IN 'I'.H-E SUPREME COURT OF OHIO

PAMELA PRIDDY andHEALTH PLAN ADMINISTRATORS, LLC,

Appellant

V.

MYRIADHEALTH, LLC,

Appellee.

MEMORANDUM IN SUPPORT OF JgJRdSDICTION OF APPELLANTSPAMELA PRIDDY AND I-IEALTH PLAN AD1VHNISTRAT®1tS, LLC

DANIEL L. BELL CO., LPADaniel L. I3ell(0046879) (COtTNSEL OF ItECORD)1799 Akron-Peninsula Road, Suite 228Akron, Ohio 44313Phone: (330) 696-8898Daniel.BellCwDbell-Law.com

COUNSEL FOR APPELLANTSPAMELA PRIDDY AND IiEALTI-1 PLAN ADMINISTRATORS, LLC

LICHKO & SCHECHTERRoy J. Schechter (0034689) (COUNSEL OF RECORD)230 Bridge Building18500 Lake RoadRocky River, Ohio 44116Phone: (440) 331-5223rschechter(a7lichkoschechter.com

COUNSEL FOR APPELLEE MYRIADHEALTH, LLCf/^J'Fi'3(fX'<: lv%f

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On Appeal from theGeauga County Court ofAppeals, Eleventh AppellateDistrict

Court of Appeals

Case No. 2013-G-03172

TABLE OF CONTENTS AND ASSIGNMENTS OF ERROR

WHY THIS IS A CASE OF PUBLIC OR GREAT GENERAL INTEREST .................... 1

STATEMENT OF THE CASE AND FACTS ..................................................................... 2

ARGUMENTS IN SUPPORT OF PROPOSITIONS OF LAW ... ..................................... 4

Proposition of Law No. I: Counsel should only be disqualified fromcurrent representation adverse to a former client if the currentrepresentation is "substantially related" to the former matter, as thatphrase is used in Ohio Rule of Professional Conduct 1.9(a) . ............................ 4

Proposition of Law No. IIe The presumption that a former client wouldbe prejudiced by a former counsel's adverse representation isrebn.ttable . ............................................................................................................ 12

CONCLUSION ................................................................................................................. 13

CERTIFICATE OF SERVICE ... ................................................................................... 14

APPENDIX Appx. Page

OPINION OF THE ELEVENTH DISTRICT COURT OF APPEALS(JLTNE 30, 2014) .. ...................................................................................... 1

JUDGMENT ENTRY OF THE ELEVENTH DISTRICT COURT OFAPPEALS (JUNE 30, 2014) ..................................................................... 11

i

WHY THIS IS A CASE OFPI.TBLIC OR GREAT GENERAL INTEREST

This case involves the appeals court's decision to deprive Appellants of their right

to choose their legal counsel based on their chosen legal counsel's prior representation of

the Appellee. The criticality of the Appellants' right to choose counsel derives from this

Court's prior declaration that disqualification of a party's attorney is a drastic measure to

be used sparingly because it deprives a party of that right. See Kala v. Aluminum Smelting

&Refiraing Co., Inc. (1998), 81 Ohio St.3d 1, 6. See also, Morgan v. North Coast Cable

Co. (1992), 63 Ohio St.3d 156, 160 (attorney disqualification requires that attorney receive

information, confidential or otherwise, detritnental to former client's current cause).

Lower courts have wide discretion when considering motions to disqualify, but must

exercise "sound, reasonable, and legal decision-making." See, e.g., Carr v. Acacia Country

Club Co. (FebruatiJ 12, 2009), 2009 Ohio 628 (gth Dist. Ct. App.)(disqualification requires

former client to prove a "substantial relationship" exists between former representation and

the current matter). To establish a"substan.tial relationship" between a former

representation and a current matter, by definition, the moving party must show that a

material factual nexus exists between the prior representation and the current matter.

Moreover, the moving party must prove that any presumed confidences shared between the

former client and challenged legal counsel during the prior representation would prejudice

the formea° client in the cLurent matter. Such prejudice cannot be supported by presumption;

the party seeking disqualification must prove how such shared confidences could be used

against it in the current matter.

1

STATEMENT OF THE CASE AND FACTS

Prior to mid-January 2010, Attorney Daniel L. Bell ("Bell") was employed with

Brouse McDowell LPA ("Brouse"). VUhile Bell was employed with Brouse, Plaintiff-

Appellee MyriadHealth, LLC ("Myriad") retained Brouse to provide it certain legal

services, and Bell was among the Brouse attorneys that performed such services.

Appellant-Defendant Parnela Priddy ("Priddy") was an owner (member) of Myriad and a

member of Myriad's Board of Managers.

In August 2007, Bell provided Myriad (through Priddy) advice about the duties that

the company's members (including Priddy) owed to Myriad under the company's

Operating Agreement. More specifically, prior to entering into an employment agreement

with Myriad, Priddy was employed by another entity, Professional Benefits Administrators

("PBA"), and she was a party to an employment contract with PBA and on "loan" to

Myriad. Most, if not all, of Myriad's ow-ners (including Priddy) had other business

interests, and some of those interests were competitive with Myriad. Accordingly, on

behalf of Myriad, in August 2007 Priddy sought and received legal advice from Brouse

about the non-competition terms of Myriad's Operating Agreement.

