[Cite as Holloway v. Holloway Sportswear, Inc.,

.]

IN THE COURT OF APPEALS OF OHIO THIRD APPELLATE DISTRICT SHELBY COUNTY

D’LORAH HOLLOWAY, ET AL.,

PLAINTIFFS-APPELLEES,

v. CASE NO. 17-11-24

HOLLOWAY SPORTSWEAR, INC., ET AL.,

DEFENDANTS-APPELLEES, -and-

RANDALL W. HOLLOWAY, OPINION

DEFENDANT-APPELLANT,

[MARK VONDENHUEVEL, ET AL., - APPELLANTS].

Appeal from Shelby County Common Pleas Court Trial Court No. 96CV000061

Judgment Reversed and Cause Remanded

Date of Decision: May 14, 2012

APPEARANCES:

Robert R. Furnier and Christopher L. Muzzo for Appellants

Neil F. Freund and Lindsay M. Johnson for Appellee Burton Case No. 17-11-24

PRESTON, J.

{¶1} Defendants-appellants, Randall W. Holloway (“Randall”) and

ARAICH, Inc. (“ARAICH”) (formerly “Holloway Sportswear, Inc.”) (collectively

“defendants”), and appellant, Mark Vondenhuevel (“Vondenhuevel”), appeal the

Shelby County Court of Common Pleas’ judgment entry granting the motion to

enforce subpoena upon Vondenhuevel filed by appellee, M. David Burton, Esq.

(“Burton”). For the reasons that follow, we reverse.

{¶2} On April 12, 1996, J. Boyd Binning, Esq. (“Binning”) and Burton

filed a complaint against defendants alleging breach of contract and fraud and

requesting an accounting on behalf of their clients, D’Lorah A. Holloway, Lorinda

Jill Holloway, and others (collectively “plaintiffs”), in the Shelby County Court of

Common Pleas. (Doc. No. 1). On July 1, 1997, the first amended complaint was

filed adding additional causes of action, including: Counts I and V of

Misrepresentation/Concealment; Counts II and VI of Breach of Fiduciary Duty;

Count III of Fraud; Counts IV and VII of Abuse of Fiduciary Relationship; and

Count VIII Demand for Accounting. (Doc. No. 110).

{¶3} On November 3, 1998, the trial court granted defendants summary

judgment as to Counts I through VII but denied defendants summary judgment on

Count VIII, and the trial court certified its entry as a final order pursuant to Civ.R.

54(B). (Doc. No. 144). On May 20, 1999, plaintiffs filed a Civ.R. 60(B) motion

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for relief from judgment, which the trial court overruled on August 28, 2000.

(Doc. Nos. 160, 174). On June 7, 2001, this Court affirmed the trial court’s

judgments. Holloway v. Holloway Sportswear, Inc., 3d Dist. Nos. 17-98-20, 17-

2000-18. On October 10, 2001, the Ohio Supreme Court declined jurisdiction.

Holloway v. Holloway Sportswear, Inc.,

. (Doc. No. 182).

Thereafter, on April 19, 2002, the trial court granted defendants summary

judgment on the remaining claim (Count VIII). (Doc. No. 189).

{¶4} On May 10, 2002, defendants filed a motion for sanctions pursuant to

Civ.R. 11 and R.C. 2323.51 against plaintiffs D’Lorah and Lorinda Jill Holloway,

and their attorneys, Burton, Binning, and Lewis E. Williams, Esq. (“Williams”).

(Doc. No. 192).

{¶5} On February 6 and 10, 2004, defendants withdrew their motion for

sanctions against D’Lorah and Lorinda Holloway and Williams. (Doc. Nos. 238,

240).

{¶6} On March 22, 2004, Binning filed a motion to dismiss, arguing that

the motion for sanctions was untimely. (Doc. No. 244).

{¶7} On April 26, 2004, defendants filed a revised motion for attorney’s

fees and litigation costs as sanctions under Civ.R. 11 and R.C. 2323.51 against

Burton and Binning. (Doc. No. 249).

