".ai^.ii â^..ii"v^ .^.ii ii.i 'vi ^^^+^ ^ vi i ii.ii.lF.îîi y ^+ui.Y. i i i^. ICiYVJU1C ui.^f.r uii^.^û ZvF ievuo li IL^..i iul ^.i 1^.^.. ve iu i

business relationships, and conversion and misappropriation of trade secrets and

confidential information on the part of three former employees of EXTRAhefp, Jerome

Buening Il, Teresa Ambos, and Nicole Brumbaugh. Finally, the complaint alleged

participation in breach of fiduciary duty and interference with business relationships by

Douglas Barry, Jr., and BarryStaff, inc.

{¶ 4} The claims in this case arise from the failed sale of EXTRAhelp to BarryStaff

in 2009. During negotiations, lawyers from Pickerel, Schaeffer and Ebeling ("PSÊ")

represented both sides of the transaction.

{¶ 5} Paul Sacksteder is the president of EXTRAhelp. At various times before the

APPENDIX PAGE NO. 2THE COURT OF APPEALS OF OHIO

SECOND APPELLATE DISTRICT

3

attempted sale, PS&E lawyers had provided services to Sacksteder and EXTRAhelp on

an "as needed, when-needed" basis. After encountering some business difficulties,

EXTRAhelp decided in August 2008, to sell fts business or liquidate. A business broker

1^ ^ ^^..^:,, ^;,., e êrîces ^rou^ L also indicated interest in{.^ d B Ican ^^ N^ P^

!o^'iaLCd Litree pC/LCIILid! LJ.+^'ers an ^

purchasing the business. Talks with Belcan and other potential buyers continued into

January and February 2009.

{y^ 6} fn mid-February 2009, attorney Jeffrey Senney sent a letter to EXTRAhelp on

behalf of BarryStaff, indicating that Senney represerited a party interested in purchasing

the business. Senney said that his client would be happy to sign a mutua{ non-disclosure

ar^reerr;ert. After rece[v^ng the letter, Sacksteder contacted Andrew Storar, who was a

member of the same law firm as Senney. Storar told Sacksteder that a confiict of interest

existed, but said the conflict could be waived. According to the complaint, Storar failed to

explain the risks involved with conflicting representation.

^^€ ^} After s:êaking with Storar, Sackst?der gave Senêy his cel! phone number.

Sacksteder then met with Dougfas Barry of BarryStaff to discuss a merger. Barry and

Sacksteder agreed :to iet PS&E represent botli sides of the transaction. Sacksteder

informed Storar of the discussions and was told that Paul Zimmer, another P^S&E

employee, would be representing Sacksteder for purposes of the sale. Again, according

.. ^_e_ i ^^.:^t....^ 7^mmor nnrto tne compia^r^L, ^ ^CiLi ici ^î ^^^ ^^^^ ,^... Stnrar informed Sacksteder of the risks of disclosing

confidential information without a non-disclosure agreement, and neither took steps to

obtain such an agreement from Barry.

{¶ 8} During subsequent discussions with Barry, Sacksteder disciosed some

confidential and proprietary business information about EXTRAhelp. During these



__ i4

discussions, Sacksteder also told Barry that he was contemplating a sale to Belcan. Barry

then offered to purchase ths business on terms similar to those that Belcan had offered.

Sacksteder decided to proceed with the sale to Barry, but Barry later withdrevv from the

proposed saie, basi3d on advice from Senney, who had discovered potentia! probiems with

the transaction. Sacksteder then informed Barry that he would pursue the sale to Belcan.

{¶ 9} In mid-March 2009, Sacksteder and Belcan entered into negotiations. Around

the same time, Sacksteder learned that EXTRAheip's own employee or former employee,

Jerome Buening, had approached a customer of EXTRAhelp. Buening told the customer

that EXTRAhelp was selling its business to Belcan and was broke. Buening then solicited

^ y,o^ 1 0° ^- ' and asked the custorner to terminate itc relationship with

^t I., vu3lCi({ 6^.r ^ 6J^d^ll Bejs

EXTRAhelp. Sacksteder also learned that Buening had revealed EXTRAhelp's confidential

and propriAtar;^ EnfnrmatEOn and trade secrets to Bar;-u.

{^ 1 E^} The sale between EXTRAhelp and Belcan closed "on or about" March 24,

`^^f^^ hzt ^ fe^ne$tar nf ^ X: i^ G:-;e}p's hoie^rooee srae^? ^ceQ+e tr+ CL in^sr. cre^ rl^n^ ^m^r.+ n+'+Ir+.J

,,.^ __:,u ^:.a^^^^ û ^.+î^.ni ^ vic5 ci uv^.u^ ^ ic^ i^ ci iuucu

---^+ =^ -- _._..._:_. - : _ _ 1<,._ k-

"Asset Purchase Agreement." Under the terms of the transaction, EXTRAhelp sold and

transferred all its trade secrets and confidential and proprietary ir^formation, incfuding

customer lists, temporary employee assignments, customer contact information, and

customer purchasing history, to Belcan. Although certain facts were not mentioned in the

^^ ^t^^^^ ^^ô^l h„ a!I r,arties in memorandacomplaint or amended compiaint, trêy wer e ^^^û^^û ^, ^--' -

connected to the various motions to dismiss, and were also explicitly considered by the trial

court in rufing on the motion to dismiss. Specificalfy, EXTRAhelp alleged that according

to the terms of the sale, EXTRAhelp could receive additional payrnents based on the

purchaser's receipts from former customers of EXTRAhelp which continued to do business

THE COURT OF APPEALS OF OH10APPENDIXPAGEN0.4


5

with the purchaser, Belcan.

{¶ 11} EXTRAhelp's employees were informed of the sale "on or about" March 25,

2009. The following day, Belcan offered employment to some employees, including

Teresa Ambos and ^licoie Brumbaugh. i^feither Atr^bos nor Bru^r°bau9h accepted

ernployment. On March 30, 2009, Sacksteder found notes that both employees had left

at their workstations, indicating that they had accepted employment with BarryStaff. On

the same day, Barry told Sacksteder that he had entered into discussions with

EXTRAhelp's largest ciient, and that as a resulf of those discussions, the client was taking

its business from EXTRAhelp and was placing it with BarryStaff.

{ii 1?} Sacksteder an" EXTF?^:hAlp fEled s ►'it in March 2010, alleging, as indicated,

that the law firm defendants, the potential purchaser (BarryStaff), and the former

of n°gl'u°nce breaches of fiduci?r^^ dut,^,emp!oyees had vom:?-^:tted varlous acts „ ^

dissemination of confidentiai information, and tortious interference with business

rpE,fi^r^nhi^+n i h^ n^co aei^3c $r^n^'GCrre£'^. [o a^r^v^^:n^ i:..idge^ '^lnd !n/'lC .`,,,,'ÎCCI Cnn^^',(){i(15.,,;fiPf! In

:F^.;^. - dr_.î viaw:iVF ^v'^ • • " -

April 2009, with a prior case that Beican had fifed against BarryStaff, Ambos, and

Brumbaugh.

{¶ 13} After the defehdants all filed motions to dismiss pursuant to Civ. R. 12(B)(6),

Sacksteder and EXTRAheip fiied an amended complaint. The defendants again filed

.,. ,-, ,,^^ îa^ G^hc°nFFantVV the trial court dismissed themotions to dismiss under ^w. rc. ^<<B^t^^^ Û^^^^,^.^^.-^>>

complaint, relying on what the court termed the "plausibfe test" of Bell Atlantic Corp. v.

Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Sackstede, and

EXTRAhelp appeal from the judgment of dismissal.

II. Alleged Error in Applying a Plausibility Test to Motions to tîsmiss



6

{¶ 14} Sacksteder's and EXTRAhelp's first assignment of error is as follows:

In rul6ng on motions to dismiss, the trial court applied the staridards of

pfeading the Supreme Court of the United States adopted in BeI/ Atlantic

Cor^. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 167 L.Ed.2d 929 (2007), and

Asf^croft v. iqbal, 129 S. Ct. 1937, 173 L.Ed.2d 868 (2009), to govern pleadings

under Fed.R.Civ.P. 8. Applying those federal pleading standards to a pleading

governed by Civ. R. 8, which requires only a short, plain statement providing

notice of the claim, the tria{ court erred.

{¶ 15} Sacksteder and EXTRAhelp contend that the trial court improperly

substituted a federai "pfausibility standard" for the notice pieading that has iong been

appiied in Chio cases. 1/\1e consider orders gr^ntina Civ. R. 12(S)(5) motions to dismiss

under a de novo standard of review. rerrysaurg Twp. v. Rossiorc^, 103 iJhio St.3d 7 9,

2004-Ohio-4362, 814 N.E.2d 44, ¶ 15. Further, in conducting this review, courts

1 • 11 1 1 1' A A- L 1^

traditiona!!y "accept as true ai[ factuai aiiegations in the compia^nt. ^e^., ciTing r^f^tcrrerr v.

1 awson IVIilk Co., 40 Ohio St.3d 190, 192, 532 N.E.2d 753 (1988).

{¶ 16} The plausibi(ity standard originates from two cases decided by the United

States Supreme Court. The first case, Bell At(antic Corp. v. Twomb{y, 550 U.S. 544; 127

S.Ct. 1955, 167 L.Ed.2d 929 (2007), involved claims brought under the Sherman Act, 15

U.S.C. 1, for restraint of trade. The action in Bell was brought by subscribers af iocai

telephone Gndlor high speed internet services against companies which had enioyed

monopoiies after the 1984 divestiture of the AT&T local te{ephone business. Id. at 548.

The subscribers alleged that the companies had conspired to restrain trade by engaging

in "parallel conduct" in their respective services areas to inhibit growth of other companies,



^

and by agreeing to refrain from competing with each other. fd. at 550-551. After the

district court dismissed the complaint for failure to state a claim, the Court of Appeals for

the Second Circuit reversed. Id. at 552-553. The United States Supreme Court then

yr ai ^t;,d Cer ÊOrari to consider the proper standard for pieading antitrust conspiracies

through "allegations of parallel conduct." Id. at 553.

{^j 'i7} In considering this issue, the Supreme Court first stressed that in the

antitrust context, "[e]ven `conscious parallelism,' a common reaction of `firms in a

concentrated market [that] recogniz[e] their shared economic interests and their

interdependence with respect to price and output decisions' is 'not in itself unlawfuL' " Id.

