Horstman v. Fanning

2019 Ohio 2483
CourtOhio Court of Appeals
DecidedJune 24, 2019
Docket12-18-14
StatusPublished

This text of 2019 Ohio 2483 (Horstman v. Fanning) is published on Counsel Stack Legal Research, covering Ohio Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Horstman v. Fanning, 2019 Ohio 2483 (Ohio Ct. App. 2019).

Opinion

[Cite as Horstman v. Fanning, 2019-Ohio-2483.]

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

TED HORSTMAN ET AL.,

PLAINTIFFS-APPELLEES, CASE NO. 12-18-14

v.

DAVID FANNING, OPINION

DEFENDANT-APPELLANT.

Appeal from Putnam County Common Pleas Court Trial Court No. 17 CV 102

Judgment Affirmed

Date of Decision: June 24, 2019

APPEARANCES:

Richard M. Kerger and Kimberly A. Conklin for Appellant

Bruce Comly French for Appellees Case No. 12-18-14

PRESTON, J.

{¶1} Defendant-appellant, David Fanning (“Fanning”), appeals the October

24, 2018 judgment of the Putnam County Court of Common Pleas. For the reasons

that follow, we affirm.

{¶2} This case stems from a business dispute between plaintiffs-appellees,

Ted and Rick Horstman (“Ted” and “Rick”) (collectively the “Horstmans”),

Fanning, and a fourth individual, Vincent Snell (“Snell”). Ted, Rick, Fanning, and

Snell were members of Ultimate Systems, Ltd. (“Ultimate Systems”), an Ohio

limited liability company that produced colorized rubber materials and end-user

products such as rubber flooring. (See Doc. No. 48, Snell’s Sept. 13, 2018 Depo.,

Ex. B). Each held a 25 percent member interest in Ultimate Systems. (Id.). In

2013, a plan was devised to “freeze” Snell out of Ultimate Systems. (See Oct. 19,

2018 Tr. at 8). Robert Honigford (“Honigford”), Ultimate Systems’s chief financial

officer and corporate attorney, was the “mouthpiece” of the scheme to acquire

Snell’s interest in Ultimate Systems. (Id. at 8-9). In late 2013, Snell’s 25 percent

interest in Ultimate Systems was “eliminated in exchange for a payment of

$525,000” based upon a valuation provided by an accounting firm hired by

Honigford. (Doc. No. 48, Snell’s Sept. 13, 2018 Depo., Ex. B). The acquisition of

Snell’s interest in Ultimate Systems was accomplished in conjunction with a merger

between Ultimate Systems and RDT Manufacturing, LLC (“RDT”), an entity

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owned equally by Ted, Rick, and Fanning, with RDT as the surviving entity. (Id.).

In 2014, the assets of RDT, along with the assets of other entities owned by the

Horstmans and Fanning, were sold to a subsidiary of Accella Performance

Materials, Inc. (“Accella”) for $40 million. (Id.); (Doc. No. 19, Ted’s Jan. 25, 2018

Depo. at 8-9).

{¶3} Soon after the Accella transaction was consummated, Snell, through

Lynx Services, Ltd. (“Lynx”), a company he had previously formed to hold his

interest in Ultimate Systems, filed a complaint against the Horstmans and Fanning

in the United States District Court for the Northern District of Ohio alleging that the

plan to freeze him out of Ultimate Systems violated Ohio law. (See Oct. 19, 2018

Tr. at 8-9); (See Doc. No. 28, Ex. A). Honigford was later added as a defendant to

the federal lawsuit. (See Doc. No. 28, Ex. A).

