Swisher v. Apex Marketing Management Inc. et al

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
MICHAEL SWISHER,
Plaintiff,
v. 	Case Number 2:25-cv-434
JUDGE EDMUND A. SARGUS, JR.
APEX MARKETING MANAGEMENT 	Magistrate Judge Kimberly A. Jolson
INC., et al.,
Defendants.
OPINION AND ORDER
This matter is before the Court on two motions filed by Defendants Apex Marketing
Management Inc., Scott Patterson, and Cody Stokes. (ECF Nos. 13, 14.) Defendants filed a
Motion to Strike (ECF No. 13), to which Plaintiff Michael Swisher responded (ECF No. 25) and
Defendants replied (ECF No. 33). Defendants also filed a Motion to Dismiss (ECF No. 14), to
which Mr. Swisher responded (ECF No. 26) and Defendants replied (ECF No. 34). For the
reasons set forth below, the Court DENIES Defendants’ Motion to Strike (ECF No. 13) and
DENIES Defendants’ Motion to Dismiss (ECF No. 14).
BACKGROUND
I. 	Factual Background
The Court summarizes the facts as alleged in Mr. Swisher’s Complaint because the Court
accepts those allegations as true for purposes of Defendants’ Motion to Dismiss.
In December 2020, Mr. Patterson, Mr. Stokes, and Mr. Swisher formed Apex Marketing
Management Inc., a three-shareholder company that performs direct mail marketing. (ECF No. 1,
¶¶ 3, 10.) Mr. Patterson is the Chief Executive Officer of Apex and owns 51% of the company’s
shares, Mr. Stokes is the Chief Financial Officer of Apex and owns 24.5% of the company’s
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shares, and Mr. Swisher was the Chief Business Officer of Apex until January 3, 2025, and owns
24.5% of the company’s shares. (Id. ¶¶ 2, 4–5.) Apex was formed with a single client,
JPMorganChase (“JPMC”), which Mr. Swisher brought to the company. (Id. ¶ 11.) Mr. Swisher
alleges that JPMC was the company’s largest and most profitable account, generating just over
$1,000,000 in profit for Apex in 2024. (Id. ¶¶ 12, 20.) In July 2023, Mr. Patterson, Mr. Stokes,
and Mr. Swisher agreed to place themselves on a $200,000 annual salary each, plus
disbursements. (Id. ¶ 17.) Disbursements were made for less than a year, and Mr. Swisher
received his last disbursement in February 2024. (Id. ¶ 18.)
Mr. Swisher oversaw envelope production and sales, and Mr. Patterson oversaw direct
mail lettershop production and sales. (Id. ¶ 13.) Mr. Swisher alleges that the envelope side of
Apex’s business was flourishing and expanding, but that the direct mail lettershop side of Apex’s
business had lost all but its largest account by summer 2024. (Id. ¶¶ 19, 21, 23.) Mr. Swisher
never saw an Apex profit and loss statement, and there was never a regular meeting with all three
shareholders to discuss the financial condition of the company. (Id. ¶¶ 14–15.) During the latter
half of 2024 and the beginning of 2025, some of Apex’s suppliers experienced unpaid and
overdue invoices, which resulted in Apex losing JPMC’s business. (Id. ¶¶ 31–32.)
During a call on January 3, 2025, Mr. Patterson and Mr. Stokes stated that, as a purported
quorum, they had decided to terminate Mr. Swisher’s employment. (Id. ¶ 28.) The last salary
payment Mr. Swisher received was $18,000 on December 17, 2024, for services rendered in
November 2024. (Id. ¶ 29.) Mr. Swisher alleges that he has not been paid the $18,000 he is owed
for services rendered in December 2024. (Id. ¶ 30.)
In February 2025, counsel for Mr. Swisher sent a letter to Apex demanding that the
company remit $18,000 to Mr. Swisher for his work in December 2024; requesting books and
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records pursuant to Ohio law, including Apex’s 2023 and 2024 annual shareholder reports; and
expressing Mr. Swisher’s interest in selling his Apex shares. (Id. ¶¶ 33, 55.) Apex denied Mr.
Swisher’s request for documents on the grounds that the request failed to state a specific purpose
and was not made in good faith. (Id. ¶ 37.) On April 8, 2025, Mr. Swisher renewed his books and
records request with the specific purpose of ascertaining Apex’s financial condition and
determining the rationale for and process behind the decision to terminate his employment and
withhold payment. (Id. ¶¶ 41, 47.) Apex rejected Mr. Swisher’s request for a second time. (Id. ¶
42.)
