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«NOTICE This slip opinion is subject to formal revision before it is published in an advance sheet of the Ohio Official Reports. Readers are requested ...»

-- [ Page 1 ] --

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as State

ex rel. Ford v. Ruehlman, Slip Opinion No. 2016-Ohio-3529.]

NOTICE

This slip opinion is subject to formal revision before it is published in an

advance sheet of the Ohio Official Reports. Readers are requested to

promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65

South Front Street, Columbus, Ohio 43215, of any typographical or other formal errors in the opinion, in order that corrections may be made before the opinion is published.

SLIP OPINION NO. 2016-OHIO-3529 THE STATE EX REL. FORD v. RUEHLMAN, JUDGE.

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as State ex rel. Ford v. Ruehlman, Slip Opinion No.

2016-Ohio-3529.] Prohibition ―Ohio judge patently lacks jurisdiction to issue injunction shielding Ohio attorney from collection efforts of Kentucky judgment creditors and other orders interfering with Kentucky court’s attempts to enforce its judgments before Kentucky judgments were domesticated in Ohio―R.C.

2329.021 et seq.―Uniform Enforcement of Foreign Judgments Act―Judge has no authority to impose extrastatutory preconditions on filing of foreign judgment in Ohio―Writ of prohibition granted to prevent unauthorized exercise of judicial power and to vacate orders previously issued.

(No. 2015-1470—Submitted March 8, 2016—Decided June 21, 2016.) IN MANDAMUS and PROHIBITION.

________________

SUPREME COURT OF OHIO

Per Curiam.

{ 1} The Boone County, Kentucky, Circuit Court has entered a multimillion dollar judgment against former attorney Stanley M. Chesley. Denied relief from the judgment by the Kentucky courts, Chesley has turned to the courts of Ohio to thwart collection of the judgment and relitigate the case. And Chesley has found a receptive audience in the respondent, Hamilton County Common Pleas Court Judge Robert Ruehlman. In Chesley v. Ford, Hamilton C.P. No. A1500067, Judge Ruehlman has repeatedly acted to shield Chesley and his assets from creditors, despite a patent lack of jurisdiction.

{ 2} Relator, Angela M. Ford, seeks a writ of prohibition to preclude Judge Ruehlman from continuing to exercise jurisdiction over the Hamilton County case.

Chesley and his former law firm, as intervenors, oppose this request on the merits and also based on a claim of mootness. We grant a peremptory writ of prohibition and order Judge Ruehlman to vacate his orders. We deny Ford’s request for a writ of mandamus.

Background The Kentucky proceedings { 3}In 1998, attorneys William Gallion, Shirley Cunningham, and Melbourne Mills filed a class-action lawsuit in Boone County, Kentucky, captioned Guard v. A. H. Robins Company, on behalf of approximately 431 persons who claimed to have been injured by the use of the diet drug “fen-phen.”1 Chesley was counsel in a separate fen-phen suit in Boone County, which he succeeded in consolidating with the Guard class action. Chesley, Gallion, Cunningham, Mills, and another attorney then entered into fee-sharing agreements that were not disclosed to the clients.

The facts concerning the Guard litigation are taken from the decision of the Kentucky Supreme Court in Kentucky Bar Assn. v. Chesley, 393 S.W.3d 584 (Ky.2013).

–  –  –

{ 4} The parties reached a settlement agreement. American Home Products, the manufacturer of fen-phen, agreed to pay $200 million in settlement of the claims brought by the 431 named plaintiffs in return for dismissal of their claims with prejudice. The class would be voluntarily decertified, and the classmember claims dismissed without prejudice. The clients were not informed of these facts before the agreement was executed and the claims dismissed. American Home ultimately disbursed $200,450,000 to the client trust accounts of Chesley and Cunningham. The clients received $46,000,000 (approximately 23 percent).

Chesley personally retained $20,497,121.87.

{ 5} In 2005, several of the Guard clients filed suit against Chesley, Gallion, Cunningham, Mills, and the Kentucky Fund for Healthy Living in the Circuit Court of Boone County, Kentucky, alleging misconduct and misappropriation of the settlement funds.2 The case was styled Abbott v. Chesley (the “Abbott case”), case No. 05-CI-436. Angela Ford, relator in the instant action, is an attorney licensed to practice in the Commonwealth of Kentucky, and she represented the plaintiffs in the Abbott litigation.

