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Federal Court of Appeals upholds ban on federal contractor political donations

Author By Finney Law FirmPosted on

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.

Caveat emptor really means caveat emptor

Author By Christopher P. FinneyPosted on

It is in our human nature to trust other people.  We assume, for example, that if a seller is selling us a house, that he would not sell us a “bill of goods” and convey a house full of defects.  It is also in our nature that, when things go wrong, we look for someone other than ourselves to blame.  It is further in our nature to expect when we hire a professional to do a job, he will do it thoroughly and properly.

But in the case of purchasing real property, all of these instincts are just dead wrong.

First, people can and do fail to disclose material defects in real property when they sell it.  It happens all the time.

Second, as we explore here, the law of Ohio is firmly established as caveat emptor, or “buyer beware.”  This means that the burden unquestionably is on the buyer to “kick the tires” and confirm the condition of real property before buying it.

Third, be careful of even relying on your home inspector, as he likely will not stand behind his work.

Now, here are some tips that will try the patience of even the heartiest homebuyer:

1) Even if you do everything right: Ask all the right questions, and hire a home inspector, he might still miss something.  Massachusetts Realtor Bill Gassett, here, has a good blog entry today on things home inspectors — despite their best efforts — miss.

2) Let’s assume the home inspector missed something — something big!  Surely he will stand behind his work.  Unlikely.  Most home inspectors have a contractual provision that if they make a mistake, the limit of their liability is the amount you paid them.  And generally that is enforceable in Ohio.

3) If you are buying a foreclosure, or from a bank or an estate, they both (i) have no obligation to complete the Ohio residential property disclosure form, and (ii) they usually disclaim liability for home defects.  If you pursue them you are going to be mostly out of luck.

4) If a seller agrees to make repairs to a home before the closing, it is incumbent upon the buyer to check — before the closing — that the work was in fact done and done correctly.  The closing is an act of finality, and a buyer will claim a “waiver” of claims.  So, confirm all obligations are fulfilled before closing.

5) Finally, even if a buyer has a meritorious claim against a seller, a Realtor or an inspector arising from property defects, the odds are pretty good that he cannot afford to pursue those claims in litigation.

What all this means is that a buyer must really, really check out the property, the structure — from footer and foundation to roof, the mechanical systems — HVAC, plumbing, and electrical, and all appliances. For, once he closes, he has bought the property and it’s his.  The likelihood of him pursuing post-closing claims profitably is minimal.

Realtor Bill Gassett blogs on pros and cons of condominiums

Author By Christopher P. FinneyPosted on

Nationally, one of the premier bloggers on real estate topics is Bill Gassett of Re/Max in Massachusetts.  You may read his blog here.

He has a nice piece on the differences between buying a single family home and a condominium, here.

Of particular interest to me is his explanation of “Control.”  In terms of legal issues associated with condominiums, this is one area that I try to explain to my clients who are considering buying a unit.  Also of interest are financing issues on condominiums, as that has become a problem area for many condo buyers of late.

If you are thinking about buying a condominium, I’d strongly recommend it for a read.

New construction: Properly documenting change orders

Author By Christopher P. FinneyPosted on

This article is the eighth in a series on new construction.  The contents of this series of articles apply to commercial as well as residential projects.

This blog entry addresses documenting change orders in new construction projects, commercial and residential.  But before we get there, let’s re-visit the fundamentals of new construction contracting.

As is set forth in this prior blog entry:

the starting point is a clear starting point.  At the time of the signing of the contract, it is important to know what the builder has committed to build — and what he has not committed to — and what the buyer has agreed to pay for that product.  Once we have that foundation, we can address the construction changes and price changes from that point.

As a bad foundation of a house will undermine the entire project, a poor starting point for a new construction contract is not a good foundation for the construction process.

Then, once the initial scope, price and timing are clear, as change orders become necessary or appropriate, every single time a change order is agreed upon in a construction project, that change order should be crisply documented.  That documentation should be a written change order signed by both parties to the contract, which includes, in each instance, all of the following:

1) The change to the scope of the project.  The parties should detail what is being eliminated from the construction and what is being added.

2) The change in the price as a result of the change order.

3) The change in the construction schedule as a result of the change order.

Even if one or more of the foregoing are not changing at all, that should be detailed and documented as well.

