Title: Hodesh v. Korelitz

State: ohio

Issuer: Ohio Supreme Court

Document:

[Cite as Hodesh v. Korelitz, 123 Ohio St.3d 72, 2009-Ohio-4220.] 
 
 
HODESH, APPELLANT, v. KORELITZ ET AL., APPELLEES, ET AL. 
[Cite as Hodesh v. Korelitz, 123 Ohio St.3d 72, 2009-Ohio-4220.] 
A Mary Carter agreement must be disclosed to a jury — Agreement in this case 
was not a Mary Carter agreement, and the trial court did not abuse its 
discretion in not disclosing it to the jury. 
(No. 2008-1133 — Submitted April 7, 2009 — Decided August 27, 2009.) 
APPEAL from the Court of Appeals for Hamilton County, 
Nos. C-061013, C-061040, C-070168, and C-070172, 2008-Ohio-2052. 
__________________ 
PFEIFER, J. 
{¶ 1} The sole legal issue in this case is whether an agreement between 
appellant, Michael Hodesh, and one of the defendants in Hodesh’s medical-
malpractice action, Jewish Hospital of Cincinnati, should have been disclosed to 
the jury.  For the reasons that follow, we conclude that the trial court did not 
abuse its discretion by not requiring disclosure of the agreement. 
Facts and Procedural History 
{¶ 2} Michael Hodesh filed a medical-malpractice action against 
appellee Dr. Joel Korelitz and the Jewish Hospital of Cincinnati, among others, 
alleging that Korelitz and the hospital staff had left a towel in his abdomen 
following a surgery for diverticulitis.  Two and a half weeks before the trial, 
Hodesh and the hospital entered into a “Contingency Agreement,” which 
contained, among other provisions, a series of provisions that collectively limited 
the hospital’s exposure to $250,000 and ensured that Hodesh would receive at 
least $175,000. 
{¶ 3} On the first day of trial, Korelitz requested disclosure of any 
agreements between Hodesh and the hospital.  The court ordered Hodesh to 
SUPREME COURT OF OHIO 
2 
 
submit to the court any existing agreements between him and the hospital.  
Hodesh submitted the agreement, which the judge did not read before placing it 
under seal.  The judge stated that there was no evidence of collusion and, based 
on Hodesh’s declaration that the agreement was a high/low agreement, concluded 
that the agreement did not need to be disclosed to the jury.  The jury found 
Korelitz negligent and returned a verdict in favor of Hodesh, awarding him 
$775,000.  The jury also found that the hospital was not liable.  After the verdict, 
the court provided a copy of the agreement to Korelitz. 
{¶ 4} Korelitz appealed on several grounds.  The only issue he raised 
that is relevant to this case is whether the trial court erred by not compelling 
disclosure of the agreement.  The court of appeals held that the trial court 
committed reversible error by not disclosing the agreement to the jury.  We 
accepted Hodesh’s discretionary appeal. 
Settlement Agreements 
{¶ 5} Settlement agreements are valid when “there is no evidence of 
collusion, in bad faith, to the detriment of other, non-settling parties.”  
Krischbaum v. Dillon (1991), 58 Ohio St.3d 58, 69-70, 567 N.E.2d 1291.  
Although settlement agreements are as varied as the cases in which they are used, 
they fall into general categories.  In a typical settlement agreement, “a settling 
defendant is withdrawn from the case and released from liability.”  Monti v. 
Wenkert (2008), 287 Conn. 101, 122, 947 A.2d 261.  In a typical “high-low 
settlement agreement * * *, the settling defendant remain[s] in the case and the 
extent of her liability [is] predicated on the amount of the verdict.”  Id.  There is 
another species of settlement agreement, called a Mary Carter agreement, see 
Booth v. Mary Carter Paint Co. (Fla.App.1967), 202 So.2d 8, which we have 
defined as “a contract between a plaintiff and one defendant allying them against 
another defendant at trial.”  Vogel v. Wells (1991), 57 Ohio St.3d 91, 93, 566 
N.E.2d 154.  See Saleeby v. Rocky Elson Constr., Inc. (Fla.2009), 3 So.3d 1078, 
January Term, 2009 
3 
 