In 2008, Myriad retained Bell to negotiate an employment agreement between it

and Priddy (the "Agreement"). Concerning such negotiations, Priddy was represented by

her own legal counsel.

After Bell resigned from employment with Brouse in January 2010, neither Bell

nor any firm with which Bell practiced represented Myriad in any legal matter. Priddy is

no longer affiliated with Myriad.

2

In September 2012, Myriad filed suit against Priddy and her new business,

Defendant-Appellant Health Plan Administrators, LLC ("HPA"), in the Geauga County

Common Pleas Court. As relates to Priddy, Myriad alleges that Priddy breached the

Agreement, breached certain fiduciary duties she owed to Myriad, tortiously interfered

with Myriad's business, and misappropriated Myriad's trade secrets. Each of those claims

is predicated solely upon alleged misconduct committed by Priddy that occurred in late-

2010, early-2011.

Bell did not represent Priddy (or HPA) in relation to any acts that either of them

committed in late-2010, early-201 1. While Myriad alleges a breach of the Agreement

(which Priddy denied in her Answer), at no time has Priddy claimed that the Agreement is

invalid, ambiguous, or unenforceable. Thus, there is no need to interpret the Agreement's

terms.

Bell did not request that Myriad consent to his representation of Priddy or HPA in

the current action because he, in good faith, does not believe such consent is required by

Ohio Rule of Professional Conduct 1.9(a). Myriad has not consented to Bell's

representation of Priddy or HPA in the current action.

Six znonths after Bell filed an Answer to the Complaint on behalf of Priddy and

HPA, Myriad filed a Motion to Disqualify Bell, based upon his prior representation of

Myriad, which had concluded in January 2010.

At the hearing on the Motion to Disqualify in the trial court, Myriad's counsel

admitted that he could not identify any information provided to Bell in the course of his

prior representation of Myriad that could be used to prejudice Myriad in the pending

lawsuit. Myriad's counsel presented no evidence (testimonial or documentary) at the

3

hearing of any nexus between any confidential information Myriad presumably shared with

Bell, and any prejudice that could be suffered by Myriad if Bell were pernnitted to continue

representing Priddy and HPA.

On November 5, 2013, the trial court ruled that Bell was disqualified from further

representing Priddy or III'A in the lawsuit filed by Myriad. Priddy and HPA appealed to

the Eleventh District Court of Appeals. By judgment entry dated June 30, 2014, the court

of appeals affirmed the trial court'sjudgment and found that: (1) There was a past attorney-

client relationship between Bell and Myriad (undisputed); (2) Bell's former representation

of Myriad was substantially related to Myriad's claims against Priddy in the current lawsuit

(disputed); and (3) Bell was presumed to have been provided confidential infornation by

Myriad in the course of his foraner representation of the company (undisputed).

'1'he court of appeals (like the trial court) egred in ruling that the trial court did not

abuse its discretion in granting the motion to disqualify because Myriad did not show that

Bell's prior representation of Myriad was "substantially related" to Bell's current

representation of Priddy and HPA. The court of appeals (like the trial court) also erred

when it did not assess whether Priddy had rebutted the presumption that the confidential

inforna.ation Myriad provided Bell during the former representation prejudiced (or was

likely to prejudice) Myriad in the current lawsuit.

ARGUMENTS IN SUl'1'®RT' ®p' PROPOSITIONS OF LAW

Proposition of Law No. I: Counsel should only be disqn.alified from currentrepresentation adverse to a former client if the current representation is"substantially related" to the former representation, as that phrase is used inOhio Rule of Professional Conduct 1o9(a).

Standard of Review. A detennination to disqualify or not disqualify counsel is

within the trial court's discretion. Eg:, In re: Kcrihla A. Smith (March 2, 2007), Case Nos.

4

2005-A-0048 & 2005-A-0056 (11'h Dist. Ct. App.); Centimark Corp. v. Brown Sprinkler

Service Co. (March 26, 1993), Case No. 93-LW-1716, $5 Ohio App.3d 485,487 ( 11th Dist.

Ct. App.). An abuse of that discretion occurs when the trial court's decision is

unreasonable, arbitrary or unconscionable. Eg., IZoyea- v. Dillow (January 9, 2014), Case

No. 13-CA-71, 2014-Ohio-53 at 4, (5h Dist. Ct. App.). Here, the Trial Court's

determination that the claims now being asserted by Myriad against Priddy and HPA and

the matters for which Myriad previously retained Bell were substantially related was

unreasonable and arbitrary.

