                NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                           File Name: 12a1281n.06

                                           No. 12-3120                                    FILED
                                                                                      Dec 11, 2012
                          UNITED STATES COURT OF APPEALS                        DEBORAH S. HUNT, Clerk
                               FOR THE SIXTH CIRCUIT


RONALD E. SCHERER, SR.,                                  )
                                                         )         ON APPEAL FROM THE
       Plaintiff-Appellant,                              )         UNITED STATES DISTRICT
                                                         )         COURT     FOR     THE
v.                                                       )         SOUTHERN DISTRICT OF
                                                         )         OHIO
JP MORGAN CHASE & COMPANY,                               )
ZIEGER, TIGGES & LITTLE, LLP, and                        )                           OPINION
STEVEN WALTER TIGGES,                                    )
                                                         )
       Defendants-Appellees.                             )
                                                         )

BEFORE: BOGGS, McKEAGUE, Circuit Judges, and CARR, District Judge.*

       McKEAGUE, Circuit Judge. Ronald E. Scherer, Sr. sued JP Morgan Chase and its

attorneys, alleging violations of the Fair Debt Collection Practices Act, abuse of process, and civil

conspiracy. The district court dismissed Scherer’s claims pursuant to Fed. R. Civ. P. 12(b)(6) on the

ground that the underlying basis for the claims had previously been litigated and decided by an Ohio

probate court and thus the collateral estoppel doctrine precluded Scherer from relitigating those

issues. In a separate order, the district court also denied a motion filed by defendants seeking to

impose sanctions against Scherer’s counsel for filing a frivolous action. Scherer appealed the

dismissal of his claims. For the reasons set forth below, we AFFIRM the district court’s order




       *
         The Honorable James G. Carr, United States District Judge for the Northern District of Ohio,
sitting by designation.
No. 12-3120
Scherer v. JP Morgan Chase & Co., et. al.

dismissing Scherer’s claims and ORDER Scherer’s counsel to show cause why he should not be

sanctioned for filing a frivolous appeal pursuant to 28 U.S.C. § 1927 or Fed. R. App. P. 38.

                     I. FACTUAL AND PROCEDURAL BACKGROUND

A. The Family Business

        Bank One Trust Company, N.A. (“Bank One”), now known as JP Morgan Chase Bank, N.A.,

was trustee under a trust agreement with Roger L. Scherer, dated 1979 and restated in 1981. Roger

Scherer funded the trust with the stock of the family’s wholesale magazine distribution business

(hereinafter the “family business”). After Roger Scherer died in April 1982, the Scherer trust was

divided into three subtrusts: (1) a trust for Roger’s son, Appellant Ronald E. Scherer, Sr. (“Scherer”),

(2) a trust for Roger’s daughter, Linda Scherer Talbott, and (3) a “wife and mother trust” for Roger’s

surviving spouse and his mother.         By 1998, the collective value of the trusts exceeded

$26,000,000.00.

        After his father died, Scherer became the chief executive in charge of day-to-day operations

of the family business. Between 1990 and 2003, while Scherer was the executive in charge, his

relationship with Bank One deteriorated as a result of Scherer’s failure to provide financial

information about the family business to the trustee.

        Consequently, in 1994, Bank One filed a lawsuit against Scherer in the Franklin County,

Ohio, Probate Court for Scherer’s alleged refusal to turn over the relevant information about the

family business. Bank One Trust Co., N.A. v. Ex’r of Roger L. Scherer Estate, No. 430379A. That

litigation was settled in 1995 when the parties entered into a Non-Disclosure Agreement, which



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required Scherer to disclose the information previously requested by Bank One, and to do so on “an

ongoing basis and in a timely manner.” (Settlement Agt., Page ID #153).

       By November 2003, the relationship between Bank One and Scherer had further eroded,

Bank One retained litigation counsel and sought to prepare a final trust accounting, obtain probate-

court approval, and resign as trustee. In response, in April 2004, Scherer attempted to remove Bank

One as trustee.

B. The 2004 Probate Action and Appeals

       In September 2004, Bank One filed a lawsuit against Scherer in the Franklin County, Ohio,

Probate Court (the “probate action”) in an effort to compel Scherer to produce the information

needed to prepare a final trust accounting, wind up Bank One’s trusteeship, and appoint a successor

trustee.1 The bank also alleged Scherer breached the 1995 Non-Disclosure Agreement by not

providing information to the trustee, and that he had engaged in wrongful and unauthorized dealings

with trust assets. On December 10, 2004, Bank One served Scherer with a document-production

request, but Scherer did not respond.

