New Wembley L.L.C. v. Klar

2022 Ohio 4250, 202 N.E.3d 99

• Court: Ohio Court of Appeals
• Decided: November 28, 2022
• Docket: 2022-G-0007
• Status: Published

Opinion

[Cite as New Wembley L.L.C. v. Klar, 2022-Ohio-4250.]

IN THE COURT OF APPEALS OF OHIO ELEVENTH APPELLATE DISTRICT GEAUGA COUNTY

NEW WEMBLEY LLC, CASE NO. 2022-G-0007

Plaintiff-Appellant, Civil Appeal from the - vs - Court of Common Pleas

JASON KLAR, Trial Court No. 2021 P 000349 Defendant-Appellee.

OPINION

Decided: November 28, 2022 Judgment: Reversed and remanded

Kerri L. Keller, Brouse McDowell, 388 South Main Street, Suite 500, Akron, OH 44311 (For Plaintiff-Appellant).

Todd M. Haemmerle, Maia E. Jerin and Chloe C. DeAngelis, Gallagher Sharp, LLP, 1215 Superior Avenue, 7th Floor, Cleveland, OH 44114 (For Defendant-Appellee).

CYNTHIA WESTCOTT RICE, J.

{¶1} Appellant, New Wembley, LLC (“New Wembley”), appeals the January 24,

2022 judgment of the Geauga County Court of Common Pleas granting the motion for

judgment on the pleadings filed by appellee, Jason Klar. For the reasons set forth herein,

the judgment is reversed and remanded.

{¶2} New Wembley is a company that operates a tennis club (“The Wembley

Club”). Mr. Klar is the Chief Executive Officer of Capstone Construction Company, LLC

(“Capstone”). Non-party Timothy Steffen was Capstone’s President. At the time of the filing of the complaint, Mr. Klar owned 70 percent of Capstone, while a non-party, Timothy

Steffen, owned the remaining 30 percent.

{¶3} In August 2016, New Wembley entered into a contract with Capstone for

the construction of a new tennis facility and other related improvements to The Wembley

Club. Mr. Steffen signed the contract on behalf of Capstone. The total cost of the project

was $1,434,240 and was to be completed by March 31, 2017. Mr. Steffen managed the

project.

{¶4} Capstone stopped working on the project in mid-2019, though a large

portion of the work remained to be completed at that time. New Wembley alleges that

the work which was completed was defective and deficient, and that the cost of finishing

the project was significantly increased due to Mr. Steffen’s “fraud, misrepresentations,

actions, and inactions.”

{¶5} In July 2019, New Wembley filed a complaint against Mr. Steffen in the

Cuyahoga County Court of Common Pleas alleging fraud and misrepresentation. Mr.

Steffen subsequently filed a Chapter 7 bankruptcy. Because New Wembley’s claims

were non-dischargeable, it filed an adversary proceeding against Mr. Steffen in the United

States Bankruptcy Court.

{¶6} In August 2020, New Wembley filed a complaint against Capstone for

breach of contract and declaratory relief in the Cuyahoga County Court of Common Pleas.

New Wembley asserts that discovery and the deposition of Mr. Steffen failed to reveal

that Mr. Klar was Mr. Steffen’s business partner.

{¶7} After further investigation, New Wembley deposed Mr. Klar in April 2021.

New Wembley alleges that during the deposition, it learned of facts that gave rise to and

Case No. 2022-G-0007 supported claims against Mr. Klar, which it did not know when it filed its cases against Mr.

Steffen and Capstone. Specifically, New Wembley learned that Mr. Steffen was a

minority owner of Capstone, that he was an employee under an employment agreement,

that it was in his capacity as an employee that he was managing The Wembley Club

project, and that Mr. Klar was responsible for delegating the responsibility for the project.

New Wembley also learned that Mr. Klar was almost completely uninvolved with The

Wembley Club project and did not supervise Mr. Steffen.

{¶8} In June 2021, New Wembley filed a complaint against Mr. Klar alleging

negligent hiring, retention, and supervision arising from Mr. Klar’s role in hiring Mr. Steffen

to work for Mr. Klar’s company, Capstone Construction Company, LLC. This complaint,

the dismissal of which is the subject of the instant appeal, was filed in the Geauga County

Court of Common Pleas, not the Cuyahoga County Court of Common Pleas as the two

previous cases had been filed, because Mr. Klar resides in Geauga County. In its

complaint, New Wembley specifically alleged that Mr. Klar knew or should have known

that Capstone was defaulting on its obligations and that Mr. Klar relied on Mr. Steffen

despite “obvious signs” that Mr. Steffen should not have been retained.

