More than 99% of all petitions to the United States Supreme Court are rejected, meaning that the petitioner’s claims are never heard by the High Court.

In 2014, we were fortunate to have two cases — of about 100 in total addressed by the Court —  accepted.  And then we then won each by 9-0 decisions authored by Justice Clarence Thomas.   Inasmuch as this was the inaugural year of our new firm, this was an exceptional honor.

As we wrote here, we asked the U.S. Supreme Court to consider a third case this year — Wagner v. City of Garfield Heights.  In that case we filed what we refer to as a “me too” petition before the U.S. Supreme Court, one addressing issues otherwise before the Court, in this case Reed v. Town of Gilbert, AZ, which was heard by the Justices in oral argument by the Court back in January.

We could not say after the Court’s initial conference that the case had been accepted or rejected — rather they just held it in abeyance.

Last week, they ruled in favor of Reed in the Arizona litigation, vindicating the First Amendment rights of the petitioner in a case involving content discrimination by the Town of Gilbert as to yard signs.  Today, they issued their ruling in the Wagner case and ruled in favor of our client, Frank Wagner.  Wagner had been cited criminally by the City of Garfield Heights for placing a 4′ x 4′ sign in his yard critical of his city council member.

The case has now been sent back to the 6th Circuit for further consideration in light of the Reed decision.  You may read the SCOTUS order here.

As is explored here, the standard Cincinnati Area Board of Realtors contract launched late last year contains very substantial changes from prior forms published by the Board.  This is important, because this new form of Contract is in use by most Realtors in the greater Cincinnati area, so buyers and sellers are more likely to encounter it than not.

Issues not explored in the prior blog entry, however, are the significant “outs” in the new form Contract for buyers.  Historically, form residential contracts in use in greater Cincinnati would provide a standard inspection contingency and financing contingency, but otherwise, the buyer’s hands were tied in contract performance.

But under the new Board contract, the buyer has additional “outs” — the right to terminate the Contract — due to the failure of an appraisal contingency (paragraph 4) and for the non-approval of a variety of documents provided by the buyer relating to homeowners association covenants against the property (paragraph 8).

These provisions — especially the HOA covenant review — give the buyer broad rights to terminate the contract, leaving the seller to need to place the house back on the market, and find another buyer.

Read more: New Cincinnati Area Board of Realtors contract contains substantial changes >>

OK, we keep talking about it, but in reality “nothing” has happened yet with the Frank Wagner v. Garfield Heights case at the U.S. Supreme Court.

We filed the case and said it had issues that tracked the U.S. Supreme Court case of Reed v. Town of Gilbert, AZ.  And the Supreme Court agreed with that proposition, refusing to dismiss the case a the first conference, where 99% of all petitions die.  But neither did they accept the case.  It just was put on a pile “to be considered later.”

On Monday, the Town of Gilbert, AZ case was decided in favor of the Plaintiffs, and free speech, the same side as the Wagner case, advancing the issues on which we had won at the trial Court in that case.  Thus, if the U.S. Supreme Court follows its precedent set this week, we should “win” a third time in 18 months at the U.S. Supreme Court. Nothing is guaranteed, but the signs all look good.

Well, that “later” for Wagner is this Thursday.  And we are hopeful the result of that conference will be a big “Reverse and Remand” to the 6th Circuit.

We’ll keep you advised.

 

We have a fantastic (if we do say so ourselves) 8-part series on legal issues on new construction for residential and commercial projects. The series, as a general proposition, provides helpful information for both contractors (builders) and buyers.

New construction: The problem of “what” is to be built >>

New construction: The “When” >>

New construction: Change orders, allowances and selections can significantly impact price >>

New construction: On whose land are you building? >>

New construction: Cost-plus versus fixed-price >>

New construction: What form of contract? >>

New construction: Ohio residential buyers absolutely protected from liens in limited circumstances >>

New construction: Properly documenting change orders >>

If we can help you “Make a Difference” with documentation of a new construction project, contact Isaac T. Heintz at (513) 943-6654.  For a dispute relating to a new construction project, contact Brad M. Gibson at (513) 943-6661.

