IN THESUPREME COURT OF OHIO

CASE NO:

RICHARD H. JOHNSON, et al,

Plaintiff-Appellee, ) On Appeal from the Lorain

V.

CHURCH OF THE OPEN DOOR, et al,

Defendant-Appellant.

County Court of Appeals,Eighth Appellate DistrictAPP. NO. 08CA009387

Trial Court Case No. 05CV 141295

MEMORANDUM IN SUPPORT OF JURISDICTIONOF APPELLANT TIMOTHY GUENTHER

COUNSEL FOR APPELLANT:

JAMES L. GLOWACKI (0001733)WILLIAM H. KOTAR (0073462)Glowacki & Imbrigiotta, LPA510 Leader Building526 Superior Avenue, EastCleveland, Ohio 44114(216) 696-7445(216) 696-0318 (fax)whk(cr^.glowacki-as sociates. com

COUNSEL FOR APPELLEE:

David A. Forrest, Esq.JEFFRIES, KUBE, FORREST& MONTELEONE CO., LPA1650 Midland Building101 Prospect AvenueCleveland, OH 44115

Patrick D. Riley, Esq.RILEY, RESAR, & ASSOCIATES, PLL520 Broadway AvenueLorain, OH 44052

JAN 07 1C09

CLERK OF COURTSUPREME COURT OF OMIO

Stephen C. Merriam, Esq.Kate E. Ryan, Esq.ULMER & BERNE, LLPSkylight Office Tower1660 West 2nd Street, Suite 1100Cleveland, OH 44113-1448Attorney for Defendant-AppelleeChurch of the Open Door

Jay Clinton Rice, Esq.GALLAGHER SHARP6th Floor, Bulkley Building1501 Euclid AvenueCleveland, OH 44115Attorney for Intervening PlaintiffRepubhc-Franklin Insurance Company

Stephanie E. Niehaus, Esq.Richard Gurbst, Esq.Jennifer Jenkins Meadows, Esq.SQUIRE, SANDERS & DEMPSEY LLP4900 Key Tower127 Public SquareCleveland, OH 44113Attorneys for Defendant-AppelleeChurch of the Open Door

Darrel A. Bilancini, Esq.595 West Broad StreetElyria, OH 44035Attorney for Defendant-AppelleeChurch of the Open Door

TABLE OF CONTENTS

Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

Table of Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii

Explanation of Why This Case is a Case of Public or Great General Interest . ............... 1

Statement of the Case and Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Proposition of Law and Argument in Support Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Proposition of Law #1. The term "aided the seller in any way" means that one acted as a"portal" for the seller and does not include mere introductions and statements regardingcharacter : ........ ............. ..... ........................................... 7

A) An introduction and puffery of another's financial acumen without somegreater involvement in the transaction does not rise to the level of "aidingthe seller in any way." . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

B) Without more involvement than an introduction and puffery of character,the law extends liability far beyond the actors knowledge . . . . . . . . . . . . . . . . . . . 9

Proposition of Law #2. In order to constitute "indirect remuneration" the Plaintiffcan not rely on mere speculation, but must show that the party received a paymentin excess of that expected as a salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Proposition of Law #3 A"storm waming" is enough to start.the running of the statuteof limitations under R.C. 1707.42 .................................................13

Conclusion ..................................................................14

Certificate of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Appendix ...................................................... following page 16

A. Decision and Journal Entry, Court of Appeals Ninth Judicial District,08CA009387, November 24, 2008.

i

TABLE OF AUTHORITIES

Boland v. Hammond (2001, 4t' Dist.) 144 Ohio App.3d 89, 759 N.E.2d 789 .............. 1, 8

Burens v. Industrial Commission ( 1955) 162 Ohio St. 549 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Goldbere v. Cohen (2002, 7" App. Dist.) 2002 WL 1371031 . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Gutter v. Dow Jones, Inc. (1986) 22 Ohio St.3d 286 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Interstate Gas Supply, Inc, v. Calex Corp. (2006, 10' Dist.) 2006 Ohio 638 . . . . . . . . . . . . . . . 10

Jevak v. Gary L. McNaughton 9"Dist. 06 CA 008928 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 13

Manno v. St. Felicitas Elementary School 161 Ohio App.3d 715, 2005-Ohio-3132 ......... 10

Olvmnic Holding Co., LLC v. ACE Ltd. (2007, 10'h Dist.) 2007 WL 4340276 ............. 11

Perkowski v. Megas Coro. ( 1990, 9^' Dist.) 55 Ohio App.3d 234, 563 N.E.2d 378 .......... 12

ii

EXPLANATION OF WHY THIS CASE IS A CASE OF PUBLIC OR GREATGENERALINTEREST

This case presents three issues concerning R.C.1707.43(A) and R.C. 1707.431(B), the

Ohio "Blue Sky" law, which govern the sale of unregistered securities. Under R.C. 1707.43(A)

liability is imposed on the "seller" and anyone who "aided the seller in any way." The Blue Sky

law is broadly worded and the Ninth District interprets the term "aided the seller in any way" to

encompass individuals who make mere introductions and statements regarding character of the

individual who fraudulently sold the securities at issue.

However, the Fourth District, in Boland v. Hammond, infra, implies that more than an

introduction and character reference is required to constitute aiding in a sale. The Fourth

District's Approach allows courts to act in their traditional role as gatekeeper concerning whether

an activity rises to an actionable level, versus, the Ninth District's approach that mere proximity

to the fraudulent sale is enough for a statutory violation. Clearly, the Ninth District's

interpretation casts too wide a net and entangles individuals who merely vouch for the

appearance of another's competency.

A second problem with the broad expanse of the Ninth District's interpretation of R.C.

1707.43 is that it extends ones duty beyond the actors knowledge and ability to learn contrary

facts. At the time that Timothy Guenther made statement concerning McNaughton's financial

ability and character, he had no information to the contrary. He believed that what he saw was

the truth about McNaughton. The people who invested with McNaughton appeared happy,

McNaughton drove expensive cars, lived in an expensive home and ate out at expensive

1

restaurants. Thus, Tim Guenther's duty under the statute extends beyond his ability to gather

facts.

Furthennore, this interpretation extends Tim Guenther's duty far beyond common law

negligent misrepresentation, which is a lesser standard than common law fraud. Under the

statute, no special relationship is required between the parties, nor is specialized knowledge

required by the actor. Thus, the duty under R.C. 1707.43(A), which is a statutory fraud

provision, extends far beyond the capability of the actor to ascertain facts and finds liability for

being trusting and gregarious.

