[Cite as Amtrust N. Am., Inc. v. Novus Credit Solutions, Inc., 2012-Ohio-4272.]

Court of Appeals of Ohio

EIGHTH APPELLATE DISTRICT 

COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINION 

No. 97499 

AMTRUST NORTH AMERICA, INC.

PLAINTIFF-APPELLEE 

vs.

NOVUS CREDIT SOLUTIONS, INC., ET AL.

DEFENDANTS-APPELLANTS 

JUDGMENT: 

REVERSED AND REMANDED

Civil Appeal from the 

Cuyahoga County Court of Common Pleas 

Case No. CV-734890 

 BEFORE: Blackmon, A.J., Stewart, J., and E. Gallagher, J. 

 RELEASED AND JOURNALIZED: September 20, 2012
ATTORNEY FOR APPELLANT

Christopher M. Ernst 

Bricker & Eckler, LLP 

1001 Lakeside Avenue East 

Suite 1350 

Cleveland, OH 44114 

ATTORNEYS FOR APPELLEE 

 

Laura L. Watson 

Stephen D. Williger 

Thompson Hine, LLP 

3900 Key Tower 

127 Public Square 

Cleveland, OH 44114
PATRICIA ANN BLACKMON, A.J.: 

{¶1} Appellant Adam Kohn (“Kohn”)1

 appeals a default judgment issued against 

him as a discovery sanction pursuant to Civ.R. 37. Kohn assigns the following error for 

our review: 

I. The trial court erred when it issued a sanction of default judgment 

against co-appellant Adam Kohn.

{¶2} Having reviewed the record and pertinent law, we reverse the trial court’s 

judgment and remand for further proceedings. 

Facts

{¶3} AmTrust North America, Inc. (“AmTrust”) is a property and casualty 

insurer specializing in workers’ compensation and commercial lines of coverage for small 

to mid-sized businesses. In March 2009, appellee AmTrust hired Novus Credit 

Solutions, Inc. (“Novus”) to collect past due accounts owed to AmTrust by AmTrust’s 

customers. 

{¶4} On August 23, 2010, AmTrust filed a complaint against Novus and Kohn 

because it believed Novus was not remitting the amounts collected to AmTrust. Kohn, at 

the time, was a shareholder of Novus. AmTrust alleged breach of fiduciary duty, 

conversion, fraud, negligent misrepresentation, breach of contract, as well as an action for 

 1

Novus also filed an appeal; however, it later filed a motion to withdraw and 

to dismiss its appeal, which we granted. 
an accounting. After leave to plead was granted by the trial court, attorney Charles P. 

Royer filed an answer on October 22, 2010, on behalf of Novus and Kohn. 

{¶5} The trial court initially set the discovery cut-off date for February 21, 2011. 

 However, based on a joint motion filed by the parties, the discovery cut-off date was 

extended to April 15, 2011. The record indicates that on February 17, 2011, the trial 

court scheduled a teleconference on March 7, 2011, to discuss a discovery dispute. As a 

result of the teleconference, the trial court ordered “the defendant” to produce the 

requested financial records by March 14, 2011. 

{¶6} On March 10, 2011, attorney Royer filed a motion to withdraw as counsel 

for both defendants and requested an in camera hearing to discuss the reasons for the 

withdrawal. The trial court later stated the reason for Royer requesting the withdrawal 

was due to ethical issues with his clients. 

{¶7} On March 11, 2011, AmTrust filed a motion for default sanctions against 

Novus and Kohn pursuant to Civ.R. 37(D). The basis for the motion was the fact that the 

CEO of Novus, Daniel Kalish, failed to appear for his debtor’s deposition on March 10, 

2011,2

 and that the defendants continued to refuse to produce their banking and financial 

records. On March 16, 2011, AmTrust filed a supplement to its motion for default 

 2

Because Kalish was involved in a bankruptcy proceeding, AmTrust pursued 

its action against Kalish in bankruptcy court. AmTrust alleges that due to the 

identical discovery problems it had with Kalish in bankruptcy court, it received a 

default judgment against Kalish. 
judgment, stating the court had ordered the defendants by telephone to produce the 

financial records by March 14, 2011, and that the defendants had failed to do so. 

