We caught Team Ivy hard at work on a Friday afternoon, all wearing their snazzy new Ivy Pointe Title polos. From left to right: Chris Finney, Laura Linneman, Tida Griffits, Patty Gillespie, and Rick Turner.
Thanks, all!
Our firm has previously written on the creative ways one can shield his or her personal assets through the corporate or limited liability structure. As noted in that entry (Link Here), “Ohio courts and courts throughout the nation have been pretty vigilant in protecting the corporate veil of owners of corporations and limited liability companies.” However, this general principle is not without a couple of narrowly drawn exceptions, explored below.
Formation of LLCs
The Finney Law Firm deals regularly with clients and other parties that are organized as limited liability companies (“LLCs”) or corporations. After all, these entities are fairly simple to create – one must simply fill out an online form or two, submit a relatively small fee to the Secretary of State, and they are then able to transact business without fear of personal liability, right? Maybe not.
The powerful “corporate veil” protection of an LLC
Generally, an LLC member cannot be held personally liable for the torts or contractual obligations of the LLC solely by virtue of his or her membership in the LLC. City of Lakewood v. Ramirez, 2014-Ohio-1075, ¶ 11 (8th Dist. 2014). Thus, if an LLC defaults on its obligations under a contract, an adverse party cannot obtain judgment against the LLC members’ or managers’ personal assets. It is for this reason, along with its ease of formation, that the LLC structure is so desirable to many. And, most of the time, it succeeds in its purpose of precluding judgment against the members’ personal assets.
Narrow exceptions
However, there are two sets of circumstances under which the limited liability structure does not shield members from personal liability.
1. Piercing the corporate veil
The first is where the court deems it proper to “pierce the corporate veil,” thereby removing that protection of limited liability.
[I]n order to pierce the corporate veil and impose personal liability upon [members or managers], the person seeking to pierce the corporate veil must show that: (1) those to be held liable hold such complete control over the corporation that the corporation has no separate mind, will, or existence of its own; (2) those to be held liable exercise control over the corporation in such a manner as to commit fraud or an illegal act against the person seeking to disregard the corporate entity; and (3) injury or unjust loss resulted to the plaintiff from such control and wrong.
Stewart v. R.A. Eberts Co., 2009-Ohio-4418, ¶ 16 (4th Dist. 2009), citing Belvedere Condominium Unit Owners’ Ass’n v. R.E. Roark Cos., 67 Ohio St. 3d 274, ¶ 3 of the syllabus, 617 N.E.2d 1075 (1993). The idea behind piercing the corporate veil is that there is so little separation between the individual and the LLC, that they can almost be considered “alter-egos” such that it is not unreasonable to hold the member or manager of the LLC personally liable for the debts, obligations, and/or liabilities of the LLC.
2. Member’s own acts, ommisions or fraud
The second instance where a member can be held personally liable notwithstanding the limited liability structure is where the members’ own acts or omissions constitute fraud. R.C. 1705.48; See also Deitrick v. Am. Mortg. Solutions, Inc., 2007-Ohio-839, ¶ 19 (10th Dist. 2007) (finding that a “corporate officer can be individually liable in tort if the promises contained in the contract are fraudulent” and “even if he commits the fraud while in the course of his corporate duties”); Stewart, at ¶ 30 (“[N]either the corporate shield, nor a shield of limited liability insulates a wrongdoer from liability for his or her own tortious acts.”). Additionally, this second instance is not contingent upon the first (i.e., a litigant who seeks to hold an LLC member personally liable for the member’s own fraud need not first pierce the corporate veil in order to do so). Yo-Can, Inc. v. Yogurt Exch., 149 Ohio App. 3d 513, 527 (7th Dist. 2002) (“[P]laintiffs need not pierce the corporate veil to hold individuals liable who allegedly personally commit fraud.”).
Conclusion
Thus, while the LLC or corporate structure are very successful at providing owners/members with a great deal of protection the overwhelming majority of the time, one shouldn’t make the mistake of thinking his or her personal assets are entirely immune regardless of the circumstances.