Thus, review of this case would allow the Court to determine what is required for an

individual to "aid the seller in any way," and narrow the focus to culpable individuals and not

merely those individuals who have a good opinion of the seller of unregistered securities.

A second issue concerns R.C. 1707.431(B), which carves out an exception for individuals

caught in the broad net of R.C. 1707.43. The statute extends liabilityto those individuals who

"directly or indirectly" receive some type of remuneration. Once again the Ninth District uses a

very expansive definifion of "indirect * * * remuneration" to impose potential liability on Timothy

Guenther. The Ninth District finds potential indirect remuneration, because Timothy Guenther's

wife was employed by Gary McNaughton in running a non church affiliated organization called

the Silos. It is undisputed that Edith Guenther, who is not a party to this action, was employed

and had responsibilities for the Silos organization. What the Johnsons characterize as indirect

remuneration, the common person would characterize as a salary. As the issue concerns indirect

remuneration through a third party, the Johnsons should not be permitted to speculate, but instead

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show hard evidence of remuneration. Especially because the net is so widely cast under R.C.

1707.43.

The last issue concerns whether a storm warning is enough to start the running of the

statute of limitations under R.C. 1707.42. In the case at bar, the Plaintiffs' were placed on

notice that things were not as they seemed, when on December 16, 2002, the Plaintiff's wife was

told by a bank teller that she could not deposit a check. Gary McNaughton's daughter was at the

bank and she deposited enough money so that the Plaintiffs could cash their check from

McNaughton. (Id. at 246, 247.) The Plainfiffthen set up a meeting with MeNaughton later that

month in order to get half of his investment back. (Id. at 247.) Giving the Plaintiffs the benefit

of the doubt, Plaintiffs were on notice of problems by January 1, 2003. The case was filed on

March 1, 2005; more than two years after the Plaintiffs were on notice of problems. Therefore,

Plaintiffs are time barred from bringing an action against Youth Pastor Guenther for any alleged

involvement.

STATEMENT OF THE CASE AND FACTS

Richard Johnson was a computer programmer for Microsoft. As an employee of

Microsoft he received stock options. In September of 2001, he left Microsoft and "cashed out"

the majority of his stock options in 2001. Also in 2001, he and his wife started a ministry called

the "Hot Church." The idea of Hot Church was to reach out to teens and young adults. The

Johnsons sent out an e-mail to 20 churches in Lorain County with the idea of partnering with

some established churches. This would allow them to get volunteers and additional resources for

their Hot Church ministry. Of the 20 churches that he sent an e-mail too, Tim Guenther, the

Youth Pastor for Church of the Open Door, was the only individual who responded.

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Tim Guenther and Richard Johnson set up a lunch meeting which occurred in January or

Februaryof 2001. During this meeting they discussed their ministries and a building called The

Silos. The Silos was a non Church of the Open Door facility. The subject of investments came

up and Tim Guenther told him about Gary McNaughton and mentioned how he helped various

churches and ministries with their investments. Gary McNaughton was running an investment

company called Haven Equity. The Plaintiff did not believe that Tim Guenther was a financial

advisor, or have a financial education or background. In fact Richard Johnson characterized this

as "a suggestion on his (Guenther's) part."

The second meeting in March of 2001 occurred at Bob Evans, where Tim Guenther

allegedly urged the Plaintiff to move their ministry to the Silos. Youth Pastor Guenther did not

speak much at this meeting and did not represent that he had anything to do with the investment.

The conversation was primarily conducted by Gary McNaughton and John Washburn. Of the

one hour and a half meeting, 20 minutes were spent discussing investments. After this second

meeting, Plaintiffs dealt directly with Gary McNaughton on all investment issues. It is

undisputed that the Plaintiffs did not consult Tim Guenther before:

- the first investment; (Plaintiff testified that Tim was not there, nor did he set up themeeting, or even knew the meeting took place.) )

- the additional $40,000.00 that Plaintiff invested;.- taking out the $100,000 home equity loan;- any re-investments of interest or principal received from McNaughton;

Tim Guenther never indicated that he was making money off of investments, had any

financial interest in Haven Equity, was receiving any commissions for referrals, nor exercised

any control over Haven Equity.

4

In April or May of 2001, the Johnsons moved their ministry to the Silos. The Silos

Ministry was conducted solely by Plaintiff Richard Johnson, Guenther, Washburn and

McNaughton. The mission of the Silos was to do things that could not be done at Church of the

Open Door or other established churches. Tim Guenther allegedly told the Plaintiff that other

Christian religious organizations were also involved in investing with McNaughton. Tim

Guenther never told the Plaintiff that he (Tim) was invested with McNaughton. In fact, the

Johnsons knew that Timothy Guenther was living on a Youth Pastor's salary and had no assets to

speak of. Tim Guenther allegedly told people that he received "bags of money" from Gary

McNaughton. This statement was allegedly made in 2002, a year after the Plaintiffs made

their investments. However, concerning this statement, the Plaintiffs never saw any bags of

money, they do not know why he would have received the alleged bags of money, they do not

know when they were allegedly received.

Q. So I understand your testimony regarding the bags of money issue, all you know is that hesaid he received bags of money.

A. Yes. (Deposition of T. Johnson, pg. 183.)

hnportant to note is that it is undisputed that the Plaintiffs have never demonstrated that Tim

Guenther had superior knowledge concerning any alleged investments or investors in the Ponzi

scheme. The totality of Tim Guenther's alleged involvement is that he told the Plaintiffs that

McNaughton was a good Christian man and the totally unsubstantiated allegation concerning the

"bags of money." Plaintiffs have never demonstrated any payment to Tim or Edith Guenther in

excess of their salary for work at the Silos. Nor have the Plaintiffs ever demonstrated any

payment made to Tim or Edith Guenther which can be traced to any "investment" made by the

Plaintiffs. Moreover, the Plaintiff testified that Tim Guenther never indicated that he was

5

making money off of investments, had any financial interest in Haven Equity, was receiving any

commissions for referrals, nor exercised any control over Haven Equity.