II at 553-55^, quoting from Brooke ^'roca^ Ltd. E^. 3rown & l^,îllfa^r;sor^ Toba^co Cor^., 509

U.S. 2t^9, 227, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993). The Court noted that it had

, rlarl aga net f ce h('+^ ^!'e dEre +'e"^ v r iGt ^^n:nrevinuslv gE âr i..^ al^.^ inferences at ^^^ . c^ , e d' an^ s! ^F- âr`Y

judgment stages of trial, based on the ambiguity of "parailel conduct," which can just as

.r.l^ ^"g1^'imutQ °th.li^Si! ic^-.j cì.. kr,n' FGl1 I! [^

e^Êl^/ be(:P7.•'."1,ÊCteE'tt \ftlEt'I"S ^ raE'SgG ^:^î nir.vije^_ _s_i^ r e,i,.^. '.; t c^.5^:'•

However, the Court concluded that the case at hand presented an opportunity to address

the "antecedent" issue of what plaintiffs must p(ead in order to state a cEaim under Section

1 of the Sherman Antitrust Act. Id.

{¶ ^ 8} To resolve this issue, the Court first considered general standards of

pleading. The court noted that detaiied factua! a!legations afe not required; but Rule

12(b)(6) requires "more than labels and conclusions, and a formulaic recitation of the

elements of a cause of action will not do." fd. at 555. ®ue to the nature of Section 1

claims, the Court determined that "when allegations of parallel conduct are set out in order

to make a§ 1 claim, they must be-pt^ced in a context that raises a suggestion of a



8

preceding agreement, not merely parallel conduct that could just as well be independent

action." Id. at 557. The Court, therefore, required some "furtherfactua! enhancement" that

would allow the complaint to cross the fine between "possibility and plausibility of

èntitfe^ment[ to reiief.' „ ld.

{¶ 19} The majority in Twomblywas clearly concerned by the fact that "proceeding

to antritrust discovery can be quite expensive," as exemplified by the case at hand, which

involved a putative class of at Ieast 90 percent of subscribers to local telephone or internet

service in the United States, and antitrust violations that had allegedly occurred over a

seven year period. 550 U.S. at 558. The majority dismissed the effect of trial court

supervision in checking discovery abuse, and concluded th^t requiring allegations to "reach

the level suggesting conspiracy" v^ras the onlyway to avoid poter}tiaiiy enormous discovery

expense in cases :ti^here there ^:âs no „`"raasonably founded hope„ ,„ that ^^^^dence to

support a cEaim wou{d be discovered. (Citatians omitted.) Id. at 559.

, i,.. a,..,^^.,..^.,u^ .. N^^,^ ,^^„^f5Y "?fet !^ fter,r.

,-z,aEî;^^ i^;ege nheenratinnc thn Cuirer^mn C'ni erF n"t®ri ti-Iafi thQ nEî^tiffc'

main objection to a"pEausibilty" standard was its confiictwith the accepted rufe from Conley

v. Gibson, 355 U.S. ^1, 78 S.Ct• 99, 2 L.Ed.2d 80 (1957), that" à complaint shou{d not be

dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can

prove no set of facts in support of his claim which would entitle him to relief.' " 550 U.S.

at 55i, qûotin^g from Conrey, 355 !^,5, at 45-46, The Court cautioned that the "no set of

facts" language in Conley should not be read in isolation to mean that "any statement

revealing the theory of the claim wiil suffice un{ess its factual impossibifity may be shov,rn

from the face of the p(eadings." Id. Instead, this phrase ("no set of facts") should be

viewed through the prism of the Conley opinion's directiy-preceding summary of the

THE COURT OF APPEALS OF OHIO APPENDIXPAGEN0.8


9

complaint's allegations, which had amply stated a claim for relief. Id. at 563.

{¶ 2'[} Nonetheless, because ofwhat the Supreme Court characterized as the legal

profession's "puzzlement" over Conley for 50 years, the Court stated that the "no set of

facts" phrase shouid be "best forgotten as an incompiete, negative gioss on an accepted

pleading standard: once a ciaim has been stated adequateiy, it may be supported by

showing any set of facts consistent with the allegations in the compiaint." id.

{¶ 22} Finaliy, the Court looked for "plausibility" in the complaint and found it

lacking. Among other things, the Court relied on the idea of viewing the compiaint "in fight

of common economic experience." 550 U.S. at 565. The Court also focused on what it

te^med an "obvious alternative expianation" for the paraiie! conduct. id. at 567. in this

regard, the Court noted history's teaching that in "a traditionaliy unreguiated industry with

n „^,.., f^.-.,,,,. ,.! ^_i^?!R^ barriarc tQ en±r^,r gn^rco ^nmr,o ^+' o^v^ !!!!!!^ ^Gmii!atii!g êpara^^'a . ru„^v u^ ^ ^v^..t^6ôn a!^ 1!`Jng i d

geographical segments of the market couid very well signify iliegai agreement." id.

Nû^ ût^v^ ^ Ivo L^ Il.+ ul..ll.e Illai e^J.Q61^^^r^ c^l l^^l I s ^Jl^77"^'.! y!! !^

ÊIIPJP\/eY}t'{'1e!'(1!!^!"eee.^'.êd^n^.c•exnE7t^^+irZnfnr+hQrl^fnr•.e-S^xr+f'e^n!!r.^.'+1 ^!"••} l••••••°••

instead that:

in the decade ^preceding the 1996 Act and weii before that, monopoiy was

the norm in telecommunications, not the exception. *** The ILECs [the alleged

conspirators] were born in that world, doubtless fiked the world the way it was, and

!., l.r,,.., t ►,o ^rranA ah^!!t him fsicl who lives by the sword. Hence, a naturalSi.irely n!l^v^ ^^^, uuUy•, ^.,..__ L ,

explanation for the noncompetition alleged is that the former

Government-sarctioned monopoiists were sitting tight, expecting their neighbors to

do the same thing. (Citation omitted.) Id. at 567-568.

{^[ 23} Thus, the Court credited the alternate explanation, conciuded the compiaint


SECOND APPELLATE DISTR]CT

10

had been properly dismissed, and reversed the decision of the Seventh Circuit Court of

Appeals.

{¶ z4} The Supreme Court's decision in Twombly could be viewed in the context

of its circumstances, which incfuded a pariicufar industry, an unavoidably enormously

expensive lawsuit, and a legal context that requires parEicularity of proof. However, its later

decision in Ashcroft v. lqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009),

continued the discussion about pleading.

{¶ 25} In Iqbal, an alleged terrorist claimed that he had been deprived of

constitutional protections while in federal custody, and filed suit against several federal

officiaEs, including Attorney Generai ô► : ^ As hcr oft. Id. at 600. Th e compfaint aEEeged that

Ashcroft and the Director of the FBI had adopted an unconstitutional policy subjecting Iqbal

i t_ rs: !-ii^+" -• ^-h ^^rr{i^. ^• , _^ r `'e^lgio'i, Or natiOnaE ^vriyîn. id.:^ h^r^.^ .^.^...^;ons ef con:;ne ,ên^, :;as;,u ..,, „^^ ace, , , ,

{^ 26} The district court denied the defendants' motion to dismiss the complaint,

^ i - - R ^ ^P,` 1 1 ` L _J ^s ero Pi /"^ . •^• • ^ • = 1 N V %1

.,I. ..,,^ +...,i _ .cc: _r ._ , ^--ap^,;1^ 7.7g ..^ ^.. .^......^ ûc.4^;.3 ^v:î va.liilE ivâ ii i `vvfti^:;%, .^^.^ V. V. ^V f, 1 V J.^vC. J^ , G !_.L^.t.GU 'vl1

(1957). On appeal, the Second Circuit Court of Appeals acknowledged that Twombly had

retired Confey's "no-set-of-facts" test. After discussing how to apply Twombly, the Second

Circuit concluded that it required a"`flexible "plausibifity standard," which obliges a pleader

to amplify a claim with some factual allegations in those contexts where such amp(ification

^ ^ r+ i ^+^l^ 6^r... ^rr.m lrvj'1^^ ^/

is needed to render the claim plausibie.' " iqbai, 556 u.^. a^ c ^ ^, quo^^^ ^y ^^ ^^ ^^^^rNU- ^

Hasty, 490 F.3d 143, 157-158 (C.A.2 2007). Because the case did not involve such a

context, the Second Circuit Court of Appea{s upheld the pleading as adequate. Ed.

{¶ 27} On appeal, the Supreme Gourt first considered subject matter jurisdiction,

which is not relevant to our discussion. The court then considered one elernent necessary

THE COURT OF APPEALS OF OH10SECOND APPELLATE DISTRICT

APPENDIX PAGE NO. 10

11

to prove the defendants' liability, which was that the defendants had adopted and

implemented the detention poficies "not for a neutral, investigative reason, but for the

purpose of discriminating on account of race, religion, or national origin." 556 U.S. at 677.

T his required a showing of purpose, rather than knowiedge. id. êfore deciding if the

complaint met this standard, the Court considered and attempted to expound upon its prior

decision in Twombly.

{¶ 28} Initially, the Court acknowledged that Fed.Civ.R. 8(a)(2) requires only a

"`short and pEain statement of the claim showing that the pleader is entitfed to refief.' " id.

The Court noted that under Twombly:

To surîve a motion to di^miss, a compEaint must contain sufficient factual

matter, accepted as true, to "state a claim to relief that is plausible on its face." î

^, ^, +^ f .,lo L... +h..cEaim h^S faclaE pfa:.lslblflt;r S^.tlen tfi°v pfalnuf^ v^..ad`'

s faCiuaf content tiiat aE1VVJS u1^

court to draw the reasonable inference that the defendant is liable for the

Lin +^ ^ °r^rr.h..h't'+vn^^^r v.u^ uui ^.^ ^^VL ^nn1 LV Ci NIVVGS1.1111LVYY91^(`_f1Pilôllv't ÊE^rsAd. The pEal,:^lreifi't^r e+^nr-17rr^ ic nn+

requirement," but it asks for more than a sheer possibility that a defendant has

acted unfawful(y. ^** Where a complaint pleads facts that are "merely consistent

with" a defendant's liability, it °stops short of the (ine between possibility and

plausibility of èntitfement to relief.' "(Citations omitted.) Id. at 678.

