The opinion
[Cite as Fahey Banking Co. v. Grady & Assocs., 2024-Ohio-159.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
THE FAHEY BANKING COMPANY, :
Plaintiff-Appellant, :
No. 112417
v. :
GRADY AND ASSOCIATES, ET AL., :
Defendants-Appellees. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: January 18, 2024
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-21-953442
Appearances:
Cooper Elliot and Barton R. Keyes, for appellant.
Mazanec, Raskin, & Ryder Co., L.P.A., Joseph F. Nicholas,
Jr., Frank H. Scialdone, and Terrence L. Williams, for
appellees.
MARY J. BOYLE, J.:
Plaintiff-appellant, The Fahey Banking Company (“Bank”), appeals the
trial court’s judgment entry granting defendants-appellees, Grady and Associates
and its attorneys, Francis X. Grady (“Attorney Grady”) and Andrew Campbell’s
(collectively “Grady”), motion for summary judgment, raising one assignment of
error for review:
Assignment of Error: The trial court erred by granting [Grady’s]
motion for summary judgment.
For the reasons set forth below, we affirm the trial court’s ruling.
In September 2021, the Bank refiled a complaint against Grady for
legal malpractice. According to the complaint, the Bank is an Ohio corporation and
a stock state bank that retained Grady, a “boutique” law firm, and its attorneys who
focused on a broad range of transactional and regulatory matters for financial
institutions and related entities. Grady was retained to provide legal services to the
Bank in connection with various matters, including the review and presentation of
consulting agreements and employment contracts for the Bank’s executive officers.
The complaint states that “at all relevant times, [Grady] represented and had an
attorney-client relationship with [the Bank]” and “owed duties to [the Bank],
including a duty of care and a duty not to take actions that advanced interests of
other to the detriment of [Bank,]” but that “[Grady] at various times took actions to
benefit individual officers and directors of [the Bank], to the detriment of [the
Bank]” and caused the Bank significant damages. In its second cause of action, the
Bank claimed that, based upon Grady’s actions, it is entitled to disgorgement.
(Bank’s Complaint, 09/23/21.) Grady filed an answer to the refiled complaint.
Therein, Grady admitted that they represented the Bank and “owed a duty to the
[Bank] to act with the degree of skill, knowledge, care, and diligence normally
applied by members of the legal profession under like or similar circumstances.”
(Grady’s Answer, 10/25/21).
In February 2022, a remote case-management conference was held
and the following litigation schedule was set:
1. Plaintiff to provide expert reports by not later than 6/6/2022.
2. Defendants to provide expert reports by not later than 8/5/2022.
3. All discovery is to be completed by not later than 9/19/2022.
4. Dispositive motions to be filed by not later than 10/5/2022.
5. Trial is scheduled for 1/23/2023 at 8:00 a.m.
6. Trial order entered.
(Journal Entry, 02/25/22.)
On August 5, 2022, Grady filed a notice of identification of a defense
expert and produced their expert report. Two months later, on October 5, 2022,
Grady filed a motion for summary judgment. The Bank next filed an unopposed
motion to clarify briefing schedule, which the trial court granted on November 2,
2022, ordering the parties to follow Civ.R. 6(C) for response times. On November 2,
2022, November 11, 2022, and November 18, 2022, the Bank filed unopposed
motions for extension of time in which to file its brief in opposition to Grady’s
dispositive motion.1 On December 2, 2022, the Bank filed its brief in opposition.
Grady filed its reply brief in support of its summary judgment motion on
December 14, 2022. Approximately one month later, the trial court granted Grady’s
motion for summary judgment. The Bank timely appeals this order.
1 No rulings by the trial court were made on these motions for extension of time.
In its sole assignment of error, the Bank argues that the trial court
erred, as a matter of law, in granting Grady’s motion for summary judgment.
We review a trial court’s judgment granting a motion for summary
judgment de novo. Citizens Bank, N.A. v. Richer, 8th Dist. Cuyahoga No. 107744,
2019-Ohio-2740, ¶ 28. Thus, we independently “examine the evidence to determine
if as a matter of law no genuine issues exist for trial.” Brewer v. Cleveland City
Schools Bd. of Edn., 122 Ohio App.3d 378, 383, 701 N.E.2d 1023 (8th Dist.1997),
citing Dupler v. Mansfield Journal Co., Inc., 64 Ohio St.2d 116, 413 N.E.2d 1187
(1980). We, therefore, review the trial court’s order without giving any deference to
the trial court. Citizens Bank at ¶ 28. “On appeal, just as the trial court must do, we
must consider all facts and inferences drawn in a light most favorable to
the nonmoving party.” Glemaud v. MetroHealth Sys., 8th Dist. Cuyahoga No.