Defendant Tim Guenther filed a motion for summary judgment, which was granted by the

trial court. Thereafter, Plaintiff filed an appeal and the Ninth District reversed the trial court

holding that it was a question of fact concerning:

a) Whether Tim Guenther's involvement in introducing the Johnsons to McNaughton and

attending a meeting with the two rises to "participating and aiding the seller in any way."

b) Whether Tim Guenther's wife receiving a $30,000 salary from the silos constitutes

"remuneration" under R.C. 1707.431(B)

c) Whether the action is time barred under the two year statute of limitation under R.C. 1707.42,

due to the °storm warning" that occurred when the Plaintiffs could not cash a check at the local

bank and thereafter, asked for half their principal back from McNaughton.

The court upheld the dismissal of the negligent misrepresentation and fraud claims advanced by

the Johnsons against Tim Guenther on the basis of the fact that the Johnsons could not have

justifiably relied upon advice of Tim Guenther. The Ninth District Court of Appeal's ruling is

inXernally inconsistent because they held that Timothy Guenther has no liability for common law

fraud, but may have violated a statutory fraud provision. This is especially true as the Ninth

District ruled that Timothy Guenther's acts do not even rise to a fact question in regard to

negligent misrepresentation.

6

LAW AND ARGUMENT

PROPOSITION OF LAW AND ARGUMENT IN SUPPORT THEREOF

Proposition of Law #1. The term "aided the seller in any way" means that one acted as a"portal" for the seller and does not include mere introductions and statements regardingcharacter.

A) An introduction and puffery of another's financial acumen without somegreater involvement in the transaction does not rise to the level of "aiding theseller in any way."

The allegations against Timothy Guenther are that he "constantly trumpeted the financial

acumen of McNaughton" and introduced the Johnsons to McNaughton. Under the Ninth

District's interpretation of R.C. 1707.43, these acts are enough to constitute "aiding a seller in

any way" under the Statute. Clearly, an introduction and alleged puffery of another's character

by an extroverted Youth Pastor should not be actionable conduct. Under R.C. 1707.43(A) it

states:

(A) Subject to divisions (B) and (C) of this section, every sale or contract for salemade in violation of Chapter 1707. of the Revised Code, is voidable at theelection of the purchaser. The person making such sale or contract for sale,and every person that has participated in or aided the seller in any way inmaking such sale or contract for sale, are jointly and severally liable to thepurchaser, in an action at law in any court of competent jurisdiction, upon tenderto the seller in person or in open court of the securities sold or of the contractmade, for the full amount paid by the purchaser and for all taxable court costs,unless the court determines that the violation did not materially affect theprotection contemplated by the violated provision. (emphasis added.)

Under 1707.01 (C)(1)& (2)

"Sale" has the full meaning of "sale" as applied by or accepted in courts of law orequity, and includes every disposition, or attempt to dispose, of a security or of aninterest in a security. "Sale" also includes a contract to sell, an exchange, anattempt to sell, an option of sale, a solicitation of a sale, a solicitation of an offerto buy, a subscription, or an offer to sell, directly or indirectly, by agent, circular,pamphlet, advertisement, or otherwise.

7

***"Sell" means any act by which a sale is made.

When one reviews R.C. 1707.43(A), it is clear that the statute is broadly written in that it

imposes liability on individuals who "participate" or "aid the seller in any way." However, the

term sale clearly encompasses something more than what is in the case subjudice, namely an

introduction and character reference. The Fourth District, in Boland v. Hammond, infi-a, implies

that more than an introduction and character reference is required to constitute aiding in a sale.

The Fourth District's Approach allows courts to act in their traditional role as gatekeeper

concerning whether an activity rises to an actionable level, versus, the Ninth District's approach

that mere proximity to the deal is enough for a statutory violation.

The uncontroverted evidence in this case establishes that Hammond relayed theproposed terms of the sales from Rogers to investors, including appellees, and thathe arranged and attended meetings between appellees and Rogers. In addition,Hammond collected the money for the investments, distributed thepromissory notes and other documents from Rogers and Sunbelt, anddistributed principal and interest payments. Although he did not have anydirect contact with appellees, Hammond was heavily involved in the actual salestransactions between Roger and Sunbelt and the appellees. By his own admission,the investment opportunities in Sunbelt would never have been presented toappellees if not for the fact that he disseminated the information or "spread theword" about the opportunities. More important, he was the only, avenue forinvestment. Rogers insisted on dealing only with Hammond, not otherinvestors. This evidence shows that Hammond was much more involved thanjust bringing Rogers together with investors. He in fact participated in andaided Rogers and Sunbelt in the sales of the securities to appellees. Boland v.Hammond (2001, 4t° Dist.) 144 Ohio App.3d 89, 759 N.E.2d 789.

This extensive involvement in the Hammond case, in which the court decided that the defendant

had acted as a "portal", stands in contrast to the case at bar. The allegations against Timothy

Guenther is that he "constantly trumpeted" the McNaughton investments and introduced

McNaughton to the Johnsons. There is absolutely no evidence that Timothy Guenther was the

8

only avenue for investment: Nor is there evidence that he was heavily involved in the actual sale,

took money from the Johnsons on behalf of McNaughton, or even represented to the Johnsons

that he was working for McNaughton. In fact, it is undisputed that the Johnsons knew that Tim

Guenther was not even an investor. In short, Tim Guenther was not a "portal" through which the

Johnsons passed. He merely vouched for the acumen of McNaughton as a businessman, which,

under the Ninth District's interpretation of "participating or aiding a seller", creates a question of

fact as to whether he violated the "Blue Sky" law. Additionally, the Ninth District would impose

liability on Timothy Guenther when it did not do the same to Mr. Washburn in Jevak v. Gary L.

McNau hg ton 9" Dist. 06 CA 008928. Unlike Mr. Guenther, Washburn was an investor in the

scheme and was at meetings where money changed hands. Clearly, the Ninth District's

interpretation casts too wide a net and entangles individuals who merely vouch for the

appearance of another's competency. Especially, when the actor does not have the ability to learn

facts which would give them a different opinion.

B) Without more involvement than an introduction and puffery of character,the law extends liability far beyond the actors knowledge.

A second problem with the broad expanse of the Ninth District's interpretation of R.C..

