IN THE SUPREME COURT OF OHIO

TRUSTEES OF OHIO CARPENTERS'PENSION FUND,

Plaintiff-Appellant,

-vs-

BAKER & HOSTETLER, LLP, et al.,

Defendants-Appellees.

Case No.

On Appeal fi-oni the CuyahogaCounty Court of Appeals,Eiglith Appellate District

Court of AppealsCase No. 09 CA 92295

APPELLANT'S MEMORANDUM IN SUPPORT OF JURISDICTiON

Larry H. James (0021773)

Andrew G. Douglas (0000006)CRABBE, BROWN & JAMES LLP500 South Front Street, Suite 1200Columbus, Ohio 43215

(614) 228-5511 /Fax: (614) 229-4559liames(a),cbilawyers.comadouglas(i6ebilawyers.cotn

ROTATORI BENDER CO., L.P.A.By: Robert J. Rotatori (0003346)(COUNSEI. OF RECORD)Richard L. Stoper, Jr. (0015208)800 Leader Building526 Superior Avenue, EastCleveland, OH 44114

(216) 928-1010/Fax: (216) 928-1007rstoner(d.rotatori.corn

Connsed for Appellant Trustees of theOhio Carpenters' pension Fttnd

R. Eric Kennedy (0006174)WEISNLAN, KENNEDY & BERRISCO., L.P.A.1600 Niidland Building101 Prospect Avenue WestCleveland, Ohio 44115Telephone: (216) 781-1111Facsimile: (216) 781-6747

Louis A. Colonibo (025711)Karl Fanter (0075686)BAKER & HOSTETLER, LLP3200 National City Center

1900 East Ninth StreetCleveland, Ohio 44114

Teleplione: (216) 621-0200h'acsimile: (216) 696-0741i

Coan.sel for Appellee Baker & flostet[er,LLP

TABLE OF CON'I'ENTS

EXPLANATION OF WHY THIS CASE IS A CASE OF PUBLIC ANDGREAT GF,NF,RAI, INTEREST ...................................................................................1

S"I'A"FEMENT OF'I'HE CASE AND FACTS ..............................................................2

ARGUMENT IN SUPPORT OF PROPOSITIONS OF LAW ......................................6

Proposition ofLaw No. 1: A client may state a claim for fraud against a lawfirtn whon the claim does not arise ti-oin the manner in which the law firmexercised legal judgment or represented the client ............................................6

Proposition of Law No. II: A client may bring an action for fraud againsta law firm based on acts of fraud by its attomeys and the one-year statuteof limitations for legal malpractice does not apply ..........................................12

Proposition of Law No. III: A trial court errs in denying a plaintiff's motionfor leave to amend a complaint to allege claims of fraud against a law firm,where the motion was timely and where the basis on which the trial courtdenied leave to amend was the ei-roneous legal conclusion that the fraudelaim was prechided by the original complaint's claim for legalm alpracti ce .......................................................................................................13

CONC'LUSION ............................................................................................................15

CERTIFICATE OF SERVICE

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

This case presents the following issues of public and grcat general interest relating to

claims against attorneys pursuant to Ohio law.

1. Whether a clietit tnay state a claim for fraud against an attoiney or law firm when

the claim does not arise from the manner in which the attoniey or law firm exercised legal

judgment or represented the client, as this Court has held as to physicians and patients in Gaines

v. Preternt-C'leveland, Inc. (1987), 33 Ohio St.3d 54, 514 N.E.2d 709?

2. Whether, in light of this Court's decision in National Union Fire Insuf•ance Co. v.

Wuerth, 122 Ohio St.3d 594, 2009-Ohio-3601, 913 N.E.2d 939, a law firin tnay be liable to a

client on a claim of fraud?

3. Whetlier a trial court errs in denying a inotion for leave to aniend a complaint to

add a claini of fraud against a law finn, where the basis on which the trial court denied leave to

,unend was the erroneous legal conclusion that the fraad claim was precluded by the original

complaint's claim foi- legal inalpractice?

This Court has never addressed the question of whether an attorney or law fii-m may be

held liable to a client for fraudulent acts that do not ai-ise from the manner in which the attorney

or law fiim exercised legal judgment or represented the client. This is a question of public and

great general interest because the public has an interest in the standards applicable to law finns

and attorneys and looks to this Court to define those standards.

There is a great public interest in protectiiig citizeris t;°om acts of fraucf by attoineys, and

this Court has been vigilant in protecting clients from the fraudulent acts of their attorneys and

has entered substantial discipline for such fraud.1 This case offers this Court the opportunity to

further define that protection by setting forth for the public whether a fraud claim is available

against attorneys and law firms.

It is also of great general interest to the public whether law firms have an obligation to

their clients not to comtnit fraud in light of this Court's unanimous decision in National Union

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

Court held that law firms cannot directly commit legal malpractice. In Wuerth, in a concurring

opinion, four Justices, Chief Justice Moyer, Justices Pfeifer, O'Connor, and Lanzinger, as well as

Judge DeGcnaro, emphasized that "our holding today does not foreclose the possibility that a

law firm inay be directly liable on a cause of action other than malpractice." Id. at 603 (Moyer,

C.J., concurring) (empliasis added). This case provides the Court with the opporhulity to

detettnine an issue reserved in Wuerth regarding whether law fimis may be liable on other

claims, such as a claim for fraud.

STATEMENT OF TPE CASE AND FACTS

Baker & Hostotlei-, LLP (hereinatter, "Baker") represented the Ohio Carpenters' Pension

Fund (hereinafter, "the Fund") for more than twenty-five years as the Fund's general counsel in

regards to litigation, colleetion of benefit contributions, ERISA counseling, and other matters. In

the 1970s, Baket- assisted the Fund in fonning a Construction Loan Cotnmittee to diversify the

See Office of Disciplinaty Counsel v. Fowerbaugh (1995), 74 Ohio St.3d 187, 658 N.E.2d 237,239 ("A lawyer who engages in a material misrepresentation to a court or a pattern of dishonestywith a client violates at a sninimum, the lawyers oath of office that he or she will not `knowinglyemploy or countenance any ** deception, falsehood or fraud.' Gov Bar R. I(8)(A). Suchconduct strikes at the very core of a lawyers relationship with the court and with the client.Respect for our profession is diminished with evcty dcceitful act of a lawyer. We cannot expectcitizens to trust that lawyers are honest if we have not yet sanctioned tliose who are not ."); LalceCounly Bar Association v. Speros (1995), 73 Ohio St.3d 101, 652 N,E.2d 681, 682 ("Dishotiestytowar(i a client, whose interests are the attorney's duty to protect, is reprehensible.").

2

Fund's inveshnents. David Strauss, a Baker attorney, set up the Committee and was the lead

underwiiter and de facto loan officer, as well as the loan portfolio manager for the Fund with

primary responsibility for underwriting, due diligence, and closing of loans.

In late 1999, Robert Lontkowski, through a former Baker partner, asked Strauss to assist

Lontkowski in obtahiiug financing for a proposed banquet facility and conference center, LA

Centre, to be built in Westlake, Ohio. Strauss's atteinpts to obtain financing for Lontkowski

through banks and other sources were unsuccessful. Since Strauss was cormsel to the

Construction Loan Committee, hc suggested Lontkowski approach the Fund.

