[Cite as Steven A. Ettinger, Inc. v. Kramer, 2021-Ohio-2219.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT )
STEVEN A. ETTINGER, INC. PROFIT C.A. No. 29848
SHARING PLAN
Appellant
APPEAL FROM JUDGMENT
v. ENTERED IN THE
COURT OF COMMON PLEAS
RICHARD J. KRAMER, et al. COUNTY OF SUMMIT, OHIO
CASE No. CV-2018-10-4432
Appellees
DECISION AND JOURNAL ENTRY
Dated: June 30, 2021
HENSAL, Presiding Judge.
{¶1} Steven A. Ettinger Inc. Profit Sharing Plan appeals from the judgment of the
Summit County Court of Common Pleas, dismissing its shareholder derivative complaint. This
Court reverses and remands for further proceedings.
I.
{¶2} Steven A. Ettinger Inc. Profit Sharing Plan (“Ettinger”) filed a shareholder
derivative complaint against 14 current and former members of Goodyear Tire & Rubber
Company’s (“Goodyear”) board of directors (“the Board”), and named Goodyear as a nominal
defendant (collectively, “the Defendants”). The 34-page complaint alleges that the Board
breached their fiduciary duties, engaged in fraudulent conduct, and committed ultra vires acts in
connection with the concealment of safety issues related to Goodyear’s G159 tire, which resulted
in litigation against Goodyear. The complaint alleges that the Board directly and/or indirectly
exercised control over Goodyear’s wrongful acts, and that they breached their duties under
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Goodyear’s Business Conduct Manual and Code of Ethics, as well as the duties imposed upon
some directors by virtue of their membership on certain committees. As a result, it alleges,
Goodyear’s reputation was damaged, Goodyear was subject to increased litigation costs and
sanctions, and Goodyear may be subjected to additional civil penalties and criminal liability. The
complaint also included the following factual allegations.
{¶3} According to the complaint, Goodyear manufactured the G159 tire from 1996 until
2003. While originally intended for pickup and delivery trucks, it was later sold for use on
motorhomes. The complaint alleges that the G159 tire was designed to withstand a temperature
of 194 degrees Fahrenheit, and that using the G159 tires on vehicles travelling long distances
caused the tire’s temperature to exceed 194 degrees. It alleges that, when used on motorhomes,
the G159 tire was prone to overheating, which resulted in tread separation, which, in turn, resulted
in crashes, accidents, and – ultimately – lawsuits. It also alleges that, when the speed limits on the
nation’s highways increased to 75 MPH, Goodyear increased the speed rating on the G159 tires
from 65 MPH to 75 MPH, and falsely claimed that the increased speed rating was safe and did not
compromise the tire’s safety margin.
{¶4} The complaint alleges that Goodyear faced numerous property damage and
personal injury lawsuits for injuries allegedly resulting from the use of the G159 tires. It alleges
that Goodyear quietly and confidentially settled these lawsuits while only internally
acknowledging the problems with the G159 tires. It alleges that these settlements were done
without full disclosure of the problems with the tires, and that Goodyear required the plaintiffs to
execute confidentiality agreements to prevent disclosure of any evidence of defects in the G159
tires.
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{¶5} The complaint highlights two lawsuits related to the G159 tires: Haeger v.
Goodyear Tire & Rubber Co. and Schalmo v. Goodyear Tire & Rubber Co. Haeger resolved first,
resulting in a settlement. Schalmo resolved after Haeger, resulting in a $5.6 million jury verdict
against Goodyear. The complaint alleges that Schalmo provided previously unknown information
to the Haeger plaintiffs about the G159 tires, including test results that called into question the
safety of those tires when used on motorhomes. As a result of the Schalmo decision, the Haeger
plaintiffs pursued additional litigation. The Haeger court determined that Goodyear and its
attorneys, including its associate general counsel, Deborah Okey, provided false and misleading
information to the court prior to that case being settled. The Haeger court sanctioned Goodyear
and its lawyers $2.7 million, which was affirmed on appeal.
