IN THE SUPREME COURT OF OHIO

Transcription

1 IN THE SUPREME COURT OF OHIO ALLEN L. DAVIS Plaintiff-Appellee, V. CNG FINANCIAL CORPORATION, Defendant-Appellant. Case No On Appeal from the Hamilton County Court of Appeals, First Appellate District Court of Appeals Case No. C Plaintiff-Appellee Allen L. Davis' Memorandum in Opposition To Defendant-Appellant CNG Financial Corporation's Motion in Support of Jurisdiction Stanley M. Chesley ( ) James R. Cummins ( ) Paul M. De Marco ( ). Waite Schneider Bayless & Chesley, L.P.A Fourth & Vine Tower Cincinnati, OH Telephone: 513/ Facsimile: 513/ Attorneysfor Plaintiff-Appellee Allen L. Davis F 10 JUN U Mark A. Vander Laan ( ) John D. Luken ( ) Peter J. Georgiton ( ) Dinsmore & Shohl, LLP 225 East Fifth Street 1900 Chemed Center Cincinnati, OH Telephone: 513/ Facsimile: 513/ Mark J. Ruehlman ( ) Pierre H. Bergeron ( ) Squire Sanders & Dempsey, LLP 221 East Fourth Street, Suite 2900 Cincinnati, OH Telephone: 513/ Facsimile: 513/ Attorneysfor Defendant-Appellant CNG Financial Corporation CLERK OF COURT SUPREME COURT OF OHIO

2 TABLE OF CONTENTS PAGE THIS CASE FAILS TO SATISFY THE REQUIREMENT THAT IT BE OF PUBLIC OR GREAT PUBLIC INTEREST...1 STATEMENT OF THE CASE... 3 A. Procedural Posture... 4 B. Statement of the Facts... 6 ARGUMENT... 8 Proposition of Law No. 1: A preliminary injunction that causes serious, irreparable harm to an appellant is a final, appealable order within the meaning of R.C (B)(4) Counter Proposition of Law No. 1: The granting of a preliminary injunction that freezes the status quo and prevents further diminution of the defendant's value as a functioning business is not an appealable order within the meaning of R.C (B)(4)(b) because, under such circumstances, the injunction leaves the appellant with a meaningful appellate remedy following final judgment Proposition of Law No. 2: A preliminary injunction is improper when the injunctive relief granted, upsets rather than preserves, the status quo, violates Ohio law governing close corporation agreements, and a plaintiff fails to show a likelihood of success and that he would sustain irreparable harm... l 1 Counter Proposition of Law No. 2: An appellate court should determine if a preliminary injunction is subject to immediate review by determining if the affected party has an adequate post-judgment remedy and not by reviewing the merits of the injunction... l l CONCLUSION...14 CERTIFICATE OF SERV ICE

3 THIS CASE FAILS TO SATISFY THE REQUIREMENT THAT IT BE OF PUBLIC OR GREAT GENERAL INTEREST Defendant/appellant CNG Corporation seeks review of the dismissal of its attempted appeal from a preliminary injunction. The law goverrting the immediate review of preliminary injunctions is well established and has been evenly applied by Ohio's appellate courts, including the First District in this case. Pursuant to R.C (B)(4)(b), Ohio's appellate courts consistently have held that preliminary injunctions are provisional remedies that are subject to immediate review only when an injunction prevents the appellant from securing a meaningful remedy after final judgment.l Indeed, after the enactment of R.C (B)(4), this Court explained in Sinnott v. Aqua-Chem, Inc. (2007), 116 Ohio St. 3d 158, 162, 2007-Ohio-5584, precisely when a meaningful remedy does not exist: "In some instances, `[t]he proverbial bell cannot be unrung and an appeal after final judgment on the merits will not rectify the damage' suffered by the appealing party."2 Preliminary injunctions that preserve the status quo typically permit trial courts to unring the bell after final judgment. Preliminary injunctions, therefore, rarely will satisfy R.C (B)(4)(b) and become ripe for immediate appeal. Despite CNG's protestations, appellate courts in Ohio do not habitually dismiss appeals from preliminary injunctions merely upon finding that the injunction is intended to preserve the status quo. There is no epidemic of unanalyzed dismissals of appeals from preliminary injunctions, as CNG appears to suggest. To the contrary, Ohio appellate courts carefully analyze the consequences of the specific preliminary injunction in order to verify that the bell can be unrung after final judgment. In this case, the First District reviewed the trial court's order and found that the preliminary injunction was issued because "the trial court was concerned that 'R.C (B)(4)(b). 2 Sinnott v. Aqua-Chem, Inc. (2007), 116 Ohio St. 3d 158, 162, 2007-Ohio-5584, 23 quoting State v. Muncie (2001), 91 Ohio St. 3d 440 at 451, quoting Gibson-Myers & Associates v. Pearce (October 27, 1999), Summit App