Lontkowski applied to the Fnnd for a loan of $8.875 million. Strauss told the Fund that

Loritkowski was a client of Baker, but did not disclose that Strauss personally represented

Lontkowski or that Strauss represented Lontkowski in regard to this loan. No waiver of the

conflict was obtained from the Fund, and Strauss did not advise the Fund to seek independent

legal representation in light of Baker's conflict. Strauss did not disclose to the Fund that he had

been unable to obtain financing for Lontkowski from any other souree.

In early 2000, the Coimnittee approved the loan subject to due diligence. Although other

professionals, Deloitte & Touchc and Leader Mortgage, perfornied due diligence on the initial

loan, Strauss, on behalf of his client Lontkowski and without the Committee's Irnowledge, made

material alterations to the due diligence report presented to the Coinmittee so that the report

ininimized risk and favored his client, Lontkowski. Throughout the course of the loan, Bake-

and Strauss represented both the Fund and Lontkowski in regards to the loan, with the

representation of Tontkowski by Strauss and Baker never being disclosed.

In March 2001, Strauss detei-mhied that there were not enough fiinds to complete the

project and convinced the Fund to increase the loan to $14.8 million. Strauss represented to the

3

Fund that Balcer would conduct the due diligence on the amended loan. To the benefit of

Lontkowski, Strauss failed to conduct the due diligence and did not advise the Committee of the

opinion of the inspecting architect that the project could not be built for the amount budgeted.

Baker, tlrrough Strauss, did no due diligence on the alleged equity contribution of Lontkowski

nor on other sources of supplemcntal funding. Banking experts testified that the loan never

would have been made had proper due diligence been conducted by Baker.

Strauss, despite knowinx that the project rvas underfunded, concealed thic fi'onn the

Faind. Instead, Strauss permitted Lontkowski to continue to spend the remainder of the $14.8

million. By Deeetnber, 2002, all of the $14.8 million had been disbursed, but the hard-cost

construction of LA Centre was only 50 percent cotnplete. The Fund ultinrately was required to

invest an additiotial $18 tnillion in the project to protect its invesmient and later foreclosed and

took possession of the property, at a loss of more than $22 milliott.

Baker, througli Strauss, blamed the underlLirtding of the project on Leader Mortgage, and,

thcrefore, thc Fund brouglit a legal action against U.S. Bank, the successor to Leader. Dm-ing

discovery in that lawsuit, evidence of Baker's malpractice first catne to ligllt. In a 2006

deposition, Strauss admitted that he llad failed to determine whetlier it was fe.asible for the

project to be built for the amount budgeted, and that he had not had the budget certified by the

inspecting architect. DocLmtents produced in discovery confirnted Balcer's negligenee. A tolling

agreement was obtained frotn Baker.

On October 25, 2007, ihe Fund filed a complaint alleging claims of breach of fiduciary

duty, negligetrt misrepresentation, restitution, and legal malpractice against Baker and claims of

breach of contract and unjust enrichntent against U.S. Bank. In light of Baker's representation of

both the lender and borrower, Baker asserted Lontkowski's attorney-client privilege, thereby

4

delaying production of dociunents. On October 14, 2008, the Fund liled a motion to compel

production and the trial court ordered an in camera review of the documents. '1'hat review was

never completed. Lontkowski eventually agreed to waive the privilege, and, on January 8, 2009,

on the eve of the deadline for filing summary judgment motions, the Fund received a CD with

7,456 additional docunlents, including Baker's billing records to Lontkowski.

The clocuments produced on January 8, 2009 disclosect new information regarding

Strauss's rep-esentation of Lontkowski in connection witli other failed attempts to obtain

financing which were never disclosed to the Fund, Strauss's knowledge that Lontkowslci could

never build the project for the amount represented to the Fand, Strauss's involvement in

preparing Lontkowski's presentation to the Fmid, and the due diligence report altered by Strauss

tiir the benefit of Lontkowski. In light of Lontkowski's recent waiver of the privilege, the Fimd,

on January 29, 2009, took Lontkowski's deposition in his bankruptcy case in Phoenix, Arizona.

On January 28, 2009, Baker filed its inotion for summary judgment. On Mareh 31, 2009, the

Fund moved to amend its complaint to allege claims of fraud based on the information and

docuinents obtained only weeks before.

On May 4, 2009, the trial court denied leave to amend on the ground that the fraud claims

set forth in the proposed amended complaint were "essentially identical" to the claims in the

complaint. (Appx. at 18). The tiial court<rlso granted Baker's motion for summary judginent on

the Frmd's malpractice claim, finding that the Fund "should have reasonably discovered the

alleged malpractice by Baker." (Appx. at 17). The trial court found pursutust to Rule 54(B) that

there was no just reason to delay entering a final order as to Baker, and the Fund appealed.

On April 8, 2010, the court of appeals affirmed the judgment of the lower court.

5

ARGUMENT IN SUPPORT OF PROPOSITIONS OF LAW

Prouosition of Law No. I. A client may state a claim for fraud against a law firin whenthe claim does not arise from the manner in which the law tirni exercised legal judginent orrepresented the client.

This Court has held that rules goveining claims against physicians are insttvctive in

eonstniing claims against attorneys. Nat'1 Union Fire Ins. Co. v. Wuerth, 122 Ohio St. 3d 594,

2009-Ohio-3601, 913 N.E.2d 939, at ¶13. hz Gaines v. Preterm-Cleveland, Inc. (1987), 33 Ohio

St.3d 54, 514 N.E.2d 709, this Court, by a substantial majority, held that "[a] physician's

knowing misrepresentation of a material fact concerning a patient's condition, on which the

patient justifiably relies to his detriment, may give rise to a eause of action in fraud independent

from an action in medical malpractice." (Syllabus ¶1). Justice Holmes, concurring, wrote that "I

fully embrace the recognition of a wholly separate cause of action for fraud as stated in

paragraph otte of the syllabus." Id. at 61 (Hohnes, J., concutring).

In Gaines, the patient alleged that her physician had misrepresented that he had renioved

her IUD during surgery. The court of appeals in Gaines had held that the patient had no fraud

claim because the "gist" of the aetiott was for medical malpractice. This Court reversed.

We cannot agree with the court of appeals' conclusion that these allegationssounded in malpractice only. A physician's knowing misrepresentatiott of a

material fact concetni ig a patient's conditiott, on which the patient justifiablyrelies to his detriment, may give rise to a cause of action in fraud independentfrom an action in niedical malpractice.... The irand actimz is separate anddistinct from the medical malpractice action which stenas fi•om the surrounfacts where the decision to misstate the facts cannot be characterized as medicalin natta•e.

Id. at 56 (foouiote otriitted) (emphasis added) .2

Ohio courts of appeals and federal eout-ts applying Oltio law have held that clients may

2 Chief Justice Moyer, although dissenting on the ground that "[a]ctual fraud was never pleaded,"wrote that "I agree that paragraph one of the syllabus is a desirable statement of the law. .. °' Iii.at 63 (Moyer, C.J., concurring in part and dissenting in part).

6

sue attorneys for fraud. "[N]ot all fraudulent conduct will always be brought back under the

umbrella of a general malpractice claini." Endicott v. Johrendt (10"' Dist.), 2000 Ohio App.

LEXIS 2697, at * 13-14. In Divine Tower vs. Kegler, Brown, Ilill & Ritter Co. (S.D. Ohio), 2007

U.S. Dist. LEXIS 65078, the district court permitted the client, Divine Tower, to maintain an

action for fraud agaiiist the law firm because the claim "did not arise out of the manner in which

the Kegler finn exercised legal judgmetit or handled Iheir representation of Divine Tower.