{11 2y} The Court then discussed what it classified as thP "two working principles"

underlying Twombly:

First, the tenet that a court must accept as true a!f of the al[egations

contained in a complaint is inapplicabfe to (egal conclusions. Threadbare recitals

of the elements of a cause of action, supported by mere conclusory statements, do

THE COURT OF APPEALS OF OHIOAPPENDIXPAGENO.11


12

not suffice. (Although for the purposes of a motion to dismiss we must take all of

the factual allegations in the complaint as true, we "are not bound to accept as true

"*** Rule 8 marks a notablea legal conclusion couched as a factual alfegation ).

and generous departure from the hyper-technicai, code-pieading regime ^f a priar

era, but it does not unlock the doors of discovery for a plaintiff armed with nothing

more than conclusions. Second, only a complaint that states a piausible ciaim for

refief survives a motion to dismiss. Determining whether a complaint states a

plausible claim for relief will, as the Court of Appeals observed, be a

context-specific task that requires the reviewing court to draw on its judicial

e^perience and common sense• But where the weEi-pleaded facts do not permit the

court to infer more thai^ the mere possibility of ^mîsconduct, tEÎe complaint has

alleaed-but it has nCt "shovR^[n]"--`°that thP pleader iS entitlarl tn refief." (Citatinn^

omitted.) 555 U.S. at 678-79.

F^ s^T rina!I^r thP frn^ ^rf riigr^^!ccPri fiha rr,ie nf trial ji irEg€^^, hy cfi^fiing thafi;^}

In keeping with these principles a court considering a motion to dismiss can

choose to begin by identifying pfeadings that, because they ar e ^ô n ôre ±han

concfusions, are not entitled to the assumption of truth. While legal conclusions can

provide the framework of a complaint, they must be supported by factual

alieaations. When there are well-pleaded factual allegations, a court should

assume their veracity and then determine whether they plausibiy give rise to an

entitlement to relief. id.

{¶ 31} {n appfying this framework to the pieadings before it, the Court first identified

al{egationsin the complaint that it felt were "not entitled to the assumption of truth." Id. at



13

680. For example; the Court rejected the allegation that Ashcroft was the principal

architect of the invidious policy of discrimination, because the Court considered it

"conclusory." Id. More troubling yet is the fact that the Supreme Court weighed the factua!

allegatior^s to determirê if they "pfausibiy suggest an entitiement to relief." id. at 681. The

Court acknowledged that specific factual allegations that thousands of Rrab Musfim men

had been arrested and detained as part of the FBI investigation of the September 11

events, and that defendants had approved the poficy of holding these men in highly

restrictive conditions, were consistent with purposefully designating detainees of "high

interest" due to race, religion or national origin. Id. at 681. However, the Court rejected

that theory as "plausibly establishing this purpose," becaîse it believed there were "more

fikefy explanations," id., like the fact that a iegitimate po(icy directing law enforcement

personnel to arrest and detain individ^jals beca^!se of a sllspe^±ed link to the terrorist

attacks would produce a "disparate, incidental impact on Arab Muslims." {d. at 682.

i^ fc^r i^ r:r,nrl icinn fha .^rîiprame f`.ni iri^ ynônt nn tn G++r^{^[ 3^} As an additional bas_ t- "^^ """"" "' n`

that even if the respondent's arrest gave rise to a plausible inference of discrimination, the

only factual allegatian against Ashcroft and MueCier was that they had adopted a policy

approving " `restrictive conditions of confinement' " for these detainees until they were

cleared by the FBI. 556 U.S. at 683. The Court rejected this contention, again on the

basis that it is ^ ^ ôre plausible tha±± ►,P n^^^cv would have been adopted for nationaf securityr....-^

reasons as opposed to purposeful discrimination. Id. Accordingly, the Court found that

the complaint failed to state a claim, and reversed the matter for a decision on whether the

petitioner would be permitted to fiie an amended compfaint. id. at 687.

{^ 33} Justice Souter, who had authored the majority opinion in Two ^^bfy, fi6ed a



14

strong dissent, in which three members of the Court concurred. Justice Souter noted that

P.shcroft and Mueller had conceded in their briefs that they would be liable for their

subordinates' conduct " if they `had actual knowledge of the assertedly discriminatory

nature of the ciassificatian of suspects as beirig"of high interest" and they were

deliberately indifferent to that discrimination.' " Id. at 694-695. (Souter, dissenting).

Souter thus concluded that the complaint satisfied Fed. Civ. R. 8(a)(2). He also

commented that the complaint went further than required, by alleging that these

defendants had affirmatively acted to create the discriminatory policy. Id. at 695.

{¶ 34} Souter further observed that:

âshcroft and nnûeller argue that these allegations fail to satisfy the

"plausibility standard" of Twombfy TheY contend that iqbai°s claims are implausibie

hecause such high-rankinr^ officialg "tPr^rl not to bb` pPrcr^nally inîr^(veri in the

specific actions of lower-leve! officers down the bureaucratic chain of command."

^rir^f f:^r âfiitinner^ 28, ^^ et thic re^^^nGe he`;peak^ a f i indarênta!

misunderstanding oftheenquirythat Twomblydemands. Twombfydoes notrequire

a court at the motion-to-dismiss stage to consider whether the factuai aifegations

are probably true. We made it clear, on the contrary, that a court must take the

allegations as true, no matter how skeptical the court may be. SeeTwombly, 550

U S at 555, 127 S,Ct. 1955 (a cour± m! ^st nroceed "on the assumption that all the- r

allegations in the compfaint are true (even if doubtful in fact)"); id., at 556, 127 S.Ct.

1955 ("[A] wel(-pleaded complaint may proceed even if it strikes a sa^vy )udge that

actual proof of the facts alleged is improbabfe"); see a(sof^feitzke v. lit/iiliams, 490

U.S. 319, 327, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989) ("RUIe 12(b)(6) does not



15

countenance ... dismissals based on a judge's disbelief of a complaint's factual

al[egations"). The sole exception fo this rule fies with allegations that are sufficiently

fantastic to defy reality as we know it: claims about little green men, or the plaintiffs

recent tl lp tl^ rlutC^, Ur experienCeJ in tilile tr avcl. T hat iS r'î^t VJi1at we have I lere.

Under Twomb/y, the relevant question is whether, assuming the factual

allegations are true, the plaintiff has stated a ground for refief that is plausibie. That

is, in Twombly's words, a piaintiff must "allege facts" that, taken as true, are

"suggestive of illegal conduct." 550 U.S., at 564, n. 8, 127 S.Ct. 1955. lqbaf, 556

U.S. at 695-696.

{^; ^5} Aftsr rqhal, federa! courts ha^ê struggled over how to intPrpret and

impfement Twomblyand iqbai. See ôbyns v. v.S., 91 Fed.Cl. 412, 42^ (Fed.CL 2"u10}

(nnting that r,anp anr^ nf .tha cpartr,lîm îia^nic thece racec in "r,n,inimafict fiermc " anr^-^•° - - ^ "

continues to apply al! or nearly all the traditional concepts identified with notice pleading;

the ^thar ^nd r,f fhP ^r,^rtr1 ^m ^<ievvc tl,er;t a_ €â^;inn ^cfahfich^d "a f1 ^n;ârr,^nt^6iy-diffPrent,^., .,

significantly-heightened pleading standard." } See, also, Khalik v. United Air Lines, 671

F.3d 1188, 1191 (1Oth Cir. 2u12).

{¶ 36} in Khalik, the Tenth Circuit Court of Appeals adopted a"middle ground" that

it described as a"refined standard" - meaning that "[i]n other words, Rule 8(a)(2) still

lives." Id. at 1191-1192. The Tenth Circuit Court of Appeals noted in Khalik that:

In âpplying this new, refined standard, we have held that plausibility refers

"to the scope of the allegatEOns in a complaint: if they are so general that they

encompass a wide swath of conduct, much of it innocent, th:en the plaintiffs `have

not nudged their claims across the line from conceivable to plausibfe."' Further, we

THE COURT OF APPEALS OF OHIO APPENDIXPAGENO.15


16

have noted that "[t]he nature and specificity of the allegations required to state a

plausible cfaim will vary based on context." (Citation omitted.) Id. at 1191.

{¶ 37} The Supreme Court has not provided further guidance to the lower courts,

Enstead, the COUrt h^S iltlrequently cited Tw:,^^r;b1y an^d lqba{ in subsequer^t caseS. ^J^^here

these cases have been cited in the context of motions to dismiss, the Court has continued

to refer to traditionaf standards for crediting aliegations in the compiaint. For example, in

U.S. 131 S.Ct. 1309, 179 L.Ed.2d 398Matrixx lnitiatives, Inc. v. Siracusano, ,

(2011), the Supreme Court held that a claim for securities fraud under Section 10(b) of the

Securities Exchange Act of 1934, was sufficient. In evaluating the complaint, the Court

,r,nt°d that "^?espondents' conso!idated amended complaint alleges the foflowing facts,

which the courts beiow properly assumed to be true." id. at 1314, citing iqba1, 55a U^S•

55E, 12g S,rt. 193?, 173 L.Ed.2d 80^ (2009). The Court reiterated the same standard

later in the opinion, stating that "[a]ssuming the complaint's allegations to be true, as we

muCt, .n.^{atrixx rthe defendant] recei^'ed information that plausibly indicated a reliable causa{

link between Zicam and anosmia." id. at 1322.

{^ 38} The use of the word "plausibt^,r" indicates that the Court has not completely

abandoned its stance, but the reference is more muted than one would expect, given the

comments in Twombly and lqbal. fn (ight of this fact and the varying approaches taken

by the federal circuit cour^s, ally abai ^donment of standards that have been routinely

applied in Ohio for many years should be a matter for the Ohio Supreme Court. Notably,

we are not bound by dPcisions of the United States Supreme Court that do not involve

federal statutory and constitutiona{ law. See, e.g., State v. Burnett, 93 ^hio St.3d 419,

422, 755 N.E.2d 857 (2001).

' APPENDIX PAGE NO. 16THE COURT OF APPEALS OF OH10


17

{¶ 39} To support their position that we should apply height^ned pleading

standards, Appellees cite several cases from other Ohio districts that have allegedly

adopted Twombly and Iqbal. We have reviewed the relevant authority and do not find that

heightened standards have been adopted.