Applicable Law. Courts applying Ohio law use a three-part test when ruling on a

motion to disqualify un.der these circumstances: (1) A fbrrner attorney-client relationship

existed between the party seeking disqualiffcation and the attorney it seeks to disqualify;

(2) the subject matter of the past relationship is substantially related to the present matter;

and (3) the attorney acquired information from the party seeking disqualification that is

relevant in the present matter. See, e.g., Stanley v. l3obeck (2009), 2009-Dhio-5696 (81'

Dist. Ct. App.). See also Dana Corp. v. Blue Cross & Blue Shield Mutual (1990), 900 F.2d

882, 889 (6th Cir.). Because disqualification is a drastic measure that has deprived Priddy

and HPA of their right to choose legal counsel; Bell should have been disqualified only if

absolutely necessary to protect Myriad's confidentiality interest. See Kala v. Aluminum

Smelting & Refining Co., Inc. (1998), 81 Ohio St.3d 1, 6. See also, Morgan v. North Coast

Cable Co. (1992), 63 Ohio St.3d 156, 160 (attorney disqualification requires attortley must

have received some information that could prejudice forrner client's current cause). The

record shows that disqualification was not necessary to protect Myriad's interests here.

5

Priddy and HPA admit that: (1) Bell formerly represented Myriad in relation to

various issues, including negotiation of the Agreement; (2)13ell did not seek consent from

Myriad to represent Priddy or HPA in this action; and (3) Priddy and HPA are adverse to

Myriad in this action. Thus, the judicial inquiry narrows to examining whether Bell's past

representation of Myriad is "substantially related" to Myriad's current claims against

Priddy and HPA alleging that in late-2010, early-2011 Priddy annd HPA engaged in

actionable wrongdoing.^

Nec!gssary Nexus. Under Ohio Rule of Professional Conduct 1.9(a)g without a

former client's written consent, "a lawyer who has formerly represented a client in a matter

shall not thereafter represent another person in the same or a substantially related matter

in which that person's interest are materially adverse to the interest of the forrner client."

(emphasis added). Under the Ohio Rules of Professional Conduct ("ORPC"), legal matters

are "substantially related" only when they involve the same transaction or legal dispute, or

there is a substantial risk that confidential factual information that would nornlally have

been obtained in the prior representation of a client would materially advance the position

of another client in a subsequent matter. ORPC 1.0(n). See also In re: Smith, supra at T65

("The proper standard to be applied under the substantial relationship test is whether `the

factual contexts of the two representations are similar or related."')(internal cites omitted).

Concerning the moving party's need to prove the factual nexus between the former

and current matters, the commentary to ORPC 1.9 provides, in relevant part:

'Before the Trial Court, the parties did not take the position that the matters were the"sarne" given that Myriad's claims against Priddy and HPA arose years after Attorney Belllast represented Myriad and he did not represent Priddy and HPA in late-2010, early-201 1,when Myriad's alleged claims arose.

6

.... Inform.ation acquired in a prior representation may have been rendered obsoleteby the passage of time, a circumstance that may be relevant in determining whethertwo representations are substantially related. In the case of an organizational client,general knowledge of the client's policies and practices ordinarily will not precludea subsequent representation; on the other hand, knowledge of specific facts gainedin a prior representation that are relevant to the matter in question ordinarily willpreclude such a representation....

Comment [3] to ORPC 1.9.

The mere existence of a former representation is not enough to compel

disqualification. The party seeking disqualification must show, by introduction of facts,

that the former representation and the current matter involve the same claims/transaction

or are so "substantially related" that the attorney sought to be disqualified could use

confidential information learned (presurnably or otherwise) from the former client to

prejudice the former client in the current matter. Id. See also, Morgan v.Narth Coast Cable

Co., 63 Ohio St.3d at 160 (disqualified attorney must have received some information from

former client that could be used to prejudice the f®rmer client in current matter); ORPC

1.0(n)(confidential factual information normally obtained in the prior representation must

"materially advance the position of another client" in current matter to establish rule

violation).

Ohio court's examining similar scenarios have followed those dictates by requiring

that there be an appreciable factual nexus between the former and current legal matters to

justify disqualification. .E.g., Carr v. Acacia Country Clzcb Co. (February 12, 2009), 2009

Ohio 628 (8th Dist. Ct. App.); Stanley v. Bobeck (October 29, 2009), 2009-Ohio-5696 (8'

Dist. Ct. App.).

Under this standard, there is no factual basis for disqualifying Bell from representing

Priddy and HPA in the action filed against them by Myriad. Assuming Bell received

7

confidential inforrnation from Myriad when representing the company, Myriad did not

show that such inforrnation could be used to its prejudice (or "materially advance" Priddy

and HPA's position) in the current lawsuit filed by Myriad. See Morgan v. North Coast

Cable C'o, 63 Ohio St.3d at 160, ORPC 1.0(n)(substantial relationship requires that

presumed confidential information "would materially advance position of another client in

a subsequent matter").

The court of appeals' reliance upon Litigation Management, Inc. v. Bourgeois, 182

Ohio App.3d 742 (8 th Dist. 2009), was misplaced, as that case is inapposite. In that case,

unlike here, the challenged attorney represented the former client concerning the very same

claims against which she sought to defend her corrent client. More specifically, the

attorney had represented her former client by perforrning legal research regarding potential

breach of contract, noncompetition and misappropriation of trade secrets that the former

client then was thinking about bringing against the attorney's current client. When the

attorney joined ber new law firm, she then attempted to defend her current client against

the former client on the vety sarne clainas she had researched on behalf of the former client.

