Hi, How Can We Help You?

Author Archives: Christopher P. Finney

U.S. District Court Judge Douglas Cole certifies RICO and fiduciary breach class action against Build Realty, Gary Bailey, George Triantafilou and First Title Agency, LLC

Author By Christopher P. FinneyPosted on

We will write more on this later, but we are pleased to announce that — six years after we first filed in State Court, and nearly four years after we moved the case to Federal Court — on Tuesday of this week Federal U.S. District Court Judge Douglas R. Cole certified our firm’s RICO and breach of fiduciary duty claims against the following Defendants as a class action:

  • Build Realty, Inc.
  • Edgar Construction, LLC
  • Cincy Construction, LLC
  • McGregor Construction, LLC
  • Cowtown Holdings, LLC
  • Build NKY, LLC
  • Greenleaf Support Services, LLC
  • Build SWO, LLC
  • Gary Bailey (as trustee and individually)
  • George Triantafilou (as trustee and individually)
  • G2 Technologies, LLC
  • GT Financial, LLC
  • Five Mile Capital Partners, LLC
  • First Title Agency, LLC

In doing so, Judge Cole certified all victims of the alleged RICO and breach of fiduciary duty scheme as class members and certified a sub-class of investors who had their properties improperly taken away by scheme participants.

A class notice is being negotiated and should be sent to class members within the coming month or so.  If you have an updated physical address or email address please email it to Chris@FinneyLawFirm.Com and we will try to keep you updated on developments.

This is a major victory for victims of this scheme, but we have many miles to trial to achieve final justice in this matter.  We will endeavor to keep the public updated through this blog.

For more background on this case, read here, here, here, here and here.

Our able co-counsel in this case is Bill Markovits and the firm of Markovits, Stock and DeMarco.

We are pleased to be “Making a Difference” for our now many clients in this long and very complex litigation.

You may read the Class Certification Order below.

 

Diana L. Emerson

Finney Law Firm warmly welcomes Diana L. Emerson

Author By Christopher P. FinneyPosted on

We are pleased to announce the latest addition to Finney Law Firm, attorney Diana L. Emerson.  Diana earned her Juris Doctor degree from the J. David Rosenberg College of Law at the University of Kentucky in the spring of 2022 and joined the Kentucky bar in the fall.  She joins our Labor and Employment Department headed by Stephen E. Imm.

Diana earned her bachelor’s degree in History and Social Science from Lindsey Wilson College and thereafter worked on Capital Hill as a Staff Assistant for a United States Representative of the Commonwealth of Kentucky.

In order to “Make a Difference” for our clients, we continuously invest in new talent and the addition of Diana is  significant and tangible part of that commitment.

 

Judge Robert Ruehlman

The case of the $222,836.53 tree — yet another win, this one with punitive damages and attorneys fees!

Author By Christopher P. FinneyPosted on

Today brought to a Finney Law Firm client a judgment for $222,836.53 for trespass onto his residential property and the removal of a tree and a portion of a wooden fence.

It’s been a big week for the Finney Law Firm in many ways, closing out yet another record year for the law firm.  And today we got our second huge, years-in-the-works victory in one week.  The Cincinnati/Alarms Registration case (final entry linked here) was five years in the making and this new “tree” case took 39 months to bring to conclusion.

The win was significant for several reasons.  First, this was the last civil trial for Hamilton County, Ohio Common Pleas Judge Judge Robert Ruehlman, the longest-ever serving Judge on the Hamilton County Common Pleas bench.  He retires from the bench January 2, 2023.    Second, awards of punitive damages and attorneys fees are fairly uncommon (either cases settle or the requisite legal standard is not met for punitive damages).  But, the Judge ruled that such standard for proof of the case and an award of attorneys fees was met by Plaintiffs, and was met by “clear and convincing evidence.”

A copy of this “tree case” order is here.  Congratulations to our client, William Chapel, and to our team consisting of Christopher Finney, Julie Gugino, Jessica Gibson and Kimi Richards, along with our expert witnesses and A/V consultant (Kevin Lewis and Media Stew!) for a wonderfully executed case from intake and filing to trial and judgment.

Now on to collections!