In April of this year, the Ohio legislature passed an updated Good Funds Law for transactions involving residential real estate to mandate, among other things, wire transfers for amounts in excess of $1,000, with a few exceptions.
Now, that amount has been increased to $10,000.
So, the new rule is that a ll funds coming into a title company to fund a residential real estate transaction must come in in one of the following ways:
- Electronically-transferred funds, including wire transfers;
- Personal checks, cashier’s checks, money orders or Official Checks of $10,000 or less;
- Automated clearing house (ACH) transfers; or
- Checks from a real estate broker’s escrow account.
We will keep you updated with further changes in the law so that we can continue to be “accurate and on-time, everytime.”
I want to extend a warm and sincere “Thank You” to the attorneys, staff, vendors, and clients of Finney Law Firm, LLC who have joined together to make our firm — dedicated to “Making a Difference” for our clients and in our profession and community — a tremendous success in our first four years in operation.
We started our new firm in Eastgate in the fall of 2013 with a great group of attorneys, a loyal and experienced staff, a top-notch lineup of vendors and a solid core of clients. Since then, we have attracted more talented attorneys and staff, and have been met with simply overwhelming response from our clients.
We started with just four attorneys and three staffers. Since then, we have grown to nine full-time attorneys, and are about to add our tenth. We have expanded the law firm at Ivy Pointe in Eastgate three times, and eventually added space in the Rookwood Pottery building in Mt. Adams. Just weeks ago, we tripled our space at Mt. Adams, so that the two offices are now roughly equal in size.
Under the leadership of attorney Rick Turner, we started Ivy Pointe Title, LLC in the fall of 2014 to support our commercial real estate closings and added to that base residential transactions. He started with one full-time staffer, and now oversees an operation of seven full time employees. Due to tremendous success under his leadership, in November, we plan on doubling the size of the title company.
Our journey has taken us three times to the United States Supreme Court (with three unanimous victories) and numerous times to the Ohio Supreme Court. We have handled dozens of multi-million dollar corporate and real estate transactions for our small business clients, and we have saved clients more than five million dollars in real estate taxes. We successfully have handled numerous class actions for clients, including acting as local counsel for the ground-breaking class action against the Internal Revenue Service. All of this is while we have daily served, client-by-client, to “make a difference” in their transaction or litigation matter.
These accomplishments are the result of the combined efforts of many people, and to each and every one of them I owe my deep gratitude. The engine of commerce, the laboratory of legal innovation, and the commitment to client service we have made together is enduring and flourishing, ultimately, because we all work together to provide value for our loyal clients in each assignment.
Thank you, most sincerely, for making this such a fun, rewarding adventure!
Christopher P. Finney, President
Suppose someone is falsely charged with a crime. They’re innocent until proven guilty, right? They have the right to a trial, to a lawyer, and to confront their accusers, right? They have a right to defend themselves and be judged by a jury of their peers, right? And if they are innocent, they may be exonerated and vindicated, right? All true. And these rights are a cherished part of our democracy. It’s all part of what we Americans call “Justice.” And most of us would see the heavens fall before we would allow a citizen to be punished for committing a crime without having these rights honored.
But suppose someone is falsely accused of doing something wrong AT WORK. Say they were accused of committing sexual harassment when they did no such thing. Or suppose they were falsely accused of doctoring time records, or some other act of dishonesty. And suppose they get fired on the basis of this false accusation. Surely they would have some protection from such false accusations, right? After all, getting fired is serious business. It can harm someone as much or more than getting charged with a crime.
The reality, though, is that for most employees there is little or no protection from being fired on the basis of a false accusation. Unless the employee is in a union or in the classified civil service of the government, the employee is considered “at will.” This means that they serve “at the will” of their employer, and thus that they can be fired for any reason that is not “contrary to law.” This can include entirely false and even “made up” reasons. So unless the employer’s ultimate motivation for firing the employee is an illegal consideration (like discrimination) there is often no legal remedy for the “at will” employee who is fired on the basis of a false accusation. They can be punished without a trial, without a fair chance to defend themselves, and without any due process.
