OA"G/NA1. In tyje 6upreme Court of bio. CLERK OF COURT gr^^^^ COURT OF OHIO. Case No Plaintiff-Appellant, THE AMERICAN CHEMICAL SOCIETY,

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1 THE AMERICAN CHEMICAL SOCIETY, In tyje 6upreme Court of bio Case No OA"G/NA1 Plaintiff-Appellant, V. LEADSCOPE, INC, et al., Defendants-Appellees. On Appeal from the Franklin County Court of Appeals, Tenth Appellate District Court of Appeals Case No. 08AP-1026 iv11':iut BitIEF OF AIv7['CiiS Cc'7lu'fiE STA T E Or OiiiO Iid SiJPP ^i T OF APPELLANT AMERICAN CHEMICAL SOCIETY MICHAEL G. LONG* ( ) *Counsel of Record Vorys, Sater, Seymour and Pease LLP 52 East Gay Street Columbus, Ohio fax mglong@vorys.com Counsel for Appellant The American Chemical Society ALAN L. BRIGGS* ( ) *Counsel of Record ANECA E. LASLEY ( ) CHRISTOPHER F. HASS ( ) Squire, Sanders, and Dempsey LLP 2000 Huntington Center 41 South High Street Columbus, Ohio fax abriggs@ssd.com Counsel for Appellees Leadscope, Inc., Paul E. Blower, Jr., Wayne P. Johnson, And Glenn J. Myatt MICHAEL DEWINE ( ) Attorney General of Ohio ALEXANDRA T. SCHIMMER* ( ) Chief Deputy Solicitor General *Counsel ofrecord DAVID M. LIEBERMAN ( ) Deputy Solicitor 30 East Broad Street, 17th Floor Columbus, Ohio fax alexandra.schimmer@ohioattorneygeneral.gov Counsel for Amicus Curiae State of Ohio ff CLERK OF COURT gr^^^^ COURT OF OHIO

2 TABLE OF CONTENTS TABLE OF CONTENTS...:... i TABLE OF AUTHORITIES..... ii INTRODUCTION...:...:...:...1 STATEMENT OF AMICUS INTEREST...3 STATEMENT OF CASE AND FACTS...3 ARGUMENT...:... 5 The State of Ohio's Proposition of Law No. I: Page Ohio recognizes a narrow tort of malicious prosecution to protect litigants frqm baseless civil litigation A. In narrow circumstances, a defendant who prevails in civil litigation may commence a common law action against the plaintiff for malicious prosecution....6 B. Leadscope cannot state a conuuon law claim for malicious prosecution The State of Ohio's Proposition of Law No. II: Ohio does not recognize a distinct tort of "malicious litigation. "...10 A. This Court has never recognized a separate tort of malicious litigation...11 B. Henry Gehring did not recognize a separate tort of malicious litigation...12 C. This Court should not recognize the tort now...16 CONCLUSION...:...:...19 CERTIFICATE OF SERVICE...:...unnumbered

3 TABLE OF AUTHORITIES Cases Page(s) Anderson v. Eyman (5th Dist. 2000), No. 00-CA-26, 2000 Ohio App. Lexis Anello v. Vinci (Vt. 1983), 458A.2d :...7 Arbino v. Johnson & Johnson, 116 Ohio St. 3d 468, 2007-Ohio Babb v. Superior Court of Sonoma County (Cal. 1971), 479 P.2d :...:...8, 9 Cincinnati Daily Tribune Co. v. Bruck (1900), 61 Ohio St Crawford v. Euclid Nat'l Bank ( 1985), 19 Ohio St. 3d :...6, 7, 17, 18 Ex parte State Farm Mut. Auto Ins. Co., 924 So.2d 706 (Ala. 2005)...7 Harco Corp. v. Corrpro Cos. (9th Dist. 1986), No. 1465, 1986 Ohio App. Lexis :...:...12 Hardy v. VerMeulen (1987), 32 Ohio St. 3d :...18 Henry Gehring Co. v. McCue (8th Dist. 1926), 23 Ohio App passim Levering v. Nat'l Bank of Morrow County (1912), 87 Ohio St: , 8 McCue v. Wells (1929), 121 Ohio St Melanowki v. Judy (1921), 102 Ohio St. 153 `...:...:...11 One Thousand Fleet Ltd. Pshp. v. Guerriero (Md. 1997), 694 A.2d :...7 Pope v. Pollock ( 1889), 46 Ohio St :...11 ii

4 Rainier's Dairies v. Raritan Valley Farms, Inc. (N.J. 1955), 117 A.2d :...7 Re/Max Int'l, Inc. v. Realty One, Inc. (6th Cir. 1999) 173 F.3d Robb v. Chagrin Lagoons Yacht Club, Inc. (1996), 75 Ohio St. 3d :... passim Sheldon Appel Co. v. Albert & Oliker (Cal. 1989), 765 P.2d 498 :...:...7 Water Management, Inc. v. Stayanchi (1984), 15 Ohio St. 3d 83...:...:...11 Watson v. Trask (1834), 6 Ohio White Mule Co. v. ATC Leasing Co. LLC (N.D. Ohio 1998), 540 F. Supp. 2d :...15 Wiles v. Medina Auto Parts, 96 Ohio St. 3d 240, 2002-Ohio Wrinch v. Miller (9th Dist.), 183 Ohio App. 3d 445, 2009-Ohio :...:...2, 8 Statutes, Rules and Constitutional Provisions 15 U.S.C `...:...:...16 Civ. R Civ. R , 7, 16 Civ. R :...2, 10 Civ. R :...2 Ohio Const., art. I 16...:...7, 17 R.C. 2323,51...7, 16 R. C :...16 Other Authorities 52 Am. Jur. 2d: Malicious Prosecution (2d ed. 2000)... 6, 7, 8 ui