       Accordingly, on two separate occasions in 2005, Bank One filed motions to compel discovery

from Scherer but did not receive the requested documents. On December 20, 2005, the probate court

entered an order finding Scherer had failed to comply with discovery requests and ordered Scherer

to comply by January 13, 2006. The court also warned Scherer that failure to comply would result



       1
        As noted by the district court, probate Judge Lawrence A. Belskis originally presided over
the probate action but ultimately recused himself after discovering a conflict. Judge Richard
Sheward was assigned to the case in January 2006.

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in a contempt charge and a fee of $250 per day until he complied. (12/20/2005 Order, Page ID

#166).

         In January 2006, Scherer filed a counterclaim against Bank One, asserting eight separate

causes of action, including breach of fiduciary duty, breach of trust agreement, defamation, and

fraudulent concealment. (Scherer Counterclaim, Page ID #184-94). In February 2006, Bank One

filed a “Further Claim and/or Third-Party Complaint” alleging Scherer breached his fiduciary duty

as the person in charge of the family business by failing to provide required information and by

mismanaging trust-owned assets. Further, they alleged that he breached his fiduciary duty as “trust

advisor” by abusing his power and acting in his own best interests. (Third Party Compl., Page ID

#218-219).

         By April 2006, Scherer had still failed to comply with the discovery order.2 The court gave

him another chance to produce certain specific categories of documents by April 27, 2006. Scherer

again did not comply. In June 2006, the court reminded Scherer that he remained in contempt and

that the daily fine was continuing. Bank One filed another motion to compel on July 25, 2006. In

granting the motion to compel, the court stated: “Defendants are blatantly flouting the discovery

process and are failing to act in good faith . . . .” (08/31/2006 Order, Page ID #268). The court

further ordered that Scherer fully comply with all discovery requests by September 21, 2006. On




         2
         In its Findings of Fact and Conclusions of Law, the probate court found that in early 2006,
Scherer had turned over tax returns and summary financial statements but that he still refused to turn
over all of the requested information or answer interrogatories—all in violation of the court’s order.
(05/14/2008 Findings, Page ID #470-71).

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October 5, 2006, the court held a hearing on the discovery issues. It issued its findings and

conclusions from that hearing on January 4, 2007.

       The court concluded that Scherer’s failure to comply was willful and in bad faith.

(01/04/2007 Findings, Page ID #287). The court explained: “The continued discovery misconduct

of Defendants and disobedience of the Court’s orders in the face of lesser discovery sanctions

previously imposed by this Court, is so reprehensible, irresponsible, and contumacious that more

warnings and further similar discovery sanctions would be futile. More drastic discovery sanctions

are therefore necessary and appropriate.” (01/04/2007 Findings, Page ID #287). As sanctions, the

court dismissed Scherer’s January 2006 counterclaim with prejudice, held Scherer in contempt, and

ordered him to pay the $250 per day fine that had been accumulating since December 2005, plus an

additional $250 per day that the judgment went unpaid. (01/04/2007 Findings, Page ID #288).

Scherer appealed the order and it was upheld by the Ohio Tenth District Court of Appeals. Bank

One Trust Co., N.A. v. Scherer, 893 N.E.2d 542, 548 (Ohio Ct. App. 2008).

       On August 10, 2007, in the ongoing probate action, Scherer filed a request for leave of the

court to file additional counterclaims against Bank One for fraudulent misrepresentation and abuse

of process. (Mot. for Leave, Page ID #405). Specifically, Scherer alleged that Bank One’s

“accounting contains numerous entries and information that are incorrect and it misrepresents

numerous transactions,” and that Bank One’s “misrepresentations were made knowingly” and with

the “ulterior purpose” of “obtain[ing] a release for its administration of the Trust.” (Mot. for Leave,

Page ID #408).



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         The case was tried to the probate court in August 2007. The court issued its 60-page decision

on May 14, 2008. Bank One Trust Co., N.A. v. Scherer, No. 430379-C. It found that beginning in

1999, Scherer had misappropriated $6,202,623.00 of trust assets over the course of seven years.