Rather, these claims concern the ordinary standards that goveni business ti-ansactions." Id. at

"56. "When `an attorney provides seivices that are not necessarily legal in nature' or acts for his

own personal gain, `the attonley's aotions may constitute a cause of actirnl for fraud separate

from a malpraetiee elaim."' Id. at '55 guoting Crullatte v. Rion (2d Dist. 2000), 145 Ohio

App.3d 620, 626, 763 N.E.2d 1215, 1219.

Oiio appellate courts have held that a elient may sue an attorney for ti-aud in a variety of

circumstances. See YVanrtan v. L. Patrick Mulligan & dssoc., Co. (2d Dist.), 2009-Ohio-1940, at

¶18 ("under circwnstancos in which au attorney provides sei-vices that are not necessarily legal in

nature, the attorney's actions niay constitute a cause of action for fi-aud separate from a

malpractice claim"); Dzatnhasow v. tlbaku»aov (8"' Dist.), 2005-Ohio-6719, at ¶18 (fi-aud claim

sustained where clients alleged that "Abakumov entered into a contract with them, charged them

excessive fees, charged a nonrefundable retainer, and failed to provide substantial legal

services"); Lynch v. Nagy (9" Dist.), 1993 Ohio App. L,EXIS 549, at *6 ("If his allegations that

Nagy aecepted money for filing a motion without disclosing that it coul(I not succeed are ttue,

then Lynch has produced evidenee to prove his claim of ti-aud."); DiPaolo v. DeVictor (10°i Dist.

1988), 51 Ohio App.3d 166 (syllabus ¶5) ("to allege a cause of action for ti-aud against attorneys

in a situation where the gist of the complaint involves legal malpractice, plaintiffs must have

7

specifically alleged that defendants coinmitted the actions for their own personal gain.").

The court of appeals in this case cited Muir K Hadler Real Estate Illrtnagement Co. (10`t'

Dist. 1982), 4 Ohio App.3d 89, 446 N.E.2d 820, for the proposition tllat "an action against one's

attoniey for damages resulting from the manner in which the attorney represented the client

constitutes an action for malpractice within the meaning of R.C. 2305.11, regardless of whether

predicated upon contract or tort or whether tbr indemnification or direct damages °" (Appx. at

12). Muir is distinguishable because it did not involve a fraud ciairo, as does this case, but

instead involved a claiin against an att.orney for indemnification based on the attorney's lack of

care in filing an eviction. Since the client in Mttir challenged the attoniey's exercise of the

standard of care, the client's claim was a malpractice claim.

The court of appeals in this case also relied on Hibbett v. City of Cincinnati (1" Dist.

1982), 4 Ohio App.3d 128, 446 N.E.2d 832, in concluding that "the gist of the Fund's proposed

atnended complaint involves actions or oniissions taken in the course of Baker's legal

represcntation of the Fund." (Appx. at 12). This Court, in Gaines, decided in 1987 after Hibbett,

rejected the argument that a fraud claim was precluded on the ground that the "gist" ofthe action

was malpractice. Gaines established that the mcre fact that a plaintiff has a malpractice claim

against a professional does not preclude a fraud claim against that same professional.

In this case, Strauss, as set forth in the following review of the proposed amended

complaint, comtnitted lcaud to benefit his other client, Lontkowski, and to enrich hitnself and

Baker through the additional fees available frotn the representation of both parties to the real

estate transaction.3

' It was clear that Baker, through Strauss, engaged in the fraud and multiple representation tomaximize its legal fees. As the Fuitd leartied in January, 2009, Strauss, in introducingLontkowski as a new client to Baker's New Business Committee, pointed out that "[t]his could

8

Claim Six of the proposed amended complaint alleged that Baker, through Strauss,

"niaterially altered the facts eontained in a due diligence report regarding the LA Centre

transaction ... to make the infoimafion contained therein appear inore favorable to his client

Robert Lontkowski." The claim alleged that Strauss altered the report to mislcad the Fund and

that the alteration "conceal[ed] the risky nature of the investtnent presented by Strauss' client

Lontkowslci." The claim alleged that the "alterations were material to the transaction as thcy

constituted the factual basis upon which the Pension Fiuzd made its decision to fund the loan."

Baker, tlirough Strauss, insttveted Deloitte & Touche to remove from the due diligence

report any indication that the Lontkowski loan had the risk of a venture capita] loan. Strauss also

instructed Deloitte to remove the poit.ion of the repott which stated that Lontkowski's "equity"

contribution had little value as collateral. Strauss also rewrote the report to remove reference to

the diminished value of property shoLdd the conference center pottion of the project not be

suceessful ancl elimitiated comments regarding logistical drawbacks such as limited parking.

Strauss's inisrepresentation tltrough alteration of the due diligence report, like the

misrepresentation in Gaines, is the proper subject of a fraud claim.

Claim Scven alleged that Baker, tlirough Strauss, "assisted Lontkowski in creating a false

and misleading loan presentation to the Pension Fimd which left out material facts regarding the

risks of the transaction and the incompeteney of the developer." 1'he documents and information

obtained in January 2009 detailed Strauss's involvement in failed attempts to obtain financing

for Lotrtkowski. Those records show that Strauss assisted Lontkowski in preparation of his

presentation to the Fund, which was materially misleading because it concealed the fact that no

one else would finance the project and misrepresented and concealed the risks of the project.

tm-n into a significant amormt of legal business ...... (PRIV 04233).

9

Numerous attempts to obtain financing from other sources failed. (Lontkowski Dep. at

20-21). Attorneys at other law firms such as Jones Day and Benesch Friedlander had refused to

help Lontkowski fuid financing. (Id. at 24). Strauss drafted letters to several banks, including

Charter One, Provident Bank, and Firstar, attetnpting to obtain fnancing for the project. (Baker

Billing Records, Entry 10/14-15/99). Strauss and Lontkowski tnet personally with Provident and

Firstar, both oF which declined to provide financing. (Entry 12/20/99 (Provident); Entry

12/28/99 (Firstar); Lontkowski Dep. at 37). Other attempts to obtain private and public

financing were unsuccessfitl. (Lontlcowski Dep. at 21, 36, 168-170; Bi1ling Records, Entry

9/14/99 (Ohio Development Department); Entry 10/27/99 (HUD Section 1081oan)).

On January 6, 2000, Provident Bank rejected the loan, and, on January 7, 2000, Strauss

and Loutkowski met to discuss fiinding sources. (Billing Records, Entries 1/6-7/00). The Fund

was the last resott. (Lontkowski Dep. at 26).

Strauss knew that Lontkowski's project was a bad one because no one else would finance

it. Nevertheless, Strauss foisted the project on the Fund while affinnatively concealing its

weaknesses and failing to disclose that the project had been rejected by every lender to whom it

had been presented. The tnaterially misleading presentation to the Fund, which Strauss helped

Lontkowski deveop, like the misrepresentation in Gairaes, is a proper basis for a fraud claim.

