Mehwald v. Atl. Tool & Die Co.

223 N.E.3d 138

2023-Ohio-2778

Michael MEHWALD, Plaintiff-Appellee,

v.ATLANTIC TOOL & DIE COMPANY, et al., Defendants-Appellants.

Nos. 111692, 111901 and 111904

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

Released and Journalized: August 10, 2023

Civil Appeal from the Cuyahoga County Court of Common Pleas, Case No. CV-20-931014.

Schneider Smeltz Spieth Bell LLP, and Thomas J. Connick, Beachwood, Mark M. Mikhaiel, Cleveland and Jenna R. Bird, for appellee.

Gallagher Sharp LLP, Monica A. Sansalone and Maia E. Jerin, Cleveland, for appellants Walter Haverfield LLP, Mark S. Fusco Sara Ravas Cooper, Cleveland and Kirk W. Roessler.

Wickens Herzer Pana, Matthew W. Nakon, Rachelle Kuznicki Zidar, Avon and Matthew N. Danese; Milano Attorneys at Law, Jay Milano and Katelyn Pruchnicki, Cleveland, for appellant Atlantic Tool & Die Company.

JOURNAL ENTRY AND OPINION

MARY J. BOYLE, J.:

{¶ 1} In this consolidated appeal, defendants-appellants, Atlantic Tool & Die Company ("ATD"), and Walter Haverfield LLP, Mark S. Fusco, Sara Ravas Cooper, and Kirk W. Roessler (collectively referred to as "WH"), appeal three different journal entries.¹ ATD appeals an order appointing a receiver sua sponte and an order to produce documents that it claims to be protected by the work-product doctrine and consulting-expert privilege. WH appeals an order to produce documents that they claim to be protected by the attorney-client privilege. Because the trial court appointed a receiver in an unwarranted way and improperly ordered the disclosure of purportedly privileged documents on the basis of privity and shared privilege, we vacate the trial court’s July 1, 2022, August 22, 2022, and August 25, 2022 journal entries and remand for further proceedings.

I. Relevant Facts and Procedural History

{¶ 2} Our recitation of the facts is limited to those relevant to the issues raised in this interlocutory appeal. Plaintiff-appellee, Michael Mehwald ("Son"), Frank Mehwald ("Father"), and Mary Mehwald ("Stepmother") have been involved in multiple legal actions that appear to be motivated by the family’s closely held company, ATD. ATD was founded in 1937 by Father’s father, along with three other partners, and became solely owned by the Mehwald family in 1958. ATD is a supplier of parts in the auto industry with locations in Ohio, Texas, Costa Rica, China, and Mexico and is "a global 100 Million Dollar Plus company." (Amended Complaint, 05/25/22.) Per the amended complaint, Father is the CEO, president, and majority shareholder of ATD. Son is a minority shareholder and the former executive vice president and director of ATD’s board. WH previously represented Father and Stepmother individually and Father in his capacity as a majority shareholder. WH currently represents ATD in another pending lawsuit.

{¶ 3} The underlying lawsuit was filed by Son, in his individual capacity, in March 2020 after he was terminated from ATD in April 2019. In May 2022, Son filed an amended complaint asserting the following claims for relief against ATD, Father, Stepmother, WH, and two members of ATD’s board of directors: wrongful termination; retaliation; legal malpractice; breach of fiduciary duty; tortious interference with Son’s business relations and economic advantage; fraud in the concealment; constructive fraud; tortious interference with Son’s employment relationship; civil conspiracy; promissory estoppel; and vicarious liability/respondeat superior. The amended complaint also included a petition for receivership and a request for the accounting or inspection of corporate books and records, the allegations of which are denied in the answer and counterclaim of ATD, Father, and Stepmother.

{¶ 4} From the onset of Son’s lawsuit, the parties engaged in extensive motion practice on various issues and discovery matters. Son propounded interrogatories, requests for production of documents, and requests for admissions to WH. Son also served a subpoena upon Technology Concepts & Design Inc. ("TCDI") commanding the production of the following: engagement letters, agreements or contracts, and letters, emails, text messages, documents, or electronically stored information ("ESI") relating to communications between TCDI and ATD, Father, Stepmother, and WH; electronic, audio, or video recordings; forensic images, copies, or duplicates of a laptop and cell phone belonging to ATD; and chain of custody forms, notes, reports, spreadsheets, summaries of findings, supporting materials, printouts, file listing inventories, directories, internet history reports, keyword lists, results from keyword searches, file carving utilities, unallocated or slack space, deleted files, native files, metadata, documents, or ESI relating to the analysis of the laptop and cell phone, a certain project, Son, or other specified individuals.

