Court Opinion

ID: 9964903
Source: CourtListenerOpinion
Date Created: 2024-05-01 13:09:00.4936+00
Date Added: 2024-06-11T08:25:47.198019
License: Public Domain

[Cite as Shram v. Masadeh, 2024-Ohio-1662.]

                     IN THE COURT OF APPEALS
                 FIRST APPELLATE DISTRICT OF OHIO
                      HAMILTON COUNTY, OHIO

 PHILIP SCHRAM,                               :   APPEAL NOS. C-230352
                                                               C-230357
         Plaintiff/Counterclaim-Defendant     :   TRIAL NO. A-2104070
         -Appellee,
                                              :
   VS.                                              O P I N I O N.
                                              :
 NADER MASADEH,
                                              :
      Defendant/Counterclaim-
      Plaintiff-Appellant,                    :

   and                                        :

 CORS & BASSETT, LLC,                         :

 BUFFALO WINGS & RINGS, LLC,                  :

   and                                        :

 BWR REAL ESTATE, LLC,                        :

      Nonparty-Appellants.                    :

Civil Appeals From: Hamilton County Court of Common Pleas

Judgment Appealed From Is: Affirmed

Date of Judgment Entry on Appeal: May 1, 2024
                  OHIO FIRST DISTRICT COURT OF APPEALS

Keating Muething & Klekamp, PLL, Daniel E. Izenson, Bryce J. Yoder, and John E.
Dahm, for Plaintiff/Counterclaim-Defendant-Appellee,

Jacobs, Kleinman, Seibel, & McNally, LPA, Mark Byrne, and Kathleen R. Byrne, for
Defendant/Counterclaim-Plaintiff-Appellant,

Cors & Bassett, LLC, Curtis L. Cornett, and Alison M. Huenefeld, for Nonparty-
Appellants.

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                    OHIO FIRST DISTRICT COURT OF APPEALS

CROUSE, Judge.

       {¶1}   This case involves a dispute over the assertion of the attorney-client

privilege on behalf of two limited liability companies (“LLC”) in a lawsuit between the

only two members of both companies.

       {¶2}   Plaintiff/counterclaim-defendant-appellee      Philip    Schram      and

defendant/counterclaim-plaintiff-appellant Nader Masadeh are the two members of

nonparty-appellants Buffalo Wings and Rings, LLC, (“BWR”) and BWR Real Estate,

LLC, (“BWRRE”). As set forth in more detail below, Schram filed suit against Masadeh

asserting various claims relating to actions taken by Masadeh in his role as manager

of BWR. During the course of the litigation, Schram served subpoenas for the

production of documents on BWR, BWRRE, and nonparty-appellant Cors & Bassett,

LLC, (“C&B”) the law firm representing BWR and BWRRE. We collectively refer to

BWR, BWRRE, and C&B as “the subpoenaed entities.” While the subpoenaed entities

disclosed some of the requested documents, they refused to disclose others on the

ground that they were privileged. The privilege was asserted on behalf of the

subpoenaed entities by Masadeh as the managing member of BWR and a 5o-percent

member of BWRRE. Schram filed a motion to compel production of the documents,

which the trial court granted.

       {¶3}   Masadeh and the subpoenaed entities now appeal from the trial court’s

order granting the motion to compel. They argue that granting the motion was in error

because it required the subpoenaed entities to produce privileged and irrelevant

information. Because Masadeh failed to meet his burden of establishing that he was

asserting the privilege in the best interests of the subpoenaed entities and not in his

own best interest, we hold that he could not assert the attorney-client privilege over

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                   OHIO FIRST DISTRICT COURT OF APPEALS

the subpoenaed documents and that the trial court did not err in granting the motion

to compel.

                    I. Factual and Procedural Background

       {¶4}   Schram and Masadeh are the sole members of BWR, the company that

runs the chain of Buffalo Wings and Rings restaurants. Each has a 50-percent interest

in the company. Schram and Masadeh have long operated and run BWR pursuant to

a jointly-executed operating agreement. The operating agreement has been amended

numerous times in the history of the parties’ ownership of BWR. The most recent

agreement, the Fourth Amended and Restated Operating Agreement (“Fourth

Amended Agreement”), was executed on December 8, 2020, and it superseded the

previous agreement under which the parties had been operating.

       {¶5}   Notably, the Fourth Amended Agreement changed the operating

structure of BWR from a member-managed LLC to a manager-managed LLC. Section

4.1 of the agreement provided that “the Manager shall direct, manage, oversee, and

control the business and operations of the Company. No Member may act on behalf of

the company in derogation of the authority, power, and discretion of the Manager.”