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{¶8} On July 21, 2004, the trial court dismissed defendants’ motion for

sanctions under R.C. 2323.51 on Counts I through VII as untimely. (Doc. No.

259). The trial court however determined that defendants’ motion for sanctions

under R.C. 2323.51 on Count VIII was timely. (Id.). The trial court also held that

defendants’ motion for sanctions under Civ.R. 11 were timely on all counts. (Id.).

{¶9} On July 26-27, 2004, December 2, 2004, and March 25, 2005, the trial

court held hearings on the motion for sanctions. (Doc. Nos. 282, 314). Thereafter,

the parties filed post-hearing briefs. (Doc. Nos. 287-289).

{¶10} On July 11, 2005, defendants filed a motion to substitute Peter

Binning, Administrator of the Estate of J. Boyd Binning, as the proper party

following Binning’s death. (Doc. No. 293). On December 20, 2005, the trial court

sustained the motion. (Doc. No. 301).

{¶11} On January 13, 2009, the trial court concluded that Burton and

Binning had committed frivolous conduct in violation of Civ.R. 11 for filing the

original and first amended complaints; and, Binning had committed frivolous

conduct in violation of Civ.R. 11 for filing the memo contra to defendants’ motion

for summary judgment dated March 13, 2002. (Doc. No. 314). The trial court

denied defendants’ motion for sanctions under R.C. 2323.51 as to Count VIII of

the amended complaint, as well as all defendants’ remaining grounds for sanctions

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under Civ.R. 11. (Id.). A hearing on the amount of sanctions was scheduled for

April 26-28, 2010. (Doc. No. 326).

{¶12} Following the trial court’s judgment entry granting sanctions, the

parties began mediating the amount of sanctions, along with the malpractice

claims set forth in Holloway Sportswear, Inc. et al. v. Binning, Case No. 05 CV

018. (Doc. No. 328).

{¶13} On March 18, 2010, Burton filed a motion to dismiss the sanctions

for failure to prosecute and failure to join a real party in interest. (Id.). Burton

alleged that defendants’ counsel failed to send him documentation necessary to

complete the mediation as ordered by the trial court. (Id.). Burton further alleged

that, on May 2, 2006, Holloway Sportswear, Inc. (“HSI”) was sold to Augusta

Sportswear, Inc.; and therefore, the former is no longer the real party in interest for

sanctions. (Id.). On March 29, 2010, Binning’s estate joined the motion to

dismiss. (Doc. No. 330).

{¶14} On April 2, 2010, defendants filed a response to the motions. (Doc.

No. 331). On April 5, 2010, the trial court overruled the motions. (Doc. No. 333).

The trial court ordered defendants’ counsel to provide all supporting documents

and a list of witnesses he intended to call at the April 26-28, 2010 hearing to

determine the amount of sanctions to Burton’s counsel by April 15, 2010. (Id.).

The trial court also instructed defendants’ counsel that the first day of the hearing

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to determine the amount of sanctions would be reserved to demonstrate the real

party in interest following the sale of HSI. (Id.).

{¶15} On April 7, 2010, Burton filed a motion to continue the hearing.

(Doc. No. 336). On April 8, 2010, the trial court held a telephone conference.

(Doc. No. 338). On April 19, 2010, the trial court amended its April 5, 2010

judgment entry, rescheduling the hearing to October 21-22, 2010. (Id.). The trial

court ordered defendants’ counsel to deliver all supporting documents and a

witness list for the rescheduled sanctions hearings and a real party in interest

hearing, scheduled for July 1, 2010, to opposing counsel by May 3, 2010. (Id.).

{¶16} On June 17, 2010, defendants filed a notice of name change and

motion for summary judgment on the real party in interest issue. (Doc. No. 340).