1083, fn. 3 (a Mary Carter agreement is “a contract by which one co-defendant 
secretly agrees with the plaintiff that, if such defendant will proceed to defend 
himself in court, his own maximum liability will be diminished proportionately by 
increasing the liability of the other co-defendants”).  The court of appeals in this 
case determined that the agreement between Hodesh and the hospital was a Mary 
Carter agreement, and that determination is why it held that the agreement should 
have been disclosed. 
{¶ 6} Mary Carter agreements are per se invalid in some states.  See, 
e.g., Dosdourian v. Carsten (Fla.1993), 624 So.2d 241, 246; Cox v. Kelsey-Hayes 
Co. (1978), 1978 OK 148, 594 P.2d 354, 360; Elbaor v. Smith (Tex.1992), 845 
S.W.2d 240, 250.  We mentioned this minority view in Ziegler v. Wendel Poultry 
Servs., Inc. (1993), 67 Ohio St.3d 10, 16, 615 N.E.2d 1022, overruled on other 
grounds by Fidelholtz v. Peller (1998), 81 Ohio St.3d 197, 690 N.E.2d 502.  We 
did not adopt the minority position then, nor do we now.  Instead, we are 
persuaded that the majority approach, which requires Mary Carter agreements to 
be disclosed to codefendants and the jury, is more reasonable and compatible with 
Ohio’s approach to settlement agreements.  Monti, 287 Conn. at 124, 947 A.2d 
261.  See Soria v. Sierra Pacific Airlines, Inc. (1986), 111 Idaho 594, 604, 726 
P.2d 706 (disclosure exposes a settling defendant’s incentive to increase 
plaintiff’s damages). 
{¶ 7} We have considered agreements alleged to be Mary Carter 
agreements on two separate occasions; both times we determined that the 
agreement was valid and did not need to be disclosed to the jury.  Vogel, 57 Ohio 
St.3d at 93-94, 566 N.E.2d 154; Ziegler, 67 Ohio St.3d at 17, 615 N.E.2d 1022.  
In Vogel, a defendant/appellant alleged that another defendant and the plaintiff 
had entered into a collusive agreement akin to a Mary Carter agreement and that 
the trial court had erred in refusing to disclose the existence of the agreement to 
the jury.  Vogel, 57 Ohio St.3d at 93-94, 566 N.E.2d 154.  We noted that Mary 
SUPREME COURT OF OHIO 
4 
 
Carter agreements typically have three basic provisions:  a guarantee of a 
minimum payment to the plaintiff, an agreement that the plaintiff will not enforce 
a court judgment against the settling defendant, and an agreement that the settling 
defendant will remain a party in the trial but his monetary exposure is reduced in 
proportion to an increase in the liability of nonsettling codefendants.  Id. at 93, fn. 
1.  We concluded that the agreement at issue was not collusive, after examining 
the trial court’s decision under an abuse-of-discretion standard.  Id. at 94. 
{¶ 8} In Ziegler, we concluded that the agreement between the plaintiff 
and one of the defendants was not a Mary Carter agreement, primarily because 
“[t]he amount of damages assessed against [the nonsettling defendant] had no 
impact on the amount [the settling defendant] would pay to [the plaintiff].  There 
was no built-in incentive on [the settling defendant’s] part to increase [the 
plaintiff’s] damages.”  Ziegler, 67 Ohio St.3d at 16-17, 615 N.E.2d 1022.  We 
also stated that “[o]ne of the major dangers of Mary Carter agreements lies in the 
distortion of the relationship between the settling defendant and the plaintiff, 
which allows the settling defendant to remain nominally a defendant to the action 
while secretly conspiring to aid the plaintiff’s case.”  Id. at 17.  See Vermont 
Union School Dist. No. 21 v. H.P. Cummings Constr. Co. (1983), 143 Vt. 416, 
427, 469 A.2d 742. 
{¶ 9} Although the advent of complex contingent agreements has 
complicated the matter, we remain committed to facilitating the settlement of 
legal controversies, even contingent agreements that do not preclude the necessity 
of a trial.  Krischbaum, 58 Ohio St.3d at 69-70, 567 N.E.2d 1291.  All settlement 
agreements in Ohio must be free from collusion, regardless of whether they fall 
under the category of Mary Carter agreements.  When reviewing a settlement 
agreement to determine whether it is collusive, we are guided by the typical Mary 
Carter agreement provisions; specifically, we look for a provision that decreases 
the settling defendant’s liability in proportion to an increase in the nonsettling 
January Term, 2009 
5 
 
defendant’s liability.  Vogel, 57 Ohio St.3d at 93, 566 N.E.2d 154, fn. 1 (setting 
forth the basic Mary Carter agreement provisions).  See Hoops v. Watermelon 
City Trucking Inc. (C.A.10, 1988), 846 F.2d 637, 640.  We are concerned that 
such an arrangement provides an inducement for the settling defendant to 
“secretly conspir[e] to aid the plaintiff’s case.”  Ziegler, 67 Ohio St.3d at 17, 615 
N.E.2d 1022.  This collusive purpose is obviated when the settling defendant “ 
‘remain[s] at risk of liability in a significant amount.’ ”  Id., quoting the court of 
appeals opinion (Dec. 31, 1991), 3d Dist. Nos. 3-90-31 and 3-90-44, 1991 WL 
280029. 
The Agreement between Hodesh and the Hospital 
{¶ 10} As a preliminary matter, we note that “[i]n construing the terms of 
any contract, the principal objective is to determine the intention of the parties.”  
Hamilton Ins. Servs, Inc. v. Nationwide Ins. Cos. (1999), 86 Ohio St.3d 270, 273, 
714 N.E.2d 898. 
{¶ 11} The agreement between Hodesh and the hospital contains 16 
numbered paragraphs.  When read in pari materia, they evince an intention to 
ensure that Hodesh receives at least $175,000 and that the hospital’s liability be 
capped at $250,000.  This is apparent from paragraph 7 of the agreement, which 
states, “In any contingency that has not been addressed specifically by this 
Agreement, [the hospital] guarantees [Hodesh] a total payment of at least 
$175,000.00 with a cap of $250,000.00.  In no event, will [the hospital] be 
required to pay Hodesh more than $250,000.00.”  The most problematic 
contingency for Hodesh is paragraph 3, which includes, among other things, this 
provision:  “In the event there is a verdict against Korelitz and not [the hospital] 
for more than $250,000.00, Hodesh will not look to [the hospital] for any payment 
and will recover all from Korelitz.” 
{¶ 12} This provision appears to provide an incentive for the hospital to 
increase the damages against Korelitz.  See Ziegler, 67 Ohio St.3d at 16-17, 615 
SUPREME COURT OF OHIO 
6 
 
