Franklin County Court of Appeals Affirms $19.6K Award Against Employer for Pursuing Frivolous Claim Against Employee

Last week the Franklin County Court of Appeals upheld an award of more than $19,500 in attorney’s fees and costs against an employer under R.C. 2323.51 for continuing with a lawsuit against a former employee after it should have been apparent that the lawsuit lacked merit. Bartelt Dancers, L.L.C. v. Icenhour, 2013-Ohio-5604.   Notably, the trial court did not find that the lawsuit lacked merit when it was filed.  However, after the employee’s attorney pointed out the flaws with the employer’s legal theory and lack of factual basis, the employer was obligation to investigate further instead of just continuing with the lawsuit.  The employer’s misconduct was exacerbated because it never made a settlement demand upon the employee and, at the preliminary injunction hearing, it focused only on the other defendant and never produced any evidence against the employee (who was an employee of the other defendant).   The Court also noted that the award of fees and costs was proper even though the employer dismissed the entire lawsuit soon after losing the preliminary injunction hearing and the employee’s attorney filed the motion for costs and fees.

According to the Court’s opinion, the employee resigned his employment and went to work for a former co-worker about 6 months after she formed a competing dance instruction studio.  About six months after that, the employer initiated legal action, including “claims for breach of contract, unfair competition, breach of fiduciary duty, and misappropriation of trade secrets and confidential information (the student list)” taken by the co-defendant.  The employee’s attorney pointed out, among other things, that the student list had not been confidential.  Although the employer’s attorney agreed that the employee was primarily a witness instead of a party, he did not dismiss the claims against her.   The employer also failed to obtain any witnesses to testify against the employee at the hearing.

 

The trial court in this case imposed sanctions under R.C. 2323.51(B), which allows the trial court to sanction a party, counsel, or both for engaging in frivolous conduct in the course of litigation. The statute defines frivolous conduct to include conduct that "consists of allegations or other factual contentions that have no evidentiary support or, if specifically so identified, are not likely to have evidentiary support after a reasonable opportunity for further investigation or discovery." R.C. 2323.51(A)(2)(a)(iii). "Under this definition of 'frivolous conduct,' the test is whether no reasonable attorney would have brought the action in light of the existing law."

 The employer’s conduct was frivolous because the employer and its attorney knew that it lacked a legal basis to continue the lawsuit against the employee.  By failing to dismiss the lawsuit, the employee

and her attorney had to prepare for and attend a preliminary injunction hearing where Plaintiff presented no evidence of any kind against her. Plaintiff and its counsel, based on the failure to secure or talk to witnesses and the one sided settlement offer to Icenhour, knew that they were not going to proceed against [the employee].

“[T]he frivolousness of appellants' conduct lies not in filing the original complaint, but rather in declining to timely dismiss it after failing to prosecute the action.”

 

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.