This is hard for many people to understand or believe. We are a nation that believes in justice, fairness, and rights. When I tell clients that an at will employee may not have any legal recourse after being fired on the basis of a false accusation, I am often met with blank stares. People have trouble believing that can be true in America. But the truth is that few people have less rights than an at will employee fired on the basis of a false allegation.
If the employer repeats the false accusation to third parties – such as to prospective employers who call for a reference on the fired employee – then in that instance the employer may be liable for defamation of the employee’s character.
But otherwise the falsely accused employee often can get no “justice” for what may be an extremely unjust act.
There has been a firestorm of controversy recently over Google’s decision to fire James Damore. Damore is the software engineer who wrote an internal memo – subsequently leaked – that criticized the company’s policies on diversity and inclusion.
Specifically, Damore claimed that biological differences between men and women may account for the fact that women are under-represented in tech positions at Google and elsewhere. Google fired Damore for his statements, and his termination has been widely debated – earning praise from liberal groups and scorn from conservatives.
But was Damore’s firing LEGAL? Does he have a legal case against Google for wrongful discharge?
For a lot of people, this is a First Amendment issue. They say, “Doesn’t he have the right to express himself? Aren’t his Constitutional rights being violated if he is fired for speaking his mind, whether we agree with him or not?”
The answer to THAT question is “no.” The First Amendment applies to actions taken by the government, not by private employers. It would protect Damore from any action taken by the government, but not from action taken by Google.
But Damore still might have a case. He has already filed an unfair labor practice charge with the National Labor Relations Board. The law says that employees are protected when they engage in “concerted activity” with one another regarding the terms and conditions of their employment. Damore’s claim with the NLRB alleges that his memo – sent to other Google employees – was “concerted activity” about a company policy that affected the employment conditions of he and his fellow employees.
Additionally, Damore claimed in his memo that the company’s diversity program discriminated against men, because – he claimed – it gave female applicants and employees unfair advantages in hiring and promotion decisions. He can claim – and probably will claim – that he was terminated in retaliation for opposing what HE saw as discrimination in the workplace. Firing an employee for expressing opposition to what they REASONABLY BELIEVE is unlawful discrimination is illegal.
Note that the employee doesn’t have to be RIGHT that illegal discrimination is occurring. He or she just has to “reasonably believe,” in good faith, that it is. If they have that reasonable belief, the employee is often protected from retaliation for expressing their opposition to the practice.
This case raises some very interesting issues about employment law and discrimination, and will be very closely watched by many different advocacy groups – and practicing lawyers like us – in the coming months and years.
Technology consumes the lives of most Americans. In fact, humans create an estimated 2.5 quintillion bytes of data each day and an estimated 90 percent of all the world’s data was created in the last two years.[1] In perspective, 2.5 quintillion bytes of data is equal to about 530 million songs or 90 continuous years of HD video.[2] Holding power and control over digital assets is advantageous to the owner, but many jurisdictions do not have laws to effectively govern what happens to a deceased person’s digital assets. Prior to April of this year, Ohio was one of those jurisdictions.
Ohio House Bill 432 (HB432) was signed into law by Governor Kasich at the end of 2016 and it became effective April 6, 2017. This Bill, otherwise known as the Omnibus Probate Bill, made significant changes to estate administration in Ohio. Chief among those changes was the adoption of the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). Under the original Uniform Fiduciary Access to Digital Assets Act (UFADAA), fiduciaries were authorized to manage digital property such as computer files, web domains, and virtual currency, but it restricted a fiduciary’s access to the substantive content of electronic communications (e.g., email messages, text messages, social media accounts, etc.). However, HB432 and RUFADAA extended the reach of a fiduciary to include the power to manage a person’s substantive digital assets.
