Background
Out of the Box Enterprises (OOTBE) operates ice rinks in Northeast Ohio. In June 2022, Russ Sinkewich approached OOTBE about a potential ice-rink venture and the parties executed a Confidentiality and Non-Circumvention Agreement containing a fee-shifting clause entitling the prevailing party to recover attorney fees in any litigation to enforce the agreement.
In 2023, the City of Lakewood solicited bids to operate its Winterhurst Ice Arena. Both OOTBE and Lakewood Community Ice, LLC (formed by Sinkewich and others), submitted proposals. Sinkewich’s company won the contract. OOTBE sued, alleging that Sinkewich misused confidential information shared under the NDA—including revenue models, staffing plans, and vendor data—to secure the Winterhurst contract. OOTBE pursued claims for reformation of the NDA, breach of contract, promissory estoppel, trade secret misappropriation, tortious interference, and civil conspiracy, seeking over $1.5 million in damages.
The trial court granted summary judgment in favor of Sinkewich and dismissed OOTBE’s entire complaint, finding no mutual mistake warranting reformation, that the information was not a trade secret, and that tort claims were preempted by Ohio’s Uniform Trade Secrets Act. When Sinkewich moved for attorney fees under the NDA’s fee-shifting clause, the trial court denied the motion, concluding Sinkewich was not the “prevailing party” because he obtained no affirmative relief on his counterclaim.
The Court’s Holding
The appellate court reversed, holding that Sinkewich and his company were the prevailing parties entitled to attorney fees. The court applied the “main issue” standard for determining prevailing-party status in negotiated commercial fee-shifting agreements: the party succeeding on the main issue is the prevailing party. Because OOTBE brought the lawsuit to enforce the NDA and every claim rested on alleged misuse of confidential information, and OOTBE obtained zero relief while Sinkewich defeated every claim, Sinkewich prevailed on the main issue.
The court rejected the trial court’s reasoning that dismissal of Sinkewich’s counterclaim as moot constituted a substantive loss. A moot dismissal reflects the absence of a remaining live controversy, not a merits determination favoring OOTBE. The declaratory judgment count became moot once the court determined the NDA would not be reformed—it did not represent a loss. The court further distinguished this case from precedents requiring a broader “some relief” standard, noting that such standards apply in statutory fee contexts where public policy supports them, but not in negotiated commercial agreements between sophisticated parties.
Regarding Sinkewich’s alternative request for sanctions under R.C. 2323.51 for frivolous conduct, the appellate court affirmed the trial court’s denial. The court applied an objective test: a claim is frivolous only if clearly no reasonable lawyer could argue it. Although OOTBE’s claims ultimately failed, they possessed arguable factual support (evidence of disclosed information) and presented genuinely contested legal questions (reformation, trade secret status, statutory preemption). Failure to prove a claim at summary judgment does not make it frivolous.
Key Takeaways
- In commercial contracts with negotiated fee-shifting provisions, courts apply the “main issue” standard to determine the prevailing party—not whether a party obtained any affirmative relief, and not whether both parties obtained some relief
- A counterclaim dismissed as moot is not a substantive merits loss and does not defeat prevailing-party status when the plaintiff’s claims are entirely dismissed
- Under R.C. 2323.51, mere failure to prove a claim does not establish frivolous conduct; the claim must be one that no reasonable attorney could have advanced under existing law
- Trial courts need not hold a hearing on sanctions motions when the record does not clearly demonstrate frivolous conduct
- Attorney fees under the NDA run only to its signatories (OHP, Sinkewich, OOTBE, and the Shockleys), not to non-party defendants
Why It Matters
This decision provides important guidance on fee-shifting clauses in commercial contracts, clarifying that courts should not dilute the concept of “prevailing party” by requiring defendants to obtain affirmative relief to qualify. The ruling protects defendants who successfully defend against litigation on summary judgment, ensuring they can recover fees even when counterclaims are dismissed as moot. For counsel, the decision reinforces that advancing claims with some factual or legal support—even controversial positions—will not be deemed frivolous merely because they ultimately fail at summary judgment.
The holding also reflects judicial recognition that sophisticated parties negotiating commercial agreements should have their explicit fee-shifting terms honored according to their plain meaning, rather than having courts impose broader “some relief” standards borrowed from statutory contexts. This supports predictability in commercial litigation and the enforceability of negotiated risk allocation.