{¶ 40} For example, the Fifth District Court of Appeals cited iqbal for the proposition

that "[a] legal conclusion cannot be accepted as true for purposes of rufing on a motion to

rdismiss." Cirotto v. Hearfbeats of Licking Cty., 5th Dist. Licking No. 10-CA-21,

2010-Ohio-4238, ¶ 18. This is hardly a novel concept. See, e.g., Bratton v. Adkins; 9th

Dist. Summit No. 18136, 1997 WL 459979, * 1 (Aug. 6, 1997)(holding that even under "

rnotice' pleading, a complaint must be more than ` bare assertions of legal conclusions' „).

fn any event, the Fifth District Court of Appeais went on to appiy traditionaf standards in

^_..^h^, '+n r^ r., .,^^ ^F.,,.+, ^„ n,,,.,,.F•,....-.

aîrrr;it'^g tho r^ligmi^â! .^•f the CCmpla^nt, ^,y a.,^.euttt tg atl la^,ûal a1laât.iul lJ a5 u uC cand

applying all reasonable inferences in favor of the moving party. id. at ^j 17.

C mmi+ FÎi+ ^:t'r^ ^^ '^nnn ^f !io-v794 '^^ ^^^ {n tl/an^r. Yi F'i*LS ni ^-lrrr!'^,rnn Q+h ^li +

; .,.ûJ vrc^ vr r ruv vrr. .^ttt VI^SI. Vulltlllll l^lV. G"t/ IJ, GVV^7- a

the Ninth District Court of Appeals cited Twomblyfor the proposition that compiaints must

contain more than mere " labefs and conclusions." The court then appiied traditionaf Civ.

R. 12(B)(6) standards. Id. at ^[ 7 and 13. Again, the rule is not new that "[u]nsupported

conclusions of a complaint are not considered admitted * ** and are not sufficient to

wit hstarld a mction to disrr,iss." Prr^dential Ins. Co. of Am. v. Corporate Circle, Ltd., 103

Ohio App.3d 93, 658 N.E.2d 1066 ( 8th Dist. 1995), citing State ex rel. Hickman v. Capots,

45 rJhio St.3d 324, 544 N.E.2d 639 (1989).

{¶ 42} Similarly, the Eleventh District Court of Appeals cited Twombly for the idea

that mere recitation of the elements of a cause of action is insufficient without some factual

THE COURT OF APPEALS OF OHIOAPPENDIXPAGEN0.17


18

al(egations. Nonetheless, traditional Civ. R. 12(B)(6) standards were also cited. See

Hoffman v. Fraser, 11th Dist. Geauga No. 2010-G-2975, 2011-Ohio-2200, ¶ 21.

{¶ 43} Several cases in the Eighth District Court of Appeals have cited Twombly

in the context of indicating that the righ'tto refief shown in the comp(aint must be more than

specu(ative. See Ga//o v. Westfield Natl. Ins. Co., 8th Dist. Cuyahoga No. 91893,

2009-Ohio-1094, ¶ 9; Williams v. Ohio Edison, 8th Dist. Cuyahoga No. 92840,

2009-Ohio-5702, ¶ 15; Parsons v. Greater Cleveland Regional Transit Auth., 8th Dist.

Cuyahoga No. 93523, 2010-Dhio-266, ¶ 11; Fink v. Twentieth Century Homes, Inc., 8th

Dist. Cuyahoga No. 94519, 2010-Ohio-5486, ¶ 24; and DiGiorgio v. Cleveland, 8th Dist.

^ Cuy^hcga 6°'^ Q^°'"^ "'01 ^-nt^°o-5^7R ^j41. Theê coiurts ccntinu:e however to cite and^^. v.^^-^^., ^ : ^ :: ^, ..., o , :

appfy traditional Civ. R. 12(B)(6) standards. See, e.g., Fink, at ¶ 23, and DiGiorgio, at ¶19.

r^ "4' Snov vie;e cuhd;vis:on ^;ò:nt êi:ture Phase ; v. iôme S. ^ ^. oi ôungsto^vn,î u ^ • ...

Ohio, 8th Dist. Cuyahoga No. 96675, 2012-Ohio-1342, is the most recent decision on this

^v ^^^^^v"^^c ifi ir`f'37 l^^JC^ Tf'9^ F-1l7YlTl1 1 IICt'r'^f"t rpf+:taN.h'....1 F.-.^..... tL.^ ^...:.. .... ['::`s.'_i t'+_.....d r n _ e_ • :

ûi.i^^...^ E i v: i{ Li iv ^.i'^^'i iei i v...u IC.i ^v'e.ii i ^ ^.^f.: ^ ue.,^. ::: ..: euz vexa^+, _. es. ê^:::., e v:ase vt :._.v:6û

traditional Ohio rufes for construing complaints, and then noted that:

This analysis was shif"ted by recent Supreme Court decisions addressing the

federal notice pleading standard in Fed.Civ.R. 8, upon which Ohio's Civ.R. 8

p(eading requirement is based. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544,

127 S.Ct. 1055, 157 L.Ed.2d g2Q (2007); A.ch_r.rr^ft vo Ipbal, 556 U.S. 662, 129 S.Ct.

1937, 149, 173 L.Ed.2d 868 (2009). The Court held that bald legal conclusions did

not constitute a weii-pled compiaint. fn order to survive a motion to dismiss, the

complaint must offer factual support for the legal conclusions drawn within. iqbal

at 1949. These holdings are similar to the rule enunciated in Capots, cited above.

THE COURT OF APPEALS OF OHIO APPENDIXPAGENO.18


19

But the shift fies in the level of certainty of the complaint. Based on the above Ohio

I case law, plaintiffs must only show some set of facts that would entitle them to

relief. O'Brien at 245, 327 N.E.2d 753. Snowville, 2012-Ohio-1342 at ¶ 9, referring

to State ex re;. f-îck^;ân v. Capots, 45 Ohio St.3d 324, 544 N.E.2d 639 ( i 989}, and

O'Brien v. University Community Tenants Union, lnc., 42 Ohio St.2d 242, 327

N.E.2d 753 (1975).

{^j 45} The interstitial, definitional progression from the "fantastic" (e.g., "fittle green

"" ossible," "plausible," "reasonably founded,"men") through "speculative;" "conceivabfe, p

"consistent with liability," "suggestive of liability," to "probability," can be the legal equivalent

of explaining the progression from a gu^r^ to the Higgs boson. C^hi^ h^s iong recognized

that cases shouid be decided on their merits, not probedural iechnicaiities. Lyl€ins v. ivliarii

n_`273`2 ^211 2d 1^^r /`^rl ^,list ) 6T a^ /.,1^.,+nSn 157 (^hin Ann,3rl 291 ^004_n!^:i N.E. ,^ ;û , , a ^^ ;a^^^t/alleyf-^- ^., ^-r , - ' " ..

noting that "Civ.R. 8(F) reguires a court to liberally construe all pleadings às to do

^ a ^^t'i,Air-^nfen®ri r^fe7rfinn cf^nrtarrl fr.r

^ljbstan[^sif Illstl[:e^ n ^;tilf5f'^`fl!!t"^'C itaV(^ 1'1C1t^C1llNted^^ u r^+^ uv^^^r o^ ,iv iu ivl

^- ^

Civ. R. 12(B)(6) motions to dismiss or considered such a motion to dismiss as a Civ. R. 56

, ,.:. : r,^ motion for summary judgment-lite. By the same token, we have never construeo ^lv.rc.

12(B)(6) as permitting eitherspecufation or complaints that are devoid offactua! allegations

supporting the legal claims.

t^t ^61 Thus. to the extent that the trial court adopted a plausibility test based on^^^ --^ .

Twombly and Iqbal, it erred, and the first assignment of error is sustained on that basis.

However, the error would not be prejudicial, unless the complaint fails on standards that

have been traditionally applied by Ohio courts to evaluate motions to dismiss.

{¶ 47} The First Rssignment of Er ror is sustained.



20

II1. Alleged Error in Appiying Traditional Civ. R. 12(B)(6) Standards

{¶ 48} Sacksteder's and EXTRAhelp's second assig^ment of error is as follows:

ln dismissing all claims againstall defendants, the trial court concluded

that "the ciairn rests on its participation in breaches by the {aw firm and none

are set out, nor are damages set out other than as conciusory." The trial

court reached these conclusions applied [sic] incorrect pleading standards

and a resulting incorrect standard on a rnotion to dismiss for failure to state

a claim, for refief. Accordingly, in applying a"plausibility" standard of

pieading in determining a inotion to dismiss under Civ. R. '!2(B)(^), the trial

court erred.

^^ ^9} As was noted, Ohio has adhered to the following standards with respect to

^,-^ ^,.Giv.R. 1^^d)(o) mot^ons:

In construing a complaint upon a motion to dismiss forfailure to state a claim,

d.e.. - •% ci^..fi.......t....... :..^F.

i...• k r-.. t.... ,.! .,,...^^... r.i I

vVe i t iljsl pl esl,fi 1 le li ial al^ iacll.lai aiiCl^dCivi iJ ui Lhe Coi t ip^d^n^ cii e ii Ue ai iU i f IctilC Gi1

reasonable inferences in favor of the non-moving party. Then, before we may

dismiss the complaint, it must appear beyond doubt that plaintiff can prove no set

offacts warranting a recovery. (Gitations omitted.) Mitchell, 40 Ohio St.3d 190, 192,

532 N.E.2d 753 (1988).

{¶ 5r3} in York v. Ohio State Highway Patrol, 60 vi iio St.3d 143, 573 N.E.2d

1063 ( 1991), the Qhio Supreme rourt stressed that under notice pfeading rules:

[p,] pEaintiff is not required to prove his or her case at the pieading stage.

Very often, the evidence necessary for a plaintiff to prevail is not obtained until the

plaintiff is able to discover materials in the defendant's possession. {f the plaintiff



21

were required to prove his or her case in the complaint, many valid claims would be

dismissed because of the rJlaintiffs lack of access to relevant evidence.

Consequently, as long as there is a set of facts, consistent with the plaintiffs

a ivvJ tl'ie piaintiff tG reCGVer, tii8 CGurt maji nGt grant acomplaint, ^,vhictl vdoi^{d 1

defendant's motion to dismiss. Id. at 145.

{¶ 51} In order to analyze the vafidity of the trial court's decision, our discussion will

separate the claims against the various groups of parties: the law firm defendants; the

potential purchaser; and the EXTRAhelp employees:

A. C{aims against the Law Firm Defendants

{¶ 52} The amended compiaint contains three claims for relief with respect to the

Eaw firm defendants, based on iegai mdlpr^ctice, i leg6igel It and in^tentionâl breach of

fiduciarv duty, and vicariQUS [iability (the latter being applicable onfy to the law firm). Cûr

discussion of these claims will be combined, because "[a]n action against one's attorney

for damaês resultlno from the manner in v^fhich the attorney represented the clier^t

constitutes an action for maipractice within the meaning of R.C. 2305.11, regardiess of

whether predicated upon contract or tort or whether for indemnificati^n or for direct

damages." Muir v. Hadler Rea/ Estate Management Co., 4 Ohio App.3d 89, 90, 446

N.E.2d 820 (10th Dist. 1982). Accord, Trustees of Ohio Carpenters' Pension Fund v. U. S.