Rather than granting this power across the board, HB432 outlines the means through which an individual may grant such power to his or her fiduciary. These means include: (1) online tools offered by a custodian or possessor of digital assets and through which an individual can select how their digital assets will be treated, (2) a will, trust, or power of attorney, and (3) the custodian’s terms of service.[3] The foregoing means are listed in order of descending authority. In other words, an online tool supersedes the terms of a will or trust, which supersedes the custodian’s terms of service, which supersedes the default RUFADAA rules.
As estate planning catches up with technology, it is important to understand how newly enacted legislation can affect your rights. With Ohio’s recent adoption of RUFADAA, individuals now have greater control over what happens to their digital assets after death. As is good practice with estate planning, individuals seeking to exert a measure of control over their digital assets after death should consult with an estate planning attorney.
[1] Bringing big data to the enterprise, IBM.com, https://www-01.ibm.com/software/data/bigdata/what-is-big-data.html (last visited May 25, 2017).
[2] Mikal Khoso, How Much Data is Produced Every Day?, Ne. U.: Level (May 13, 2016), https://www.northeastern.edu/levelblog/2016/05/13/how-much-data-produced-every-day/.
[3] See generally, Ohio Rev. Code § 2137.03 (2017).
The Cleveland Park District has a policy requiring people obtain permission before engaging in any “First Amendment Activity” within Cleveland parks. And, once granted permission, one must remain within a specific (often remote) designated First Amendment zone.
During a recent Edgewater Live concert (think the old Party in the Park), our client, Alison Abdul-Kareem, attempted to circulate petitions in support of an initiative to place an issue decriminalizing misdemeanor amounts of marijuana on Cleveland’s ballot this November.
Ms. Abdul-Kazeem refused to either apply for a permit, or limit herself to the free speech zone (a 15 minute walk from the area of the park hosting the concert series). Thus, park rangers, enforcing the Park District’s policy proceeded to harass our client, including at one point surrounding her standing only a few feet away from her, thus frightening off any would be petition signers. Our suit, styled Alison Abdul-Kazeem v. Board of Commissioners of the Cleveland Metropolitan Park District, et al. 17-cv-01613, seeks to vindicate the right of Abdul-Kazeem, and others, to exercise their First Amendment rights throughout the public areas of public parks, without the threat of official harassment.
As first year law students learn, because initiative petitioning goes to the essence of self-government and constitutes and implicates core political speech and associational rights, “First Amendment protection for such interaction…is ‘at its zenith.’” (Buckley v. American Constitutional Law Foundation, Inc., 525 U.S. 182, 183 (1999), quoting Meyer v. Grant, 486 U. S. 414, 425 (1988)).
A Finney Law Firm attorney filed the complaint and motion for a temporary restraining order and preliminary injunction on Tuesday in the U.S. District Court for the Northern District of Ohio, and Judge Dan A. Polster has ordered the Park District to respond by noon on Wednesday and will hold conference on the motion at 3 p.m. on Wednesday. We are pleased to see the Court acting with such speed in this matter; and are hopeful that the Court will issue the injunction, allowing our client and other petition circulators free access to Edgewater Park in time for the next concert on Thursday – the last such event before petitioning ends for this year (petitions must be turned in by next Wednesday in order to qualify for the November 2017 ballot).
A copy of the complaint and motion are available here and here.
Cleveland.com has an article on the lawsuit here.
In order to advance our mission of “Making a Difference,” we are pleased to announce a further expansion of our Mt. Adams office, nearly our footprint at that location. We now have offices for seven attorneys and additional staff that that location in the Rookwood Pottery Building (1077 Celestial Street, Cincinnati, Ohio 45202).
For our clients, if you are downtown or in the area and need an outpost with a desk, WiFi, a printer and a beautiful view of the City, we have a large lounge area from which you are welcome to work. We also now have two conference rooms at that location for depositions, closings, and meetings.
Please stop by and visit; let us show you around!