II. 	Procedural Background
Mr. Swisher filed this lawsuit in April 2025 against Defendants Apex, Patterson, and
Stokes. (ECF No. 1.) Mr. Swisher asserts five claims: Denial of Access to Books and Records in
violation of Ohio Revised Code § 1701.37 against all Defendants (Count I), Denial of Annual
Financial Statements in violation of Ohio Revised Code § 1701.38 against all Defendants (Count
II), Unjust Enrichment against all Defendants (Count III), Breach of Fiduciary Duty against
Defendants Patterson and Stokes (Count IV), and Declaratory Judgment against all Defendants
(Count V). (Id.) The Complaint alleges that this Court has diversity jurisdiction over Mr.
Swisher’s claims pursuant to 28 U.S.C. § 1332. (See id. ¶ 6.)
In June 2025, Defendants moved to strike certain paragraphs and exhibits from Mr.
Swisher’s Complaint pursuant to Federal Rule of Civil Procedure 12(f). (ECF No. 13.)
Defendants also moved to dismiss Mr. Swisher’s Complaint under Federal Rule of Civil
Procedure 12(b)(1) and (b)(6). (ECF No. 14.) Mr. Swisher responded in opposition to both
motions (ECF Nos. 25, 26), and Defendants replied in support (ECF Nos. 33, 34). Defendants’
Motion to Strike and Motion to Dismiss are now ripe for review.
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DEFENDANTS’ MOTION TO DISMISS
Defendants move to dismiss Mr. Swisher’s Complaint under Rule 12(b)(1) for failure to
satisfy the jurisdictional amount in controversy and under Rule 12(b)(6) for failure to state a
claim upon which relief may be granted. (ECF No. 14.) The Court addresses each argument in
turn.
I. 	Federal Rule of Civil Procedure 12(b)(1)
A. 	Legal Standard
Federal Rule of Civil Procedure 12(b)(1) provides for dismissal when the court lacks
subject matter jurisdiction. Motions to dismiss for lack of subject matter jurisdiction are either
facial attacks or factual attacks. United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). A
facial attack challenges the sufficiency of the pleading itself, and the court accepts the allegations
in the complaint as true. Id. To survive a facial attack, the complaint must contain a “short and
plain statement of the grounds” for jurisdiction. Rote v. Zel Custom Mfg. LLC, 816 F.3d 383, 387
(6th Cir. 2016). On the other hand, a factual attack challenges the factual existence of subject
matter jurisdiction and requires a court to “weigh the conflicting evidence to arrive at the factual
predicate that subject-matter [jurisdiction] does or does not exist.” Ritchie, 15 F.3d at 598;
Gentek Bldg. Prods., Inc. v. Sherwin-Williams Co., 491 F.3d 320, 330 (6th Cir. 2007).
B. 	Analysis
Defendants move to dismiss this lawsuit pursuant to Rule 12(b)(1), arguing that the
Complaint’s allegations do not plausibly exceed the $75,000 amount in controversy threshold for
diversity jurisdiction. (ECF No. 14, PageID 88–90.)
A federal court has original diversity jurisdiction where the suit is between citizens of
different states and the amount in controversy exceeds $75,000, exclusive of costs and interest.
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28 U.S.C. § 1332(a). “To defeat diversity jurisdiction, ‘[i]t must appear to a legal certainty that
the claim is really for less than the jurisdictional amount.’” Charvat v. GVN Mich., Inc., 561 F.3d
623, 628 (6th Cir. 2009) (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283,
289 (1938)). “Generally, the amount claimed by the plaintiff in the complaint rules, as long as
claimed in good faith.” Id. Dismissal is proper if the amount alleged in the complaint was never
recoverable in the first instance, such as where applicable law bars the type of damages sought
by the plaintiff. Id.
In his Complaint, Mr. Swisher states that the amount in controversy exceeds $75,000 and
asks for general, special, compensatory, punitive, and exemplary damages in an amount greater
than $75,000. (ECF No. 1, PageID 2, 13.) Defendants acknowledge that Mr. Swisher seeks
$18,000 for allegedly unpaid compensation, hundreds of dollars related to his claims for access
to company records, and compensation for his 24.5% ownership interest in Apex, but posit that
these damages do not total $75,000. (ECF No. 14, PageID 90.) In response, Mr. Swisher argues
that he is owed “any lost share of corporate profits to which Defendants denied him fair access,
which—given the substantial profits and his 24.5% interest in the company—well exceed
$75,000.” (ECF No. 26, PageID 213.)