5 Dan B. Dobbs, Law of Torts (2001)...:...:...6, 9, 13, 17 Prosser & Keeton, Law of Torts (5th ed. 1984)...:... passim Restatement (Second) of the Law: Torts (1977)...:...10 Restatement (Third) of the Law: Unfair Competition (1993)...13 iv

6 INTRODUCTION Although this case arises out of a private commercial dispute, it has far-reaching consequences for core State and public interests-chief among them, the effectiveness and fairness of Ohio's civil litigation system and access to the courts. After a decade of wrangling, the two parties in this case-the American Chemical Society ("ACS") and Leadscope, Inc.-proceeded to trial over an intellectual property dispute. Eight weeks later, the jury rejected ACS's claims for breach of contract and misappropriation of trade secrets, and it accepted Leadscope's counterclaims that ACS engaged in defamation, tortious interference, and unfair competition. The jury then awarded a $26.5 million verdict to Leadscope and its three founders, which the trial court supplemented with $7.9 million in attorney fees and costs. The problem: The jury's unfair-competition verdict is based on a finding that ACS engaged in "malicious litigation" against Leadscope. The trial court instructed the jury to hold ACS liable if it found that ACS's litigation effort "was not founded upon good faith, but was instituted with the intent and purpose of harassing and injuring a rival engaged in the same business." Trial Tr. (Mar. 25, 2008), at The Tenth District endorsed that reasoning, stating that "Ohio recognizes malicious litigation as a basis for an unfair competition claim." Am. Chem. Soc. v. Leadscope (10th Dist.), No. 08AP-1026, 2010-Ohio-2725, 29. Not so. The idea that a party can be held liable solely because it initiated "litigation... for the purpose of harassing and injuring a rival," Trial Tr. at 5878, is foreign to Ohio law and contrary to this Court's precedents. What does exist is much narrower. This Court has long recognized "a claim of malicious civil prosecution." Robb v. Chagrin Lagoons Yacht Club, Inc. (1996), 75 Ohio St. 3d 264, 269. To prevail, a plaintiff must show "(1) malicious institution of prior proceedings against the

7 plaintiff by the defendant, (2). lack of probable cause for the filing of the prior lawsuit, (3) termination of the prior proceedings in plaintiff's favor, and (4) seizure of plaintiff's person or property during the course of the prior proceedings." Id. (alterations and citation omitted). As a matter of law, Leadscope cannot meet three of those elements. First, a claim of malicious civil prosecution does not accrue "until the original suit between the parties has been legally terminated." Levering v. Nat'l Bank of Morrow County (1912), 87 Ohio St. 117, 122. Thus, "a malicious prosecution action cannot be a counterclaim when the basis of the claim is the underlying action itself" Wrinch v. Miller (9th Dist.), 183 Ohio App. 3d 445, 2009-Ohio-3862, 21. That is exactly what Leadscope has attempted in this case. Second, Leadscope must satisfy "the long-held and well-reasoned requirement of seizure of property." Robb, 75 Ohio St. 3d at 270. But here, ACS did not seize any Leadscope property. Third, Leadscope must show that ACS's lawsuit lacked probable cause. Such a showing is unachievable given the history of these proceedings. If ACS's legal claims were so lacking in merit, the trial court should have dismissed the case at the pleading stage under Civ. R. 12, granted a motion for summary judgment under Civ. R. 56, or issued a directed verdict for Leadscope under Civ. R. 50. The opposite occurred-the trial court submitted ACS's claims to the jury and, after deliberations, a minority of the jurors sided with ACS. The Tenth District's decision embracing a separate "malicious litigation" tort should be reversed. No such tort exists under Ohio law and the Court should refuse to fashion such a tort anew, especially where the result would mean the radical transformation of civil litigation. If allowed to stand, the Tenth District's rule will result in an explosion of civil litigation. Defendants will plead the new tort as a counterclaim in every commercial dispute. Courts will then oversee costly and time-consuming discovery disputes as parties attempt to investigate their 2

8 opponents' motives, and the opponents invoke a host of privilege defenses to that inquiry. Even worse, the very threat of a "malicious litigation" charge will discourage many plaintiffsnamely.; individuals with limited resources-from filing lawsuits in the first place. For these reasons, the Court should reject malicious litigation as a theory of tort liability. "There are opportunities already built into the civil system to deal with a meritless lawsuit." Robb, 75 Ohio St. 3d at 270. STATEMENT OF AMICUS INTEREST The State of Ohio has an interest-both protective of others and personal unto itself-in the fair adjudication of commercial disputes. An efficient and effective civil litigation system is vital to the economic well-being of the State and its corporate and individual citizens. And the State itself-chiefly through its public universities and affiliated entities-holds valuable intellectual property rights that it may be called upon to safeguard, either by initiating civil litigation or defending against it. The orderly and predictable development of common law rules governing commercial relationships is essential to businesses of all stripes, and to the State's economy as a whole. The Tenth District's recognition of a so-called "malicious litigation" tort upsets that delicate balance-it exposes plaintiffs to a range of liability never before contemplated in this State, it degrades the efficiency and fairness of the courts as a forum for dispute resolution, and it invites a flood of new complications in commercial litigation that will drown the courts.' STATEMENT OF CASE AND FACTS In 2002, ACS brought suit against Leadscope, Inc., and its three founders-paul Blower, Jr., Wayne Johnson, and Glenn Myatt-for misappropriation of trade secrets, breach of ' While the State also urges reversal of the Tenth District's ruling on the defamation claim, the State's interests are most directly implicated by the "malicious litigation" question, which is therefore the exclusive focus of the State's amicus brief. 3