Rank IVath Assn., 189 Ohio App.3d 260, 2010-^hio-911, 938 N.E.2d 61, ¶ 23 (8th Dist.).

Further, the law firm is only liable if the attorneys are found to have committed iegal

malpractice. lVatl. Union Fire Ins. Ca. of Pittsburgh, PA v. !il/uerth, 122 Ohio St.3d 594,

594, 2009-Ohio-3601, 913 N.E.2d 939, paragraph two of the syliabus.

To estabfish a cause of action for legal maiptactice based on negligent


SECOND APPELLATE DtSTRICT

22

representation, a plaintiff must show (1) that the attorney owed a duty or obligation

to the plaintiff, (2) that there was a breach of that duty or obligation and that the

attorney failed to conform to the standard required by law, and (3) that there is a

causai connection between the conduct compfained of and the re5ufting damage

or loss. Vahila v:-fâll, 77 Ohio St.3d 421, 422, 674 N.E.2d 1164 (1997), syl{abus.

{¶ 53} The complaint and amended complaint allege that an attorney-client

relationship existed between the law-firm defendants and the plaintiffs. The cornplaints

alsa alleged breach of the duty in three basic ways: 1) the attorneys failed to properly

advise plaintiffs about precautions to take when proceeding with discussions with Barry

^ ^ L rnni^êarJ ^ î^h rJicrlncie^n

and Barr °^Staff; 2) tE Ee attor6 ieysfaiied ^v adi/ise `Jf - i I`Sf^s asJ.v^^cad^-u . e^riô ^ ^.e^JViv.^^^ i^

confidential information without a properiy executed confidentiafity agreement; and 3) the

r ^«.ff.attorne1y`S fail ed ±o provide such an agreerrlent t^ b" °x°^l.;t°r,ul hy i,r^,laintiffc anrl R,a^ nt^ta

In addition, the complaints and memoranda aflege that the plaintiff, Sacksteder, disc{osed

rnrlsir^6ansiî irs^nrrraî^n tn ^^Pr^^ rs^Fring nAnnfiafjnnc anrl that r_^+arni tieGF; irl^nrrv-Qafinn

gained during negotiations or from EXTRAhelp's employees to solicit, and thus, basically

steal EXTÂhefp's fargest cfien't. Finaify, the complaints aiiege that Sacicsteder and

EXTRAheip would have enjoyed a better financial position without the improper acts, and

that they suffered financial damages as a result of the lawyers' failures,

x ,._: ^ .+ ,.,,n^^^ ^^-toÎ +hat "It rlneg not{¶ 54} In granting the motion to dismiss, ^îe u â^ cou^ ^ ^^^ ^^ÛU^-u ^^ û^

appear that plaintiff passed on any particu{ar information that Barry could have put to use."

Trial Court êcision and Entry, p. 3. This is an assumption that is not established by ±he

facts, and is not part of the court's duties in evaluating a motion to dismiss. The trial court

further stated that:

THE COURT OF APPEALS OF OHIOSECOND APPELLATE DISTRICT


^

23

In paragraph 33 of the Amended Complaint Sacksteder states that during his

talks with Barry he gave him confidential information. Barry with his attorney

terminated their negotiations and shortly thereafter a sale was made to Belcan. No

foss due to th,e failure of negotiations is ciaimed; none can be since no numbers are

given as to either Barry's offer nor as to Belcan's final price for the business. Again,

the court is invited simply to speculate, if those are the damages plaintiff is speaking

of. Id.

{¶ 55} We conclude that the trial court's decision requires a degree of specificity

that is unwarranted in filing a complaint. Furthermore, the arguments by the law firm

►efAnd^r.ts miss the poi^t. Fnr examplP, the faw firm defendants argue that they were n^t

invoived directiy in Sacksteder's decision to discuss confidentiai information with Barry.

^nweVer, the cruX nf the allegerl rYtalprartlre Is that the rlafanrlar^tc failPrl aitf^cr tr^ adviê

Sacksteder r ► ot to disclose information, or to protect him in the event that he chose to do

^c^ Thi^ tntnt3lc; be n^rtirt^l^rlv impnrt^nt in the cnntext nf di ► a! re^recenfafinn h^^ the Eaenr

firm..• ^ ^^ ^. i,,; ^„-;^^.

{^[ 56} The !aw firm defendants also heaviEy rely on the contenîort ^t â^ pâ^r^^„J

cannot show the proximate cause of the alleged darnages, because plaintiffs cannot prove

that the damages are collectable, as required by law. In this regard, defendants focus on

II the fact that Barry "made the final decision not to purchase EXTRAhelp, likely based on

EXTRAheip's financial condition or other r"actors which would have influenced Barry

regardless of the PSE A.ppellees' involvement in those discussions." Brief of La`N F^rm

Appellees, p. 20. (Emphasis added.) The law firm defendants afso focus on the fact that

EXTRAhelp's business was sold to another party da;^s later.



24

{¶ 57} The Supreme Court of Ohio has held that "collectibility is logically and

inextricably finked to the legal-malpractice plaintiffs damages, for which the plaintiff be;^rs

the burden of proof. In proving whatwas lost, the plaintiff must showwhatwould have been

gaiiied." râierek ii. PeLerserl & lbOlc^,118 Ghio St.3d 5û3, 2008-^hib-279G, 890 N.E.2d

316; ¶ 37. However, this is not a matter of proof at the pleading stage; it is a matter for trial

or, perhaps, for summary judgment if the facts are undisputed. For example, inPaterek,

the case did not come before the court foilowing motions to dismiss the legal malpractice

case - the matter proceeded to trial and a jury verdict. Id. at ¶ 16.

{¶ 58} In this regard, we are also troubled by the specufation that is shown through

co,.Ê„pnts abo,^,t what an®ther party was "tikely" thinking when makin^ decisions. This kind

of remark (many of which are found in ali defendants' briefs), exempiifies the danger or'

d^^m^ss^ng C:aseG ^n the pleadlr^gC thro^ 1(^f!'1 \NPlgrl,ll'1g Qf P\/If{Pt'tê^ aC t{'1P !'^Pfendants argue

that Twombly and lqbal appear to allow.

{^ c^} ThF` I?vtir firm def°C?dat?tS ais^ rnntenri fhaf EA;Tf?A.heip IackS Standing tv ^ring

this case, because its business was sold to Belcan shortly after the sale to SarryStaff fell

through. The faw firm contends that E?CTE.^::heip was required to allege specifics with

respect to the sale, or as the trial court phrased it, to provide "numbers." We disagree.

{¶ 60} "Standing is a threshold question for the court to decide in order for it to

proceed to adjudicate the action^." State °Y re!. :InnPs v. Suster, 84 Ohio St.3d 70, 77,

1998-Ohio-275, 701 N.E.2d 1002. However, the issue of lack of standing "challenges the

capacity of a party to bring an action, not the subject matter jurisdiction of the court." Id.

To decide whether the requirement has been satisfied that an action be brought by the real

party in interest, "courts must look to the substantive law creating the rigiî being sued upon



25

to see if the action has been instituted by the party possessing the substantive right to

relief." Shealy v. Campbell, 20 Ohio St.3d 23, 25, 485 N.E.2d 701 (1985).

{¶ 61}Although standing is a threshofd matter, the decision is often made at the

earliest at the summary judg ►rlent stage. See, e.g., Shealy at 24 (standing issue decided

upon trial of case); Fifth Third Mtge. Co. v. Bihn, 2d Dist. Montgomery No. 24691,

2012-Ohio-637, ¶ 15 (standing issue implied in trial court and specifically raised on appeal

after summary judgment had been granted to mortgagee);Dibert v. Carpenter, 196 Ohio

App.3d 1; 2011-Ohio-5691, 961 N.E.2d 1217, ¶21-22 (2d Dist.) (standing issue raised via

motion for partial summary judgment); and Fed. Horne Loan Mtge. Corp. v. Schwartzwald,

1Q4 C`hio App.3d 544, 2011-^hio-2581, 957 N.E.2d 790, ¶ 19 (2d Di^t.)(starlding issue

raised in summary judgment motion).

g annnt hn„ raiSed !n mot!^n^ t^ dlBmiS^.{^ ^?} Th;s !s net to sa;r ±h^t standln C^

Fiowever, "[a]t the pfeading stage, a party establishes standing by alleging enough general

F^,rjTC^;C cF^n^ ci Th^t !.^"'^ô_ir^r rcc^ ^liad frnrr! she r^lafenr^lant'^ C.::nu^.,6Ct, heCa'4Ce :.rl,en .r.,ieClClny u

motion to dismiss, a court wili presume `that general allegations embrace those specific

facts that are necessary to support a ciaim.' "(Citation omitted). S. ChrisfianLeadership

Conference v. Combined Healfh Dist.,191 Ohio App.3d 405, 2010-0hio-6550, 946 N.E.2d

282, ¶ 17 (2d Dist.).

^^__ .^:,.,,•,^^,^^, ,^,o rnnr.Illde that Sacksteder and{¶ 63} in view of the preceâiny U^^û^^^^^ ^, ••^ ^^• ^-^-

EXTRAhelp have alleged sufficient facts to withstand a motion to dismiss on the issue of

standing. As we mentioned, the complaints indicate that if the lati^r firm defendants had

proper{y represented Sacksteder and EXTRAhelp, they (Sacksteder and EXTRAhe(p)

would have enjoyed a better f inancial position than the financial position in which they fi^ ^d



^6

thernselves. The complaints also state that Sackstederand EXTRAhelp have each

suffered monetary damages.

{¶ 64} While there is no specific allegation that the eventual sale price was less, the

inference is present. in addition, Sackstederand EX T Ri^help indicated to the trial cou `'

and the court did consider, the allegation that the sa{e to Belcan provided for revenue

based on future sales to customers of EXTRAhelp that were retained. if the saie price

were to be paid over time, or were dependent, in part, on future business from

EXTRPrhefp'sformer customers (see ¶ 10, supra), the attorneys' faifure to get a signed

confidentially agreement could have led to Barry's taking someof EXTRAhelp's customers

(see ¶ 11, supra;. This e^ôâld cause monetary damages to the plaintiffs.