4 CNG's value was diminishing because it was taking on large amounts of debt and paying out more in dividends that it was earning. The preliminary injunction sought to preserve the parties' rights until the case could be decided on its merits."3 Under these circumstances, the First District concluded, CNG would be afforded a meaningful remedy by appeal after the entry of final judgment on all claims.4 This is precisely how Sinnott contemplated that appellate courts would analyze R.C (B)(4)(b). Similarly, in Hootman v. Zock,5 the Eleventh District held that an appeal from a preliminary injunction failed to satisfy R.C (B)(4)(b). Despite finding that the trial court intended the preliminary injunction to preserve the status quo, the court also correctly considered whether the appellant could obtain effective post-judgment relief. The court determined that the appellant could unring the bell after the final judgment. "In addition, if this case were to proceed to final judgment, and the trial court granted a permanent injunction to appellees, appellants would have the ability to appeal the judgment to this court."6 The First District's judgment entry in this case and the Eleventh District's Hootman decision are but two recent examples demonstrating the appellate bench's grasp of R.C (B)(4)(b). Despite CNG's bombastic rhetoric, it has failed to explain why it would be unable to obtain meaningful or effective appellate review of the preliminary injunction following final judgment. The preliminary injunction does not force CNG to expend funds that it could not recover, or cause CNG to lose business it could not replace, or ring a bell that CNG could not unring following a fmal judgment 7 It expressly ' Judgment Entry at 4. ^!d. 5 Hootman v. Zock, (C.A. 11), 2007 WL , 2007-Ohio Id. at 17. ' Sinott at 23. 2

5 freezes the status quo, preventing additional reckless expenditures.8 The First District properly found that this order does not satisfy R.C (B)(4)(b) and, thus, is not appealable.9 The record below and the indisputable fact that a preliminary injunction preserving the status quo as in this case more likely than not affords the appellant an opportunity for postjudgment appeal combine to show that this matter does not rise to the necessary level for this Court to assume jurisdiction. Ohio appellate courts have demonstrated that their analysis of R.C (B)(4)(b) does not end with a finding that the particular injunction maintains the positions of the parties. Rather, they carefully analyze the availability of meaningful postjudgment relief, as this Court instructed in Sinnott v. Aqua-Chem, Inc. (2007), 116 Ohio St. 3d 158, 162, 2007-Ohio In short, Ohio's appellate courts, including the First District, already are adhering to Sinnott when interpreting and applying R.C (B)(4)(b). This is not an area of the law in need of this Court's superintendence. This appeal, therefore, fails to present a case of public or great general interest. STATEMENT OF THE CASE After an extensive evidentiary hearing and extensive briefing, the trial court, the Honorable Norbert Nadel presiding, granted Plaintiff Allen Davis's preliminary injunction motion.10 When it issued its Order, the trial court found that the evidence clearly and convincingly established that Plaintiff had a high likelihood of success on the merits and that CNG's deteriorating financial condition, combined with Plaintiff's obligation to guarantee the full amount of CNG's debt, created irreparable harm to Plaintiff. The trial court, therefore, detennined that a preliminary injunction was necessary to preserve the status quo and protect 8 T.d Hootman at 16; East Cleveland Firefighters, L4FF Local 500 v. City of East Cleveland, 2007 WL , 2007-Ohio- 1447, at 5; Deyerle v. City ofperrysburg, 2004 WL , 2004-Ohio-4273, at T.d. 276 and