Through his breach of fiduciary duty claim, Mr. Swisher seeks monetary damages for lost
payroll earnings, lost disbursements, and lost profits. (ECF No. 1, ¶¶ 69–71.) Ohio courts permit
minority shareholders to recover profits that they are entitled to through a breach of fiduciary
duty claim. Daly v. Rowe, 199 N.E.3d 237, 245 (Ohio Ct. App. 1st Dist. 2022); Yackel v. Kay,
642 N.E.2d 1107, 1110 (Ohio Ct. App. 8th Dist. 1994). Mr. Swisher alleges that, before his
termination in January 2025, parts of Apex were “flourishing.” (ECF No. 1, ¶ 19.) For example,
envelope sales and production experienced “continued profits” and the JPMC account generated
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over $1,000,000 in profit in 2024 for Apex. (Id. ¶¶ 20, 24.) Despite this, Mr. Swisher received
his last disbursement in February 2024 and alleges that Mr. Patterson and Mr. Stokes historically
denied him disbursements. (Id. ¶¶ 18, 69.) Mr. Swisher says that these facts are sufficient to
support his allegation that the amount in controversy exceeds $75,000. (ECF No. 26, PageID
212–13.) The Court agrees. Defendants criticize Mr. Swisher’s position as “speculative,” but do
not argue that Mr. Swisher is legally barred from recovering these damages. (See ECF No. 34,
PageID 281–82.)
It does not appear to a legal certainty that Mr. Swisher’s claims are for damages less than
$75,000, nor does it appear that Mr. Swisher alleged the amount in controversy in bad faith, so
Defendants’ request to dismiss this action due to lack of subject matter jurisdiction is denied.
II. 	Federal Rule of Civil Procedure 12(b)(6)
A. 	Legal Standard
Federal Rule of Civil Procedure 12(b)(6) provides for dismissal of actions that fail to
state a claim upon which relief can be granted. Plaintiffs must satisfy the pleading requirements
set forth in Rule 8(a), which requires a pleading to contain a “short and plain statement of the
claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Accordingly, “[t]o
survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true,
to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 677–78
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. at 678 (clarifying the
plausibility standard from Twombly, 550 U.S. at 556). Furthermore, “[a]lthough for the purposes
of a motion to dismiss [a court] must take all of the factual allegations in the complaint as true,
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‘[the court is] not bound to accept as true a legal conclusion couched as a factual allegation.’” Id.
at 678 (quoting Twombly, 550 U.S. at 555).
B. 	Analysis
1. 	Count I – Denial of Access to Books and Records Under Ohio Law
Defendants move to dismiss Mr. Swisher’s claim that they violated Ohio Revised Code §
1701.37 by denying him access to Apex’s books and records. (ECF No. 14, PageID 90–92.) A
shareholder’s right to inspect and copy the shareholder records of an Ohio corporation is
governed by Ohio Revised Code § 1701.37(C), which provides:
Any shareholder of the corporation, upon written demand stating the specific
purpose thereof, shall have the right to examine in person or by agent or attorney at
any reasonable time and for any reasonable and proper purpose, the articles of the
corporation, its regulations, its books and records of account, minutes, and records
of shareholders aforesaid, and voting trust agreements, if any, on file with the
corporation, and to make copies or extracts thereof.
Defendants contend that Mr. Swisher’s requests for books and records lacked a specific
and proper purpose and were made in bad faith. (ECF No. 14, PageID 91–92.) The Ohio
Supreme Court has explained that, for a shareholder to exercise his right of inspection,
“[n]othing more is required than that, acting in good faith for the protection of the interests of the
corporation and his own interests, he desires to ascertain the condition of the corporation’s
business.” Lake v. Buckeye Steel Castings Co., 206 N.E.2d 566, 569 (Ohio 1965); see also
Carlson v. Rabkin, 789 N.E.2d 1122, 1129 (Ohio Ct. App. 1st Dist. 2003).
Here, Mr. Swisher requested books and records from Apex on February 11, 2025, and
renewed his request on April 8, 2025, clarifying that he seeks documents to “ascertain the
condition of Apex’s business, as well as the reasoning and process supporting his termination
and the withholding of payment for services rendered.” (ECF No. 1, ¶¶ 33–34, 41–42; ECF No.
1-1; ECF No. 1-4.) So, Mr. Swisher included a reasonable and proper purpose when requesting
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documents. See Celina Mut. Ins. Co. v. Am. Druggists Ins. Co., 369 N.E.2d 1066, 1068–69 (Ohio
Ct. App. 1st Dist. 1977) (holding that “securing information as to the details of the business . . .
and the status of its affairs, investigating whether there are any improprieties in its management
and operation, and communicating with other shareholders regarding the affairs” are proper
purposes).
Defendants also argue that dismissal is warranted because Mr. Swisher asked Defendants
to comply with his books and records requests within one week. (ECF No. 14, PageID 90–91.)