 

Judge Wende Cross issues Order granting final Class Action Settlement in Cincinnati Alarms Case

Author By Christopher P. FinneyPosted on

A big win was had today in Court for two classes of Cincinnati taxpayers.

After more than four years of litigation — through Common Pleas Court, the Court of Appeals, an attempt for Ohio Supreme Court review and back — today Hamilton County Common Pleas Court Judge Wende Cross signed the Order Approving Class Action Settlement in the case of Andrew White et al. v. City of Cincinnati, Ohio, Hamilton County, Ohio Common Pleas Court Case No. A1804206 (known as the “Alarms Tax Case”).

Background

The Order established a common fund of $3,277,802.25 from illegal alarms registration fees  (NOTE: not false alarm fees) collected by the City of Cincinnati from 2014 to present.  That nearly $3.3 million fund is to pay refunds to those who paid the illegal tax and attorneys fees incurred in the litigation.  The litigation in this matter was led by Maurice Thompson of the 1851 Center for Constitutional Law.  Finney Law Firm and attorneys Christopher Finney and Julie Gugino served as co-counsel.

As we explain in more detail here, Judge Cross certified two classes to receive refunds (a) residential and (b) non-residential payors of the Cincinnati alarms tax.  The City charged residential alarm-system-owners $50 per year to register their systems and commercial owners $100 per year to register their systems.  Last fall, the 1st District Court of Appeals unanimously ruled the tax illegal under Ohio law and unconstitutional, overruling a trial Court ruling on the same subject.  In March of this year, the Ohio Supreme Court preserved that victory for Cincinnati property owners when it refused to accept discretionary review of the case.

Making a difference

“Making a difference” for our clients is the mission of Finney Law Firm and its capable attorneys.  In this case, we successfully enjoined the enforcement of the illegal tax and achieved more than seven years of refunds for payors.  The victory was won under both state law (the assessment was an illegal tax) and the U.S. Constitution (the tax was an infringement on free speech rights by preventing or making more difficult reporting of crimes to the police).

How to get your refund

If you were a Cincinnati alarm registration payor at any time from 2014 to today, you should already have received a postcard, email or voicemail about the refund.  If we have a current address for you (i.e., you received the postcard), you should be receiving a refund by by February 21, 2023.

If you have not gotten a mailed postcard, please make sure we have your name and current address (and the address for which the alarm tax was paid) (will post information shortly of where to write with this info).  Write to Info@OhioConstitution.Org with this information: your name, the payor’s name, your address, and the property for which the alarm registration fee was paid.

 

 

 

 

 

Pins and needles

Author By Christopher P. FinneyPosted on

In pre-litigation and litigation, we frequently have clients who are understandably anxious to resolve their disputes.  They typically are concerned with the open-ended liability that can result from a claimed breach of real estate contract or a business deal gone bad — and the legal fees that inevitably will come from them.  And as a result of that unknown exposure, they want swift finality to the matter.  They are constantly on pins and needles to close this small chapter of their life.

A good settlement versus a quick settlement

Unfortunately, getting a good resolution frequently is inconsistent with the desire for a quick resolution.  Patience, many times, is a virtue that pays good dividends.  This does not mean we typically recommend litigation as a solution.  Litigation is lengthy, unpredictable and terribly expensive, and is accompanied by the same sense of unease until that long course to resolution.  But the other side can sense when you are anxious to put a dispute behind you — attorneys are especially good at dragging things out to achieve a more favorable resolution than the courts would provide to them precisely because of that desire of the opposing party for quick closure.  Showing that insistence on a quick and final settlement can drive up the cost of a resolution exponentially.  So, slow down.  Relax.

Why the anxiety?

The nature of our legal system is that we frequently need to give “lawyerly” answers to what seem to be simple questions:

  • Am I liable?
  • What is the extent of my financial exposure?

These vague answers are so because many times the answer from a review of the documents and a review of the correspondence and oral exchanges leave a conclusion unclear.  Many times — most times — clients don’t tell us the whole story.  Sometimes, we are wrong.  And even if we as attorneys can give a clear anticipated outcome and we are correct in our analysis, the Judge (or Arbitrator) may in the end not agree with us.