106148, 2018-Ohio-4024, ¶ 50, citing N.E. Ohio Apt. Assn. v. Cuyahoga Cty. Bd. of
Commrs., 121 Ohio App.3d 188, 192, 699 N.E.2d 534 (8th Dist.1997).
The moving party has the initial responsibility of informing the trial
court of the basis for the motion and identifying those portions of the record that
demonstrate the absence of a genuine issue of material fact on the essential elements
of the nonmoving party’s claims. Dresher v. Burt, 75 Ohio St.3d 280, 292-293, 662
N.E.2d 264 (1996). “To accomplish this, the movant must be able to point to the
evidentiary materials of the type listed in Civ.R. 56(C) that a court is to consider in
rendering summary judgment.” Id. These include “the pleadings, depositions,
answers to interrogatories, written admissions, affidavits, transcripts of evidence,
and written stipulations of fact, if any.” Civ.R. 56(C). “These evidentiary materials
must show that there is no genuine issue as to any material fact, and that the moving
party is entitled to judgment as a matter of law.” Dresher at 293. After the moving
party has satisfied this initial burden, the nonmoving party has a reciprocal duty to
set forth specific facts by the means listed in Civ.R. 56(C) showing that there is a
genuine issue of material fact. Id.
Grady does not dispute that an attorney-client relationship existed
between them and the Bank and that they had professional duties arising from that
relationship. Grady argued in their motion for summary judgment that the Bank’s
legal malpractice fails as a matter of law because it did not produce the requisite
expert testimony to establish that Grady breached their standard of care. Grady
further asserted that the only competent evidence regarding the standard of care
and duty owed were the opinions of their expert, who opined that Grady complied
with those duties and satisfied their obligations to provide competent representation
to the Bank. Moreover, Grady claimed that the Bank’s claim for disgorgement also
fails as a matter of law because there is no such claim in Ohio.
Attached to Grady’s motion for summary judgment was the affidavit
of their defense expert, Benjamin A. Barnhill (“Barnhill”), a practicing attorney who,
for the past 15 years, represented community banks and vendor companies and
advised those banks on corporate, transactional, regulatory, securities, governance,
change-in-control, and executive compensation matters. The affidavit included a
true and accurate copy of Barnhill’s expert report and curriculum vitae. In his
report, Barnhill opined that 1) Grady appropriately structured compensation
agreements to comply with applicable laws; 2) Grady had a reasonable basis to
believe that the compensation agreements were reasonable given the Bank’s size,
health, and relevant industry; 3) it was reasonable for Grady to rely upon the Bank’s
board of directors to determine the appropriateness of the compensation
agreements and whether to approve them on behalf of Bank; 4) Grady addressed
any perceived conflict of interest by seeking and receiving informed approval for the
employment agreements from the board; and 5) Grady satisfied their obligation to
provide competent representation to the Bank.
The Bank countered by arguing that summary judgment is not
proper in this matter because it set forth specific facts in its brief in opposition
showing that it did not need expert testimony to support its causes of action proving
that Grady owed a professional duty, breached that duty, and caused the Bank
damages. Specifically, the Bank contended that Grady advised Carl Hughes (“C.
Hughes”), the Bank’s former chief executive officer, and Coleman Clougherty
(“Clougherty”), the Bank’s former chief operating officer, how to protect their
personal interests, negotiate against the Bank, and extend their tenure at the Bank.
The Bank explained that an attorney-client relationship existed only between the
Bank and Grady, and never with individual executive officers. The Bank argued that
Grady’s actions clearly violated a lawyer’s duty of loyalty because C. Hughes and
Clougherty were adverse parties to the Bank, the corporation Grady was
representing. The Bank asserted that large amounts of the work Grady performed
and the Bank paid for involved consulting agreements and employment contracts
for C. Hughes and Clougherty that were as executive friendly as possible and efforts
to ensure the personal interests of these individual executive officers were better
served. The Bank claimed that it did not need an expert to establish the standard
of care or its breach because it was obvious and within the understanding of a
layperson that an attorney should not advise a party on the opposite side of a
transaction to his client.
