IN THE SUPREME COURT OF OHIO

ROBERT BERRY, et al., ®^^ ^5 0-" 7Appellees, ) On Appeal from the Cuyahoga County

vs.Court of Appeals, Eighth Appellate District

Court of AppealsJAVITCH, BLOCK & RATHBONE, L.L.P., ) Case No. CA 08 091723

Appellant.

MEMORANDUM IN SUPPORT OF JURISDICTIONOF APPELLANT JAVITCH, BLOCK & RATHBONE, L.L.P.

Roger M. Synenberg, Esq. (0032517) (COUNSEL OF RECORD)Dominic J. Coletta, Esq. (0078082)Clare C. Christie, Esq. (0081134)SYNENBERG & ASSOCIATES, L.L.C.55 Public Square, Suite 1200Cleveland, Ohio 44113Phone (216) 622-2727Fax (216) 622-2707Email office@synenberg.com

COUNSEL FOR APPELLANT, JAVITCH, BLOCK & RATHBONE, L.L.P.

Christopher M. DeVito, Esq. (0047118) (COUNSEL OF RECORD)Alexander J. Kipp, Esq. (0081655)MORGANSTERN, MACADAMS & DEVITO Co., L.P.A.623 West Saint Clair Avenue

Cleveland, Ohio 44113Phone (216) 621-4244Fax (216) 621-2951Email cdevito @.nimd-law.com

and

Paul Grieco, Esq. (0064729)LANDSKRONER, GRIECO, MADDEN, LTD.

1360 West 9'1' Street, Suite 200Cleveland, Ohio 44113

PLDDM..!" J U %00J

CI_FRK OF COURTSUPREiVit L;OURT OF OHIO

COUNSEL FOR APPELLEES, ROBERT AND DIANE BERRY

TABLE OF CONTENTS

EXPLANATION OF WHY THIS CASE IS A CASE OF PUBLIC OR GREATGENERAL INTEREST ............................... .......................................................1

STATEMENT OF THE CASE AND FACTS ................................................................................3

ARGUMENT IN SUPPORT OF PROPOSITIONS OF LAW ..........................................7

Proposition of Law No. I: Where a tort claim is released by execution of asettlement agreement and consent judgment entry and the releasor desires torecover more than anyone has paid or agreed to pay for the release, the releasor ofthat tort claim may not pursue a separate action for fraud in the inducement of therelease, but must seek relief from the consent judgment and rescind the settlementagreement ......................... ..................... ...............................................7

CONCLUSION .... ....... ... .. ......... ................... .. ............................... .................12

PROOF OF SERVICE...................................................................................... 12

APPENDIX Annx. Page

Opinion of the Cuyahoga County Court of Appeals(July 6, 2009) . . .. . . . .. . . .. . .. .... .. . .. . .. . . . . .. . .. .... . . . .. . .. . . . . .. . .. . . . .... .. . .. . . . .... . . . .. . .. ....1

i

EXPLANATION OF WHY THIS CASE IS A CASE OFPUBLIC OR GREAT GENERAL INTEREST

This cause presents a critical issue affecting the settlement of every tort claim in Ohio:

whether the releasor of a tort claim may attack the validity of a release allegedly induced by

fraud by pursuing a new lawsuit for fraud without tendering back the consideration received for

the release and seeking to enforce the tort claim. In this case, the court of appeals concluded that

the releasor of a legal malpractice claim may choose to bring a separate action for fraud in the

inducement of a settlement agreement and consent judgment entry, therefore, allowing a tort

claim releasor to retain the benefit of his act of compromise while simultaneously attacking the

validity of that compromise.

The decision of the court of appeals threatens the well-settled policy of law favoring the

prevention of litigation by the compromise and settlement of controversies. Haller v. Borror

Corp. (1990), 50 Ohio St.3d 10, 14, 552 N.E.2d 207 (citing LVhite v. Brocaw (1863), 14 Ohio St.

339, 346). By its ruling, the court of appeals disregards the long-standing precedent of this Court

that the releasor of a tort claim ought not be allowed to retain the benefit of his act of

compromise and at the same time attack its validity when he understood the nature and

consequence of his act, regardless of the basic nature of the inducement allegedly employed. Id.,

50 Ohio St.3d at 14, 552 N.E.2d 207 (citing Shallenberger v. Motorists Mut. Ins. Co. (1958), 167

Ohio St. 494, 150 N.E.2d 295). Moreover, the court of appeals' decision disregards the principle

of finality in litigation, establishing a rule that a party may ignore a validly entered consent

judgment of a tort claim and pursue a new, separate cause of action. These unprecedented

attacks upon well-settled policies favoring settlement and finality of judgments offend the

precedent of this Court and urgently need correction.

1

The implications of the decision of the court of appeals affect virtually every court and

thousands of litigants in Ohio. The public's interest in the efficient and effective resolution of

tort claims by Ohio courts is profoundly affected by a finding that both allows a tort claim

releasor to pursue a new, separate lawsuit for fraud against a releasee while retaining the

consideration paid for the release. Similarly, the public's interest is affected if a party to a

consent judgment entry need only assert a new, independent lawsuit rather than demonstrate that

the ends of justice will be better served by setting aside the judgment. Such a rule sabotages the

fundamental bases of the policy favoring settlement and compromise of controversies: it creates

litigation, it exponentially increases litigation costs, and it will flood the already overcrowded

court dockets with new lawsuits.