Claim 8ight alleged that Baker, through Strauss, cotnmitted fraud during thc pendettcy of

the loan becatiSe Strauss, having inside knowledge ot' Lontkowski's financial distress and tlie

true status of the project, "assisted Robert Lontkowski in tnisrepresenting the ongoing status of

the LA Center project to the Pension Fimd." The claim alleged that "lalse inCormatiort and

mislead'uzg information misrepresented the amount of money spent, the budget, the percentage

completion, the equity involved, the nloncy needed to complete the project." Documents

10

produced for the first time in January 2009 demonstrated that Straiss knew that the project could

not be built for the amount budgeted and concealed such information from the Fund. (PRIV

04853-04855; PRIV041 07-041 1 1). Likewise, Lontkowski, in his January 2009 deposition,

testified that Baker knew that the project could not be completed for the amount budgeted and

was engaged in "damage control." (Lontkowski Dep. at t 18, l21). Strauss's misrepresentations

based on his inside knowledge of the project and Lontkowski's finances, like the

misrepresentatiou itt Gaines, are a proper basis for a fraud claim against Baker.

Baker should not bc permitted to takc advantage of any confusion created by its improper

simultaneous representation of Lcmtkowski and the Fund. Strauss's acts of fraud committed

against the Fund were not acts of legal judgment, but piain and simple fraud. Strauss's conduct

is akin to a crime against a client and does not implicate the legal judgtient at issue in a

rnalpractice claitn. 'The lower court, by denying the motion to amend, essentially immuiiized

Strauss and other attorncys fi•om liability for fraud that they perpetrate on their clients.

Accordingly, this Court should accept jurisdiction to determine whether a law finn,

through oue of its attorneys, may be lield liable to a client for fraudulent acts committed by its

attot-neys that do not arise from the manner in which the law fn-m exercised legal judgmcnt or

rcpresented the client 4

t Strauss's acts of fraud componnded his ctlrical violations relating to disclosure of conflicts."`The law itnposes certain obligations upon ... attorneys who seek to advance conflictinginterests. Thcy have the duty to make full disclosLu-e and obtain clear and informed consent. Ifthe G'ansaction thcrcafter goes sour, tlteirs is the burdeii of proving full disclosure and the factand scope of consent. This burden is not met by arguing that the party to whom the duty wasowed had eonstiuctive knowledge of the conflict. ... Such a position would shift the burdenfrom the fiduciary to the party to whom the duty is owed. . . . To satisfy the burden of fulldisclosure, it is not sufficient that both parties be informed of the fact that a lawyer isundertaking to represent both of them. Rather, there must be a disclosure of risks in such detailthat the person can understand the reasons why it may be desirable to withhold consent."' ElCarnino Resources Licl_ n. Ihrntington National Bank (W.D. Mich), 2007 U.S. Dist. LEXIS

ll

Proposition of Law No. II. A client may bring an action for fraud against a law firm basedon acts of fraud by its attorneys and the one-year statute of limitations for legalinalpractice does not apply.

The court of appeals did not address the applicability of this Court's unanimous decision

in National Urtion Fire Ins. Co. v. Wuerth, 122 Ohio St.3d 594, 2009-Ohio-3601, 913 N.E.2d

939 to this case. In Witerth, this Court hcld "that a law fit-m does not engage in the practice of

law and therefore cannot commit legal malpractice directly." Id. at 600. Chief Justice Moyer,

with Justices Pfeifer, O'Connor, and Lanzinger, as well as Judge DeGenaro, concurring,

emphasized that "our holding today does nof foreclose the possibility that a law firm may be

directly liable on a cause of action other than malpractice." Id. at 603 (Moyer, C.J., concurring).

This Proposition of Law raises the qucstion unaddressed in Wuerth of whether a law finn

may be liable for fraud perpetrated by the law tirm against a clietzt.

In Wuerth, this Court deteimined that a law finn owed no duty enforceable in an action

for legal malpraetice. If the Fund does not have a direct claim Ibr legal malpractice against

Baker pursuant to YVuerth, the i-ule applied by the court of appeals in this case - that an aetion

against an attorney is necessarily one for malpractice - is not applicable. Where no legal

malpractice claim is available, there is no basis for finding that a fraud claim is subsumed by a

claim for malpractice. Therefore, the Fund should not be precluded from puz-suing a fraud claim

against Baker, and the four-year statute of limitations for fi-aud, Ohio Rev. Code §2305.09(C),

not the one-year malpraetice statute of limitations, Ohio Rev. Code §2305.1 1, applies.

Accordingly, the Court should accept jurisdiction to detcnnine whetlier a client may

bruig a claim for fraud against a law fiim.

67813, at *43-44 (citation omitted).

12

Proposition of Law No. 111. A trial court errs in denying a plaintiff's motion for leave toamend a coniplaint to allege claiins of fraud against a law firm, wherc the motion wastimely and where the basis on which the trial court denied leave to aniend was theerroneous legal conclnsion that the fi•aud claim was precluded by the original complaint'sclaim for legal malpractice.

Ohio Rule of Civil Procedure 15(A) provides, in pertinent part that "[1]eave of court shall

be fi'eely given when justice so requires." In Peterson v. Teodo.sio (1973), 34 Ohio St.2d 161,

175, 297 N.E.2d 113, 122, this Court held that, "[a]lthough the grant or denial ofleave to amend

a pleading is discretionary, where it is possible that the plaintift; by an ainended complaint, may

set forth a claim upon which relief cau be granted, and it is tetidered timely and in good faith and

no reason is apparent or disclosed for denying leave, the denial of leave to file such amended

cotnplaint is an abuse of discretion." In Peterson, this Court reversed an order denying leave to

amend a fraud claim and held that "[t]he spirit of the Civil Rules is the resolution of cases upon

their merits, not upon pleading deficiencies. Civ.R. 1(B) requires that the Civil Rules shall be

applied `to effect just results."' Id. This Court in Peterson permitted the amendment even

though the motion for leave to amcnd was not filed until arter a motion for judgment on tlte

pleadings had been granted.

Because Propositions of Law I and II establish that a fraud claim can be stated against a

law lirm and an attorney, the trial court erred in denying leave to amend on the ground that no

fraud claim was available.

Neither the trial court nor the court of appeals in this case acknowtedged that the fraud

claims were based on doeuments produced by Baker shot-tly before the tilvig of the tnotion for

leave to amend. "The timeliness of the motion is defined by the reasonable diligence of the

moving party and any prejudice to defendant's ability to defend, and those are questions of law

to be determined by the court." Patterson v. V & MAuto Body (1992), 63 Ohio St. 3d 573, 575

13

n.1, 589 N.E.2d 1306, 1308 n. 1.

The Fund's motion was timely because 1) the motion was based on more than seven

thousand docmnents produced by Baker just weeks before the filing of the motion, and the

follow-np deposition of Lontkowski; 2) the trial court ha(l not completed an in canaera review of

documents, the production of which both parties sought to compel; and 3) Baker itself had

requested a continuance from the lrial court to conduct additional discovery.

On October 14, 2008, the Fund filed a motion to compel production of doeuments, and

the trial court decided to conduct an in carnera review. On January 8, 2009, atter Lontkowski

waived the privilege, Baker produced 7,456 additional documents. 'The documents withheld by

Baker until January 8, 2009 provided the basis for the fraud claims set forth in the proposed

amended complaint. Putting such documents in context with other cliscovery assisted the Fund

in determining that it had claims for fraud against Baker. '1'he documents produeed included

Baker's billing records, which disclosed the extent of Strauss's prior representation of

Lontkowski and Strauss's direct personal involvement in Lontkowski's preparation of financial

documents and overtures to the Fund. '1'he documents and Lontkowski's deposition disclosed

ttiat Strauss knew the extent to which Lontkowski had been rejected by prior lenders and the

financial insufficiencies of the project, yet concealed these from the Fund.