And Section 4.2 of the agreement stated that Masadeh would serve as the initial

manager of BWR.

       {¶6}   As relevant to this appeal, the Fourth Amended Agreement also

contained the following provisions: Section 4.4 of the agreement required that each

member and manager perform their duties in good faith; Section 4.6 required the

manager to make BWR’s books and records available to any member, as long as the

books and records were requested for a reasonable purpose; and Section 7.3 provided

that the manager “shall” make cash distributions to the members from time to time.

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                    OHIO FIRST DISTRICT COURT OF APPEALS

       {¶7}   On the same date that the Fourth Amended Agreement was executed,

Schram and Masadeh also executed a document titled “Joint Action Without a Meeting

of the Members and Managers of Buffalo Wings & Rings, LLC” (“the Joint Action”).

The Joint Action set forth the parties’ intention for BWR to become a manager-

managed LLC and for Schram to become a passive owner in the company, while

Masadeh remained responsible for day-to-day operations. It provided that Schram

would no longer be a BWR employee, but would hold the title of “Advisory Board

Chair,” and that he was entitled to various benefits, including a consulting fee, a

quarterly payment to offset certain expenses, company gift cards, and insurance

benefits.

       {¶8}   Schram and Masadeh were likewise the only two members of BWRRE,

an entity that owned the property located at 8501 Beechmont Avenue. Each had a 50-

percent interest in the company. BWRRE was also operated pursuant to a jointly-

executed operating agreement. The most recent agreement, the Second Amended and

Restated Operating Agreement, was executed on August 3, 2020. Management of

BWRRE was reserved to its members, with each member possessing a vote equal to

the member’s ownership interest. Masadeh was the “President and CEO” of BWRRE,

while Schram served as the company’s “Chairman” and “Chief Brand Ambassador.” In

his role, Masadeh was responsible for “the general supervision, administration, and

direction of the Company’s affairs,” for “executing all legal documents on behalf of the

Company,” and was “in charge of all money, bills, and insurance policies.”

       {¶9}   Schram filed suit against Masadeh on November 24, 2021. The

complaint alleged that Masadeh had engaged in a myriad of actions that violated both

the Fourth Amended Agreement and the Joint Action, including overcompensating

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                   OHIO FIRST DISTRICT COURT OF APPEALS

himself, using BWR resources to pay personal legal expenses, refusing to pay

distributions to Schram, dissolving in bad faith BWR’s Advisory Board that Schram

chaired, obstructing Schram’s access to BWR’s records, and failing to give Schram the

benefits to which he was entitled under the Joint Action.

       {¶10} The complaint asserted claims for fraudulent inducement, breach of

contract, breach of the duty of good faith and fair dealing, and breach of the duty of

loyalty. It additionally sought the following: removal of Masadeh as manager of BWR;

a declaratory judgment that Schram had complied with his obligations under the

Fourth Amended Agreement and Joint Action, that Masadeh had failed to comply with

his obligations under the same documents, and that Masadeh had breached the duty

of loyalty and the duty of good faith and fair dealing; injunctive relief enjoining

Masadeh from violating the terms of the Fourth Amended Agreement and Joint

Action; attorneys’ fees; and punitive damages.

       {¶11} Masadeh filed various counterclaims against Schram. In support of the

counterclaims, Masadeh alleged that it became apparent around 2018 that Schram

was not able to perform his duties for BWR, that Masadeh received complaints from

numerous BWR employees regarding Schram’s substandard performance and

inability to communicate, that two consulting firms were hired to evaluate BWR, and

that the consulting firms reported that Schram lacked leadership abilities. Masadeh

further alleged that Schram had refused to cooperate with a sale of a portion of the

Beechmont Avenue property owned by BWRRE and had demanded to receive a

distribution in excess of one million dollars before providing his signature on a

corporate authorization form to allow the sale of the property. He asserted

counterclaims for breach of the obligation of good faith and fair dealing, breach of

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                    OHIO FIRST DISTRICT COURT OF APPEALS

contract, and breach of fiduciary duty. Masadeh also sought a declaratory judgment

that BWR was required to pay his attorney fees.

       {¶12} Schram served subpoenas for the production of documents on the

subpoenaed entities. The subpoenaed entities complied in part with the subpoenas

and turned over a portion of the requested documents, but they asserted that other

documents would not be disclosed because they were privileged. The privilege was

asserted on behalf of the subpoenaed entities by Masadeh as the managing member of

BWR and a 5o-percent member of BWRRE. Although the subpoenaed entities initially

stated that a privilege log would be provided, they later asserted that a privilege log

was unnecessary and declined to provide one.