9 employment agreements, unfair competition, breach of fiduciary duty, conversion, and violation of implied license under shop rights. See Amer. Chem. Soc. v. Leadscope (10th Dist.), No. 08AP-1026, 2010-Ohio-2725, 8 ("App. Op."). In response, Leadscope filed a number of counterclaims for defamation, tortious interference with business relations, unfair competition, and violations of two Ohio statutes. Id. The common pleas court then stayed the case for several years to allow Leadscope to resolve a collateral dispute with its insurer. Id. at 9. At the close of an eight-week trial in 2008, the trial court issued instructions to the jury. It directed the jury to consider a theory of "malicious litigation" when considering Leadscope's counterclaim for unfair competition: In Ohio, unfair competition may consist of malicious acts by way of litigation in court that is not founded in good faith, but is for the purpose of harassing and injuring a rival producing and selling the same commodities. It is the law that the pursuit of one competitor by another, either in court or out of court, for the purpose of injuring his business, is prohibited. If you find by the greater weight of the evidence that Plaintiff has committed malicious acts by way of litigation in the courts, or if you find litigation was not founded upon good faith, but was instituted with the intent and purpose of harassing and injuring a rival engaged in the same business, you should find for the Defendants on their counterclaim of unfair competition in an amount that would fairly compensate Defendants for the damage suffered by reason thereof. Trial Tr. (Mar. 25, 2008), at The jury returned verdicts against ACS, and verdicts in favor of Leadscope on its counterclaims for defamation, tortious interference, and unfair competition. App. Op., 2010-Ohio-2725, at 10. The jury awarded $26.5 million in compensatory and punitive damages to Leadscope, which the trial court supplemented with $7.9 million in attorney fees and costs. ACS filed an assortment of post-trial motions in an effort to vacate or reduce the award, which the trial court denied. Id. at 11.

10 On appeal, the Tenth District affirmed. It observed that Leadscope's unfair competition claim was founded, in part, on the allegation that ACS "engaged in malicious litigation against Leadscope."2 Id: at 28. The court further stated that "Ohio recognizes malicious litigation as a basis for an unfair competition claim," and that Leadscope could recover against ACS if it could demonstrate that ACS's "litigation [was] not founded in good faith, but brought for the purpose of harassing and injuring a rival who was producing and selling the same commodities." Id. at 29, 31. After summarizing the trial record, the Tenth District held that "[t]he jury, as trier of fact, was entitled... to conclude ACS's civil action constituted malicious litigation undertaken in bad faith." Id. at 38. The court further announced that the issue of probable cause-whether "ACS knew at the time it filed its complaint that it could never substantiate its intellectual property claims"-was irrelevant to Leadscope's ability to recover on its malicious litigation theory. Id. The Tenth District also affirmed the jury's verdicts on defamation and tortious interference with business relations, its damages calculation, and the trial court's attorney fee award. ACS appealed, and this Court accepted jurisdiction over the case. ARGUMENT Common law in Ohio has long recognized a limited right of recovery against a party who files a frivolous lawsuit. That party is liable under the tort of malicious civil prosecution. Leadscope has not pressed such a claim against ACS, and for good reason: It cannot demonstrate three of the tort's well-worn elements. 2 Leadscope also supported its unfair competition claim with allegations that ACS "circulated false and disparaging statements about Leadscope and its principals." App. Op, 2010-Ohio- 2725, at 28. The Tenth District properly addtessed these allegations "in [its] discussion of Leadscope's defamation claims." Id. 5

11 Instead, Leadscope attempted, and the Tenth District endorsed, a novel theory of "malicious litigation." A business, entity, or individual is now liable if a jury finds that it instituted litigation in bad faith-that is, with the intent to harass and injure a competitor. Ohio has never sanctioned such expansive liability in ordinary commercial disputes. To do so now would depart from common law, harm ordinary citizens and businesses, and saddle the courts with a radically transformed system of civil litigation. The State of Ohio's Proposition of Law No. I: Ohio recognizes a narrow tort of malicious prosecution to protect litigants from baseless civil litigation. Under certain circumstances, the common law gives civil litigants a right of recovery against an opposing party for baseless litigation. That option is not available to Leadscope in this case. A. In narrow circumstances, a defendant who prevails in civil litigation may commence a common law action against the plaintiff for malicious prosecution. Under common law, an individual or entity who files a frivolous civil complaint is liable under the tort of malicious civil prosecution. To maintain such a claim, the victimized party must demonstrate: "(1) malicious institution of prior proceedings :.. by the defendant, (2) lack of probable cause for the filing of the prior lawsuit, (3) termination of the prior proceedings in [its] favor, and (4) seizure of [its] person or property during the course of the prior proceedings." Robb v. Chagrin Lagoons Yacht Club, Inc. (1996), 75 Ohio St. 3d 264, 269 (citing Crawford v. Euclid Nat'l Bank (1985), 19 Ohio St. 3d 135, 139) (alterations omitted).3 This Court has refused invitations to relax these elements. For instance, in Crawford and Robb, the plaintiffs criticized the fourth element-the seizure-of-property requirement-as 3 These requirements follow the common law defmition of malicious prosecution used in most jurisdictions. See, e.g., Dan B. Dobbs, Law of Torts (2001) ; 52 Am. Jur. 2d: Malicious Prosecution (2d ed. 2000) 8. 6