All paities atiticipated fui[her discovery as is evidenced by the fact that documents

remained utider in carnera review by the trial court and Baker had filed a motion for continuance

to obtain more discovery. In seeking a eontinuance, Baker argued that "Baker should not be

required to respond to Carpenters' motion [for summary judgment] until 30 days after Baker

receives the documcnts being reviewed in camera" and that "Baker should not be required to

respond to Caipenters' motion until 30 days after it deposes Robert Lontkowski." Accordingly,

14

since Baker itself admitted that additional discovery remained to be completed, the Fund's

motion to amend its complaiut based on documents only recently produced was timely.

In addition, Baker had been in possession of the documents for nearly ten years. The

documents had been authored or received by Baker attonieys to whom Baker had access to

complete any investigation it needed. The Fund was in possession ofthe 7,456 documents for

only a few weeks. Since Baker withheld the docunlents, the Fund could not have brought its

motion for leave to file an amended complaint any earlier than it did.

This Court should accept jurisdiction to review whetlier a trial court crrs in denying a

plaintift's timely motion to amend a complaint where the basis on which the trial court denied

leave to amend was the en-oneous legal conclusion that the fraud elaim was preclucled by the

original complaint's claim for legal malpractice.

CONCLUSION

This case involves issues of public and great general interest. The Fund requests that the

Court grant jurisdiction and allow this case to be fully briefed and argued so that the important

issues presented in this case may be reviewed on the merits.

Respectfully subinitted,

Larry H. Jai6es (001177311 eeAndrew G. Douglas (000(?^0^6)CRABBE, BROWN & JAMES LLP500 South Frotit Street, Suite 1200Columbus, Ohio 43215(614) 228-5511 /Fax: (614) 229-4559ljames^ebilawyers.comadou las cblawyers.coni

<:} lRO'I'A"1'ORl BENDER CC:, L.-'.A.Robcrt J. Rotatori (0003346)Richard L. Stoper, Jr. (0015208)800 L.eaderBuildiug526 Superior Avenue, N.E.Cleveland, Ohio 44114Tclephone: (216) 928-1010Fax: (216) 928-1007rstoper rotatori.coinrir@)rotatori.com-^--- -

Attorneys forPlaintiff-Appellants Trustees of theOhio Carpenters Fringe Benefit Fund

15

CERTIFICATE OF SERVICE

A copy of the foregoing was scnved by First Class U.S. Mail this

upon the Pollowing:

Louis A. ColomboBaker & Ilostetler LLP3200 National City Center1900 East Ninth StreetCleveland, Ohio 44114

R. Lrie KennedyWeisman, Kennedy & Berris Co., I,PA101 Prospect Avenue, West1600 Midlanci BnildingCleveland, OH 44115

Attorneys for Appellee Baker & Hostetler, LLP

Steven A. F iedmanSquire Sanders & Dempsey4900 Key Tower127 Public SquareCleveland, OH 44114

Attorney for Defendant ZIS Bcrnk

ay°'of May, 2010

Attorney lor Plaintitf-Appellants

16

APR 'A' 52010

'Qf'OLixt of ZIppPA6 D

EIGHTH APPELLATE DISTRICTCOUNTY OP CUYAHOGA

JOURNAL ENTRY AND OPINIONNo. 93295

TRUSTEES OF OHIO CARPENTERS'PENSION FUND

PLAINTIFF-APPELLANT

vs.

U.S. BANK NATIONAL ASSOCIATION, ET AL.

DEFENDANTS-APPELLEES

JUDGMENT:AFFIRMED

-^--xCivil Appeal from the - u

Cu h C t C t f Cya oga oun y our o ommon PleasCase No. CV-639819 .^..,

BEFORE: Cooney, J., Blackmon, P.J., and Dyke, J ^

RELEASED: March 11, 2010 .^,. :^^..,

JOURNALIZED : 010APR;;8 2

fU!f'/JL

ATTORNEYS FOR APPELLANT

Robert J. RotatoriRichard L. Stoper, Jr.Rotator, Bender, Gragel, Stoper, & Alexander Co.800 Leader Building526 Superior Ave., N.E.Cleveland, Ohio 44114

ATTORNEYS FOR APPELLEE

For Baker & Hostetler, LLP

R. Eric KennedyWeisman, Kennedy & Berris Co., LPA.1600 Midland Building101 Prospect Avenue WestCleveland, Ohio 44115

Louis A. ColomboKarl FanterBaker & Hostetler, LLP3200 National City Center1900 East Ninth StreetCleveland, Ohi.o 44114-3485

For U.S. Bank National Assoc.

Steven A. FriedmanSquire, Sanders & Dempsey4900 Key Tower127 Public SquareCleveland, Ohio 44114

ANNOUNCEMENT OF DECISIONPER A13P,R. 22(B) AND 26(A)

E;ECEIWED

GECLERK OF T'rlNcp1ftTAf 4PPEA4SBY

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), or a motion for consideration en banc withsupporting brief per Loc.App.R. 25.1(B)(2), is filed within ten 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. 2.2(A)(1).

FILED AND JOURNALIZEDPER APP.R. 22(0)

GERA U TCLERM Of TH 0T - PEALSBY 6E,P.

CA0909329562115629

2P G ^.^u9 ta

COLLEEN CONWAY COONEY, J.:

Plaintiff-appellants, Trustees of the Ohio Carpenters' Pension Fund ("the

Fund"), appeal the trial court's granting summary judgment to defendant-

appellee, Baker & Hostetler, LLP ("Baker") regarding the Fund's legal

malpractice claim and denying the Fund the opportunity to ainend its

complaint. Finding no merit to the appeal, we affirm.

The instant case involves alleged malpractice while Baker represented

the Fund in connection with the LaCentre development project. During the

relevant time, the Fund lent millions of dollars to another of Baker's clients,

Robert Lontkowski ("Lontkowski"), to develop LaCentre in a transaction that

the Fund claims caused it to sustain significant financial losses.

In October 2007, the Fund sued Baker for legal malpractice, breach of

fiduciary duty, negligent misrepresentation, and restitution. Baker moved for

summary judgment in January 2009. In March 2009, the Fund opposed Baker's

motion and moved to amend its coxnplaint to add a fraud claim based on newly

acquired evidence. Thereafter, in May 2009, the trial court denied the motion

to amend and granted summary judgment as to all of the claims against Baker.

The Fund now appeals, raising four assignments of error for our review.

The first three assignments of error relate to the trial court's grant of summary

3

uitu95

judgment, and the fourth relates to the trial court's denial of the Fund's motion

to amend. In the first and second assignments of error respectively, the Fund

alleges that the lower court erred in granting summary judgment because there

exist genuine issues of material fact regarding (1) the occurrence of a cognizable

event giving rise to a legal malpractice claim, and (2) the date that the Fund

and Baker's attorney-client relationship terminated.

In the third assignment of error, the Fund alleges that the trial court

erred in granting summary judgment based upon unauthenticated exhibits and

speculative hearsay testimony that violated Civ.R. 56. We overrule this

assignment of error because the Fund has not identified the specific exhibits

that it claims are inadmissible. App.R. 12(A)(2) and 16(A)(7). Accordingly, we

turn to the remaining assignments of error.