Apart from the foregoing, which make this case one of public interest, the decision of the

court of appeals has great general significance. According to the Composite Report for Courts of

Common Pleas statewide in the 2007 Ohio Courts Sununary issued by this Court, nearly twenty-

one thousand new tort cases were filed in Ohio common pleas courts that year. Moreover, over

seven thousand tort cases were reported as having been settled or dismissed prior to trial. The

decision of the court of appeals sets a precedent that opens to challenge every settlement and

consent judgment of tort claims in Ohio. This rale has the potential practical effect of increasing

the tort litigation in Ohio by at least one-third by creating the right for a new, independent cause

of action for fraud arising from the settlement or consent judgment of each tort claim.

To uphold the well-settled policy of law favoring prevention of litigation by compromise

and settlement of controversies, and the finality of judgments long defended by Ohio courts, this

Court must grant jurisdiction to hear this case and review the erroneous and dangerous decision

of the court of appeals.

2

STATEMENT OF THE CASE AND FACTS

This case arises from a claim by appellees, Robert and Diane Berry (hereinafter

collectively the "Berrys") that appellant, Javitch, Block & Rathbone, L.L.P. (hereinafter "JBR")

fraudulently and negligently provided false and/or incomplete responses to an Interrogatory

during the course of an earlier legal malpractice lawsuit.

hi June 2000, the Berrys filed a legal malpractice lawsuit against Javitch, Block, Eisen &

Rathbone, P.L.L., now known as JBR, in the Cuyahoga County Court of Common. Upon

receiving service of summons, JBR inunediately reported the lawsuit to its legal malpractice

insurance agent, who in turn reported the claim to the managing agent for the carrier whose

policy was then in effect, Legion Insurance Company (hereinafter "Legion"). Legion initially

provided an attorney to defend against the Benys' claim under a reservation of rights.

During the pendency of that malpractice action, the Berrys served written discovery

requests, including several interrogatories. One of the Berrys' Interrogatories requested "the

name of insurer, type of policy/policies, policy number/numbers, and limits of coverage of each

and every insurance policy that may cover your alleged liability in this action, including

umbrella coverage" (hereinafter "subject Interrogatory"). JBR responded to the subject

Interrogatory on or about March 13, 2001, stating "Legion Insurance Company/Claims made

policy 10-12-99 through 10-12-00/Policy No. PL 106-572-42/Limits: $1 million per claim/$3

million aggregate." However, JBR did not disclose an earlier policy from Clarendon National

Insurance Company (hereinafter "Clarendon") in effect from October 12, 1998 to October 12,

1999 as, by its express language, the time for reporting a claim expired October 22, 1999. This

policy was not disclosed as it was a claims-made policy, and no claim was made during the

effective dates of the policy. As the time for reporting claims to trigger the Clarendon policy had

3

long since expired, even if JBR had identified the policy in its answers to the subject

interrogatory and Berrys' counsel inunediately seized upon that information, Clarendon would

have owed neither coverage nor an indemnity obligation to JBR or Berrys. Thus, by the time the

Berrys initiated their legal malpractice lawsuit in June 2000, the Clarendon policy was no longer

an "insurance policy that may cover" JBR's alleged malpractice liability and Legion was the

only policy that "may have covered" JBR's alleged malpractice liability.

Subsequent to JBR's response to the subject Interrogatory, Legion informed JBR that

there was no coverage for the Berrys' malpractice claim and that it would be withdrawing the

defense. JBR supplemented its March 13, 2001 response to the subject Interrogatory, stating:

"Since providing our original answer to this interrogatory, we have been advised by

representatives of Legion Insurance Company that there is no coverage for plaintiffs' claim."

After attempts to prompt reconsideration of the coverage denial failed, JBR retained an

attorney to pursue litigation against the insurance agent, managing agent and carrier. This action

was taken as JBR believed that the coverage denial was inappropriate and in bad faith.

Contemporaneously, JBR filed a Motion to Stay or Continue Trial and Request for a Pretrial

Hearing in the malpractice lawsuit so that it could obtain a declaration concerning coverage

before settling or proceeding in the malpractice lawsuit. Attached to JBR's Motion was a copy

of the correspondence from Legion denying coverage, specifically identifying the basis for the

denial, and articulating Legion's belief that JBR was on notice of a claim prior to the effective

date of its policy. The Berrys' received and opposed this request and the Motion to Stay or

Continue Trial was denied.

As JBR's attempt to resolve the coverage issue before proceeding in the malpractice

action failed, the parties agreed to resolve the malpractice action in lieu of continued litigation.

4

The Berrys knowingly entered into a settlement agreement as they believed it to be in their best

interest due to expediency. Although JBR maintains that Berrys' claims of malpractice had no

merit, it likewise agreed that settlement made economic sense. The parties agreed to a unique

settlement pursuant to which JBR consented to judgment in the amount of $195,000, $65,000 of

which was to be paid by JBR upfront. Following execution of the agreement, JBR, through its

attorney, was to attempt to persuade Legion to safisfy the judgment for ninety days. Thereafter,

the Berrys were permitted to file a supplemental petition at their own costs in an attempt to

collect the balance of the consent judgment amount from Legion. By the express terms of the

agreement, the parties acknowledged Legion's denial of coverage and refusal to defend JBR in

the malpractice action. The settlement agreement also states:

The parties will enter into a mutual settlement and release of any and all claims,except that Plaintiffs will not release Javitch Block with respect to the amount ofthe consent judgment, until such time as that judgment is satisfied by LegionInsurance Company or the claim against Legion Insurance Company for thatjudgment is otherwise resolved.*+*

It is expressly understood that under no circumstances will Javitch, Block payPlaintiffs under this agreement or under any judgment on the subject claim morethan a total of $65, 000...