       {¶13} Schram filed a motion to compel the subpoenaed entities to comply with

the subpoenas and produce the requested documents. Masadeh and the subpoenaed

entities opposed the motion to compel. The trial court issued an order granting

Schram’s motion to compel. It stated that:

       Plaintiff counterclaim defendant Philip Schram’s motion to compel

       compliance with subpoenas filed February 28, 2023: GRANTED,

       provided that all materials produced for which a claim of privilege is

       made shall be considered ‘confidential material’ covered by the

       protective order entered by this Court on February 18, 2022, such that

       such information may only be used in this proceeding and shall only be

       filed under seal.

       {¶14} It is from this entry that Masadeh and the subpoenaed entities now

appeal.

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                    OHIO FIRST DISTRICT COURT OF APPEALS

                               II. Motion to Compel

       {¶15} Both Masadeh and the subpoenaed entities raise a single assignment of

error challenging the trial court’s order granting the motion to compel. They contend

that they were erroneously required to produce privileged and irrelevant materials.

                                   Standard of Review

       {¶16} Typically, an appellate court reviews a trial court’s discovery order for

an abuse of discretion. Spurgeon v. Mercy Health-Anderson Hosp., LLC, 2020-Ohio-

3099, 155 N.E.3d 103, ¶ 7 (1st Dist); Ward v. Summa Health Sys., 128 Ohio St.3d 212,

2010-Ohio-6275, 943 N.E.2d 514, ¶ 13. But where a “trial court’s discovery order

involve[s] the application or construction of statutory law regarding privilege, we

review the order de novo.” Spurgeon at ¶ 7; see Ward at ¶ 13. We accordingly review

de novo appellants’ assertion that they were erroneously required to turn over

privileged material. “The burden to show that testimony or documents are confidential

or privileged is on the party seeking to exclude the material.” Grace v. Mastruserio,

182 Ohio App.3d 243, 2007-Ohio-3942, 912 N.E.2d 608, ¶ 19 (1st Dist.).

                              Authority to Assert Privilege

       {¶17} Masadeh and the subpoenaed entities assert multiple reasons why the

trial court erred in granting the motion to compel. One such reason is that the

operating agreements of BWR and BWRRE entitled Masadeh, as their corporate

representative, to assert privilege on their behalf. They claim that Schram has no

authority to waive that privilege on behalf of the companies. In response, Schram

asserts that Masadeh could not assert a privilege on behalf of BWR and BWRRE

because he was not asserting the privilege in the best interest of the corporations, but

rather on his own behalf.

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                     OHIO FIRST DISTRICT COURT OF APPEALS

       {¶18} Thus, the threshold question in this case is whether Masadeh could

assert the attorney-client privilege on behalf of the subpoenaed entities. Such a

determination depends on whether he was asserting the privilege in the best interests

of BWR and BWRRE or on his own behalf.

       {¶19} The purpose of the attorney-client privilege is “to encourage full and

frank communication between attorneys and their clients and thereby promote

broader public interests in the observance of law and administration of justice.” Grace,

182 Ohio App.3d 243, 2007-Ohio-3942, 912 N.E.2d 608, at ¶ 18, quoting Upjohn Co.

v. United States, 449 U.S. 383, 389, 101 S.Ct. 677, 66 L.Ed.2d 584 (1981). The

attorney-client privilege extends to corporations as clients through R.C. 2317.021.

Hollingsworth v. Time Warner Cable, 157 Ohio App.3d 539, 2004-Ohio-3130, 812

N.E.2d 976, ¶ 64 (1st Dist.); Shaffer v. OhioHealth Corp., 10th Dist. Franklin No.

03AP-102, 2004-Ohio-63, ¶ 10.

       {¶20} As the United States Supreme Court has recognized, “[t]he

administration of the attorney-client privilege in the case of corporations, however,

presents special problems.” Commodity Futures Trading Comm. v. Weintraub, 471

U.S. 343, 348, 105 S.Ct. 1986, 85 L.Ed.2d 372 (1985). This is because corporations are

inanimate entities that cannot speak directly to an attorney or directly waive the

attorney-client privilege if it is in their best interest to do so. Id. Rather, corporations

must act through agents. “[T]he power to waive the corporate attorney-client privilege

rests with the corporation’s management and is normally exercised by its officers and

directors.” Id. In other words, “[c]orporate executives and managers, if endowed with

appropriate authority by their employer, may on behalf of the corporation either assert

or waive the attorney-client privilege.” Hollingsworth at ¶ 64, quoting Shaffer at ¶ 10.