The trial court rightfully disqualified her because the former and current representation

involved the very same claims. Here, unlike the former and current matters in Litigation

Management, supra, the former and current matters are neither the same nor substantially

related. ORPC 1.0(n) & 1.9(a).

Here, Myriad did not show that Bell's prior work for Myriad, including negotiation

of the Agreement or advice concerning the non-competition provision. in the Myriad

Operating Agreement, involved any inforrnation that could be used to prejudice Myriad or

materially advance Priddy or HPA's position in the pending lawsuit. Priddy and Myriad

8

entered into the Agreement in 2008, which contract Myriad alleges was breached in late-

2010 or early-201 1, when Bell was not representing Priddy. What Bell may have learned

in the course of negotiating the Agreement in 2008, which contract is not being challenged

as invalid, ambiguous, or unenforceable, is not relevant to the current claims being asserted

by Myriad and it could not be used to Myriad's detrinient (or to advance Priddy's or HPA's

interests), and there is no record proof to the contrary.

Priddy has not attempted to defend the claims in Myriad's action based on the

Agreement being void or ambiguous, defenses that might make the parties' negotiation

history and Myriad's pre-contract strategy and information (and Bell's presumed

knowledge of same) materially and potentially prejudicial in Bell's hands. Rather, Priddy

is asserting that she did not breach the Agreement. Thus, there is no apparent relationship,

presuaned or otherwise, between Bell's negotiation of that contract, which occurred in

2008, and the facts and circumstances underlying Myriad's current claims against Priddy

or HPA, all of which alleged misconduct occ;carred in late-2010, early-2011.

Likewise, Myriad has not shown that Bell's advice provided to Myriad (via Priddy)

concerning the non-competition provision in the Operating Agreement could be used to

Myriad's detriment in relation to its current claims against Priddy or HPA.

Myriad cannot rest on the mere allegation of a substantial relationship between the

prior and current legal matters; it must show that the information presumably shared with

Bell during the forrn.er representation can be used by Priddy in the current lawsuit to

advance her interests or to prejudice Myriad. Absent such a showing, there is no

"substantial relationship" between the former and current matters to support

9

disqualification. See, e.g., Stanley v. Bobeck, supra; Dana Corp. v. Blue Cross & Blue

Shield'Mutual, 900 F.2d at 889. See also, OPRC 1.9(a); Comment [3] to ORPC 1.9.

This Court must balance the need to maintain the highest standards of the legal

profession against Priddy and 1-1PA's right to choose their counsel. Kala v. Aluminum

Smelting & Refining Co., Inc., 81 Ohio St.3d 1, 6 (1998). While the Ohio Supreme Court

has not yet struck that delicate balance under these circumstances, the New Jersey Supreme

Court did so by providing a workable standard for deciding when a current matter is

"substantially related" to a former matter under a New Jersey professional responsibility

rule that is the same as ORPC 1.9(a). City ofAtlantic City v. Trupos (2010), 201 N.J. 447,

992 A.2d 762, 774. According to the Trupos court, matters are "substantially related"

only if:

(1) the lawyer for whom disqualification is sought received confidentialinfonnation from the former client that can be used against that client in the subsequentrepresentation of parties adverse to the former client, or

(2) facts relevant to the prior representation are both relevant and material to thesubsequent representation. Icd

This standard, which embodies the same principles as those embodied in OPRC

1.9(a) and Comment [3] to OPRC 1.9, protects otherwise privileged communications while

also protecting individuals' right to choose their counsel by requiring the party seeking

disqualification to show that the former and current legal matters have a congruity of facts,

and not merely similar legal theories, so that it may fairly be presumed that the attorney's

knowledge of such facts would be prejudicial to the former client.

While the lower court and the court of appeals properly presumed that Bell received

confidential infornlation from Myriad during the forrner representation, such a

presumption does not obviate the need for Myriad to establish that such inforxnation could

10

be used to its prejudice. To allow Myriad to merely allege that confidential information

was shared and that the fdrrner and current matters were similar would nullifv the mandate

in ORPC 1.0(n) that the former client's shared information must be such that it coutd be

used to prejudice the former client (or unfairly advance the current client's interests) in the

current matter. Such a result also would unfairly and unnecessarily trample Priddy and

HPA's right to choose their counsel--a result that is inconsistent with ORCP 1.9(a) and the

cases addressing the "substantial relationship" issue.

Myriad should have been required to show that the inforrnation it presumably

shared with Bell in the former representation could be used to Myriad's detriment in the

current lawsuit. Such a showing was not made by Myriad or required by the lower court

or the court of appeals. Absent such a showing, the forrner and current matters could not

be "substantially related" and there was no proper basis for disqualification.