(emphasis added). The parties executed the agreement on December 21, 2001 and, when JBR

was unable to persuade Legion to pay the balance of the judgment, the Consent Judgment decree

was executed and filed on April 1, 2002.

JBR pursued litigation against its insurance agent, Legion's managing agent and Legion.

Berrys similarly pursued Legion in a supplemental petition, and later amended their

supplemental petition to include claims against Clarendon. When JBR's claims against the

adjusting company and Legion were dismissed upon summary judgment, JBR appealed. The

appellate court determined that Legion owed no duty to defend as JBR was found to be aware

5

"of a potential legal malpractice claim prior to the effective date of the Legion policy." Javitch,

BlockEisen & Rathbone, P.L.L. v. Target Capital Partners, Inc. (June 29, 2006), Cuyahoga App.

No. 86926, unreported, 2006 WL 1781095. The Berrys similarly were unsuccessful in their

supplemental petitions and ultimately dismissed their claims against both Legion and Clarendon.

The Berrys then commenced this action in the Cuyahoga County Court of Common

Pleas, alleging fraudulent misrepresentation, fraudulent concealment, gross negligent

misrepresentation, and gross negligent concealment against JBR. As a basis for these claims, the

Berrys alleged that, during the course of the malpractice litigation, JBR twice responded to an

Interrogatory regarding insurance that may have covered the liability alleged in that action

falsely and/or incompletely. Taken together, the thrust of the Berrys' claims was that JBR's

Interrogatory responses were knowingly false and/or incomplete, made intentionally to mislead

the Berrys, and that the Berrys' ultimately relied upon the responses to their detriment. The

Berrys claim that JBR failed to identify the Clarendon policy - a policy it held before the Legion

policy period - in response to the subject Interrogatory.

Upon the completion of discovery, JBR moved for summary judgment. In its motion,

JBR asserted that Berrys' claims were barred by the one-year statute of limitations applicable to

Ohio Civ. R. 60(B)(3), that Berrys' could not elect to affirm the settlement agreement and

consent judgment and independently sue for fraud, and that the Berrys' could not establish the

requisite elements of their claims. The court of common pleas granted JBR's motion for

summary judgment, finding "[t]here are no remaining genuine issues of material fact and [JBR

is] entitled to judgment as a matter of law." The Berrys appealed the decision to the Cuyahoga

County Court of Appeals. The court of appeals reversed the judgment, finding that: (1) Ohio

Civ. R. 60(B)(3) does not apply because the Berrys could and did choose to bring a separate

6

action for fraud without rescinding the settlement agreement and seeking relief from the consent

judgment entry; and (2) a material issue of fact remains as to whether JBR purposely withheld

the existence of the Clarendon policy.

The court of appeals erred in ruling that the Berrys could elect to bring a separate action

for fraud without seeking relief from the consent judgment entry and rescinding the settlement

agreement. In support of its position on this issue, the appellant presents the following argument.

ARGUMENT IN SUPPORT OF PROPOSITIONS OF LAW

Proposition of Law I: Where a tort claim is released by execution of a

settlement agreement and consent judgment entry and the releasor desires to

recover more than anyone has paid or agreed to pay for the release, the

releasor of that tort claim may not pursue a separate action for fraud in the

inducement of the release, but must seek relief from the consent judgment

and rescind the settlement agreement.

This Court has long prohibited separate actions for fraud in the inducement of settlement

of a tort claim allowed by the court of appeals here. "A releasor may not attack the validity of a

release for fraud in the inducement unless he first tenders back the consideration he received for

making the release." Haller, 50 Ohio St.3d at syllabus paragraph two. This Court outlined the

reasoning for this well-settled principle of Ohio law in Shallenberger v. Motorists Mutual Ins.

Co., (1958), 167 Ohio St. 494, 150 N.E.2d 295:

There is usually no analogy between the situation of one induced by fraud torelease a tort claim and one induced by fraud to buy something. Obviously, in acase like the instant case, the releasor of a tort claim buys nothing, although hemay receive something, usually money or its equivalent, for what he relinquishes.He does give up something (i.e., his tort claim), as a seller gives up what he sells.Thus, on cursory consideration, the release of a tort claim might appear to beanalogous to a sale of something. However, where there has been a sale ofsomething, possession of that something has usually been relinquished by the

7

seller. Even where use of the sold something has not made it less valuable, theseller will usually want money for it as he did when he made the sale. If he takesit back, he has to sell it to get that money. Each change of possession of thatsomething will ordinarily involve expense or inconvenience. On the other hand,the releasor has nothing to repossess on rescission of the release; and suchrescission revests him with the same claim for money that he had before, notsomething he must resell to get that money. In reality, the releasor does not sellanything even of an intangible nature. In effect, the releasor has merely agreedfor a consideration not to enforce his tort claim. To allow the releasor to recovermore than anyone agreed to give for his tort claim, because the releasor wasinduced by fraud...is to permit the releasor in effect to enforce part of the tortclaim that he agreed for a consideration not to enforce...If he desires to do that,he must set aside, not affirm, his agreement not to sue...

Id. at 501 (citing Picklesimer v. Baltimore & O. R. Co. (1949), 151 Ohio St. 1) (emphasis added).

Two well-settled policies of law require this determination.