6 Plaintiff from irreparable harm while advancing the public interest. The trial court further found that "CNG and third parties will benefit rather than be harmed by a preliminary injunction and the public interest will be served by the granting of a preliminary injunction."" The First District dismissed CNG's appeal upon finding, under R.C (B)(4)(b), that CNG would have a meaningful post- judgment appellate remedy. A. Procedural Posture12 On Febntary 22, 2005, Mr. Davis initiated an action against CNG seeking the following regef: 1) a declaratory judgment that a) the Amended and Restated Option Agreement (the "Option") was issued to him as part of the division of marital property and not as compensation, b) detemiined the number of shares of CNG to which he is entitled based on the cashless exercise provision included in the Option, c) declared the identity of the shareholders of CNG entitled to vote and receive dividends as of December 31, 2003, and d) declared the number of shares controlled by each of the identified shareholders; 2) injunctive relief requiring CNG to take appropriate action to comply with the declaratory judgments issued by the court; and 3) a preliminary injunction.t3 CNG removed the action to federal court, which subsequently remanded it based on United States District Judge Sandra Beckwith's conclusion that the complaint raised the false entries on CNG's books, issues that would be govemed by Ohio corporation and contract law, not federal law.14 While the case was before Judge Beckwith, Mr. Davis sought and obtained a temporary restraining order ("TRO") enjoining CNG from 1) conducting any shareholder meetings, 2) issuing any debt instrument or securities or entering into any agreement or obligation to issue these or any similar Trial court's fmdings of fact and conclusions of law at This Court already is familiar with most of the history based on CNG's earlier appeal, CNG Financial Corp. v. Nadel, 111 Ohio St.3d 149, 2006-Ohio ' Complaint T.d Notice of Remand T.d

7 instruments or securities, and 3) declaring or paying any dividends or making any distributions in respect to any ownership of shares.15 Following remand, Mr. Davis immediately sought and obtained a TRO similar to the one issued by Judge Beckwith.16 At the expiration of the trial court's TRO, the parties entered into a stipulation and order to facilitate settlement discussions." It provided that 1) CNG would retum $25 million it had borrowed on May 5, 2005, during the short interval when no TRO was in place, 2) CNG could not pay any dividends, and 3) CNG would provide Mr. Davis with a list of draws that it made from its line of credit on a biweekly basis.18 The stipulated order also prohibited shareholder meetings and required CNG to preserve documents.19 On June 17, 2005, after settlement talks stalled, CNG willingly entered into another stand-still agreement, which contained provisions sinular to the May 13, 2005 stipulated order.20 Although CNG originally agreed it would remain in effect through the duration of the preliminary injunction hearing, CNG disavowed it on August 29, 2005 Z1 The trial court heard testimony from Mr. Davis's witnesses on July 19, 2005, October 11, 2005, January 19 and 20, 2006, February 22 and 23, 2006, and March 15, 2006, and from CNG's witnesses on March 16, 2006, June 30, 2006, February 9, 2007, July 18, 2007, and August 1 and 2, The court requested, and the parties simultaneously subnutted, proposed findings of facts and conclusions of law.22 On October 11, 2007, the court granted the preliminary injunction.23 CNG filed its notice of appeal on October 19, The First District heard argument and journalized its judgment entry dismissing the appeal on March 26, The " Pltf. Hearing Ex. 2 T.p. Vol. I, Temporary Reshaining Order dated May 6, 2005 T.d. 33. ' Stipulation and Order T.d ld 1' ld 20 June 17,2005 letter from Mark Vander Laan, Pltf. Hearing Ex. 16 T.p., Vol. IV, 456. " T.p., Vol. N, 451. ZZ T.p. Vol. XVII, 2254; T.d. 269, T.d