1707.43 is that it extends ones duty beyond the actors knowledge and ability to learn contrary

facts. At the time that Timothy Guenther made statement concerning McNaughton's financial

ability and character, he had no information to the contrary. He believed that what he saw was

the truth about McNaughton. The people who invested with McNaughton appeared happy,

McNaughton drove expensive cars, lived in an expensive home and ate out at expensive

restaurants. These are the same "facts" which the Johnsons leatned after becoming friends with

9

the MeNaughton family. Tim Guenther did not have the ability to learn otherwise. It is

undisputed that Tim Guenther did not hold himself out as anything beyond what he was; a Youth

Pastor. Thus, Tim Guenther, as a Youth Pastor who admittedly has no financial acumen, now

must verify the finances of McNaughton before he makes an introduction and tells them that

McNaughton is a great investor. He has this duty despite the fact that he has no position with

Haven Equity, has admittedly no financial training or acumen, no ability to examine the books of

Haven Equity, much less ability to interpret the data in those books, and does not work in the

financial industry. Thus, Tim Guenther has a duty to learn that McNaughton is running a

criminal enterprise and all his alleged investment retums are a mirage, without the corresponding

ability to do so. Tim Guenther's duty under the statute extends beyond his ability to gather facts.

Furthermore, this interpretation extends Tim Guenther's duty far beyond common law

negligent misrepresentation, which is a lesser standard than common law fraud. In order to

demonstrate negligent misrepresentation it must be shown: .

"(1) One who, in the course of his business * * * supplies false information forthe guidance of others in their business transactions, is subject to liability forpecuniary loss caused to them by their justifiable reliance upon the information, ifhe fails to exercise reasonable care or competence in obtaining or communicatingthe information.*** *** ***

Gutter v. Dow Jones, Inc. (1986) 22 Ohio St.3d 286. A negligent misrepresentation cause of

action does not lie for omissions; there must be an affirmative false statement. Interstate Gas

Supglv. Inc. v. Calex Corp., (2006, 1V Dist.) 2006 Ohio 638; Manno v. St. Felicitas Elementarv

School, 161 Ohio App.3d 715, 2005-Ohio-3132, at ¶ 34. Furthermore, there must be a special

10

relationship between the parties. "Those who are in the business of supplying information for the

guidance of others typically include attomeys, surveyors, abstractors of title and banks dealing

with non-depositors' checks °' Olvmnic Holding Co.. LLC v. ACE Ltd. (2007, 10" Dist.) 2007

WL 4340276.

The reason that the misrepresentation must by in ones "course of business" is because one

is presumed to be an authority in that area that one makes ones living. One does not have a

cause of action for negligent misrepresentation against an attomey friend who says "I would not

worry about that mole" when the mole later turns out to be cancerous. However, that might not

be the case for a medical professional. Thus, the duty under R.C. 1707.43(A), which is a

statutoryfraud provision, extends far beyond the capability of the actor to ascertain facts and

finds liability for merely being trusting and gregarious.

Therefore, the Ninth District is properly reversed and the judgment of the trial court

reinstated.

Proposition of Law #2. In order to constitute "indirect remuneration" the Plaintiff can not relyon mere speculation, but must show that the party received a payment in excess of that expectedas a salary.

R.C. 1707.431, carves out an exception for individuals caught in the broad net of R.C.

1707.43. The statute provides:

(B) Any person, other than an investment adviser, investment adviserrepresentative, bureau of workers' compensation chief investment officer, or stateretirement system investment officer, who brings any issuer together with anypotential investor, without receiving, directly or indirectly, a commission, fee,or other remuneration based on the sale of any securities by the issuer to theinvestor. Remuneration received by the person solely for the purpose of offsettingthe reasonable out-of-pocket costs incurred by the person shall not be deemed acommission, fee, or other remuneration

11

Once again the Ninth District uses a very expansive definition of "indirect *** remuneration" to

impose potential liability on Timothy Guenther. hi the case at bar, Edith Guenther was employed

by the Silos. Edith Guenther is not a party to this action. It is undisputed that the facility was

hosting numerous events and that the responsibilities of Edith Guenther increased. Additionally,

it is undisputed that the pay to Edith Guenther increased as the Silos took off. Gary McNaughton

was the individual responsible for payments made at the Silos for everything from maintenance

of the building to what each employee received as compensation for work. Edith Guenther

received checks from the Gary McNaughton for the same amount, once every two weeks.

Therefore, the Johnson's argued that Timothy Guenther was receiving an indirect benefit from

the sale of securities to the Johnsons. However, it is clear that as she was employed by the Silos,

this "remuneration" was not for Tim Guenther's introduction to the Johnsons, but instead a check

she received for work done at the Silos. The Johnsons rely on speculation that Edith Guenther's

salary was instead a kickback. Where facts give rise to two irreconcilable inferences, either of

which is reasonable, submission of choice thereof to jury is to permit jury to indulge in

speculation and conjecture and is error. Burens v. Industrial Commission (1955) 162 Ohio St.

549.

When one contrasts this speculative indirect remuneration through a non party versus the

Perkowski case, it is clear that something more than a salary must be shown to constitute an

indirect remuneration. In Perkowski v. Megas Corp. (1990, 9t° Dist.) 55 Ohio App.3d 234, 563

N.E.2d 378, the Court had to determine whether an "advertising fee" received by a radio station

host constituted remuneration. The radio host held himself out as a financial expert, was a

licensed attorney, and he had his name on investment publications. The court characterized the

12

"advertising fee" as being informal and noted that the payments were not made to the host's radio

station, but instead, directly to the host. Thus, the host was receiving a commission in excess of

his salary traceable to the sale of securities. The "advertising fee" was definitely not employment

related, but instead a kickback for the sale of securities.

Similarly, in Jevack v. McNau he ton (2007, 9" Dist.) 2007 WL 1461171, the Plaintiff

attempted to argue that indirect tithes to the church constituted indirect remuneration. The

Plaintiff attached

"giving statements" from Open Door regarding contributions made byMcNaughton, and a Church memo stating that McNaughton was a contributor toOpen Door on a regular and substantial basis. However, without more, thesedocuments do not show that the donations were made directly or indirectly fromthe sale of the securities, in accordance with R.C. 1707.431. Similarly, Appellantshave produced no evidence that Washbum received any remuneration from thesale. Therefore, R.C. 1707.431 clearly exempts Open Door and Washburn fromliability under R.C. 1707.43.

Jevack v. McNaughton (2007, 9`h Dist.) 2007 WL 1461171. In the case at bar, the Plaintiffs are

speculating that payments to a non-party employee are kickbacks and not a salary. As Plaintiffs

are alleging an indirect and not a direct theory of remuneration, the Plaintiffs must rely on more

than speculation to create a jury issue and must show remuneration directly related to the sale

prohibited by R.C. 1707.43.