Defendants cite Davis v. DCB Financial Corporation, 259 F. Supp. 2d 664 (S.D. Ohio 2003)
(Graham, J.), as support. There, the plaintiff alleged that he was denied access to books and
records “at the time of his choosing,” and the Court rejected that claim because the plaintiff did
not allege that the deadlines for compliance—seven days in one instance and five days in
another—were reasonable. Id. at 677. Notably, the plaintiff in Davis “did not allege in his
complaint that he was denied all access to . . . books and records.” Id. Although Mr. Swisher
included similar deadlines in his letters to Apex, Mr. Swisher’s claim is distinct because it is
based on Apex’s failure to produce books and records altogether, not Apex’s failure to produce
books and records by a certain deadline. (ECF No. 1, ¶¶ 37, 42, 49.)
Mr. Swisher has sufficiently alleged a claim for denial of access to books and records
under Ohio Revised Code § 1701.37 and the Court denies Defendants’ request to dismiss Count
I.
2. 	Count II – Denial of Annual Financial Statements Under Ohio Law
Defendants move to dismiss Mr. Swisher’s claim that they violated Ohio Revised Code §
1701.38 by denying him access to Apex’s 2023 and 2024 annual shareholder reports. (ECF No.
14, PageID 92–93.)
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Ohio Revised Code § 1701.38 provides that “[u]pon request of any shareholder made in
writing . . . prior to the date of the [annual meeting of shareholders] . . . the corporation shall
send a copy of any financial statements, written statements, and reports, as applicable, laid or to
be laid before the shareholders at the meeting to the shareholder” within a certain timeframe.
Ohio Rev. Code. § 1701.38(A), (C). Mr. Swisher alleges that he is a shareholder of Apex; he
requested documents, including the 2023 and 2024 annual shareholder reports, from Apex in
writing on February 11, 2025, and April 8, 2025; and Defendants rejected those requests. (ECF
No. 1, ¶¶ 2, 33, 37, 41, 42, 55, 56.)
Defendants argue that Count II must fail because no annual meeting had been scheduled
when Mr. Swisher requested Apex’s shareholder reports and Mr. Swisher’s requests imposed
unreasonably short deadlines. (ECF No. 14, PageID 92–93.) But defendants are “not entitled to
avoid the mandate of R.C. 1701.38 as to financial statements by failing formally to schedule
meetings and give plaintiff notice thereof.” Cousins v. Brownfield, 615 N.E.2d 1064, 1067 (Ohio
Ct. App. 10th Dist. 1992); cf. McConnell v. Bare Label Prods., Inc., No. 2013-T-0050, 2015 WL
1432464, at *6 (Ohio Ct. App. 11th Dist. Mar. 31, 2015). Thus, the Court declines to dismiss Mr.
Swisher’s claim under Ohio Revised Code § 1701.38 on that ground. And, for the reasons
discussed above, the deadlines associated with Mr. Swisher’s requests do not warrant dismissal.
The Court denies Defendants’ request to dismiss Count II.
3. 	Count III – Unjust Enrichment
In Count III, Mr. Swisher asserts an unjust enrichment claim arising out of Defendants’
alleged failure to pay him $18,000 for services rendered to Apex in December 2024. (ECF No. 1,
¶¶ 59–64.) Defendants argue that this claim fails because Mr. Swisher admits an express
agreement set his compensation at $18,000 per month and exhibits attached to the Motion to
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Dismiss confirm Apex paid Mr. Swisher in full. (ECF No. 14, PageID 93.) Mr. Swisher responds
that he sufficiently alleged an unjust enrichment claim and asks the Court to refrain from
considering the exhibits at this time. (ECF No. 26, PageID 219–20.)
A claim for unjust enrichment “arises out of the obligation cast by law upon a person in
receipt of benefits which he is not justly entitled to retain.” Hambleton v. R.G. Barry Corp., 465
N.E.2d 1298, 1302 (Ohio 1984) (quoting Hummel v. Hummel, 14 N.E.2d 923, 925–26 (Ohio
1938)). To state a claim for unjust enrichment, a plaintiff must allege “(1) a benefit conferred by
a plaintiff upon a defendant; (2) knowledge by the defendant of the benefit; and (3) retention of
the benefit by the defendant under circumstances where it would be unjust to do so without
payment.” Id.