The motion for summary judgment alleged that, in 2006, HSI sold all of its assets

to Holloway Acquisition, Inc., except for the right to pursue claims against Burton

and Binning. (Id.). Attached to the motion was an “Acknowledgement and

Modification of Asset Purchase Agreement,” executed on April 30, 2010,

representing that the transfer of HSI’s assets to Holloway Acquisition, Inc. did not

include any rights of recovery in the actions against Burton and Binning in Case

Nos. 96CV000061 (sanctions) and 05CV000018 (malpractice claim). (Id.).

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{¶17} Also on June 17, 2010, Burton and Binning’s estate filed a joint

motion to continue the July 1, 2010 hearing for the purpose of conducting

discovery on the real party in interest issue. (Doc. No. 344, 346).

{¶18} On June 24, 2010, the trial court granted the motion to continue and

held defendants’ motion for summary judgment in abeyance until Burton and

Binning’s estate conducted discovery concerning the 2006 sale of HSI. (Doc. No.

349). The trial court scheduled a conference call for July 1, 2010. (Id.).

{¶19} On June 30, 2010, Burton filed a motion to continue the briefing and

decision on defendants’ motion for summary judgment. (Doc. No. 351). On July

7, 2010, the trial court granted the motion to continue the discovery deadline until

September 29, 2010. (Doc. No. 355). On July 16, 2010, the trial court granted

Burton’s Civ.R. 56(F) motion to extend the deadline for responding to defendants’

motion for partial summary judgment. (Doc. No. 356).

{¶20} On September 30, 2010, Burton filed another motion to continue

discovery until January 31, 2011 since HSI’s current president, Vondenhuevel,

failed to attend deposition and bring certain documents, even though he was

subpoenaed. (Doc. No. 361).

{¶21} On October 13, 2010, the trial court approved and filed an agreed

entry vacating both the October 12, 2010 status hearing and October 21, 2010 real

party in interest hearing. (Doc. No. 364).

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{¶22} On December 27, 2010, Burton filed a motion to enforce the

subpoena directed at Vondenhuevel and HSI. (Doc. No. 370). On January 10,

2011, the trial court held a hearing on the motion, and Vondenhuevel filed a

memorandum in opposition. (Doc. Nos. 371, 377).

{¶23} On February 16, 2011, the trial court granted Burton’s motion to

enforce the subpoena as revised by the trial court to allow Vondenhuevel an

opportunity to compile a privilege log for communications he believed were

protected under the attorney-client privilege. (Doc. No. 384). On February 24,

2011, a protective order governing the confidentiality of documents produced

concerning the 2006 sale of HSI was entered upon the record. (Doc. No. 388).

{¶24} On April 22, 2011, Burton filed a motion for in-camera review of the

documents subpoenaed from Vondenhuevel, which Vondenhuevel listed as

privileged communications. (Doc. No. 393). On April 27, 2011, defendants filed a

motion for a protective order and to quash the subpoena. (Doc. No. 395).

{¶25} On May 23, 2011, the trial court held a hearing on the pending

motions. (May 31, 2011 JE, Doc. No. 412). The trial court granted Burton’s

motion to enforce the subpoena of Vondenhuevel stating:

[Burton]’s counsel will be permitted to again subpoena and depose

Mark Vondenhuevel related to the real party in interest issue,

including but not limited to documents Mr. Vondenhuevel has

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executed and produced in this case, his knowledge of and

involvement in the 2006 asset purchase of [HSI] and the 2010

Acknowledgement and Modification of Asset Purchase Agreement.

Nothing in this Entry shall limit counsel’s ability to question Mr.

Vondenhuevel related to the issue of real party in interest. (Id.).

The trial court also granted defendants’ motion for in camera review of documents

and determined that the documents were, in fact, entitled to attorney-client

privilege and not helpful to the real party in interest issue. (Id.).

{¶26} On June 29, 2011, appellants Holloway, ARAICH, and

Vondenhuevel filed a notice of appeal from the trial court’s judgment entry. (Doc.