First, the law favors the prevention of litigation by the compromise and settlement of

controversies. Haller, 50 Ohio St.3d at 14 (citing White v. Brocaw (1863), 14 Ohio St. 339,

346); Krischbaum v. Dillon (1991), 58 Ohio St.3d 58, 69, 567 N.E.2d 1291 (citing State ex rel.

Wright v. Weyandt (1977), 50 Ohio St.2d 194, 363 N.E.2d 1387, syllabus); Board of Commrs. of

Columbiana Cty. v. Samuelson (1986), 24 Ohio St.3d 62, 63, 493 N.E.2d 245. Indeed, "[g]iven

the explosion of litigation so characteristic of the modem era, it is essential that the settlement of

litigation be facilitated, not impeded." Krischbaum, 58 Ohio St.3d at 69.

Second, a releasor ought not be allowed to retain the benefit of his act of compromise and

at the same time attack its validity when he understood the nature and consequence of his act,

regardless of the basic nature of the inducement employed. Haller, 50 Ohio St.3d at 14 (citing

Shallenberger, 167 Ohio St. 494). In that event, the consideration should first be returned so that

the parties may be placed in the positions they enjoyed prior to the practice of the fraud alleged.

Id.

8

The court of appeals held that, despite the clear precedent of this Court to the contrary,

the releasor of a legal malpractice claim could choose to bring a separate action for fraud without

rescinding the settlement agreement and seeking relief from the consent judgment entry. This

holding ignores the black letter law regarding claims for fraud in the inducement of tort claims

and improperly opens settlements and consent judgments in tort cases to collateral attack. Such

an opinion by the court of appeals violates the time-honored principle of stare decisis, recognized

by this Court as "the bedrock of the American judicial system." Westfield Ins. Co. v. Galatis

(2003), 100 Ohio St.3d 216, 217. Indeed:

The doctrine of stare decisis is designed to provide continuity and predictability inour legal system. We adhere to stare decisis as a means of thwarting the arbitraryadministration of justice as well as providing a clear rule of the law by which thecitizenry can organize their affairs ... Those affected by the law come to rely uponits consistency ... Accordingly, stare decisis is long revered.

Westfield Ins. Co. v. Galatis (2003), 100 Ohio St.3d 216, 226 (internal citations omitted).

Moreover, it is well established that courts have sought for centuries to protect the

finality of judgments so that there might be an end to litigation. Ohio Civ. R. 60(B), Staff Notes

at ¶ 2. Relief from a final judgment should not be granted unless the party seeking such relief

makes at least a prima facie showing that the ends of justice will be better served by setting the

judgment aside. Rose Chevrolet, Inc. v. Adams (1988), 36 Ohio St.3d 17, 21, 520 N.E.2d 564.

As the puipose of a consent judgment is to resolve a dispute without further litigation, this

principle applies equally to judgments entered by consent of the parties:

[A]s a general rule, a consent judgment operates as res judicata with the sameforce given to a judgment entered on the merits in a fully adversarialproceeding ... Implicit in the rule is the recognition that a judgment entered byconsent, although predicated upon an agreement between the parties, is anadjudication as effective as if the merits had been litigated and remains, therefore,just as enforceable as any other validly entered judgment.

9

Gilbraith v. Hixson (1987), 32 Ohio St.3d 127, 129, 512 N.E.2d 956 (citing Sponseller v.

Sponseller (1924), 110 Ohio St. 395, 399, 144 N.E. 48.

Seelcing relief from judgment pursuant to Ohio Civ. R. 60(B) is the method available for

avoiding a voidable settlement agreement and consent judgment entry allegedly induced by

fraud. See Haller, 50 Ohio St.3d at 14. Ohio Civ. R. 60(B) states, in pertinent part:

On motion and upon such terms as are just, the court may relieve a party or hislegal representative from a final judgment, order or proceeding for the followingreasons: (1) mistake, inadvertence, surprise or excusable neglect; (2) newlydiscovered evidence which by due diligence could not have been discovered intime to move for a new trial under Rule 59(B); (3) fraud (whether heretoforedenominated intrinsic or extrinsic), misrepresentation or other misconduct of anadverse party; (4) the judgment has been satisfied, released or discharged, or aprior judgment upon which it is based has been reversed or otherwise vacated, orit is no longer equitable that the judgment should have prospective application; or(5) any other reason justifying relief from the judgment. The motion shall bemade within a reasonable time, and for reasons (1), (2) and (3) not more than oneyear after the judgment, order or proceeding was entered or taken. A motionunder this subdivision (B) does not affect the finality of a judgment or suspend itsoperation. The procedure for obtaining any relief from a judgment shall be bymotion as prescribed in these rules.

(emphasis added). While this Court liberally construes this rule with a view toward effecting just

results, it has simultaneously recognized the competing principle that litigation must be brought

to an end. Rose Chevrolet, Inc., 36 Ohio St.3d at 21. Thus, to be successful, this Court has

required parties seeking relief from final judgments to demonstrate three requirements: (1) that

the party has a meritorious claim or defense; (2) that the party is entitled to relief under one of

the grounds stated in Civ. R. 60(B)(1) through (5); and (3) that the motion was timely presented.

GTE Automatic Elec. v. ARC Industries, Inc. (1976), 47 Ohio St.2d 146, 351 N.E.2d 113,

paragraph two of syllabus.