We explore the issues of insurers and indemnitors in these two previous articles:

Navigating turbulent waters: Insurers and indemnitors (Part 1) >>

Indemnities and Warranty Deeds: Open-ended access to your checkbook >>

These blog entries primarily provide an understanding of indemnities from two different perspectives: That of the indemnitee (the person who is protected under an indemnity), and that of the indemnitor (the person providing the protection).

In this article, we explore multiple facets of the indemnity, and its enforcement.

As a starting point, in contractual indemnities, various terminology is used for risk-shifting provisions:

  • Indemnify
  • Defend
  • Hold harmless

These three terms, to us, have different meaning, but in application courts have interpreted them interchangeably, or at least to overlap.

  • “Indemnify” is an open-ended commitment to both cover the expenses of a third party claim and potentially to defend against that action, i.e., pay the the indemnity attorneys fees.
  • “Defend” more specifically covers that obligation to protect the first party from suits.  It probably does not include a broad indemnity for the underlying liability.
  • And “hold harmless” generally means simply that the second party will himself not raise a claim against the first party for certain claims, almost like a prospective release.  “Party B will hold Party A harmless from claims relating to the underground storage tanks on the property.”

But, because courts fail to make these fine-line distinctions, when drafting contract provisions perhaps more precision as to what is intended is in order.  In some instances, a party will provide all three protections: “Tenant will indemnify, defend and hold harmless Landlord from all claims relating to his occupancy of the property.”  Other times, it would be appropriate to tighten the scope of the risk-shifting provision: “Landlord has disclosed to Tenant the leaking roof on the property, and Tenant agrees to hold harmless Landlord against claims relating to the same.”

Because contractual risk-shifting provisions essentially provide open-ended access to a checkbook of the indemnitor, great care should be exercised in agreeing to such provisions.  For, even if a claim ultimately is unfounded, the cost to defend can bankrupt even well-capitalized parties.  Consideration also should be given to indemnities that must be personally signed, thus voluntarily piercing the corporate veil carefully constructed to protect the individual owners.

Today, for example, it is common for lenders to ask that individual investors in a real estate transaction personally indemnify and defend a lender against environmental risks associated with real property being financed.  Caution should be exercised in undertaking such an open-ended risk.  For, the very reason we advise clients to take title to property in the form of an LLC or corporation is to shield the individual form such open-ended liability.  An indemnity blows past that carefully-planned protection.

Finally, how is an indemnity or insurance provision enforced when the indemnitor or insurer chooses to ignore his contractual obligation?  This can be accomplished in one of two ways:

  1. At the time the claim is pending, the indemnitee can bring a “declaratory judgment” action asking the Court to declare that the indemnitor provide the promised protection.
  2. After the fact, as long as proper demand has been made previously for such a defense, a monetary damages claim can be brought to compensate indemnitee for the damages caused by indemnitor’s breach of his contractual obligation.

In many ways indemnities are “super” contract provisions because instead of defining specific contractual obligations (e.g., to make payments, to pay taxes, or to repair a roof) they protect against open-ended and sometimes unknown obligations, and indeed obligations from third parties who are foreign to the transaction being undertaken.

Whenever I review a contract, a lease, a mortgage or loan agreement, or other contractual agreement for a client, my antenna is raised when I read that my client is agreeing to “indemnify,” “defend,” “hold harmless,” “protect” or words of similar impact some other party. Those “super” contract provisions should be undertaken with due consideration to the impact on the indemnitor.

 

In perhaps the most audacious litigation gambit I have been involved with for a client, we resuscitated a failed Ohio Supreme Court case with a U.S. District Court action that rendered a favorable settlement for our client over…the elimination of his curb cut.

Curbs serve several purposes on a roadway: They are part of the storm water management system, moving water along a road’s edge into a storm sewer, and they operate as an important traffic control mechanism, whereby access onto roadways to and from individual properties is “regulated” by “curb cuts.”  A curb cut is the lowering or elimination of an otherwise continuous curb along a roadway, that is too high for traffic to traverse, to allow ingress and egress into private property.

Ohio has a long and rich tradition of allowing, as a constitutional right, access to one’s property through a curb cut onto a public road. See, e.g., OTR v. Columbus (1996), 76 Ohio St.3d 203, 667 N.E.2d 8.