In this regard, the appeals court and the lower court also should have noted, but did

not, that Priddy was an owner and Board member of Myriad, so she likely had access to

and knowledge of the same information about Myriad that Tom Dolan (Myriad Board

Chair) had when negotiating the Agreement (and presumably provided to Bell), except the

company's negotiation strategy for her employment agreement (which again is not relevant

to the current claims as they are based on the contract's unambiguous terms, not how or

why the ternns were negotiated). Priddy's lcnowledge f-urther underrnines any inference

that Bell had unique knowledge from Myriad that could adversely affect the company in

the pending litigation. Finally, the passage of substantial time between Bell's former

representation of Myriad in relation to the Agreement (2008) and the advice on fiduciary

11

duties/non-cognpetition (2007), and the alleged misconduct committed by Priddy and HPA

in late-2010, early-2011 (which did not involve Bell).

Proposition of Law No. IIs Any presumption that a former client would beprejudiced by a former connsel9s adverse representation is rebuttable.

Myriad ultimately should have been required to prove that it would suffer prejudice

if Bell were pernlitted to defend Priddy and HPA against Myriad's current claims. See,

e.g., Morgan v. North Coast Cable Co. (1992), 63 Ohio St.3d 156; Centimark Corp., 85

Ohio App.3d at 485. Instead, the lower court and the court of appeals irrebuttably

presumed that such prejudice would result based on its initial presumption that Myriad

sliared confidential information with Bell in the course of their forrner relationship. While

the presumption of shared confidences may be justified, the presumption that prejudice

would result absent disqualification was an impermissible intrusion on Priddy and HPA's

right to choose their legal counsel.

Once an initial showing of prejudice was made by Myriad, Priddy and HPA should

have been pernitted to articulate their position that no prejudice would result from any

presumed confidential information shared with Bell, and then Myriad would ultimately be

responsible for proving that it was or could be prejudiced by the information it shared with

Bell.

Consistent with ORPC 1.9(a), Myriad should have been required to prove that

Bell's knowledge gained in his fornaer representation of Myriad could soinehow be used

to its prejudice. See Morgan v. North Coast, 63 Ohio St.3d at 160.

At the hearing on the Motion to Disqualify in the trial court, Myriad did not

demonstrate how Bell's presumed knowledge could prejudice its prosecution of its claims

against Priddy or HPA.

12

As for law, in support of its position,lVlyriad cited to Kelly v. Buckley (2011), 193

Ohio App.3d 11 (8" Dist. Ct. App.), and Sarbey v.lilat'l City Bank, Akron_(1990), 66 Ohio

App.3d 18, 26 (9h Dist. Ct. App.), but both cases support Priddy and HPA's position

concerning the proof necessary to disqualify Bell. Both cases illustrate that Myriad must

prove that Bell was provided some information by Myriad that could be used to Myriad's

detriment in its action against Priddy and HPA. To establish such prejudice, Myriad must

do more than proffer information about the generic tasks that Bell performed for it as legal

counsel; and billing entries generically describing what Bell did for Myriad. That

information goes to whether Myriad shared confidences with Bell; but does not show how

such information could be used against Myriad. By allowing such a generic showing to

support disqualification, the lower court and the court of appeals improperly and

unnecessarily failed to consider whether Priddy and HPA could unfairly benefit from the

presumed confidences shared and to establish the existence of prejudice to Myriad.

Because the lower courts irrebuttably presumed, rather than requiring Myriad to

prove, that Myriad was or could be prejudiced by Bell's representation of Priddy and HPA

against Myriad's current claims, those courts acted unreasonably and arbitrarily in

disqualifying Bell and denying Priddy and IiPA their right to choose their legal counsel.

CONCLUSION

For the reasons discussed above, this case involves matters of public and great

general interest. The Appellants request that this Court accept jurisdiction in this case so

the important issues presented will be reviewed on the merits.

13

Respectfully submitted,

L. BEt.L Co., LPA

B, aniel L. Bell (0046879)I 79 Akron-Peninsula Road, Suite 228Akron, Ohio 44313Phone: (330) 696-8898

arieloB a1-141 Lb ,11^^

AT TtJRIo1EY FOR APPELLANTSPAMELA PRIIaD^.' ANDHEALTH PLAN ADMINISTRATORS,LLC

CERTIFICATE OF SERVICE

I hereby certify that a copy of the foregoing Memorandum in Support ofJurisdiction was sent by electronic mail on the 8th day of August, 2014 to:

Roy J. SchechterLICHKO & SCHECHTER230 Bridge Building18500 Lake RoadRocky River, Ohio 44116Rschec^ter Cq,^,Licbjcoscl-gecher.cm

Attorneys for Appellee

Elizabeth H. FarbmanRoth, Blair, Roberts, Strasfeld & Lodge100 East Federal Street, Suite 600Youngstown, Ohio 445 03 -1893Efarb^^^anLa)Rotizbiair . com

A.ttorneys for Bruce Lev

Daniel L. Bell (0046879)COUNSEL FOR APPELLANTSPAMELA PRIDDY ANDHEAL I'l I PLAN ADMINISTRATORS, LLC

14

IN THE COURT OF APPEALS

ELEVENTH APPELLATE DISTRICT

GEAUGA COUNTY, OHIO

DA1/ID D. DOtlGLASS, o OP! NIOtVCOURT APPOINTED RECEIVERFOR MYRIADHEALTH, LLC,

CASE NO® 20^ 3-^=31 ^2PlairttifFAppeitee, tN rOeRT OF°^^PEALS

° vs - JUN 3 0 2014

PAMELA S. PRIDDY, et a6.,

Defendants-Appellants

Dr,t4tsE n̂̂ry .a^w^►NSKICLERK N!^ COtJR'CSGEAUC;A C®umva o

Civil Appeal from the Geauga County Court of Common Pleas, Case No. 12 M 000956.