Just as with the long-standing prohibition against a releasor's election of remedies when

claiming the fraudulent inducement of a settlement agreement, the court of appeals' decision

10

ignores the well-settled proposition that the only procedure for obtaining relief from a consent

judgment entry shall be by motion as prescribed by Ohio Civ. R. 60(B). This holding ignores the

evident meaning of Ohio Civ. R. 60(B), as well as this Court's requirement that, due to the

principle that litigation must be brought to an end, relief from a final judgment should not be

granted unless the party seeking relief makes a prima facie showing that justice will be better

served by setting the judgment aside. Rather, the court of appeals establishes an unprecedented

right of releasors to retain the benefit of a consent judgment entered in final settlement of a tort

claim while pursuing a separate action against the releasee for allegedly inducing that judgment

by fraud. The court of appeal's decision permits the Berrys, who never returned the $65,000

consideration paid for release of their tort claim nor attempted to demonstrate their entitlement to

relief from the parties' consent judgment, to pursue an independent action for fraud in the

inducement. Moreover, it creates a right of action on behalf of all tort claim releasors that opens

all tort claim settlements in Ohio to attack.

This Court must grant jurisdiction to hear this case and review the erroneous and

dangerous decision of the court of appeals that has abrogated the well-settled policy of law

favoring prevention of litigation by compromise and settlement of controversies, and the finality

of judgments long defended by Ohio courts.

11

CONCLUSION

For the discussed above, this case involves matters or public and great general interest.

The appellant requests that this Court accept jurisdiction in this case so that the important issues

presented will be reviewed on the merits.

Respectfally Submitted,

Roger M. Synenberg, Counsel of Record

COUNSEL FOR APPELLANT,JAVITCH, BLOCK & RATHBONE, L.L.P.

Certificate of Service

I certify that a copy of this Memorandum in Support of Jurisdiction was sent by ordinaryU.S. mail to counsel for appellees, Christopher M. DeVito, Esq. and Alexander J. Kipp, Esq.,Morganstern, MacAdams & DeVito Co., L.P.A., 623 West Saint Clair Avenue, Cleveland, Ohio44113, and Paul Grieco, Esq., Landskroner, Grieco, Madden Ltd., 1360 West 9th Street, Suite200, Cleveland, Ohio 44113, on Thursday, August 20, 20

COUNSEL FOR APPELLANT,JAVITCH, BLOCK & RATHBONE, L.L.P.

12

JUL 6 - 2009

Tmcrt af Appettl ,s uf (94taEIGHTH APPELLATE DISTRICT

COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINIONNo. 91723

ROBERT BERRY, ET AL.

^E- E

^x. 3

TAXEDpw m aPLAINTIFFS-APPELLANTS

vs.

JAVITCH, BLOCK & RATHBONE, L.L.P.

DEFENDANT-APPELLEE

JUDGMENT:REVERSED AND REMANDED

Civil Appeal from theCuyahoga County Court of Common Pleas

Case No. CV-601524

BEFORE: Kilbane, J., Gallagher, P.J., and Jones, J.

RELEASED: June 25, 2009

JOURNALIZED: JUL 6 - 2009

CVO660124 58452060

f INIVNIU^laONIINI^^IBNnllllfllil^W38635 R60356

-1-

ATTORNEYS FOR APPELLANTS

Paul GriecoLandskroner, Grieco, Madden, Ltd.1360 West 9th StreetSuite 200Cleveland, OH 44113

Christopher M. DeVitoMorganstern, MacAdams & DeVito623 West St. Clair AvenueCleveland, OH 44113-1204

ATTORNEY FOR APPELLEE

Roger M. SynenbergSynenberg & Associates, LLC55 Public SquareSuite 1200Cleveland, OH 44113

RECEIVED FOR FILING

JUL 13 aA99eRSCaERALD E.

By. Deputy

FFII.ED AND JOURNALIZEDPER APP. g. 22(E)

JUL 6 - 2009GERALD E UERST

CLERK OF C RT ^APPEALS

BY DEP.

CA6SD'9177358188430

AN^IOUNCI;MEN i OF DECISION

pEBAPP. RR ECEIV(EAND26(A)

JUN 2 5 2^

N.B. This entry is an announcement of the court's decision. See App.R. 22(B) and26(A); Loc.App.R. 22. This decision will be journalized and will become the judgmentand order of the court pursuant to App.R. 22(C) unless a motion for reconsiderationwith supporting brief, per App.R. 26(A), is filed within ten (10) days of theannouncement of the court's decision. The time period for review by the SupremeCourt of Ohio shall begin to run upon the journalization of this court's announcementof decision by the clerk per App.R. 22(C). See, also, S.Ct. Prac.R. II, Section 2(A)(1).

T 0LFRK

i81:0685 f60357

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MARY EILEEN KILBANE, J.:

Plaintiffs-appellants, Robert and Diane Berry ("the Berrys"), appeal the

decision of the Cuyahoga County Court of Common Pleas granting summary

judgment in favor of defendant-appellee, Javitch, Block, & Rathbone, L.L.P.

("Javitch"). After a thorough review of the record and pertinent law, we conclude

there is an issue of material fact, therefore, we reverse.

The Berrys commenced an action for fraudulent and gross negligent

misrepresentation, as well as fraudulent and gross negligent concealment

against Javitch. In an earlier suit, the Berrys alleged that Javitch committed

fraud when it failed to disclose the fact that it was insured for legal malpractice

by Clarendon National Insurance Company ("Clarendon") from October 1998

through October 1999. In June 2000, the Berrys filed a legal malpractice action

against Javitch. In an interrogatory, Javitch disclosed only its policy with

Legion Insurance Company ("Legion"), which did not cover the time period when

the Berrys' claim occurred. Javitch contacted Clarendon in October 2001, but

did not list this insurance policy in its discovery responses.