12 archaic and unnecessary. The Crawford Court rightly refused to abandon it, observing that the seizure requirement "is necessary, as a matter of public policy, to dissuade the multiplicity of counter-suits that could occur in the absence of such a requirement." 19 Ohio St. 3d at 139. The Court in Robb echoed that refrain: "[R]emoving the seizure requirement from malicious civil prosecution claims," it said, "would result in an explosion of claims for malicious prosecution." 75 Ohio St. 3d 270. The Court highlighted the many "opportunities already built into the civil system to deal with a meritless lawsuit"-notably, a motion to dismiss under Civ. R. 12, or a motion for sanctions under Civ. R. 11 or R.C (13)(1). Id. The Court's approach is hardly unique. The malicious prosecution tort "has never been regarded with any favor by the courts, and it is hedged with restrictions which make it very difficult to maintain." Prosser & Keeton, Law of Torts (5th ed. 1984) 876; accord 52 Am. Jur. 2d: Malicious Prosecution 5 (2d ed. 2000) ("Actions for malicious prosecution are not favored by the courts" and "[are] subject to limitations that are more stringent than those surrounding other kinds of actions."). The Court's unwillingness to expand the tort also tracks the constitutional requirement that courts in Ohio "be open" to "every person[] for an injury done him." Ohio Const., art. I 16. A claim of malicious prosecution is "a disfavored cause of action" precisely because it "impose[s] an undue `chilling effect' on the ordinary citizen's willingness... to bring a civil dispute to court." Sheldon Appel Co. v. Albert & Oliker (Cal. 1989), 765 P.2d 498, 502; accord Ex parte State Farm Mut. Auto Ins. Co., 924 So.2d 706, 710 (Ala. 2005); One Thousand Fleet Ltd. Pshp. v. Guerriero (Md. 1997), 694 A.2d 952, ; Anello v. Vinci (Vt. 1983), 458 A.2d 1117, 1120; Rainier's Dairies v. Raritan Valley Farms, Inc. (N.J. 1955), 117 A.2d 889,

13 This Court's modest view of the malicious prosecution tort is grounded in precedent, shared by other j'urisdictions, and animated by a desire to minimize the cost, complexity, and rancor that accompany civil litigation. Whether or not to expand the tort is a task best "le[ft] to our Rules of Civil Procedure[] or the General Assembly," not to the vagaries of common law. Robb, 75 Ohio St. 3d at 270. B. Leadscope cannot state a common law claim for malicious prosecution. Even if Leadscope could demonstrate the first element of a malicious prosecution claimthat ACS maliciously instituted a civil proceeding against Leadscope-the company plainly cannot satisfy the tort's three other requirements. See App. Op., 2010-Ohio-2725, at First, a claim of malicious civil prosecution does not accrue "until the original suit between the parties has been legally terminated." Levering v. Nat'l Bank of Morrow County (1912), 87 Ohio St. 117, 122. "The termination requirement operates to preclude a defendant from filing a counterclaim for malicious prosecution; since the main claim has not terminated when the counterclaim is filed, the counterclaim is premature and subject to disniissal." Prosser & Keeton, supra, at 892; accord 52 Am. Jur. 2d: Malicious Prosecution 41 ("[S]uch a claim is premature if it is filed as a counterclaim... in a pending civil proceeding."). The reason for this requirement is plain: "Until the resolution of the [earlier] action, there is no way to determine whether [a party] lacked probable cause to file th[e] suit." Anderson v. Eyman (5th Dist. 2000), No. 00-CA-26, 2000 Ohio App. Lexis 5982, at *8; accord Wrinch v. Miller (9th Dist.), 183 Ohio App. 3d 445, 2009-Ohio-3862, 21; Babb v. Superior Court of Sonoma County (Cal. 1971), 479 P.2d 379, (noting "a certain metaphysical difficulty in permitting a counterclaim for 8

14 malicious prosecution since theoretically that cause of action does not :.; exist" until "the date that the proceedings in the prior action were dismissed or terminated.") 4 In this case, Leadscope alleged malicious litigation by ACS in a counterclaim to ACS's original suit. Because Leadscope raised these allegations before the legal "termination of [a] prior proceeding[] in [its] favor." Robb, 75 Ohio St. 3d at 269 (citation omitted), those allegations cannot form the basis of a malicious prosecution suit. Second, a plaintiff must allege "a prejudgment seizure of property" to state a claim for malicious prosecution. Id. at 270. Leadscope suffered no such deprivation in this case. It experienced only dignitary harms: according to Leadscope and the jury, ACS's senior management issued (and threatened to issue) false and misleading statements about Leadscope and its intellectual property. Third, a plaintiff must demonstrate a "lack of probable cause for the filing of the prior lawsuit" Id. at 269 (citation omitted). If the defendant "reasonably believe[d] that he ha[d] a good chance of establishing [his prior lawsuit] to the satisfaction of the court or the jury," the plaintiff cannot prevail. Prosser & Keeton, supra, at 893; accord Dan B. Dobbs, Law of Torts (2001) 1230 ("[T]he original suitor must believe in the facts he asserts and that a civil claim is plausible, or he has a good chance at establishing the case to the satisfaction of judge and jury."). This inquiry "turns on the reasonableness of the accusation made against the plaintiff but not on the accuser's improper purpose or malice." Dobbs, supra, at The probable cause requirement serves as a protective shield for civil litigants, who often must bring their claims 4 The termination requirement is also animated by strong policy considerations. Allowing defendants to file malicious prosecution counterclaims "would facilitate their use as dilatory and harassing devices... since filing a cross-action requires less time, expense, and preparation than does initiation of a separate action." Babb, 479 P.2d at 382. "Furthennore, the introduction of evidence on the issues of malice and probable cause [through a counterclaim] may prejudice the trier of fact against the plaintiff s underlying complaint." Id. 9

