Gorsha et al v. Clark et al

Filing 82

OPINION AND ORDER denying 32 Motion for Judgment on the Pleadings. Signed by Judge James L. Graham on 3/7/2019. (ds)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION

JOSEPH P. GORSHA, et al.,
Case No. 2:18-cv-508
Plaintiffs,
v.

Judge Graham

BERNARD E. CLARK, et al.,

Magistrate Judge Jolson

Defendants.
OPINION AND ORDER
This matter is before the Court on Defendants Jonathan C. Clark and Clark & Clark and
Associates, LLC’s (“Defendants Clark & Clark”) Motion for Judgment on the Pleadings. (ECF
No. 32). Defendants Clark & Clark move this Court pursuant to Fed. R. Civ. P. 12(c) for an Order
granting Judgment on the Pleadings and dismissing Count Six of Plaintiffs’ Complaint asserting
legal negligence against them. (Compl. ¶¶ 60–66, ECF No. 1 at 11–12). For the reasons that
follow, Defendants Clark & Clark’s motion is DENIED.
I.

Background
Plaintiffs Joseph D. Gorsha, Nancy Gorsha, Damon J. Faldowski, Dianne M. Faldowski,

Damon J. Faldowski, II, and Mark R. Faldowski (collectively “Plaintiffs”) jointly owned real
property in Belmont County, Ohio consisting of 37.525 acres located on Sandy Ridge Road,
Barnesville, Ohio, bearing parcel number 45.00151.000 (the “Property”). (Id. at ¶ 1, 2). In May
2013, Plaintiffs and Defendants Bernard and Alice Clark (the “Buyers”) entered into a contract for
the sale, of the surface rights only, of the Property (the “Real Estate Purchase Contract”). (Id. at ¶
2, 2). The Real Estate Purchase Contract specifically stated, “Seller is [r]eserving mineral
[r]ights.” (Id. at ¶ 2, 2; Ex. 1, ECF No. 1-2 at ¶ 8). Prior to the sale of the surface rights to the
Property to the Buyers, Plaintiffs entered into an Oil & Gas Lease with Rice Drilling D, LLC
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(“Rice Drilling”) (Id., Ex. 2, ECF No. 1-3) for the Property. (Id. at ¶ 3, 3). At the time Plaintiffs
sold the surface rights to the Buyers, Rice Drilling had not commenced production or any payment
of royalties. (Id. at ¶ 4, 3).
Plaintiffs’ real estate agent, Brian Bauer, retained Mid Ohio Title Agency, LLC doing
business as Lanco Title Agency (“Lanco”), on Plaintiffs’ behalf. (Pls.’ Mem. Opp. Defs.’ Clark &
Clark Mot. J. Pleadings 2, ECF No. 42 at 226). Lanco served as the escrow agent for the sale of
the Property. (Compl. ¶ 14, ECF No. 1 at 5). Lanco is owned by attorney Jonathan C. Clark. (Id.).
Mr. Clark prepared the warranty deed (the “Deed”) for the Plaintiffs’ signatures. (Id., Ex.
4, ECF No. 1-5 at 34). The Deed did not provide for the reservation of mineral rights as agreed to
by the parties to the Real Estate Purchase Contract. (Id. at ¶ 30, 7). The Plaintiffs signed the Deed
on September 4, 2013. (Id., Ex. 4, ECF No. 1-5). Lanco recorded the Deed with the Belmont
County Recorder on October 4, 2013. (Answer ¶ 6, ECF No. 16 at 73).
Plaintiffs did not discover Mr. Clark’s error until February 4, 2018 when they inquired with
Mr. Bauer about the upcoming expiration of the Oil & Gas Lease. (Compl. ¶ 32; ECF No. 1 at 7).
After checking the Ohio Department of Natural Resources’ records, Mr. Bauer informed the
Plaintiffs that the Property’s 37.525 acres were in drilling units and had been drilled by Rice
Drilling’s subsequent purchaser, Gulfport Energy Corp. (“Gulfport Energy”), during the third
quarter of 2016. (Id.).