{¶6} The complaint alleges that, while Haeger shed light on Goodyear’s misleading and
deceptive conduct, the extent of Goodyear’s involvement in concealing the defects related to the
G159 tires was not known until additional evidence was uncovered in 2018. It alleges that, in
January 2018, the National Highway Traffic Safety Administration opened an investigation
regarding the G159 tires, which could lead to civil penalties against Goodyear if the investigation
reveals that Goodyear failed to report certain information.
{¶7} The complaint also alleges that, in 2018, a blog called Jalopnik obtained and
published previously sealed records that revealed additional facts about the G159 “cover-up[.]” It
asserts that this information established the Board’s knowledge and participation (either by action
or inaction) in the G159 cover-up, and that – prior to the publication of these previously sealed
records – Ettinger had no knowledge of the Board’s conduct. It concludes that, by virtue of the
Board’s fraudulent concealment, any applicable statute of limitations was tolled. The complaint
also alleges that the Board made no effort to establish and maintain adequate internal controls to
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ensure that Goodyear had systems in place to prevent and report safety defects associated with its
products, including the G159 tire.
{¶8} Six pages of the 34-page complaint specifically address demand futility. The
complaint alleges that a pre-suit demand to the Board1 would have been futile because the Board
is incapable of making an independent and disinterested decision in light of the ultra vires and
illegal acts the Board committed. Regarding the ultra vires acts, the complaint alleges that seven
of the current directors attended a presentation by Attorney Okey (Goodyear’s then-associate
general counsel) in 2010 regarding the G159 tire litigation, which establishes that they knew or
should have known that the G159 tire was defective. It alleges that the Board’s subsequent inaction
reveals that the Board knowingly engaged in a cover-up or, at best, turned a blind eye to the
widespread misconduct. As a result, it alleges, Goodyear has experienced a loss of reputation and
consumer confidence, and may possibly incur fines.
{¶9} Alternatively, the complaint alleges that a pre-suit demand would have been futile
because the Board is not disinterested given that the individual directors face a substantial
likelihood of liability. To that end, the complaint alleges that the Board knowingly failed to fulfill
their duties, and knowingly participated in a cover-up of the G159 tire defects. It also alleges that
the Board lost its independence due to the directors’ ability to reap substantial financial benefits
by failing to comply with the law and government regulation.
{¶10} The Defendants moved to dismiss Ettinger’s complaint, arguing that: (1) the
complaint was not properly verified under Civil Rule 23.1; and (2) Ettinger lacked standing due to
1
We note that demand futility relates to the defendants who were members of the board of
directors at the time the complaint was filed. Monday v. Meyer, N.D.Ohio No. 1:10 CV 1838,
2011 WL 5974664, *4 (Nov. 29, 2011) (“Demand futility is determined with respect to the board
as it existed at the time the complaint was filed.”)
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its failure to submit a pre-suit demand to the Board. In the alternative, the Defendants requested
that the trial court order Ettinger to submit a demand to the Board, and stay the matter pending the
Board’s consideration of that demand.
{¶11} Regarding Ettinger’s alleged failure to properly verify the complaint, the
Defendants pointed to language contained on the complaint’s verification page stating that Steven
A. Ettinger, on behalf of Steven A. Ettinger Inc. Profit Sharing Plan, “declare[d]” under penalty of
perjury” that he had “personal knowledge” that the matters alleged in the complaint “are true,” and
that other matters alleged in the complaint “are true and accurate to the best of [his] personal
knowledge, information and belief, based upon the investigation conducted by counsel.” The
Defendants argued that these unsworn, un-notarized statements were insufficient under Ohio law,
which requires such verifications to be made in the presence of an authorized officer, such as a
notary public, and to swear to the truth of the statements contained in the document.