On the face of the Complaint, Mr. Swisher has plausibly alleged an unjust enrichment
claim. Mr. Swisher alleges that he worked for Apex during December 2024; he has not been paid
the $18,000 he is owed for that work; his work conferred benefits on Apex, such as managing the
company’s JPMC account; and Defendants’ refusal to pay him resulted in their unjust
enrichment. (ECF No. 1, ¶¶ 27, 60–64.) According to Defendants, Mr. Swisher’s allegation that
Mr. Patterson, Mr. Stokes, and Mr. Swisher agreed to place themselves on a $200,000 annual
salary shows that an express agreement exists and precludes him from pursuing an unjust
enrichment claim. (ECF No. 1, ¶ 17; ECF No. 34, PageID 283.) But Mr. Swisher also alleges
that he “had no employment agreement with Apex.” (ECF No. 1, ¶ 36.) At this early stage of
litigation, when the Court must accept the factual allegations in the Complaint as true and draw
reasonable inferences in favor of Mr. Swisher, the Court finds that Mr. Swisher has not alleged
the existence of an express contract such that his unjust enrichment claim is barred.
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Defendants attached four exhibits to their Motion to Dismiss: three bank statements and a
termination letter addressed to Mr. Swisher. (ECF No. 14, PageID 99–107.) Defendants say these
documents confirm Apex paid Mr. Swisher for his work in December 2024. (Id. PageID 93.) Mr.
Swisher characterizes the exhibits as unauthenticated and ambiguous, and argues that
considering them would convert Defendants’ Motion to Dismiss into a motion for summary
judgment. (ECF No. 26, PageID 209–10, 219–20.)
“When a court is presented with a Rule 12(b)(6) motion, it may consider . . . exhibits
attached to defendant’s motion to dismiss so long as they are referred to in the Complaint and are
central to the claims contained therein.” Bassett v. Nat’l Collegiate Athletic Ass’n, 528 F.3d 426,
430 (6th Cir. 2008). Mr. Swisher’s Complaint does not mention the bank statements or
termination letter that Defendants attach to their Motion to Dismiss. Even if the Court were to
consider these documents, though, its decision would not change. With respect to the bank
statement exhibits, the Court cannot determine who sent or received the payments or why the
payments were issued. (See ECF No. 14, PageID 99–104.) The exhibits are not accompanied by
a declaration or affidavit providing this context. The fourth exhibit—a termination letter to Mr.
Swisher—discusses Apex’s intent to pay Mr. Swisher for three days of work in January 2025,
but does not confirm that this payment occurred and does not address payment to Mr. Swisher
for work in December 2024. (See id. PageID 106–07.) As such, the documents attached to
Defendants’ Motion to Dismiss do not justify dismissing Mr. Swisher’s unjust enrichment claim
at this time.
The Court denies Defendants’ request to dismiss Count III.
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4. 	Count IV – Breach of Fiduciary Duty
In Count IV, Mr. Swisher alleges that Mr. Patterson and Mr. Stokes took advantage of
their majority control of Apex and did not provide Mr. Swisher with an equal opportunity to
benefit, thereby breaching their fiduciary duty to Mr. Swisher. (ECF No. 1, ¶¶ 65–71.)
Defendants move to dismiss this count, arguing that Mr. Swisher cannot assert this claim as a
direct action, which he has done here, and must do so through a derivative action instead. (ECF
No. 14, PageID 94–95.) Mr. Swisher counters that Ohio law permits him to pursue his breach of
fiduciary duty claim directly. (ECF No. 26, PageID 221–24.)
i. 	Close Corporation
A heightened fiduciary duty exists between majority and minority shareholders in a close
corporation. Crosby v. Beam, 548 N.E.2d 217, 220–21 (Ohio 1989). Here, Defendants argue that
“Apex is not a statutorily recognized close corporation” because the shareholders did not execute
a Close Corporation Agreement pursuant to Ohio Revised Code § 1701.591. (ECF No. 14,
PageID 94.) In Ohio, a close corporation is defined as “a corporation with a few shareholders and
whose corporate shares are not generally traded on a securities market.” Crosby, 548 N.E.2d at
220. Corporate entities that meet these criteria but have not adopted a close corporation
agreement are still considered close corporations. Duggan v. Orthopaedic Inst. of Ohio, Inc., No.
3:03 CV 7651, 2004 WL 951469, at *2 (N.D. Ohio Apr. 8, 2004) (collecting cases). As such, the
Court is unpersuaded by Defendants’ argument that Apex does not qualify as a close corporation
simply because it has not executed a close corporation agreement. The Complaint sufficiently
alleges that Apex is a close corporation in that it has a few shareholders (three) and its corporate
shares are not generally traded on a securities market. (See ECF No. 1, ¶¶ 10, 33, 39; ECF No. 1-
3, PageID 25.)
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ii. 	Majority or Controlling Shareholders
Next, Defendants argue that Mr. Swisher may not bring a direct action because both Mr.
Stokes and Mr. Swisher are minority shareholders. (ECF No. 14, PageID 94–95.)
