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Author Archives: Finney Law Firm

Federal Court of Appeals upholds ban on federal contractor political donations

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In Wagner v. FEC, Wendy Wagner, a law professor who is working under a consulting contract for the Administrative Conference of the United States, sought to overturn a federal law prohibiting federal contractors from making contributions to federal candidates and their parties, so that she could make contributions to “candidates running for federal offices and/or their political parties.” Wagner argued that such a prohibition violates her First Amendment Rights.

The D.C. Circuit Court of Appeals, ruling en banc, applied a heightened scrutiny (the State must demonstrate “a sufficiently important interest and employ a means closely drawn to avoid unnecessary abridgment of associational freedoms”), a standard just below traditional First Amendment analysis (i.e. Strict Scrutiny, requiring a the state show a compelling governmental interest and the means must be narrowly tailored to achieve that interest).

Using the “rigorous standard of review” set forth by the Supreme Court in Buckley v. Valeo, 424 U.S., at 29, the Court of Appeals distinguished the recent Citizens United case in which strict scrutiny was applied, stating that strict scrutiny was applied in Citizens United not because the case involved a ban on contributions, but because the case involved independent expenditures rather than contributions.

The Court found that there are two important governmental interests at stake: (1) protection against quid pro quo corruption and its appearance; and (2) protection against interference with merit-based public administration. The Court pointed to historical examples of bribery and pay to play schemes involving among others, Duke Cunningham of California, and Ohio’s Bob Ney; as well as testimony to the Watergate Committee from government contractors that they felt pressured to contribute – that their contracts were dependent upon the President’s re-election.

In determining that the restriction on political contributions during the time of contracting and performing under the contract, the Court found that the risk of corruption is greatest at such time. ”Unlike the corruption risk when a contribution is made by a member of the general public, in the case of contracting there is a very specific quo for which the contribution may serve as the quid: the grant or retention of the contract… a contribution made while negotiating or performing a contract looks like a quid pro quo, whether or not it truly is.“

Likewise, the risk that politicians would coerce contributions from employees or contractors is greater than coercion of the general public. “Because a contractor’s need for government contracts is generally more focused than a member of the general public’s need for other official acts, his or her susceptibility to coercion is concomitantly greater. And coercing a contractor to contribute, even if limited by a contribution ceiling, is still coercion. ”

Thus, federal employees and contractors must accept, in the D.C. Court of Appeals’ eyes at least, a limit on their First Amendment rights as part of the bargain.

Village Council Grammar Found Wanting; Woman Escapes Parking Ticket

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In a case that has received some Internet attention, the Village of West Jefferson, Ohio, learned that commas still matter. You can read the Court of Appeals decision here.

Andrea Cammelleri woke up on Thursday evening, February 13, 2014 (she worked third shift) to find that her pickup truck – that had been parked in front of her home –  was missing. She called 911 to report the vehicle stolen, only to be informed that the car wasn’t stolen, it was impounded. It seems that the Ms. Cammelleri had parked her truck in the same spot for more than 24 hours, in violation of a Village Ordinance:

It shall be unlawful for any person, firm or corporation to park or leave standing upon any street, road, thoroughfare or highway in the Village, any motor vehicle camper, trailer, farm implement and/or non-motorized vehicle for a continued period of twenty-four hours except on weekends and holidays, at which the time shall be seventy-two hours.

Ms. Cammelleri and her attorney argued that the ordinance is ambiguous, she parked a pickup truck and the ordinance refers only to “any motor vehicle camper, trailer, farm implement and/or non-motorized vehicle” The trial court, in convicting Ms. Cammelleri, found that it is obvious that a comma is missing between “motor vehicle” and “camper” and everyone understands that the ordinance is intended to apply to “motor vehicles” or “campers,” and that therefore, it is illegal in the Village of West Jefferson to park a pickup truck in the same spot for more than 24 hours.

Ms. Cammelleri, however, refused to accept that the grammar lessons we had all been taught as children no longer mattered. She took her case to the Court of Appeals.

The Twelfth District Court of Appeals determined that (a) because of the missing comma, the statute is ambiguous; and (b) applying the normal rules of statutory interpretation, the statute, as written, does not apply to Ms. Cammelleri’s pickup truck. Her conviction was thus overturned.