{¶4} In late September 2016, Snell was subjected to deposition in Columbus,

Ohio. The Horstmans and Fanning were present at Snell’s deposition; Honigford

was not. (See Oct. 19, 2018 Tr. at 11, 37). On September 30, 2016, the second day

of Snell’s deposition, Snell, Fanning, and the Horstmans met privately to discuss

the possibility of settling the federal lawsuit. (Id. at 11). (See Sept. 30, 2016 Tr. at

3). Eventually, Snell, Fanning, and the Horstmans agreed that Lynx would dismiss

the federal lawsuit in exchange for $4.5 million. (Oct. 19, 2018 Tr. at 11, 37). That

day, the parties recited the general terms of their settlement agreement into the

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record. (Sept. 30, 2016 Tr. at 3-5). Later, the parties executed a “Global Settlement

Agreement and General Release” providing that Lynx would dismiss the federal

lawsuit with prejudice in exchange for $4.5 million, $3 million of which was due on

or before November 15, 2016 and $1.5 million of which was due on or before April

30, 2017. (Doc. No. 21, Ex. G). Neither the settlement agreement as recited into

the record nor the written settlement agreement specify who was responsible for

paying what percentage of the $4.5 million. According to the Horstmans and Snell,

the Horstmans were to be responsible for paying $1.5 million each, Fanning was to

pay $1.5 million, and Honigford was not to pay any part of the $4.5 million. (See

Doc. No. 21, Ex. E); (See Oct. 19, 2018 Tr. at 13-14, 21-23). According to Fanning,

however, he never agreed to contribute a specific sum toward the $4.5 million

settlement, and he did not agree that Honigford should not have to pay at all. (See

Fanning Affidavit at 4).

{¶5} After the parties adopted the written settlement agreement, the

Horstmans each paid $1.5 million to Lynx.1 Subsequently, on or about April 22,

2017, Fanning advised the Horstmans that he did not intend to pay Lynx the

remaining $1.5 million. (Doc. Nos. 1, 7). As a result, the Horstmans decided to

1 The written settlement agreement provided that Lynx would move to dismiss the federal lawsuit within one day after receiving the “Initial Payment” of $3 million due in November 2016. (See Doc. No. 21, Ex. G). Although $1.5 million of the $4.5 million remained outstanding in November 2016, because the Horstmans made the required $3 million Initial Payment in November 2016, the federal lawsuit was dismissed with prejudice in November 2016.

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split the remaining $1.5 million payment evenly, with Ted and Rick each paying

Lynx an additional $750,000. (Oct. 19, 2018 Tr. at 16).

{¶6} On June 22, 2017, the Horstmans filed a complaint in the trial court

against Fanning requesting a judgment for $1,501,748.73 plus interest.2 (Doc. No.

1). On August 4, 2017, Fanning filed his answer to the Horstmans’ complaint.

(Doc. No. 7).

{¶7} On March 26, 2018, the Horstmans filed a motion for summary

judgment. (Doc. No. 21). On April 24, 2018, Fanning filed a memorandum in

opposition to the Horstmans’ motion for summary judgment as well as a cross-

motion for summary judgment. (Doc. No. 28). On May 7, 2018, the Horstmans

filed a memorandum in opposition to Fanning’s cross-motion for summary

judgment. (Doc. No. 29). On May 9, 2018, Fanning filed a brief in reply to the

Horstmans’ memorandum in opposition to his cross-motion for summary judgment.

(Doc. No. 31).

{¶8} Following a May 10, 2018 hearing on the motions for summary

judgment, the trial court partially granted the Horstmans’ motion for summary

judgment. (Doc. No. 33). First, the trial court found that the Horstmans and Fanning

“agreed to the settlement amount and incorporated that agreement on the record and

2 The additional $1,748.73 represents “taxes due to an adjustment to the December 31, 2014, Form 1040 for RDT Manufacturing, LLC in the sum of one-third (1/3) of $1,290.68; and the sum for additional attorneys’ fees from Bugbee & Conkle in the aggregate sum of $1,318.50.” (Doc. No. 1).

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as a future written settlement agreement” but that “[t]he settlement agreement was

silent as to the contribution amounts as it would pertain to any of the parties.” (Id.).

The trial court concluded that the Horstmans had established that “an agreement to

pay a settlement in the Federal case does exist.” (Id.). In essence, the trial court

concluded that the only issue in dispute was the precise amount of money Fanning

would be required to pay toward the $4.5 million settlement. (See id.).

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