15 "before all of the relevant facts can be ascertained to a reasonable degree of certainty." Restatement (Second) of the Law: Torts (1977) 675, cmt. d. Jettisoning the element "would put an undesirable burden upon those whose rights cannot be otherwise effectively enforced." Id. The jury in this case never received an instruction on probable cause. In fact, quite the opposite-and the Tenth District stated that the reasonableness of ACS's civil complaint was irrelevant to Leadscope's ability to recover. See App. Op., 2010-Ohio-2725, at 38 (indicating that Leadscope could recover "regardless of whether [it] fell short of proving ACS knew at the time it filed its complaint that it could never substantiate its intellectual property claims"). More to the point, the record demonstrates that ACS's original complaint was not lacking in probable cause. ACS filed its complaint on the advice of counsel and an expert witness. See Prosser & Keeton, supra, at 894 ("Advice of counsel... that there is a reasonable chance that the claim will be found to be valid is enough to establish probable cause."). In addition, the trial court let the case proceed to trial. Then, at the close of evidence, the court denied Leadscope's motion for a directed verdict under Civ. R. 50(A), showing that "reasonable minds" could have found the evidence sufficient to sustain ACS's claims. Finally, a minority of jurors sided with ACS in the final verdict, further confirming that ACS advanced a credible legal theory in this litigation. In short, Leadscope could not avail itself of the traditional common law remedy for malicious civillitigafion. It had to look elsewhere. The State of Ohio's Proposition of Law No. 11: Ohio does not recognize a distinct tort of "malicious litigation. In lieu of a malicious prosecution suit, Leadscope pressed an unfair competition claim against ACS using a charge of "malicious litigation." In the Tenth District's view, this claim has just one element a party is liable if it instituted litigation "with the intent and purpose of 10

16 harassing and injuring a rival." App. Op., 2010-Ohio-2725; at 29 (citing Henry Gehring Co. v. McCue (1926), 23 Ohio App. 281, 283). Whether or not probable cause existed-that is, whether "[a] possible combination of yet-to-be-disproved facts could support [ACS's] claims"- was of no moment. Id. at 30. This theory is novel, unsupported, and perilous. A. This Court has never recognized a separate tort of malicious litigation. The Court has never endorsed "malicious litigation" as a theory of recovery in civil litigation. Nor has the Court ever affirmed a jury award on this ground.5 In fact, the phrase "malicious litigation" appears on only one page of the Ohio Reporter. In Water Management, Inc. v. Stayanchi (1984), 15 Ohio St. 3d 83, the plaintiff alleged that two former employees misappropriated trade secrets. The court of appeals had found the employees liable for "unfair competition" and "disclos[ing] trade secrets." Id. at 85. This Court disagreed with both findings. It first stated that "[u]nfair competition ordinarily consists of representations by one person, for the purpose of deceiving the public, that his goods are those of another." Id. The Court ftirther observed that "[t]he concept of unfair competition may also extend to unfair commercial practices such as malicious litigation, circulation of false rumors, or publication of statements, all designed to harm the business of another." Id. In this case, however, "[tjhere were neither allegations nor findings at the trial level of any unfair competition as defined above." Id. (emphasis added). The Court then reviewed the record to ascertain "whether trade secrets were disclosed," and agreed with the trial court that the disputed information was not a trade secret. Id. at This paucity of attention contrasts starkly to the tort of malicious prosecution. Over the past century, the Court has issued numerous decisions discussing that tort and its elements. See, e.g., Melanowki v. Judy (1921), 102 Ohio St. 153; Cincinnati Daily Tribune Co. v. Bruck ( 1900), 61 Ohio St. 489; Pope v. Pollock ( 1889), 46 Ohio St

17 As the Sixth Circuit has recognized, Water Management "has nothing to do with malicious litigation." Re/Max Int'l, Inc. v. Realty One, Inc. (6th Cir. 1999), 173 F.3d 995, The plaintiff never alleged a claim of unfair competition, so the Court had no occasion to even explore the concept of malicious litigation, much less articulate its elements. At best, the Court's passing reference to "malicious litigation" is dicta, and given the facts, the Court most likely employed the phrase as shorthand for the tort of malicious civil prosecution. This sparse record undermines the Tenth District's analysis below. After all, the common law, by definition, is the accumulation of precedents over time. If common law in Ohio indeed "recognizes malicious litigation as a basis for an unfair competition claim," App. Op., Ohio-2725, at 29, one would expect far more attention to the tort in this Court's decisions. B. Henry Gehring did not recognize a separate tort of malicious litigation. Seeking a foothold for its recognition of the malicious litigation tort, the Tenth District looked to a ninety-year-old appellate decision-henry Gehring Co. v. McCue (8th Dist. 1926), 23 Ohio App In doing so, the court misinterpreted and overstated the import of that case. Gehring involved two rival beverage-machine vendors. The defendant, Harry McCue, filed a patent infringement claim in federal court against the Gehring Company. (The district court later dismissed the suit without prejudice.) McCue then circulated letters to Gehring's customers, charging the company with infringement of his patent. In the letter, McCue discussed his federal litigation, indicated that he would prosecute all infringements vigorously, and threatened the Gehring customers with litigation. The Gehring Company filed suit, claiming that 6 The Tenth District also referenced Harco Corp. v. Corrpro Cos. (9th Dist. 1986), No. 1465, 1986 Ohio App. Lexis That case provides no insight on the validity of the malicious litigation tort. Although the jury in Harco issued a verdict for the plaintiff on malicious litigation, the Ninth District expressly declined to consider its validity on appeal. The court instead upheld "the jury's general verdicts... under either of [two] altemate theories" for unfair competition-the Valentine Act and trade disparagement. Id. at *