Specifically, the court found that Scherer “stymied all of [Bank One’s] efforts to obtain information

in order to more effectively administer the assets of the . . . Trusts, [and thus] began the process of

resigning as Trustee . . . .” Further, in the face of repeated discovery requests, Scherer “failed to put

a hold on his document destruction policy,” and “refused to provide [Bank One] with any of the

requested information.” (05/14/08 Findings, Page ID #469-70).

         Moreover, the court found that Scherer, “without [Bank One’s] knowledge or consent,

systematically began liquidating the remaining assets of the Scherer Family Business and otherwise

engaging in transactions outside the usual course of business.” (05/14/08 Findings, Page ID #472).

These transactions “depleted the value of the Scherer Family Business and diverted millions of

dollars of cash and other assets that should have been paid to the Trustee on behalf of [the Trusts].”

(05/14/08 Findings, Page ID #472). Additionally, Scherer “knowingly impeded [Bank One’s] ability

to perform the very functions that [he] alleges [Bank One] failed to fulfill despite its diligent efforts

to do so: to actively manage the assets of the [Trusts], to monitor or diversify trust assets, to discover

sooner Mr. Scherer’s . . . misappropriation of Trust assets, to prepare full and accurate trust

statements and accountings, and to prepare accurate trust tax returns.” (05/14/08 Findings, Page ID

#481).

         With respect to Scherer’s late counterclaims for misrepresentation and abuse of process, the

court stated, “[c]ontrary to [Scherer’s] allegations, [Bank One’s] final accountings do not contain

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misrepresentations, and [Bank One’s] preparation and filing of the final accountings was not done

with an ulterior purpose or in an effort to use court procedures to accomplish a purpose for which

they were not designed.” Further, “[e]ach of [Bank One’s] final accountings, as supplemented, is

true, accurate, and complete. Even if . . . the final accountings are inaccurate and incomplete . . any

such deficiencies were caused by the repeated refusal of [Scherer] . . . to provide information to

[Bank One] despite its repeated and diligent efforts to obtain the information . . . .” (05/14/08

Findings, Page ID #485-86).

       The court held that Scherer breached his fiduciary duties as an officer and director of the

family business and entered judgment against Scherer for $6,202,623.00 plus interest. It also held

that “[a]ny further objections to [Bank One’s] final accountings, and any and all claims against

[Bank One] arising from or relating to its final accountings, its administration of the Trusts, or any

other matters pertaining to the Trusts and Trust Agreement are hereby adjudicated and hereafter

barred.” (05/14/08 Findings, Page ID #496, 499).

       Scherer appealed the judgment against him. On November 24, 2009, the Ohio court of

appeals unanimously affirmed both the $6,202,623.00 judgment against Scherer for improper

diversion of trust assets and the dismissal of Scherer’s January 2006 counterclaims as a discovery

sanction. Bank One Trust Co., N.A. v. Scherer, 2009 WL 4049123 (Ohio Ct. App. Nov. 24, 2009).

The court also reversed the probate court’s decision as to Scherer’s family’s counterclaims and their

objections as to the final accounting. The court remanded the case to the probate court to address

the family’s counterclaims and objections, but the court specifically stated this did not include



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Scherer’s counterclaim or the monetary judgment against him. Bank One Trust Co., 2009 WL

4049123, at *1.

       After remand, the probate court held a trial on the remaining issues. It issued its decision on

December 1, 2011. Bank One Trust Co., N.A. v. Ronald E. Scherer, No. 430379-C.3                  In the

meantime, Scherer filed his federal action on the first day of the probate court’s proceedings, July

18, 2011. The federal district court issued its decision on December 29, 2011, but did not discuss

the probate court’s decision in detail.

C. Scherer’s Federal Claims

       Scherer’s federal complaint asserts three claims. First, he alleges that defendants violated

the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., by “[m]aking false statements of

fact during the course of the 2004 Franklin County Probate Action” in pursuit of a “False Debt

Claim” in order to harass Scherer, and using false, misleading, or unconscionable means to collect

a debt. Second, he claims that defendants committed “abuse of process” by perverting the 2004

probate action through the “use of false, deceptive or misleading representations and evidence”

submitted during that lawsuit in pursuit of the bank’s “ulterior motive of attempting to avoid liability

. . . with respect to the Bank’s failure to properly administer the [Trusts]; its failure to properly



       3
           On remand, the trial court once again concluded that “Bank One accurately accounted for
. . . the unauthorized transactions and that Scherer, Sr. did in fact, misappropriate and wrongfully
divert $6,202,623 of Trust assets . . .” (12/01/2011 Probate Findings, Appellees’ Appx. at A73).
Additionally, in response to accusations that the bank committed fraud on the court in order to get
the judgment against Scherer, the court asserted the accusations were “factually baseless,” and that
“Bank One and its representative did not make any false statements to the Court.” (12/01/2011
Probate Findings, Appellees’ Appx. at A75).