{¶ 5} In response, ATD filed a motion for protective order or, in the alternative, to quash the subpoena issued to TCDI. Therein, ATD claimed that TCDI was "a non-testifying/consulting-expert that was retained by ATD in early 2019 in connection with Cuyahoga County Case No. 18CV908866 * * *, which was dismissed" with prejudice. (Motion, 04/06/22.) ATD further noted that the trial court in Case No. 18CV908866, a prior lawsuit filed by Father and Stepmother against Son and other parties, issued a protective order after "a nearly identical" subpoena was served upon TCDI in that case. Son filed a brief in opposition, and ATD filed a reply in support. A pretrial hearing was then held to discuss a number of pending matters, including ATD’s motion regarding the TCDI subpoena. The trial judge commented that "everybody wants arguing over this business, which is apparently a successful" business, but there are some issues about how it’s being run or financed." (05/10/22, tr. 8). Following the hearing, the trial court issued a journal entry denying ATD’s motion for protective order or to quash the subpoena issued to TCDI.

{¶ 6} About two weeks later, Son filed a motion to compel and show cause for contempt, along with subsequent replies in support, claiming ATD and TCDI failed to comply with the trial court’s order by "asserting objections, privilege among them, as the basis for effusing full, complete, and unredacted production of the documents requested." (Motion, 05/23/22.) The trial court subsequently issued an order inviting the parties to file all grievance motions, briefs in opposition, and replies in support; set deadlines; and scheduled a motion hearing.

{¶ 7} ATD filed a brief in opposition and requested clarification of the trial court’s order denying ATD’s motion for protective order because it was unclear whether the trial court ordered the production of privileged materials to Son or directed ATD to submit the materials with a privilege log to the court for in camera inspection. Non-party TCDI also filed a brief in opposition. Therein, TCDI explained its role as follows:

TCDI is a technology and cybersecurity firm specifically retained as an independent consulting-expert for [ATD] pursuant to an Electronic Discovery and Computer Forensics Agreement * * * between the parties. TCDI has no control over disposition of any documents or data under the agreement. TCDI acts merely as a custodial expert. * * * The written engagement agreement betweenTCDI and ATD confirmed and acknowledged that TCDI’s consulting-expert services were confidential and privileged, that ATD and its attorneys hold the privilege as to TCDI’s consulting-expert engagement, and TCDI would not produce information or documents it held or developed for ATD and its attorneys without their written consent.

(Brief, 06/06/22.)

{¶ 8} Son also filed a motion to compel discovery from WH alleging that WH failed to provide full, accurate, and sufficient discovery responses to which Son was entitled based on his "third-party attorney-client relationship" with WH. (Motion, 06/10/22.) WH filed a brief in opposition asserting that WH never represented Son, rather, "[Son] has at all times been adverse to [WH] relative to the representation of [Father], [Stepmother], and/or ATD." (Brief, 06/22/22.) Son filed a reply in support, and a pretrial hearing was held on June 30, 2022.

{¶ 9} Without motion, notice, or prior argument of counsel, the trial court advised the parties at the beginning of the hearing that a receiver, who appeared via Zoom, was to be appointed. The trial court judge stated, "So I’ll tell you, in the best interest of the company here, due to the multiple lawsuits and allegations by all the parties that the other parties are pilfering from the company and/or looting the company, I am appointing a receiver. At this point, I think that is best for the company." (06/30/22, tr. 42.) ATD’s counsel immediately objected and requested an evidentiary hearing prior the receiver’s appointment, explaining:

[ATD] is a hundred[-]million[-]dollar company. [Son] no longer works there. It is being run fine. There [are] no problems going on with the company. This will affect their banking. This will affect their international business.

* * *

[T]here are no facts before you. There are merely allegations. * * * This is a relatively simple case, and it is not necessary under those circumstances, without having some evidence before you, that you appoint this receiver, because what will happen here is this will affect the banks. This will affect their relationship. They deal with foreign companies, mostly in Japan, and by doing all this, you’ll be sending a message to the market that this company is in trouble, and it’s not. The company is in fine shape right now. It’s running just fine.

* * *

Without evidence that this company is somehow being damaged, based only on allegations in the pleadings, not even depositions, just allegations in the pleadings, you are putting a very clear risk — if this hits the business community, this company will have severe damage to it. I think at least we should have the ability to brief

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