With that as background, in 1998 our client, Preschool Development Co., developed its property along S.R. 73 in Springboro, Ohio into a preschool.  It purchased a single family residence that enjoyed an existing curb cut onto S.R. 73, demolished the building, and proposed to build a new preschool there with direct access onto S.R. 73.  The City of Springboro at first conditioned zoning approval of the new development on a promise from the developer that when a new drug store was developed next door, we would close our curb cut onto S.R. 73, and access our property only through the drug store parking lot.  We objected, citing to the constitutional principle noted above.  Eventually, the owner reached a contractual agreement with the City that when the drug store parcel ultimately was developed, the owner would install, at its expense, a median in S.R. 73, thus preventing left turns into and out of the property, a reasonable compromise that allowed the development to go forward while at the same time improving traffic safety along S.R. 73.

As a side note, Ohio law provides, and we certainly believe, that municipalities can require anything they want to assure traffic safety along their roads.  But, if they are going to unconstitutionally burden a property to accomplish that, they simply must pay just compensation to the owner to achieve that end.  That is the law.

Fast forward 48 months and the new drug store parcel is being developed.  The City makes a renewed demand upon the property owner to close his curb cut and access his preschool parcel through the drug store parking lot.  We located and dusted off the agreement calling for a median in S.R. 73, instead, and the City persisted.  We resisted.

Finally, one fine July Monday morning, my client calls and informs me that, overnight, the City closed his curb cut by building a 6-inch curb in front of his property.  His only access to his property is across the drug store parcel.  Even worse, he has no legally-enforceable easement across the drug store parcel parking lot, meaning the City of Springboro has effectively land-locked his parcel and rendered it unmarketable.

Under constitutional principles, one is unable to sue a City directly for damages arising from a “taking,” but rather you sue the municipality –in what is called a mandamus action — to make them sue you for eminent domain – and establish judicially in that second proceeding the value of the property taken.  Under Ohio law, Plaintiffs have a choice for “mandamus actions,” to proceed initially and directly at the Common Pleas Court, the Court of Appeals, or at the Ohio Supreme Court.  Since the law and facts were clearly on our client’s side, we elected to take the case directly and initially to the Ohio Supreme Court.

So we proceeded in an original action at the Ohio Supreme Court for a mandamus requiring that the City “take” our client’s property and pay him just compensation for it.  As noted above, this action was supported by a long line of Ohio cases providing that a Curb Cut was a constitutionally-protected interest in Ohio that cannot be taken without just compensation.  We were certain the Supreme Court would grant the requested relief, and our client would be compensated for his loss.  This confidence was compounded by the fact that the “taking” was not just of a curb cut, but of all legal access to my client’s property – rendering it value-less.

Much to our surprise, the Ohio Supreme Court, in this 4-3 decision, denied our client’s requested relief. They essentially ignored 150 years of precedent on the topic – and the further defective easement rendering our client’s property worthless – in what we felt was a bad decision.  The problem was, that by electing to first go to the Supreme Court for our relief, there was no court to which we could appeal the decision.  In short, our client was stiffed.

But we were not content to rest on that outcome.  The Fifth Amendment to the US Constitution provides that “private property” shall not be “taken for public use, without just compensation.”  Thus, again, the City, the State, have the right to take our client’s property (his curb cut access to S.R 73), but they must pay for it.  There is federal precedent that when the State’s courts refuse to provide a mechanism to provide that just compensation – in Ohio a mandamus action – one can avail themselves of a remedy directly in federal court.

As a huge bonus to our client, an award of attorneys fees is generally not available to a Plaintiff either for a mandamus action forcing the bringing of a condemnation action, or for the defense of the action to establish damages — thus making much of this litigation impractical if not impossible.  But when the State has effectively denied the Plaintiff any remedy for the taking, an action lies under 42 U.S.C. Sections 1983 and 1988, which includes the right in the victorious Plaintiff to recover attorneys fees.  In a perverse way, the Ohio Supreme Court had done us huge a favor by making ripe our federal constitutional claims by denying the takings claim in State court.