Standard of Review

Appellate review of summary judgment is de novo. Grafton v. Ohio

Ey dison Co. (1996), 77 Ohio St.3d 102, 105, 671 N.E.2d 241; Zerncik v. LaPine

Trucr't Sales & i,quip. Co. (1998), 124 Ohio App.3d 501, 585, 706 N.E.2d 860.

The Ohio Supreme Court set forth the appropriate test in Zivich v. Mentor

Soccer Club (1998), 82 Ohio St.3d 367, 369-370, 696 N.E.2d 201, as follows:

"Pursuant to Civ.R. 56, summary judgment is appropriate when (1) there is nogenuine issue of material fact, (2) the moving party is entitled tojudgment as a matter of law, and (3) reasonable minds can come to but

44)u9 6

-3-

one conclusion and that conclusion is adverse to the nonmoving party,said party being entitled to have the evidence construed most strongly inhis favor. Hort.on, v. Harwick Chem. Corp. (1995), 73 Ohio St.3d 679, 653N.E.2d 1196, paragraph three of the syllabus. The party moving forsummary judgment bears the burden of showing that there is no genuineissue of material fact and that it is entitled to judgment as a matter oflaw. Dresher v. Burt (1996), 75 Ohio St.3d 280, 292-293, 662 N.E.2d 264,273-274."

Once the moving party satisfies its burden, the nonmoving party "may not

rest upon the mere allegations or denials of the party's pleadings, but the

party's response, by affidavit or as otherwise provided in this rule, must set

forth specific facts showing that there is a genuine issue for trial." Civ.R. 56(E);

Mootispaw v. Fckstein (1996), 76 Ohio St.3d 383, 385, 667 N.E.2d 1197. Doubts

must be resolved in favor of the nonmoving party. Murphy u. .Reynoldsburg

(1.992), 65 Ohio St.3d 356, 358-359, 604 N.E.2d 1.38.

Statute of Limitations for Le al Malpractice Claims

The Ohio Supreme Court explained the statute of limitations in legal

malpractice actions in Smith v. Conley, 109 Ohio St.3d 141, 2006-Ohio-2035,

846 N.E.2d 509, ¶4, holding:

"R.C. 2305.11(A) is the statute of limitations for the filing of legal-malpracticeclaims: `[A]n action for *** malpractice *** shall be commenced withinone year after the cause of action accrued ***.' `LTnder R.C. 2305.11(A),an action for legal malpractice accrues and the statute of limitationsbegins to run when there is a cognizable event whereby the clientdiscovers or should have discovered that his injury was related to hisattorney's act or non-act and the client is put on notice of a need to pursuehis possible remedies against the attorney or when the attorney-client

5

r.f,.l;;.? i ls 2 Fr!;1 U t^ 1

-4-

relationship for that particular transaction or undertaking terminates,

whichever occurs later.' Zimmie v. Calfee, IZalter & Griswold (1989), 43Ohio St.3d 54, 538 N.E.2d 398, syllabus, citing Ornni-.Food & Fashion,

Inc, z). Sinith (1988), 38 Ohio St.3d 385, 528 N.E.2d 941. Zimmie and

Omni-Food require two factual determinations: (1) When should theclient have known that he or she may have an injury caused by his or herattorney? and (2) When did the attorney-client relationship terminate?The latter of these two dates is the date that starts the running of the

statute of limitations. Zimmie, syllabus; Ornni,-Food, paragraph one of the

syllabus."

In the instant case, the parties entered into a tolling agreement on

January 1, 2007, pertaining to all of the claims that were not already barred by

the statute of limitations. Because we hold that both the termination date and

the cognizable event took place before January 1, 2006, the statute of

limitations bars the legal malpractice claim.

The Cognizable Event

A "cognizable event" is an event sufficient to alert a reasonable person

that his or her attorney may have committed an improper act and that further

investigation is needed. See Zimmie at 402; IZalliwell v. Bruner (Dec. 14, 2000),

Cuyahoga App. Nos. 76933 and 77487. Thus, the statute of limitations begins

to run when the client obtains constructive knowledge of relevant facts. Flowers

v. Walker (1992), 63 Ohio St.3d 546, 589 N.E.2d 1284.'

'Although Flowers involves a medical malpractice action, the discovery rule

applies equall,y to a legal malpractice claim. Zim.mie.

f^ 6f; ;?

0 7 U

- 5-

In the instant case, we find that several. cognizable events occurred before

January 1, 2006, which should have alerted the Fund to further investigate

Baker's legal services. In January 2000, Lontkowski applied to the Fund's

Construction Loan Committee ("Committee") for an $8.875 million loan to

develop the LaCentre project. The Committee was responsible for investing

some of the Fund's assets in commercial and residential real estate projects, and

David Strauss ("Strauss"), a Baker attorney, was the Committee's legal counsel..

It is undisputed that Baker notified the Fund of a conflict of interest in the

LaCentre transaction because it represented Lontkowski and related entities.

But unbeknownst to the l^'und, Strauss worked on the LaCentre transaction on

behalf of both. Lontkowski and the Fund. Nonetheless, the simple fact that the

Fund knew that Baker attorneys represented both Lontkowski and the Fund

and. that Baker had not obtained written, informed consent from the Fund nor

advised the Fund to obtain independent legal counsel should have alerted the

Fund of possible impropriety.

Because it knew of sorne conflict of interest, the U'und hired Deloitte &

Touche ("Deloitte") and Leader Mortgage (now known as U.S. Bank) to conduct

the due diligence for th.e project. In 2001, Lontkowski sought to increase the

funding for the LaCentre project to $14.8 million, and the Fund granted the

increase. By January 2002, Committee members had become dissatisfied with

099 7

-6-

the LaCentre project generally and Strauss's performance. For example, Paul

Dalferro, the Committee's secretary, blamed Strauss for the project's poor

performance, in part because of Strauss's connection to Lontkowski. In the

January 2002 Committee meeting, the Committee decided to require that all

professionals disclose, "any vested interest *** in all present, past, and future

loans with the Construction Loan Committee." It also determined that all

future loans "MUST be strictly for the benefit of the Carpenters Union."

By December 2002, the LaCentre project had run out of money and. was

far from complete. The Cominittee's meeting minutes of January 2003 reflect

that the Committee demanded that Lontkowski explain the reasons for the loan

inibalance and directed Deloitte to investigate the matter. Committee members

questioned how the project could have failed even though so many

professionals, including Baker, Deloitte, Leader Mortgage, and inspecting

architect David Fortunato were involved.

The Fund decided to restructure the LaCentre loan and hired Ulmer &

Berne ("Ulmer") as independent counsel to review the entire LaCentre loan

process and restructure amendments that Baker proposed. Even though the

Fund di.d not hire Ulmer to investigate legal malpractice, the investigation

should have alerted it that Baker may have engaged in questionable legal

practices.