Proposition of Law #3 A"storm warning" is enough to start the running of the statute oflimitations under R.C. 1707.42, as a matter of law.

To conclusively show that the action is time barred, one must demonstrate both (1) the

relevant statute of limitations, and (2) the absence of factors which would toll the statute, or

13

make it inapplicable. Goldberg v. Cohen (2002, 7" App. Dist.) 2002 WL 1371031. The statute

at issue, R.C. 1707.43 states:

No action for recovery of the purchase price as provided for in this section, and noother action for any recovery based upon or arising out of a sale or contract forsale made in violation of Chapter 1707. of the Revised Code, shall be broughtmore than two years after the plaintiffknew, or had reason to know, of the factsby reason of which the actions of the person or director were unlawful, or morethan four years from the date of such sale or contract for sale, whichever is theshorter period." (Emphasis added).

In the case at bar, the Plaintiffs' were placed on notice of the fact that things were not as they

seemed when on December 16, 2002, the Plaintiff's wife was told by a bank teller that she could

not deposit a check. Gary McNaughton's daughter was at the bank and she deposited enough

money so that the Plaintiffs could cash their check from McNaughton. (Id. at 246, 247.) The

Plaintiff then set up a meeting with McNaughton later that month in order to get half of his

investment back. (Id. at 247.) Giving the Plaintiffs the benefit of the doubt, Plaintiffs were on

notice of problems by January 1, 2003. The case was filed on March 1, 2005; more than two

years after the Plaintiffs were on notice of problems. Therefore, Plaintiffs are time barred from

bringing an action against Youth Pastor Guenther for any alleged involvement.

CONCLUSION

For the reasons discussed above, this case involves matters of public and great general

interest, Appellant Timothy Guenther respectfully requests that this Honorable Court accept

jurisdiction in this case so that the important issues presented will be reviewed on the merits.

14

JAMES L. abOWAM (0001733)WILLIAM H. KOTAR (0073462)Glowacki & Imbrigiotta, LPA510 Leader Building526 Superior Avenue, EastCleveland, Ohio 44114(216) 696-7445(216) 696-0318 (fax)whkna,glowacki-associates.com

COUNSEL FOR APPELLANT,TIMOTHY GUENTHER

15

CERTIFICATE OF SERVICE

The undersigned hereby certifies that copies of the foregoing pleading were sent this

day of January, 2009, by regular U.S. mail to:

David A. Forrest, Esq.JEFFRIES, KUBE, FORREST& MONTELEONE CO., LPA1650 Midland Building101 Prospect AvenueCleveland, OH 44115

Patrick D. Riley, Esq.RILEY, RESAR, & ASSOCIATES, PLL520 Broadway AvenueLorain, OH 44052Attorneys for Plaintiff-Appellee

Darrel A. Bilancini, Esq.595 West Broad StreetElyria, OH 44035Attorney for Defendant-AppellantChurch of the Open Door

Jay Clinton Rice, Esq.GALLAGHER SHARP6th Floor, Bulkley Building1501 Euclid AvenueCleveland, OH 44115Attorney for Intervening PlaintiffRepublic-Franklin Insurance Company

Stephen C. Merriam, Esq.Kate E. Ryan, Esq.ULMER & BERNE, LLPSkylight Office Tower1660 West 2nd Street, Suite 1100Cleveland, OH 44113-1448Attorney for Defendant-AppellantChurch of the Open Door

Stephanie E. Niehaus, Esq.Richard Gurbst, Esq.Jennifer Jenkins Meadows, Esq.SQUIRE, SANDERS & DEMPSEY LLP4900 Key Tower, 127 Public SquareCleveland, OH 44113Attorneys for Defendant-AppellantChurch of the Open Door

JAMES L. GLZ?VtW"ACKIWILLIAM H. KOTARAttorneys for AppellantTimothy Guenther

16

APPENDIX A

NOY 2 Vs 2000 i

STATE OF OHIO

COUNTY OF LORAIN

RICHARD JOIINSOM,`ef'd.

Appellants =

v.. ^.;^^...,,-.s ^:• «

CHURCH OF THE OPEN DOOR, et al.

Appellees

THE COURT OF APPEALSNINTH JUDICIAL DISTRICT

C.Ai No. 08CA009387

APPEAL FROM JUDGMENT$NTERED IN THE

4OURT OF COMMON PLEASCOUNTY OF LORAIN, OHIOCASE No. 05CV 141295

DECISION AND.JOURNAL ENi RI'

Dated: November 24, 2008

DICKINSON, Judge.

INTRODUCTION

{11} Gary McNaughton conned Rich and Trina Johnson out of over a million dollars

by convincing them to invest in a Ponzi scheme and cosign on a commercial loan. The Johnsons

sued, among others, Pastor Tim Guenther and the Church of the Open Door because they

introduced the Johnsons to McNaughton and recommended investing with him. The trial court

granted Guenther and the Church summary judgment. Because the Johnsons were not justified

in Telying on what Guenther told them about McNaughton's program, this Court affirms the trial

court's judgment on the Johnsons' negligent misrepresentation and fraud claims. Because

genuine issues of material fact exist regarding whether Guenther aided McNaughton in, the sale

of unregistered securities and whether he was acting within the scope of his employment, this

Court reverses the trial court's judgment on their,Ohio Securities Act claim and remands for

farther proceedings.

2

FACTUAL BACKGROt,'ND

{¶2} McNaughton is a Canadian citizen who met Church representatives at a spiritual

retreat in the mid-1990s. He told them that he lived off of investment income and wanted to

devote hi3nself to ministry work full time. The Churoh recruited him to assist with its youth

ministry and helped him obtain a visa to come to the United States. At the Church, MeNaughton

served under Guenther as its Director of Activities and Out•each.

{¶3} Church members were curious about how McNaughton could support himself off

of his investments. He told them that be had a friend in 'Canada named Andrew Lech who

managed a large family trust and who was a wizard at playing the stock market: He said that

Lech enjoyed helping those who did ministry work and offered to let them invest with him if

they were interested. Several members of the Church, including some of its pastors, invested

with McNaughton. Althougb Guenther did not invest with McNaughton, he knew about the

program.

{¶4} In the late 1990s, Guenther, McNaughtov, and a couple of other Church members

wanted to expand the Church's footprint in the community. Seeking to minister to high school

students that did not attend the Church, they purchased a barn that they thought could serve as a

youth center and started a not-for-profit organization known as the Silos. They offered the Silos

to commuriity organizations as a place to hold meetings and began leading character-building

classes for local schools. Although McNaughton and Guenther spent many hours at the Silos,

they hired Guenther's wife to serve as its director and run most of its activities. The Silos'

operating expenses were primarily underwritten by McNaughton, who made donations to the

Silos out of his investment income.

