CADDYSHACK LLC v. AHNER (2024)

DECISION AND JUDGMENT

{¶ 1} Appellant Mark Ahner appeals the judgment of the Erie County Court of Common Pleas granting judicial dissolution of Caddyshack, LLC (“Caddyshack”). Because the trial court's judgment is not a final, appealable order, this appeal is dismissed for lack of jurisdiction.

I. Factual Background and Procedural History

{¶ 2} Caddyshack is a limited liability company owned by Mark Ahner and his sister, appellee Patricia Ahner (“Pat”), with each of them owning 50 percent. It exists primarily to own and lease commercial property on Kelleys Island.

{¶ 3} On January 5, 2023, appellees Caddyshack and Pat filed a complaint for judicial dissolution in case No. 2023 CV 0005. The complaint alleged that Mark and Pat's personal and professional relationships have deteriorated to the point that they are deadlocked in the management and future existence of the company.

{¶ 4} Mark answered the complaint and asserted four counterclaims. The first sought a judgment declaring the validity of several leases that were entered into between Caddyshack and businesses that Mark controlled. The second sought to dismiss the complaint “for lack of any legal or equitable basis to dissolve Caddyshack LLC.” The third alleged that Pat violated her fiduciary duties as well as the duty of fair dealing and good faith by seeking a dissolution in an attempt either to deprive Mark of the value of his ownership of three other businesses or to diminish the value of the investments he has made in those businesses. Finally, the fourth counterclaim requested that if judicial dissolution was awarded, then Mark “must be given credit for and an offset against the value of the LLC for his investments which total approximately $1 million.”

{¶ 5} On the same day that Mark filed his answer and counterclaim, appellees filed an application for judicial dissolution. This application was fully briefed by the parties.

{¶ 6} On March 2, 2023, appellees filed motions to (1) dismiss Mark's third counterclaim for failure to state a claim upon which relief could be granted and (2) to designate his second counterclaim as a defense. These motions were fully briefed by the parties.

{¶ 7} Appellees then amended their complaint on March 15, 2023, to add additional counts of a breach of duty of care in violation of R.C. 1706.31 and a breach of duty of care in violation of R.C. 1706.311. Mark filed an amended answer.

{¶ 8} The litigation process continued through discovery and case management and settlement conferences. On February 1, 2024, the trial court entered its judgment granting appellees’ application for judicial dissolution. Following that, on February 16, 2024, appellees moved for partial summary judgment on Mark's first counterclaim that sought a declaration that his lease agreements were valid and enforceable.

{¶ 9} Meanwhile, on October 30, 2023, Caddyshack initiated a separate forcible entry and detainer action in case No. 2023 CV 0414 against Mark and two business entities that he owned. Shortly thereafter, the two cases were consolidated. Proceedings continued in the forcible entry and detainer action until Caddyshack voluntarily dismissed it on February 22, 2024, pursuant to Civ.R. 41(A)(1)(a).

{¶ 10} On March 1, 2024, Mark timely appealed the trial court's February 1, 2024 judgment awarding judicial dissolution in case No. 2023 CV 0005. Subsequently, the trial court entered an order vacating all court dates and holding in abeyance all dispositive motions pending the appeal.

II. Assignment of Error

{¶ 11} On appeal, Mark asserts one assignment of error for review:

1. The lower court erred in its judgment ordering that Caddyshack, LLC be dissolved.

III. Analysis

{¶ 12} Because this court lacks jurisdiction, Mark's appeal must be dismissed.

{¶ 13} Article IV, Section 3(B)(2) of the Ohio Constitution provides that “[c]ourts of appeals shall have such jurisdiction as may be provided by law to review and affirm, modify, or reverse judgments or final orders of the courts of record inferior to the court of appeals within the district ․” “It is well-established that an order must be final before it can be reviewed by an appellate court.” General Accident Ins. Co. v. Ins. Co. of N. Am., 44 Ohio St.3d 17, 20, 540 N.E.2d 266 (1989). “If an order is not final, then an appellate court has no jurisdiction.” Id. “Whether an order is final and appealable is a jurisdictional question that this court can—and must—raise sua sponte.” Kinzel v. Ebner, 2020-Ohio-4165, 157 N.E.3d 898, ¶ 90 (6th Dist.), citing Turner & Son Funeral Home v. Hillsboro, 2015-Ohio-1138, 28 N.E.3d 1279, ¶ 8 (4th Dist.).

{¶ 14} “An appellate court, when determining whether a judgment is final, must engage in a two-step analysis. First, it must determine if the order is final within the requirements of R.C. 2505.02. If the court finds that the order complies with R.C. 2505.02 and is in fact final, then the court must take a second step to decide if Civ.R. 54(B) language is required.” General Accident at 21, 540 N.E.2d 266. “An order of a court is a final, appealable order only if the requirements of both Civ.R. 54(B), if applicable, and R.C. 2505.02 are met.” Chef Italiano Corp. v. Kent State Univ., 44 Ohio St.3d 86, 541 N.E.2d 64 (1989), syllabus.