Contemporaneously with the filing of its brief in opposition, the Bank
filed two affidavits, to wit: the affidavit of Barton R. Keyes (“Keyes”), the Bank’s
current counsel, and the affidavit of Martin J. Hughes, III (“M. Hughes”), the Bank’s
current president and one of the largest shareholders. In his affidavit, Keyes
authenticated and included documents that were produced in discovery, i.e., Grady’s
written engagement; email correspondence; pre-bill worksheets; letters;
employment agreements; and invoices. The Bank quoted specific portions of these
documents in its brief in opposition and argued that Grady’s statements like “[t]his
contract is as CEO friendly as possible” and “your personal interests are better
served by a more comprehensive employment contract similar to the sample
document I am providing you” supported its position that there was an obvious and
ascertainable breach of the standard of care and duty of loyalty because Grady was
providing advice to opposing parties. (Bank’s Brief in Opposition, 12/02/22.)
In the other affidavit, M. Hughes averred to his personal knowledge
of the following facts:
2. I am currently employed at [the Bank] as its President and am one
of the largest shareholders of the Bank. My current tenure at [the
Bank] began in early 2019.
3. Both [C. Hughes] and [Clougherty] (“then-management”) worked
for the bank before their entering into the employment and related
agreements in which [Attorney] Grady was involved in 2017.
4. Even before [Attorney] Grady’s representation of [the] Bank began
in 2017, I believed the Bank was being poorly run, and that there were
serious improprieties that needed to end. I had been vocal about this
to the Board of Directors, to Mr. Clougherty, and to other shareholders.
Ultimately, I wanted to effect a change in the board and change in
management consistent with my rights as a shareholder, and always
within any legal or regulatory restrictions that might apply. I
undertook efforts to do so. If successful, these efforts would have
resulted in [C. Hughes] and Clougherty no longer holding their
positions at the Bank.
5. Because of my efforts, I was heavily involved in litigation,
arbitration, bank regulator proceedings, and other disputes with the
Bank under its then-management, as well as disputes with [C. Hughes]
that would affect who had authority to vote substantial numbers of
shares of [the] Bank[’s] stock (in turn potentially affecting the election
of directors who select management). Through those disputes, I came
to know of [Attorney] Grady’s and his firm’s involvement representing
the Bank.
6. I also came to know of a number of improper efforts by then-
management, and Defendant counsel to restrain or discourage me and
other shareholders who also sought to legally exercise our voting rights
to stop prior management from continuing to enrich themselves at the
expense of the bank. For example:
a. Then-management and Grady and his firm submitted false
allegations to multiple bank regulators suggesting that I had
violated the federal Change in Bank Control Act (and the Ohio
equivalent), allegedly by crossing a voting threshold of voting rights
that required prior regulatory approval. They supported these
allegations with a false record of the level of my voting rights. They
also denied my access to the correct voting rights information by
refusing my legal right as a shareholder to inspect the bank records.
They sought an order from the regulator barring me from
participating in the affairs of any financial institution. With my
votes barred, [C. Hughes] and Clougherty could not have been
removed and would remain in place continuing to receive the
lucrative benefits from their management friendly contracts. As a
result of these false allegations, I was forced to go through a
government investigation, the bank was forced to pay large legal
fees to [Attorney] Grady’s firm, and then-management remained in
place. The investigation only ended much later when I discovered
that a component line item in the alleged record submitted by Grady
permitted me, with access to the bank records previously
improperly blocked, to prove to the regulators that the total voting
rights claimed in the documents submitted by then-management
and Grady was false.
b. Then-management gave change in control agreements to several
manager-level employees who did not have them before. These
agreements gave these employees the right to substantial separation
pay if, after a change in the majority of the board of directors, the
employee leaves for certain reasons. One of those reasons was a
material diminution of the authority, duties, or responsibilities not
just of the employee, but alternatively of the supervisor to whom the
employee reported (i.e., Clougherty or [C. Hughes]). These
agreements also lacked noncompete provisions. This created
cascading incentives for all management personnel to leave at once
after a change in control, thus potentially discouraging efforts to
change the board and remove [C. Hughes] and Clougherty from the
Bank. They then argued in court that the shareholder vote to
remove incumbent management needed to be enjoined because it
could result in almost all department heads leaving the bank at
once.