We read the documents and do our best to understand the facts, and conclude: “Your exposure should be limited to ‘X,'” but the Judge may later conclude it is “X” times 3.5.  And that is so because we can be wrong or the Judge can decide the case incorrectly (in our opinion).  Further, we conclude “the fees and expenses to get to that conclusion should be ‘Y,'” but opposing counsel and judges can make the odyssey much more expensive.

Perhaps my bedside manner makes clients uneasy because I do have and share “worst case scenario” war stories where liability and legal fees well exceed that which should reasonably be anticipated.  But for every one of those legal calamities, we have 20 or 40 cases that resolve quickly and fairly, if not inexpensively.

So, relax

I recently was consulted by a physician who had contracted to purchase a small investment property, and he had decided he contractually  agreed to pay too much and wanted to back out of the deal.  He was more or less crawling out of his skin to have resolution of the matter — and his total exposure if he was in fact found to be in breach of the contract was on the order of maybe $20,000.  And this was the worst case for him.

But he was anxious, and called me four or five times in a two-day period stressing about this “what if” and that “maybe” scenario.

I asked him: “You are a doctor.  What kind of doctor?”  He responded: “I am an oncologist.”  So I said: “OK, let me understand.  Every day you have to tell someone — and their family — that they or their loved one has cancer.  Is that right?”  He says: “Correct.”  And, I further inquired: “Yet you are stressed about a simple contract claim that might cost you $10,000 or $20,000 if you ultimately are sued, is that right?”  “That’s right,” he responds,  “But I see your point.”

Another case I have my client terminated a residential purchase contract because the strict terms of the financing contingency were not met — the bank had a higher interest rate and a higher down payment than the contingency contemplated. The buyer sent a contract termination letter and the seller responded with a rejection of that — but then just sat and sat and did not place the house back on the market — at least not right away.

I explained to the client that “these almost all work themselves out without litigation.”  Further, he has an appraisal of the property at the purchase price.  If that is the value that would be adopted by a court in litigation, then the seller has no damages anyway.  Further, if they refuse to place the home back on the market, the seller will have violated his duty to “mitigate his damages,” weakening the seller’s claim in court.

Still, the client and his wife are anxious, concerned about the many possible outcomes to the suit.  And we don’t as of this writing know exactly how it will turn out.

Conclusion 

No one has cancer.  No one lost an arm or an eye.  No one is going to die.  You are not going to end up in bankruptcy court as a result of this contract claim.  Be patient and allow the other side to work out their “mad” and realize the cost and time that litigation will take.  It will all be OK.  That does not mean fighting until the last breath and last dollar is the best strategy, but being somewhat patient as a settlement works its way out can be advisable.

As to code enforcement and nuisance actions we strongly recommend “comply”

Author By Christopher P. FinneyPosted on

Friday, our founder Christopher Finney was featured on a panel presentation before the Cincinnati Bar Association on “Code Enforcement from the Municipal Perspective.”  The panel included Erica Faaborg, Deputy City Solicitor of Cincinnati, Kathy Ryan of Wood and Lamping, and Stacey Purcell of Legal Aid of Cincinnati.

The panel discussion covered a wide range of code enforcement and nuisance actions, many of which fall outside the scope of what Finney Law Firm typically would handle such as slum landlords without heat and tenant hoarding.

Our primary experience falls in two areas: (i) Chronic and acute health and building code violations, with the municipality typically seeking an injunction and a fine against the property owner and (ii) nuisance actions seeking either the forced closure of the nuisance business (usually either a motel or a liquor establishment) or the appointment of a receiver to manage, fix up and sell a property.

In both instances, in nearly every jurisdiction in question, the municipality is simply seeking compliance.  In most instances, they neither want your money nor control of your property. They want the nuisance conduct (underage drinking, violence, drug dealing, prostitution) stopped or the the property fixed up.  Period.

