Login | November 14, 2018

9th District reverses business dispute over discovery issues

Legal News Reporter

Published: December 6, 2017

A Summit County trial court erred by ordering a businessman to produce confidential and privileged discovery in a dispute with his partner, the 9th District Court of Appeals recently ruled.

Scott Pagano and John Heck were partners in SloMo Booths, LLC, a business venture that involves designing, manufacturing and selling slow motion photo booths for the special event industry.

Heck was in charge of maintaining the accounting books for SloMo.

Pagano’s business, Any Excuse for a Party, sued Heck and SloMo in April 2015 for breaching the partnership agreement.

Pagano claimed Heck failed to provide monthly and quarterly reports. He sought money damages and demanded an accounting.

Heck countersued, arguing Pagano failed to book trade show appearances and reneged on helping to design, market and sell the product as per their agreement.

The partners then became embroiled in a discovery disagreement.

The trial court approved an agreed protective and confidentiality order in January 2016.

About one month later, Pagano filed a motion to compel discovery, claiming Heck still had not produced an accounting of the business.

The trial court then ordered Heck to produce all outstanding discovery within 30 days.

Heck answered certain discovery requests but argued that the issue of whether he was obligated to provide an accounting of the business was an unresolved issue in the lawsuit.

Pagano opposed the motion for reconsideration and filed a motion for sanctions.

In October 2016, the trial court found that Heck had still not complied with discovery orders, and ordered Heck and SloMo to “produce all outstanding discovery, including a full accounting within 14 days of this order.”

The trial court said failure to comply with the journal entry and order could result in sanctions for misconduct in discovery.

Heck then retained new counsel and appealed the order, claiming the trial court erred by ordering him to produce and accounting and discovery without a determination that Pagano’s claim for an accounting had merit.

In a 3-0 opinion, the appellate court agreed.

“The trial court erred by prematurely ordering the disclosure of potentially confidential or privileged information without first conducting an in camera inspection of those materials,” 9th District Judge Donna J. Carr stated in her opinion. “… Pagano maintains on appeal that Heck has no basis to challenge the order because he never requested an in camera inspection or submitted a privilege log. In light of the parties’ agreement, however, Heck … had no reason to anticipate that the trial court would order him to turn those materials over during the discovery phase.”

Appellate judges Lynne Callahan and Thomas Teodosio concurred that the case should be remanded.

The case is cited Pagano v. Heck, 2017-Ohio-8564.