{¶12} Regarding Ettinger’s lack of standing due to its failure to submit a pre-suit demand
to the Board, the Defendants asserted that Ettinger did not satisfy its burden of establishing that a
pre-suit demand would have been futile. They asserted that the demand-futility analysis boiled
down to one question: “[d]oes the complaint set forth particularized facts that demonstrate that at
least 6 of the 12 current members of Goodyear’s board are substantially likely to be found by clear
and convincing evidence to have deliberately harmed Goodyear or to have recklessly disregarded
its interests?” The Defendants asserted that the resounding answer to this question was “no[,]”
and set forth the following arguments and sub-arguments in support of their position:
(1) Ettinger failed to plead with particularity that at least six of the current directors were
substantially likely to be personally liable because: (a) the complaint “lump[ed]” the directors
together and did not allege particularized facts as to each director; (b) mere allegations of
committee membership are insufficient to establish a substantial likelihood of personal
liability; (c) allegations about the supposed defectiveness of the G159 tire, litigation sanctions,
regulatory inquiries, or the lack of internal controls do not establish a substantial likelihood of
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personal liability; (d) Ettinger’s claims were barred by the four-year statute of limitations, and
it followed that the Board could not face liability for time-barred claims;
(2) allegations that the directors were paid for serving on the board of directors did not establish
demand futility; and
(3) neither conclusory allegations of ultra vires acts nor an unsupported assertion of a lack of
independence establishes demand futility.
{¶13} The trial court granted the Defendants’ motion to dismiss prior to Ettinger filing a
response. The trial court did so based upon the fact that the verification did not contain language
indicating that it was made in the presence of an authorized officer, such as a notary public. The
trial court later vacated that order, acknowledging that it issued the order prematurely, and allowed
Ettinger the opportunity to respond. Ettinger filed a response, as well as an amended verification
that was executed before a notary public. The trial court ultimately granted the Defendants’ motion
to dismiss on its merits, and this appeal followed. Ettinger now raises one assignment of error for
this Court’s review.
II.
ASSIGNMENT OF ERROR
THE TRIAL COURT ERRED BY HOLDING THE VERIFIED SHAREHOLDER
DERIVATIVE COMPLAINT FAILS TO ALLEGE SUFFICIENT
PARTICULARIZED FACTS UNDER CIVIL RULE 23.1 DEMONSTRATING
THAT A PRE-SUIT DEMAND WOULD HAVE BEEN FUTILE BECAUSE A
MAJORITY OF GOODYEAR’S BOARD OF DIRECTORS WERE UNABLE TO
MAKE AN UNBIASED AND INDEPENDENT BUSINESS DECISION IN
DETERMINING WHETHER THE SUIT SHOULD BE FILED.
{¶14} In Ettinger’s assignment of error, Ettinger argues that the trial court erred by finding
that the complaint failed to allege sufficient particularized facts demonstrating that a pre-suit
demand would have been futile. Ettinger argues, in part, that the trial court’s analysis was
incomplete because the trial court focused exclusively on the complaint’s allegations about the
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excessive compensation received by the Board. For the reasons that follow, we sustain Ettinger’s
assignment of error.
{¶15} The trial court’s order granting the Defendants’ motion to dismiss is five pages long
and mostly contains a summary of various filings, the arguments presented, and a recitation of
some applicable law. The trial court’s application of the law to the facts of this case is one
paragraph long, stating:
Despite having named all board members as defendants, Plaintiff has not shown the
directors are conflicted, not independent, or otherwise incapable of exercising
reasonable business judgment with any particularity. The notion that board
members cannot exercise independent business judgment because they receive
compensation from the corporation or because they are directors is rejected as
falling short of demonstrating demand futility. Plaintiff’s allegations fail to provide
any detail as to how at least six of the twelve board members “reaped” financial
benefits from their alleged conduct covering up the G159’s defects, apart from
receiving compensation for their services as board members, or what personal
adverse company interests they have to participate in a cover up of the G159 tire
defects. Broad and vague allegations of futility have consistently been held to not
satisfy the demand requirements of Civil Rule 23.1.
