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Ohio Court of Appeals Upholds Sanctions for Attorney’s Frivolous Conduct

On August 28, 2017, the Ohio Court of Appeals for the Eleventh District upheld a trial court’s order imposing frivolous conduct sanctions in the amount of $22,926.72 on a plaintiff’s attorney and his law firm in the case of Keith-Harper v. Lake Hosp. Sys., Inc., --- N.E.3d ----, 2017-Ohio-7361 (11th Dist. Lake).

The plaintiff, Linda Keith-Harper, filed a complaint asserting seven causes of action against Defendants, alleging that they had engaged in unlawful age discrimination, wrongful termination based on age discrimination, disability discrimination based on Keith-Harper's knee replacement, wrongful termination based on disability discrimination, unlawful FMLA retaliation, workers’ compensation retaliation, and intentional infliction of emotional distress.

After the Court of Common Pleas for Lake County granted summary judgment on all of Keith-Harper’s claims, Defendants moved for an order imposing sanctions under Ohio’s frivolous conduct statute, R.C. 2323.51. Unlike a typical motion for sanctions, which may argue that a party’s allegations were frivolous from the onset, Defendants argued that Keith-Harper’s claims were rendered frivolous by the evidence adduced during the discovery process. Despite this evidence, Defendants had to incur additional fees and costs to litigate the case even after it was clear that Keith-Harper’s claims lacked any objective merit.

Granting Defendants’ motion for sanctions, the trial court agreed that by the time discovery had closed, “it was clear that there was no evidence that the plaintiff had requested or taken FMLA […] that she was disabled or perceived as disabled, […] that she was terminated for claiming workers’ compensation benefits that ended ten months earlier,” or that “she was directly targeted because of her age,” as “[t]he evidence showing she was terminated for just cause [was] overwhelming.” Because Keith-Harper’s attorneys failed to withdraw these claims after it became clear that they were not viable, the trial court awarded Defendants $22,926.72 for legal fees and costs incurred following the close of discovery. This sanction was imposed on Keith-Harper’s individual attorney and his law firm.

On appeal, Keith-Harper’s attorneys argued, among other things, that their conduct was not “frivolous” as a matter of law and that even if it was, the trial court erred by imposing joint and several liability against their law firm.

Affirming the trial court’s decision in a divided opinion, the Eleventh District adopted a deferential standard of review and drew several important distinctions between R.C. 2323.51 and its more well-known counterpart, Civ. R. 11. As an initial matter, the Court of Appeals recognized that unlike Civ. R. 11, which requires a finding of subjective bad faith before sanctions can be imposed, R.C. 2323.51 judges frivolous conduct under an objective standard “without inquiry as to what the individual knew or believed.” Recognizing that the statute provides several grounds for determining the frivolity of a claim or defense, the Court of Appeals also held that where a trial court finds that claims or defenses are factually frivolous (as opposed to legally frivolous) its determination that frivolous conduct took place will be affirmed so long as that decision is supported by competent, credible evidence. A decision that a claim is legally frivolous, on the other hand, is reviewed de novo. If the trial court makes a finding of frivolous conduct and proceeds to order an award of monetary sanctions, that decision is reviewed for abuse of discretion. Because it found that the trial court’s detailed decision outlining the factual frivolity of Keith-Harper’s claims was supported by competent, credible evidence, the Court of Appeals affirmed the lower court’s finding of frivolous conduct. 

The Court of Appeals likewise rejected the argument that it was error to award sanctions under R.C. 2323.51 against a law firm. Citing to the statutory language that permits an award of sanctions against “a party, the party’s counsel of record, or both” the Court reasoned that unlike Civ. R. 11, which was drafted to impose responsibilities and sanctions on individual attorneys who have signed a pleading, R.C. 2323.51 was drafted more broadly to “afford an avenue of relief to a party adversely affected by frivolous conduct.” Acknowledging that several Ohio appellate courts have construed “counsel of record” to include an attorney’s firm as well as an individual lawyer, the Eleventh District affirmed the trial court’s decision to impose joint and several liability on Keith-Harper’s attorneys’ law firm.

The Eleventh District’s decision in Keith-Harper highlights an attorney’s obligation to reevaluate the merits of an asserted claim at each and every stage of litigation, and to pursue only those claims that have objective factual and legal merit. A party’s or her attorney’s failure to do so may result in a violation of R.C. 2323.51 and significant exposure to compensate an opponent for legal fees and costs.

Brennan, Manna & Diamond, LLC represented the Defendants in the trial and appellate courts, with BMD attorneys Christopher Congeni and Daniel Rudary briefing the case at the court of appeals and BMD attorney Daniel Rudary presenting oral argument in defense of the trial court’s sanctions award.

CLIENT ALERT: CMS Unveils New Price Transparency Rules

On November 15th, the Trump administration put forth two long-anticipated rules that increase price transparency for both hospitals and insurers. These rules are a step toward price transparency across the health care industry and are in furtherance of the Trump administration’s goal of empowering healthcare consumers. The finalized rule and the proposed rule strive to make pricing information more available to healthcare consumers so they can make informed health care decisions. Through price transparency, consumers should expect to see a reduction in healthcare costs in the future. In order to provide hospitals enough time for compliance with the new requirements, the effective date of the finalized rule is January 1, 2021. The comment period for the proposed rule is open until January 14, 2020.

CLIENT ALERT: IRS Announces 401(k) and HSA Contribution Limits for 2020

With 2020 just around the corner, the IRS announced important information for the upcoming year for both 401(k) Contributions and Health Saving Accounts (HSAs).

CLIENT ALERT: U.S. Department of Labor, Wage and Hour Division Sets Enforcement Record

In advance of Halloween, the U.S. Department of Labor announced the results of its Wage and Hour Division's (WHD) recovery efforts for Fiscal Year 2019, and it reads like a horror story. The good news to lull you into a feeling of safety was that the 18,844 Complaints Registered was the fewest amount over the past 22 years or published records.

CLIENT ALERT: Will Ohio Recognize a Biddle Claim in a Post-HIPAA World?

OHIO SUPREME COURT WILL HEAR CASE INVOLVING CLASS ACTION FOR ALLEGED HIPAA VIOLATIONS: Will Ohio Recognize a Biddle Claim in a Post-HIPAA World?

CLIENT ALERT: Proposed New Rules to both the Stark Law and the Anti-Kickback Statute

On October 9, 2019, as part of the “Regulatory Sprint to Coordinate Care,” the Centers for Medicare and Medicaid Services (“CMS”), along with the US Department of Health and Human Services, Office of Inspector General (“OIG”), proposed new rules to both the physician self-referral law (“Stark Law”) and the Anti-Kickback Statute (“AKS”). Rule changes are aimed at fostering innovative arrangements for coordinating care consistent with a shift to a value-based system. Both proposed rules are expected to be published to the Federal Register on October 17, 2019. Public comments are due 75 days after publication.