How do I obtain an Ohio commercial real estate broker lien?
First, let’s be clear: There is no lien right for real estate brokers for property consisting solely of between one and four residential units. (O.R.C §§1311.85 and .86).
However, licensed real estate brokers do have lien rights in transactions involving commercial properties, i.e., anything other than between one and four residential units. (O.R.C §§1311.86).
The lien rights extend to brokerage contracts for the provision of services for selling, purchasing, and leasing. (O.R.C §§1311..86(A) and (B)). They do not appear to cover the provision of property management services.
What is a lien?
In one sense, a lien does not get you anything more than the contract rights you already have: You have a signed listing agreement, you have earned your commission, you can sue in a court of competent jurisdiction, and you can thus get paid the amount of money you are owed.
But as a practical matter, lien rights are tremendously powerful in “turning the tables” on a property owner, giving quick, inexpensive and powerful leverage to the Realtor to resolve a commission dispute.
Why is a lien important?
Leverage often is the “whole ballgame.” So often, (a) debtors will avoid debts they clearly owe just because they can, for purposes of the time-value of money (by delaying the payment, they can use your money in the interim) and (b) the reality is that most creditors will not go to the trouble and expense of hiring and paying an attorney to collect the sums owed to them.
Litigation can cost as little as $20,000 per case, up to hundreds of thousands of dollars for a vigorously-contested action. So, the question for a Realtor claiming a commission is: Can I “check” or “checkmate” a property owner (seller or landlord) into recognizing, dealing with and paying my claim without the two years and tens of thousands of dollars in legal fees needed to vindicate that right?
A lien is a powerful tool — it encumbers real property
A lien is an encumbrance on real property. In most cases, real property encumbrances have the same priority of the order of filing, i.e., the first-filed is paid first from the sale proceeds, the second, second and so forth. (Ohio mechanics liens are the major exception to this rule, dating back to the date of first work on a project.)
This gives the lien holder two distinct advantages, many times powerful advantages: (a) their claim is secured against the real estate (i.e., the owner cannot further squander the equity in the property by a sale or mortgage) (b) the claimant has placed a cloud on the title with what may still be a disputed claim, effectively preventing the owner from selling or mortgaging the asset until the earlier of (i) the statutory expiration of the lien or (ii) the judicial disposition of the claim and the lien rights.
Thus, as a practical matter if the property owner wants to sell his property or take out a new mortgage or refinance an existing mortgage, he will have to “deal with” the Realtor’s claims before doing so.
A broker’s lien is unilateral — it does not require the owner’s signature or consent
Contrary to what many clients ask of us in a simple contract or tort claim (“please lien their property”), in most circumstances a lien cannot be placed against real property until either (a) the owner signs a voluntary instrument such as a mortgage or (b) the conclusion of litigation, which usually takes years. In the meantime, a defendant can sell and mortgage the property, or otherwise encumber it, and then squander the asset without concern for the plaintiff’s claims. (This is constrained by concerns about fraudulent conveyance issues that will be discussed in another blog entry later.)
The right to place a unilateral lien against real estate is very narrow, being limited to government liens (such as tax liens, assessments, environmental liens, etc.) and mechanics liens (for work done on real property and materials delivered to real property for incorporation therein).
Commercial brokerage lien rights
O.R.C. §1311.86 provides such unilateral lien rights for the collection of a commission in commercial transactions in specific circumstances set forth in the statute. Being a unilateral filing, means that the Realtor claiming the lien simply signs and files a piece of paper in the Hamilton County Recorder’s office. It does not require a signature (on the lien filing) of the property owner.
Statutory requirements
Because the lien arises from the statute, strict compliance with the statutory mandates will be required. F. W. Winstel Co. v. Johnston, 103 Ohio App. 525, Paragraph 1 of the Syllabus (1st Dist. 1957). These are set forth in O.R.C. §1311.86:
- It is for written brokerage contracts only (O.R.C. §1311.86(A) and (B)).