The Berrys and Javitch entered into a settlement agreement wherein

Javitch consented to judgment in the amount of $195,000, $65,000 of which was

to be paid by Javitch up front. Following the execution of the agreement,

Javitch, through its attorney, was to attempt to persuade Legion to satisfy the

A86 8 500358

-2-

judgment. After 90 days, if Ja"vitch was not successful, the Berrys were

permitted to attempt to collect the balance from Legion. In the agreement, both

parties acknowledged that Legion was denying coverage. Further, the Berrys

agreed that under no circumstances would Javitch pay the Berrys more than

$65,000. The Berrys were bound to release any and all claims when one of two

conditions occurred: (1) Legion satisfied the consent judgment, or (2) the claim

against Legion for that consent judgment was otherwise resolved. The

agreement was executed on December 21,2001. Javitch was unable to persuade

Legion to pay the balance of the judgment, and the consent decree was executed

and filed on April 1, 2002.

Javitch pursued litigation against Legion, which was ultimately dismissed

on summary judgment in favor of Legion. The Berrys were also unsuccessful in

pursuing Legion.

In September 2006, the Berrys filed suit again, claiming that they were

fraudulently induced into settling the malpractice case, arguing that they would

not have settled for $195,000 had they known that Javitch had been insured by

Clarendon.

Javitch filed a motion for summary judgment, which was granted without

opinion. This appeal followed. The Berrys assert one assignment of error for our

review, which states the following:

'^1.:0685 00359

-3-

"The trial court erred as a matter of law when it grantedJavitch Block's motion for summary judgment because theevidence before it established that the Berrys had viableclaims for fraudulent conduct."

This court reviews a trial court's grant of summary judgment de novo.

Ekstrom v. Cuyahoga Cty. Community College, 150 Ohio App.3d 169,

2002-Ohio-6228. Before summary judgment may be granted, a court must

determine that "(1) no genuine issue as to any material fact remains to be

litigated, (2) the moving party is entitled to judgment as a matter of law, and (3)

it appears from the evidence that reasonable minds can come to but one

conclusion, and viewing the evidence most strongly in favor of the nonmoving

party, that conclusion is adverse to the nonmoving party." State ex rel. Dussell

v. Lakewood Police Dept., 99 Ohio St.3d 299, 300-301, 2003-Ohio-3652, citing

State ex rel. Duganitz v. Ohio Adult Parole Auth., 77 Ohio St.3d 190, 191,

1996-Ohio-326.

The Berrys argue that Civ.R. 60(B)(3) is inapplicable because they did not

seek to rescind the settlement agreement, but rather sought damages for fraud.

Javitch contends that the Berrys failed to timely allege fraud, pursuant to the

one-year statute of limitations set forth in Civ.R. 60(B)(3). The Berrys may

choose to bring a separate action for fraud without moving for relief from the

consent judgment entry. The Berrys first learned of the Clarendon policy in July

,0,0685 ;M0360

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2004, and filed suit in September 2006, well within the four-year statute of

limitations for fraud.

In Frederickson v. Nye (1924), 110 Ohio St. 459, 468-469, the Ohio

Supreme Court stated:

"The law is elementary that where one has suffered byreason of the misrepresentation of another, and has been ledto part with his money in reliance upon said false andfraudulent misrepresentation, he has three independentremedies: First, he may affirm the contract into which hehad been induced to enter and sue for his damages for thefraud perpetrated upon him. Second, he may rescind thecontract itself and bring action to recover back the moneyswhich he has paid. Third, he may bring an action in thenature of the action at bar in a court of equity to obtain arescission of the contract into which he had been induced toenter, with incidental relief. An action for rescission isentirely independent and inconsistent with an action fordamages by reason of the false and fraudulentrepresentations. In the first action the contract is treated asa nullity and the plaintiff asks the intervention of a court ofequity to obtain a nullification of said contract. In theaction for damages for fraudulent representations whichinduced him to enter into the contract, he affirms thecontract and brings his action to recover damages by reasonof such false representations. In the one action he treats thecontract as nonexistent, and in the other action he affirmsthe contract. Each remedy is inconsistent with the other."Id., quoting Clark v. Kirby, 204 App. Div., 447, 451, 198N.Y.Supp., 172, 175. See, also, Colvenbach v. McLaughlin(June 18, 1982), Ashtabula App. No. 1082.

We agree with the appellants that Civ.R. 60(B)(3) does not apply in this

case because the appellants were not looking to rescind the settlement

Vl;8 685 RD®361

-5-

agreement, but rather were suing for damages caused by Javitch's alleged fraud.

Therefore, the limitation in Civ.R. 60(B) requiring relief to be sought within one

year is inapplicable.

Javitch has argued that the settlement agreement executed by the paxties

in 2001 contained a release absolving them from future litigation. However, the

specific language of the settlement agreement reads,

"Plaintiffs will not release Javitch Block with respect to theamount of the consent judgment, until such time as thatjudgment is satisfied by Legion Insurance Company or theclaim against Legion Insurance Company for that judgmentis otherwise resolved. The release wi1l include, inter alia, anacknowledgment that the settlement constitutes a resolutionof disputed clainis." (Settlement Agreement 17.)

Based on this language the Berrys did not release Javitch of future claims.

