Pales v. Fedor

113 N.E.3d 1019

2018 Ohio 2056

Sean PALES, et al. Plaintiffs–Appellees

v.Robert J. FEDOR, et al. Defendants–Appellants

No. 106024

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

RELEASED AND JOURNALIZED: May 24, 2018

Larry W. Zukerman, S. Michael Lear, Brian A. Murray, Adam M. Brown, Zukerman Daiker & Lear, Co., L.P.A., 3912 Prospect Avenue, Cleveland, Ohio 44115, Jason D. Winter, Winter Trimacco, Co., L.P.A., Ernst & Young Tower, 950 Main Avenue, Suite 1210, Cleveland, Ohio 44113, ATTORNEYS FOR APPELLANTS

Brian D. Spitz, The Spitz Law Firm, L.L.C., 25200 Chagrin Boulevard, Suite 200, Beachwood, Ohio 44122, Ian N. Friedman, Friedman & Nemecek, L.L.C., 1360 East 9th Street, Suite 650, Cleveland, Ohio 44114, ATTORNEYS FOR APPELLEES

Robin Weaver, President Elect, Desiree Blankenship, General Counsel, Ohio State Bar Association, 1700 Lake Shore Drive, Columbus, Ohio 43204, Holly Marie Wilson, Reminger Co., L.P.A., 101 West Prospect Avenue, Suite 1400, Cleveland, Ohio 44115, Attorneys for the Ohio State Bar Association, AMICUS CURIAE

BEFORE: E.A. Gallagher, A.J., McCormack, J., and Celebrezze, J.

JOURNAL ENTRY AND OPINION

EILEEN A. GALLAGHER, A.J.:

{¶ 1} Defendants-appellants Robert J. Fedor, Robert J. Fedor, Esq., L.L.C. and Michael T. Arnold (collectively, "appellants") appeal the trial court's order granting plaintiffs-appellees Sean and Allison Pales' (collectively, "appellees" or the "Paleses") motion to compel discovery and denying appellants' motion for a protective order. Appellants assert that the information and documents to be produced under the trial court's order—answers to interrogatories seeking the identities of certain of appellants' nonparty clients and bank statements from appellants' interest on lawyers trust account ("IOLTA") containing information regarding financial transactions involving certain of their nonparty clients—is protected from discovery by the attorney-client privilege. Finding some merit to the appeal, we affirm the trial court's decision in part, reverse it in part and remand the matter for further proceedings.

Factual and Procedural Background

{¶ 2} Attorneys Fedor and Arnold are tax attorneys who practice with the law firm Robert J. Fedor, Esq., L.L.C. (the "Fedor firm"). The Paleses retained appellants to represent them with respect to various tax matters before the Internal Revenue Service ("IRS") and other tax authorities. Appellants represented the Paleses through at least September 30, 2015.

The Paleses' Claims Against Appellants

{¶ 3} On September 1, 2016, appellees filed a complaint against appellants and John and Jane Does 1–10 ("individuals that were employed by the Firm that promoted, participated, and/or ratified the conspiracy and other conduct"), asserting claims of legal malpractice, breach of fiduciary duty, fraud, civil conspiracy, spoliation of evidence and violation of the Ohio Corrupt Practices Act. The Paleses alleged that appellants negligently or intentionally failed to adequately represent them by, among other things, failing to timely file the Paleses' tax returns, failing to advise the Paleses to make estimated quarterly tax payments, filing the Paleses' tax returns without "proper support," failing to claim a research and development credit on the Paleses' tax returns, failing to properly respond to IRS audit requests and mishandling the Paleses' appeal in the United States Tax Court. The Paleses further alleged that appellants intentionally billed them "amounts excessive to amount of time and rate," that these bills were submitted electronically and by U.S. mail (constituting telecommunications fraud and mail fraud) and that appellants had collected payment from the Paleses for this "fraudulently billed time." The Paleses also alleged that appellants had "engaged in similar corrupt acts with other clients" "[a]s will be further proven through discovery." The Paleses sought to recover compensatory damages, treble damages, punitive damages, their attorney fees and costs.

{¶ 4} On November 9, 2016, appellants filed a "partial answer" with respect to the Paleses' legal malpractice claim and a motion to dismiss appellees' claims of breach of fiduciary duty, fraud, civil conspiracy, spoliation of evidence and violation of the Ohio Corrupt Practices Act, arguing that these claims were subsumed into the legal malpractice claim and that fraud was not pled with particularity.