8 court of appeals held that CNG possessed a meaningful remedy after the entry of final judgment on all of Mr. Davis's claims Z4 B. Statement of the Facts By way of overview, this case is about two brothers wielding corporate power to satisfy their thirst for money to support their lifestyles and unrelated business ventures, while punishing their father for divorcing their mother. Presented with a toxic, constantly changing situation - the brothers had declared nearly $77 million in dividends since the action commenced, far more than the corporation earned - the trial court did the most rational thing possible: it halted the brothers' spending spree and borrowing binge until both sides' rights could be sorted out. CNG is a closely held Ohio corporation that is taxed as a Subchapter S Corporation.25 As such, CNG's income flows through the corporate entity and becomes taxable to its shareholders on a pro rata basis in accordance with each shareholder's percentage of ownership.26 Mr. Davis is a minority shareholder. His sons Jared and David Davis collectively contro164% of CNG and serve as two of its three Directors and as its Executive Officers.Z7 J. David Rosenberg owns approximately 8%, which he received through a cashless exercise of a 2000 warrant.28 hi 2002, Allen Davis and his wife Judy were involved in a complicated divorce. As part of the division of marital property, he transferred half of his CNG shares to herz9 and she granted him an option to repurchase them. Because Judy preferred the money, Jared and David redeemed their mother's shares for $15 nvllion, subject to Allen's repurchase option. As part of the redemption of their mother's shares, CNG issued the Amended and Restated Option Agreement ("Option") to Allen. 24 T.d. at T.d zb Id 27 Id at 2. zs ld Z'Idat3. 6

9 It was the same as the option Judy had granted him, plus a cashless option exercise and specific language intended to elinvnate arty question of compensation. The Option contained a formula for calculating how many shares he could purchase at any point 30 The option exercise price was $16 million - that is, CNG received $1 million more from him than it paid to redeem the same number of shares from Judy.31 At the time Mr. Davis entered into the Option with CNG, he requested, and Jared and David Davis agreed to include, the following language: Nothing contained herein shall be construed as providing the Optionee with a continued right to employment with the Company or the Company with a continued right to Optionee's employment services.3z In August 2004, CNG sought $150 million in fmancing from National City Bank.33 To secure it, CNG was required to provide National City with financial statements and projections.34 The financial statements and projections correctly did not reflect an expense for $36.9 million in connection with the Option.35 This was consistent with CNG's detailed account of the Davis divorce settlement in a prior letter to National City.36 Despite abundant evidence to the contrary, CNG took the position in 2004 that the Option compensated Mr. Davis. As controlling shareholders, Jared and David personally stood to reap the most benefits from reducing the taxable income that would flow to them as Subchapter S shareholders. In reaping such benefits, they acted with reckless disregard and caused CNG to account for the Option improperly, conduct that CNG repeated each time it disseminated the inaccurate financial statements to banks, shareholders, regulators and other interested parlies jd " T.d Option, Pltf. Hearing Ex. 9 at 7, T.p. Vol. III, T.d Id 35Id 36 T.d ; Pltf. Hearing Ex. 53, T.d. Vol. XI, ' T.p. Vol. XV,

10 ARGUMENT Proposition of Law No. 1: A preliminary injunction that causes serious, irreparable harm to an appellant is a final, appealable order within the meaning of R.C (B)(4). Counter Proposition of Law No: 1: The granting of a preliminary injunction that freezes the status quo and prevents further diminution of the defendant's value as a functioning business is not an appealable order within the meaning of R.C (B)(4)(b) because, under such circumstances, the injunction leaves the appellant with a meaningful appellate remedy following final judgment. Contrary to CNG's characterization, the First District did not merely dismiss the appeal upon finding that the injunction preserved the status quo. The Court of Appeals dismissed the appeal by faithfully applying RC (B)(4)(b) and finding that CNG would be afforded a meaningful remedy by an appeal after the entry of final judgment 38 The First District's analysis and application of RC (B)(4)(b) completely fulfills the guidance this Court provided in Sinnott v. Aqua-Chem, Inc.39 In Sinnott, the Court analyzed RC and addressed when a provisional remedy, such as a preliminary injunction, denies an appellant an effective or meaningful remedy through a post judgment appeal. The Court stated that an appellant would be denied an effective or meaningful post-judgment appeal when the provisional remedy in some way, shape, or form rings a bell that cannot be unrung A0 Accordingly, this Court has established the standard. The First District certainly understood and adhered to this test. Before it dismissed the appeal, it analyzed the effect of the injunction on Mr. Davis as well as on CNG. After its review, the court found that the injunction "sought to preserve the parties' rights until the case could be decided on the merits."41 CNG simply is wrong when it argues that the First District merely 38 T.d. at (2007), 116 Ohio St. 3d 158, 162, 2007-Ohio Id. at 23 quoting State v. Muncie (2001), 91 Ohio St. 3d 440 at 451, quoting Gibson-Myers & Associates v. Pearce (October 27, 1999), Summit App T.d. at 4. 8