No. 419). Appellants raise a single assignment of error for our review.

ASSIGNMENT OF ERROR

THE TRIAL COURT ERRED BY DENYING THE JOINT MOTIONS TO QUASH AND FOR PROTECTIVE ORDER OF RESPONDENT MARK VONDENHUEVEL AND DEFENDANTS RANDY HOLLOWAY AND ARAICH, INC. [DOCKET NO. 412.]

{¶27} In their sole assignment of error, appellants argue that the trial court

erred by expanding the discovery process in a post-trial sanctions proceeding

absent extraordinary circumstances. Specifically, appellants contend that the

expansive discovery in this case will only reveal what is known by the parties

already—that HSI did not transfer the rights to Shelby County Case Nos.

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96CV000061 (sanctions) and 05CV000018 (malpractice) to Holloway

Acquisition, Inc. in 2006.

{¶28} Generally speaking, a trial court’s decision regulating the procedure

of a Civ.R. 11 sanctions proceeding should not be disturbed on appeal absent an

abuse of discretion. Stevens v. Kiraly,

(9th Dist. 1985),

citing 2A Moore, Federal Practice (1985) 11-20, paragraph 11.02[2]. As the

Court of Appeals in Stevens v. Kiraly observed:

Civ.R. 11 is silent on the procedure to be followed in seeking

sanctions against an attorney for violations of the rule, but some

guidance may be found in the federal rule and case law. The federal

rule provides that sanctions may be invoked upon motion of either

the court or the aggrieved party. Once again, wide latitude is

granted the courts, according to the Advisory Committee Note:

“* * * [I]t is within the court’s discretion to decide the procedure,

timing and appropriateness of imposing a particular sanction. * * *”

.

The Sixth and Tenth Districts have followed the Ninth District’s decision in

and, likewise, concluded that trial courts have discretion

concerning the procedure of Civ.R. 11 proceedings. Woods v. Savannah Foods

and Industries, Inc., 6th Dist. No. L-92-160, *7-9 (Feb. 26, 1993); Huntington

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Natl. Bank v. Abbot, 10th Dist. No. 89AP-432, *5 (Sept. 26, 1989). An abuse of

discretion implies more than a mere error in judgment; rather, it implies that the

trial court’s attitude was unreasonable, arbitrary, or unconscionable. Blakemore v.

Blakemore,

(1983).

{¶29} Neither Civ.R. 11 nor Ohio case law interpreting it addresses the

proper scope of discovery for sanction proceedings. Since Civ.R. 11 was adopted

nearly identical to Fed.R.Civ.P. 11 and has been amended over the years

consistent with Fed.R.Civ.P. 11, federal case law addressing this issue, while not

controlling, is instructive. Ceol v. Zion Indus., Inc.,

(9th

Dist. 1992), citing 2A Moore’s Federal Practice (1990), Paragraph 11.01[3], at 11-

3; Myers v. Toledo,

,

, ¶ 18, citing First Bank

of Marietta v. Mascrete, Inc.,

(1997); Stevens,

, citing 2A Moore, Federal Practice (1985) 11-20, paragraph

11.02[2]. For purposes of Fed.R.Civ.P. 11, federal circuit courts have concluded

that trial courts “‘* * * must to the extent possible limit the scope of sanction

proceedings to the record. Thus, discovery should be conducted only by leave of

the court, and then only in extraordinary circumstances.”’ Amwest v. Mortg. Corp.

v. Grady,

(9th Cir. 1991), quoting Fed.R.Civ.P. 11, Notes of

1983 Advisory Committee on Rules; Borowski v. DePuy, Inc.,

(7th Cir. 1989), citing Indianapolis Colts v. Mayor and City Council of

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Baltimore,

(7th Cir. 1985); Donaldson v. Clark,

(11th Cir. 1987); McLaughlin v. Bradlee,

(D.C.