- It is for “for services related to selling, leasing, or conveying any interest in commercial real estate” (O.R.C. §1311.86(A)) and “for services related to purchasing any interest in commercial real estate.” (O.R.C. §1311.86(B)).
- “The lien is effective only if the contract for services is in writing and is signed by the broker or the broker’s agent and the owner of the lien property or the owner’s agent.” (O.R.C. §1311.86(A) and (B)).
- The lien is for the broker only, not his salespersons. (O.R.C. §1311.86(C)(1).
- The lien amount is either the brokerage commission due, or if due in installments only that portion due on conveyance. (O.R.C. §1311.86(C)(2) but in the case of commercial leasing, (O.R.C. §1311.86(C)(3).
- Only the property subject to the brokerage agreement can be liened. ((O.R.C §§86(C)(5)).
Lien contents
To perfect a lien, the following steps must be followed:
- The claimant must prepare, sign and have acknowledged (notarized) an affidavit containing each of the following: (a) name of the broker who has the lien, (b) the name of the owner of the lien property, (c) a legal description of the lien property, (d) the amount for which the lien is claimed, (e) the date and a summary of the written contract on which the lien is based, and the real estate license number of the broker. R.C. 1311.87(B)(2).
- Additionally, the lien affidavit must state that the information contained in the affidavit is true and accurate to the knowledge of the broker. Id.
Lien deadlines
The timeframes within which a commercial broker’s lien must be filed are:
- For a sale of liened, the Affidavit must be recorded prior to the conveyance of the property. R.C. 1311.86 (B)(3).
- For a purchase of liened property the Affidavit must be recorded within ninety days after the conveyance of the property. R.C. 1311.86 (B)(4).
- For liens based upon a leasing commission, the Affidavit must be recorded within ninety days after a default by the owner in payment. R.C. 1311.86 (B)(5).
Notice to property owner
One other requirement not to overlook: “On the day the lien affidavit is recorded, the broker shall provide a copy of the lien affidavit to the owner of the lien property and, where a contract for the sale or other conveyance of the lien property has been entered into, to the prospective transferee, where known, either by personal delivery or by certified mail, return receipt requested. O.R.C. 1311.86 (B)(6).
Be careful — “Slander of title” claims can be nasty
If one files a lien against real property that is later determine to have been in bad faith, the lien claimant can find himself the target of a suit for a cause of action known as “slander of title.” Slander of title is the tort of impairing title to someone’s real estate without a reasonable basis therefor. McClure v. Fischer Attached Homes, 2007-Ohio-7259, ¶ 21, 882 N.E.2d 61 (Clermont Co. C.P. 2007), citing Green v. Lemarr, 139 Ohio App. 3d 414, 433 (2d Dist. 2000).
The really bad part of a slander of title claim is that it can include an award to the property owner of an award of his attorneys fees and a punitive damages amount. Additionally, the commercial brokerage lien statute specifically allows for the prevailing party to recover its attorney’s fees. O.R.C. 1311.88(C) (“[A] court may assess the nonprevailing parties with costs and reasonable attorney’s fees incurred by the prevailing parties.”). However, in cases involving general slander of title claims (i.e., outside of the commercial brokerage lien context), the attorney’s fees have been limited to the those “necessary to counteract a disparaging publication,” and did not include those incurred in prosecuting the slander of title. Cuspide Props. v. Earl Mech. Servs., 2015-Ohio-5019, ¶ 40 (6th Dist. 2015).
Thus, we recommend moving forward with the filing of an affidavit for a commercial broker’s lien cautiously, only where the broker is certain of the merits of his position and even then still willing to withstand the possible claim for slander of title from an owner.
Conclusion
The Finney Law Firm is privileged to have many real estate brokerage clients, including commercial Realtors. The commercial lien right is a very powerful one, and one that we think is under-utilized in commission disputes.
Consider one of our attorneys to assist you in such a dispute, including the use of the right to a commercial lien.