Opinion
Case No. 2:07-CV-568.
March 29, 2011
OPINION AND ORDER
This matter is before the Court, with consent of the parties pursuant to 28 U.S.C. § 636(c), for consideration of Plaintiff's Motion for Summary Judgment, Doc. No. 93. For the reasons that follow, the motion is granted.
I.
The Motion for Summary Judgment seeks judgment on Defendant's counterclaims. Resolution of that motion requires a detailed recitation of the procedural history of the case.
Plaintiff Todd Delay ["Plaintiff"] was employed as the Columbus, Ohio, branch manager for Defendant Rosenthal Collins Group, LLC ["Defendant"], a futures commission merchant with its principal place of business in the State of Illinois. Amended Complaint, Doc. No. 4, at ¶¶ 1, 2. In 2005, Plaintiff was sued by the Commodity Futures Trading Commission ["CFTC"] for allegedly violating the Commodity Exchange Act while employed by Defendant. Id., at ¶¶ 8-11. The CFTC action was eventually resolved in favor of Plaintiff. Id. at ¶ 12. Plaintiff thereafter initiated this action, seeking indemnification for all expenses, including attorney's fees, incurred in connection with the CFTC action as well as damages in connection with Defendant's termination of Plaintiff's employment, allegedly in breach of the parties' contract.
This action was originally filed in the Franklin County Court of Common Pleas from which it was removed by Defendant as a diversity action. Notice of Removal, Doc. No. 2.
In response to the Amended Complaint, Defendant filed a motion to dismiss for failure to state a claim upon which relief can be granted. Motion to Dismiss, Doc. No. 18. The District Judge to whom the case was assigned at the time dismissed the indemnification claim as preempted by federal law, but permitted the breach of contract claim to go forward. Opinion and Order, Doc. No. 44. In October 2008, the parties settled the breach of contract claim, Notice, Doc. No. 69, and final judgment was thereupon entered. Amended Judgment, Doc. No. 72.
The parties thereafter consented to disposition of the case by the undersigned pursuant to 28 U.S.C. § 636(c). Notice, Doc. No. 54.
Plaintiff appealed the dismissal of the indemnification claim. Notice of Appeal, Doc. No. 73. The United States Court of Appeals for the Sixth Circuit reversed the dismissal of that claim, holding that federal law does not preempt a state law indemnification right, if any such right exists. Delay v. Rosenthal Collins Group, LLC, 585 F.3d 1003 (6th Cir. 2009).
On remand, Defendant again moved to dismiss the indemnification claim, arguing that Illinois law does not recognize such a claim. Motion to Dismiss, Doc. No. 82. In denying that motion, this Court agreed that Illinois law governs the issue but concluded that Illinois common law recognizes an implied right to indemnification. Opinion and Order, Doc. No. 85.
Defendant thereafter filed an answer and counterclaims in response to the Amended Complaint. Answer and Counterclaims, Doc. No. 87. The counterclaims, i.e., breach of fiduciary duty, negligence and breach of contract, arise out of Plaintiff's allegedly
improper conduct in performing his duties in relationship to his supervision of certain futures trading activity of the Columbus, Ohio Branch Office in 2003 . . . [which] resulted in the CFTC and the [Chicago Mercantile Exchange] opening investigations and the filing of a putative class action . . . and [which] continue to cause substantial monetary and reputational harm to [Defendant], which has been forced to expend considerable resources and effort to defend itself.Id. at 7.