18 McCue's behavior constituted unfair competition. See Petition, Henry Gehring Co. v. McCue, No (Cuyahoga C.P. Feb. 6, 1925) (reproduced at Ex. 1). The common pleas court dismissed the case, but the Eighth District reversed. The complaint, it said, contained sufficient allegations that would permit "recovery.. based upon the doctrine of `unfair competition."' Gehring, 23 Ohio App. at 284. In doing so, the court noted "well-established authority... holding that the pursuit of one competitor by another, either in court or out of court, for the purpose of injuring him in his business, may result in recovery." Id. at 283. The Eighth District further observed the "numerous cases of successful recoveries because of malicious acts by way of litigation in the courts, where it appears that the litigation was not founded upon good faith, but was instituted with the intent and purpose of harassing and injuring a rival." Id. The Tenth District focused on that passage in affirming the jury's award for malicious litigation here. The "seminal" Gehring decision, it said, "adopt[ed] malicious litigation as a basis for the tort of unfair competition." App. Op., 2010-Ohio-2725, at 30. That conclusion is suspect for three reasons. First, it is entirely novel; the court seemed to make something from nothing. As noted above, the term "malicious litigation" is conspicuously absent from Ohio case law. A study of secondary sources and sister jurisdictions is no more productive. None of the leading torts treatises identify (much less discuss) the concept of "malicious litigation" when introducing the common law tort of unfair competition. See Dobbs, supra, at ; Prosser & Keaton, supra, at ; see also Restatement (Third) of the Law: Unfair Competition (1993). The State is also unaware of any common law precedent from other States endorsing a theory of "malicious litigation," or something distinct from malicious prosecution. 13

19 Second, the history of the Gehring litigation undercuts any suggestion that the Eighth District endorsed a new common law tort. After the remand by the Eighth District, the parties went to trial. The trial court's jury instructions on unfair competition did not mention "malicious litigation." Significantly, the court did not ask the jury to consider whether McCue's earlier patent suit was "founded upon good faith," or whether he brought the suit "with the intent and purpose of harassing and injuring a rival."7 Gehring, 23 Ohio App. at 283. In fact, the trial court employed those terms later when defining the concept of punitive damages. The court told the jury that it "ha[d] the right... to award additional damages by way of conscience against the guilty party" if "the conduct of that party has been characterized by malice"-the "reckless and wanton disregard of the rights of another." But if the party, although "in the wrong, acted in good faith and with reasonable grounds for [its] action," "discretion would not then be granted to the jury to award [additional] damages." Charge to the Court, Henry Gehring Co. v. McCue, No (Cuyahoga C.P.) (reproduced at Ex. 2). The appearance of terms like "malice" and "good faith" in the trial court's instruction on punitive damages-and their absence from the trial court's instruction on unfair competition-further indicate that the case did not recognize "malicious litigation" as a basis for an unfair competition claim. Third, this Court's later decision in Gehring omits any reference to "malicious litigation." After the jury issued its verdict for the plaintiff, McCue appealed. This Court ultimately 7 When defining unfair competition, the trial court indicated that McCue admitted to mailing the letters ("The sending of the letters being admitted."), and that he did not contest their falsity ("McCue[] no longer claims that the apparatus manufactured and sold by The Gehring Company is an infringement on its patent."). The only question of fact for the jury was causationwhether McCue's actions in initiating the patent litigation, sending the letters, and threatening the customers "resulted in loss or damage to The Gehring Company." Charge to the Court, Henry Gehring Co. v. McCue, No (Cuyahoga C.P.) (reproduced at Ex. 2). 14

20 accepted jurisdiction and reversed the verdict due to error in the trial court's instructions. Those instructions, the Court said, deprived McCue of an opportunity to validate "the charge of infringement made by him" in the letters. McCue v. Wells (1929), 121 Ohio St. 53, 55. The Court's short three-paragraph decision speaks volumes about the significance (or lack thereof) of the Gehring case. At no point does the opinion use the terni "malicious litigation." In fact, the Court's recitation of the unfair competition claim omits any reference to McCue's federal litigation. Rather, the Court focused on his letters: "The petition alleged, in substance, that McCue, during the month of September, 1924, and before and after such date, had mailed to various customers of the Gehring Company communications falsely charging the Gehring Company with infringement of a patent upon a vending machine for the dispensing of beverages." Id. at 53. If the Eighth District's had recognized a new tort of malicious litigation in its earlier opinion, this Court surely would have mentioned it. In fact, the pleadings, the trial court's instructions, and this Court's decision allsuggest that Gehring was a straightforward suit for common law product disparagement (or "injurious falsehood"). See, e.g., Prosser & Keaton, supra, at 967 ("[T]he publication of matter derogatory to the plaintiff's title to his property, or its quality... of a kind calculated to prevent others from dealing with him."). In a campaign to reduce his competitor's market share, McCue circulated letters claiming that the competitor's beverage machine product was unlawful and threatening litigation against anyone that got in his way. Similar allegations have long prompted tort litigation in this State 8 See, e.g., Watson v. Trask (1834), 6 Ohio 531 (defendant guilty of libel for circulating publications accusing plaintiff of infringing on patent for bark mills). $ Developments in First Amendment jurisprudence "distinguishing fact from opinion" limit the applicability of Gehring and other precedents to modern-day litigation. White Mule Co. v. ATC Leasing Co. LLC (N.D. Ohio 1998), 540 F. Supp. 2d 869, 898 n.20 ("[A] factual statement that 15

21 But regardless of how one characterizes Gehring, the case was not a "seminal" decision for the annals of common law tort development. If the Eighth District had defined a new malicious litigation tort, the trial court would have used the definition in its jury instructions, this Court would have mentioned it in its later opinion, the treatises would have included the tort in their chapters on unfair competition, and other appellate courts would have cited it. None of this occurred. C. This Court should not recognize the tort now. The dearth of authority for the malicious litigation tort is reason enough to reverse the Tenth District's judgment. But one more ground exists: The tort runs counter to public policy. First, "[t]here is no need to recognize a common-law action... if there already exists a statutory remedy that adequately protects society's interests." Wiles v. Medina Auto Parts, 96 Ohio St. 3d 240, 2002-Ohio-3994, 15. Ohio law provides such remedies for litigants haled into court on baseless civil charges. They can seek quick dismissal of the complaint under Civ. R. 12, sanctions under Civ. R. 11, and fee awards under R.C (13)(1) (allowing fee awards for frivolous conduct in connection with civil claims). State law also provides a remedy against a party who disseminates false or misleading information about pending litigation in an effort to gain a competitive advantage: A plaintiff may seek injunctive relief and recover actual damages against any person who "[d]isparages [his] goods, services, or business... by false representation of fact." R.C (A)(10); see also 15 U.S.C. 1125(a)(1) (authorizing federal cause of action against "[a]ny person who, on or in connection with any goods or services, or any container for goods, uses in commerce any... false or misleading description of one party is infringing a patent could be libelous" but "[a] statement reflecting one's opinion on the issue (not to mention a statement reflecting one's opinion on the strength of a case deciding the issue) is not such a situation."). 16