{¶9} Mr. Klar responded with a motion for a more definite statement, which the

court granted over New Wembley’s objection. New Wembley then filed an amended

complaint. Mr. Klar answered and moved for judgment on the pleadings. New Wembley

filed a reply and opposed the motion. The trial court granted Mr. Klar’s Civ.R. 12(C)

motion for judgment on the pleadings without explanation.

{¶10} New Wembley now appeals, assigning one error for our review, which

states:

Case No. 2022-G-0007 {¶11} The trial court erred by granting Appellee Jason Klar’s Civ.R. 12(C) motion for judgment on the pleadings.

{¶12} “‘Under Civ.R. 12(C), dismissal is appropriate where a court (1) construes

the material allegations in the complaint, with all reasonable inferences to be drawn

therefrom, in favor of the nonmoving party as true, and (2) finds beyond doubt, that the

plaintiff could prove no set of facts in support of his claim that would entitle him to relief.

* * * Thus, Civ.R. 12(C) requires a determination that no material factual issues exist and

that the movant is entitled to judgment as a matter of law.” (Citations omitted.) Wilson v.

McCormack, 11th Dist. Ashtabula No. 2016-A-0039, 2017-Ohio-5510, ¶14, quoting State

ex rel. Midwest Pride IV, Inc. v. Pontious, 75 Ohio St.3d 565, 570 (1996). “A Civ.R. 12(C)

motion for judgment on the pleadings presents only questions of law, and a determination

of the motion is restricted solely to the allegations in the pleadings.” Francis v. Northeast

Ohio Neighborhood Health Services, Inc., 8th Dist. Cuyahoga No. 110322, 2021-Ohio-

3928, ¶11, Peterson v. Teodosio, 34 Ohio St.2d 161, 166 (1973). “Accordingly, our

standard of review is de novo.” Wilson, supra, citing Oko v. Lake Erie Corr. Inst., 175

Ohio App.3d 341, 2008-Ohio-835, ¶15 (11th Dist.).

{¶13} New Wembley alleges the trial court erred in two specific ways: (1) by

finding that New Wembley’s claims were barred by the two-year statute of limitations for

negligent hiring, negligent supervision, and negligent retention; and (2) by finding that it

failed to state a claim against Mr. Klar because its claims were based on Mr. Klar’s role

as a shareholder or officer of Capstone. We address each contention in turn.

{¶14} Application of the Discovery Rule

{¶15} It is undisputed that New Wembley’s claims for negligent hiring, negligent

supervision, and negligent retention were subject to a two-year statute of limitations 4

Case No. 2022-G-0007 pursuant to R.C. 2305.10(A). See, e.g., Keisler v. FirstEnergy Corp., 6th Dist. Ottawa No.

OT-04-055, 2006-Ohio-476, ¶27. “Generally, a cause of action accrues and the statute

of limitations begins to run at the time the wrongful act was committed.” Mattlin Holdings,

L.L.C. v. First City Bank, 189 Ohio App.3d 213, 2010-Ohio-3700, ¶7 (10th Dist.), citing

Collins v. Sotka, 81 Ohio St.3d 506 (1998). “For certain types of cases, a discovery rule

applies, and the statute of limitations does not begin to run until the plaintiff discovers or,

through the exercise of reasonable diligence, should have discovered a possible cause

of action.” Mattlin Holdings, supra, citing Doe v. Archdiocese of Cincinnati, 109 Ohio

St.3d 491, 2006-Ohio-2625.

{¶16} The discovery rule has been extended to cases involving negligent hiring,

retention, and/or supervisions claims. See Lisboa v. Tramer, 8th Dist. Cuyahoga No.

97526, 2012-Ohio-1549, ¶24. The Eighth District in Lisboa found that because the statute

of limitations begins to accrue when “the injury or loss to person or property occurs,”

pursuant to R.C. 2305.10(A), it is subject to the discovery rule.

{¶17} We agree with the application of the discovery rule to negligent hiring,

retention, and supervision claims. The Supreme Court has found that the discovery rule

is an exception created to avoid the unconscionable result in circumstances where an

injured party’s right to recovery may be barred by the statute of limitations before he is

even aware of its existence. Flagstar Bank, F.S.B. v. Airline Union’s Mtge. Co., 128 Ohio

St.3d 529, 2011-Ohio-1961, ¶13, citing O'Stricker v. Jim Walter Corp., 4 Ohio St.3d 84

(1983). That is the factual situation that New Wembley now brings.