As three starting points, commonly I advise:

  • Maybe our client has a legitimate defense, the nuisance does not exist, is not as exaggerated as the municipality claims, or we have an over-zealous building inspector picking a fight with a single property owner. But (a) this usually can be worked out (as their objective typically is compliance, we universally find they are clear and reasonable when asked to be) and (b) the Judge who will hear the case lives in our community and typically wants zealous code enforcement — we all want to live in a nice community, right?  As to judicial matters, these are “police powers” enforcement and the Judge almost never wants to second guess the City in a code issue. It will be very hard to overcome the presumption that the City is being reasonable in its enforcement.
  • Even if the client is right, the risk of lost and cost of litigation pales in comparison to the cost of fixing up the property or abating the nuisance.
  • And, worst of all, if the City is victorious in seeking the appointment of a receiver for your property, it’s “game over” for the property owner in terms of preserving any value from — any equity in — the property.  Why? Because the lawyers and receiver take over the property, repair it at your expense, charge their professional fees to the project and pay themselves from the income and proceeds, and sell the property quickly for what they see as a fair price to a new operator.  You can kiss your years-developed, hard-earned equity goodbye.  In the case of liquor establishments, if you are ordered closed, your millions of dollars in capital to develop and promote an establishment are out the window if you are forcibly shut down.

As a result, we strongly recommend working with building officials toward a reasonable compromise for enforcement — it can end the dispute, it improves the property or its operation, and it makes our communities stronger.  More importantly, in in the long measure, it saves the client money by investing in his property or business rather than running up a huge — and likely non-productive — legal tab.

Having said all of this — and we do counsel compliance and cooperation — a business owner or property owner does not need to just “lay down” for expensive and over-the-top enforcement.  Our firm has fought and won amazing battles against State and local governments, all the way to the US Supreme Court.  We have successfully challenged entire legislative schemes, including pre-sale and pre-leasing inspections, which are a constitutional overreach, in multiple jurisdictions.  Our firm has made a name for itself fighting and winning against bad government actors.  Our tools include the US and State Constitutions, state statute, the State of Ohio taxpayer statutes against both cities and county commissions, Open Meetings laws, Public Records laws, and other statutory avenues.  But before launching into these battles, we want to make sure we are positioned to win and that the client appreciates the costs and risks for undertaking these fights.

Today’s NYT: Insurance coverage, “You’ve got to provide notice early and often”

Author By Christopher P. FinneyPosted on

Today’s New York Times has an instructive tale in insurance coverage in a high-profile U.S. Supreme Court case.  There, Harvard University is embroiled in expensive and protracted litigation over its affirmative action policies.

For such litigation, it had an initial $2.5 million deductible under its primary carrier, and then $25 million in primary coverage.  It however, failed to notify its “excess coverage” carrier, which provided an additional $15 million in coverage.  Because the litigation lasted so long and cost so much, that failure to timely notify the carrier — a policy requisite — it may have deprived itself of that needed $15 million in coverage.

The lesson, as quoted in the article, is, as to coverage: “you’ve got to provide notice early and often.”  Our position is: “When in doubt, notify.” (Clients are rightly concerned that notice causes increased rates and/or cancelation.  Our experience is different: If you are an overall responsible insured, even with occasional claims, even meritorious claims, it should not impact rates or coverages, or if so not greatly.)

The matter is pending in court, and in the hallowed halls at Harvard the question of whether someone is going to lose their job is open as well.

Our favorite Courts reporter — really focused on the US Supreme Court — Alan Liptak, brings us this report.

Major survey “fails”: They happen

Author By Christopher P. FinneyPosted on

I recently received a plat of survey from a client for a 90-year-old two-family residence he had purchased.  (Survey obtained after the closing.)  It showed several things:

  • The building encroached 8′ onto his neighbor’s property;
  • In addition, there was a walkway and retaining wall the projected even further onto his neighbor’s property; and
  • The home projected 6′ into the public right-of-way (a “right-of-way” is the land owed in “fee simple” or by easement by a governmental entity for roadway and sidewalk purposes (such as through dedication); it is usually much wider than the actual paved area for either).

Now, that’s a hot mess of title and survey issues.  What to do?  What to do?

Get a survey before a purchase

Well, for starters, this is great example of why a buyer needs a survey in addition to a title examination before purchasing real property.  None of these problems would be evidenced by a title examination.  Only a field survey would show these encroachments.  Further, title insurance does not cover these occurrences.

Excuses and justifications

As a side note, we hear over the phone and in the closing room the 25 reasons why a buyer, lender or Realtor does not think title insurance or a survey is needed:

  • The property is “new” (i.e. a new subdivision, with newly-constructed houses);
  • The property is “old,” meaning the homes, garages, driveways and other improvements have existed for a long time.
  • Certainly the seller checked the title and survey, so it is fine.