Thus, we filed an action in the U.S. District Court for the Southern District of Ohio, and drew knowledgeable Judge Arthur Spiegel.  Judge Spiegel was fantastic, from the first meeting of the litigants forward.  For, as a young attorney, he too was a real estate lawyer, and intuitively understood the principle that one has a property right in and to a curb cut, and was prepared to enforce that right.

The litigation was complex and arduous, with laborious motion work, discovery, expert witnesses, and hearings lasting more than a year.  The matter was complicated by issues of res judicata and issue preclusion, as well as the difficult-to-interpret, difficult-to-apply Rooker-Feldman doctrine.   Hundreds of hours were spent on briefing, and tens of thousands of dollars were invested on expert witness testimony.

In the end, we filed a motion for partial summary judgment on the question of liability.  The City filed a cross motion for summary judgment seeking essentially to extend and enforce the decision of the Ohio Supreme Court.  Judge Spiegel thankfully issued a decision – which we thought correct – granting partial summary judgment to the Plaintiff on the issue of liability.  Thus, we were headed to trial solely on the question of the value of the taking exacted by the City of Springboro.  It was a long-fought-for and sweet victory.

Facing that consequence — a trial solely on damages, where the City would have to pay Plaintiff’s attorneys fees, the City quickly settled – paying our client a fair amount for the “taking” and the full sum of all our client’s attorneys fees expended in the matter.

After five years of battle, the client was completely made whole.


Our deep knowledge of Ohio real estate law, combined with our extensive public interest law experience and incredible persistence and resilience, surely made a difference not only for this client, but to vindicate an important constitutional principle for all Ohioans.

We had planned on an insightful analysis of the Reed v. Town of Gilbert decision, for, as our loyal blog readers know, this decision is of keen interest to us.  This is so because we have a “me too” petition pending before the Supreme Court on a case involving very similar issues of law and fact, Wagner v. City of Garfield Heights.  If the U.S. Supreme Court properly follows the Town of Gilbert precedent set today, we should notch our 3rd U.S. Supreme Court win for the firm in only 18 months of existence.  Hopefully, that will come before the end of the month.

But such work detailing the Town of Gilbert decision is not needed, because Professor Volokh in his Volokh Conspiracy column and web page for the Washington Post tackles the analysis for us, here: Supreme Court reaffirms broad prohibition on content-based speech restrictions, in today’s Reed v. Town of Gilbert decision.

So, read it and rejoice in the affirmation of our First Amendment liberties.  We shall instead of writing, head to the pool!

 

 

 

The Ohio Supreme Court today issued its decision in State ex rel. Carr. v. London Corr. Inst.  There, an inmate had sought under Ohio Public Records Law a copy of a single document, a memo from the prison Chaplain to the mail room staff “listing ministries that regularly send religious material to inmates.”

The records request was quite specific: it “identified the author and recipient and specified a two-month time frame during which the memorandum was sent.”

Despite this specificity, the prison’s response was a rote rejection, stating that the request was overbroad and burdensome.  Amazingly, in this opinion, the 12th District Court of Appeals sided with the prison.

The Ohio Supreme Court today overturned that decision in this 6-1 opinion, with only Justice Lanzinger adopting the reasoning of the 12th Circuit.

The well-written Dispatch article on the case is here.

Our firm is frequently called by buyers about claims relating to defects in real property, commercial and residential, after the closing.  They are disappointed that some aspect of the property or another is defective, and demand repairs paid by the seller.  Cracks in a concrete slab, mold, water leaks in plumbing, roofs and basements, and present or past termite infestation and damage are just a few of the common complaints.

The law on this topic is well-developed in Ohio.  Under Layman v. Binns and Traverse v. Long, the Ohio Supreme Court has clearly adopted the doctrine of caveat emptor, or “buyer beware.”  The Court has pronounced that buyers have no cause of action against a seller unless either (a) the defect was not discoverable upon a reasonable inspection and the seller knew about the defect or (b) the seller took steps to actively conceal or lie about the defect.

So, the Layman standard sets up a difficult factual challenge: a plaintiff must show that the damages were not reasonably discoverable by him on inspection, but on the other hand, as of the time of the litigation, the problems are so great that (a) the seller certainly knew about them and (b) they deserve significant recompense by the Court.  This is a vexing problem for every property defects plaintiff, commercial or residential.