3

{15} In 2001, Guenther received.an e.mail from Johnson, who Was running a youth

ministry called Hot Church at a nearby community college. Because Johnson's ministry was

small, he had emailed a number of churches in the area looking to share resources. Guenther

was the only pastor who responded. The Guenthers and Johnsons arranged to have dinner to talk

about Johnson's ministry.. At the dinner, Johnson told Guenther that he had retired from

Microsoft, that he had substantial savings, and that he was looking for a way that he could live

off of his investments and minister full time. Guentheir told Johnson about the activities that

went on at the Silos and about McNaughton's investment program.

{¶6} Johnson was interested in investing with McNaughton so he asked Guenther to set

up a meeting with him. At the meeting, which Guenther also attended, MeNaughton told

Johnson that Lech was an expert at investing in stock options, which let him make a profit

whether the market was going "up, down, or sideways." He said that, depending on the size of

the investment, Lech would guarantee up to 18% in annual retums, paid in monthly installments.

He also said that, because of the size of Lech's fainily trvst, Johnson's investments would be safe

unless there was a global economic meltdown. Guenther did not say much at the meeting, but

did invite Johnson to move his ministry to the Sil.os.

{¶7} Following the meeting, Johnson called a couple of references that McNaughton

had provided him. Ide then invested over $500,000 with McNaughton. When McNaughton sent

hirn his initial interest payment, Johnson sent it back and requested that it be rolled into his

principal. A few months later, he invested $40,000 more. He also obtained a $100,000 home

equity loan and invested the proceeds with McNaughton. By the end of 2002, Johnson held a

pronussory note from McNaughton for nearly $750,000. .

{$8} Johnson, meanwhile, moved his ministry to the Silos. When. Guenther's

supervisor at the Church learned that another• church was operating out'of the Silos, he became

concerned. Mrs. Guenther explained to him, however, that, although Johnson's ministry was

called "Hot Church," it was only a "parachurch organization" for young adults that Guenther

thought could feed into the Church. In fact, a few months after Johnson moved his ministry to

the Silos, he began attending the Church and sending lus children to the Church's school.

{¶9} When Guenther and McNaughton first purchased. the Silos, they entered into a

land contract. Because they had problems dealing with the landowner, MeNaughton thought it

would be better to obtain a mortgage loan. He tried to have Cruenther co-sign for the loan, but

Guenther did not have enough assets. He then asked the Johnsons for help. According to

Johnson, McNaughton told. him that, because he was aCanadian citizen, he needed them to sign

the loan as charmcter references. The Johnsons did not read the loan documents and actually

signed as co-borrowers. Furthermore, although the amount owed on the land contract was less

than $200,000, the loan was for $400,000. McNaughton received the exira $200,000,

supposedly to fund the Silos' programs.

{¶10} The Johnsons received monthly payments until December 2002, when their bank

refused one of McNaughton's . checks. Johnson's mother, who had also invested with

MeNaughton, encountered a problem in October 2002, when her check bounced. McNaughton

apologized to the Johnsons and blamed the Patriot Act, which he said had complicated

transferring money to and from Lech. The Johnsons received payments for three more months,

but did not receive any more after March 2003. The Johnsons later learned that McNaughton

and Lech had been rnnning a Ponzi scheme and that their "interesf' payments had actually been

5

funded with other people's investments. They also discovered that.they were responsible for the

Silos' mortgage.

{111} The Johnsons sued McNaughton and Lech, asserhing multiple claims. They sued

Guenther because, according to them, he had recommended McNaughton, had trumpeted his

investment plan, had made assurances about the plan, and he and his wife had benefited

financially from it. They sued the Church, alleging it did not adequately supervise the Silos, and

under a theory of respondeat superior for Guenther'-s actions. The Church's insurance company

intervened, seeking a declaratory judgment that its policy did not cover the Johnsons' claims.

{¶12} The Johnsons were not the only parties who sued the Church regarding

McNaughton's scheme. In Jevack v, McNaughton; 9th Dist. No. 06CA008928, 2007-Ohio-2441,

at ¶18, this Court determin.ed that the Church was not responsible for McNTaughton's acts just

because he worked for it. In Kelly v. McNaughtorc, Lorain County Court of Common Pleas, No.

03CV135478 (Jun. 12, 2007), the court determined that the Church was not liable for

McNaughton's scheme because it did not hire him to sell investment instruments and did not

participate in the sales. Citing those cases, the trial court granted summary judgment for

Guenther and the Church. It also granted judgment for the Church's insurance company, The

Johnsons have appealed, assigning two errors.

STANDARD OF REVIEW

{¶13} The Johnsons' first assignment of error is that the trial court incorrectly granted

summary judgment for Guenther and the Church because there are genuine issues of material

fact in dispute that remain to be litigated. In reviewing a trial court's ruling on a motion for

summary judgment, this Court applies the same standard a trial court is required to apply in the

first instance: whether there are any genu.i.ne issues of material fact and whether the movin.g

6

party is entitled to judgment as a matter of law. Parenti v. Good} ear Tire & Rubber Co., 66

Ohio App:3i3. 826, 829 (1990).

{^[14} The Johnsons asserted a nuYnber of claims in their Complaint, including violations

of the Ohio Securities Act, negligence, breach of fiduciary duty; conversion, invasion of privacy,

respondeat superior, proinissory estoppel, and fraudulent misrepresentation. In their brief, the

Johnsons have only addressed.their negligent misrepresentation, fraudulent misrepresentation,

Ohio Securities Act, and respondeat superior claims. This Court will limit its discussion to those

claims. See State ex rel. Moore v. Malone, 96 Ohio St. 3d 417, 2002-Ohio-4821, at ¶39 (holding

that a party waived the claims she failed to pursue in her merit brief). Moreover, before this

Court can determine whether respondeat superior applies, it must detennine whether Guenther

can be held liable. Moncol v. Bd. of Educ. of N. Royalton Sch. Dist., 55 Ohio St. 2d 72, syllabus

(1978) ("a judgment in favor of the servant on the merits renders invalid any judgment against

the master.").