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account for the administration of such trusts; and the loss of more than $26,000,000 in value from

such trusts as a consequence of the Bank’s acts or omissions.” Finally, Scherer brings a civil

conspiracy claim alleging defendants conspired to “knowingly and intentionally misrepresent

material facts . . . to the Franklin County Probate Court during the 2004 Franklin County Probate

Action, all for the purpose of attempting to insulate the Bank from liability for its misconduct.”

       On October 3, 2011, defendants filed a motion to dismiss for failure to state a claim under

Federal Rule of Civil Procedure 12(b)(6). Prior to the district court’s decision on the motion to

dismiss, defendants also filed a motion for sanctions under Rule 11 of the Federal Rules of Civil

Procedure. Scherer filed responses to both motions. On December 29, 2011, the district court

granted defendants’ motion to dismiss and denied their motion for sanctions.

       In deciding defendants’ motion to dismiss, the district court held that all of Scherer’s claims

were barred by the collateral estoppel doctrine because the underlying factual basis for each of the

claims, defendants’ alleged false statements about Scherer’s refusal to provide defendants with

required information, had already been litigated and decided against Scherer in the 2004 probate

action. Scherer v. JP Morgan Chase & Co., 2011 WL 6884237, at *4 (S.D. Ohio 2011).

       With respect to defendants’ motion for sanctions, the court stated that it was “a very close

call,” but that it was “not inclined to grant the sanctions,” because even though Scherer’s counsel

“should have been more familiar with preclusion law and, perhaps, more careful with the wording

utilized in the complaint, it does not appear to the Court that counsel filed this action for the

improper purpose of harassing Defendants and increasing the cost of litigation.” (12/29/2011 Opn

on Mot. for Sanctions, Page ID #3657-58).

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        Scherer timely appealed the district court’s decision granting defendants’ motion to dismiss.4

                                     STANDARD OF REVIEW

        We review de novo a district court’s ruling on a motion to dismiss a claim, Jones v. City of

Cincinnati, 521 F.3d 555, 559 (6th Cir. 2008), and a district court's application of collateral estoppel.

Hammer v. INS, 195 F.3d 836, 840 (6th Cir. 1999). Collateral estoppel is properly raised in a Rule

12(b)(6) motion to dismiss. See Evans v. Pearson Enter., Inc., 434 F.3d 839, 849-50 (6th Cir. 2006)

(affirming 12(b)(6) dismissal because all elements of collateral estoppel were satisfied); see also

Palmer v. Manor Care, Inc., 11 F. App’x 567, 569 (6th Cir. 2001) (“We conclude that the district

court properly relied on collateral estoppel to grant defendant’s motion to dismiss.”).

        Generally, in order to defeat a motion to dismiss:

        [T]he complaint must contain either direct or inferential allegations respecting all
        material elements to sustain a recovery under some viable legal theory. We need not
        accept as true legal conclusions or unwarranted factual inferences, and conclusory
        allegations or legal conclusions masquerading as factual allegations will not suffice.
        [T]he complaint's [f]actual allegations must be enough to raise a right to relief above
        the speculative level, and state a claim to relief that is plausible on its face.

Terry v. Tyson Farms, Inc., 604 F.3d 272, 275–76 (6th Cir. 2010) (citations and internal quotation

marks omitted).




        4
         Scherer filed an opening brief to this Court, and defendants filed a response, but Scherer did
not file a reply brief.

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                                            ANALYSIS

A. Collateral Estoppel

       Generally, “[f]ederal courts must give the same preclusive effect to a state-court judgment

as that judgment receives in the rendering state.” Abbott v. Michigan, 474 F.3d 324, 330 (6th Cir.