Specifically, Defendant alleges that Plaintiff "owed a fiduciary duty to [Defendant] to know, understand and conduct the branch office business of [Defendant] in accordance with applicable law, the rules and regulations of the CFTC and CME, [and] the various other regulated markets. . . ." Id. at ¶ 24. Defendant also alleges that Plaintiff "owed a fiduciary duty to [Defendant] to supervise his employees and their trading activities in a manner consistent with [such] rules and regulations. . . ." Id. at ¶ 25. Defendant claims that Plaintiff acted in breach of these duties. Defendant's negligence claim is based on Plaintiff's alleged failure "to act in accordance with the standard of skill and care applicable to one in his position as a branch office manager of [Defendant] in the performance of his duties." Id. at ¶ 29. Finally, Defendant alleges that Plaintiff acted in breach of the "Branch Office Agreement" in connection with his trading activities in August 2003 and October 2003. Id. at ¶¶ 34-36.
In his Motion for Summary Judgment, Plaintiff takes the position that Defendant's counterclaims are barred by the October 2008 Settlement Agreement and Release ["the Release"] to which the parties agreed in settling Plaintiff's breach of contract claim.
II.
In his Motion for Summary Judgment, Plaintiff points to the following provisions of the Release:
§ 6. Defendant, for itself, its agents, servants, employees, officers, directors, attorneys, shareholders, administrators, executors, and heirs, and any affiliate corporations and entities, and its respective predecessors, successors, and assigns, completely and forever expressly releases, acquits and forever discharges Plaintiff, his agents, servants, employees, officers, directors, attorneys, shareholders, administrators, executors, and heirs, and any affiliate corporations and entities, and his respective predecessors, successors, and assigns, from any and all claims, suits demands, causes of actions, debts, liability, damages, costs and expenses, whether in law or equity, known or unknown of any nature whatsoever concerning the Controversy between Plaintiff and Defendant, except that Defendant specifically retains the right to assert claims based on a breach of this Agreement.
* * *
§ 8. This Settlement Agreement and Release is intended to and does cover all claims, whether known at the time of the execution of this release or not, which have resulted or may hereinafter result or which may hereinafter be discovered and which may have been caused or claimed to have been caused by any and all transactions occurring prior to the date hereof concerning the alleged Controversy between Plaintiff and Defendant, other than the indemnification claim set forth in the Controversy.
Exhibit B, attached to Motion for Summary Judgment (emphasis in original). Plaintiff argues that the Release operates as an absolute bar to Defendant's counterclaims. For its part, Defendant notes that, at the time the Release was executed, the only claim then pending was Plaintiff's claim for breach of contract; Plaintiff's indemnification claim had been dismissed and that decision was not yet the subject of an appeal. It was only after the indemnification claim had been reinstated that Defendant filed its counterclaims, which Defendant characterizes as compulsory. Memorandum contra, Doc. No. 98, at 6. According to Defendant, the Release "does not explicitly prohibit the bringing of [Defendant's] counterclaim, but instead contemplates it as a part of the controversy regarding [Plaintiff's] indemnification claim." Id. at 4. At a minimum, Defendant argues, the Release is ambiguous with respect to Defendant's counterclaims. Finally, Defendant argues that the Release does not foreclose the counterclaims because those claims were not within the contemplation of the parties at the time the Release was executed.
According to the settlement agreement, the "Controversy" "arises out of a lawsuit filed by Plaintiff against Defendant seeking indemnification and alleging breach of contract. Delay v. Rosenthal Collins Group, United States District Court, Southern District of Ohio, Case No. 2:07-cv-568. . . ." Exhibit B, attached to Motion for Summary Judgment, at 2.
III.
The standard for summary judgment is well established. This standard is found in Rule 56 of the Federal Rules of Civil Procedure, which provides in pertinent part:
The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.
Fed.R.Civ.P. 56(a). In making this determination, the evidence "must be viewed in the light most favorable" to the non-moving party. Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970). Summary judgment will not lie if the dispute about a material fact is genuine, "that is, if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). However, summary judgment is appropriate if the opposing party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The "mere existence of a scintilla of evidence in support of the [opposing party's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [opposing party]." Anderson, 477 U.S. at 252.