; c' ^!i`) 1 g0 0

-7-

Moreover, the Fund had another source of information regarding Baker's

substandard services. In October 2004, LaCentre's former clii.ef financial

officer, Jeff Christian ("Christian") contacted both Ulmer and the Committee

directly to advise them that Strauss had engaged in questionable legal

practices. Christian informed Alan W. Scheufler ("Scheufler"), one of the

primary Ulmer attorneys working witb the Committee, that lie had told Strauss

in December 2001 that the LaCentre project was $26 million over budget and

that Strauss had not taken any appropriate action. In December 2004,

Christian hand-delivered a letter to Roger Newman of the Fund's

Administrative Office indicating, in part, that he believed that some things

about the LaCentre project were "just not right." In the letter, he stated that

he had informed Strauss that the project was over budget and that Lontkowski

had been purchasing land and paying debt with the Fund's loan proceeds.

In light of these facts, we find that several cognizable events occurred

before January 1, 2006. Having established that, we now examine wb.en the

attorney-chent rela.tionsl'iip i,ernniia.ted.

Termination of the Attorney-Client Relationship

For statute of limitations purposes, the attorney-client relationship

terminates "when the attorney-client relationship for that particular

transaction or undertaking terminates[.]" (Emphasis sic.) Zitnmie, citing Omni-

9f 1u', O

-8-

Food. The record clearly demonstrates that Baker and the Fund's relationship

terminated witli respect to real estate loan transactions before January 1, 2006.

The October 2003 Committee meeting minutes show that the Committee

selected Ulmer to represent the Fund with respect to real estate loan matters.

Thereafter, in June 2004, the Committee instructed Baker to send "their entire

files concerning any outstanding loans to IJlmer & Berne[.]" On January 26,

2005, Scheufler wrote to attorney Robert Rotatori, indicating that Ulmer served

as legal counsel to the Committee.

We reject the Fund's claim that the attorney-client relationshi.p continued

into 2006 merely because Baker continued to bill the Fund for legal services as

late as August 2006. The Fund has not disclosed the type of legal work Baker

completed and the dates of service to which the bills correspond. The Fund has

not met its burden to demonstrate a genuine issue of, material fact exists.

Based on the foregoing, we find that the attorney-client relationship

between Baker and the Fund with respect to real estate loans terminated before

January 1, 2006. r ccordingly, the trial court properly granted summary

judgment after finding that the statute of limitations had expired prior to

January 1, 2007.

The first and, second assignments of error are overruled.

10

0 2

-9-

Motion for Leave to Amend the Complaint

Finally, we turn to the fourth assignment of error, in which the Fund

alleges that the trial court erred in denying its motion for leave to amend its

complaint to allege a fraud claim. "When a tribunal is faced with a request for

leave to amend a complaint, Civ.R. 15(A) directs it to grant such leave 'freely'

and `when justice so requires."' Columbus BarAssn. v. Douglaerty, 99 Ohio St.3d

147, 2003-Ohio-2672, 789 N.E.2d 621., J(15. We review a trial court's decision

to deny leave to amend a complaint for an abuse of discretion. Wilmington.Steel

Products, Inc. v. Cleveland T'lec. Illuininating Co. (1991), 60 Ohio St.3d 120,573

N.E.2d 622. "The term `abuse of discretion' connotes more than an error of law

or judgment; it implies that the court's attitude is unreasonable, arbitrary or

unconscionable." Blakem.ore v. Blakemore (1983), 5 Ohio St.3d 217, 219, 450

N.E.2d ll40.

In denying the Fund's motion, the trial court held:

"The court finds that the.new claims which Plaintiff seeks to assert againstDefendant Baker & Hostetler LLP are essentially identical to the issuescontained in the plaintiffs original cornplaint. The court interprets theplaintiffs motion for leave to amend its complaint as an attempt to avoidsummary judgment, especially considering that the instant motion wasfiled after briefing was complete on Detendant Baker's motion forsummary judgment. Although plaintiff contends that attorney Strauss'conduct fell outside the scope of his representation of. Plaintiff, the courtdoes not agree. Plaintiff cannot restyle a claim for legal malpractice as aclaim for fraud in order to avoid the application of the statute of

limitations."

, c , a ^' -,P', ' 11^ . i 0 3:L: ^0 ,

-10-

We find that the trial court did not abuse its discretion in reaching this

conclusion. It is well-established that "`[a]n action against one's attorney for

damages resulting from the manner in which the attorney represented the

client constitutes an action for malpractice within the meaning of R.C. 2305.11,

regardless of whether predicated upon contract or tort or whether for

indemnification or for direct damages."' Leski v. Ricotta, Cuyahoga App.

No. 83600, 2004-Ohio-2860, quoting Muir v. Had.ler Real Estate. Mgmt. Co.

(7.982), 4 Ohio App.3d 89, 90, 446 N.E.2d 820. "Malpractice by any other name

still constitutes malpractice." Muir at 90. Thus, the Fund cannot seek to

extend the statute of limitations by casting its malpractice claim as a fraud

claim.

In the instant case, the gist of the Fund's proposed amended complaint

involves actions or om.issions taken in the course of Baker's legal representation

of the Fund. And "`[i]n Ohio, the applicable statute of limitations is determined

not from the form of pleading or procedure, but from the gist of the complaint."'

Leski, quoting Hibbett v. Cincinnati (1982), 4 Oliio App.3d 128, 131, 446 N.E.2d

832.

Moreover, the Fund's motion to amend its complaint was untimely and

prejudicial. By the time it moved to amend the complaint, appropriate

individuals had been deposed, dispositive motions had. been submitted, and trial

uct i 10 ': `u':) i^^4 12^

-11-

was set to begin within seven weeks. As the Ninth District aptly held in Brown

U. FirstEnergy Corp., 159 Ohio App.3d 696, 2005-Ohio-712, 825 N.E.2d 206, ¶6,

"[A] plaintiff must move to ainend under Civ.R. 15(A) in a timely manner.

Johnson tz Noratan Malqne & Assoc., Inc. (Dec. 20, 1989), 9th Dist. No.

14142, at 10. See, also, Peterson [u. Teodosio (1973), 34 Ohio St.2d 161,

175, 63 0.O.2d 262, 297 N.E.2d 1131. Ilowever, `[a]n attempt to amend acoinplaint following the filing of a motion for summary judgment raises

the spectre of prejudice.' See Johnson, supra, at 10."

Based on the foregoing, we find that the trial court did not abuse its

discretion in preventing the Fund from amending its complaint to include a

fraud claim. The fourth assignment of error is overruled.

Judgment is affirmed.

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

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate issue out of this court directing the

common pleas 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.

k4ev^ ^^;a^•? ^. ^-^.L^.,JUDGECOLLEEN CONWCOONE

PATRICIA ANN BLACKMON, P.J., CONCURS;ANN DYKE, J., CONCURS IN JUDGMENT ONLY

13105

IN TI3E COURT OF COMMON PLEASCUYAHOGA COUNTY, OHIO

TRUSTEES OFTHE OHIO ) CV 07 639819CARPENTERS' PENSION FUND )

) OPINION AND JOURNAL ENTRYPlaintiff, )

))V.

)U.S. BANK NATIONAL ASSOCIATION, )

dba U.S. BANK HOME MORTGAGE, )fica THE LEADER MORTGAGF, )COMPANY, LLC, et al., )

)Defendants. )

Judee John J. Russo:

This case is before the court on Deferidant Baker & Hostetler LLP's ("Baker")

Motion for Summary Judgment. For the following reasons, summary judgment is

granted.