It is clear that the parties contemplated executing a release in the future when

the judgment had been satisfied. Further, in 2007, a letter from Javitch's

counsel sent to counsel for the Berrys specifically references Javitch's desire to

obtain a release from the Berrys. (Conforming Reply Brief of Appellants, Exhibit

2.)

Finding no merit to Javitch's contention regarding the release, we must

now consider whether the trial court's granting of summary judgment was

appropriate. The Berrys argue that summary judgment should not have been

granted because there is a material issue of fact as to their fraud claims.

'u.0685 50362

-6-

Although the Berrys also alleged negligent misrepresentation and concealment

in their complaint, they have not addressed either in this appeal. Consequently,

we will only address their fraud claims.

To establish a claim of fraudulent misrepresentation andlor concealment

the following elements must be proved: "(a) a representation or, where there is

a duty to disclose, the concealment of a fact (b) which is material to the

transaction at hand, (c) was made falsely, with knowledge of its falsity, or with

such utter disregard and recklessness as to whether it is true or false that

knowledge may be inferred, with the intent of misleading another into relying

upon it, [and] justifiable reliance upon the representation or concealment, with

a resulting injury proximately caused by the reliance." Burr v. Stark Cty. Bd.

of Commrs. (1986), 23 Ohio St.3d 69, 73. (Internal citations omitted.) The

failure to prove any one of these elements is fatal to the plaintiffs case. Conley

v. Willis, Scioto App. No. 00CA2746, 2001-Ohio-2410, at 12. Where the

pleadings and evidence submitted clearly fail to support a claim for fraud,

summary judgment is properly granted. Id. at 13.

The crux of the Berrys' argument lies in Javitch's response to

"Interrogatory No. 4" in the legal malpractice lawsuit that requested "the name

of insurer, type of policy/policies, policy number/numbers, and limits of coverage

of each and every insurance policy that may cover your alleged liability in this

°^iL^685 0^J363

-7-

action, including umbrella coverage." Javitch responded, "Legion Insurance

Company/Claims made policy 10-12-99 through 10-12-00/Policy No. PL 106-572-

42/Limits: $1 million per claim/$3 million aggregate." After Legion denied

coverage, Javitch supplemented its response, explaining that Legion was

denying coverage.

The Berrys insist that Javitch should have disclosed the existence of the

Clarendon policy that_wasin_effectit-the time their malpractice suit arose.

Javitch contends that the Clarendon policy would not cover the situation because

it was a "claims made" policy that required notification prior to the policy's

expiration, which did not happen in this case. Javitch would have had to notify

Clarendon of a possible claim between October 12, 1998 and October 12, 1999.

On August 26,1999, before the expiration of the Clarendon policy, Roetzel

and Andress contacted Javitch on behalf of the Berrys and stated,

"[We] have advised the Berrys that they could prosecute aclaim against your firm ***. We have also advised them thatthey would have a viable claim to recover the fees andexpenses that they have paid your firm to date. We believethese claims would have significant value before a jury,including the potential forthe recovery ofpunitive dama.ges.We respectfully suggest that you put your firm's maZpracticeinsurance carrier on notice." (Appellants' Brief, Exhibit 2).

Despite receiving this communication on behalf of the Berrys, Javitch did

not place Clarendon on notice during the applicable period, and later repeatedly

10685 a-0364

-8-

insisted Legion would cover the claim. Upon receipt of the August 26, 1999

letter, Javitch held a meeting specifically to address the Berrys' claims. Joel

Rathbone, a partner at Javitch, participated in the meeting. (Joel Rathbone,

Deposition at 35.) Javitch did not notify Clarendon, and Legion continued to

deny coverage, asserting the claim occurred before the Legion policy was in effect

and while Clarendon was still providing coverage.

The Berrys allege that Javitch's interrogatory responses were knowingly

false or incomplete, made intentionally to mislead them, and that they relied on

the fraudulent responses to their detriment. The Berrys claim that Javitch

knew or should have known that Clarendon was their legal malpractice

insurance carrier during the applicable time period. They contend that they

never would have settled if they were aware of the Clarendon policy.

Javitch argues that because they did not believe Clarendon would provide

coverage.they did not have a duty to disclose the policy in the interrogatory.

However, the interrogatory submitted to Javitch sought the names of any

coverage which "may" cover the claim. Initially, Javitch disclosed only Legion.

When Javitch learned Legion was denying coverage, Javitch supplemented their

response to indicate Legion was denying coverage.

Interestingly, on the same day the interrogatory was supplemented,

Javitch, through its attorney, sent a letter to Clarendon stating, "[w] e are hereby

010 6 $S IG©365

-9-

putting you on notice of a claim which may be covered by your policy because of

events occurring during your policy period which allegedly constituted a claim."

(Appellants' Brief, Exhibit 3.)

Javitch's contention that although the letter was sent, they believed that

Clarendon would not cover the claim. This argument is without merit. Javitch

is a seasoned law firm. Javitch, through its counsel, would not have sent

Clarendon a letter putting it on notice and specifically requesting coverage if

they truly believed there was no possibility of coverage as they now argue.

Further, when asked to explain a claims made policy, Joel Rathbone answered

"claims made policy means that the occurrence of the claim has to occur during

the time of the policy." (Joel Rathbone Deposition at 23-24.) Mr. Rathbone did

not believe Clarendon had to be placed on notice during the policy period, rather

he believed the claim must occur during that time period.

Javitch's counsel, Gary Hermann, stated that when he sent Clarendon the

October 24, 2001 letter, he was uncertain as to whether there would be coverage.