The "party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions" of the record that demonstrate "the absence of a genuine issue of material fact." Celotex Corp., 477 U.S. at 323. The burden then shifts to the nonmoving party who "must set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 250 (quoting Fed.R.Civ.P. 56(e)). "Once the moving party has proved that no material facts exist, the non-moving party must do more than raise a metaphysical or conjectural doubt about issues requiring resolution at trial." Agristor Fin. Corp. v. Van Sickle, 967 F.2d 233, 236 (6th Cir. 1992) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)).
IV.
As a preliminary matter, the Court addresses whether Ohio or Illinois law applies to the issue presently before the Court. Defendant argues that, because Illinois law applies to Plaintiff's indemnification claim, see Opinion and Order, Doc. No. 85, Illinois law also governs resolution of the effect of the Release on Defendant's counterclaims. Memorandum contra, at 3.
Defendant's argument to the contrary notwithstanding, the Court concludes that the law of the case doctrine is inapplicable to this issue. Under that doctrine, "when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages of the same case." Scott v. Churchill, 377 F.3d 565, 569-70 (6th Cir. 2004) (internal citation omitted). However, this Court's earlier decision addressed only the law applicable to Plaintiff's indemnification claim; Defendant's counterclaims had not yet even been asserted. In the Court's view, the counterclaims, and the effect of the parties' Release on those counterclaims, cannot be considered the "same issue" for purposes of the doctrine. Thus, the Court must determine whether to apply Illinois law or Ohio law in interpreting the effect of the parties' Release on the counterclaims.
A federal court sitting in diversity must apply the choice of law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Under Ohio's choice of law rules, "the law of the state with the more significant relationship to the contract should govern disputes arising from it." National Union Fire Ins. Co. v. Watts, 963 F.2d 148, 150 (6th Cir. 1992). In making this inquiry, Ohio courts apply the test set forth in the RESTATEMENT (SECOND) CONFLICT OF LAWS § 188. Nationwide Mut. Ins. Co. v. Ferrin, 21 Ohio St.3d 43 (1986). That provision provides, in relevant part, as follows:
(2) In the absence of an effective choice of law by the parties, . . . the contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:
(a) the place of contracting,
(b) the place of negotiation of the contract,
(c) the place of performance,
(d) the location of the subject matter of the contract, and
(e) the domicile, residence, nationality, place of incorporation and place of business of the parties.Id.
Section 6 of the RESTATEMENT (SECOND) CONFLICTS OF LAWS provides, inter alia, that "[a] court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law.
Applying these factors to the case at bar, the Court concludes that Ohio law applies to the effect of the Release on Defendant's counterclaims asserted in this litigation, which was instituted and remains pending in Ohio.
In any event, the parties agree that there is no material difference between Illinois or Ohio law in this regard.
The Court now addresses the effect of the Release on Defendant's counterclaims. It is Defendant's position that the Release does not foreclose its pursuit of the counterclaims. According to Defendant, the counterclaims were "contemplate[d] . . . as a part of the controversy regarding Delay's indemnification claim." Memorandum contra, at 4. In support of this position, Defendant cites Sloan v. Standard Oil Co., 177 Ohio St. 149 (1964).
In Sloan, the Ohio Supreme Court considered the circumstances under which a release of claims may be rescinded or cancelled. The plaintiff in Sloan was injured as a result of an automobile accident involving an employee of the defendant. Five weeks after the accident, and without prior negotiations, the parties entered into an agreement releasing defendant of liability. Some five months later, plaintiff manifested physical injury allegedly caused by the accident. Plaintiff sought to cancel or rescind the release. In addressing this issue, the Ohio Supreme Court observed that "[t]he dispositive inquiry . . . is what did the parties intend? If the facts indicate that the parties intended that all claims for all injuries would be relinquished, the release is not subject to rescission or cancellation in a court of equity." Id. at 152. In determining the parties' intent, certain factors are to be considered:
The absence of bargaining and negotiating leading to settlement; the releasee is clearly liable; absence of discussion concerning personal injuries; the contention that the injuries were in fact unknown at the time the release was executed is reasonable; an inadequate amount of consideration received compared with the risk of the existence of unknown injuries . . .; haste by the releasee in securing the release . . .; and the terms of the release exclude the injuries alleged. . . .Id. at 153 (internal citations omitted).