While not directly on point, we are hopeful that this case will lead to a resurgence of the Oxford Comma.

 

Attorney fee shifting provisions in commercial contracts are enforceable

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Ohio law provides that parties have a fundamental right to contract freely. With limited exceptions, the terms of contracts entered into freely will be enforced – particularly contracts between sophisticated parties (e.g. corporations or other entities).  This includes the right to collect attorneys fees.

In 2-J Supply, Inc. v. Garrett & Parker, L.L.C., 2015-Ohio-2757, Ohio’s Fourth District Court of Appeal reversed a local court’s ruling denying attorney fees to the successful Plaintiff. The trial court failed to enforce the contract provision calling for the defendant to pay the plaintiff’s attorney fees as part of the terms of a credit account for the purchase of goods, finding, erroneously that the trial court did not have the power to enforce this contract provision.

2-J Supply provided materials to Garrett & Parker, LLC under a contract that provided payment terms. Additionally, Garrett & Parker, LLC’s principals signed the contract as personal guarantors. When Garret & Parker, LLC failed to pay the invoices as they became due, 2-J Supply brought suit for the unpaid invoices (approximately $16,000.00) and sought attorney fees of approximately $4,000.00. Neither Garrett & Parker, LLC nor its principals responded to the suit, resulting in a default judgment for 2-J Supply in the amount of the unpaid invoices, but not the attorney fees.

Ohio has a statutory prohibition against attorney fee shifting for “contracts of indebtedness” that do not exceed $100,000.00. The trial court relied upon this statute in denying 2-J Supply’s request for attorney fees.

However, the Court of Appeals reasoned that the indebtedness was not realized until the date the payment was due, rather than on the date of the contract.  Under this reasoning, the Court of Appeals determined that the contract at issue was not a “contract of indebtedness.” Based upon this analysis and prior case law, the Court of Appeals found that the trial court erred in denying the request for attorney fees.

Before signing any contract, make sure you read and understand the contract.

Public Bodies Cannot Contract out of Ohio Sunshine Laws

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In a recent Ninth District Court of Appeals case, Teodecki v. Litchfield Township, 2015-Ohio-2309 the former fire chief sued the township and trustees for among other things, breach of contract relating to the release of an investigation report regarding the former chief’s activities in her role as fire chief.

Shortly after the report was completed (but before it was released to the public or any charges brought), Chief Teodecki resigned her position as part of a separation agreement with the Township under with the Township would not to pursue charges against her and (possibly) not to disclose the results of the investigation – whether the confidentiality clause was part of the agreement at the time it was executed is a matter of dispute.

After resigning, Mrs. Teodecki wrote a letter to the local newspaper criticizing the Township Trustees. The Trustees, seeking apparently to exact some revenge for the letter to the editor, voted to release the investigation report to the public. Mrs. Teodecki then brought suit claiming that Trustees breached the separation agreement by making the investigation report public.

However, as the Ninth District Court of Appeals ruled, even assuming the non-disclosure clause was part of the agreement, there was no breach because the Trustees could not legally keep the investigation report from the public. The confidentiality clause was against public policy of open public records, and, absent any of the statutory exemptions mandating release of public records; the investigation report could not be withheld from the public.

The Court’s analysis of the investigation report’s status as a public record is thoughtful and deserves note as well.

We conclude that the Report prepared by Sergeant McDermott following his extensive investigation into the Litchfield Township Fire Department and Mrs. Teodecki falls squarely within R.C. 149.43’s definition of a public record. The Report, which was commissioned by the township and kept in the township’s possession, was a document detailing findings concerning the fire department’s alleged noncompliance with state law. The township’s fire department is without question a public office. Thus, by statute, the Report is required to be disclosed to the general public.

This is a particularly enjoyable case it is rare to see public officials seeking to have Ohio’s public records law read in a keeping with the intent of the law. And, because in this case the old maxim proved true: Sunlight is the best disinfectant.

 

Breach of general warranty covenants can be costly mistake

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A common form of conveyance when selling real estate is the general warranty deed. With a general warranty deed, not only does the seller transfer title to the property, but also promises that she has good, marketable title and will defend any claims against the property otherwise.