The Plaintiffs further discovered that Gulfport Energy paid the

corresponding mineral production royalties to the Buyers. (Id. at ¶ 31, 7).
On May 22, 2018, Plaintiffs commenced this action against the Buyers, Lanco, and Clark
& Clark alleging seven causes of action. (Id.). In their sixth cause of action for legal negligence,1

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Though Plaintiffs’ complaint asserts a legal negligence claim, the Court will construe this claim as a legal malpractice
claim since the Plaintiffs claim they suffered damages through Defendants Clark & Clark’s negligent action while
providing legal services.

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Plaintiffs allege that Mr. Clark provided legal services to them and was directly paid for those
services out of the escrow funds created by Lanco for the sale of the Property. (Id. at ¶ 61, 12).
Plaintiffs further allege that Mr. Clark owed them a duty of care commensurate with that provided
by other Ohio attorneys, he breached that duty by failing to reserve the mineral rights in the
Property to the Plaintiffs when he prepared the Deed, and that failure harmed the Plaintiffs when
the mineral production royalties were paid to the Buyers instead. (Id. at ¶¶ 62–65, 12).
II.

Standard of Review
“After the pleadings are closed—but early enough not to delay trial—a party may move

for judgment on the pleadings.” Fed. R. Civ. P. 12(c). The standard applied to motions for
judgment on the pleadings is the same standard applicable to motions to dismiss under Rule
12(b)(6). See Hindel v. Husted, 875 F.3d 344, 346 (6th Cir. 2017). “For purposes of a motion for
judgment on the pleadings, all well-pleaded material allegations of the pleadings of the opposing
party must be taken as true, and the motion may be granted only if the moving party is nevertheless
clearly entitled to judgment.” JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577, 582 (6th Cir.
2007) (internal citation and quotation marks omitted). But legal conclusions or unwarranted
factual inferences are not accepted as true. Id. at 581–82 (citing Mixon v. Ohio, 193 F.3d 389, 400
(6th Cir. 1999)). When considering a motion for judgment on the pleadings, a court reviews not
only the complaint, but “matters of public record, orders, items appearing in the record of the case,
and exhibits attached to the complaint.” Barany–Snyder v. Weiner, 539 F.3d 327, 332 (6th Cir.
2008).
To withstand a motion for judgment on the pleadings, “a complaint must contain direct or
inferential allegations respecting all the material elements under some viable legal theory.”
Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 336 (6th Cir. 2007). “The

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factual allegations in the complaint need to be sufficient to give notice to the defendant as to what
claims are alleged, and the plaintiff must plead ‘sufficient factual matter’ to render the legal claim
plausible, i.e., more than merely possible.” Fritz v. Charter Township of Comstock, 592 F.3d 718,
722 (6th Cir. 2010) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.
III.

Discussion
Defendants Clark & Clark seek judgment in their favor on Plaintiffs’ claim of legal

negligence and advance two primary arguments as to why they believe they are entitled to
judgment on the pleadings regarding this claim. First, Defendants Clark & Clark insist no attorneyclient relationship existed between the parties. (ECF No. 32 at 158). They next aver that even if
such a relationship had existed, Plaintiffs’ malpractice claimed is barred by the one-year statute of
limitations under Ohio Rev. Code § 2305.11(A). (Id.).
A. Attorney-Client Relationship
To establish a legal malpractice claim in Ohio,2 a plaintiff must show that: (1) the attorney
owed a duty or obligation to the plaintiff, (2) there was a breach of that duty or obligation and that
the attorney failed to conform to the standard required by law, and (3) there is a causal connection
between the conduct complained of and the resulting damage or loss. Vahila v. Hall, 77 Ohio St.
3d 421, 421–22, 674 N.E.2d 1164, 1167 (1997). Defendants Clark & Clark argue that absent an
attorney-client relationship no corresponding duty or obligation can exist. (ECF No. 32 at 162).
Defendants Clark & Clark contend that, “[A]n attorney-client relationship exists when an attorney
advises others as to their legal rights, a method to be pursued, the forum to be selected, and the

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This is a diversity action, and the Plaintiffs’ legal negligence claim is brought under Ohio law for alleged malpractice
by an Ohio firm and an Ohio attorney.