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                     OHIO FIRST DISTRICT COURT OF APPEALS

When exercising the privilege, the authorized executives and managers must do so “in

a manner consistent with their fiduciary duty to act in the best interests of the

corporation and not of themselves as individuals.” Weintraub at 349; Stuffleben v.

Cowden, 8th Dist. Cuyahoga No. 82537, 2003-Ohio-6334, ¶ 34.

       {¶21} In the case at bar, the privilege was asserted on behalf of the subpoenaed

entities by Masadeh as the managing member of BWR and a 5o-percent member of

BWRRE. Although Masadeh is the party invoking the attorney-client privilege, he and

the subpoenaed entities seemingly argue that it was necessary for him to do so because

“Schram wishes to view privileged information, not on behalf of BWR or BWRRE, but

in order to pursue his personal claims against Masadeh.”

       {¶22} Masadeh and the subpoenaed entities have the analysis backwards and

are looking at the motivation of the wrong party. In this case, it is Masadeh who has

asserted the attorney-client privilege in order to prevent Schram from seeing certain

documents. Pursuant to Weintraub and Stuffleben, it is the motive of the person

exercising the attorney-client privilege on behalf of a corporation that must be

examined. Exercise of a privilege includes both its assertion and waiver. See

Hollingsworth, 157 Ohio App.3d 539, 2004-Ohio-3130, 812 N.E.2d 976, at ¶ 64 (on

behalf of a corporation, authorized persons may either assert or waive the attorney-

client privilege).

       {¶23} The lawsuit in this case is between the two 50-percent members of BWR

and BWRRE. The two companies were not named as parties to the litigation.

Generally, Schram’s claims against Masadeh asserted that Masadeh, as the managing

member of BWR, violated BWR’s operating agreement and the Joint Action. While

Schram’s lawsuit against Masadeh largely centered around BWR, the Fourth Amended

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                      OHIO FIRST DISTRICT COURT OF APPEALS

Agreement, and the Joint Action, Masadeh’s counterclaims against Schram included

claims related to BWRRE and Schram’s failure to cooperate with the sale of property

owned by that entity.

       {¶24} As the managing member of BWR and a 50-percent member of

BWRRE, Masadeh had the authority to assert the attorney-client privilege on behalf

of these companies. But Masadeh’s exercise of the privilege must be made in the best

interests of BWR and BWRRE. See Stuffleben, 8th Dist. Cuyahoga No. 82537, 2003-

Ohio-6334, at ¶ 36.

       {¶25} The asserted claims in this case concern allegations that either a

managing member or a member with a 50-percent interest took action in violation of

the duties owed to BWR and BWRRE that harmed the only other member of those

entities. Contrary to the assertions of Masadeh and the subpoenaed entities, it can be

plausibly argued that it is in the best interests of BWR and BWRRE that their members

abide by the applicable operating agreements and to determine the veracity behind the

allegations.

       {¶26} The party seeking production of the allegedly privileged documents in

this case is a 50-percent member of both BWR and BWRRE. Although the Joint Action

made clear that Schram had withdrawn from the day-to-day operations of BWR, he

remained a 50-percent member of that company. He did not own only a minority

interest in the company, and there were no other members of the company other than

Schram and Masadeh. The same is true of BWRRE. Schram was a 50-percent member

of the two-member company. While Masadeh was responsible for the day-to-day

operations of BWRRE, Schram was also an officer of the company. He served as the

“Chairman” and “Chief Brand Ambassador,” and pursuant to BWRRE’s operating

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                    OHIO FIRST DISTRICT COURT OF APPEALS

agreement, was to assume Masadeh’s duties should Masadeh be unable to perform

them. Accordingly, Masadeh has not asserted the attorney-client privilege against a

former member of either company, the general public, or a competitor of BWR and

BWRRE; rather he is attempting to shield the documents from a fellow member of

BWR and BWRRE in a lawsuit in which he is both seeking to avoid personal liability

and personally recover on his asserted claims.

       {¶27} On this record, we hold that Masadeh has failed to meet his burden of

establishing that it is in the best interests of BWR and BWRRE to allow Masadeh to

assert the attorney-client privilege and prevent a 50-percent member of each company

from accessing the requested documents. See Grace, 182 Ohio App.3d 243, 2007-

Ohio-3942, 912 N.E.2d 608, at ¶ 19 (“The burden to show that testimony or documents

are confidential or privileged is on the party seeking to exclude the material.”).

       {¶28} In an attempt to forestall such a holding, Masadeh argues that if he is

precluded from invoking the attorney-client privilege on behalf of BWR and BWRRE,

there would be no person at either company with the authority to invoke the privilege.

Not so. Masadeh’s argument conflates the overall authority to invoke the privilege with

a determination of whether that invocation is in the best interests of the companies.