For example, if you sell property using a warranty deed and there is an unpaid lien against the property, you must either pay an attorney to defeat the lien, or you must pay off the lien. Failure to do so is a breach of the warranty; and will entitle the buyer to damages, and attorney fees. Read more about types of deeds here.

Hollon v. Abner (1997 WL 602968), a 1997 Hamilton County Court of Appeals case, illustrates the point precisely. The sellers failed to account for tax liens that had attached to the property during the brief time that the property was in their son’s name.

The Abners came to own the property when their son, under contract to purchase the property, was unable to complete the purchase. The Abners stepped in and gave him the money to complete the purchase. Title transferred to the son’s name, and he immediately transferred the property into the parents’ names. But just that one moment during which the property was in the son’s name was enough for IRS liens for the son’s unpaid taxes to attach to the property.

After owning the property for five years, the Abners sold the property to Hollon (by general warranty deed). When Hollon later tried to sell the property, a title report the buyer insisted on revealed the tax liens.

In order to complete the closing, Hollon was forced to place over fifteen thousand dollars in escrow. Despite repeated demands from Hollon, the Abners refused to either defend against or pay off the liens. Eventually, Hollon brought suit against the Abners for breach of warranty, because the title they transferred to him was not free of encumbrances, and the Abners refused to defend or pay off the liens.

Hollon was granted summary judgment against the Abners, and the trial court ordered the Abners to pay damages in the amount of the tax liens, plus the escrow fees, and Hollon’s attorney fees.

While it is generally understood that attorney fees are only awarded in a breach of warranty claim where the buyer incurred attorney fees in defending against the lien, in this case, the Court Appeals ruled that that the trial court’s award of attorney fees was appropriate because Hollon only incurred fees because the Abners both failed to convey marketable title, and refused to defend or pay the liens; that is, it was only because of the Abners’ failure to live up obligations that the lawsuit was necessary.

The lesson being, if you sell real estate via general warranty deed and the buyer later contacts you regarding a lien that had attached before you sold the property, live up to your obligations before the court forces you to.

Real Estate 101: Breach of general warranty covenants can be costly mistake

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A common form of conveyance when selling real estate is the general warranty deed. With a general warranty deed, not only does the seller transfer title to the property, but also promises that she has good, marketable title and will defend any claims against the property otherwise.

For example, if you sell property using a warranty deed and there is an unpaid lien against the property, you must either pay an attorney to defeat the lien, or you must pay off the lien. Failure to do so is a breach of the warranty; and will entitle the buyer to damages, and attorney fees. Read more about types of deeds here.

Hollon v. Abner (1997 WL 602968), a 1997 Hamilton County Court of Appeals case, illustrates the point precisely. The sellers failed to account for tax liens that had attached to the property during the brief time that the property was in their son’s name.

The Abners came to own the property when their son, under contract to purchase the property, was unable to complete the purchase. The Abners stepped in and gave him the money to complete the purchase. Title transferred to the son’s name, and he immediately transferred the property into the parents’ names. But just that one moment during which the property was in the son’s name was enough for IRS liens for the son’s unpaid taxes to attach to the property.

After owning the property for five years, the Abners sold the property to Hollon (by general warranty deed). When Hollon later tried to sell the property, a title report the buyer insisted on revealed the tax liens.

In order to complete the closing, Hollon was forced to place over fifteen thousand dollars in escrow. Despite repeated demands from Hollon, the Abners refused to either defend against or pay off the liens. Eventually, Hollon brought suit against the Abners for breach of warranty, because the title they transferred to him was not free of encumbrances, and the Abners refused to defend or pay off the liens.

Hollon was granted summary judgment against the Abners, and the trial court ordered the Abners to pay damages in the amount of the tax liens, plus the escrow fees, and Hollon’s attorney fees.

While it is generally understood that attorney fees are only awarded in a breach of warranty claim where the buyer incurred attorney fees in defending against the lien, in this case, the Court Appeals ruled that that the trial court’s award of attorney fees was appropriate because Hollon only incurred fees because the Abners both failed to convey marketable title, and refused to defend or pay the liens; that is, it was only because of the Abners’ failure to live up obligations that the lawsuit was necessary.