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practice to be followed for the enforcement of their rights.” (Id.) (quoting Toliver v. Duwel, 2012Ohio-846, ¶ 55 (Ct. App.)). They emphasize to the Court that the ultimate concern is “whether the
putative client reasonably believed that the relationship existed and that the attorney would
therefore advance the interests of the putative client.” Id. (quoting Davis v. Montenery, 173 Ohio
App. 3d 740, 746, 880 N.E.2d 488, 492 (2007)).
Plaintiffs point out that Defendants Clark & Clark have the same address as Lanco, and
that Mr. Clark serves as an agent to both the title agency and his firm. (ECF No. 42 at 229). They
further stress that Lanco advertises that it is owned by attorney Jonathan C. Clark. (Id.). Plaintiffs
claim that this public representation led them to believe that by engaging the services of Lanco,
they were also engaging the legal services of Defendants Clark & Clark. (Id.).
Plaintiffs further claim they expected the Deed to be prepared by an attorney and not Lanco,
as preparation of a deed falls within the practice of law in Ohio. (ECF No. 42 at 234). To support
this contention, Plaintiffs highlight the Supreme Court of Ohio’s decision in Disciplinary Counsel
v. Jones where the court declared, “‘The practice of law embraces the preparation of legal
documents on another’s behalf, including deeds which convey real property.’ The preparation of
deeds for another constitutes the practice of law.” 138 Ohio St. 3d 330, 331–32, 6 N.E.3d 1159,
1160–61 (2014) (quoting Disciplinary Counsel v. Doan, 77 Ohio St. 3d 236, 237, 673 N.E.2d 1272
(1997). Plaintiffs further aver that to avoid engaging in the unauthorized practice of law, Lanco
had to retain an attorney on their behalf to prepare the Deed. (ECF No. 42 at 234–35). Plaintiffs
point to the portion of the Deed bearing Defendant Clark & Clark’s names next to “This instrument
prepared by:” as confirmation of this belief. (Id. at 229; ECF No. 1-5 at 34). Plaintiffs emphasize
that despite the Settlement Statement (HUD-1) notation of their document preparation payment to
“Lanco Title Agency” (Answer, Ex. A, ¶ 1113, ECF No. 16 at 85), Lanco could not keep such a

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fee for a document it could not legally prepare and was instead obligated to give that payment to
Defendants Clark & Clark as the actual preparers of the Deed. (ECF No. 42 at 235). Plaintiffs
insist that as the owner and agent of the title agency, Mr. Clark served multiple roles during the
real estate transaction, and that they contracted with Defendants Clark & Clark for the preparation
of the Deed and not with Lanco. (Id. at 234).
Defendants Clark & Clark maintain that Mr. Clark only served as an agent of the title
agency and did not serve as the Plaintiffs’ attorney. (ECF No. 45 at 254). While Defendants Clark
& Clark acknowledge Mr. Clark’s dual role as both the owner and agent of the title agency, they
contend that Defendants Clark & Clark did not charge the Plaintiffs for the preparation of the Deed
(ECF No. 32 at 160), and that Mr. Clark’s wearing of “multiple hats” is immaterial to the Plaintiffs’
malpractice claim. (ECF No. 45 at 254).
Ohio case law is helpful in distinguishing between the roles of escrow agent and attorney
during a transaction. “Ordinarily, the positions of escrow agent and attorney . . . are separate,
distinct, and mutually exclusive.” Folino v. Brown, No. 15619, 1996 Ohio App. LEXIS 3132, at
*6 (Ct. App. July 12, 1996) (citing Saad v. Rodriguez, 30 Ohio App. 3d 156, 506 N.E.2d 1230
(1986). The primary function of an escrow agent is to “hold documents and funds until the
conditions of the purchase agreement are met whereupon the escrow agent releases the documents
and funds.” Saad, 506 N.E.2d at 1233 (citing Pippin v. Kern-Ward Bldg. Co., 8 Ohio App. 3d 196,
456 N.E. 2d 1235 (1982); Squire v. Branciforti,131 Ohio St. 344, 2 N.E.2d 878 (1936); Gove v.
Jablonski, No. 48411, 1985 Ohio App. LEXIS 5743 (Ct. App. Feb. 7, 1985)). The escrow agent
thus serves as a fiduciary agent for both parties to an agreement. Id. The attorney, on the other
hand, represents only one party to the agreement and serves as a fiduciary agent to his or her client