{ 6} On March 8, 2006, the Boone County court found Cunningham, Gallion, and Mills liable for breach of fiduciary duty. In a later order, dated August 1, 2007, the court awarded damages in the amount of $42,000,000.

{ 7} The question of Chesley’s liability remained unresolved for seven years. In the interim, the Kentucky Supreme Court permanently disbarred Chesley for his conduct in the Guard litigation. Kentucky Bar Assn. v. Chesley, 393 S.W.3d 584 (Ky.2013). He is registered in Ohio as “permanently retired.” { 8} On April 15, 2013, shortly after his Kentucky disbarment, Chesley executed a wind-up agreement for his law practice, Waite, Schneider, Bayless & The Kentucky Fund for Healthy Living was an allegedly “charitable” organization set up by Chesley “to harbor millions of dollars of the settlement money that was not distributed to the clients.” Kentucky Bar Assn. v. Chesley, 393 S.W.3d 584, 590, (Ky.2013), fn. 6.





SUPREME COURT OF OHIO

Chesley Co., L.P.A. (“WSBC”), of which he was the sole shareholder. Pursuant to the agreement, Chesley transferred his shares in WSBC to Thomas F. Rehme, who would hold the shares in trust for the purpose of winding up the corporation’s affairs. Chesley was entitled to receive any proceeds remaining from the liquidation of the firm’s assets after the creditors were paid. In addition, the agreement preserved Chesley’s right to share in legal fees relating to services performed before the date of the transfer.

{ 9} On August 1, 2014, Boone County Circuit Court Judge James R.

Schrand granted a motion for partial summary judgment in the Abbott case and held Chesley liable, jointly and severally with Cunningham, Gallion, and Mills, for the $42,000,000 judgment.

{ 10} On August 11, 2014, Chesley petitioned the Boone County court to reconsider and vacate the partial-summary-judgment order. Judge Schrand denied the motions on September 19, 2014.

{ 11} Chesley responded with a motion for clarification, on October 20, 2014, seeking an order to compel the Abbott plaintiffs to identify by name each party-plaintiff, the capacity in which each was suing (individual or representative), and the amount of the judgment attributable to each individual. Judge Schrand denied that motion as well.

{ 12} On October 22, 2014, Judge Schrand issued a second amended judgment against Chesley, which added language designating the order as final and appealable. Chesley filed a motion to vacate the second amended judgment, which was also denied.

The Ohio proceedings { 13} On January 6, 2015, Chesley filed suit in the Common Pleas Court of Hamilton County against attorney Ford and “possibly over 400 John Doe or Jane Doe” respondents. These so-called “Unknown Respondents” were the Abbott case

January Term, 2016

judgment creditors. At the time Chesley filed his lawsuit, Ford and the Abbott plaintiffs had taken no steps to domesticate or enforce their judgment in Ohio.

{ 14} In his complaint, Chesley requested five specific orders:

1. A declaration that before respondents could take any action in Ohio to enforce the Abbott judgment, Chesley is entitled to know, and Ford must immediately disclose to Chesley and the court, the name, address, and amount owed to each judgment creditor, and the exact current total amount owed on the judgment.

2. A declaration that Chesley is entitled to know, and Ford must immediately disclose to Chesley, the amount of money and value of assets recovered pursuant to the 2007 judgment against Gallion, Mills, and Cunningham, the date on which payments were made or assets forfeited or seized, the total amount distributed to the judgment creditors, the amount collected and not distributed, and the total amount distributed to the Unknown Respondents pursuant to the settlement agreement and in the Abbott case, after reduction for Ford’s fees and expenses.

3. An injunction to prevent Ford, the Unknown Respondents, or anyone acting on their behalf from taking any action in the state of Ohio to collect the Abbott judgment until 90 days after Chesley receives the information.

4. An injunction to prevent Ford, the Unknown Respondents, or anyone acting on their behalf from registering or domesticating the judgment against Chesley in Ohio, or issuing subpoenas or other discovery to parties in Ohio, until 90 days after Chesley receives the information.

5. An injunction to prevent the destruction of documents relevant to the issues in Chesley’s pleadings.

{ 15} The case was assigned to Judge Ruehlman.

