Summary
The Ohio First District Court of Appeals reviewed claims arising from the sale of a family business, including unjust enrichment concerning accounts receivable and alleged breaches of employment agreements. The court held that the unjust enrichment claim against a nonparty to the asset purchase agreement was not cognizable on these facts and that the evidence did not establish enforceable implied employment contracts or a breach of the duty of good faith and loyalty. The court reversed the relevant trial court judgments, affirmed in part, and remanded with instructions to enter judgment for the Johnson family.
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Practice areas
Questions Presented
- Whether Deffren could recover from Donna Johnson for unjust enrichment when the accounts receivable were governed by an express asset purchase agreement to which Donna was not a party and Deffren did not confer a benefit on her.
- Whether Kathy and Brian Johnson were liable for breach of an implied employment contract or a duty of good faith and loyalty based on inadvertent wage and vacation-pay overpayments and nonbinding employee-handbook provisions.
- Whether Deffren was entitled to prejudgment interest or additional damages after the judgments against the Johnson family were reversed.
Holdings
- An unjust-enrichment claim was not cognizable against Donna Johnson on these facts because the asset purchase agreement governed the subject matter, Donna was not a party to it, and Deffren did not confer a benefit upon her.
- The employee handbook did not create contractual obligations because it expressly disclaimed contractual force, reserved the employer's right to modify it, and stated that employment was at will; Deffren therefore could not rely on the handbook alone to establish an implied employment contract.
- Kathy and Brian Johnson did not breach an employment-related duty of good faith and loyalty merely by making inadvertent overpayments or violating nonbinding handbook provisions; the common-law duty cannot be used to convert noncontractual handbook terms into binding contractual obligations.
- Deffren was not entitled to prejudgment interest or additional damages because the judgments supporting those requests were reversed and no employment contract existed.
Key quotations
“Unjust enrichment, of course, sounds in equity, and it is generally only available in the absence of an enforceable contract.” (¶ 10)
“We find, as a matter of law, that an unjust enrichment claim is not cognizable against Donna on the facts of this case.” (¶ 12)
“Mr. Deffren can’t have it both ways—he can’t disavow the existence of a contract by telling employees that the handbook is unenforceable, and then try to render the handbook enforceable (under the auspices of “good faith”) when it suits him.” (¶ 23)
“An inadvertent violation of nonbinding terms of an employment handbook does not rise to the level of the purposeful behavior required to breach an employee’s duty of good faith and loyalty.” (¶ 24)
Factual background
In 2012, Richard Deffren purchased the assets of Akro Tool Company from its sole owner, Kenneth Johnson, under an asset purchase agreement. After closing, $43,631.61 in customer payments for pre-closing work was deposited into an Akro account and eventually transferred to a joint account belonging to Kenneth and Donna Johnson. Deffren also hired Kenneth and Donna's children, Kathy and Brian, and later sought recovery of alleged wage overpayments. The trial court found the overpayments accidental or inadvertent but nevertheless imposed liability based on an unjust-enrichment theory against Donna and an implied employment-contract theory against Kathy and Brian.
Procedural history
Richard Deffren sued members of the Johnson family after purchasing the assets of Akro Tool Company, asserting claims arising from accounts receivable and alleged employee overpayments. After a bench trial, the trial court entered judgment for Deffren on an unjust-enrichment claim against Donna Johnson and a breach-of-employment-contract claim against Kathy and Brian Johnson, while rejecting the remaining claims. The Johnson family appealed, and Deffren cross-appealed several adverse rulings. The appellate court reversed the judgments against the Johnson family in part, affirmed in part, dismissed one assignment as moot, overruled Deffren's cross-assignments, and remanded with instructions to enter judgment for the Johnson family.
Remand instructions
Enter judgment in favor of the Johnson family. The trial court's judgment was reversed in part and affirmed in part.