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based on the attorney-client relationship. Id. at 1233–34. The roles of escrow agent and attorney
are therefore “distinct and mutually exclusive.” Id. at 1233.
Despite the “distinct and mutually exclusive” roles of the escrow agent and attorney to a
transaction, the Saad court acknowledged the possibility that an attorney and his or her firm may
act in a dual capacity as attorneys for one of the parties and as escrow agent for both parties. Id.
Here, Defendants Clark & Clark argue that Lanco was retained for the benefit of both the Plaintiffs
and the Buyers. (ECF No. 45 at 254). Moreover, Defendants Clark & Clark claim they prepared
the Deed on behalf of Lanco, and that Lanco is not in privity with the Plaintiffs. (Id.). They further
insist that they never acted as the Plaintiffs’ attorney, as they never advised the Plaintiffs as to their
legal rights, and the Plaintiffs have failed to indicate that Defendants Clark & Clark ever engaged
in any communication with them. (ECF No. 32 at 163).
Plaintiffs assert that an attorney-client relationship can be implied from the conduct of the
attorney and the expectations of the client. (ECF No. 42 at 236) (citing Davis v. Montenery, 173
Ohio App. 3d 740, 746, 880 N.E.2d 488, 492 (2007). Like the plaintiff in Davis, the Plaintiffs in
the case at issue contend that although they may not have contacted Defendants Clark & Clark
directly to represent them, they expected Mr. Clark to prepare the Deed, and Mr. Clark’s conduct
in preparing the Deed conformed to their client expectations. (ECF No. 42 at 236).
The Plaintiffs also rely on a Florida decision to analogize to the present case. In JBJ Inv.
of S. Fla., Inc. v. S. Title Grp., Inc., the Florida court determined that, “The consultation
requirement [is] met when an agent of the client consults with an attorney on the client’s behalf.”
251 So. 3d 173, 178 (Fla. Dist. Ct. App. 2018). In the Florida case, the plaintiff wanted an attorney
to prepare loan documents. Id. at 179. His title agent contacted an attorney on his behalf and hired
that attorney to prepare a note and mortgage for a fee. Id. Under these facts, the Florida court

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found that since the attorney was hired by the plaintiff’s title agent, rendered legal services, and
billed for those services, a reasonable jury could find that an attorney-client relationship existed
between the plaintiff and the attorney by virtue of the title agent consulting with the attorney in
her capacity as the plaintiff’s agent and referring to that attorney the work of preparing the loan
documents. Id. Here, the Plaintiffs argue that the consultation requirement was met when Lanco
acted as their agent by arranging for Defendants Clark & Clark to provide legal services by
preparing the Deed, Defendants Clark & Clark prepared the Deed, and the Plaintiffs paid a
document preparation fee that ultimately went to Clark & Clark. (ECF No. 42 at 237).
Though the extent of the relationship between Defendants Clark & Clark and the Plaintiffs
remains unclear, the Court finds that the Plaintiffs have pleaded sufficient facts to support a
plausible legal malpractice claim against Defendants Clark & Clark. Plaintiffs’ complaint contains
both direct and inferential allegations respecting the material elements of a legal malpractice claim
under Ohio law. (Compl. ¶¶ 60–66, ECF No. 1 at 11–12). Plaintiffs allege Defendants Clark &
Clark owed them a duty of care, subsequently breached that duty when Mr. Clark failed to reserve
Plaintiffs’ mineral rights in the Deed, and that a causal connection exists between the conduct
complained of and the resulting damage or loss. (Id.). Plaintiffs’ allegations allow the Court to
draw the reasonable inference that Defendants Clark & Clark may be liable for the misconduct
alleged. Therefore, Defendants Clark & Clark are not clearly entitled to judgment as a matter of
law on Plaintiffs’ legal malpractice claim.
B. Statute of Limitations
Defendants Clark & Clark further urge the Court to consider that even if an attorney-client
relationship existed, Plaintiffs have run afoul of the statute of limitations for a legal malpractice
claim, and their claim must be dismissed. (ECF No. 32 at 164, 166). Under Ohio Rev. Code §