22 fact, or false or misleading representation of fact"). Given these outlets, Leadscope's effort to broaden the common law is unavailing. Second, the Tenth District's judgment, if affirmed, will result in an explosion of claims for malicious litigation. To prevail, a party need only show that the defendant instituted litigation "for the purpose of harassing and injuring a rival." Ap. Opp., 2010-Ohio-2725, at 31. That is a minimal burden, as this case demonstrates. Because "few tort suits are brought without a degree of rancor," Dobbs, supra, at 1230, every defendant in a commercial dispute could press a plausible allegation of malicious litigation. Parties would then engage in costly and timeconsuming discovery on the motives and thought-processes of their opponent in initiating the suit. Pretrial disputes will intensify in number and degree, hampering settlement efforts and injecting even more confusion and acrimony into the adjudicatory process. Such an outcome runs headlong into this Court's admonitions in Crawford and Robb. In those cases, the Court expressed concern that expansion of the malicious prosecution tort would tempt "[e]very successful summary judgment defendant... to file a malicious prosecution claim," Robb, 75 Ohio St. 3d at 270, "mak[ing] litigatiominterminable," Crawford, 19 Ohio St. 3d at 138 (citation omitted). Those concerns are even more pronounced here because the socalled "malicious litigation" tort (with its one element) is far easier to plead than the malicious prosecution tort (and its four elements). Unless the Tenth District's judgment is reversed, the new tort will inevitably become standard fare in every commercial suit between competitors. Third, the malicious litigation tort is in tension with the open courts guarantee of the Ohio Constitution. As noted above, Section 16 of Article I requires that courts in Ohio "be open" to "every person[] for an injury done him." The Court has interpreted this provision to "require[] an opportunity granted at a meaningful time and in a meaningful manner" to an individual 17

23 seeking recourse for an "injury to [his] person, property, or reputation." Hardy v. VerMeulen (1987), 32 Ohio St. 3d 45, 47. "[S]tatutes that effectively prevent individuals from pursuing relief for their injuries" are invalid under this section. Arbino v. Johnson & Johnson, 116 Ohio St. 3d 468, 2007-Ohio-6948, 44. The malicious litigation tort will do just that. It is not hard to imagine "a scenario where a potential litigant is deterred from utilizing the courts to resolve legal disputes for fear of reprisal via a counter suit." Crawford, 19 Ohio St. 3d at 138 (citation omitted). That may not be the case here (ACS and Leadscope are sophisticated companies with experienced counsel), but a number of commercial disputes fit the "David and Goliath" mold: A plaintiff of limited means seeking recourse against a wealthy defendant with a cadre of lawyers. The threat of a malicious litigation charge (and the accompanying liability) will hamper the right and willingness of these plaintiffs to press their claims. Simply put, the malicious litigation tort offends the public policy of this State, which "supports free, unhampered access to the courts for litigants, as well as swift resolution of legal disputes." Crawford, 19 Ohio St. 3d at 138 (citation omitted). It may be true that such openness occasionally prompts certain individuals to petition the courts for improper reasons, but, as discussed above, "[t]here are opportunities already built into the civil system to deal with" such occurrences. Robb, 75 Ohio St. 3d at

24 CONCLUSION For all of the foregoing reasons, the Court should reverse the decision below. Respectfully submitted, MICHAEL DEWINE ( ) Attorney General of Ohio /I3.,^...^l^..- ^ SC^ ALEXANDRA T. SCHIMMER* ( ) Chief Deputy Solicitor General *Counsel ofrecord DAVID M. LIEBERMAN ( ) Deputy Solicitor 30 East Broad Street, 17th Floor Columbus, Ohio fax alexandra. schimmer@ohioattorneygeneral. gov Counsel for Amicus Curiae State of Ohio 19

25 CERTIFICATE OF SERVICE I certify that a copy of the foregoing Merit Brief of Amicus Curiae State of Ohio was served by U.S. mail this 28th day of February, 2011, upon the following counsel: Michael G. Long Vorys, Sater, Seymour and Pease LLP 52 East Gay Street Columbus; Ohio Counsel for Appellant American Cheniical Society Linda Woggon Ohio Chamber of Commerce 230 E. Town St. Columbus, OH Counsel for Amicus Ohio Chamber of Commerce Anne Marie Sferra Bricker & Eckler LLP 100 South Third St. Columbus, OH Alan L. Briggs Aneca E. Lasley Christopher F. Hass Squire, Sanders, and Dempsey LLP 2000 Huntington Center 41 South High Street Columbus, Ohio Counsel for Appellees Leadscope, Inc., Paul E. Blower, Jr., Wayne P. Johnson, And Glenn J. Myatt Eugene P. Whetzel Ohio State Bar Association 1700 Lake Shore Dr. Columbus, OH Counsel for Amicus Ohio State Bar Association Counsel for Amici Ohio Manufacturers' Association and Ohio Council of Retail Merchants ' ^,.,^..^..,^, Alexandra T. Schimmer Chief Deputy Solicitor General