JUSTIFIABLE RELIANCE

{^15} The Johnsons have argued that Guenther made negligent misrepresentations and

defrauded them. "[T]he elements of fraud and negligent misrepresentation are very similer."

Martin v. Ohio State Univ. Found., 139 Ohio App. 3d 89, 104 (2000). In parLicular, justifiable

reliance is an essential element of botli. In describing liability for.negligent misrepresentation,

the Ohio Supreme Court has written: "One wlio, in the course of his business, profession or

employment, or in any other transaction in which he has a pecuniary interest, supplies false

information for the guidance of others in their business transactions, is subject to liability for

pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to

exercise reasonable care or competence in obtaining or communicating the information."

7

Delman v. Cleveland Heights, 41 Ohio St. 3d 1, 4 (1989) (emphasis in original) (quoting

Restatement (Second) of Torts § 552(l) (1965)). "The elements of fraud are: (a) a

representation or, where there is a duty to disclose, concealment of a fact, (b) Which is material to

the transaction at hand, (c) made falsely, with knowledge of its falsity, or with such utter

disregard and recklessness as to whether it is true or false that knowledge may be inferred, (d)

with the intent of misleading another into relying upon it, (e) justifiable reliance upon the

representation or concealment, and (f) a resulting injury proximately caused by the reliance."

Roberts v. Hagen, 9th Dist. No. 2845-M, 2000 WL 150766 at *2 (Feb. 9, 2000) (quoting Burr v.

StarkCountyBd.ofComm'rs, 23 Ohio St. 3d 69, paragraph two of the syllabus (1986)).

f¶16} To deteimine whether the Johnson's reliance was justified, "this Court must

inquire into the relationship between the parties." Lapos Constr. Co. v. Leslie, 9th Dist. No.

06CA008872, 2006-Ohio-5812, at ¶21 (citing Crown Prop. Dev. Inc. Y. Omega Oil Co., 113

Ohio App. 3d 647, 657 (1996)). It must "consider the nature of the transaction, the form and

materiality of the representation, the relationship of the parties and their respective means and

knowledge, as well as other circumstances." Farris Disposal Inc. v. Leipply's Gasthaus Inc., 9th

Dist. No. 22569, 2005=Ohio-6737, at ¶18 (quoting Radice Partners Ltd v. ,4ngerman, 9th Dist.

No. 90CA004861, 1991 WL 6138 at 'k5 (Jan. 16, 1,991)).

{¶17} Johnson testified that, after he told Guenther he wanted to minister full time,

Guenther told him that there was a man at his church who helps people invest, that he has helped

pastors, churches, and other ministries, and that he had been doing it for a long time. He told

Johnson that he did not know how the program worked, but could have others explain it to him.

At the second meeting, Guenther was present, but did not speak much. According to Johnson,

although he knew Guenther was not a financial advisor, lie invested with MeNaughton because

8

of Guenther's and McNaughton's credibility. He claimed they had told him that the Church's

senior pastor and several other members had successfully invested and that the Church offered

the investments as a way to help eburches, pastors, and Christian campgrounds.

{¶18} Acoording, to Johnson, after he moved his ministry to the Silos, Guenther

continued to promote McNaughton's investments. Guenther spoke openly about the "bags of

money" that McNaughton gave him and refen•ed. to McNaughton's investment program as the

"G plan." He assumed tlie.Guenthers were part of the investment program because Mrs.

Guenther had notarized some of the promissory notes he received. Johnson testified, however,

that, after he made his initial investment with McNaughton, he did not rely on Guenther's advice

in deciding to make additional investments.

{¶19} The Jdhnsons invested over half a million dollars with McNaughton, aIlegedly

based on Guenther's advice, even though they had just met Guenther, Guenther did not know

many details about MeNaughton's program, and the Johnsons knew he was not a Iicensed

financial advisor. Even if it was reasonable for the Johnsons to think Guenther was trustwortly

because he was a f^Ilow niinister, they knew he had no expertise with financial investments.

{¶20} Moreover, despite Guenther's recommendation, the Johnsons sought other

assurances. After meeting with McNaughton, they contacted two couples who had invested with

McNaughton to verify his claims. In Christian v. McLaughlin, 9th Dist. No. 19064, 1999 WL

1579 (Dec. 30, 1998), this Court concluded that the purchasers of a house did not justifiably rely

on a real estate agent's representations because "[d]espite [the agent's) representations as to the

wiring and plumbing, [the buyers] continued to investigate possible problems on their own and

relied on the representations and work of [a] home inspector and [] electrician. Their resort to

these outside sources and the continuing suspicion of problems with the house show that any

reliance on [the agent's] representations was no longer justified." Id. at *2. Similarly, despite

Guenther's recommendation, the Johnsons continued to be wary about McNaughton's plan and

contacted others who had invested with him. Under these circumstances, their reliance on

Guenther's statements was not justified as a matter of law.

{¶21} Regarding the mortgage for the Silos, the Johnsons have not atleged that Guenther

was involved in that transaction, While Guenther was president of the Silos and Mrs. Guenther

was its director, it was MeNaughton who asked the Johnsons to cosign for the loan.

Accordingly; they cannot establish that. Guenther made any negligent or fraudulent

misrepresentations about the loan. The trial court correctly determined that Guenther and the

Church were entitled to summary judgment on the Johnsons' negligent misrepresentation and

fraud claims.

O$J.O SECURITIES ACT

{¶22} The Johnsons have aLso argued that Guenther participated or aided in the sale of

unregistered . securities, in violation of Section 1707.43 of the Ohio Revised Code. Section

1707.43(A) provides that "every person that. has participated in or aided the seller [of an

unregistered security] in any way ... [is] jointly and severally liable to the purchaser :..." A

person who has not received remuneration based on the sale, however, "shall not be deemed to

have . . . participated in, or aided.the seller . ...." R.C. 1707.431(B).

{123} Guenther has argued that his conduct did not rise to the level of participating in a

sale. While there has not been much case law interpreting the phrase "participated in or aided

the seller in any way," "it is clear that this language is broad in scope given the phrase `in any

way."' Federated Mgrnt. Co. v, Coopers & Lybrand, 137 Ohio App. 3d 366, 391 (2000)

(quoting R.C. 1707.43(A)). Guenther not only told the Johnsons about McNaughton's

10

investment program, b.e arranged for them to meet with McNaughton and attended the meeting.