I tell clients that the point of a contract is twofold: (i) to flesh out the issues between the parties and eliminate confusion as to what is being agreed upon and (ii) to create a document of the commitment of each party to the other that, yes, can be enforced in a court of law.

What happens when one or more of these issues are left unaddressed is that both issues are at play: (i) the parties may have a misunderstanding of the impact of the change order on timing or price, and (ii) it creates a murky situation when it comes time to enforce that contract.

 

Seller financing holds significant risks for seller

Author By Christopher P. FinneyPosted on

When a seller acts in the role of financing the sale of real property, residential or commercial, there are significant potential downsides for the seller.

In this article, we explore the three primary vehicles for seller financing in the sale of real property: (i) lease with option or obligation to purchase, (ii) land installment contract, and (iii) deed with note and mortgage back from the buyer.  In each of these three vehicles, the seller risks non-payment by the buyer.  That blog entry then explores the legal paths to recovering clear title and possession  of the property, and collecting on the indebtedness.

But beyond the simple action to collect on the debt, seller financing situations frequently involve further complications for the seller:

1) First, with the seller’s security for payment of the debt being recovering possession of and title to the property, the “security” of the seller is getting the property “back.”  But the buyer could in the interim, significantly impair the condition of the property.  Commercial buyers could environmentally contaminate the property or make modifications that impair the structure.  Residential buyers may make “improvements” to the property that impair its marketability.

2) Second, we have experienced all too-frequently that the buyer tends to assert claims against the seller as a defense to the payment  of the seller financing.  These claims range from fraud in failure to disclose claimed defects in the real property to misrepresentation as to the rent roll and the P&L statement provided before the closing.

3) Seller can encounter significant legal complications due to unpaid contractors for work on the property (giving rise to mechanics lien claims), unpaid taxes, and unpaid utility bills.

And taking a second mortgage position for a portion of the purchase price (where a deed is exchanged for a portion of the purchase price)  can be even more precarious.  A second mortgage holds all of the risks set forth above, and in addition, second mortgagees are, obviously, subordinate, to a first mortgage.  To the extent that the value of the property to a foreclosure sale is inadequate to pay the first mortgage, the second mortgage is valueless.

Thus, seller should carefully weigh the risks associated with seller financing of real property.

Village Council Grammar Found Wanting; Woman Escapes Parking Ticket

Author By Finney Law FirmPosted on

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.

 

Advanced commercial real estate law: Seller beware, the contract that doesn’t end

Author By Christopher P. FinneyPosted on

There is a creative children’s song called “The song that doesn’t end,” and through its circular lyrics, according to the song, “it just goes on and on my friend.”  Listen here.

For some unfortunate sellers of real estate (usually commercial real estate), there are contracts that don’t end, either.  They just go on and on, tying up the seller from selling the property to a third party.

There are some unscrupulous buyers who use a form of commercial real estate purchase contract — on retail space, raw land, offices, apartment buildings, warehouses, and various and other sundry commercial properties — that puts the seller in a terrible box.  This form of contract, through some creative and circular language — referencing, for example, 180 days from a date that never occurs– never requires buyer to close, but it also never puts an end to his due diligence period, so neither does he have to terminate.

Thus, forever and ever, under this form of contract, the buyer can sit and wait — preventing seller from selling the property to another party.  This allows the buyer to both (i) without cost, to wait until the property becomes “hot” and then someday sell it at a profit to a third party or (ii) to extort a payment from the seller to just dry up and blow away.

Now, because the buyer never has to perform and never has to terminate, it is likely the contract could be defeated in litigation as unenforceable for lack of consideration.  The problem is that the buyer can tie the matter up in Courts for a year or two even after the seller commits to litigate, at great cost, of course, to the seller.

The net result is the same — the seller can neither shake the buyer nor force him to close.

Thus, seller beware of the contract that doesn’t end.  Read every contract thoroughly before signing.

Must you pay to play? Recovering attorney fees in litigation

Author By Bradley M. GibsonPosted on

As a litigator, one of my jobs is to ensure that my clients understand the risks and benefits of pursuing or defending a lawsuit. As the saying goes, knowledge is power. Only when my clients understand the economic realities of their case are they empowered to make the right decision for them.