Plaintiff, Trustees of the Ohio Carpenters' Pension Fund ("OCPF"), brings several

causes of action against Defendant Baker including breach of contract, negligent

representation, unjust enrichment, breach of fiduciary and legal malpractice. Plaintiff's

allegations arise out of legal representation provided by Baker on behalf of OCPF in

connection with financing of the construction of the LA Center project located in

Westlake, Ohio. The dispute centers around the legal representation that Baker attorneys

provided on behalf of both OCPF and Robort Lontkowski, the developer of the project.

The project encountered multiple problcros over several years involving funding

and cost ovemrns, and ultimatelv the borrower, Lontkowski, defaulted on the loan. OCPF

claims its losses are due in part by the negligent legal representation provided to it by

14

Baker surrounding the project financing. Baker seeks summary judgment on the legal

malpractice claim, arguing that OCPF's claims are barred by the statute of limitations.

Civil Rule 56(C) provides that before summary judgment may be granted, it must

be determined 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 such

evidence most strongly in favor of the party against whoni the motion for summary

judgment is made, that conclusion is adverse to that party. Temple v. Wean United, Inc.

(1977), 50 Ohio St. 2d 317, 327.

Pursuant to O.R.C. 2305.11(A), the statute of limitation for legal malpractice is

one year aftar the cause of action accrues. For the purposes of analyzing the alleged legal

malpractice herein, the court looks to the tolling agreement entered into between the

parties which was executed on January 1, 2007, witli respect to all claims not already

barred by the statute of limitations. Therefore, any claims which accrued paior to January

1, 2006, would be barred.

"An action for legal malpractice accrues and the stature of limitations begins to

run when there is a cognizable event whereby the client discovers or should have

discovered that his injury was related to his attorney's act or nonact and the client is put

on notice as to the need to pursue his possible remedies against the attomey, or when the

attoniey-client relationship for that particular transaction or undertaking terrriinates,

which ever occurs later." Smith v. Conley (2006), 109 Ohio St. 3d 141, 142, citing

Zimmie v. Catfee, Halter & Griswold (1989), 43 Ohio St.3d 54.

4-5

Baker points out that OCPF terminated Baker's representation in all real estate

matters on September 8, 2003, including the LA Centre project. Baker's services were

ultimately terminated with respect to all remaining non-real estate matters on August 10,

2005. Additionally, Baker contends that throughout the attorney-client relationship with

OCPF, there were multiple "cognizable events" about which OCPF complains that should

have triggered the running of the statute of limitations including the undertaking of

various investigations and reviews of Baker's involvement in the LA Centre project at

various time periods from 2002 through 2005. Notably, the report issued by Rotatori,

Bender, Gragel, Stoper & Alexander Co., L.P.A. in July of 2005, which resulted from

OCPF liiring the firm to conduct an investigation of the LA Centre transaction, contains

comments concerning many of the same issues raised in the Plaintifl's complaint.

OCPF argues that they were not aware of the true nature of the cotiduct by Baker

until at least 2006 and that additional details did not come to light until there were

documents provided to them as part of the present lawsuit. Even if the court accepted

this contention on its face, the standard to be applied to legal malpractice actions is not

actual knowledge of an alleged act. Ohio law requires oniy "constnxctive knowledge of

facts, rather than actual knowledge of their legal significance to start the statute of

limitations running." Flowers v. Walker, (1992) 63 Ohio St. 3d 546, 589. As stated by

the court in FDIC v. Alexander (1996), 78 F.3d 1103 at 1107, a cause of action for legal

malpractice accrues:

`when the injured party became aware, or should have become aware, ofthe extent and scriousness of his or her alleged legal problem; whether theinjured party was aware, or should have been aware, that the damage orinjury alleged was related to a specific legal transaction or undertakingpi-eviously rendered him or her; and whether such dan-tage or injury would

16

put a reasonable person on notice of the need for further inquiry as to thecause of such damage or injury.' citing Zimmie, 43 Ohio St.3d 54.

The Plaintiff in the instant matter engaged in several investigations to analyze the

problem-ridden LA Ccntre project and was critical of Baker's involvement during many

stages of the process. The court finds these various events, about which OCPF has

brought in this action, when taken individually would have been sufficient to begin the

running of the statute of limitations. When considered collectively, the events are more

than sufficient to demonstrate that OCPF should have reasottably discovered the alleged

malpractice by Baker. Therefore, the court finds the legal malpractice claim to be barred

by the statute of hmitations.

The additional claims raised by Plaintiffs are all legal theories that are actually

encompassed by the legal malpractice claim. "An 'action against one's attorney for

damages resulting from the tnanner in which the attorney represented the client

constitutes an action for malpractice within the meaning of R.C. 2305.11, regardless of

whether predicated upon contract or tort or whether for indemnification or for direct

damages."' Omlin v. Kaufmann & Cumberland Co., L.P.A., (2003) Cuyahoga App No.

82248, 1115, quoting Muir v. Iladler Real Estate Management Co. (1982), 4 Ohio App.3d

89.

Therefore, the Court having considered all the evidence and having construed the

evidence most strongly in favor of the non-moving parties, determines that reasonable

minds can conte to but one cottclusion, that there are no genuine issues of material fact,

and Defendant, Baker & Hostetler LLP is entitt.ed to judWnt as a_TMter of law.

RECEIVED FOR FILING

MAY 0 4 2009G^^ fVEflST, CtEAK

mt^

1llilll IIII(IIIII IIIII IIIII IIIII IIIII IIIII Illf IIII I IIII57322427

IN THE COURT OF COMMON PLEASCUYAHOGA COUNTY, OHIO

TRUSTEES OF THE OHIO CARPENTER'S PENSIONFUND

Pluntiff

U.S. BANK NATIONAL ASSOCIATION DBA F,TC.ET AL.

Defendant

Case No: CV-07-639819

Judge: JOHN J RIISSO

JOURNAL ENTRY

PI TRIISTEES OF TI-iE OHIO CARPENTERS PENSION FUND MOTION FOR LEAVE TO FILE AMENDED COMPLAINT, IS

DENIED,

TIIE COURT FINDS THAT THE NEW CLAIMS WIlICH PLAINTIFF SEEICS TO ASSERT AGAINST DEFENDANT BAKER &HOS'FETLER LLP A RE ESSENTIALLY IDENTICAL'I'0PHE ISSUES CONTAINED IN 1TiE PLAINTIFF'S ORIGINALCOMPLAINT. THE COUR'I' INTERPRETS THE PLAIN I'IFF"S MOTION FOR LEAVE TO AMEND PPS COMPLAINT AS ANATTEMPT'I'0 AVOID SUMMARY JUDGMENT, ESPECIALLY CONSIDERING THAT THE INS'I'ANI MOTION WAS FILEDAFTER BRIEFING WAS COMPLE'I'E ON DEFENDANT BAI<ER:S MOTION FOR SUMMARY JUDGMENT. ALTHOUGHPLAINTIFF CONTENDS THAT A1°I'ORNEY STRAUSS' CONDUCT FELL OUTSiDE THE SCOPE OF IIISREPRESENTATION OF PLAINTIFF, TIIE COURT DOES NOT AGREE. PLAINTIFF CANNOT RESTYLE A CLAIM FORLEGAL MALPRACTICE AS A CLAIM FOR FRAUD IN ORDER TO AVOII) TIIE APPLICATION OF THL STATUTE OFLIMITATIONS. MOTION DENIED.

Judge Signature 05/04/2009

05/03/2009RECEIVED FOR FILING

05/0412009 104734By:CLPAL

GliRALDE.FUF.RST,CLERK

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