2007) (citing 28 U.S.C. §1738). Accordingly, federal courts must look to the law of the rendering

state to determine whether and to what extent the prior judgment should receive preclusive effect in

a federal action. Migra v. Warren City Sch. Dist. Bd. of Educ., 465 US. 75, 81 (1984). Thus, in this

case we look to Ohio law to determine the preclusive effect of the judgment entered against Scherer

in the 2004 probate action.

       Under Ohio law, “issue preclusion precludes the relitigation of an issue that has been actually

and necessarily litigated and determined in a prior action,” McKinley v. City of Mansfield, 404 F.3d

418, 428 (6th Cir. 2005), “whether the cause of action in the two actions be identical or different.”

Fort Frye Teachers Ass’n v. State Emp’r Relations Bd., 692 N.E.2d 140, 144 (Ohio 1998); see also

Whitehead v. Gen. Tel. Co., 254 N.E.2d 10, 13 (Ohio 1969) (“[E]ven where the cause of action is

different in a subsequent suit, a judgment in a prior suit may nevertheless affect the outcome of the

second suit.”).

       Thus, in Ohio, collateral estoppel applies when the fact or issue: (1) was actually and directly

litigated in the prior action, (2) was passed upon and determined by a court of competent jurisdiction,

and (3) when the party against whom collateral estoppel is asserted was a party in privity with a party

to the prior action. Daubenmire v. City of Columbus, 507 F.3d 383, 389 (6th Cir. 2007). Where

collateral estoppel is invoked defensively, only the party against whom issue preclusion is applied

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must have been a party to the underlying action. McCrory v. Children’s Hosp., 501 N.E.2d 1238,

1244 (Ohio Ct. App. 1986); see also Schroyer v. Frankel, 197 F.3d 1170, 1178 (6th Cir. 1999)

(reasoning that Ohio law allows the use of non-mutual defensive collateral estoppel if the plaintiff

was afforded the opportunity to litigate the issue); McAdoo v. Dallas Corp., 932 F.2d 522, 525 (6th

Cir. 1991) (“We do not read Ohio law as insisting on mutuality in defensive collateral estoppel cases

. . . .”).

             In the district court, Scherer contested each of the collateral-estoppel elements, but his

briefing to this Court only contests the first element—whether the issues were actually and directly

litigated in the prior action. His main argument on this point is that the district court erred when it

concluded that Ohio law does not require that the issue adjudicated in the prior action be completely

identical to the issue in the subsequent action. Scherer argues that the Ohio Supreme Court cases

relied upon by the district court, in particular Fort Frye, are inapplicable, and that a more recent Ohio

Supreme Court case holds that, for collateral estoppel to apply, the issues in the prior and subsequent

actions must be “identical.” Scherer believes that in this case, the issues are not “identical” because

“[n]othing in the Prior State Court Proceeding involved whether the manner of Appellees’

prosecution of the claims against Scherer violated, or did not violate, the FDCPA,” and the record

“is devoid of any evidence that there was an actual or necessary adjudication of the issues pertaining

to Scherer’s abuse of process claim.” Appellant Br. at 24-25. Scherer is mistaken.

             The district court did not err in its discussion or application of the Ohio collateral-estoppel

doctrine. Scherer primarily relies upon two Ohio cases to support his assertion that the doctrine

requires complete identity of the issues in order for estoppel to apply, Olmsted Falls Bd. of Educ.

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v. Cuyahoga Cnty. Bd. of Revision, 909 N.E.2d 597 (Ohio 2009), and Beatrice Foods, Inc. v.

Lindley, 434 N.E.2d 727 (Ohio 1982).              Notably, both cases involved a very distinct

issue—challenges to property valuations in appeals from the Board of Tax Appeals—and contrary

to Scherer’s argument, neither case altered the collateral-estoppel doctrine in Ohio.

        In Olmsted Falls, a taxpayer appealed a decision of the Board of Tax Appeals (“BTA”) that

adopted an increased valuation of the taxpayer’s property from $325,000 in 2002 to $1,200,000 for

2003. The taxpayer argued in part that the BTA’s decision was barred under an estoppel

theory—though the court specifically noted that the case did not present a “classic” type of estoppel.

Olmsted Falls, 909 N.E.2d at 601.