c. Two other unrelated [Bank] shareholders with significant
holdings were also active in the banking industry. They also voted
to remove incumbent management. As soon as they did so, then-
management and Grady filed complaints with multiple banking
regulators alleging that the other shareholders, too, were violating
the Change in Bank Control Act—again seeking to negate their votes
that could remove [C. Hughes] and Clougherty. One of these two
shareholders was also the President and a director of another bank
that was going through a major merger transaction. Grady also filed
objections to the merger with several banking regulators alleging
that the President/Director was engaging in illegal activities. Again,
Grady’s allegations against people that opposed the continued
tenure of [C. Hughes] and Clougherty had no merit and the
regulators approved the transaction.
d. My mother owned a significant block of [the] Bank[’s] stock. Its
disposition upon her death was controlled by a trust. The stock
beneficiaries under the trust were Robin Hughes (the wife of our
brother Paul, who had recently died from multiple sclerosis), as
trustee for their children, and me. Robin and her children made
clear they intended to vote their shares to change the Board so that
then-management could be removed. [C. Hughes], having already
received one-third of Natalie’s stock, then used his position as co-
trustee to refuse to transfer the remaining shares to Robin and me,
who sought to change the Board and management, so that we could
not vote them. [C. Hughes] also sought in an arbitration to have
Paul’s children disinherited. Ultimately, the arbitrator removed [C.
Hughes] as co-trustee for gross abuse of his fiduciary duty for using
his position as trustee to preserve his personal interest in extending
his tenure at [the] Bank. [Attorney] Grady and his firm participated
in discussions with [C. Hughes]’s litigation counsel, and billed that
time to [the] Bank. Also, [C. Hughes], Clougherty, and Grady used
the delay to try to amend the bank’s Code of Regulations to extend
the terms of the incumbent directors to three years — again
preserving the time [C. Hughes] and Clougherty could remain at the
bank receiving their benefits at the expense of the bank. Again,
[Attorney] Grady and his firm billed this time to the [B]ank.
e. For the 2018 shareholder meeting, then-management hired its
own inspector of elections and communicated with him before and
after the shareholder meeting in response to the inspector’s
questions about how they wanted him to count the votes. The
inspector declared that I had fewer votes than I did, with the effect
being that the board (and therefore [C. Hughes] and Clougherty)
remained in place. This effect was only undone through litigation,
at which point the shareholder meeting was reconvened, the votes
counted correctly, the board changed, and prior management was
out.
7. If then-management had succeeded in the efforts I describe in
paragraph 6, it would have the effect of discouraging or outright
preventing me and other shareholders from exercising our voting
rights to change the board of directors, which in turn would have
prevented [C. Hughes] and Clougherty’s removal from their positions
as chief executive officer and chief operating officer. None of the
regulatory allegations or other efforts succeeded.
8. I have reviewed invoices submitted by [Attorney] Grady’s firm and
paid by the [B]ank. These invoices show that large amounts of the work
[Attorney] Grady and his firm did, and for which the [B]ank paid his
firm more than half a million dollars, were related to [C. Hughes] and
Clougherty’s employment and related agreements and subsequently to
the efforts I describe in paragraph 6. After secretly ensuring that then-
management’s “personal interests are better served” against the
interests of his own client, Grady continued to take wasteful and false
actions in the name of his client, but all serving the interest of the same
officers of continuing in the positions where there “personal interests
are better served” under contracts that are “as [officer] friendly as
possible.” The vast majority of the nearly $550,000 in fees Grady billed
to the bank were for these activities.
9. I have seen nothing in the Bank’s records indicating that Grady ever
disclosed to the Bank that he had advised [C. Hughes] and/or
Clougherty about their personal interests or provided them contracts
that were as executive-friendly as possible while representing the Bank
in connection with the contracts.
(Affidavit of M. Hughes, 12/02/22.)