None of these is a good reason not to get title insurance and a survey.  We can explain further if you like.

Other survey nightmares

In addition to the problems identified above, we have seen other major survey problems:

  • A new house built in violation of a zoning or covenant setback.
  • An entire subdivision where each house was built 5′ onto the neighbor’s property (and thus needs re-platting, deeding the 5′ to the correct owner, a release of the “wrong” mortgage and a re-filing of the correct mortgage).
  • Condominiums where the unit numbering was changed from the time the contract was signed to the time when the condominium documents were file (and thus many units were mis-numbered and every unit needs a new deed, a release of the “wrong” mortgage and a re-filing of the correct mortgage).
  • A complete misunderstanding (or misrepresentation) of the location of property lines.
  • Encroachments (e.g., fences, sheds, utilities) of various improvements onto our client’s property.
  • Encroachments of various improvements from our client’s property onto their neighbor’s property.
  • An easement that runs right where your client intends to build on otherwise “raw land.”

Solutions

For the client noted above, he has several remedies to the problems.

  1. First, did he purchase title insurance?  If he did, he may have a claim — but probably not.  Why not?  For starters, title insurance provides coverage for the insured premises, not for property outside the boundaries of the insured premises.  And by definition, the three problems he called about are outside of the metes and bounds of the property he acquired.  Moreover, the standard title insurance policy specifically excepts coverage of matters that would be disclosed by an accurate survey, and as a rule that exception to coverage is not deleted (and thus coverage provided) without a survey certified to the title company.
  2. Second, did he get a general warranty deed from the seller, the most common form of deed in use in southwest Ohio certainly?  If so, he may (may) have a claim against the seller for breach of the contract and breach of the general warranty covenants.
  3. Third, as to the first two issues (the encroachments onto the neighbor’s property he almost certainly has a strong case for a claim to ownership of the property through “adverse possession.”  You may read a detailed analysis of that here.
  4. Fourth, however, as to the portion of the property in the public right-of-way, the client has a difficult row to hoe.  One may not adversely possess against a governmental entity in Ohio.  The only way to perfect title to the portion of the building in the right-of-way is to seek a deed (or statutory street vacation) from the governmental entity whereby they voluntarily surrender that title to the property owner.

Conclusion

The saying “an ounce of prevention is worth a pound of cure” is appropriate here, as it is with all due diligence investigations before the purchase of real property.  The buyer should have “kicked the tires” with a good surveyor before closing on the sale.  But this is the situation now. So, he can pursue the seller and the neighbor to vindicate his rights to the home and walkway.  As to the governmental entity owning an interest in the right-of-way, he simply needs to work the ropes to see if it will relinquish its interest in his home.

 

 

Clermont property buyer gets tagged with $682,000 extra tax bill; litigation ensues

Author By Christopher P. FinneyPosted on

The purchaser of an apartment building Clermont County and his counsel are learning the lessons of real property taxes — and the ways to handle tax prorations —  the hard way.  Because neither the seller nor his attorney thought through the transaction carefully, the purchaser (a) lost $682,000 in tax proration negotiations and (b) has suffered what appears to be an entirely unnecessary increase in the same amount in his annual real estate taxes, essentially forever.

How can outcomes between savvy and clumsy real estate transactional work vary so dramatically?

Underlying facts

On December 28, 2021, RS Fairways, LLC closed on the purchase of Fairways at Royal Oaks, an apartment complex in Pierce Township on Clermont County for $32,600,000.  The Auditor’s valuation at the time of the sale was $6,622,000.  The difference between the sale price and the Auditor’s valuation was $25,977,700, a whopping 500% increase.

Following the sale, our former Associate, Brian Shrive — who now heads the civil division of the Clermont County Prosecutor’s office — on behalf of the Prosecutor, saw the conveyance fee form filed with the deed reporting the whopping sale price-compared-to-Auditor’s-valuation and filed \a Board of Revision Complaint to increase the valuation — retroactively to January 1, 2021 — to the sales price.

Almost inexorably, the Board of Revision would have so increased the value, so the owner, the Prosecutor and the School Board later entered into a Stipulation as to the new valuation at $32,600,000.