11 referenced the status quo and dismissed the appeal without regard to how the injunction would affect CNG. The First District actually suggested that in this instance preserving the status quo would benefit not only Mr. Davis but also CNG, which until then "was taking on large amounts of debt and paying out more in dividends than it was earning." Thus, concluded the First District, the preliminary injunction preserved both parties' "rights until the case could be decided on its merits." Aside from CNG's refusal to acknowledge that Ohio appellate courts such as the First District properly apply RC (B)(4)(b), CNG's argument lacks merit because it refuses to acknowledge that a preliminary injunction preserving the status quo naturally affords the appellant a meaningful remedy after a final judgment. "Status quo" is the last uncontested status between the parties before the pending dispute developed. 42 However, the focus is on prevention of injury, and not just preservation.43 By preserving the status quo, a preliminary injunction reduces the likelihood that any party can take advantage of the situation and cause irreparable injury to the other parties. The trial court's order and opinion below are instructive on this point. In light of its determination that Mr. Davis faces a threat of harm due to CNG's pattern of borrowing money to pay dividends in excess of earnings, the trial court enjoined CNG from declaring or paying dividends or making distributions to shareholders 44 However, the trial court made certain that the injunction would not injure or damage CNG or its shareholders. The injunction allows CNG to make distributions sufficient to permit the shareholders to pay their share of taxes from CNG's 42 11A Wright & Miller, Federal Practice &Procedure: Civil 2d, 2948, p. 136; Black's Law Dictionary (5th ed., 1979), p. 1264; See also Canal Authority of the State of Florida v. Callaway (5th Cir. 1974), 489 F.2d 567, 576 ("The focus always must be on prevention of injury by a proper order, not merely on preservation of the statas quo:'). 43 '" T.d

12 operation.45 The trial court further found that the injunction actually would benefit CNG. "CNG and third parties will benefit rather than be harmed by a preliminary injunction and the public interest will be served by the granting of a preliminary injunction."46 Indeed, assuming that CNG is in compliance with the injunction, CNG's recent conduct implicitly acknowledges that the order is not causing irreparable harm but instead permits it to cany on its essential business activities and, indeed, to expand. The May 23, 2008 edition of the Cincinnati Business Courier reported that CNG intends to invest $20 million to expand its lending activities in Great Britain. According to the news account: [CNG] is hedging its bets against increasing domestic competition and regulatory activism by building a global chain of payday-lending stores, starting in Scotland. The Mason-based parent of 1,300 Check 'n Go stores recently cornpleted the acquisition of, an Edinburgh-based subsidiary that operates 130 locations in Scotland, England and Wales. The Scottish invasion happened in stages. CNG Financial purchased a majority stake in the company in April Last summer, British newspapers quoted Cheque Centre Property Director Philip MacLauchlan as saying its U.S.-based parent company would invest up to $20 million to open 100 stores in Great Britain, bringing its total there to 205. The company's Web site indicates 130 locations now offer payday lending, check cashing and currency exchange services. Doug Clark, CNG's chief operating officer, said his company purchased the remaining minority stake in Cheque Centres about a month ago, giving it 100 percent ownership. "We envision the (area) to be a very attractive market over the long haul," said Clark. "We are considering other markets" where regulators have yet to clamp down on interest rates for short-term loans. "In Canada, believe it or not, regulations actually encourage short-term, cash-advance lending."47 CNG's list of horribles that the injunction will create simply has no basis in fact or in the law. 45 T.d. 276 at Court's findings of fact and conclusions of law at 9. ' See "CNG Courts Great Britain for Expansion," Vol. 25, No. 5 Cincinnati Business Courier, May 23, 2008 at 1,