{¶ 15} Relevant here, R.C. 2505.02(B) provides that “[a]n order is a final order that may be reviewed, affirmed, modified, or reversed, with or without retrial, when it is one of the following: ․ (2) An order that affects a substantial right made in a special proceeding or upon a summary application in an action after judgment.” A “substantial right” means “a right that the United States Constitution, the Ohio Constitution, a statute, the common law, or a rule of procedure entitles a person to enforce or protect.” R.C. 2505.02(A)(1). A “special proceeding” means “an action or proceeding that is specially created by statute and that prior to 1853 was not denoted as an action at law or a suit in equity.” R.C. 2505.02(A)(2).

{¶ 16} Going through the elements of R.C. 2505.02(B)(2), Mark's ownership interest in Caddyshack is a substantial right. See Article 1, Section 1 of the Ohio Constitution (“All men are, by nature, free and independent, and have certain inalienable rights, among which are those of enjoying and defending life and liberty, acquiring, possessing, and protecting property, and seeking and obtaining happiness and safety.” (Emphasis added.)); Puritas Metal Prods. Inc. v. Cook, 2012-Ohio-2116, 972 N.E.2d 615, ¶ 9 (9th Dist.) (“[S]hares of a corporation are personal property, and property rights are expressly protected by the Ohio Constitution.”). Further, it is evident that Mark's ownership interest is “affected” by the judicial dissolution of Caddyshack.

{¶ 17} The next question is whether the judicial dissolution is a “special proceeding.” In this case, the judicial dissolution is authorized by R.C. 1706.47(E), which provides that a limited liability company is dissolved and its activities wound up upon “[o]n application by a member, the entry by the appropriate court of an order dissolving the limited liability company on the grounds that it is not reasonably practicable to carry on the limited liability company's activities in conformity with the operating agreement.”

{¶ 18} While case law on this issue is scant, the Third District in Meyers v. Marks, 2011-Ohio-3523, 2011 WL 2765886, ¶ 23, noted that “cases dealing with judicial dissolution are special proceedings.” Like here, Meyers involved the judicial dissolution of a limited liability company.

{¶ 19} Meyers relied on Tilberry v. Body, 24 Ohio St.3d 117, 120, 493 N.E.2d 954 (1986), in which the Ohio Supreme Court determined that the judicial dissolution of a partnership pursuant to former R.C. 1775.31(A)¹ was a special proceeding. Former R.C. 1775.31(A) is similar to R.C. 1706.47(E) in that it is brief in its description of the process for judicial dissolution: “On application by or for a partner the court shall decree a dissolution whenever: ․ (4) A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him.”

{¶ 20} Further, judicial dissolution of corporations have also been held to be special proceedings. It should be noted, however, that the statutory process for obtaining a judicial dissolution of a corporation under R.C. 1701.91 is significantly more robust and, as recognized in McCarthy v. Anderson, 2018-Ohio-1994, 2018 WL 2324331, ¶ 29 (5th Dist.), R.C. 1701.91(E) specifically provides that “[a] judicial proceeding under this section concerning the judicial dissolution of a corporation is a special proceeding, and final orders in it may be vacated, modified, or reversed on appeal pursuant to the Rules of Appellate Procedure or the Rules of Practice of the Supreme Court, whichever are applicable, and, to the extent not in conflict with those rules, Chapter 2505. of the Revised Code.”

{¶ 21} The weight of this caselaw points to judicial dissolutions of limited liability companies as provided for in R.C. 1706.47(E) being “special proceedings” for purposes of R.C. 2505.02.

{¶ 22} The final question is whether the language of Civ.R. 54(B) is required. Civ.R. 54(B) provides,

When more than one claim for relief is presented in an action whether as a claim, counterclaim, cross-claim, or third-party claim, and whether arising out of the same or separate transactions, or when multiple parties are involved, the court may enter final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay. In the absence of a determination that is no just reason for delay, any order or other form of decision, however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties, shall not terminate the action as to any of the claims or parties, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties.

{¶ 23} In the present case, the judicial dissolution order failed to adjudicate all of the claims between the parties. Specifically, appellees’ two claims in their amended complaint for breach of fiduciary duty and Mark's four counterclaims filed with his answer all remain pending. In addition, the February 1, 2024 entry granting judicial dissolution did not include the Civ.R. 54(B) language that there was no just cause for delay. Thus, if the Civ.R. 54(B) language is required, this appeal must be dismissed for lack of a final appealable order.