Tax proration language

As we have written about here (just one month before this buyer closed; he should have read our blog!), standard tax proration language in use in the Cincinnati area calls for a tax proration to be based upon the most recent available tax duplicate.  Since the Auditor and School Board will not know about the sale until after the deed is recorded, current taxes can’t possibly be based upon the sale price.  Here, the Auditor obviously had a grossly outdated and inaccurate valuation.

In other words, standard and customary contract language in use in greater Cincinnati simply does not adequately protect the purchaser in a situation where it is paying much higher than the Auditor’s present valuation.

The Contract in question provided:

If the 2021 tax bill is not available as of the Closing Date, then the proration described in clause (b) above shall be based on the 2020 tax bill for the property.

Why do we prorate taxes in Ohio?  Taxes in Ohio are paid “six months in arrears at the end of the period.”  What does that mean?

It means that the first half 2021 tax bill is issued in January of 2022 and the second half 2021 tax bill is issued in July of 2022.  Therefore as of the date of closing (here, the end of December 2021), the seller owned the property for all of 2021, but hadn’t paid the taxes for 2021.  Therefore, at closing (under local contract form and custom) the seller prorates to the buyer the taxes for the period it had owned the property, but at existing tax and valuation rates.

The dual problems are: (i) if there is a change in the tax rate for 2021 (such as with the passage of a school or other levy), the proration will be wrong as to the 2021 rate and (b) if there is a change in the tax valuation in the normal triennial cycle, the valuation (and thus the taxes) will change, and, here’s the kicker, (c) well after the closing, a school board or the County Prosecutor have the right to ask the Board of Revision to retroactively, back to the beginning of the prior tax year, change the valuation to a reported sales price.

And, as Casey Jones of our office blogged here, a recent arm’s length sale is uncontestably the valuation for tax purposes.

Thus, under the law, a purchaser is liable for taxes calculated at the tax amount for the taxes for the periods from the date prior to the sale (based upon the next tax bill to be issued) and into the future.  And this new tax rate calculates in “unknowns” at the time of the closing, which are a change in rate and a change in valuation.  Both of these can be both assessed, and as to the valuation, can be contested and litigated, well after the sale, but the retroactive liability for those taxes falls on the new property owner.

“Forever” increase in taxes

The tax proration flub — a $682,000 mistake — was bad enough, but worse is that the reported sale will result in a new baseline valuation for future taxes of $32,600,000 for a property that previously was valued and taxed at just $6.2 million.  Every three years the County will start with the $32 million number and make (likely) increases from there, so this owner will have $700,000 in higher taxes (than likely he anticipated) forever.

Could the massive increase have been prevented?

Two fairly sophisticated legal techniques could have been employed by this purchaser to avoid these massive “surprise” tax bills.  One would have spared them the cost of the under-proration, and the second could have resulted in a permanent savings — tens of millions to the purchaser’s bottom line.  They employed neither.

First, when a purchaser pays an amount significantly above Auditor’s valuation for property (this is a simple task of comparing the sale price to Auditor’s valuation [a quick on-line check]) before the contract is negotiated and signed, a purchaser will want the tax proration language to include a re-proration after the final taxes for the year prorated are known.  [By the way, when we get into an environment of declining values, the inverse rules as to tax proration can apply — the purchaser will have an advantage in the proration process — an over-proration —  if the contract language is not modified.]

Second, a technique is available in Ohio (but not Kentucky) to have the seller first transfer the property into an LLC that he owns exclusively (by deed, but with an “exempt conveyance fee form,” so that no sales price is reported) and then, at the closing between seller and purchaser, the seller transfers his interest in the LLC to the purchaser — and thus there is no recorded deed.  These transfers are referred to as “drop and swaps” or “entity transfers.”  In this situation — with some possible exceptions, the Auditor and school board are not put on notice of the sale or the sale price, and thus the increase in value could slip by unnoticed.

Here, the purchaser employed neither technique resulting in a bad proration and “forever” tax liability.

Ensuing litigation

Despite terrible tax proration language that we see as “fatal” to the purchaser’s claims (see above, they agreed to base the proration on the 2020 tax bill, period), the purchaser has sued the seller for a re-proration based upon the post-closing tax “surprise.”  Good luck with that.  See the Complaint here.