{¶8} The trial court scheduled the sanctions hearing for April 6, 2011, without 

first ruling on Royer’s motion to withdraw. Royer filed a motion to continue because he 

was scheduled to be in trial on another matter. The trial court, thereafter, rescheduled the 

matter for April 25, 2011. Royer requested another continuance because he had a 

previously scheduled vacation at that time. According to attorney Royer’s affidavit 

attached to his motions for continuances, he had informed the trial court that James V. 

Loiacono had advised the trial court’s staff attorney that he would be representing the 

defendants, and Royer had sent the new attorney notice of the hearing. 

{¶9} The trial court entered an order on May 4, 2011, stating that a default 

hearing had been conducted and that the default motion would be “held in abeyance.” 

The court stated that “any perceived discovery noncompliance shall be reported to the 

court immediately” and set July 29, 2011, as the new discovery cut-off date. The court 

also granted attorney Royer’s motion to withdraw as counsel. 

{¶10} A telephone conference was scheduled on June 20, 2011, to discuss issues 

regarding discovery. AmTrust’s counsel appeared for the telephone conference, but no 

one on behalf of the defendants appeared. The court scheduled the matter for a show 

cause hearing on June 27, 2011. After conducting the hearing, the court held as follows: 

Plaintiff’s counsel was present. Defendants’ counsel was contacted by 

phone. Defendants’ counsel inadvertently neglected to file a notice of 

appearance and represented to the court that he would file one today. 
Parties are ordered to converse this week on the issue of outstanding 

discovery. Any discovery dispute shall be immediately brought to the 

court’s attention and will be set for hearing on the record. 

The discovery cut off date is hereby vacated. Parties are to report to 

the court by 7/08/2011 with a mutually agreed upon discovery cut-off 

date. Any intentional actions that result in delay of the discovery 

proceedings shall be subject to a sanctions hearing. Judgment Entry, 

June 29, 2011. 

{¶11} The parties agreed to a new discovery cut-off date of November 30, 2011, 

conditioned on the defendants producing their financial records by July 30, 2011. All 

other written discovery and the taking of depositions were subject to the November 30, 

2011 date. 

{¶12} On July 21, 2011, almost one month after the trial court directed him to do 

so, attorney Loiacono filed a notice of appearance with the trial court in which he stated 

he was representing, “defendant, Novus Credit Solutions.” The notice made no mention 

of Adam Kohn. 

{¶13} On August 26, 2011, AmTrust again filed a motion for default judgment 

based on defendants’ failure to produce the requested documents by July 30, 2011, as 

agreed. The trial court conducted a hearing on October 3, 2011. AmTrust’s counsel was 

present, but attorney Loiacono claimed to have a conflict and sent an attorney from 

another office to appear on his behalf. 

{¶14} The trial court concluded on the record that “I have never seen in seven 

years on the bench, a history of just blatant non compliance in a case.” The trial court 

told the attorney appearing on Loiacono’s behalf, “[Y]ou’ve done your best to represent 
counsel, your clients really should be here on something as important as this. Obviously 

they don’t take the orders of the court very seriously. And they have not — they have 

failed to comply. I think this court is well within its right to grant default judgment.” 

The court then entered an order granting default judgment in favor of AmTrust in the 

amount of $131,047.907, along with costs, and statutory interest. 

Default Judgment

{¶15} In his sole assigned error, Kohn argues the trial court erred by sanctioning 

him by entering a default judgment. 