        In deciding the tax issue, the court explained that it is “elemental that for purposes of any

challenge to the valuation of real property, each tax year constitutes a new ‘claim’ or ‘cause of

action,’ such that the determination of value for one tax year does not operate as res judicata . . . of

value as to the next tax year.” Id. The court then recognized a line of tax valuation cases in which

Ohio courts held that tax value in one year does not constitute the “‘same issue’ as the ultimate issue

of tax value in a different year.” Id. However, the court also stated that “the determination in an

earlier year of a discrete factual/legal issue that is common to successive tax years may bar

relitigation of that discrete issue in the later years.” Id. at 602 (citing Columbus Bd. of Educ. v.

Franklin Cnty. Bd. of Revision, 1993 WL 540285, at *3 (Ohio Ct. App. Dec. 28, 1993)). Ultimately,

the court rejected the taxpayer’s argument on the basis that it mistakenly equated the issue of tax

value for one year with the issue of tax value for a subsequent year as if they were the “same issue.”

Olmsted Falls, 909 N.E.2d at 602.

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         Contrary to Scherer’s assertions, the Olmsted Falls decision did not alter Ohio’s collateral

estoppel doctrine. The court’s decision was clearly on a discrete issue involving challenges to

property valuations from year to year, and it only involved those cases having decided that discrete

issue. The court even recognized that this was not a “classic” type of estoppel. And in any event,

the court explained that even under such unique facts, estoppel may still apply to a prior decision on

a “discrete factual/legal issue” common to the successive years. Further, the court failed even to

mention the Ohio Supreme Court’s Fort Frye decision that Scherer argues was displaced by Olmsted

Falls.

         Notably, there were two dissenting justices in Olmsted Falls who agreed with the majority

“that this case does not involve collateral estoppel . . . .” Olmsted Falls, 909 N.E.2d at 604 (Pfeifer

and O’Donnell, JJ., dissenting). One would think that if the Ohio Supreme Court was making a

decision that altered the collateral-estoppel doctrine, there would be much more discussion among

the justices than this. And in fact, it is clear from cases decided after Olmsted Falls that the Ohio

Supreme Court continues to recognize the viability of Fort Frye and the principle that collateral

estoppel “‘precludes the relitigation, in a second action, of an issue that had been actually and

necessarily litigated and determined in a prior action that was based on a different cause of action.’”

State ex rel. Nickoli v. Erie MetroParks, 923 N.E.2d 588, 592 (Ohio 2010) (quoting Ft. Frye, 692

N.E.2d at 144).

         Scherer’s reliance on Beatrice Foods is similarly unconvincing. In that case, the taxpayer

argued that the Tax Commissioner’s prior tax assessments barred the Commissioner from issuing

a subsequent assessment. Beatrice Foods, 434 N.E.2d at 731. The court rejected this argument and

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stated “[i]n order for [collateral estoppel] to apply, there must be an identity of parties and issues in

the proceedings.” Id. It concluded, “[a]t issue in the case at bar is a separate assessment based on

an entirely different audit period, and we find the requisite identity of issues is not present.” Id.

        Scherer argues based on this case that the issues presented to the district court here were not

“identical” to issues decided in the 2004 probate action and thus should not have been barred. We

disagree and conclude that the district court correctly determined that collateral estoppel applied

here.

        All three of Scherer’s claims in this action are premised on a single foundation—that the

bank made false statements and misrepresentations to the probate court regarding Scherer’s conduct

during discovery and regarding Scherer’s misappropriation of trust assets over the course of several

years. Scherer’s complaint alleges that the bank made “false statements of fact during the course of

the 2004 Franklin County Probate Action” in pursuit of a “False Debt Claim”; that they perverted

the 2004 probate action through the “use of false, deceptive or misleading representations and

evidence” submitted during that lawsuit in pursuit of the bank’s “ulterior motive of attempting to

avoid liability”; and that the bank conspired to “knowingly and intentionally misrepresent material

facts . . . to the Franklin County Probate Court during the 2004 Franklin County Probate Action, all

for the purpose of attempting to insulate the Bank from liability for its misconduct.” (Compl., Page

ID #34, 37, 39).

        There is no question that the probate court squarely decided these issues during the course

of the 2004 action and that the Ohio Court of Appeals upheld the decision as it applied to Scherer.