Conclusion

Smart advance legal planning by a purchaser or seller can dramatically change the outcome as to taxes in a real estate transaction.  Contact Isaac T. Heintz (513.943.6654) or Eli Krafte-Jacobs (513-797-2853) for assistance on your real estate transactions to avoid these disastrous outcomes.

Finney Law Firm frequently utilizes “We can talk” agreements in settlement discussions

Author By Christopher P. FinneyPosted on

Ohio Rule of Evidence 408 generally provides that settlement discussions are “not admissible to prove liability for or invalidity of the claim or its amount.”

Public policy behind inadmissibility of settlement discussions.

Why not? Shouldn’t the judge or jury know all of the facts of a situation in determining liability and in assessing damages, for if a Defendant offered to pay he more or less must be liable, correct? Or shouldn’t the amount — the range — of settlement amount discussed, be some indication of the value of the claim?

Well, Courts have decided as a matter of public policy that the answer is “no.”  It would discourage good faith settlement discussions if the fact of such discussions and what was discussed were admissible.  We want parties to settle their disputes and bringing settlement conversations into Court would throw a cold wet towel on those conversations.

But Rule of Evidence 408 is not perfect

But Rule 408 is not all-encompassing.  It excepts party admissions of liability jnd, if agreement is reached, — or claimed to be reached — that oral settlement can be enforceable — sometimes much to the surprise and chagrin of one of the parties.

Further, in our experience, impermissibly and unethically, what happens in the course of settlement discussions is that those conversations seep into court proceedings and discovery.  Further, invariably opposing counsel will share some morsel of the tenor, tone or dialogue with a Judge to gain an advantage in the litigation.  In other words, opposing counsel and parties are not always trustworthy.

“We Can Talk Agreements”

As a result, before engaging in settlement discussions with opposing parties or counsel, Finney Law Firm frequently has the parties sign what we call a “We Can Talk Agreement” that generally provides two things:

  • Nothing said in the course of the settlement discussions will come into play in any manner in the litigation proceedings: Not in discovery, not in “in Chambers” conversations with the Judge, and not in Court.
  • No claimed oral settlement agreement will be binding unless and until it is memorialized in writing and signed by our client.  Period.

I recently had opposing counsel ask me: “Why would you ask me to sign such an agreement?”  It was a case in which we had the upper hand and the defendant was flailing around for some foothold for a defense.  Opposing counsel already had engaged in motion and discovery abuse, needlessly and substantially driving up the cost of litigation, and after 26 months of writing, twisting and turning, he had run out of underhanded tactics, and was approaching facing the music before the Judge.  My answer: “Because I don’t trust you. You, in this case and attorneys at your firm over the years, have engaged in underhanded tactics, and we won’t sit and talk except on our terms.”

Setting the proper tone for settlement conversations

In addition to beefing up the protections of Rule of Evidence 408, the “We Can Talk Agreement” establishes, shall we say, imposed mutual respect between the parties.  We find it a powerful tool to set the proper tone in settlement discussions.

Direct client conversations

Other times, clients want to talk directly — without the filter of attorneys.  Again, it’s not just what our client may say during the course of those conversations that is potentially problematic, but what the other party will claim they said.  (Side note: Assume all conversations these days are being recorded, especially those in situations of conflict.)  Further, sometimes clients want to use an intermediary, such as a priest, pastor or mutual friend to resolve a dispute.

In these instances, we also recommend a “We Can Talk Agreement” to enable and encourage a full and robust conversation.

Conclusion

When you already know you are in the midst of a conflict with another party, caution is the watchword and a “We Can Talk Agreement” can greatly advance the cause of a cautious approach to settlement discussions.

__________________________________________________

The text of Ohio Rule of Evidence 408 is below:

Evidence of (1) furnishing or offering or promising to furnish, or (2) accepting or offering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability for or invalidity of the claim or its amount. Evidence of conduct or statements made in compromise negotiations is likewise not admissible. This rule does not require the exclusion of any evidence otherwise discoverable merely because it is presented in the course of compromise negotiations. This rule also does not require exclusion when the evidence is offered for another purpose, such as proving bias or prejudice of a witness, negating a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution.

1 2 3 … 56