' ^^^} Whife the ciaim as to damage^ rn^y have beei ^ bettcr p hrased, p6ainatiffs are{

T{"Ie Qrl(tl a romplaint was 45 paaes{ivt reyuir ed t^v tr;^ the^r

âê sn the !n!tlal plear^lingc, .^.n I

iong, and the amended complaint consisted of 38 pages. Both documents could have

p,^le4nêAer it^°e^î^vreart'ftîiiys

b"^t tF;e dersrPP nf fief^ll dAYYtîYifte(ibV C^Pf^:i'i(iai5lti v^F^3^{d reE;LSire

litigants to write a book when filing fegal actions:

{¶ ^6} ln fdct, cour"ts have previousfy commented on cor<eplain^ts that are

unnecessaril lengthy and detailed. For example, in Scacciav. Lemmie, 2d Dist.

Y

fîontgomery t^fo. 21506, 2007-Ohio-1055, we affirmed the dismissal of a case in which the

--lai^ ^tiff had filed a 70-pagecomplaint that contained 548 paragraphs and nineteen

^separate causes of action, and an amended complaint that contained 50 pages, 440

ara ra hs, and eighteen causes of action. !d. at ¶ 5 and 8. The plaintiff in Scaccia

p g p

argued that the complaint was as concise as it could be, given the nature of the action, and

that the triai cou^ i had err ed by striking the entire ccmp!aint, rather than excising the

THE COURT OF APPEALS OF OHIO AppENDIXPAGEN0.26SECOND APPELLATE DISTRICT

27

improper parts. Id. at ¶ 19

{¶ 67} In reviewing the matter, we noted that "`Civ.R. 8(A} does not contemplate

evidentiary pleading.' " Id. at ¶ 20, quoting Collins v. Nationa! City Bank, 2d Dist:

f^^on^tgomey No. 1088 +, 2003-Chio-0893, ^( ^8. `J',Ie fitrther obser ved that:

We have reviewed the first complaint, and agree with the trial court that it

failed to set forth a short and plain statement showing thaf Scaccia was,entitled to

refief. For example, at one point in the complaint, Scaccia devotes five paragraphs

to describing his quafifications for empfoyment rather than merefy averring that he

was quafified for the position he sought. In anofher portion of the complaint,

Sdaccia devetes approximate(y twenty paragraphs to describing the birth of his child

and the City's failure to piovide him with appropriate leave rather thari mereiystating

that the City acted inappropriately by denying the leave. These are merely two

examples of page after page of tedious detail of numerous events that could, and

shoul^, have been distilled into a more concise statement. Ed. at ^j 21.

{^ 68} Litigants shouid not have to navigate between the ScylEa of saying too fittle

and the Charybdis of saying too much, never ^:nowing what leve! of detai! wiil cause their

complaints to be dismissed.

{¶ ^^} As a final matter, the law firm defendants contend that Sacksteder's claims

should be dismissed because h e does not allege ±ha± he had an individual attorney-client

refationship with the firm. We disagree. The complaints afiege that Andrew Storar and

other lawyers at PS&E provided various leoal services to Sacksteder and EX_TRAhelp on

an "as-needed, when-needed" basis. The complaints fur'ther allege that Sacksteder was

told that attorney Paul Zimmer wou(d be representing Sacksteder and EXTRAhelp with



28

regard to the transaction in question. We fail to see what more would be required to al{ege

an attorney-c(ient relationship.

70 A lying standard Civ. R. 12(B)(6) analysis, we conclude thatthe complaints{¶ } pp

state a claim for reiief against the iaw firm defendants. Even appEying a"plausibi'ity" test,

it is certainly "plausible" that an attorney's failure to properly advise a client regarding

fidentialit , or to protect the client by providing confidentiaiity agreements, could causecon Y

damage to the sale of a client's business. EXTRAhelp alieged that the law firm's failures

sed it to be in a poorer financial condition, and this is sufficient. EXTRAheip was notcau

required to detail its damages, or to provide "numbers," as the trial court suggested. This

eâs not a triu! to the bench or a r^-totion for summary judgment - it was simply a motion to

deterrrmine if the case could proceed to discovery. Accordingly, the tria! court erred in

^;cmissin t"e First, c°cond, ar;d Thirrl (:laims for RPIiPf, which were brought against the

uia g

faw firm defendants. We express no opinion on the merits or even probabi(ity of success

nT fhecA î?irF?S,

B. Ciaims against the Prospective Purchaser

^j 7°ii} The claims against BarryStaff, the prospective purchaser, and its presiêi ^t,

{

Douglas Barry, Jr., are contained in the Fourth, Seventh, and Ninth Claims for Reiief.

These claims for refief alfege, respectivefy, that the Barry defendants participated in the

breaches of fiducia^y duty by ±t,P {aw firm defendants; that the Barry defendants

participated in the breaches of fiduciary duty by the employees of EXTRAhelp; and thatthe

Bar defendants tortious!y interfered with the existing business and contractualry

re(ationships that Sacksteder and EXTRAhelp had with customers and ciients af

EXTRAhelp.

THE COURT OF APPEALS OF OHIO AppENDIXPAGEN0.28


29

{¶ 72} "To maintain. a, c.laim of breach of a fiduciary duty, the plaintiff must prove (1)

the existence of a duty arising from a fiduciary relationship; (2) a failure to observe the

duty; and (3) an injury resulting proximatelytherefrom."Harwood v. Pappas &Assoc., Inc.,

8th Dist. Cuyahoga No. 84761, 20u5-Ohio-2442, ^ 26, citingSrrock v. Pressneil, 38 uhio

St.3d 207, 216, 527 N.E.2d 1235 ( 1988).

{¶ 73} The relationship between the plaintiffs and the law firm defendants was a

fiduciary relationship, but the allegation against the Barry defendahts is based on their

artici ation in another's breach of fiduciary duty. This theory was rejected by the trialp p

court, based on the fact that Ohio courts have not recoghized a cause of action for

r t•^ , îiparCiClpaî^vn in a brea^`^1 oi ii^l.iEîai')^ ut^

r ^^r! C^/ (^^;help (^^nteC1C^ t^'iai ^^'tEf^vavk.^7tedei ^ ` %`T ^

has recognized this tort.

Court of ^ 1^ ^^cl, ^ ^+ ^^n;^^dST 7^[.1 ^fiô iof^+ ^nioro filorJ tro C! lr+r p villv iooueu û u`^'vialvi i^^f ^ i 611Vr brlVl 7 VYVIV IIIVW, IV V^1rlemC+

answering a certified question regarding whether Ohio recognizes a cause of action for

li^;:F;:iityunrEcr ^êct^rern®nt nf the i^^F,^ 2u, i^r6s, êcti .^vn ^ i v (1 979 j i hi.°.^. ^^^^•tion

provides for imposition of liabi(ity for the conduct of others, if the defendant:

(a) does a torfiious act in concert with the other or pursuant to a comrnon design with

him, or

(b) knows that the other's conduct constitutes a breach of duty and gives substantial

^^_ ^^.,.r ^„ +^ ^^ îûct himself; orassistance or encouragement to «^^ o^^ ^ci ^^ ^^ ^^n^

(c) gives substantial assistance to the other in accomplishing a tortious result and

his own conduct, separate!y considered, cor,stitutes a breach of duty to the trird

person. Id. at 315.

{¶ 75} The Supreme Court of Ohio answered the question in the negative, stating



30

that :"This court has never recogn!zed a claim under 4 Restatement 2d of Torts, Sect!on

876 (1979), and we decline to do so under the circumstances of this case." DeVries Dairy,

Ohio St.3d 2012-Ohio-3828, N.E.2dL.L.C. v. White Eagle Coop. Assn., Inc., ^

, ^ 2•

{¶ 76} In view of this recent decision of the Supreme Court of Ohio, we conclude

that the tr!al court did not err in dismissing the Fourth and Seventh Claims for Relief against

Barry and BarryStaff. Whether the fiduciary c{aim is against the law firm defendants or the

employees of EXTRAhelp, persons "participating" in the direct actor's breach of fiduciary

duty are not !iable.

{^ 77} -rhe n±her ^[aim acainst the Barry defendants is based on contractual and

business interference. The trial court rejected these claims, based on !ack of standing,

!ar(^ nf cnarifir_^ rPgarrling ranrallatinnc ra^,^îng I^^^ tr^ p!aintiff^, and !ack ^f allega±iCn^r ^.^... ^

that "any contracts cf any kind are al!eged to have gone out of the Be!can-EXTRAhe[p

^rhit," Tria! Cni ► ;î_ E^^îcir^sn anri Entr;r, ^, n.

{¶ 78} "The elements of the tort of tortious interference with contract are (1) the

existence of a confract, (2) the v^rrongdoer's know!edge of the contract, (3) the wrongdoer's

intentional procurement of the contract's breach, (4) !ack of justification, and (5) resu{ting

damages." Fred Siegel Co., LPA v. Arter & Hadden, 85 Ohio St.3d 171, 707 N.E.2d 853

(1999) paragrap" o^ ê cf the gy!lah^ ^c. Simi{ar!y; "The elements essential to recovery for

a tortious interference with a business relationship are: (1) a business relationship; (2) the

wrongdoer's know!edge thereof; (3) an intentiona! interference causing a breach er

termination of the relationship; and (4) damages resulting therefrom." (Citations omitted.)

VVolf v. iVlcCuilough-Hyde Itilemorial Hosp., 67 Ohio App.3d 349, 355, 586 N.E.2d 120^+

THE COURT OF APPEALS OF OHIOSECOND APPELLATE DISTRICT APPENDIXPAGEN0.30

31

{12th Dist.1990). "The main distinction between tortious interference with a contractual

relationship and tortious interference with a business relationship is that interference with

a business relationship includes intentional interference with prospective contractual

relations; not yet reduced to a contract." (Citation omitted.) Diarrond t^"3ine & Spirits, frrc.

v. Dayton Heidelberg Distrib. Co., 148 Ohio App.3d 596, 2002-Ohio-3932, 774 N. E.2d 775,

¶ 23 (3d Dist.).

{¶ 79} We have already discussed the standing issue, and reject that argument.