{¶16} An appellate court reviews discovery rulings made by a trial court under an 

abuse of discretion standard. Nakoff v. Fairview Gen. Hosp., 75 Ohio St.3d 254, 256, 

1996-Ohio-159, 662 N.E.2d 1. Civ.R. 37(B)(2) grants courts authority to sanction a party 

for failure to provide discovery: “[T]he court in which the action is pending may make 

such orders in regard to the failure as are just, [including] * * * an order * * * dismissing 

the action or proceeding * * *, or rendering a judgment by default against the disobedient 

party[.]” However, “the harsh remedies of dismissal and default should only be used 

when the * * * failure to comply has been due to * * * willfulness, bad faith or any fault 

of the petitioner.” Toney v. Berkemer, 6 Ohio St.3d 455, 458, 453 N.E.2d 700 (1983). 

{¶17} Kohn contends that the trial court abused its discretion by ordering that the 

default judgment applied to him as well as Novus. He contends that when attorney 

Royer withdrew from representing him and Novus, attorney Loiacono filed an appearance 
as to Novus, not him. Therefore, he contends he was unrepresented and never received 

notice as to the default judgment proceedings. 

{¶18} AmTrust claims that attorney Loiacono made various representations to the 

court and to AmTrust that he was representing both Kohn and Novus. However, our 

review of the trial court’s docket shows that a formal notice of appearance was filed by 

attorney Loiacono on Novus’s behalf only. There was no formal notice of appearance 

filed on Kohn’s behalf. 

{¶19} Upon AmTrust informing the trial court that it had not received the 

documents that the defendants had promised would be provided by July 30, 2011, the trial 

court ordered AmTrust to “notify the defendants of the date and time of the [sanctions] 

hearing via certified mail receipt * * *.” AmTrust then sent the notice for both Novus 

and Kohn to attorney Loiacono. Thus, Kohn did not receive notice of the default 

hearing. Pursuant to Civ.R. 55(A): “If the party against whom judgment by default is 

sought has appeared in the action, he (or if appearing by representative, his 

representative) shall be served with written notice of the application for judgment at least 

seven days prior to the hearing on such application.” (Emphasis added.) Here, Kohn did 

not have an attorney, therefore, it was crucial for AmTrust to serve Kohn personally with 

notice of the hearing, which it failed to do. Without the requisite notice and hearing 

under Civ.R. 55(A), a default judgment is void and shall be vacated upon appeal. 

Hartmann v. Ohio Crime Victims’ Reparations Fund, 138 Ohio App.3d 235, 741 N.E.2d 
149 (10th Dist.2000); Miamisburg Motel v. Huntington Nat’l. Bank, 88 Ohio App.3d 117, 

623 N.E.2d 163 (2d Dist.1993). 

{¶20} We appreciate AmTrust’s argument that a party’s claim of not receiving 

notice of a default is more appropriately raised in a Civ.R. 60(B) action, where the party 

may present evidence in an affidavit as to whether the party did not receive notice. See 

Miamisburg, 88 Ohio App.3d at 124. However, in the instant case, the evidence strongly 

supports Kohn’s claim that he did not receive notice of the default. For example, the 

trial court directed AmTrust to provide notice to Kohn and AmTrust’s affidavit of service 

showed that only attorney Loiacono was served on behalf of both Novus and Kohn. 

During oral argument, the attorney for AmTrust explained that she believed it ethical to 

serve only attorney Loiacono. Accordingly, the trial court’s granting of default 

judgment as to Kohn is reversed and the matter remanded for further proceedings. 

Kohn’s sole assigned error is sustained. 

{¶21} Judgment reversed and remanded. 

It is ordered that appellant recover from appellee costs herein taxed. 

The court finds there were reasonable grounds for this appeal. 

It is ordered that a special mandate be sent to said court to carry this judgment into 

execution. 

A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of 

the Rules of Appellate Procedure. 
 

PATRICIA ANN BLACKMON, ADMINISTRATIVE JUDGE 

MELODY J. STEWART, J., and 

EILEEN A. GALLAGHER, J., CONCUR