{ 16} The next day, January 7, 2015, Judge Ruehlman entered an ex parte

temporary restraining order. Under the terms of the order, for the next 14 days:

SUPREME COURT OF OHIO

1. Ford, any co-counsel, and any Ohio lawyer representing the Unknown Respondents were enjoined from taking any action in Ohio to enforce the Abbott judgment against Chesley or serve any Chesley-asset-related discovery on any Ohio resident, citizen, or domiciliary, except Chesley himself.

2. Ford, any co-counsel, and any Ohio lawyer representing the Unknown Respondents were enjoined “from making any filing in any Ohio court that would be or could be part of an effort to domesticate or register” the Abbott judgment in Ohio.

3. Ford, the Unknown Respondents, and any person acting on their behalf were enjoined from taking any action to collect the Abbott judgment in Ohio from any Ohio resident, citizen, or domiciled entity, other than Chesley.

4. Ford, the Unknown Respondents, and any person acting on their behalf were enjoined from issuing any subpoena seeking documents or testimony to any Ohio resident, citizen, or domiciled entity, other than Chesley, if the purpose of the requested documents or testimony is to obtain information related to efforts to enforce the Abbott judgment.

5. Ford, the Unknown Respondents, and any person acting on their behalf were enjoined from destroying, damaging, or secreting any documents or electronically stored information relating to a host of topics.3 { 17} One week later, Judge Ruehlman entered an order extending the injunction to keep the restrictions of the TRO in force until further order of the court. Judge Ruehlman modified the TRO in one respect: whereas the first order Specifically, the order shielded documents relating to any issues described in Chesley’s petition, including documents reflecting funds collected and/or credited against the Abbott judgment against Chesley’s former co-counsel, the restitution obligations of his former co-counsel, the forfeiture of assets in Abbott, funds transferred to or from a person identified only as “Johnston,” funds transferred to or for the benefit of victims who were not plaintiffs in Abbott, amounts distributed to the Abbott plaintiffs, the operation of the “Tandy L.L.C.” receivership, funds transferred to or by the United States Marshals Service relating to the criminal case or Abbott, and the legal fees and expenses of Ford and her Abbott co-counsel.

January Term, 2016

permitted Ford to serve discovery on Chesley, the extended order clarified that such discovery could only occur in a non-Ohio jurisdiction. The order expressly stated that Chesley was not required to post any security.

{ 18} In February 2015, Ford removed the case to federal court, based on diversity jurisdiction. She then filed motions to dissolve the restraining order and to dismiss the complaint. The motion to dismiss argued that Ohio had no personal jurisdiction over Ford, that the complaint identified no justiciable case or controversy, and that the complaint constituted an impermissible collateral attack against a final judgment from another jurisdiction, in violation of the Full Faith and Credit Clause, Article IV, Section 2 of the U.S. Constitution.

{ 19} In response, Chesley filed a motion in the federal district court for leave to file an amended complaint to identify six Abbott judgment creditors by name. The newly named parties were all Ohio residents. Chesley then filed a motion to remand the case on the grounds that diversity jurisdiction did not exist.

{ 20} U.S. District Court Judge Peter C. Economus found that “Chesley’s primary purpose in amending his complaint [was] to destroy the Court’s apparent diversity jurisdiction over the original complaint.” Chesley v. Ford, S.D.Ohio No.

1:15-cv-83, 2015 WL 1569103, at *3 (Apr. 6, 2015). Nevertheless, he permitted the amendment and granted the remand motion.

{ 21} Once the case returned to state court in May 2015, Judge Ruehlman denied Ford’s motions to dismiss the case and to dissolve the injunction. He denied Ford’s request for security for the injunction.

Dueling proceedings { 22} Since then, litigation has proceeded in both Kentucky and Ohio, with the two courts in direct and open conflict. For example, Ford served a subpoena duces tecum on the Kentucky offices of the accounting firm Clark Schaefer Hackett, seeking financial and tax records for Chesley, WSBC, or any other entity in which they hold an interest. Clark Schaefer refused to comply, in part because

SUPREME COURT OF OHIO

it contended that the subpoena violated Judge Ruehlman’s injunction. Judge Schrand granted a motion to compel Clark Schaefer to respond, holding that the subpoena did not violate Judge Ruehlman’s order because an Ohio injunction “cannot limit [a Kentucky court’s] ability to Order a business located and transacting business in Kentucky to comply with Kentucky law to secure a Judgment from a Kentucky case.” However, Judge Ruehlman later declared that filing a motion to compel in Kentucky against Clark Schaefer did violate the restraining order.



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