{¶16} The trial court did not address many of the allegations contained in Ettinger’s
complaint regarding demand futility. For example, it did not address the allegations regarding the
Board’s illegal and ultra vires acts, or the allegations regarding the individual directors’ exposure
to liability. Nor did the trial court address many of the arguments raised by the parties in their
motion-to-dismiss briefing, including the alternative bases for dismissal raised in the Defendants’
motion. For example, the trial court did not address the Defendants’ argument that Ettinger’s
claims were barred by the statute of limitations, or that the complaint was not properly verified,
warranting dismissal. While a trial court is not required to address and dispose of each argument,
the nature of this case and the number of arguments presented differentiates this case from others.
This case involves a 34-page derivative shareholder complaint, multiple defendants, and extensive
briefing that raises numerous arguments and legal issues concerning demand futility. It requires a
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comprehensive review and analysis of all of the allegations of the complaint to determine whether
Ettinger alleged sufficient particularized facts demonstrating that a pre-suit demand would have
been futile. That analysis does not turn on the allegations regarding the Board’s compensation, or
the motives related thereto, alone. Yet that is what the trial court’s order in this case suggests.
{¶17} Because of the trial court’s limited analysis, the parties essentially reargued the
same arguments presented below on appeal. See Copen v. CRW, Inc., 9th Dist. Wayne No.
15AP0034, 2017-Ohio-349, ¶ 12, quoting Mourton v. Finn, 9th Dist. Summit No. 26100, 2012-
Ohio-3341, ¶ 9 (addressing the trial court’s grant of summary judgment and noting the trial court’s
failure to provide an analysis is “unfair to the parties, who are essentially forced to simply refile
their summary judgment motions in the appellate court due to being unsure why the trial court
rendered the decision it did.”). That puts this Court in the position of having to address these
arguments in the first instance. That is not the function of a reviewing court. Mourton at ¶ 9 (“This
Court has consistently held that it is the trial court’s duty to resolve issues in the first instance.”).
This Court, therefore, reverses and remands the matter so that the trial court can set forth an
analysis that permits our review. See Molnar v. City of Green, 9th Dist. Summit No. 28650, 2018-
Ohio-1168, ¶ 5-6 (reversing and remanding the trial court’s denial of a motion to dismiss based
upon the trial court’s failure to provide an analysis); Baab v. Medina City Schools Bd. of Edn., 9th
Dist. Medina No. 14CA0091-M, 2015-Ohio-5315, ¶ 6 (reversing and remanding the trial court’s
denial of a motion to dismiss “so that the trial court can set forth an analysis that permits our
review.”). Ettinger’s assignment of error is sustained on that basis.
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III.
{¶18} Steven A. Ettinger Inc. Profit Sharing Plan’s assignment of error is sustained. The
judgment of the Summit County Court of Common Pleas is reversed, and the cause is remanded
for further proceedings consistent with this decision.
Judgment reversed,
and cause remanded.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the period
for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is instructed to
mail a notice of entry of this judgment to the parties and to make a notation of the mailing in the
docket, pursuant to App.R. 30.
Costs taxed to Appellees.
JENNIFER HENSAL
FOR THE COURT
CALLAHAN, J.
SUTTON, J.
CONCUR.
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APPEARANCES:
RICHARD S. WAYNE, ROBERT R. SPARKS, and JEFFREY A. LEVINE, Attorneys at Law,
for Appellant.
ANDREW S. GOLDWASSER and PHILLIP A. CIANO, Attorneys at Law, for Appellant.
GEOFFREY J. RITTS, Attorney at Law, for Appellee.
MARJORIE P. DUFFY, Attorney at Law, for Appellee.
JOHN C. FAIRWEATHER, AMANDA M. LEFFLER, and CHRISTOHER T. TEODOSIO,
Attorneys at Law, for Appellee.
Steven A. Ettinger, Inc. v. Kramer
Combined Opinion