Finally, the Bank claimed that Grady, as the Bank’s lawyers, were
fiduciaries who owed a duty of undivided loyalty to the Bank. The Bank asserted
that
‘[c]ourts throughout the country have ordered disgorgement of fees
paid or the forfeiture of fees owed to attorneys who have breached their
fiduciary duties to their clients by engaging in impermissible conflicts
of interest.’ Maritrans GP, Inc. v. Pepper, Hamilton & Scheetz, 529
Pa. 241, 258, 602 A.2d 1277 (Pa. 1992) (citing, e.g., White v. Roundtree
Trans., Inc., 386 So.2d 1287 (Fla.App. 1980); Perl v. St. Paul Fire &
Marine Ins. Co., 345 N.W.2d 209 (Minn.1984); Rice v. Perl, 320
N.W.2d 407 (Minn.1982); Financial Gen. Bankshares, Inc. v. Metzger,
523 F.Supp. 744 (D.D.C.1981), vacated on jurisdictional grounds, 680
F.2d 768 (D.C.Cir.1982); Goldstein v. Lees, 46 Cal.App.3d 614, 120
Cal.Rptr. 253 (1975); and Zeiden v. Oliphant, 54N.Y.S.2d27
(Sup.Ct.1945)).
(Bank’s Brief in Opposition, 12/02/22.) Quoting Eleventh District, Sixth Circuit,
and out-of-state caselaw, the Bank argued that expert testimony was not needed to
establish damages because even without proof of separate harm, courts have long
recognized disgorgement of money paid to a disloyal fiduciary. See e.g., In re Estate
of Fraelich, 11th Dist. Trumbull No. 2000-T-0016, 2004-Ohio-4538, 23 (“‘A lawyer
engaging in clear and serious violation of duty to a client may be required to forfeit
some or all of the lawyer’s compensation for the matter.’ Restatement of Law
Governing Lawyers 3d, Section 37. ‘Even if a fee is otherwise reasonable,’ a fee may
still be subject to forfeiture. Restatement of Law Governing Lawyers 3d, Section 37,
Comment a.”); Wischermann Partners, Inc. v. Nashville Hosp. Capital LLC, 6th Cir.
No. 21-5326/21-5604, 2022 U.S. App. LEXIS 17133, 12-13 (June 21, 2022), quoting
Crawford v. Logan, 656 S.W.2d 360, 364 (Tenn. 1983) (“‘Misconduct in violation
of a statute or acts against public policy, or in breach of an attorney’s fiduciary duty
to his client, may support a complete forfeiture of fees.’”); Burrow v. Arce, 997
S.W.2d 229, 232 (Tex.1999) (“The principal question in this case is whether an
attorney who breaches his fiduciary duty to his client may be required to forfeit all
or part of his fee, irrespective of whether the breach caused the client actual
damages. Like the court of appeals, we answer in the affirmative and conclude that
the amount of the fee to be forfeited is a question for the court, not a jury.”); Hendry
v. Pelland, 315 U.S.App.D.C. 297, 73 F.3d 397, 401 (1996) (“[T]o the extent [that
clients] sought disgorgement of legal fees, they needed to prove only that [their
attorney] breached his duty of loyalty, not that his breach proximately caused them
injury.”).
In their reply brief, Grady included the affidavit of Attorney Grady to
further support their motion. In the affidavit, Attorney Grady described his
experience as a banking attorney and his knowledge of standard practices within the
industry. Attorney Grady confirmed that Grady was retained by the Bank and
explained the nature of the work Grady performed, including their role in drafting
various agreements for the Bank’s executive officers at the Bank’s request. Attorney
Grady averred that one agreement utilized similar terms from an existing
employment agreement and clarified others. Attorney Grady claimed that Grady
was required to work with individual executives in the preparation of certain
agreements and that this was standard practice in the banking and regulatory
industry. Attorney Grady explained that prior to approval, each proposed
agreement was presented to the Bank’s board for review after drafting was complete
and that he prepared summaries for the board’s review and met with its members
on several occasions to answer questions and address concerns. Attorney Grady
averred that the Board, including disinterested members, approved each of the
agreements. Finally, Attorney Grady stated that “[t]he executive agreements were
in line with other similarly situated Ohio banks” and “[e]ach of [them] were
prepared and approved in a manner consistent with [his] practice and the standard
industry practice.” (Grady’s Reply in Support, Exhibit 1: Affidavit of Attorney Grady,
12/14/22.) Grady argued that the Bank’s recitation of facts failed to create a genuine
issue of material fact because the statements cited did not establish an actionable
conflict of interest, the communications questioned were standard within banking
industry practice, and the agreements criticized were approved by the board. Grady
also claimed that their representation of the Bank in resisting the change in control
pursued by M. Hughes was authorized under Ohio law. Grady further asserted that
expert testimony was necessary to establish any alleged breach of duty and a causal
connection between the fees Grady charged and the alleged breach.