The lesson being, if you sell real estate via general warranty deed and the buyer later contacts you regarding a lien that had attached before you sold the property, live up to your obligations before the court forces you to.

Chapter 7 debtor cannot strip wholly unsecured 2nd mortgage

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In the important case of Bank of America, N.A. v. Caulkett, 135 S. Ct. 674 – 2014, the US Supreme Court has held that debtors in a Chapter 7 bankruptcy proceeding may not void a wholly unsecured junior mortgage lien under 11 U.S.C  §506(d) when the debt owed on a senior mortgage lien exceeds the current value of the collateral if the credi­tor’s claim is both secured by a lien and allowed under §502 of the Bankruptcy Code.   The Court overruled and reversed the Eleventh Circuit decision  rendered in McNeal v GMAC Mortgage, LLC, 735 F.3d 1263 (11th Cir. 2012) which allowed wholly unsecured liens to be stripped.

The Supreme Court ruled that  §506(d) does not permit bankruptcy courts to “strip off” completely unsecured junior mortgage liens on the property even if the value of the property acting as collateral is less than the amount the Chapter 7 debtor owes to the first (senior) mortgage holder.   In making its decision the Court extended on its ruling in Dewsnup v. Timm, 502 U.S. 410 (1992), which held that §506(d) does not allow a Chapter 7 debtor to “strip down” a partially mortgage lien to the current value of the collateral.

Chapter 7 Debtors are now left to look to filing for Chapter 13 or Chapter 11 reorganization plan to obtain the partial or complete lien strip that Dewsnup and Caulkett denies to a homeowner.

Read the complete decision here.

Advanced commercial real estate law: The power of Lis Pendens in Ohio

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Lis Pendens, Latin for “suit pending,” means that any interest in real property acquired while a case is pending relating to that property is subject to the final determination of the case.

As set forth in R.C. 2703.26: “When a complaint is filed, the action is pending so as to charge a third person with notice of its pendency. While pending, no interest can be acquired by third persons in the subject of the action, as against the plaintiff’s title.”  Under this doctrine, the outcome of the litigation applies to, and is binding upon, any person who acquires an interest in the property; whether a party to the lawsuit or not. Indeed the purpose of the doctrine is to bind non-parties.

“The effect of lis pendens is that if a third party acquires an interest in the property while the lawsuit is pending, the third party takes the property subject to the final outcome of the suit.” Gunlock v. Z.B.P. Partnership, 1997 WL 598394, at *1 (Ohio App. 12 Dist., 1997). Indeed, “if the trial court awards the plaintiff rights in the property, the plaintiff takes free of any interest acquired by third parties during the lawsuit.” Martin, Rochford & Durr v. Lawyer’s Title Ins. Corp., 619 N.E.2d 1130, 1131, 86 Ohio App.3d 20, 22 (Ohio App. 9 Dist., 1993).

“In order for the plaintiff to utilize the doctrine of lis pendens, the property that is described for the purpose of invoking lis pendens must be at the very essence of the controversy between the litigants.” Levin v. George Fraam & Sons, Inc., 585 N.E.2d 527, 530, 65 Ohio App.3d 841, 846 (Ohio App. 9 Dist., 1990).

If the property is Unregistered Land, and the lawsuit is filed in the same county in which all of the property is located, Lis Pendens attaches upon the initial filing of a complaint relating to the ownership of real property and a description of the property in the complaint. Any interest in the property that is recorded after the filing of the lawsuit is subject to the Judge’s final ruling. If the suit is brought in a county other than that in which the property is located, a certified copy of the complaint must be filed with the Common Pleas Court in which the property is located (this also applies to property that straddles two or more county lines). See Civil Rule 3(F).

In a recent case we represented a buyer in a specific performance case.  Our client was under contract to purchase a parcel of unregistered land in Hamilton County. The seller informed our client that the seller would not complete the sale; rather he would sell to another buyer for a higher price. Our client was insistent on completing the purchase and forcing the sale.

Before the seller recorded the deed transferring the property to the third party, we filed suit for specific performance and included a notice of Lis Pendens in the complaint. After we filed the complaint, not only did the third party record a deed, that third party then sold the property to another third party who also recorded a deed. Bear in mind though, that each of these deeds were recorded after the lawsuit had been initiated, and thus those purchasers’ interests were subject to the outcome of our lawsuit.