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        The probate court concluded that Scherer “stymied all of [Bank One’s] efforts to obtain

information,” and that he repeatedly “failed to put a hold on his document destruction policy,” and

“refused to provide [Bank One] with any of the requested information.” Further, the court found that

Scherer, “without [Bank One’s] knowledge or consent, systematically began liquidating the

remaining assets of the Scherer Family Business and otherwise engaging in transactions outside the

usual course of business.” And these transactions “diverted millions of dollars of cash and other

assets that should have been paid to the Trustee on behalf of [the Trusts].” (05/14/08 Findings, Page

ID #472).

        Additionally, the court concluded that Scherer “knowingly impeded [Bank One’s] ability to

perform the very functions that [he] alleges [Bank One] failed to fulfill despite its diligent efforts to

do so: to actively manage the assets of the [Trusts], to monitor or diversify trust assets, to discover

sooner Mr. Scherer’s . . . misappropriation of Trust assets, to prepare full and accurate trust

statements and accountings, and to prepare accurate trust tax returns.” (05/14/08 Findings, Page ID

#481)

        Scherer cursorily argues that his request for leave to file his late counterclaims for

misrepresentation and abuse of process was never expressly granted by the probate court and thus

the issues contained in that counterclaim were never decided. Scherer does not cite any authority

for this proposition. Ordinarily, “[i]ssues adverted to in a perfunctory manner, unaccompanied by

some effort at developed argumentation, are deemed waived.” McPherson v. Kelsey, 125 F.3d 989,

995-96 (6th Cir. 1997).



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        But even assuming Scherer has not waived his argument by not supporting it, the probate

court’s opinion contradicts Scherer’s assertion. The court clearly took up the counterclaim issues

and decided them when it concluded: “Contrary to [Scherer’s] allegations, [Bank One’s] final

accountings do not contain misrepresentations, and [Bank One’s] preparation and filing of the final

accountings was not done with an ulterior purpose or in an effort to use court procedures to

accomplish a purpose for which they were not designed.” The court further held, “[e]ach of [Bank

One’s] final accountings, as supplemented, is true, accurate, and complete. Even if . . . the final

accountings are inaccurate and incomplete . . any such deficiencies were caused by the repeated

refusal of [Scherer] . . . to provide information to [Bank One] despite its repeated and diligent efforts

to obtain the information . . . .” (05/14/08 Findings, Page ID #485-86).

        The Ohio Court of Appeals overwhelmingly upheld the probate court’s decisions with respect

to Scherer’s attempts to “cripple” discovery proceedings and his improper diversion of trust assets.

Bank One Trust Co., N.A., 2009 WL 4049123, at *11, *14 (“[T]he evidence not only is sufficient

to sustain the probate court's factual conclusions regarding the transactions but is nearly one-sided

in support of those conclusions.”).

        We have recognized, consistent with Ohio law, that where a factual predicate or essential

element of the claim being asserted has already been determined, collateral estoppel applies. See,

e.g., McCormick v. Braverman, 451 F.3d 382, 398 (6th Cir. 2006) (concluding that factual predicate

of property ownership decided in state court precluded claims based on that predicate); Quality

Measurement Co. v. IPSOS S.A., 56 F. App’x 639, 646 (6th Cir. 2003) (“RSC's claims for actual and

constructive fraud are therefore barred by issue preclusion, as an essential element of its claim has

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already been determined against it.”); Clemons v. Noland, 1978 WL 216612, at *4 (Ohio Ct. App.

1978) (“Collateral estoppel applies to bar a second action when an essential element of that second

action has been adversely decided against plaintiff in a prior action between the same parties.”).

        Here, all of Scherer’s claims are premised on his assertion that the bank used false

statements, and otherwise engaged in false or deceptive representations, to establish that Scherer

stymied discovery and diverted millions of dollars in assets from the Trusts. These factual predicates

to Scherer’s claims were clearly resolved by the probate court. For purposes of collateral estoppel,

it does not matter that Scherer is asserting a different variety of claim in this action. Issue preclusion

precludes the relitigation of an issue that has been actually and necessarily litigated and determined

in a prior action “whether the cause of action in the two actions be identical or different.” Ft. Frye,

692 N.E.2d at 144. The underlying factual issues here have already been decided. Accordingly,

Scherer is precluded from relitigating them in federal court.