{¶18} In O’Stricker, the Supreme Court had held that “[w]hen an injury does not

manifest itself immediately, the cause of action does not arise until the plaintiff knows or,

Case No. 2022-G-0007 by the exercise of reasonable diligence should have known, that he had been injured by

the conduct of defendant, for purposes of the statute of limitations contained in R.C.

2305.10.” O’Stricker, supra, at paragraph two of the syllabus. (Emphasis added.)

{¶19} In Hervey v. Normandy Dev. Co., 66 Ohio App.3d 496, 498 (11th Dist.1990),

this court found the facts of the case to be distinguishable from those in O’Stricker. In

Hervey, this court addressed a similar argument to the case at bar in regard to a plaintiff

seeking to recover for injuries sustained by formaldehyde emissions within her mobile

home. This court determined that because the plaintiff both knew of the injury, its cause,

and “knew or should have known that there was a manufacturer of component parts” but

failed to identify the specific manufacturer at fault until after the statute of limitations has

run. Id.

{¶20} However, the facts in Hervey are distinguishable from those in the case at

bar. In Hervey, the plaintiff knew that some manufacturer was responsible for her injuries

but failed to determine exactly which manufacturer before the statute of limitations had

run. Here, New Wembley knew of its injury and of Mr. Steffen’s involvement in 2017.

Accepting the facts pleaded as true, it did not learn that Mr. Steffen was an employee or

that Mr. Klar was in any way involved with Capstone or Mr. Steffen until 2020.

{¶21} Importantly, however, the discovery rule states that “the cause of action

does not arise until the plaintiff knows or, by the exercise of reasonable diligence should

have known, that he had been injured by the conduct of defendant * * * .” (Emphasis

added.). O’Stricker, supra. Thus, there remains a question of fact as to whether New

Wembley should have discovered Mr. Klar’s involvement earlier. Doe v. Robinson, 6th

Dist. Lucas No. L-07-1051, 2007-Ohio-5746, ¶17, (“Often, the application of a statute of

Case No. 2022-G-0007 limitations involves a mixed question of law and fact.”) Because this is a question of

material fact, we agree with New Wembley that it would be erroneous to grant judgment

on the pleadings based on the statute of limitations and discovery rule. However, our

discussion does not end there.

{¶22} Sufficiency of the Pleadings as to Mr. Klar’s Personal Liability

{¶23} We turn now to New Wembley’s second argument: whether the trial court

erred finding that it failed to state a claim against Mr. Klar because its claims were based

on Mr. Klar’s role as a shareholder or officer of Capstone. We find that New Wembley

sufficiently pleaded facts to establish it was pursuing negligent hiring, retention, and/or

supervision claims against Mr. Klar personally, as Mr. Steffen’s employer.

{¶24} Generally, “a complaint is only required to contain ‘(1) a short and plain

statement of the claim showing that the party is entitled to relief, and (2) a demand for

judgment for the relief to which the party claims to be entitled.’” Francis, supra, at ¶12,

quoting Civ.R. 8(A) and Tennant v. Huntington Natl. Bank, 8th Dist. Cuyahoga No.

108993, 2020-Ohio-4063, ¶15. “‘[A] plaintiff is not required to prove his or her case at the

pleading stage. * * * [A]s long as there is a set of facts, consistent with the plaintiff’s

complaint, which would allow the plaintiff to recover, the court may not grant a defendant’s

motion to dismiss.’” Francis, supra, quoting York v. Ohio State Hwy. Patrol, 60 Ohio St.3d

143, 144-145 (1991).

{¶25} However, “[i]n order to survive a motion for judgment on the pleadings, a

negligent hiring/retention claim ‘must plead operative facts with particularity.’” Erickson

v. Mgt. & Training, 11th Dist. Ashtabula No. 2012-A-0059, 2013-Ohio-3864, ¶40 quoting

Byrd v. Faber, 57 Ohio St.3d 56 (1991), syllabus. “‘The mere incantation of the elements

Case No. 2022-G-0007 of a negligent hiring claim, i.e., the abstract statement that the [employer] knew or should

have known about the employee’s criminal or tortious propensities, without more, is not

enough to enable a plaintiff to survive a motion to dismiss for failure to state a claim.’”