We also conclude, contrary to the trial court, that EXTRAhelp adequateiy stated a claim

for business interference and/or contractual interference. The complaints alleged that

var Y and Ba erySt^ff ^,^-ror^g{y soEicited E"TP..^.help's largest custor?'??r, ^. tsing confidential

trade secrets or confidential information, and wrongly caused that customer to leave

EXTRLI{-lelr^. ^:.^rthermore, alfihn^,^gh nnt PYpIl r;itly rn,{er^l i;-I t!';e cc;^?plaint ±he ±rial C^'u'r^ :^,'as

aware of EXTRAhe{p's contention that it was entit{ed to a share of further earnincus from

,r,î^ctnrnare thaf ^ne^ra r^f^,irâd h`^ r-',raEran a;^'rer tha âir^, Tf,e triai CO:;ri^ rejertpd this- s

argument, stating that because EXTRAHeIp chose not to attach this contract to the

complair^t, that there was no such contract. At most, such document cou(d have been

provided, if it exists, in response to an appropriate motion by the Barry defendants.

{¶ 80} Again, the case was not before the trial court on a summary judgment or

bench trial. EXTRAhelp and Sacksteder were not required to try their case o^ ^ the

pleadings. They were also not required to attach a copy of the sale contract to the

pleading. AEthough Civ. R. 10(D) provides that "`^^^;hen any claim or defense is founded on

an account or other written instrument, a copy of the account or written instrument must

be attached to the pleading," the claim against the Barry defendants was not founded on

THE COURT OF APPEALS OF OHIO APPENDIXPAGEN0.31SECOND APPELLATE DISTRICT

32

an account orwritten document. The requirement of attaching documents typically applies

to matters like accounts, leases, and the like. For example, "The purpcse of the

requirement to attach an account imposed by Civ.R. 10(D) is to exemplify the basis of the

pariicuiar claim for relief aiieged, in order to confine the issues in the action to mafters

related to the course of dealings between the parties the attachment portrays." Asset

Acquisitions Group, L.L.C. v. Gettis, 186 Ohio App.3d 586, 2010-0hio-950, 929 N.E.2d

506, ¶ 14 (2d Dist.). This is because the contract is the "best evidence" of the transaction.

Id

{¶ 81} The case before us does not involve a"contract" between the plaintiffs and

r ,a + Th^ ^M^,•n^Q nf a ntrart hafin,reen f,^^lr^n ^nd EXTR.^help,th e Barry deênân_s. ^ ex. ^^. ^r :^. co -

aflowing for payment to EXTRAhefp based on retained customers, is evidentiary matter

that ^nrCt,Îr,l he ^ceti at tria! t^ rn,rp^;e rlamage^. It nePr^ nnt he attaciled t^ ±hn^ ^nmplalnt ;n

order for the complaint to survive a motion to dismiss. !f courts vvere to require this type

nf ^tt^rrsrrtient fr, niaadit^rsc fhara rrn^îd ha nn and trZ enrhatrn,E,aintir,',r'^ enrn^,;,i;d be rAM;,îrer^;,i t0

fife, simply to be allowed to proceed beyond the initial pleading

burden cours, which are already plagued by a sea of documents.

it would aiso unduly

{¶ 82} As final matter, we note that Sacksteder conceded in the trial court that he

has no individual claim against Barry under the Ninth Claim for Refief.

^_ ^,.^.,. ,..:.,i ,.,.^ ^.+ ÎI^! r,nt arr in dismissing the Fourth{^ 83} For the reasons statÛ, u ^^ ^^ â^ ^û^ ^ u^^ ^°^^ ^• •

and Seventh Claims for Refief, but did err in dismissing the Ninth Cfaim for Relief with

respect to the Barry defendants, but only insofar as the dismissa! of EXTRRhelp's clairns

is concerned. The dismissal with regard to Sacksteder's claims was not error.

Claims against the EXTR^help Empioyees

THE COURT OF APPEALS OF OHIO ,^ppENDIXPAGEN0.32


33

{¶ 84} In the Fifth, Sixth, and Eighth Claims for Relief, Sacksteder and EXTRAhelp

contend that Buening, Ambos, and Brumbaugh improperly misappropriated, converted,

and disseminated trade secrets and confidential and proprietary business information. The

triaE court dismissed these claims, because EXTRAheip never provided facfs to bring the

information within the "statutory definition of trade secret." Trial Court Decision and Entry,

p. 5. The court also focused on the fact that Sacksteder, himself, disclosed "some" of his

secret information to Barry, and that the employees did not sign non-disc{osure

agreements.

{¶ 85} As an initial matter, we note that Sacksteder conceded in the trial court that

he has no lndividua! c!aim against the empfoyees. Têrefore, the sufficiency of the

compEaint wili be considered oniy as to EXTRAhelp's ciaims.

I^T fi^l (n thr^ FifFh ^laim fnr RPliaf FXTF?Aha{p ^nntand^ that B^„ening D;Y;hOs, andc o - J

Brumbaugh were employed in managerial positions of trust, gained access to confidential

inforfrcation in triat rnârity, and brear!-,pd fidu^ri^ j^ r,î^^,^ties hv disc!oslCeg this infCrmation

to Barry. As was noted, Sacksteder also alfeged in the comp{aints that Barry used this

confiderttia! information tc so!icit EXTRAhefp's largest cEient.

{¶ 87} In order to prove a breach of fiduciary duty cfaim, the plaintiff must

estab(ish ( 1) the existence of a duty arising from a fiduciary relationship; (2)

a fallUre LU (^b5elYe the duty; and (^) an jn^tJry resulting proximately

therefrom. "A `fiduciary' has been defined as a person having a duty, created

by his undertaking, to act primari!y for the benefit o f arôther in matters

connected with his undertaking." In some instances, an employee can be a

fiduciary of an empioyer; however, emp(oyees typicaliy owe nothing more



34

than a duty of good faith and loyalty to their employer.

Generally, the determination of what constitutes a fiduciary

re!ationship is a question of fact dependent ori the circumstances of each

case. (Citation omitted). Graceiech (rc. v. Perez, 8th Dist. Cuyahoga ^ô.

96913, 2012-Qhio-700, ¶ 11-12.

{^ 88} !n our view, the complaints adequately aliege the existenceof fiduciary

relationships between these employees and their employer.The complaints allege that

they were in managerial pos!tions, were in positions of trust, and were entrusted with

confidential and proprietary business information. We are unsure, factually, what more

the corr^F^laints ^^^'ou!d ha v e n€G^ded to ra^, un!ess it ^,^âs to !ist the exact confidential and6'

proprietary information. VVhether such a reiationship actua!ly existed and what the

information e^,as ?r? q^ ^?Stinnc nf fart nnt racnlîah!a tk-2rn6 igh a rtlotinn fin dismiSS.

{¶ 8g} In this regard, the employee defendants point out that ordiriary employees

#vnic?libe n+^xrc tâir at^'ip!^yenY- ^nt!-;irig t'^'inra t{ân ^ fi6^fl^tl'^ art iti fi^1e 66trt'i('tî gofSCi falt!"1.

_^^, s . _ .. _._ -

While this is true, reference to the case cited for this proposition iilustrates why dismissal

at the pfeading stage is not appropriate. in Lombardo v. âhc^êy, 8th Dist. Cuyahoga Pô.

92608, 2009-Ohio-5826, an employer had sued its employee, claiming breach of fiduciary

duty. The trialcourt denied a motion for judgment on the pleadings, and then later granted

ud ment after the empioyee sub^^îtted evidencP indicating that she merelysummary j 9

performed clerical functions !ike answering telephones and taking messages. She also

offered proof that she had not tak.en the improper actions a!!eged, and the employer

offered no evidence of any kind in response. Id. at ¶ 17 and 20. Under the

circumstances, the employee was cfearly not actingin a fiduciary capac!ty, and the claims



35

against her were not substantiated. But, the claims were dismissed afterthe employer had

been given an opportunity to present factual issues regarding its case.

{¶ 90} This discussion illustrates the problems with the position advocated by ali

defendants, which appears to urge triai on the pleadings, governed by judges who weigh

facts. For exampfe, the employee defendants point outthat Sacksteder, himself, disclosed

trade secrets or confidential information to Barry during their discussion. They, contend,

therefore, that they could not be liable for disclosing trade secrets, because Sacksteder

disclosed the "same" information. See,Ambos and Brumbaugh Brief, p. 18, and Buening

Brief, p. 17.

^;^ 91 } The complînts did not say that Sacksteder discl::se^ the "sam^" information

fihat the defendants aifegedly disciosed. instead the compiaints stafed that Sackst^der did

pf r^^^n+r. ^c+`+ rdin['^ ^(^ n rl

4{^YÎvê ^r^mn nnr+firlcan+ial ir+fnrmo+inn +n Rarni and +hat +hp

vv1111^..^v11LILAI 1 IIVIIIIULIVII LV v It3/, II L11 L11C3

dC^lelIlAQ116J aIJV uIJVIVJ U

confidential and proprietary information and trade secrets: Whether this invoives the

tv Fê eet7Fiiici,eri ^++ho cl ler.er.^n^lÎ lrinrnont e^+nnr^ nr_ LwL4vl LAL/IIJI \J 4L Ll llr J4f I

II I IGI j I4Ul^. I I IG11 JLQ^ ^V

`^carrs,a" i.^.fnrrr;atinn n,rr nnt ic u m^fi+ar ^

at trlal.

^ j 92} The compfaints do not specificafiy indicate whether Ambos and Brumbaugh

knew of the sale until after it occurred. However, the complaints do indicate that these

individuals, as well as Buening, disclosed confidential information, that Barry improperly

I lô,^ + ►,i^ ^nnfidPntial information to solicit EXTRAhelp's customers, and that EXTRAhelpu.^^+^.. u I..+ v.. ^

was damaged as a result. See Amended Complaint, ¶ 105-107. As was noted, if

EXTRAhelp ^hrere due to receive revenue from clients that Belcan retained, EXTPv,help

would have standing to sue. Accordingly, we conclude that EXTRAheip provided sufficient

information to withstand a moticn to dismiss the Fifth Claim for Relief.



36

{¶ 93} The Sixth and Eighth Cfaims for Relief alleged that the employee defendants

misappropriated and converted trade secrets and confidential and proprietary business

information for their own uses. Again, the employee defendants contend that the

information is insufficient to withstand a motion to dismiss, because Sacicsteder disciosed

the "same" information. They also argue that the complaints are deficient because they

fail to compiy with certain standards adopted in the area of trade secrets.

{¶ 94} This argument again illuminates why dismissal on the pleadings is

premature. In this regard, the employee defendants rely on a six-factor test that the

Supreme Court of Ohio adopted for determining whether items meet the statutory definition

of trade secrets contained in R.C. 1^^1.01(^}. See State Px rel. ^he Plai^^ Dealer v. ^hi°

Dept. of fns., 80 Ohio St.3d 513, ^^4-^2^, 0^^ f^.E.2d t^61 (1997}.

