Schafer v. Soderberg & Schafer C.P.A.s, L.L.C.

964 N.E.2d 24, 196 Ohio App. 3d 458
CourtOhio Court of Appeals
DecidedSeptember 16, 2011
DocketNo. OT-10-009
StatusPublished
Cited by12 cases

This text of 964 N.E.2d 24 (Schafer v. Soderberg & Schafer C.P.A.s, L.L.C.) 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
Schafer v. Soderberg & Schafer C.P.A.s, L.L.C., 964 N.E.2d 24, 196 Ohio App. 3d 458 (Ohio Ct. App. 2011).

Opinion

Osowik, Presiding Judge.

{¶ 1} This is an appeal by appellant/eross-appellee, Edmund M. Schafer, and a cross-appeal by appellees/cross-appellants, Soderberg & Schafer, C.P.A., L.L.C. (“S & S”), David Soderberg, and Joseph Brenner, from a judgment of the Ottawa County Court of Common Pleas, following a jury trial, in which the trial court granted a directed verdict and dismissed Schafer’s individual claims against Soderberg and Brenner, and the jury found that Schafer was entitled to $540,000 in damages in a breach-of-eontract action. On appeal, Schafer sets forth the following assignment of error:

{¶ 2} “The trial court erred when it granted appellees’ motion for a directed verdict as to count I of the appellant’s complaint.”

{¶ 3} S & S, David Soderberg, and Joseph Brenner set forth the following cross-assignments of error on appeal:

{¶ 4} “[Cross-]Assignment of Error # 1: The lower court erred by failing to hold that the retirement buy-out provisions of the buy-sell agreement are too indefinite and uncertain to be enforced.

{¶ 5} “[Cross-]Assignment of Error # 2: The lower court erred in failing to hold that [appellant] failed to satisfy the conditions precedent to a sale of his interest in the company.

{¶ 6} “[Cross-]Assignment of Error # 3: The lower court erred in failing to find [appellant] repudiated the buy-sell agreement by imposing unreasonable conditions to the transfer of his interest in the company.

{¶ 7} “[Cross-]Assignment of Error # 4: The trial court erred by submitting an issue of law to the jury, allowing the jury to make its own interpretation of the language of a contract.”

[464]*464{¶ 8} In 1983, Edmund Schafer and David Soderberg, both certified public accountants, combined their accounting businesses into one partnership. Shortly thereafter, Schafer sold a building that he owned, which was located at 121 Jefferson Street in Port Clinton, Ohio, to the partnership. Schafer and Soder-berg then formed a second company, 121 Jefferson Realty, L.L.C. Soderberg and Schafer each had a 50 percent interest in both the partnership and 121 Jefferson Realty.

{¶ 9} In 1999, Soderberg’s nephew, Joseph Brenner, was hired as a clerk for the partnership. On January 1, 2002, Soderberg and Schafer executed documents whereby their partnership was converted to S & S, a limited-liability corporation. Immediately thereafter, additional documents were executed to make Brenner a shareholder with a 10 percent interest in S & S, while Soderberg and Schafer each retained a 45 percent interest in the business. The documents included an assignment of the general partnership’s interest to S & S, a transfer of a 10 percent interest in S & S to Brenner, a promissory note in the amount of $60,000 taken in exchange for giving Brenner his 10 percent interest, an operating agreement that set forth how the company would be structured, and a no-competition agreement. The no-competition agreement stated that after leaving S & S, Schafer, Soderberg and Brenner agreed not to “directly or indirectly enter the employment of, or perform an advisory or consulting service for, or make a substantial investment in, any company, partnership, sole organization, proprietorship, or other entity that engages in the practice of accounting” in Erie, Huron, Ottawa, and Sandusky Counties for five years. Each member also agreed not to “make available to any other firm any data, research, customer list or process relating to the accounting business.”

{¶ 10} In addition, the parties executed a buy-sell agreement that contained provisions that would be applied in the event that one of the three partners would die, leave the business, or elect to retire.

{¶ 11} From the inception of the original partnership, Schafer had acted as the manager for the partners’ accounting business. As the managing partner, Schafer oversaw the functions of client billing, banking activities, paying of bills for the business, and supervision of employees. However, after S & S was formed and Brenner purchased an interest in the company, friction developed between Brenner and Schafer as to how S & S should be run.

{¶ 12} On February 20, 2008, Schafer asked Soderberg and Brenner for a meeting to discuss his retirement from S & S. At the meeting, which took place on March 3, 2008, Schafer gave written notice that he intended to retire from S & S not later than August 30, 2008, and that he wanted to cash out his interest in 121 Jefferson Realty. In the written notice, Schafer stated that pursuant to the [465]*465buy-sell agreement, his 45 percent of S & S was worth $540,000.1 Schafer also gave Soderberg and Brenner copies of a to-do list in order to prepare the business and its owners for his upcoming retirement. Items on the to-do list included preparation of the following: (1) a retirement agreement, “including relevant tax structure of payments, allocation of 2008 income, [and] final capital distribution to Schafer,” (2) a “note payable to Schafer, including personal loan guarantees,” (3) “preparation and execution of [a] covenant not to compete,” (4) a release of Schafer as guarantor of bank loans for S & S, (5) modifications to life insurance policies for Schafer, Soderberg, and Brenner that were held by S & S, and (6) provisions for transferring responsibility for running S & S and transitioning clients after Schafer’s retirement. In addition, the to-do list addressed the necessity of obtaining a real estate appraisal before computing the amount necessary to compensate Schafer for his interest in 121 Jefferson Street.

{¶ 13} By agreement, further discussion of the matter was postponed until after tax season. In the interim, Schafer hired an attorney, who drafted a proposed “Purchase Agreement of Retired Members [sic] Interest by Company and Members.” Attached to the purchase agreement was a “Determination of Value of Member’s Interest and Subsequent Year Guarantee as of the 1st Day of Jan., 2008,” executed by Schafer, Soderberg, and Brenner, which placed the value of Schafer’s 45 percent interest in S & S at $540,000. Also attached was a new proposed no-competition agreement, which stated that Schafer agreed not to “actively solicit any of the business accounts or customers of [S & S] existing as of the date” that the new agreement was executed.

{¶ 14} A meeting was held at the end of the tax season, at which Schafer and Soderberg disagreed as to what method should be used to determine the value of 121 Jefferson Street. No consensus was reached as to the terms of Schafer’s retirement. In May 2008, another meeting took place, at which Schafer offered not to withdraw from 121 Jefferson Street, in order to resolve the conflict as to its valuation. Thereafter, Schafer, Soderberg, and Brenner discussed Schafer’s impending retirement. At some point during the meeting, Brenner presented Schafer with a draft of a no-competition agreement that Schafer refused to accept, even though Schafer stated that he had no intention of competing for business with S & S. In addition, Soderberg and Brenner refused to personally guarantee the company’s obligation to pay Schafer $540,000. The meeting ended without producing any agreement as to the terms of Schafer’s retirement. No further direct communication took place between the three men after that date.

[466]

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Bluebook (online)
964 N.E.2d 24, 196 Ohio App. 3d 458, Counsel Stack Legal Research, https://law.counselstack.com/opinion/schafer-v-soderberg-schafer-cpas-llc-ohioctapp-2011.