It is well settled in Ohio that in order to prevail on a legal malpractice
claim, a plaintiff (the Bank) must demonstrate through expert testimony, by a
preponderance of the evidence, that the representation of the attorney failed to meet
the prevailing standard of care and that this failure proximately caused damage or
loss to the client. This court discussed this principle in Jarrett v. Forbes, 8th Dist.
Cuyahoga No. 88867, 2007-Ohio-5072, ¶ 19, when it summarized the Ohio Supreme
Court decision of Vahila v. Hall, 77 Ohio St.3d 421, 674 N.E.2d 1164 (1997), stating:
“[T]he Ohio Supreme Court defined the elements that must be established to make
a case for legal malpractice. The Supreme Court made it clear that there must be a
causal connection between the lawyer’s failure to perform and the resulting damage
or loss.” “Because the elements of a legal-malpractice claim are stated in the
conjunctive, the failure to establish any one element of the claim is fatal.” Niederst
v. Kohrman Jackson & Krantz, L.L.P., 8th Dist. Cuyahoga No. 110913, 2022-Ohio-
2579, ¶ 18, citing Estate of Hards v. Walton, 8th Dist. Cuyahoga No. 93185, 2010-
Ohio-3596, ¶ 7, and Williams-Roseman v. Owen, 10th Dist. Franklin No. 99AP-871,
2000 Ohio App. LEXIS 4254 (Sept. 21, 2000). Expert testimony is required to
sustain a claim of legal malpractice except where the alleged errors are so simple
and obvious that it is not necessary for an expert’s testimony to demonstrate the
breach of the attorney’s standard of care. Hirschberger v. Silverman, 80 Ohio
App.3d 532, 538, 609 N.E.2d 1301 (6th Dist.1992); McInnis v. Hyatt Legal Clinics,
10 Ohio St.3d 112, 113, 461 N.E.2d 1295 (1984); Rice v. Johnson, 8th Dist. Cuyahoga
No. 63648, 1993 Ohio App. LEXIS 4109 (Aug. 26, 1993); Cross-Cireddu v. David J.
Rossi Co., L.P.A., 8th Dist. Cuyahoga No. 77268, 2000 Ohio App. LEXIS 5480
(Nov. 22, 2000).
In the case sub judice, the Bank claims that its failure to produce an
expert report supporting its refiled claim of legal malpractice is not fatal given the
alleged acts of malpractice by Grady. The Bank asserts that the evidence offered in
opposition to Grady’s motion for summary judgment documents Grady’s disloyalty
in advising C. Hughes and Clougherty how to protect their personal interests and
negotiate against the Bank, Grady’s client. The Bank argues that Grady did not have
an attorney-client relationship with any of the Bank’s individual executives and had
“no conceivable obligation to advise the opposite party.” The Bank further claims
that Grady did not request or obtain any conflict waivers related to the advice for
and negotiation of C. Hughes and Clougherty’s employment agreements and
contracts. The Bank argues that Grady’s actions demonstrate a clear conflict of
interest that breached the standard of care. The Bank asserts that this breach is so
simple and obvious that it is within the understanding of a layperson. The Bank
argues that the lack of an expert report obviated the need for expert testimony
demonstrating that the attorneys owed a duty or obligation to it.
Grady does not dispute that an attorney-client relationship existed
between them and the Bank and that they had professional duties arising from that
relationship. Thus, the issues for resolution are whether Grady breached the
professional duties owed to the Bank and whether that breach proximately caused
damages to the Bank. In order to determine whether Grady breached its
professional duties, we need to discuss what duty was owed. “‘The duty of an
attorney to his client is to “* * * exercise the knowledge, skill, and ability ordinarily
possessed and exercised by members of the legal profession similarly situated, and
to be ordinarily and reasonably diligent, careful, and prudent in discharging the
duties he has assumed.”’” Estate of Hards at ¶ 9, quoting Palmer v. Westmeyer, 48
Ohio App.3d 296, 298, 549 N.E.2d 1202 (6th Dist.1988), quoting 67 Ohio
Jurisprudence 3d, Malpractice, Section 9 at 16 (1986).