Judgment: Afrirrroed.

Roy J. Schechter, 230 Bridge Building, 18500 Lake Road, Cleveland, OH 44116 (ForPiaintiffi:,Appeliee).

Daniel L. Bell, 1799 Akron-Peninsula Road, Suite 228, Akron, OH 44313 (ForDefendants-Appellants).

TIMOTHY P. CANNOtV, P.J.

(,11) Appellants, Pamela S. Priddy and Health Plan Administrators, LLC

CHPA'°), appeal the judgment of the Geauga County Court of Common Pleas granting

the motion to disqualify appellants' counsel filed by appeilee, David D. Douglass, as

court-appointed receiver for NiyriaifHeaith, LLC ("Myriad°°}. The trial court disqualified

appellants' counsel, Daniel L. Bell, due to his prior representation of Myriad. For the

reasons that follow, we afrirm.

I

Appx. Page 1

.._ p

$12} Myriad was incorporated in 2003 as a Delaware limited liability company.

According to its Ohio application for registration as a foreign limited liability company,

Myriad's stated purpose was to "own and operate a health care payment system."

11[3) Prior to Priddy entering into an employment contract with Mydad, Priddy

inquired whether "the Myriad Operating Agreement would prevent any of the members

from participating in another business venture" that competed with Myriad. Bell, acting

in his role as Myriad's outside counsel, advised Priddy on his understanding of Myriad's

Operating Agreement in an August 22, 2007 email and of the need to take into account

"other contracts" and legal duties that restrict such activity.

11[41 In 2008, Myriad retained Bell, who at the time was employed by the

Brouse McDowell law firm, to negotiate and draft an employment contract hidng Priddy

as company president. During the negotiation of her employment agreement, Priddy

was represented by her own legal caunsei. On August 13, 2008, Priddy signed the

employment contract. The contract was effective retroactive to June 4, 2008. By this

time, Myrrisd was engaged primarily in the development of software that was to be

licensed for use by health care third-party administrators.

(¶S) In August 2008, Myriad received a $750,000 loan from the Ohio

Department of Development for the purpose of furthering Myriad's software

development business. For reasons not contained in the record before this court, the

loan failed to spur growth of the business, and Myriad defaulted on the loan in January

2011. At the time of default, the entire $750,000 principle balance of the loan was

unpaid.

2

Appx. Page 2

Appellants responded to the motion to disqualify Bell on July 12, 2013. On July 31,

2013, Myriad filed a reply in support of its motion to diaqualify.

(111) On October 24, 2013, a hearing was held on the motion to disqualify Bell.

The parties also filed a stipulation of the facts regarding Bell's prior representation of

Myriad. On November 5, 2013, the t(al court granted Myriad's motion to disqualify Bell.

{112} Appellants tirneiy appeal the trial court°s November 5, 2013 judgment

entry, dlsqualifying Bell, and assert two assignments of error.

(¶13} In their first assignment of error, appellants assert:

The Trial Court corrtrnitted prejudicial error in granting [Myriad's],motion to disquaiify counsel because it improperly concluded that[Bell's] former representation of iVdyriad and his currentrepresentation of [appellants] are "substantiaily related", as thatphrase is used in Ohio Rule of Professional Responsibility 1.9(a).

{1141 Under their first assignment of error, appellants present the issue of

whether the trial court erred when it determined that the claims asserted in Myriad's

complaint were "substantially related" to the subject matter of Bell's prior representation

of Myriad. For the reasons that follow, we hold that the trial court did not abuse its

discretion when it ruied that Myriad's claims were substantially related to Bell's prior

representation of Myriad.

(125) Initially, we note that an order disqualifying an attcarney from representing

a client in a civil case is a final, appealable order pursuant to R.C. 2505.02(B)(4).

Westfali v. Cross, 144 Ohio App.3d 211, 218R219 (7th Dist.2001).

{¶16} Furthermore, it is well accepted that disqualification of an attorney is a

drastic measure that should not be imposed unless necessary. Kala v. Aluminum

Smeidng & Refining Co., lno., 81 Ohio St.3d 1, 6 (1998), citing Freeman v. Chicago

4

Appx. Page 4

Musical Instrument Co., 669 F.2d 715, 721 (7th Circ.1982). Despite a general policy

against attomey disqualification, a trial court has Wide discretion when considering

motions to disqualify counsel. Maple Heights v. Redi Car Wash, 51 Ohio App.3d 60, 61

(8th ®ist.1966). A trial court's determination on whether to grant a motion to disqualify

will not be reversed upon review in the absence of an abuse of discretiors. Cart° v.