13 Proposition of Law No. 2: A preliminary injunction is improper when the injunctive relief granted, upsets rather than preserves, the status quo, violates Ohio law governing close corporation agreements, and a plaintiff fails to show a likelihood of success and that he would sustain irreparable harm. Counter Proposition of Law No. 2: An appellate court should determine if a preliminary injunction is subject to immediate review by determining if the affected party has an adequate post-judgment remedy and not by reviewing the merits of the injunction. The question for this Court is not whether the trial court properly found that Mr. Davis suffered a threat of irreparable harm, that Mr. Davis has a likelihood of success on the merits, and that CNG and third parties will benefit rather than be harmed by the preliminary injunction.48 The question is whether the current law is unclear as to how appellate courts should determine that a preliminary injunction denies meaningful post- judgment relief. CNG, however, realizing that it cannot establish that appellate courts are confused, seeks to invoke the jurisdiction of this Court and bypass the First District Court of Appeals as to the merits of the injunction. In diving headlong into the merits of its appeal, CNG fails to recognize that this is neither the time nor the place for that. In any event, CNG's merits argument goes nowhere. A prelin-iinary injunction is an equitable remedy. "An injunction is an extraordinary remedy in equity where there is no adequate remedy available at law."49 When it fashions an equitable remedy, a court is entitled to broad leeway.50 CNG ignores this principle and seeks an order from this Court that interferes with the trial court's ability to preserve the positions of the parties by issuing an appropriate injunction. 48 Court's fmdings of fact and conclusions of law at 9, Garono v. State (1988), 37 Ohio St.3d 171, See Schulz v. Sullivan (1` Appellate Dist., 1993), 92 Ohio App.3d 205, 213 ("...courts applying equity are not bound by formula or restrained by any limitation that tends to interfere with or limit their just exercise of discretion. Keystone Driller Co. v. Gen. Excavator Co. (1933), 290 U.S. 240, 54 S. Ct. 146, 78 L.Ed Rather, we seek only to protect the equitable interests of all parties to this litigation.") 11

14 CNG misstates the record hoping to gain sympathy from the Court. CNG argues that the injunction prevents it from complying with the Close Corporation Agreement and therefore alters the status quo. This argument is without merit. First, by paying dividends in excess of its earnings, CNG has been operating outside the Corporation Agreement. That agreement permits CNG to distribute dividends of 60% of its taxable income.sl CNG has clearly exceeded this linutation by paying dividends that in February 2007 exceeded its total eamings by an astounding $33.5 million. Second, the Corporation Agreement provision that allows for the distribution of discretionary dividends also recognizes that CNG never would be required to make a dividend distribution if the distribution violates the law: Notwithstanding anything to the contrary contained in this Agreement, the Corporation shall be under no obligation to distribute any portion of a Required Ivlinitnum Distribution which is then rohibited under applicable law or any agreement to which the Corporation is a party.5p From the time the action was commenced until August 29,2005 (almost six months), CNG was subject either to restrictions imposed by the TROs or to voluntary restrictions akin to the prelinunary injunction's (i.e., the sfipulated order and a stand-still agreement). hi other words, the injunction imposes no new restrictions, but rather only limitations to which CNG previously agreed. CNG further ignores that the trial court found Mr. Davis demonstrated by clear and convincing evidence that he was likely to succeed on the merits, i.e., proving that he received the Option as part of the settlement of divorce property rather than as compensation.53 The trial court found the following evidence credible and persuasive: 1) the testimony of Davis's accounting expert witness, Teresa lannaconi, who stated that her review of the Option indicated that it was not granted for continued employment services, but as part of the Davis divorce property settlement; 2) the testimony 51 Close Corporation Ageement 3.1, Pltf. Hearing Ex Id 53 T.d