In Ohio, minority shareholders may bring a breach of fiduciary duty claim through a
direct action against majority or controlling shareholders in a close corporation. Crosby, 548
N.E.2d at 221. In addition, “Ohio courts impose heightened fiduciary duties on minority
shareholders when they dominate [the] corporation to the exclusion of other minority
shareholders.” Duggan, 2004 WL 951469, at *1–2 (finding that shareholders qualify as
controlling when they act collectively to exert complete control over the company and terminate
another shareholder); see also McLaughlin v. Beeghly, 617 N.E.2d 703, 705 (Ohio Ct. App. 10th
Dist. 1992) (“Typically, cases addressing a dominant shareholder’s [fiduciary duty] involve
factual situations where a single majority shareholder, or coalition group of minority
shareholders, manipulate corporate procedures for their own advantage by exercising domina[nt]
control.”); Vontz v. Miller, 111 N.E.3d 452, 461 (Ohio Ct. App. 1st Dist. 2016) (noting that a
heightened fiduciary duty applies when one shareholder exercises “control over the corporation
to an extent that [the shareholder’s] actions dominate” even though the shareholder is “not
technically a majority owner”).
Mr. Patterson is a majority shareholder of Apex who owns a 51% share. (ECF No. 1,
¶ 4.) Although Mr. Stokes is a minority shareholder of Apex who owns a 24.5% share, Mr.
Swisher alleges that Mr. Patterson and Mr. Stokes formed a controlling majority, used that
control to their advantage, did not provide Mr. Swisher an equal opportunity to benefit, and
isolated and injured him. (Id. ¶¶ 1, 5, 66, 68.) The Complaint states that Mr. Stokes aligned with
Mr. Patterson as a controlling majority to terminate Mr. Swisher and deny him access to
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corporate records. (Id. ¶ 66.) Mr. Swisher also alleges that Mr. Stokes historically acted as Mr.
Patterson’s right-hand man. (Id.) At this stage in the litigation, these statements are sufficient to
show that Mr. Patterson and Mr. Stokes were majority or controlling shareholders against whom
a breach of fiduciary duty claim may be asserted.
iii. 	Separate and Distinct Injury
Next, Defendants argue Mr. Swisher may not bring a direct action because he did not
allege that he suffered an injury separate from that of the company. (ECF No. 14, PageID 95.)
“[I]f the complaining shareholder is injured in a way that is separate and distinct from an injury
to the corporation, then the complaining shareholder has a direct action.” Crosby, 548 N.E.2d at
219. In other words, when the harm to a minority shareholder “can be construed to be individual
in nature, then a suit by a minority shareholder against the offending majority or controlling
shareholders may proceed as a direct action.” Id. at 221.
Here, Mr. Swisher alleges harm that is individual in nature, including that controlling
shareholders of Apex removed him from the company’s payroll and denied him disbursements
from the company’s profits. (ECF No. 1, ¶ 69); Heaton v. Rohl, 954 N.E.2d 165, 175–76 (Ohio
Ct. App. 11th Dist. 2011) (concluding that “[t]he cause of action was appropriately brought as a
direct action” because the defendant deprived “the sole remaining shareholder, of both his equal
share in the company and his employment”); Yackel, 642 N.E.2d at 1110 (explaining that a
shareholder may bring a direct action to pursue relief for being wrongfully discharged and
deprived of his share of corporate profits). Requiring Mr. Swisher to bring his breach of
fiduciary duty claim as a derivative action would not be “an effective remedy” in this case
because “any recovery would accrue to the corporation and remain under the control of the very
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parties who are defendants in the litigation.” Crosby, 548 N.E.2d at 221. Therefore, this lawsuit
may proceed as a direct action.
iv. 	Procedural Exhaustion Requirements
Finally, Defendants argue that Mr. Swisher’s failure to pursue internal remedies and
comply with procedural requirements in Ohio Rule of Civil Procedure 23.1 before filing suit
warrants dismissal. (ECF No. 14, PageID 95.) Those requirements apply to derivative actions,
not direct actions. See Crosby, 548 N.E.2d at 221 (“[C]laims of a breach of fiduciary duty
alleged by minority shareholders against shareholders who control a majority of shares in a close
corporation, and use their control to deprive minority shareholders of the benefits of their
investment, may be brought as individual or direct actions and are not subject to the provisions
of Civ.R. 23.1.”). Since Mr. Swisher has plausibly alleged a breach of fiduciary duty claim that
he may pursue as a direct action, this argument fails.
Accordingly, the Court denies Defendants’ request to dismiss Count IV.
