Oral Argument Preview. The Court Examines Tortious Acting in Concert. DeVries Dairy v. White Eagle Cooperative Ass’n.

On August 28, 2012, the Court handed down a merit decision in this case.  Read the analysis of the merit decision here.

Read the analysis of the oral argument here.

On July 10, 2012, the Supreme Court of Ohio will hear oral argument in the case of DeVries Dairy v. White Eagle Cooperative Assoc., 2011-1995. The issue in this case is whether, under the applicable circumstances, Ohio recognizes a cause of action for tortious acts in concert under the Restatement (2d) of Torts, § 876. The Court accepted this as a certified question from  Judge James Carr, who sits in the U.S. District Court in Toledo.

DeVries operates a commercial dairy farm in Marion County. In 2003, it became a member of White Eagle, a dairy farming cooperative.  Under the co-op membership agreement, White Eagle was the exclusive marketing and sales agent for all of its members. The co-op commingled proceeds from sales of its members’ milk and distributed proceeds evenly among members. White Eagle hired Jacoby & Co., and its subsidiary company, Dairy Support, Inc. (DSI) to manage its day-to-day operations, including determining buyers, terms of sales, and prices that co-op members would receive for their milk. In 2008 White Eagle reduced the proceeds it paid to DeVries, allegedly because DeVries refused to stop using bovine growth hormone in its cows. DeVries notified White Eagle that it was ending its contract with the co-op.

DeVries brought a suit in diversity in federal court in the Northern District of Ohio against White Eagle, Jacoby, and DSI, alleging various causes of action in tort and contract, including a claim for tortious acts in concert. Its amended complaint alleged that Jacoby and DSI owed a fiduciary duty to DeVries as a member of the co-op, and that White Eagle was aware of the actions Jacoby and DSI had taken in failing to pay DeVries the amount due under the membership agreement. DeVries argued that the defendants were liable in concert for the commission of these torts.  The trial judge granted summary judgment in favor of White Eagle on all claims except one narrow contract issue, but concluded that he could not determine whether the Supreme Court of Ohio has, or would likely, recognize a cause of action for tortious acts in concert, (aiding and abetting liability), and certified that question to the Supreme Court of Ohio. That claim is alleged against all three defendants.

The Restatement (2d) of Torts § 876, Persons Acting in Concert, reads as follows:

For harm resulting to a third person from the tortious conduct of another, one is subject to liability if he

(a) does a tortious act in concert with the other or pursuant to a common design with him, or

(b) knows that the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself, or

(c) gives substantial assistance to the other in accomplishing a tortious result and his own conduct, separately considered, constitutes a breach of duty to the third person.

DeVries argues that its amended complaint covers all three types of conduct set forth in § 876 of the Restatement, which it urges the Ohio Supreme Court expressly  to adopt.  The Ohio courts that have considered whether the tortious acts in concert cause of action is recognized have never expressly rejected it, but merely found that the facts of the particular case did not support the claim. The Supreme Court of Ohio considered the issue in Great Central Ins. Co. v. Tobias, 37 Ohio St. 3d 127, 524 N.E.2d 168 (1988), but found that the party making the claim had failed to prove that the principal committed a tort, which is a necessary element of the claim. DeVries points out that the Court’s failure to adopt the tort expressly in Tobias has led to a split among the Ohio Courts of Appeals. It argues that the Court should resolve the uncertainty by adopting § 876 as other states in the 6th Circuit and some neighboring states have done, and to recognize that lower Ohio courts have been treating it as the law already.  DeVries also argues that Ohio has a long tradition of recognizing common law claims from the Second Restatement of Torts, and that public policy favors the adoption of this section in order to hold accountable those who work in conjunction with others to cause harm.

White Eagle argues that DeVries has incorrectly construed the certified question too broadly—the question is not whether Restatement § 876 should be part of the law of Ohio, rather, it is whether a claim of tortious acts in concert exists in the “applicable circumstances of this case.” Thus, the Supreme Court is not being asked to decide whether the cause of action exists hypothetically, but rather whether it should exist based on these facts, which White Eagle assumes is breach of fiduciary duty.  White Eagle points out that every tort claim against it except for the concerted action claim has been dismissed. It argues that where the principal has not committed a tort, there is no concerted action claim. Furthermore, it argues that both it and Jacoby and DSI owed a separate and independent fiduciary duty to co-op members. Therefore, there is no need to recognize aiding and abetting liability where any one of the actors could be directly liable for its own breach. Finally, White Eagle argues that all of DeVries’ claimed damages are purely economic loss, and thus applying § 876 would be inconsistent with the economic loss doctrine, which prevents recovery in tort for purely economic loss.  White Eagle argues that essentially, this is a breach of contract case.

Jacoby and DSI argue that the Supreme Court did not actually recognize or adopt § 876  as the law in Ohio in Tobias, and say that simply disposing of a claim on its facts (as the Court did in Tobias) does not constitute implicit recognition of an aiding and abetting  cause of action. They argues that neither Ohio appellate courts nor out of state courts cited by DeVries have recognized the tort under similar facts.

The Ohio Association For Justice has filed an amicus brief in support of DeVries’ position. It argues that acting in concert, or aiding and abetting, has long been recognized at common law by a large majority of states. Recognizing the tort is consistent with the Ohio Constitution’s grant of a right to seek redress for injuries. Finally, it argues that § 876 codifies a basic moral principle- that citizens should refrain from encouraging others to do harm.

Student Contributor: Greg Kendall

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