In the case presently before the Court, it is significant that Defendant does not seek to cancel or rescind the agreement by which the parties settled Plaintiff's breach of contract claim; Sloan is therefore inapposite. Rather, the Court understands Defendant's position to address the interpretation of the particular language of the Release and it is that issue that the Court will likewise address.
As Plaintiff points out, if the entire agreement were rescinded, his breach of contract claim would presumably be revived.
Under Ohio law, the interpretation of a written contract is first a matter of law for the court to determine. Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241 (1978). If the language of the agreement can be characterized as "plain and unambiguous," the intent of the parties must be determined "through only the language employed." Beverly v. Parilla, 848 N.E.2d 881, 886 (Ohio App. 2006), citing Davis v. Loopco Indus., Inc., 66 Ohio St.3d 64, 66, 609 N.E.2d 144 (1993). In contrast, if the language is ambiguous, "the court may consider extrinsic or parol evidence to ascertain the intent behind the language." Id.
In this case, the language of the Release is clear and unambiguous. In Section 5, Plaintiff releases Defendant from all claims concerning the controversy between these parties "except that Plaintiff specifically retains the right to pursue the indemnification claim set forth in the Controversy and the right assert claims based on a breach of this Agreement." Exhibit B attached to Motion for Summary Judgment, at 2 (emphasis in original). In contrast, Section 6 — which addresses Defendant's release of claims — makes no mention of either Plaintiff's claim for indemnification or Defendant's counterclaims responsive to that claim; the only articulated exception to Defendant's release is Defendant's "right to assert claims based on a breach of this Agreement." Id., at 3. By the express terms of the parties' negotiated settlement agreement and release, Defendant surrendered its right to pursue "any and all claims, suits, demands, causes of actions, debts, liability, damages, costs and expenses, whether in law or equity, known or unknown of any nature whatsoever concerning the Controversy between Plaintiff and Defendant, except that Defendant specifically retains the right to assert claims based on a breach of this Agreement." Id. Defendant's counterclaims are unquestionably claims "concerning the Controversy," as that term is used in the parties' agreement.
Defendant's argument that its claims were "unknown" at the time the Release was executed is equally unavailing. The Release expressly forecloses both "known and unknown" claims. Although the indemnification claim had, at the time, been dismissed from the action and was not yet the subject of an appeal, Section 8 makes clear that the "Settlement Agreement and Release is intended to and does cover all claims, whether known at the time of the execution of this release or not . . . and which may have been caused or claimed to have been caused by any and all transactions occurring prior to the date hereof concerning the alleged Controversy between Plaintiff and Defendant, other than the indemnification claim. . . ." Id. (emphasis in original).
Paragraph 2 of the agreement, which evidences the parties' "desire to compromise, adjust and settle the breach of contract claim . . .," Exhibit B, Id., does not militate a different result. This provision goes on to provide, "It is the specific intent of the parties not to settle the indemnification claim, and Defendant is fully aware that Plaintiff intends to continue to pursue that claim on appeal." Id. (emphasis in original). This provision simply cannot be read to contemplate Defendant's pursuit of its own claims.
Although Defendant may not have anticipated the reversal of the dismissal of the indemnification claim, the language of the agreement must be interpreted according to its express terms which, as the Court has found, are not ambiguous.
In short, and based on the clear and unambiguous language of the Release, the Court concludes that Defendant cannot proceed with its counterclaims.
WHEREUPON Plaintiff's Motion for Summary Judgment, Doc. No. 93, is GRANTED. Defendant's counterclaims are DISMISSED. Plaintiff's indemnification claim remains pending for resolution.