{¶ 5} The Paleses opposed the motion to dismiss. The trial court summarily denied appellants' motion to dismiss, and appellants filed an "amended/complete" answer to the Paleses' complaint, denying the material allegations of the complaint and asserting various affirmative defenses.

The Discovery Dispute

{¶ 6} The Paleses propounded an initial set of interrogatories and request for the production of documents with their complaint. In November 2016, appellants served their responses and objections to the Paleses' discovery requests.¹ The parties filed a joint motion for a stipulated protective order, setting forth procedures for protecting the "confidential and sensitive business and personal information" the parties anticipated would be disclosed during discovery. The trial court granted the motion.²

{¶ 7} Pursuant to the joint stipulated protective order, appellants produced redacted copies of bank statements from their IOLTA account from June 30, 2010 to August 31, 2015, and copies of checks and an account transaction listing relating to the Paleses. However, appellants refused to provide other requested documents and information, including the identities of their current and former nonparty clients and unredacted IOLTA records relating to financial transactions involving their current and former nonparty clients. On March 22, 2017, after informal efforts to resolve the discovery dispute failed, the Paleses filed a motion to compel discovery responses and for sanctions, seeking to compel appellants to "properly and completely respond to written discovery." Specifically at issue were appellants' objections and responses to the following discovery requests:

INTERROGATORY NO. 5

Identify all banking, savings, checking, investment or other similar accounts on which a Defendant is signatory from 2006 to the Present.

ANSWER: Objection: this interrogatory seeks irrelevant information not reasonably calculated to lead to the discovery of admissible evidence, is overly broad, unduly burdensome, and is designed solely to harass the defendants. This interrogatory also seeks private financial information unrelated to the instant litigation and information protected from compelled disclosure by the attorney client and work product privileges.

INTERROGATORY NO. 6

Identify all banking, savings, checking, investment or other similar accounts where Defendants deposited funds from the Paleses.

ANSWER: See response to Interrogatory No. 5. In further answering, the defendants deposited the Pales' [sic] funds into the firm IOLTA account.

INTERROGATORY NO. 7

Identify all clients of a Defendant that paid amounts owed for taxes into an account of a Defendant from 2006 to the Present.

ANSWER: Objection: this interrogatory seeks irrelevant information not reasonably calculated to lead to the discovery of admissible evidence, is overly broad, unduly burdensome, seeks private financial and tax information of third persons not parties to the instant litigation, and the requested information is protected from compelled disclosure by the attorney client and work product privileges. Furthermore, this Interrogatory is designed solely to harass the defendants.

INTERROGATORY NO. 8

Identify all clients of a Defendant who have been audited for tax years in which a Defendant prepared the tax returns from 2006 to the Present.

ANSWER: Objection: this interrogatory seeks irrelevant information not reasonably calculated to lead to the discovery of admissible evidence, is overly broad, unduly burdensome, seeks private financial and tax information of third persons not parties to the instant litigation, and the requested information is protected from compelled disclosure by the attorney client and work product privileges. Furthermore, this Interrogatory is designed solely to harass the defendants.

INTERROGATORY NO. 9

Identify all clients of a Defendant who have been an owner in business and did not pay estimated quarterly income taxes from 2006 to the Present.

ANSWER: Objection: this interrogatory seeks irrelevant information not reasonably calculated to lead to the discovery of admissible evidence, is overly broad, unduly burdensome, seeks private financial and tax information of third persons not parties to the instant litigation, and the requested information is protected from compelled disclosure by the attorney client and work product privileges. Furthermore, this Interrogatory is designed solely to harass the defendants.

INTERROGATORY NO. 10

Identify all clients of a Defendant who have received Research and Development Credit from 2006 to the Present.

ANSWER: Objection: this interrogatory seeks irrelevant information not reasonably calculated to lead to the discovery of admissible evidence, is overly broad, unduly burdensome, seeks private financial and tax information of third persons not parties to the instant litigation, and the requested information is protected from compelled disclosure by the attorney client and work product privileges. Furthermore, this Interrogatory is designed solely to harass the defendants.

INTERROGATORY NO. 11

Identify all clients of a Defendant who have not filed tax returns by the deadline or automatic extension date from 2006 to the Present.

ANSWER: Objection: this interrogatory seeks irrelevant information not reasonably calculated to lead to the discovery of admissible evidence, is overly broad, unduly burdensome, seeks private financial and tax information of third persons not parties to the instant litigation, and the requested information is protected from compelled disclosure by the attorney client

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