To support its argument that an expert is not needed, the Bank
highlights dicta from an out-of-state, federal case for the proposition that “[a]
person does not need a law degree to understand the conflict that comes from
standing on both sides of a transaction * * *.” Nasrabadi v. Kameli, N.D.Ill. No. 18
C 8514, 2019 U.S. Dist. LEXIS 84266 (May 20, 2019). But ultimately, the Bank relies
on Riley v. Clark, 4th Dist. Scioto No. 98CA2629, 1999 Ohio App. LEXIS 5436 (Nov.
10, 1999), to substantiate its position that expert testimony was not necessary to
establish its legal-malpractice claim against Grady.
Conversely, Grady argues that the lower court properly granted
summary judgment in their favor because (1) the Bank failed to produce the
requisite expert testimony and (2) the only competent evidence regarding the
standard of care or any alleged breach establishes that Grady satisfied their duty to
Bank. Grady claims that the Bank must produce expert testimony to establish that
Grady breached the requisite standard of care given the complexities of the claims,
allegations, and legal issues raised in this case, which involve the structuring and
drafting of contracts and compensation agreements for various bank executives.
Grady asserts that any breach of the standard of care in such complex matters is not
obvious or within the ordinary knowledge of a layperson. In support of their
argument, Grady distinguishes Riley and argues that Northwestern Life Ins. Co. v.
Rogers, 61 Ohio App.3d 506, 512, 573 N.E.2d 159 (10th Dist.1989), is more
analogous.
In Riley, plaintiffs filed a legal-malpractice action against their
attorney, alleging that their lawyer betrayed their trust by neglecting to inform them
that their respective interests were adverse; breached his duty when he failed to
advise them of crucial information known to him; and caused harm by advising
them to purchase a business, that he secretly owned in part, despite knowledge of
the business’s extensive financial troubles. Id. at 22. After the trial court granted
the attorney’s motion for summary judgment, the plaintiffs argued on appeal that
they presented sufficient evidence of breach of duty and proximate cause and were
not required to present expert testimony because the applicable standard of care and
its relation to their injury was obvious even to a lay jury. Id. at 20-21. The Fourth
District Court of Appeals found that the questions of whether the attorney breached
his duty to the plaintiffs and whether he proximately cause their harm was within
the jury’s general experience and knowledge because the conflict was not complex
or unclear: the attorney, as a partial owner of the failing business, profited directly
from advising his clients to pay an inflated price for its purchase. Id. at 24-25.
Comparatively, in Northwestern Life Ins. Co., plaintiffs filed a legal-
malpractice action against their attorney, alleging that he had a conflict of interest
in violation of the Code of Professional Responsibility when he was retained to
represent them after they entered into a real estate contract and when he had an
interest in the title insurance company involved in the transaction. Id. at 161. The
Tenth District Court of Appeals held that it was not a case where the attorney’s
misconduct was obvious from the record and expert testimony was required to
support the allegations due to “the very nature and complexity of the Code of
Professional Responsibility and the conduct of legal matters.” Id. at 163-164
(“Expert testimony is required so that the trier of fact does not have to speculate on
the standard of care, particularly in a complex case involving real estate transactions
which are normally not within the realm of understanding of a layman.”).
We agree with Grady and find that the alleged conflict of interest
between Grady, the Bank, and the Bank’s executives is not as direct and clear as the
conflict in Riley, 4th Dist. Scioto No. 98CA2629, 1999 Ohio App. LEXIS 5436, and
more akin to complex conflict presented in Northwestern Life Ins. Co., 61 Ohio
App.3d 506, 512, 573 N.E.2d 159. The Bank’s allegations of malpractice against
Grady contemplate the communications, strategies, and tactical decisions involved
in resisting a change in control and structuring, drafting, and negotiating complex
agreements and contracts for the Bank’s executives. The complexity of Grady’s
alleged malpractice is even more apparent when considering the affidavit of M.
Hughes, one of the Bank’s largest shareholders and current president. M. Hughes’s
tenure began in early 2019, after Grady was retained by the Bank to draft C.
Hughes’s and Clougherty’s employment agreements and contracts. In the affidavit,
M. Hughes described his dissatisfaction with the Bank’s operations, even prior to
Grady’s involvement, and his efforts to put an end to “serious improprieties” by
effecting changes in the board and management that were consistent with his rights
as a shareholder and within any applicable legal or regulatory restrictions. M.