We do not dispute that Masadeh is authorized to exercise the attorney-client privilege

on behalf of BWR and BWRRE. But case law makes clear that he may only do so in the

best interests of the companies. And on the facts of this case, he has not met his burden

to show that he has done so.

       {¶29} We accordingly hold that because Masadeh has not met his burden of

demonstrating that he is invoking the attorney-client privilege in the best interests of

BWR and BWRRE, the trial court did not err in granting the motion to compel.

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                   OHIO FIRST DISTRICT COURT OF APPEALS

                                         Relevancy

       {¶30} With the exception of Masadeh’s argument that the trial court ordered

the subpoenaed entities to produce documents that were irrelevant to the matter at

hand, our holding that Masadeh lacked authority to assert the attorney-client privilege

moots the appellants’ remaining arguments.

       {¶31} Masadeh contends that the attorney-fee bills for both C&B and his

personal counsel, which the motion to compel required be produced, are irrelevant.

We do not reach the merits of this argument because it is outside of the scope of our

limited appellate review.

       {¶32} Our appellate jurisdiction is limited to the review of final judgments

issued by lower courts. Ohio Constitution, Article IV, Section 3(B)(2). Typically,

“discovery orders are neither final nor appealable.” Summitbridge Natl. Invests.,

L.L.C. v. Ameritek Custom Homes, Inc., 1st Dist. Hamilton No. C-120476, 2013-Ohio-

760, ¶ 6. But because a provisional remedy is defined in R.C. 2505.02(A)(3) to include

a proceeding concerning the discovery of a privileged matter, an appeal of a trial

court’s order compelling the production of privileged material will be final and

appealable if it meets the requirements of R.C. 2505.02(B)(4). Id.

       {¶33} R.C. 2505.02(B)(4) provides that a final order is:

       An order that grants or denies a provisional remedy and to which both

       of the following apply:

       (a) The order in effect determines the action with respect to the

       provisional remedy and prevents a judgment in the action in favor of the

       appealing party with respect to the provisional remedy.

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                    OHIO FIRST DISTRICT COURT OF APPEALS

       (b) The appealing party would not be afforded a meaningful or effective

       remedy by an appeal following final judgment as to all proceedings,

       issues, claims, and parties in the action.

       {¶34} Here, the trial court’s order granting the motion to compel determined

the action with respect to the provisional remedy by ordering the subpoenaed entities

to produce allegedly privileged material. The documents at issue will no longer be

confidential after disclosure, preventing a judgment in appellants’ favor after trial. See

Am. Environmental Group, Ltd. v. H.M. Miller Constr. Co., 8th Dist. Cuyahoga No.

100854, 2014-Ohio-4681, ¶ 14. Further, “[i]f appellants are required to disclose

privileged information, there exists no meaningful or effective remedy should the

discovery order have been in error because once the information has been disclosed,

there is no way to undo the disclosure.” Id. at ¶ 15. The trial court’s order in this case

met both requirements of R.C. 2505.02(B)(4) and was final and appealable.

       {¶35} But our jurisdiction to review the trial court’s order is limited to matters

concerning the discovery of privileged material. “To the extent an order pertains to

matters other than those concerning discovery of privileged matters, the order is

deemed interlocutory and therefore not final and appealable.” Legg v. Hallet, 10th

Dist. Franklin No. 07AP-170, 2007-Ohio-6595, ¶ 16. As such, arguments that a

discovery order required a party to produce irrelevant material are not subject to

immediate review. B.R.M. v. OhioHealth Corp., 5th Dist. Richland No. 2022 CA 0078,

2023-Ohio-2399, ¶ 9; Hope Academy Broadway Campus v. White Hat Mgt. LLC,

10th Dist. Franklin No. 12AP-116, 2013-Ohio-911, ¶ 43. To the extent that Masadeh’s

assignment of error challenges the trial court’s order on the ground that it required

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                     OHIO FIRST DISTRICT COURT OF APPEALS

the disclosure of irrelevant material, the trial court’s order is interlocutory and we lack

jurisdiction to consider the argument.

                                    III. Conclusion

       {¶36} Because Masadeh did not meet his burden of demonstrating that he is

asserting the attorney-client privilege in the best interests of BWR and BWRRE, the

trial court did not err in granting the motion to compel. The assignments of error

raised by Masadeh and the subpoenaed entities are overruled, and the judgment of the

trial court is affirmed.

                                                                     Judgment affirmed.

ZAYAS, P.J., and KINSLEY, J., concur.

Please note:

       The court has recorded its entry on the date of the release of this opinion.

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