{¶ 24} Generally, the Ohio Supreme Court has suggested that Civ.R. 54(B) applies to final orders from special proceedings. In General Accident, 44 Ohio St.3d at 22-23, 540 N.E.2d 266, the court applied Civ.R. 54(B) to special proceedings for declaratory judgments. In that case, an order declaring that the appellee had no duty to defend the insureds was considered to be a final appealable order because it affected a substantial right in a special proceeding and because even though a counterclaim remained unresolved the order contained the appropriate Civ.R. 54(B) language. Id.

{¶ 25} The issue is not entirely settled, however.

[T]here is good reason to question whether Rule 54(B) properly applies to appeals under R.C. 2505.02(B)(2). In the case of R.C. 2505.02(B)(1), Rule 54(B) is the mechanism for a trial court to transform an otherwise-interlocutory order on the merits of one or more claims—an order that does not “determine[ ] the action” or “prevent[ ] a judgment” because of other pending claims—into a final order that determines the action with respect to the resolved claims. By contrast, R.C. 2505.02(B)(2) contains no requirement that the order “determine[ ] the action” or “prevent[ ] a judgment,” so Rule 54(B) would appear to be inapposite ․ But most of the case law holds that Rule 54(B) language is a predicate to an appeal under R.C. 2505.02(B)(2) if there remain pending claims (and some courts have held that in that circumstance the order is “final” but not final and “appealable.”).

(Footnotes omitted; emphasis sic.) Baldwin's Ohio Handbook Series Ohio Appellate Practice, § 2.16, Final orders—R.C. 2505.02—Order affecting a substantial right in a special proceeding or upon a summary application in an action after judgment—Application of Civ.R. 54(B) (2023).

{¶ 26} Notwithstanding the debate about whether Civ.R. 54(B) should apply to final orders in special proceedings under R.C. 2505.02(B)(2), the majority of the caselaw suggests that it does. See Baldwin's Ohio Handbook, citing Wiggins v. Safeco Ins. Co. of Indiana, 2021-Ohio-3526, 2021 WL 4495902, ¶ 34 (2d Dist.); Harbor Island Assn., Inc. v. Stecks Buckeye Storage Units, LLC, 2021-Ohio-2969, 2021 WL 3832374, ¶ 25 (6th Dist.); DeGrant v. DeGrant, 2021-Ohio-107, 2021 WL 191288, ¶ 10 (11th Dist.); Am. Cancer Soc., E. Cent. Div., Inc. v. Jones, 2019-Ohio-1748, 2019 WL 2031191, ¶ 20 (5th Dist.); Whitley v. Progressive Cas. Ins. Co., 2012-Ohio-329, 2012 WL 315048, ¶ 7-10 (1st Dist.); Puritas Metal, 2012-Ohio-2116, 972 N.E.2d 615, at ¶ 10-11 (9th Dist.); Kierland Crossing, L.L.C. v. Ruth's Chris Steak House, Inc., 2011-Ohio-5626, 2011 WL 5191137, ¶ 19 (10th Dist.); but see Doe v. Sherwin, 2015-Ohio-2451, 2015 WL 3824019, ¶ 6 (11th Dist.) (“[P]ursuant to R.C. 2505.02(B)(2), the order is final; the requirement of ‘no just reason for delay’ language under Civ.R. 54(B) was not necessary to render the final order immediately appealable; any conflict between the rule and statute should be resolved in favor of the statute, as the issue affects a substantive right; and prohibiting an appeal at this time would result in immediate harm to Sherwin.”). More directly, in McCarthy, 2018-Ohio-1994, ¶ 31 (5th Dist.), the Fifth District held that an appeal from a judgment granting judicial dissolution of a corporation was not a final and appealable order because there were other pending claims and the judgment did not contain the Civ.R. 54(B) language.

{¶ 27} Applying this precedent, the trial court's February 1, 2024 judgment in this case is not a final appealable order because it does not contain the appropriate Civ.R. 54(B) language of no just cause for delay. Therefore, this court lacks jurisdiction over Mark's appeal and it must be dismissed.

IV. Conclusion

{¶ 28} For the foregoing reasons, the February 1, 2024 judgment of the Erie County Court of Common Pleas is not a final appealable order. This appeal is dismissed for lack of jurisdiction. Appellant is ordered to pay the costs of this appeal pursuant to App.R. 24.

Appeal dismissed.

A certified copy of this entry shall constitute the mandate pursuant to App.R. 27. See also 6th Dist.Loc.App.R. 4.

FOOTNOTES

1.   Former R.C. 1775.31 was repealed and its provisions are now contained in R.C. 1776.61.

SULEK, P.J.

Gene A. Zmuda, J. Myron C. Duhart, J. CONCUR.