Acacia Country Club Co., 8th Dist. Cuyahoga No. 91292, 200 hi®-626, 116, citing

155 N. High, Ltde v. Cincinnati ieas. Co., 72 Ohio St.3d 423, 426 (1995). An abuse of

discreti®rt is the trial court's °®`failure to exercise sound, reasonable, and legal decisi®n-

making.°'g State v. Beechter, 2d ®ist. Clark ht®. 09-CA-54, 2010-Ohio-1900, 1(62,

quoting Black's Law Dictionary 11 (6th Ed.2004).

#Q17$ Rule 1.9(a) of the Ohio Rules of Professional Conduct sets forth an

attarney's duties to former clients: "Unless the former client gives informed consent,

conrirmed in writing, a lawyer who has formerly represented a client in a matter shall not

thereafter represent another person in the same or a substantially related matter in

which that person's interests are madterially adverse to the interests of the former client."

A matter is deemed to be substantially related when it'°invo{ves the same transactiort or

legal dispute or one in which there is a substantial risk that confidential factual

information that would normally have been obtained in the prior representation of a

client would materially advance the position of another client in a subsequent matter."

Prof.Cond.R. 1.0.

(If1S) It is undisputed that Myriad did not give consent to Bell to represent

appellants in this matter. Therefore, to resolve Myriad's motion to disqualify, the tria6

court considered the three-part test articulated by the Sixth Circuit Court of Appeals in

5

Appx. Page 5

Dana Corp. v. Blue Cross & Blue Shield Mut, Of N. Ohio, 900 F.2d 882, 889 (6th

Cir.1990). The Dana test has been applied throughout Ohio°s appellate districts. See,

e.g., Cargould v. Manning, 10th Dist. Franklin No. 09AF°-194, 2009-Ohio-5853, ¶7;

Stanley v. Bobeck, 8th Dist. Cuyahoga No. 92630, 2009-Ohio-5696, ¶13; Youngstown

v. Joenub, Inc., 7th Dist. Mahoning No. 01-CA-019 2001-Ohio-3401, 115.

{¶19} The Sixth Circuit stated that the appropriate test for attomey

disqualification requires consideration of whether °°(1) a past attorrtey-olient relationship

existed between the party seeking disqualification and the attomey it seeks to disqualify;

(2) the subject matter of those relationships was/is substantially related; and (3) the

attorrzey acquired oonfidential information from the party seeking disqualification." Dana

at 889, citing Cleveland v. Glevelend Elec. illum. Co., 440 F. Supp. 193, 207 (N. D.Ohio

1976). In this case, the t(al court found all three prongs were satisfied and, as a resuit,

disqualified Bell.

{120} First, it is undisputed there was a past attorney-client relationship betNeen

Bell and Myriad. Myriad retained Bell. to represent it in the negotiation and drafting of

Priddy's employment contract. As counsel for Myriad, Bell also advised Priddy on

sections of Myriad's Operating Agreement. Indeed, Bell billed Myriad a significant

amount of money for reprasentation related to the negotiation of Priddy's employment

contract. As such, the first prong is clearly satisfied.

1121) Second, we cannot say that the trial court abused its discretion when it

found the subject matter of the past attomey-client relationship was substantially related

to the present case. Speaking through its judgment entry, the trial court found that

"F'riddy°s obligations per her employment contract and as a fiduciary were the subjects

6

Appx.1'age 6

of Mr. Bell's representation of MyriadHealth and are critical Issues in the present case.'

Bell, on behaif of Myried, drafted and negotiated Priddy's employment contract. The

contract included detailed raona compete and noro-solieitetion provisions. Bn drafting the

employment contract, Bell received direction from Myriad's board of managers. Myriad

alleges that Priddy violated provisions of the employment contract drafted by i3ell.

While appellants argue that they are not challenging the validity of the employment

contract, they are challenging the applicability of certain provisions to the facts of the

case. Accordingly, the interpretation of the non-compete and norf-solicitetion issues m(fii

be in dispute. Therefore, the subject nnatter of the past ett®rney®cisent relationship is

substantially related to the present case, setisfying the second prong.

1122) Finally, we cannot say that the trial court abused its discretion when it

made its finding that Bell acquired confidential information from his prior representation

of Myriad. The trial court stated, "ji]t is presumed that as counsel for Myrisdhieeith,

attorney Bell was privy to confidential inforrnetion." In making this conclusion, the trial

court directs the parties to the Eighth Appellate District's decision in Litigation Mgt., Inc.

v. Bourgeois, 182 Ohio App.3d 742 (8th Dist.2009). While the facts in this case are not

as clear with respect to the third prong as they were in Litigation Mgt., Inc., they are

sufficient to demonstrate that Bell acquired confidential information from his prior

representation of Myriad.