5. 	Count V – Declaratory Judgment
In Count V of his Complaint, Mr. Swisher asserts a declaratory judgment claim,
requesting that this Court find and declare that Defendants acted with bad faith and malice. (ECF
No. 1, ¶¶ 72–76.) As an initial matter, the Complaint does not clarify whether Mr. Swisher seeks
declaratory judgment under federal or state law. In response to Defendants’ Motion to Dismiss,
Mr. Swisher cites the federal Declaratory Judgment Act, 28 U.S.C. § 2201. (ECF No. 26, PageID
224–26.)
Under the Declaratory Judgment Act, a federal court “may declare the rights and other
legal relations of any interested party seeking such declaration.” 28 U.S.C. § 2201(a). The Act
confers on the “federal courts unique and substantial discretion in deciding whether to declare
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the rights of litigants.” Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995). When deciding
whether to exercise this discretion, courts in the Sixth Circuit apply five factors:
(1) whether the declaratory action would settle the controversy; (2) whether the
declaratory action would serve a useful purpose in clarifying the legal relations in
issue; (3) whether the declaratory remedy is being used merely for the purpose of
“procedural fencing” or “to provide an arena for a race for res judicata;” (4) whether
the use of a declaratory action would increase friction between our federal and state
courts and improperly encroach upon state jurisdiction; and (5) whether there is an
alternative remedy which is better or more effective.
Grand Trunk W. R.R. Co. v. Consol. Rail Corp., 746 F.2d 323, 326 (6th Cir. 1984).
Defendants state summarily that all five factors weigh in favor of dismissal and the
declaratory judgment claim is redundant and non-justiciable. (ECF No. 14, PageID 95–96.) Mr.
Swisher disagrees on each of those points, arguing that the declaratory action would clarify
“whether Defendants will be liable for punitive damages and/or attorney’s fees should Plaintiff
prevail on his other claims;” the declaratory remedy is “limited to Defendants’ actions in the
instant action,” so it is not sought to obtain res judicata in another proceeding; the declaratory
action will not encroach upon state jurisdiction because it “is joined with other claims that are
properly before this Court pursuant to 28 U.S.C. § 1332(a);” and a “determination of
Defendants’ bad faith and actual or implied malice is not a necessary element of any of the other
claims.” (ECF No. 26, PageID 224–26.)
The Court declines to dismiss Mr. Swisher’s declaratory judgment claim at this early
stage of litigation based on the undeveloped arguments in Defendants’ Motion to Dismiss.
Defendants may re-raise their arguments in more detail on summary judgment. The Court denies
Defendants’ request to dismiss Count V.
DEFENDANTS’ MOTION TO STRIKE
Defendants move to strike Paragraphs 39 and 40 and Exhibits 3 and 5 from Mr. Swisher’s
Complaint pursuant to Federal Rule of Civil Procedure 12(f). (ECF No. 13.) Defendants argue
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that each of those paragraphs and exhibits reference confidential settlement negotiations and are
inadmissible under Federal Rule of Evidence 408 and Local Civil Rule 16.3(c). (Id.)
I. 	Legal Standard
Rule 12(f) allows a court to “strike from a pleading an insufficient defense or any
redundant, immaterial, impertinent, or scandalous matter.” “Motions to strike are generally
disfavored, and the resolution of such motions is reserved to the sound discretion of the trial
court.” Wausau Benefits v. Progressive Ins. Co., 270 F. Supp. 2d 980, 985 (S.D. Ohio 2003)
(King, M.J.). The Sixth Circuit has noted that “the action of striking a pleading should be
sparingly used by the courts,” “resorted to only when required for the purposes of justice,” and
“only when the pleading to be stricken has no possible relation to the controversy.” Barkley v.
Nationwide Agribusiness Ins. Co., No. 2:22-cv-4458, 2024 WL 1142177, at *2 (S.D. Ohio Mar.
15, 2024) (Marbley, C.J.) (quoting Brown & Williamson Tobacco Corp. v. United States, 201
F.2d 819, 822 (6th Cir. 1953)).
Federal Rule of Evidence 408 provides:
(a) Prohibited Uses. Evidence of the following is not admissible — on behalf of
any party — either to prove or disprove the validity or amount of a disputed claim
or to impeach by a prior inconsistent statement or a contradiction:
(1) furnishing, promising, or offering — or accepting, promising to accept, or
offering to accept — a valuable consideration in compromising or attempting to
compromise the claim; and
(2) conduct or a statement made during compromise negotiations about the claim .
. .
(b) Exceptions. The court may admit this evidence for another purpose, such as
proving a witness’s bias or prejudice, negating a contention of undue delay, or
proving an effort to obstruct a criminal investigation or prosecution.