A genuine issue of material fact, therefore, exists regarding whether he aided MeNaughton in the

sale of unregistered securities,

{¶24} Guenther has argued that he falls within the exclusiori under Section 1707.431(B)

because he did not receive remuneration based on the sale. The Johnsons, however, have

presented eviden.ce that, around the time they began investing with McNaughton, Mrs.

Gu.enther's salary at the Silos increased. Guenther testified thatIvIcNaughton, as vice-president

of the Silos, was responsible for determining her salary. The Johnsons have submitted evidence

that, in 2000, Mrs. Guenther received $30,000 from McNaughton's investment account. They

have also submitted.evidence that, in 2001, some of Mrs. Guenther'.s.salaty was paid directly

from McNaughton's investment account. Acoordingly, there is a. genuine issue of material fact

regarding, whether Guenther received remuneration for aiding McNaugh.ton in the sale of

unregistered securities. See Perkowski v. Megas Corp., 55 OhioApp. 3d 234, 236 (1990)

(concluding radio show host who received an advertising fee had received nidirect remuneration

for bringing issuers and purchasers of securities together).

{¶25.} Guenther has also argued that the Johnsons' claim is time-barred under Section

1707.43(B,), which provides that no action "shall be brought more than two years after the

plaintiff lai.ew, or had reason to know, of the facts by reason of whicb the actions of the person or

director were unlawful ...." He has noted that the Johnsons. were unable to cash one of

McNaughton's checks in December 2002, which, according to him, gave them notice that there

was a problem. In fact, he has noted that they asked McNaughton to return almost half of their

piincipal following that incident. They did not file their Complaint, however, until March 2005.

11

{¶26} Although the Johnsons had trouble cashing one of McNaughton's checks in

December 2002, McNaughton's daughter was at the bank at the same time aud deposited enough

money into his account so that they could be paid. The Johnsons were. reassured by

McNaughton that the problem was only temporary because of increased regulations following

passage of the Patriot Act. Although they requested that McNaughton return a large amount of

their principal, their promissory note gave him four months to do so. Following the incident,

they continued receiving monthly payments until April .2003. They did not fail to receive a

check or have their principal timely retumed until April 2003, and were not aware of a

government investigation into the investment scheme until June 2003. A genuine issue of

material fact, therefore, exists regarding when they knew or should have known that

McNaughtoii's investment program was unlawful. The trial court . incorrectly granted Guenther

sunnnary judgment on the Jahnsons' Ohio Securities Act claim. Their first assignment of error

is sustained regarding their claim against Guenther under Section 1707.43(A), but overruled as to

their negligent inisrepresentation and.fraud claims.

RESPONDEAT SUPERIOR

{¶27) The Johnsons' second assignment of error is that the trial court incorrectly failed

to submit the question of whether Guenther was acting in the scope of his employment to a jury.

"For an employer to be liable for a tortious act of its employee, that employee must be acting

within the scope of employment when [he] commits the tortious act." Groob v. KeyBank, 108

Ohio St. 3d 348, 2006-Ohio-1189, paragraph two of the syllabus. "A person is acting within the

scope of his employment when: `(a) it is of the kind he is employed to perform; (b) it occurs

substantially within the authorized time and space limits; [and] (c) it is actuated, at least in part,

by a purpose to serve the master."' Jevack v. McNaughton, 9th Dist. No. 06CA008928, 2007-

12

Ohio-2441, at¶16 (quoting Akron v. Holland Oil Co., 102 Ohio St. 3d 1228, 2004-Ohio-2834, at

T13-15 (Pfeifer, J., dissenting)}. "[T]he burdenis on [the John.sons].to show.that [Guenther was]

actirig within the scope of [his] employment with the purpose to serve [the Churph]." Id. "If []

reasonable minds can only conclude that the tort occurred outside the scope of [Guenther's]

employment, then [the Church] would not be vicariously liable to [the Johnsons] and summary

judgment in its favor would be proper." Id. (quoting Wrinkle v. Cotton, 9th Dist. No.

03CA008401, 2004-Ohio-4335, at¶8).

{¶28} The Johnsons have argued that Guenther was acting within the scope of his

einployment because his duties included ministering at the Silos, enlarging the footprint of the

Church in the commuazity, gaining access to public high schools, getting people involvad in

college and youth ministries, and getting people -from the cominunity to attend the Church. In

October 2000, Guenther's supervisor approved a job deseription for Guenther that contained a

section.for community representation and outreach, including bis work at the Silos. The

Johnsons have argued that, when Guenther mentioned the investment program to them, he was

responding to their request to build a relationship with the Church and their interest in devoting

themselves to practicing their ministry fizll time at the Silos. According to the letter Mrs.

Guenther wrote to Guenther'.s supervisor, Guenther also thought that their ministry could serve

as a feeder for the Church.

(¶29} Although Guenther's responsibilities did not include aiding or parficipating in the

sale of securities, he knew that the Johnsons wanted to devote themselves to ministry work full

time. He also knew that they could only do so if they could live off of their investment income.

Viewing the evidence in a light most favorable to the Johnsons, Guenther may have encouraged

them to invest in McNaughton's program to entice them to move their min.isfry to the Silos and

13

recruit them to the Church. A genuine issue of material fact, therefore, exists regarding whether

he was acting within the scope of his employment when he told the Johnsons about

McNaughtori's investcrrent program andtaided in McNaughton's sale of unregistered securities.

The trial court incorrectly granted the Church summary judgment on the Johnsons' Ohio

Securities Act claim. Their second assignment of error is sustained.

CONCLUSION

{¶30} Genuine issues of material fact exist regarding whether Guenther aided or

participated in the sale of unregistered securities and whether he did so within the scope of his

employment. The judgment of the Lorain County Common Pleas Court is affirnied in part and

reversed in part,. and this matter is. remanded for proceedings consistent with this opinion.

Judgment affirmed in part,reversed in part,

and cause remanded.

The Court finds that 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 Lorain, 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.

Inamediately upon the filing hereof, this document shall constitute tlie joumal 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(E). 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.

14

Costs taxed equally to both parties.

CLAIIZE. DICKINSONFOR THE COURT

MOORE, P. J.SLABY, J.CONCUR

APPEARANCES:

DAVID A. FORREST; Attorney at Law, for appellants.

PATRICK D. RILEY, Attorney at Law, for appellants.

KATE E. RYAN, Attorney at Law, for appellees.

7AMES L. GLOWACKI and WILLIAM H. KOTAR, Attorneys at Law, for appellees.

JAY CLINTON RICE, Attorney at Law, for appellees.