N.E.2d 1022.  But three factors prevent us from reaching that conclusion.  First, 
there are several contingency clauses under which the hospital will pay less if the 
damages are less.  The lower the verdict, the greater the likelihood that the 
hospital would be required to pay $175,000 and the less the likelihood that it 
would be required to pay $250,000.  Thus, the hospital had a financial interest in a 
lower verdict.  See Ziegler at 17. 
{¶ 13} Second, paragraph 3 requires the hospital to pay $175,000, even if 
the verdict against Korelitz exceeded $250,000, if Korelitz or his insurance 
company does not pay within 30 days.  An appeal by Korelitz would delay 
payment past 30 days, triggering this provision, and the higher the verdict, the 
more likely it would be that Korelitz would appeal. 
{¶ 14} Third, the trial judge saw no signs of collusion during the trial.  
Even though the judge had not read the agreement, he knew that Hodesh and the 
hospital had an agreement and that Korelitz was concerned that the agreement 
was collusive.  Thus, he was on alert for any trial tactics that appeared collusive. 
{¶ 15} A better course of action would have been for the judge to read the 
agreement prior to sealing it.  But after the trial, when the document was disclosed 
to Korelitz and he moved for a new trial, the judge determined that the agreement 
was not collusive and denied the motion.  After reading the agreement and 
reviewing the record, we also are convinced that the parties to the agreement were 
not in collusion. 
{¶ 16} The court of appeals read much into the hospital’s decision to 
oppose bifurcation of the trial, which would have separated the issue of 
negligence from the issue of intentional destruction of evidence, and the hospital’s 
decision to excuse a juror who was potentially sympathetic to the defendants.  
Although it is always possible to second-guess trial tactics, the trial court was in a 
better position than the court of appeals to determine the motives of counsel and 
whether collusion was behind their decisions, because he observed counsel and 
January Term, 2009 
7 
 
witnesses while the court of appeals reviewed a cold record.  In denying Hodesh’s 
posttrial motions to revoke the agreement and to grant a new trial, the trial court 
wrote, “[T]here was no evidence that [the hospital] remained as only a nominal 
Defendant which conspired with [Hodesh] to the detriment of Dr. Korelitz.  The 
positions of [Hodesh] and the hospital remained adversarial at all times.” 
Other Considerations 
{¶ 17} A fact that must be considered whenever one defendant makes an 
allegation of collusion between his codefendant and the plaintiff is that 
codefendants often attempt to blame each other.  Part of the defense for both the 
hospital and Korelitz in this case is that the other defendant was to blame for the 
towel having been left in Hodesh’s abdomen.  That the hospital attempted to show 
that Korelitz was responsible was no more evidence of collusion than Korelitz’s 
attempt to convince the jury that the hospital staff was to blame.  The legal 
positions of codefendants are often antithetical and adversarial.  Plaintiffs benefit 
when codefendants attempt to blame each other; that, standing alone, is not 
evidence of collusion. 
Conclusion 
{¶ 18} For all the reasons above, we conclude that the agreement between 
Hodesh and the hospital was not collusive and that the trial court did not abuse its 
discretion in refusing to disclose the agreement to the jury.  We reverse the 
judgment of the court of appeals on this issue.  Several issues that were raised in 
the court of appeals were mooted by that court when it determined that the 
agreement should have been disclosed.  Those issues now need to be addressed.  
Accordingly, we remand the cause to the court of appeals with instructions to 
consider those issues. 
Judgment reversed 
and cause remanded. 
SUPREME COURT OF OHIO 
8 
 
 
MOYER, C.J., and LUNDBERG STRATTON, O’CONNOR, O’DONNELL, 
LANZINGER, and CUPP, JJ., concur. 
__________________ 
 
Bruce Whitman, for appellant. 
 
Tucker, Ellis & West, L.L.P., and Irene C. Keyse-Walker; and Triona, 
Calderhead & Lockemeyer and David Calderhead, for appellees Joel Korelitz, 
M.D., and Cincinnati General Surgeons, Inc. 
 
Paul W. Flowers Co., L.P.A., and Paul W. Flowers; and Elk & Elk Co., 
Ltd., and Peter D. Traska, urging reversal for amicus curiae Ohio Association of 
Justice. 
 
Rendigs, Fry, Kiely & Dennis, L.L.P., Jeffrey M. Hines, and Karen A. 
Carroll, urging reversal for amici curiae Jewish Hospital of Cincinnati and Health 
Alliance of Greater Cincinnati. 
_____________________