15 of Paul Green, CNG's tax accountant, that the Option was issued to Mr. Davis as part of the divorce; 3) the language in the Option stating "Nothing contained herein shall be construed as providing the Optionee with a continued right to employment with the Company or the Company with a continued right to Optionee's employment services"; 4) Mr. Davis's testimony that he was obligated to remain involved in CNG, with or without the Option; 5) a November 2002 letter from CNG requesting National City's consent to CNG's redemption of Judy's shares subject to the option set forth in the Davis divorce property settlement; 6) the evidence that Mr. Davis paid a $1 million premium to CNG for the Option; and 7) CNG's inconsistent accounting for the Option, i.e., not reporting the material $36.9 million expense in fmancial statements provided to National City to obtain the $150 million in financing in Based on this overwhelniing evidence, the trial court concluded that Mr. Davis likely would prevail on the merits and prove that the Option was part of the settlement of marital property. The trial court's conclusion is clearly the result of sound reasoning and does not constitute an abuse of discretion. The trial court also found threatened irreparable injury, concluding as follows: 1) based on the testimony of plaintifps financial expert, Ed VonderBrink, CNG's financial condition was "weak" and it faced significant financial difficulties, including the actual closing of its North Carolina operations; 2) CNG was engaging in a pattem of borrowing to pay dividends in excess of its eamings; and 3) under 5.10 of the Close Corporation Agreement, Mr. Davis would be required to guarantee CNG's debts. The trial court also noted CNG's pattern of paying dividends in excess of earnings when it was free of court-imposed restraints.55 Accordingly, it concluded that, absent court-imposed restraints, this pattem would continue. Implicit in this finding is that CNG, in order to obtain financing, would continue to rely on the false and misleading financial statements and continue disseminating sa T.d ss T.d

16 them. The court concluded that CNG's conduct would erode the value of Mr. Davis's investment while exposing him to ever increasing debt obligations, given the Close Corporation Agreement's provision requiring him to guarantee CNG's debt. Finally, CNG resorts to redefming the status quo as the brothers' borrowing binge and spending spree, accusing the trial court not of preserving but rather of "upending the status quo." CNG's Memorandum, p. 12. Surely this wordplay does not warrant the Court's intervention, for this is hardly the first time an enjoined party has sought to use semantics to redefine the status quo in such a self-serving way. By CNG's logic, when a driver is barreling down the highway at 100 miles per hour - a metaphor not totally divorced from the facts of this case - that level of speed and recklessness constitutes the status quo and the officer who stops him is "upending the status quo." This Court need not take the time to refute this misguided argument, for it is well established that, as noted above, the status quo resides in the parties' last uncontested status visa-vis one another. CONCLUSION For all of the foregoing reasons, Plaintiff respectfully requests that the Court deny jurisdiction in this case. Respectfully submitted, ^ S4^-^ A C6^^,.+ /--), ^/^rtr /- ew f"gyi Stanley M. Chesley ( ) James R. Cummins ( ) Paul M. De Marco ( ) WAITE, SCHNEIDER, BAYLESS & CHESLEY 1513 Fourth and Vine Tower Cincinnati, Ohio (513) (phone) (513) (fax) Counsel forplainti,fj= Appellee Allen L. Davis 14

17 CERTFICATE OF SERVICE I hereby certify that a true and correct copy of Plaintiff-Appellee' Allen L. Davis' Memorandum in Opposition to Defendant-Appellant CNG Financial Corporation's Memorandum in Support of Jurisdiction was served by United States Regular Mail, postage prepaid, this 9`" day of June 2008 on the following persons: Mark A. Vander Laan ( ) Dinsmore & Shohl LLP 225 East Fifth Street 1900 Chemed Center Cincinnati, Ohio Telephone: (513) Facsimile: (513) Attorney for Relator CNG Financial Corporation Jerome A. Kunkel ( ) Christian J. Schaefer ( ) 230 East Ninth Street, Ste 4000 Cincinnati, Ohio Telephone: (513) Facsimile: (513) Attorneys for Respondent- Appellee Hon. Norbert Nadel Mark J. Ruehlmann ( ) Pierre H. Bergeron ( ) Squire, Sanders & Dempsey L.L.P. 312 Walnut Street, Suite 3500 Cincinnati, Ohio Telephone: (513) Facsimile: (513) ,.._