Yost v. Schaffner

161 N.E.3d 857

2020 Ohio 5127

Dave YOST, Attorney General of Ohio, Plaintiff-Appellee

v.David K. SCHAFFNER, et al., Defendants-Appellants

No. 19 CA 000030

Court of Appeals of Ohio, Fifth District, Guernsey County.

DATE OF JUDGMENT ENTRY: October 30, 2020

THADDIUS A. TOWNSEND, ASSISTANT ATTORNEY GENERAL, 150 East Gay Street, 23rd Floor, Columbus, Ohio 43215, For Plaintiff-Appellee.

CRAIG G. PELINI, WILLIAM M. SHACKELFORD, PAUL B. RICARD, PELINI, CAMPBELL, & WILLIAMS, LLC, 8040 Cleveland Avenue, NW, Suite 400, North Canton, Ohio 44720, For Defendants-Appellants.

ERIK A. SCHRAMM, KYLE W. BICKFORD, HANLON, ESTADT, MCCORMICK & SCHRAMM CO., LPA, 46457 National Road West, St. Clairsville, Ohio 43950, For Plaintiff-Appellee Guernsey.

JUDGES: Hon. W. Scott Gwin, P.J., Hon. John W. Wise, J., Hon. Earle E. Wise, Jr., J.

OPINION

(NUNC PRO TUNC)

Wise, John, J.

{¶1} Defendants-Appellants David K. Schaffner And Schaffner Law Offices, Co., LPA, appeal the decision of the Guernsey County Court of Common Pleas denying their Motion to Quash Subpoena and Motion for Protective Order related to Appellants' IOLTA records.

{¶2} Appellee is the Intervenor Plaintiff Ohio Attorney General. The original Plaintiff in this action was the Guernsey County Community Development Group.

STATEMENT OF THE FACTS AND CASE

{¶3} This matter involves the conversion of assets from a non-profit charitable corporation in Guernsey County, Ohio.

{¶4} For purposes of this appeal, the relevant facts and procedural history are as follows:

{¶5} It is undisputed that between 2010 and 2016, Defendants-Appellants David K. Schaffner and Schaffner Law Offices, Co., LPA, handled more than ten million dollars belonging to the Guernsey County Community Development Corporation (GCCDC), a non-profit charitable corporation, which it deposited into its IOLTA account. These funds consisted mainly of revenue from oil and gas leases.

{¶6} The CDC's former board members denied having knowledge of the lOLTA activity and further denied that they and the Schaffner Defendants negotiated the deals resulting in the deposit of oil and gas revenue into the IOLTA. The Schaffner Appellants denied having knowledge of and involvement in the deals precipitating the receipt of revenue into the IOLTA, but they did not deny that they had possession and control of the revenue.

{¶7} Prior to the filing of the Complaint in this matter, the GCCDC engaged the services of Attorney Mark Stubbins and a forensic accountant from Perry & Associates with regard to an investigation concerning the conversion of assets by its former executive director, former legal counsel, and former board members through various fraudulent and intentional schemes, including but not limited to: self-serving real estate and oil and gas transactions, and the conversion of millions of dollars for fraudulent "equipment" purchases.

{¶8} On May 9, 2016, former legal counsel, the Schaffner Appellants, produced a purported IOLTA account ledger to Attorney Stubbins. The ledger was subsequently provided to Perry & Associates for review. The ledger contained a number of inaccuracies, including duplicative check numbers, missing check numbers, and negative balances.

{¶9} On February 2, 2018, the Guernsey County Community Development Group (GCCDC) filed its Amended Complaint against its former Executive Director Daniel L. Speedy, and his spouse, Dora Speedy; former counsel David K. Schaffner and Schaffner Law Offices Co., LPA; Ohio limited liability companies formed by Defendants Daniel L. Speedy, David K. Schaffner, and/or former Board President Steve Allen, being One Percent, LLC, Monster Management, LLC, Whispering Pines, LLC, Synergy Land Company, LLC, and Homestead Utica, LLC; Defendant Kimberly Allen, the spouse of former Board President Steve Allen (deceased), and member of Defendant Homestead Utica, LLC; and former Board Members Gerald Leister, Bonnie Braden, Robert E. Oakley, Frank Fleischer, and Kenneth Hill. The GCCDG attached the IOLTA ledger to its Amended Complaint.

{¶10} In said Complaint, the GCCDC alleged intentional and fraudulent acts on behalf of the Schaffner Defendants, which included claims of civil conspiracy, civil RICO, conversion, fraud, and breach of fiduciary duty. Notably, Defendant David K. Schaffner's role as a member of Defendants Whispering Pines, LLC, and Synergy, LLC, do not involve the provision of legal services to the GCCDC in any capacity.

{¶11} On September 20, 2018, the Ohio Attorney General, through its Charitable

Law Section, subsequently intervened as a Plaintiff, and filed its Amended Complaint against Defendants Daniel Speedy, Dora Speedy, One Percent, LLC, Monster Management, LLC, and Kimberly Allen.

{¶12} In its brief, the GCCDC stated that it and the Ohio Attorney General have been working together on discovery cooperatively in an attempt to reduce costs and duplication of efforts, and to ensure coordination where the claims align.

{¶13} During discovery, questions arose as to the whereabouts of millions of dollars belonging to the GCCDC and why those funds were or had been in Atty. Schaffer's IOLTA account.