Ultimately, we prevailed and the property was re-titled in the name of our client and the interests of the two third party purchasers were extinguished.  The third party purchasers now have to look to the original seller to recoup their money.

For Registered Land, Lis Pendens does not attach until after the complaint is filed with the Court and a Notice of Lis Pendens is filed with the County Recorder. Civil Rule 3(F) also applies where the suit is brought in county other than that in which all of the property is located.  What this means for purchasers of Unregistered Land is that certainty of your interest requires not only that you search the title, but that you also search the court filings for any litigation involving the property.

For a party seeking to invoke Lis Pendens over registered land, the process is slightly more complex. The party must first file the complaint with the court, then present a certified certificate of the pendency of the suit with the county recorder and a memorial of the suit entered on the certificate of title by the county recorder.

While the road to Lis Pendens against registered land is more cumbersome for the plaintiff, the third party buyer can rest easy that he has good title by simply looking at the county recorder’s certificate of title for the property to see if there is a memorial of a lawsuit on the certificate. Simply stated with registered land, the certificate of title tells the whole story.

Recreational Activity and Liability for Injury

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SoccerWe’ve heard it from television commentators and even youth league coaches, “injuries are part of the game.” Nearly every game; from football to soccer, baseball, basketball, cycling, and running; whatever the sport, there comes with it a chance of injury.

And it’s not just sports commentators and coaches who understand the risk of injury. Ohio’s courts recognize the old maxim as well. Ohio law protects against liability for injuries sustained during recreational activity, where that injury was the result of mere negligence.

As enunciated by Ohio’s Supreme Court: “Where individuals engage in recreational or sports activities, they assume the ordinary risks of the activity and cannot recover for any injury unless it can be shown that the other participant’s actions were either ‘reckless’ or ‘intentional’” Marchetti v. Kalish.

Underlying this rule is the assumption that by voluntarily participating in a recreational activity, one has consented to the ordinary risks inherent in that activity.

This rule has been applied not only on the field of traditional sports, but even in some rather unusual “recreational activities.” In Konrad v. Morant, the “recreational activity” involved two children and one BB gun. They took turns chasing each other and shooting at each other, all very fair and sportsmanlike. Likewise, in Marcum v. Zerkle, there was no liability for injuries sustained in a paintball game.

This same rule has also been applied to injuries sustained by spectators.

In Ohio, whether you’re on the field or in the stands, you’ve assumed the ordinary risks associated with the activity you’re engaged in or even merely watching.

Dos and Don’t of Small Business: Legal Representation of LLCs, Corporations and Partnerships

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While Ohio law allows individuals to represent themselves in court (pro se), non-lawyers may not represent others. This prohibition extends to non-lawyers who are the sole member of a limited liability company or sole shareholder of a corporation.

While for many small businesses there may seem to be no distinction between the sole shareholder/member and the entity itself, the law recognizes the distinction – indeed such recognition is the foundation of corporate existence – and it is important to recognize and respect that same distinction.

We recently handled a case involving two defendants, both of which were limited liability companies. The statutory agents for both defendant entities were non-lawyer members of the respective companies (perfectly legal and acceptable); and the statutory agents for both companies attempted to make “pro se” filings in the case. These filings were stricken by the Court, and treated as if neither defendant had appeared or answered the complaint in the case. Ultimately, the judge entered default judgment in our client’s favor and against the defendants.

Further, the Ohio Supreme Court has held that such attempted “pro se” representation warrants civil fines and sanctions for “unauthorized practice of law.” See Disciplinary Counsel v. Kafele, 843 N.E.2d 169, 174, 108 Ohio St.3d 283, 288, 2006 -Ohio- 904, ¶ 20 (Ohio,2006), finding a $1,000.00 fine appropriate where a non-lawyer member of an LLC made filings and attempted to represent the LLC in a lawsuit, and  Cleveland Metro. Bar Assn. v. McGinnis, 137 Ohio St.3d 166 (Ohio,2013) assessing a $6,000.00 fine for such unauthorized practice of law.

If your small business has a legal issue, hire an attorney to make sure you and your business are protected.

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