Helmer Martins, Rice & Popham Co., L.P.A. secures a 7-0 victory in the Ohio Supreme Court.
In a case with great interest to all litigators across Ohio, the Ohio Supreme Court agreed with Helmer Martins that directors who mismanage their corporation’s litigation are not immune from liability based on the common law “litigation privilege.” In so deciding, the Court corrected and clarified the proper scope of Ohio’s litigation privilege.
The matter before the Court involved conflicted directors who caused their corporation to lose a massive $49.5 million jury verdict in an earlier lawsuit. The corporation was offered dismissal with prejudice, but the directors rejected it, resulting in what the Ohio Supreme Court called a “‘be careful what you wish for’ turn of events.” The corporation lost, couldn’t pay the judgment, and the trial judge appointed Receiver John Reister to prosecute the directors for breach of fiduciary duty. The Receiver retained our law firm as counsel. To date, the Receivership has been a huge success, obtaining two settlements from other directors and now winning this jurisdictional appeal against the remaining directors.
Justice Patrick Fischer, writing for the unanimous Court (one justice concurring in judgment only), held that the lower courts had improperly conflated Ohio’s litigation privilege with the “business judgment rule.” The Court clarified that these are separate rules with independent goals. Importantly, the Court reiterated that the litigation privilege is a limited immunity that only protects statements made during and relevant to judicial proceedings. The immunity does not apply, however, to conduct or actions that are simply connected in some way to litigation.
The defendant directors, along with the Ohio Chamber of Commerce as amicus curiae, had argued that anything related to litigation should be immune from liability. Rejecting this expansive view, the Court instead opted to keep the litigation privilege confined to statements, consistent with its prior 90 years of precedent on the subject.
Undoubtedly, the decision will be the leading case on Ohio’s litigation privilege for years to come. And the decision represents a significant win for shareholders and those in favor of responsible corporate governance everywhere.
The case has now been remanded to the trial court to determine the full extent of the directors’ breach of fiduciary duties in mishandling their corporation’s bet-the-company lawsuit. Helmer Martins and the Millikin & Fitton law firm represent the court-appointed Receiver in bringing the breach of fiduciary duty claims on behalf of the aggrieved corporation.
Reister v. Gardner, Slip Opinion No. 2020-Ohio-5484.