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II. 	Analysis
In their Motion to Strike, Defendants ask the Court to strike Paragraphs 39 and 40 and
Exhibits 3 and 5 from the Complaint or, in the alternative, strike or redact a portion of Exhibits 3
and 5 from the Complaint and record. (ECF No. 13.) Defendants contend that these paragraphs
and exhibits reference confidential settlement negotiations, which are inadmissible under Rule
408 and Local Rule 16.3(c).1 (Id.) In response, Mr. Swisher argues that striking allegations and
exhibits from the Complaint is inappropriate at this early stage of litigation because the Court
cannot yet determine the admissibility of those materials. (ECF No. 25, PageID 201–03.) Mr.
Swisher also states that the communications are not barred by Rule 408 because they were not
part of settlement negotiations and, even if they were, they are relevant for reasons other than
proving or disproving the validity or amount of a disputed claim. (Id. PageID 203–04.)
Before this litigation ensued, the Parties exchanged letters in which Mr. Swisher
demanded to be paid for his work in December 2024, requested books and records, and
expressed interest in selling his Apex shares, and Defendants responded to those points. (ECF
Nos. 1-1, 1-2, 1-3, 1-4, 1-5.) In two letters, Defendants offered to purchase Mr. Swisher’s
interest in Apex for $2,000. (ECF Nos. 1-3, 1-5.) Defendants now move to strike the paragraphs
in the Complaint and exhibits that reference those offers.
At this preliminary stage, the Court cannot conclude that the challenged paragraphs and
exhibits are inadmissible under Rule 408. “For Rule 408 to be applicable, the Court must first
1 Under Local Civil Rule 16.3, “evidence of conduct or statements made in settlement
negotiations is not admissible to prove liability for or the invalidity of a claim or its amount in
the case in which the settlement negotiations occur.” S.D. Ohio Civ. R. 16.3. Local Civil Rule
16.3 refers to settlement negotiations that occur while litigation is pending. Here, the disputed
communications took place before litigation began. Even if Local Civil Rule 16.3 were to apply,
the Court would reach the same result given the similarities between Local Civil Rule 16.3 and
Federal Rule of Evidence 408.
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determine that compromise negotiations were in fact happening.” Ullmann v. Olwine, Connelly,
Chase, O’Donnell & Weyher, 123 F.R.D. 237, 242 (S.D. Ohio 1987) (Merz, M.J.). The Court
agrees with Mr. Swisher that it is not clear yet whether the communications in dispute were
made in the context of compromise negotiations. The Complaint and exhibits demonstrate that
Apex offered $2,000 to repurchase Mr. Swisher’s shares but do not address whether that offer
was made as an attempt to resolve Mr. Swisher’s claims and do not reference forthcoming
litigation. (ECF No. 1, ¶¶ 39, 40; ECF No. 1-3; ECF No. 1-5.)
In addition, “Rule 408 [is] inapplicable when compromise evidence is offered for a
purpose other than to prove the validity, invalidity, or amount of a disputed claim.” Fed. R. Evid.
408 advisory committee’s note to 2006 amendment. Mr. Swisher has suggested uses for this
evidence other than to prove the validity of his claims or the amount of his damages. Mr.
Swisher argues that he could offer the communications to show that Defendants denied his
request for books and records to prevent him from valuing his shares in Apex and prompt him to
accept a nominal offer for his 24.5% interest in the company, which could be relevant to Mr.
Swisher’s ability to collect punitive damages and attorney’s fees. (ECF No. 25, PageID 204.)
Before Mr. Swisher has presented evidence related to Defendants’ offer to purchase his
shares in Apex for a particular purpose, the Court cannot conclude that there is no admissible
purpose for this evidence. Tirone v. Am. Lebanese Syrian Associated Charities, Inc., No. 20-cv-
02807-SHM, 2021 WL 1206413, at *9 (W.D. Tenn. Mar. 30, 2021); Tobin v. InterLinc Mortg.
Servs., LLC, No. 3:24-cv-329, 2025 WL 1207775, at *7 (W.D. Ky. Apr. 25, 2025). The Court
will not strike or redact Paragraphs 39 and 40 or Exhibits 3 and 5 from the Complaint or the
record at this time. Other opportunities remain to seek exclusion of the challenged evidence prior
to the commencement of trial.
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CONCLUSION
For the reasons set forth above, the Court DENIES (ECF No. 13) Defendants’ Motion to
Strike and DENIES (ECF No. 14) Defendants’ Motion to Dismiss.
This case remains open.
IT IS SO ORDERED.
3/11/2026 	s/Edmund A. Sargus, Jr.
DATE 	EDMUND A. SARGUS, JR.
UNITED STATES DISTRICT JUDGE
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