{!^ 95} R.C. 1 ^31.01(G} defines a trade secret as:

[i]nformation, including the whole or any portion or phase of any scientific or

f^nhr+ir^^l in^f^rm^îv.n r: inn r;rn^^â.cay pr^v^v°c_dure, f^rmuia, patt°crn, cvmpiiativn,

C...:Si:EI!lVÊ !!!lVIE!!C.'!°.Ll!!, 4-ê^!^!!i ^' .

program, device, method, technique, or improvement, or any business information

or plans, financiaf information, or fisting of names, addresses, or teiephone

numbers, that satisfies both of the following:

(1) It derives independent economic value, actual or potential, from not being

gerêral^y kncY^rn ±o, and npt hPing readily ascertainable by proper means by, other

persons who can obtain economic value from its disclosure or use.

(2) Et is the subject of efforts that are reasonable under the circumstances to

maintain its secrecy.

{¶ 96} fn The îairr Dealer, the Supreme Court adopted and applied the fo!lowing



37

s'ix-factor test for deciding if trade. secret claims meet the statutory definition;

(1) The extent to which the information is known outside the business; (2) the

extent to which it is known to those inside the business, i.e., by the employees; (3)

the precautions taken by the holder of the trade secret to guard thc secr^cy of th^

information; (4) the savings effected and the value to the holder in having the

information as against competitors; (5) the amount of effort or money expended in

obtaining and developing the information; and (6) the amount of time and expense

it would take for others to acquire and dup(icate the information. 80 Ohio St.3d at

524-525.

{^ 97^. !n the cas° before us; the employee defendants contend that the complaints

are insufficient because they faii to contain factual a66egations pertaining to each of trese

rriteria, Anain, wP disagree. (f cnmpl.aints Were requirPd to set out factual criterla that

meet various "tests" adopted by courts to review evidence, Qhio would return to

^^ in,hersn ►.'?",? pleading reqiuirernents thatlêre d^scarded many years ago. The n^^m^ber of

such lists of factors or "tests" could be virtually endless. ( n this regard, we note that unfike

the present case, The Plain C?ealAr in^ô!ved a petition for writ of mandamus and an

evidentiary review, including an in camera inspection of documents claimed to be trade

secrets. Id. at 517. Thus, the court had an opportunity to decide the matter on the merits,

not the pieadings.

{¶ 98} For the reasons stated, the Sixth and Eighth Claims for Relief are sufficient

to titiîthstand a motion to dismiss, and the trial coi ^rt erred in dismissing these claims. As

before, we state no opinion on the merits of the claims.

{¶ 99} The only matter remaining is the Pvinth Claim far Refief, which raises claims



^ 38

of contractua! and business interference. The trial court dismissed this claim against the

employee defendants, because the complaint failed to demand judgment against the

employee defendants. EXTRAhelp does not address this point in its brief, but simply

points out that th e claim for refief states a claim against ârry, BarryStaf f, and the

employee defendants.

{¶ 100} The triaf court was correct in concluding that EXTRAhelp did not ask for

judgment against the employee defendants on this particular claim, but neither the triaf

court nor the parties offered legal analysis or citations to support dismissal on this ground.

{¶ 101} Civ. R. 54(C) states that "[e]xcept as to a party against whom a judgment

is ei 6tered by defa,^:l±y e 6,enr^ f9na! jûd^mer.t shall g.rant the relief to which the party in whoê

I ' rendered is entitied, even if the party has not demanded the reiief in thefavor it ^s

nlaar{innc " Thi ^c fnr rrxamrn,fa^ a plaintiff hac F,^gen allnwr^rl tn recnvPr r_lar,r?agPC nr nthPr

^,...,uu., .^...

forms of recovery that either exceed the amount requested in the complaint, or were not

raniâcfan af aii. =eP ^.^,. ,^frr,nlÎ v, Fitlrvnr^C^, f l^:., Rth î^t_ C:o^y^f-ic^,g^ ^'vn. 84i 37,

2004-Ohio-7031, ¶ 12-13, and State ex rel. Rothal v. Smith, 151 Ohio App.3d 289, 307,

2002-Ghio-7328, 783 ^^.E.2d 1001, ^ 80-82 (9th Qist.) (noting that under Civ. R. 54(C), "the

tria( court may render whatever judgment is equitable considering the issues raised in the

pleadings or at trial.") Consequently, failure to specifically request judgment against the

^^ employee defendants was not a proper basis for disr'^'issing the Ninth Claim of Relief.

{¶' 102} We have already concluded that the complaints adequately state a claim

for business and/or contractua! interference against the Barry defendants, ar.d the same

reasoning would apply here. The employee defendants contend in their briefs that

EXTRAhelp fai{ed to allege numerous facts, including the names of customers w ho were


SECOND APPELLATE DISTRICT^

39

solicited, the nature of the customers' relationships with EXTRAhelp, or facts regarding the

defendants' knowledge of these customers. In addition, the defendants maintain that

EXTRAhelp should have attached its contracts with customers to the complaint.

{¶ 1^3} As noted, EXTRAhe1p did alfege sufficient facts to suppori a business

inte^ferenee claim. And, contrary to the employee defendants' assertions, EXTRAhelp did

allege that its largest customer was lost to due to interference

Claim states a claim for refief against the employee defendants

IV. Conclusion

Accordingly, the Ninth

{¶ 104} The judgment of the trial court will be affirmed in part and reversed in part.

Tha diSrr;i`^cal nf Sa^k^êder's and E.XTRAhelp's First; Second; and Third Claims for Relief

is reversed; the dismissal of the Four'th and Seventh Claims for Relief is affirmed; the

dismissal of the Sixth and Eighth Claim^ for Relief is affirmed, ..îth respect to the claims

of Sacksteder, but reversed as to the claims of EXTRAhelp; the dismissal of the Ninth

Claim foi' Relief is ^ffirt'iêd v^rith resp^rfi tn tha cfaimc nf âr:ffgtev.ier,anr^l i^ reîe,rcgd :r'atn

respect to the claims of EXTRAhelp against Barry, BarryStaff, Buening, Ambos, and

Brumbaugh. This case v,'ill be remanded for further procsedings.

FAIN, J., concurring:

{11 ;► ua} f co^^cur in^ Judge Frcelich's opinion forthe court. I write separately merely

to cfarify my view of the rules of pleading.

{^j 1^6} The reguirements for pleading a cause of action in an Chio ccurt are set^

forth in Civ.R. 8. The Supreme Court of Ohio is the uitimate authority on the proper

THE COURT OF APPEALS OF OHIO AppENDIXPAGEN0.39


40

construction of Ohio law, not the Supreme Court of the United States.' Therefore, the

decisions of the Supreme Court of the United States in the BeUAtlantic Corp. v. Twom6ly I

and Ashcroft v. Iqbal cases, cited in Judge Froe(ich's opinion, cannot override the rules of

pleading estabfished by the C)hio Rufes of Civil Procedure, as interpreted by the Supreme

Court of Ohio. The Twombly {ine of cases has no appiication to the rules of pleading in

Ohio courts unless and until the Supreme Court of Ohio incorporates the principles set

forth in those cases in its interpretation of the Ohio rules of pleading.

HALL, J., concurs with Judge Froeiich's opinion and with Judge Fain's concurring opinion.

'Of course, if federal faw confiicts with Ohio faw, federal {aw prevails by virtueof the Supremacy C{ause in f^rticie VI of the United States Constitution. in the casebefore us, there is no conffict; federal rules of pleading govern the pleading ofcauses of action in federal court, and Ohio ruies ofi pleadi^ig govern the pleading of

causes of action in Ohio courts.

THE COUI2T OF APPEALS OF OH10APPENDIXPAGEN0.40


41

Copies mailed to:

John J. MuellerNeil F. FreundLindsay M. JohnsonJohn F. HavilandCarla J. MormanQuintin F. LindsmithVictoria A. FlinnHon. Michael L. Tucker

THE COURT OF APPEALS OF OHIOSECOND APPELLATE DISTRICT


u., .^.

^

1012

IN 1"HE COtJRT C,^ ^s

MON lPAUL L. SACKSTEDER, et a

Pfaintiffs-Appella nts

v.

JEFFREY 5. SENNEY, et al.

Defendants-Appe(lees

^_^^^^^^^^F,_E^..j^^^r^^

i R

H^ ^; qP AL ^^C?^MONTGOMERY COUNTY, OHt4 _

Or (:^'i^1RT^ ,f g ^^• aHlt7

: C.A. CASE N{). 24993

: T.C. NQ. 10CV1913

: Fif1lAL ENTRY

^ Pursuant ia the apinian af this couri rendered on the^^^n day af ^^^^^mp^^2vi2,

the judgment of the trial caurt is a^rmed in part, reversed in part, and the matter is

remanded far further praceedings consistent with this caurt's opinicrn.

Casts to be paid as fallaws: 50°lo by plaintiffs-appeflants; 50% by defendants-

appellees.

°ur^::a,^,c ^G ^vf'itî App.s?. ^n,e J^ it Sc ^nrehy nrôroÎ tF^^t thev Îer'{S af thF,+ Af1^n^^^menJ^ 1\ VV f-S t ^ V V 1 V V I --

County Caurt af Appeals shalf immediately serve notice of thisjudgmer^t upan all parties and

make a nate in the docket of the mailing. ^,

,

M! KE FAI N, J udge

JEF . FRf3 iCH, Judge^

MiCH EL T. FÂLL, Judge

THF COURT OF APPEALS OF OI^t10 APPENDIXPAGEN0.42

SECOND APPELLATH DISTRICT

^ . ^II "

Copies maifed ta:

2

3ohn J. Mueller .632 Vine StreetSuite 8Q0Cincinnati, Ohio 45202

Neil F. FreundL.indsay M. JohnsonFifth Third Center1 South Main Street, Suite 1800Qa.yton, ^hia 45402

John F. HavilandCarEa J. Morman400 PNC Center6 North Main Street®a^lton, ^3hEt} 4J^^^

Quinton F. LindsrnithVictoria A. Flinn^ 00 South Third StreeiColumbus, Qhio 43215

Hon. Michael L, TuckerCur^mon PEeas Co^art41 N. Perry StreetQayton, tJhio 45422

E

_ _ _ _

THE COURT OF APPEALS OF OH10 APPENDIXPAGEN0.43SECOND APPELLATE DISTRICT

pq.h': 1737^ 222-j.^769 gsjohn f. haviland carla j. morman bieser, greer & landis, llp 400...

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