Hughes detailed the actions C. Hughes, Clougherty, and Grady took to combat his
efforts, including suggesting that he violated federal and state banking rules and
regulations, creating a false record, filing complaints against shareholders and
objections to a merger, attempting to amend the Bank’s code of regulations, and
hiring their own inspector of elections to prevent shareholders from exercising their
voting rights. M. Hughes further described issues surrounding his family trust and
C. Hughes’s actions as a trustee and indicated that Grady participated in discussions
with C. Hughes’s litigation counsel. The evaluation of such complex matters, like
those presented by the Bank and detailed in the affidavit of M. Hughes, are not so
obvious and within the general experience or knowledge of a layperson. See, e.g.,
Niederst, 8th Dist. Cuyahoga No. 110913, 2022-Ohio-2579 (holding expert
testimony was necessary to establish the plaintiff’s allegations of malpractice, which
involved tactical legal decisions that were more complex than merely missing a court
deadline); Richard C. Alkire Co., L.P.A. v. Alsfelder, 8th Dist. Cuyahoga No. 104153,
2017-Ohio-1547 (finding expert testimony was necessary to support the plaintiff’s
legal-malpractice claim because a disciplinary matter before the Ohio Supreme
Court was complex and not within the ordinary knowledge of the layman);
Northwestern Life Ins. Co. (holding expert testimony was required in a complex
case involving real estate transactions, the conduct of legal matters, and the Code of
Professional Responsibility).
Moreover, Grady presented evidence in support of their motion for
summary judgment, through the affidavits of Attorney Grady and Barnhill, the
defense’s expert, that Grady’s conduct did not breach the standard of care and was
consistent with standard industry practices. The Bank did not produce any evidence
in its brief in opposition to Grady’s motion for summary judgment establishing
1) what the appropriate standard of care is or 2) how Grady’s conduct breached that
standard. Rather, the Bank summarily concludes that, based on the produced
documents and affidavit of M. Hughes, Grady’s conduct amounted to obvious
malpractice that is simple to understand. We disagree and cannot say that the
Bank’s legal-malpractice claim is so obvious and within the ordinary knowledge of a
lay person that expert testimony is not needed. Rather, due to the complex nature
of the banking and regulatory industry and the legal issues and allegations involved
in the Bank’s malpractice claim, the Bank was required to present expert testimony
to establish its claim that Grady breached its duty to the Bank. Because the Bank
did not produce an expert report, it failed to satisfy its reciprocal duty showing that
genuine issues of material fact remain as to its legal-malpractice claim. Therefore,
the trial court properly granted summary judgment in favor of Grady.
As argued by Grady, we note that disgorgement is a remedy for a
claim, not a claim for relief itself under Ohio law. Cirino v. Bur. of Workers’ Comp.,
2021-Ohio-1382, 171 N.E.3d 840, ¶ 16 (10th Dist.), citing Stepak v. Schey, 51 Ohio
St.3d 8, 15, 553 N.E.2d 1072 (1990) (noting that disgorgement is a remedy for breach
of fiduciary duty); Nick Mayer Lincoln Mercury v. Ohio Bur. of Workers’ Comp.,
8th Dist. Cuyahoga No. 93752, 2010-Ohio-2782 (dismissal of complaint was in error
where disgorgement was plaintiff’s prayer for relief, not its claim for relief);
Wauseon Plaza, Ltd. Partnership v. Wauseon Hardware Co., 156 Ohio App.3d 575,
2004-Ohio-1661, 807 N.E.2d 953, ¶ 80 (6th Dist.) (“Our review of Ohio law indicates
that disgorgement is an available remedy for a claim of breach of fiduciary duty.”).
Because we find that the Bank’s legal-malpractice claim must fail as a matter of law,
it is not entitled to the remedy of disgorgement. Accordingly, we find that the trial
court did not err in granting summary judgment in favor of Grady and overrule the
Bank’s sole assignment of error.
Accordingly, judgment is affirmed.
It is ordered that appellees recover from appellant 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.
_________________________
MARY J. BOYLE, JUDGE
ANITA LASTER MAYS, P.J., and
MICHELLE J. SHEEHAN, J., CONCUR