The Layman case was decided in 1988, and then only a few years later the Ohio legislature affirmatively mandated for single family homes the use of the Ohio Residential Property Disclosure Form.  The current version of that form is here.

Because either affirmatively covering up a defect or making an affirmative misrepresentation can be the basis for liability under Layman, a misrepresentation on the Residential Property Disclosure Form can form the basis for liability under Ohio law.  Indeed, in our experience on property defects cases for residential properties, a mis-statement on a Residential Property Disclosure Form is the most common basis for these liability claims.

When pursuing a property defects claim, the plaintiff has several legal causes of action (i.e., bases under the law for suit).  These include breach of contact, misrepresentation and fraud.  Of these, only the fraud claim can be the grounds for recovery of attorneys fees and punitive damages, and our experience is that — even under that cause of action — state court judges in Ohio are extremely reluctant to arrive at liability including punitive damages and attorneys fees.  As such, a Plaintiff should enter into the litigation understanding that a “win” involving reimbursement of his fees invested in the case are unlikely.

In the commercial setting, where actual damages arising from the defect may be in the hundreds of thousands and millions of dollars, litigation may yield an economically positive outcome.  However, in the residential setting, buyers must carefully consider the cost-benefit of pursuing this litigation.  Conversely, a seller defending against such a claim may want to consider what he must invest in that defense, versus an early settlement.

Given that our firm’s objective for each matter assigned to us is to “make a difference” for the client, we carefully work with clients in property defects litigation to develop a strategy that is most likely to result in a net positive outcome for the client.

There are almost as many types of covenants against residential subdivisions as there are subdivisions, as covenants are first and foremost a matter of “contract,” and not a function of statute.

That is not to say that there are no statutory constraints on residential subdivision covenants, as Ohio Revised Code Chapter 5312 “Ohio Planned Community Law” does set forth a framework of certain minimum requirements for subdivision documents and does require that bylaws of an association be recorded.  But beyond that framework, that statute does not precisely say what the declaration and bylaws must provide.

As such, the developer decides — in the declaration of covenants  against the subdivision and bylaws of the association — what terms that “contract” will contain.  And then each owner acquiring a lot in that subdivision, whether he knows it or not, becomes a party to that “contract” on the terms set forth in the declaration and bylaws of the association.

The first issue we explore in this article is “homeowners’ association or no homeowners’ association?” for there are subdivisions subject to a declaration and covenants as to the development (minimum square footages, setbacks, design standards, etc.) and use (parking of boats and R.V.s on lots, rental of houses, parking restrictions, etc.) of real estate, that do not have a homeowners’ association and the monthly or annual fees that accompany the same.  Some developers — typically of smaller subdivisions — choose not to create a homeowners’ association because there are no common areas (lakes or detention ponds, entrance monuments, etc.) to maintain.  As such, a there is no reason to assess a fee.  And without a fee being due and owing, there is no need for an association to manage that fund.  In this circumstance, without an association, enforcement of the covenants is then left to the individual lot owners.

Thus, not all subdivision covenants include an association or a fee that accompanies the same.

Then, onto the covenants themselves.  The covenants are a “contract” by and among the lot owners on the terms set forth therein.  Because parties are free to contract except as to those things prohibited by law (e.g., unlawful discrimination), the “contract” can contain such restrictions as the initial developer thinks appropriate.  As such, a buyer should carefully review and consider these restrictions before buying.  Are they too restrictive as to the lifestyle choices of the prospective homeowner?  Are they not sufficiently restrictive on the homeowners’ soon-to-be-neighbors?  These documents make good bedtime reading.

Finally, a note of caution as to covenants that do establish a homeowners association: Be cognizant of the powers vested in that association, as to setting fees, maintaining common areas, enforcing covenants and making new rules, as many times the exercise of those powers by the association can be the source of frustration for homeowners in the subdivision.

We caution clients to be mindful of all of the provisions of covenants for their subdivision, as it typically will the longest, most complicated “contract” they will ever enter into.  And part of that is understanding the powers given to the homeowners association in those documents.

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Read more on this topic: Condominium versus Landominium — What’s the difference under Ohio Law? >>