{¶14} In anticipation of Atty. David Schaffer's deposition, the Attorney General subpoenaed bank records from First Federal Community Bank, NA, including as bank statements, canceled checks, account application records, deposit tickets, and wire transfer records. First Federal did not file or serve written objections to the subpoena.

{¶15} On August 19, 2019, the Schaffner Defendants filed a Motion to Quash Subpoena and for a Protective Order, arguing that the bank records contain "financial information relating to clients ... in regards to the legal services provided."

{¶16} By Order filed September 11, 2019, the trial court denied the motion.

{¶17} On October 3, 2019, Appellants filed a motion to stay enforcement of the subpoena, which the trial court granted.

{¶18} Appellants assign the following error for review:

ASSIGNMENT OF ERROR

{¶19} "I. THE TRIAL COURT ERRED IN DENYING DEFENDANTS-APPELLANTS' MOTION TO QUASH SUBPOENA AND MOTION FOR PROTECTIVE ORDER RELATED TO DEFENDANTS-APPELLANTS' IOLTA RECORDS."

I.

{¶20} In their sole assignment of error, Appellants challenge the trial court's decision denying the motion to quash subpoena and for a protective order.

{¶21} Generally, a ruling on a discovery request by a trial court is not a final, appealable order. Walters v. Enrichment Ctr. of Wishing Well, Inc. (1997), 78 Ohio St.3d 118, 121, 676 N.E.2d 890. R.C. § 2505.02(A)(3) states that a "provisional remedy," a proceeding ancillary to an action can be a final, appealable order. Very few discovery proceedings qualify as provisional remedies. Myers v. Toledo, 110 Ohio St.3d 218, 2006-Ohio-4353, 852 N.E.2d 1176, ¶ 24. R.C. § 2505.02(A)(3) itself names only one - a proceeding that results in the discovery of privileged matter. Northeast Professional Home Care, Inc. v. Advantage Home Health Servs., Inc. , 5th Dist., 188 Ohio App.3d 704, 2010-Ohio-1640, 936 N.E.2d 964, ¶ 30 citing Bennett v. Martin , 186 Ohio App.3d 412, 2009-Ohio-6195, 928 N.E.2d 763, ¶ 33. See also, Scott Process Sys. v. Mitchell , 5th Dist. No. 2012 CA 00021, 2012-Ohio-5971, 2012 WL 6617363.

{¶22} In the case of an order compelling the production or disclosure of material allegedly protected by attorney-client privilege, an interlocutory appeal will lie. Shaffer v. OhioHealth Corp., Franklin App. No. 03AP-102, 2004-Ohio-63, 2004 WL 35725, at ¶ 6.

{¶23} In general, discovery orders are reviewed under an abuse-of-discretion standard." Med. Mut. of Ohio v. Schlotterer , 122 Ohio St.3d 181, 2009-Ohio-2496, 909 N.E.2d 1237, ¶ 13 ; Mauzy v. Kelly Servs., Inc. , 75 Ohio St.3d 578, 592, 664 N.E.2d 1272 (1996). When the discovery of confidential or privileged information is at issue, however, the reviewing court applies a de novo standard. Roe v. Planned Parenthood Southwest Ohio Region , 122 Ohio St.3d 399, 2009-Ohio-2973, 912 N.E.2d 61, ¶ 29 ; Schlotterer at ¶ 13.

{¶24} "It is well-settled that the burden of showing that testimony sought to be excluded under the doctrine of privileged attorney-client communications rests upon the party seeking to exclude it." Waldmann v. Waldmann , 48 Ohio St.2d 176, 178, 358 N.E.2d 521 (1976) ; Moskovitz v. Mt. Sinai Med. Ctr. , 69 Ohio St.3d 638, 660-661, 635 N.E.2d 331 (1994) ("the mere relation of attorney and client does not raise a presumption of confidentiality of all communications made between them").

{¶25} In general, "[p]arties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action." Civ.R. 26(B).

{¶26} "In Ohio, the attorney-client privilege is governed by statute, R.C. 2317.02(A), and in cases that are not addressed in R.C. 2317.02(A), by common law." State ex rel. Leslie v. Ohio Hous. Fin. Agency , 105 Ohio St.3d 261, 2005-Ohio-1508, 824 N.E.2d 990, ¶ 18. The statute provides in relevant part that an attorney "shall not testify in certain respects * * * concerning a communication made to the attorney by a client in that relation or concerning the attorney's advice to a client" unless "the client voluntarily reveals the substance of attorney-client communications in a nonprivileged context." R.C. 2317.02(A)(1). The common-law attorney-client privilege "reaches far beyond [the] proscription against testimonial speech" afforded by the statute and "protects against any dissemination of information obtained in the confidential relationship." (Citation omitted.) Leslie at ¶ 26 ; See Smith v. Technology House, Ltd. , 11th Dist. Portage No. 2018-P-0080, 2019-Ohio-2670, 2019 WL 2746868, ¶¶ 14-17

{¶27} In Pales v. Fedor , 8th Dist., 2018-Ohio-2056, 113 N.E.3d 1019, the Eighth District Court of Appeals reviewed the issue of attorney-client privilege as it applied to IOLTA banking transactions and found:

Although we are aware of no Ohio appellate court that has addressed the issue, federal courts that have considered the issue have long

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