{4[23) In its judgment entry, the trial court properly considered Bell's role in

advising Myriad regarding its employment contract with Priddy. According to the

stipufation of facts, Thomas Dolan, as the Chair of Myriad's Board of Managers,

provided Bell with information and direction to use in negotiating the employment

7

}

Appx. Page 7

e ^ .

agreement. The court considered the substantial amount of information and direction

Bell received from Myriad's board of directors while negotrating Priddy's employment

contract. The board of directors worked with Bell to determine the language of the

contract's ncn-ccmpete and ncn-sciicitaticn ci^uses. The interpretation of these

clauses will likely be important to Myriad's suit against appellants. The trial court

properly determined that this infcrmaticn possibly contained confidential information that

would be critical to the present case. For these reasons, the third prong of the Dana

test is satisfied.

€4124} As the three prongs of the Dana test were sufficiently proven by Myriad,

including that Bell's former representation of Myriad and his current representati®n of

appellants are substantially related, the trial court did not err in disqualifying Bell.

Accordingly, appellants' first assignment of error is without merit.

(125) In their second assignment of error, appellants assert:

(126) "1"he Trial Court comrnitted prejudicial error when it did not require

[IVlyriad] to present evidence sufficient to show that IViyr°iad would be prejudiced by

Att®rney Bell's representation of [appellants] against Myriad's current ciaims:"

€,127} Appellants' second assignment of error fails because Myriad, as a fbrmer

client, was not required to put forth evidence demonstrating that it would be prejudiced

by Bell's representation of appellants. "A former client is not required to reveal the

confidential information learned by the lawyer in order to establish a substantial risk that

the lawyer has ccnfdential information to use in the subsequent matter." Prof.C®nd.R.

1.9, cmt 3. Accordingly, a court can properly assume that confidences were disclosed

to the attorney on the subject matter of the representation durirsg the course of the

8

Appx. Page 8

9 a y

former representatian, so long as the former representatian was substantially related.

Sarbey v. Nafl. City Bank, 9th Dist. Summit No. 14094, 1990 Ohio App. LEXIS 368, *24

(Jan. 31, 1990), quating T.C. Theatre Corp. v. Warner Bros. Piotures, lnc., 113 F. Supp.

265, 268 (1953). As discussed above, the trial court properly concluded that the former

representation was substantially related to the current dispute, rendering proof of

prejudice unnecessary.

I¶281 !n arguing that Myriad should have been required to establish prejudice,

appellants direct this court to Morgan v. N. Coast Cable Co., 63 Ohio St.3d 156 (1992).

In that case, the plaintiff sought recovery against the defendants on the theory of unjust

enrichn7ent and fraud. However, Morgan is readily distinguishable from the case at

hand,

(4q29) The pBaintiff's attorney in Morgan had previously represented a separate

client in litigation against the same defendant. fd: at 160. As a result of the previous

case's aettlernent, the plaintiffa attorney acquired asma66 interest in the defendant's

limited partnership. Id. The defendant sought to have the plaintiffs attorney disqualifted

because his interest in defendant's partnership created a conflict between the plaintiffs

own interest and that of their attorney. Id. at 159. Affirrning the decision of the Eighth

®istrict Court of Appeals, the Ohio Supreme Court held that the defendants, as

strangers to the attcarraey-client re4ationahip, lack the requisite standing to assert that a

conflict of interest exists. 6d at 161.

{,q30) The issue in Morgan was not whether the defendant was required to

present evidence that it would be prejudiced by having one of the firm's limited partners

represent the plaintiff. Rather, the issue in that case was whether the defendant had

9

Appx. Page 9

® .o

standing to complain of a conflict of interest between the plaintiff and its sttorney. Bd. at

159. That conflict was the plaintifl•'s attorney's ownership interest in the defendant`s

Ifmited partnership. lcl. at 160. In this case, Myriad clearly possesses the requisite

standing to challenge appellants° counsel. Accordingly, appe6lants' reliance on Morgarr

is wholly unpersuasive.

(131) Appeilants' seoond assignment of error is without rne(t.

{132) The decision of the Geauga County Court of Common Pleas disqualifying

Bell is affirmed.

DIANE V. GRENDELL, J.,

CYNTHIA ii1 ►ES`fC(3TT RICE, J.,

concur.

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Appx. Page 10

.^..^.^.._ . d

STATE OF OHIO

COUNTY OF GEAUGA)SS.

0

IN THE COURT OF APPEALS

ELEVENTH DISTRICT

DAVID D. DOUGLASS, JUDGMENT ENTRYCOURT APPOINTED RECEIVERFOR MYRiA®HEALTH, LLC,

NO. 2413-G®3172Plairotit'f-Appatlee, 1iF L lfly

Etg COURT OF ^+P^'MS

p 1f^ - jU% 3 0 2014PAMELA S. PR1DD`e , et ai., DENiSE M. KAMiNS4tt

CLF-RK OF COURTS

Defendants-Appellants. GEAUGA cOU"Ty

For the reasons stated in the opinion of this court, appellants' assignrraants

^of error are without madt. It is the judgment and order of this court that the

judgment of the Geauga County Court of Common Pleas is affirmed.

Costs to be taxed against appellants.

PR 1NG JUIA& `flMd3THY F. CANhlON

FOR THE COURT

14/So8 Appx. Page t I