26 APPENDIX

27 IN THE COURT OF COMMON PLEAS C.P C.A.8833 JANUARY TERM,1925 STATE OF OHIO, CUYAHOGA COUNTY, SS. } THE HENRY GEHRING CO., Plaintiff, vs. MONEY ONLY. H.J. McCuE, Defendant. PETITION (Filed in Common Pleas Court Feb. 6, 1925.) Comes now the plaintiff, The Henry Gehring Company, and for its cause of action against the defendant says that it is a corporation duly organized and existing according to law, and is and has been engaged in the business of manufacture, sale and use of dispenser of liquid beverages; that the defendant is doing business under the trade name of The Humphrey Dispenser Company, and is also in the business of manufacturing vending machines for the dispensing of beverages. Now the plaintiff says that heretofore, and particularly during the month of September, 1924, but also before and after said date, the defendant wrote and sent through the United States Mails to various of the customers of the plaintiff communications reading as follows: "The Humphrey Dispenser Company and the writer, owning and operating under the Humphrey Patents on Dispenser apparatus and Processes of David S. Humphrey, have, after being advised by Patent Lawyers of New York and two firms in Cleveland, brought suit to enjoin the use of Polar Spray Dispensing devices, because they infringe the Humphrey Process patent no. 1,243,068. It is our intention to proceed against all infringements of these patents, and to prosecute them vigorously. At the present time we have started suit against Henry Gehring Company in the United States Court of Cleveland for using and selling the Polar Spray dispensing apparatus, as its use constitutes infringement of that patent and possibly others. We have previously actually filed another suit to enjoin infringement by a similar apparatus, and have instructed our Patent Lawyers to bring additional suits, which they are now preparing to do.

28 If you desire any further information we refer you to Bates, Macklin, Golrick and Teare, of Cleveland, who are handling this litigation. It occurred to the writer that a word of waming would be considered by you to be valuable, and it may lead to avoiding trouble in the future." Now the plaintiff says that the defendant, for the purpose of harassing and annoying the plaintiff and embarrassing it in and about the sale of its goods, wares and merchandise, filed a suit in the United States District Court for the Northern District of Ohio, Eastern Division, against this plaintiff, same being case No upon the equity docket of said court, and falsely alleging a patent infringement; that thereupon and thereafter the said defendant proceeded to circularize the customers of the plaintiff with highly improper and damaging communications of the kind, character and nature set forth herein, and communicated by telephone, by word of mouth and otherwise with the customers of the defendant, threatening them with litigation and falsely accusing the plaintiff of infringing the letters patent of defendant, and that through and by such methods of unfair competition the defendant caused a large portion of the trade of the plaintiff to be interrupted, halted and stopped, and prevented customers and prospective customers of the plaintiff from making purchases, and caused an injury and damage to the plaintiff in the sum of Twenty-five Thousand Dollars ($25,000.00). WHEREFORE, plaintiff prays judgment against the defendant in the sum of Twenty-five Thousand Dollars ($25,000.00) and for its costs. THE HENRY GEHRING COMPANY, BY HENRY GEHRING, Pres., and TURNEY & SIPE, (Duly Verified.) Its Attorneys. Reproduced from Record, McCue v. Wells, No (filed Mar. 15, 1929), available at Ohio Supreme Court Briefs and Records (vol. 966).

29 CHARGE OF THE COURT JONES, J.: Ladies and gentlemen of the jury, at this stage of the case, the Court is required to give you what is called the charge of the case, in which the Court endeavors to explain to you the issues, or disputed propositions of fact, which are contained in the pleading, as the written statements of the plaintiff and defendant are called in law, and define to you what you must determine to be the truth as to the facts in this case and to explain to you the law that regulates what kind of a verdict you shall return when you have ascertained the facts in this case. In order to perform the duty which the law imposes on me, it may be necessary for me to be, apparently, at least, somewhat tedious. There are a number of matters which I am required by law to call to the attention of the jury, and I can only say, and I say it without any intention of flattery, that I hope the same patient and careful attention which I have been gratified to see you have given throughout this long drawn-out and necessarily tedious case will attend you to the end, and that you may listen carefully to what I have to say, as you have done heretofore in the case, and I will be as concise as possible. The pleadings, as I have already defined to you.are the written statements of the claims of the parties and in the trial they are confined to the case made out, or claimed to be made out by such pleadings. The pleadings you will have in the jury room and you will have the right to refer to them if you desire in case it becomes uncertain in your memory as to the precise claims made by the respective plaintiff and defendant. You will remember, however, that these pleadings although they are sworn to are not evidence in the case, the evidence being what you have heard on the stand from the witnesses and the documents that have been submitted to you for your consideration. Now, stated as briefly as possible-i will not attempt to read these pleadings as a whole because, as I said, you can refer to them if you desire to do so,-the action is brought by The Henry Gehring Company, now represented by its trustee in bankruptcy, Mr. Wells, which will be referred to throughout the charge as the plaintiff, as the law entitles it, against H. J. McCue, doing business as The Humphrey Dispenser Company, which is the defendant and will be so referred to in the charge. The action is brought on the part of the plaintiff to recover damage for what is claimed to have been a wrong committed by the defendant against the plaintiff. The answer of the defendant, in its turn, charges the plaintiff with having wronged and invaded its legal rights and it in its turn asks for damages. So, each party is here asking for damages against the other. It now becomes the duty of the jury to consider all the facts in this case and determine whether under the law either party is entitled to any damages or whether neither of them. The petition has averred that at the time that it was filed The Henry Gehring Company was engaged in the manufacture and sale of beverages and also in the manufacture and sale of machines for dispensing such beverages. It further avers that during the month of September, 1924, the defendant, Mr. McCue, doing business as The Humphrey Dispenser Company, wrote letters to several customers of The Gehring Company, one of which letters is set out in full in the petition in which The Humphrey Dispenser Company and Mr. McCue notify these parties that they had brought suit to enjoin the use of Polar Spray dispensing devices because such devices infringe on a patent held by The Humphrey Company covering such process and apparatus. The letter goes on to say that The Humphrey Company intends to prosecute all persons who violate A-3