He specifically stated, "1 hadn't fully investigated the issue yet, and wasn't sure

whether.there was coverage at that point." (Gary Hermann Deposition at 34.)

Hermann attempted to find a way for the claim to be covered under the

Clarendon policy and even assigned an associate to research the issue. (Gary

Hermann Deposition at 33.)

'M 685 00366

-10-

Javitch argues that merely failing to disclose the Clarendon policy does not

amount to concealment, we disagree. 'The simple failure to - disclose a fact is not

equivalent to concealment, for a distinction is made between the concealment of

a fact and the failure to disclose a fact, the former implies purpose-design; the

latter does not." Mitchell v. Slocum (1981), 7 Ohio Misc.2d 33, 455 N.E.2d 20.

Javitch was aware the Berrys would probably not be able to collect from Legion,

as Legion had previously denied the claim. Javitch's attorney contacted

Clarendon in October of 2001 trying to obtain coverage, while at the same time

failing to list Clarendon in response to the Berrys' discovery requests. There is

sufficient evidence for the fact finder to conclude that Javitch purposefully

withheld information about the Clarendon policy.

The Berrys bolstered their claims with an expert report prepared by

Attorney W. Craig Bashein (`Bashein"). After reviewing all pertinent

information, Bashein provided a report concluding Javitch provided inaccurate

responses to discovery, and that the Berrys relied on the inaccurate responses

when they entered into the settlement agreement.

There is ample evidence to support that the Berrys justifiably relied on the

representations from Javitch that Legion was the only coverage. While the

Berrys realized Legion may not pay the claim when they settled with Javitch,

they were unaware that there was another insurance company they could

:v0685 f08367

-11-

pursue. If the Berrys had known about Clarendon, they may have declined to

enter into the settlement agreement.

Accordingly, we find a material issue of fact still remains as to whether

Javitch purposefully withheld the existence of the Clarendon policy; therefore,

we sustain the Berrys' sole assignment of error.

The judgment of the trial court is reversed and remanded for proceedings

consistent with this opinion.

It is ordered that appellant recover from appellee costs herein taxed.

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate be sent to said court to carry this

judgment into execution.

A certified copy of this entry shall constitute the mandate pursuant to

Rule 27 of the Rules of Appellate Procedure.

kRAn,. /ai

SEAN C. GALLAGHER, P.J., DISSENTS (SEE SEPARATE DISSENTINGOPINION)LARRY A. JONES, J., CONCURS

M-0685 130368

-12-

SEAN C. GALLAGHER, P.J., DISSENTING:

I respectfully dissent. I would find that summary judgment was properly

granted in favor of Javitch because there is no evidence that Javitch intended

to mislead the Berrys or that the Berrys justifiably relied upon Javitch's

response to their detriment.

Although I agree that Javitch's response was less than accurate, the record

does not support the Berrys''claim that Javitch made a false statement with

knowledge of its falsity. When the Berrys finally filed suit against Javitch, the

Clarendon policy had expired. Javitch believed that the Clarendon policy would

not cover the cause of action because that policy required notification before the

term of the policy expired, which was not done. Javitch believed that the Berrys'

cause of action would be covered by the Legion policy. Javitch even pursued

Legion to provide coverage for the Berrys' claims. I fail to see how it would

benefit Javitch to purposely hide the Clarendon policy.

Further, an insurance policy is a contract between the insurance company

and the insured. McPhillips v. Travelers Indemnity Co., Cuyahoga App. Nos.

91286 and 91561, 2009-Ohio-1262. Although the Berrys had threatened to file

suit before the Clarendon policy expired, Javitch did not notify Clarendon

because it did not think the Berrys' allegations were valid or that the Berrys

would file suit. Unless required by statute, an insured may elect to handle

^,0685 f00369

-13-

claims itself or to turn the claims over to its insurance carrier.

Mnally, I do not think the record supports the Berrys' claim that they

justifiably relied uponthe inaccurate information. When the Berrys settled with

Javitch, they were keenly aware that Legion was denying coverage because the

claim was outside the policy's time frame. They were well aware that they might

not recover any money from Legion. Nevertheless, the Berrys agreed to accept

$65,000 from Javitch without the possibility.of recovering the balance from

Javitch if Legion continued to deny coverage. This proves that the Berrys were

eager to settle for whatever Javitch could provide, regardless of coverage from

an insurance carrier. Accordingly, I would find that summary judgment was

properly granted against the Berrys.

'.6@5 8 5 100370

CC 97 / 2783

Dated:

lgije &tate of ®fjio, 1 ^Cuyahoga County. J I GERALD E. FUERST, Clerk of the Court of

Appeals within and for said County, and in whose custody the files, Joumals and records of said Court are

required by the laws of the State of Ohio, to be, kept, hereby certify that the foregoing is taken and copied

from the ku5tial• Volume 685 Page 356 DatAd: 7-6-09 CA 91723

of the proceedings of the Court of Appeals within and for said Cuyahoga County, and that the said foregoing

copy has been compared by me with the original entry on said Agy • Vnl. 685 Page 356

July 6, 2009 and that,the same is correct transcript thereof.

3fn Zestimonp Vryerenf, I do hereunto subscribe my name officially,

and affix the seal of said court, at the Court House in the City of

Cleveland, in said County, this 13th

day of July A.D.20 09

GERALD E. FUERST, Clerk of Courts

By ^?• &^^ Deputy Clerk