Frequently, a client will assume that if we prevail in the litigation, the opposing party will have to reimburse my client for his or her attorney fees. But, the reality is that attorney fees are awarded only in special circumstances, and even when those circumstances are present, it is far from guaranteed that a court will award attorney fees to the prevailing party.

Ohio follows the “American rule” for the recovery of attorney fees under which a prevailing party in a civil action generally cannot recover attorney fees as part of the costs of litigation. Attorney fees may be awarded to the prevailing party, however, when: (1) a federal or state statute explicitly provides for an award of attorney fees; (2) the prevailing party demonstrates bad faith or malicious conduct on the part of the unsuccessful litigant; or (3) where the dispute involves an enforceable contract that contains an attorney fee provision.

The Fourth District Court of Appeals recently issued a decision discussing whether a prevailing party in a contract dispute may recover its attorney fees as damages from the opposing party.  In 2-J Supply, Inc. v. Garret & Parker, LLC, the plaintiff was granted default judgment on its claim for goods sold to the defendant under the terms of a credit account application. The defendants had also personally guaranteed their debts. Both the credit account application and the personal guarantees contained a provision that required the defendants to pay the plaintiff’s attorney fees and litigation costs if the defendants defaulted on their obligations under the contracts. Nevertheless, the trial court determined that the plaintiff was not entitled to an award of its attorney fees because no statute authorized the recovery of those fees.

The plaintiff appealed the trial court’s decision denying its request for attorney fees. On appeal, the Fourth District held that the trial court erred in refusing to award attorney fees. In its decision, the appellate court emphasized that parties have a fundamental right to contract, and as a result, agreements to pay another’s attorney fees are normally enforceable and not void as against public policy. The court explained that where the attorney fee provision is unambiguous, is not the product of compulsion or duress, and did not result from the parties having unequal bargaining power, the provision should be enforced by the courts.

Judge Hoover authored a vigorous dissent, however, stating that the Ohio Supreme Court has previously held that contracts for the payment of attorney fees upon default of a debt obligation are void and unenforceable. Judge Hoover reasoned that the Credit Account Application at issue operated as a penalty to the defaulting party and only benefitted the plaintiff/creditor who provided the form agreement. The dissent further opined that contractual attorney fee provisions should only be enforced where the evidence suggests that the provision was freely negotiated by parties with equal bargaining power.

Despite the clear contractual provision at issue in this case, the dissenting opinion highlights that almost nothing is guaranteed when it comes to seeking a recovery of a litigant’s attorney fees. When contracts provide attorney fees for only one party – as opposed to a provision allowing the successful party to recover its fees – they are less likely to be enforced.

It is important that litigants understand the costs of prosecuting or defending a lawsuit. It is my goal to hold these candid conversations with my clients early and often so we can develop the best strategy going forward for each client on each case. What makes sense for one, may not make sense for another. The potential recovery of attorney fees may help shape these decisions, but clients must understand that courts generally disfavor awarding such fees unless special circumstances exist.

This discussion also highlights the importance of contract drafting for our commercial clients. As a litigator, I typically get involved only after a dispute arises. All too often I find myself in the position of having to inform my clients that if a particular contract term had simply been incorporated into a contract, or drafted more appropriately, they would have allowed themselves a remedy far superior to what is presently available.

Our transactional team is well aware of this conundrum, and strives to ensure that our commercial clients are well-protected in their contractual documents to avoid these potential pitfalls before they arise. A well-drafted contractual provision can be the difference between expensive litigation, and a quick, decisive resolution.

The Finney Law Firm is positioned to serve your litigation and transactional needs.  On the front end, we work to provide our commercial clients with contractual documents that will best position them should a dispute later arise. With respect to litigation, we make it our goal to fully inform our clients of all aspects of their case – legal and economic – so that we can empower you to make the best decisions necessary to resolve your disputes.

An interesting option in legal studies at Chase College of Law

Author By Christopher P. FinneyPosted on

My law school alma mater, Salmon P. Chase College of Law, is offering a Master of Legal Studies program folks who want to acquire targeted legal knowledge and skills in a year or so, but who don’t want to practice law or commit 3 or 4 years to law school.  It’s an interesting and new option.

The idea is that professionals in business, real estate, media and publishing, criminal justice and other disciplines can take focused studies in the law aimed at helping them to better understand our legal and governmental systems.

 

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