Cir. 1986). Similarly, federal courts have noted that Rule 11 hearings are much

narrower in scope than civil proceedings and cautioned against allowing sanction

proceedings to expand into full-blown litigation. Amwest,

;

Faigin v. Kelly,

(1st Cir. 1999) (“The scope of a Rule 11 hearing is

generally much more circumscribed than that of a trial or comparable

proceeding.”); McIntyre’s Mini Computer Sales Group Inc. v. Creative Synergy

Corp.,

(E.D.Mich. 1986) (“The Advisory Committee

cautioned against allowing sanctions proceedings to expand into full-blown

litigation * * *.”); Klayman v. Barmak,

(D.D.C. 2009)

(“A motion for sanctions does not provide parties an opportunity to litigate fully—

conduct discovery, present and cross-examine witnesses * * *.”). The 1983

Advisory Committee on Rules noted that the limitation on discovery during

sanction proceedings was “[t]o assure that the efficiencies achieved through more

effective operation of the pleading regimen will not be offset by the cost of

satellite litigation over the imposition of sanctions * * *.” Fed.R.Civ.P. 11, 1983

Advisory Committee Notes.

{¶30} The trial court abused its discretion by allowing further discovery in

the Civ.R. 11 sanctions proceedings herein. Prior to the trial court’s order

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enforcing the subpoena served upon Vondenhuevel, defendants filed an

“Acknowledgement and Modification of Asset Purchase Agreement” in which the

original parties to the sale of HSI clarified that HSI, now ARAICH, did not

transfer any rights or liabilities related to litigation in the Shelby County Court of

Common Pleas against Burton and Binning in Case Nos. 96CV00061 (sanctions)

and 05CV000018 (malpractice) to Holloway Acquisition, Inc., now HSI. (Doc.

No. 342, attached). This document was signed by W. Randall Holloway, president

of ARAICH, and ARAICH Group, Inc., and Vondenhuevel, president of the newly

formed Holloway Sportswear, Inc. (Id.). Prior to the trial court’s order,

Vondenhuevel, president of both the former and newly formed HSI, submitted an

affidavit detailing the history of the parties’ original sale of former HSI’s assets

and the subsequent acknowledgment and modification agreement. (Doc. No. 404).

In relevant part, Vondenhuevel averred that the Shelby County litigation was

considered personal to Randall, and that Augusta management, the purchasers of

the former HSI, had approved the execution of the Acknowledgement and

Modification of Asset Purchase Agreement to that effect. (Id.). Despite these

filings indicating that Randall and ARAICH (former HSI) are the real parties in

interest herein, the trial court enforced the subpoena upon Vondenhuevel for

Burton and Binning to further investigate the real party in interest issue.

Consequently, this case failed to present any “extraordinary circumstance”

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meriting further discovery on this issue; and therefore, the trial court abused its

discretion in enforcing the subpoena upon Vondenhuevel.

{¶31} The trial court’s order granting further discovery on the real party in

interest issue is also unreasonable in light of the extreme delay that has already

occurred in the sanctions proceedings. This case was originally filed in 1996 and

was finally disposed of by summary judgment in 2002. Seven years later, the trial

court determined that Burton and Binning committed frivolous conduct under

Civ.R. 11. Now, more than three years later, the trial court has yet to determine

the amount of sanctions to impose. This case epitomizes the expression “justice

delayed is justice denied,” and the record demonstrates that the parties and the trial

court share the blame for the extreme delay in this case. Absent our intervention,

we fail to see this case coming to a much-needed, expeditious end. There is no

need to expand the sanctions proceedings into full-blown litigation contrary to the

intent of Civ.R. 11.

{¶32} Appellants’ assignment of error is, therefore, sustained.

{¶33} Having found error prejudicial to the appellants herein in the

particulars assigned and argued, we reverse the judgment of the trial court and

remand for further proceedings consistent with this opinion.

Judgment Reversed and Cause Remanded

SHAW, P.J. and ROGERS, J., concur.

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