Erickson, supra, quoting Byrd, supra. “A well-pled complaint must include, however,

factual allegations going to each element of the claim, and conclusory statements without

any supporting factual allegations are insufficient.” Stevens v. Little Stars Early Learning

Ctr., L.L.C., 8th Dist. Cuyahoga No. 110602, 2022-Ohio-380, ¶35 citing Hendrickson v.

Haven Place, Inc., 8th Dist. Cuyahoga No. 100816, 2014-Ohio-3726, ¶27.

{¶26} To make out a claim for negligent hiring and retention, a plaintiff must show

“(1) the existence of an employment relationship, (2) the employee’s incompetence, (3)

the employer’s actual or constructive knowledge of such incompetence, (4) the

employer’s act or omission causing plaintiff’s injuries, and (5) the employer’s negligence

in hiring or retaining the employee as the proximate cause of plaintiff’s injuries.’” Evans

v. Akron Gen. Med. Ctr., 9th Dist. Summit No. 28340, 2018-Ohio-3031, ¶261. Mr. Klar

asserts that New Wembley failed to plead sufficient facts to establish the first element,

i.e., that Klar employed Steffen. We disagree.

{¶27} In its amended complaint, New Wembley states that Mr. Steffen is an

employee of Capstone and that Mr. Klar was Mr. Steffen’s employer. The amended

complaint specifically states, “[i]t is Defendant’s conduct and his role as an employer that

is at issue in this case, i.e., Defendant is responsible for allowing Steffen to commit

1. On appeal to the Ohio Supreme Court, the court declined to the adopt this test for the purpose of answering the certified questions on appeal. Evans v. Akron Gen. Med. Ctr., 163 Ohio St.3d 284, 2020- Ohio-5535, ¶5. However, the Court affirmed the Ninth District's decision by answering the questions based on the appellate court’s application and analysis of the test. Id. at ¶5, 15. 8

Case No. 2022-G-0007 various torts and/or for failing to prevent that through his negligent hiring, supervision,

and retention of Steffen.” Thus, we find that New Wembley sufficiently pleaded the first

element of a claim for negligent hiring, retention, and/or supervision.

{¶28} We also find New Wembley sufficiently pleaded all the remaining elements

of negligent hiring, retention, and supervision. As to the second and third elements, the

employee’s incompetence and employers’ knowledge of the employee’s incompetence,

New Wembley alleges, “[u]pon information and belief, Steffen lacked the qualifications,

experiences, skills and/or abilities to be employed in the role in which Capstone employed

him, and Defendant either knew or should have known this.” Specifically, it alleges that

Steffen failed to secure necessary contractors, failed to oversee the project, committed

fraud, made material misrepresentations, and performed defective work. It also alleges

that Mr. Klar knew or should have known that Capstone was defaulting on its obligations

due to Mr. Steffen’s actions and inactions.

{¶29} In support of the fourth element, the employer’s act or omission caused

injury, New Wembley alleges that Mr. Klar was uninvolved in the project, did not supervise

Mr. Steffen in his capacity as an employee for Capstone. It states, “[h]ad Defendant

exercised reasonable care in the hiring, supervision, and retention of Steffen, New

Wembley’s damages would have been avoided.”

{¶30} Finally, as to the fifth element, New Wembley states that Mr. Klar’s conduct

in failing to exercise reasonable care hiring, supervising, and retaining Mr. Steffen, makes

him a proximate cause of New Wembley’s injury. New Wembley alleges in excess of

$25,000 in damages. We find the amended complaint was sufficiently well-pleaded to

overcome judgment on the pleadings.

Case No. 2022-G-0007 {¶31} Because we disagree with Mr. Klar’s contention that all of New Wembley’s

allegations were based on his role as shareholder or officer of Capstone, we need not

address Mr. Klar’s argument that New Wembley failed to plead sufficient facts to pierce

the corporate veil. New Wembley brought its claims against Mr. Klar personally for his

own allegedly negligently tortious conduct. See, e.g., Evans, supra, 2018-Ohio-3031, ¶33

(An action for “negligent hiring, supervision, and retention is based on a theory of direct

liability * * *.”).

{¶32} In light of the foregoing, the judgment of the Geauga County Court of

Common Pleas is reversed and remanded.

THOMAS R. WRIGHT, P.J.,

MARY JANE TRAPP, J.,

concur.

Case No. 2022-G-0007