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2305.11(A), the statute of limitations for a legal malpractice claim is one year. Defendants Clark
& Clark argue that the Plaintiffs’ cause of action accrued on September 4, 2013 when the Deed
was executed and expired a year later on September 4, 2014. (ECF No. 32 at 164). Thus, they
argue, Plaintiffs’ legal malpractice claim is time-barred. (Id.).
In Ohio, a cause of action for legal malpractice “accrues and the statute of limitations
begins to run when there is a cognizable event whereby the client discovers or should have
discovered that his injury was related to his attorney’s act or non-act, and the client is put on notice
of a need to pursue his possible remedies against the attorney or when the attorney-client
relationship for that particular transaction or undertaking terminates, whichever occurs later.”
Werts v. Penn, 164 Ohio App. 3d 505, 508, 842 N.E.2d 1102, 1105 (2005). “A ‘cognizable event’
is an event that places a reasonable person on notice that a ‘questionable legal practice may have
occurred,’” which may necessitate legal action against the attorney. Id. at 510, 1106.
Plaintiffs claim that when they signed the Deed on September 4, 2013, they had no reason
to believe that a questionable legal practice may have occurred. (ECF No. 42 at 240). Plaintiffs
further assert that they could not have reasonably discovered their injury until they were notified
by their realtor that the Deed did not reserve their mineral rights as specified in the Real Estate
Purchase Contract. (Id.). Plaintiffs highlight the Supreme Court of Ohio’s decision in Zimmie v.
Calfee, Halter & Griswold to support their contention, where the court found that the cognizable
event in that case did not occur on the date the deficient document was signed, but instead occurred
on the date the document was declared invalid. (Id. at 240–41 citing Zimmie, 43 Ohio St. 3d 54,
58, 538 N.E.2d 398, 402 (1989)). Only then, the Plaintiffs explain, did the Supreme Court of Ohio
determine that the plaintiff was put on notice to pursue possible remedies against the drafters of
the agreement. (Id. at 241).

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Plaintiffs argue that these circumstances are also present in this case. (Id.). Plaintiffs allege
that they were not put on notice of a need to pursue possible remedies against Defendants Clark &
Clark until they learned that the Deed failed to reserve their mineral rights. (Id.). They therefore
maintain that their legal malpractice action did not accrue until February 4, 2018, and that by filing
this action on May 22, 2018, they adhered to the one-year statute of limitations set forth in Ohio
Rev. Code § 2305.11(A). (Id. at 226).
While the date on which the Plaintiffs should have discovered Mr. Clark’s error remains at
issue, the Court finds that the Plaintiffs have pleaded sufficient facts supporting their contention
that under the discovery rule, their legal malpractice claim is not time-barred. As such, their claim
will not be dismissed on Defendants Clark & Clark’s Motion for Judgment on the Pleadings.
IV.

Conclusion
A motion for judgment on the pleadings may be granted only if the moving party is clearly

entitled to judgment as a matter of law. Here, Defendants Clark & Clark are not clearly entitled
to judgment on Plaintiffs’ legal malpractice claim. Plaintiffs have pleaded sufficient factual matter
to not only render their claim possible, but to also support their contention that their claim was
timely filed. Accordingly, Defendants Clark & Clark’s Motion for Judgment on the Pleadings as
to Count Six of Plaintiffs’ Complaint (ECF No. 32) is DENIED.
IT IS SO ORDERED.

/s/ James L. Graham
JAMES L. GRAHAM
United States District Judge
DATE: March 7, 2019

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