B. Sanctions

        Under 28 U.S.C. § 1927, we have discretion to impose “costs, expenses, and attorney fees”

personally on an attorney “who . . . multiplies the proceedings in any case unreasonably and

vexatiously.” Waeschle v. Dragovic, 687 F.3d 292, 296 (6th Cir. 2012); 28 U.S.C. § 1927. “This

standard is met ‘when an attorney knows or reasonably should know that a claim pursued is

frivolous.’” Tareco Prop., Inc. v. Morriss, 321 F.3d 545, 550 (6th Cir. 2003) (quoting Jones v.

Cont’l Corp., 789 F.2d 1225, 1230 (6th Cir. 1986)); see also Garner v. Cuyahoga Cnty. Juvenile Ct.,

554 F.3d 624, 644 (6th Cir. 2009) (advising that sanctions are appropriate “where the attorney . . .

knowingly disregards the risk that his actions will needlessly multiply proceedings.”) (internal

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Scherer v. JP Morgan Chase & Co., et. al.

quotations omitted). Section 1927 sanctions may be imposed without a finding that the lawyer

subjectively knew that his conduct was inappropriate. Ridder v. City of Springfield, 109 F.3d 288,

298 (6th Cir. 1997); see also Gibson v. Solideal USA, Inc., 2012 WL 2818944, at *6 (6th Cir. 2012)

(“A court may sanction an attorney under § 1927, even in the absence of bad faith”). However, the

conduct must exceed “simple inadvertence or negligence that frustrates the trial judge.” Ridder, 109

F.3d at 298.

        Similarly, under the Federal Rules of Appellate Procedure Rule 38, we can impose sanctions

if we determine that an appeal is frivolous after a separately filed motion or notice from the court and

a reasonable opportunity to respond. Fed. R. App. P. 38; see also Roadway Express, Inc. v. Piper,

447 U.S. 752, 767 (1980) (explaining that notice and opportunity to respond must precede the

imposition of sanctions). We have noted that “Rule 38 should doubtless be more often enforced than

ignored in the face of a frivolous appeal.” WSM, Inc. v. Tenn. Sales Co., 709 F.2d 1084, 1088 (6th

Cir. 1983). Sanctions under Fed. R. App. P. 38 are “appropriate when an appeal is ‘wholly without

merit’ and when the appellant's ‘arguments essentially had no reasonable expectation of altering the

district court's judgment based on law or fact.’” B&H Med., L.L.C. v. ABP Admin., Inc., 526 F.3d

257, 270 (6th Cir. 2008) (quoting Wilton Corp. v. Ashland Castings Corp., 188 F.3d 670, 677 (6th

Cir. 1999)).

        Here, even though the district court elected not to impose sanctions, it stated that the decision

was a “very close call.” The district court also admonished counsel for not being more familiar with




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Scherer v. JP Morgan Chase & Co., et. al.

preclusion law and advised him to be more careful in evaluating potential cases. This should have

given counsel a clear warning that the issues raised below would likely lack any merit on appeal.5

         Thus, at the very least, Scherer’s counsel seems to have “knowingly disregard[ed] the risk”

that in pursuing an appeal his actions would “needlessly multiply proceedings.” Garner, 554 F.3d

at 644. Counsel’s failure to file a reply brief is further evidence that he had reason to know the issue

on appeal was a non-starter. See Leeds v. City of Muldraugh, Meade Cnty., Ky., 174 F. App’x 251,

256 (6th Cir. 2006) (acknowledging that failure to file reply brief may be additional evidence that

sanctions are appropriate). It is also noteworthy that on appeal counsel abandoned all but a single

argument raised below and that the best support he could muster for that argument was an Ohio

Supreme Court case that briefly discussed the concept of estoppel, but that clearly did not alter the

course of the estoppel doctrine in Ohio. After the district court’s rebuke, counsel should have seen

the writing on the wall.

         Accordingly, we order Scherer’s counsel to show cause as to why, pursuant to 28 U.S.C. §

1927 or Fed. R. App. P. 38, he should not be sanctioned for filing this appeal.

                                             CONCLUSION

         For the foregoing reasons, we AFFIRM the dismissal of Scherer’s claims pursuant to Fed.

R. Civ. P. 12(b)(6), and we ORDER Scherer’s counsel to show cause as to why he should not be

sanctioned for filing this appeal. Counsel will have 30 days to submit a response to the clerk of this

court.



         5
             Scherer had the same counsel in the district court and during the course of this appeal.

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