Category Archives: Business & Civil Litigation

On September 29, 2021, the First District Court of Appeals issued a decision in CUC Properties, Inc. v. smartLink Ventures, Inc., Case No. C-210003 which will have a far reaching and substantial impact upon cases in the State of Ohio in which default judgment was obtained as a result of service by the US Postal Service during the COVID-19 pandemic.

At issue in CUC Properties v. smartLink was the service of Summons and Complaint by the US Postal Service.  In that action, smartLink disputed that it received service of the Complaint as provided under Civ. R. 4.1 where the USPS noted “Covid 19” or “C19” on the return receipts delivered to smartLink and its registered agent.  As a result of their failure to file an Answer, CUC Properties obtained judgment by default against them.  smartLink appealed, asserting that the notation “Covid 19” or “C19” did not amount to service as provided under the Civil Rules.

The Court agreed, holding that,

The Covid-19 pandemic certainly demanded innovation and flexibility, and courts around the state (and country) admirably exhibited great creativity in keeping the courthouse doors open while also ensuring public safety. The challenging nature of the pandemic aside, we simply cannot dispense with the rules and due process protections. This is particularly so when the record contains no indication that service was otherwise validly achieved. On this record, therefore we hold that a notation of “Covid 19” or “C19”  does not constitute a valid signature under Civ. R. 4.1(A).

This decision, undoubtedly, will have far reaching effects upon the finality of default judgments granted in Ohio courts during the course of the pandemic where the USPS chose to use a notation of “Covid 19” or “C19” in place of having the individual at the address personally sign for the mail from the Court.

The Basics

As a basic principle, every citizen in the United States (and even non-citizens) are entitled to due process under the law. In simpler terms, everyone has the right to have their legal disputes treated fairly based on established laws and principles. With certain exceptions, this includes a right to bring an action in court to hold accountable those who have committed a wrong.

So what are those exceptions, and what do they mean?

One of the most notable exceptions to the right of a person to have their matter heard in court is where the parties have agreed to a process known as “arbitration.” Arbitration is “a method of dispute resolution involving one or more neutral third parties who are [usually] agreed to by the disputing parties and whose decision is binding.”  Black’s Law Dictionary 119 (9th ed. 2009). Practically speaking, arbitrators are usually practicing or retired attorneys and/or judges who essentially serve as the trier of fact in an expedited proceeding held in lieu of a court trial. Arbitration can be particularly appealing to large companies that often face high volumes of threatened or actual legal claims for a multitude of reasons – for one, arbitration is generally more expedient and cost effective than in-court litigation. Employers frequently require them as a condition of employment so that various employment claims are handled confidentially.

Why wouldn’t everyone want to participate in arbitration?

Another reason that large companies, such as banks, credit card companies, and other financial institutions, may push arbitration is that it is a significantly more favorable forum for – you guessed it – those companies. Other significant disadvantages for the “Average Joe” consumer in arbitration are: (a) these arbitration clauses often disallow class actions or certain elements of damages, i.e., “punitive” damages, (b) arbitration usually limits the parties’ discovery rights – for example, the consumer may not be able to depose witnesses or seek the production of documents that could help them prove their claims and (c) arbitration is frequently required to be confidential, prohibiting a public discussion of the facts and outcome of the proceeding.

What if I don’t want to be forced into arbitration?

Over the past several decades, the law has been very favorable to companies seeking to force customers/consumers into arbitration. Southland Corp. v. Keating, 465 U.S. 1, 11 (1984) (noting “a national policy favoring arbitration”). However, there has recently been a palpable shift in these principles, especially in Ohio and the Sixth Circuit.

Arbitration Case Law

In March 2021, the Sixth Circuit overturned an Eastern District of Tennessee case wherein the District Court granted a bank’s motion to dismiss litigation filed in court and compel arbitration. See generally, Sevier County Schs. Fed. Credit Union v. Branch Banking & Trust Co., 990 F.3d 470 (6th Cir. 2021). In that case, the bank (after a series of mergers) sent out a new agreement that contained new or updated terms and stated that, by continuing to maintain an account with the bank, the accountholders agreed to those new terms – in other words, continuing to do business with the bank constituted acceptance of the new terms. The new terms included, inter alia, a binding arbitration provision and a waiver of class actions. Id., at 473. The District Court found that, by continuing to do business with the bank, the plaintiffs had accepted such terms and, therefore, must pursue their claims via arbitration. See generally, id. But the Sixth Circuit disagreed. Id.

In rendering its decision, the Sixth Circuit found that determining the existence of a valid arbitration agreement is a question of state-law contract principles. Id., at 475. That is, what are the elements required to create a contract under state law, and were those elements met. Under Tennessee contract law (which is analogous to Ohio contract law), the formation of a contract requires consideration and mutual assent. Id., at 476. Mutual assent can only be found where there is a “meeting of the minds,” meaning “Did both sides assent to be bound by the terms of the contract?” Id. The Sixth Circuit in Sevier County found no mutual assent and, specifically, noted that mere “silence or inaction” is insufficient to bind a party to an arbitration provision. See id., at 477, quoting its prior decision in Lee v. Red Lobster Inns of America, Inc., 92 F. App’x 158, 162 (6th Cir. 2004) (“The flaw in the district court’s analysis is that it places the burden on the [consumers] to . . . object to a company’s unilaterally adopted arbitration policy or risk being found to have agreed to it. This is not how contracts are formed.”).

Ohio courts have begun following suit, even citing directly to Sevier County. On August 5, 2021, the Eighth District Court of Appeals rendered its decision in Gibbs v. Firefighters Community Credit Union, 2021-Ohio-2679, affirming the lower court’s decision denying a defendant’s motion to stay the action pending arbitration. In Gibbs, plaintiffs filed a class action lawsuit, and the defendant credit union moved to compel arbitration, arguing that plaintiffs agreed to a change in the terms and conditions of their account agreements, including an “Arbitration and Waiver of Class Action Relief provision,” by failing to opt out. Id. at ¶¶ 2-3. The credit union purportedly sent notice of these changes to account holders via email, and the email stated that an account holder’s continued use of defendant’s banking services indicated assent to the updated terms. Id. at ¶¶ 3-4. The credit union maintained that because plaintiffs never opted out of the provision, it became effective and controlled the matter. Id. at ¶ 3. However, nothing in the content of the email informed the account holders of the Arbitration and Waiver of Class Action Relief provision or the ability to opt out – this information was, instead, included in an attachment to the email.  Id. at ¶ 5.

Like the court in Sevier County, the Eighth District in Gibbs relied on Ohio contract law principles governing the formation of contracts and found that the credit union failed to meet its burden of establishing the existence of an agreement to arbitrate. Id. at ¶¶ 14, 18. The court held that there was no “meeting of the minds” between plaintiff and the credit union as to the arbitration provision because the content of the email notice gave no indication that the changes involved the addition of the arbitration provision. Id. at ¶¶ 16-17. Instead, “[t]he Plaintiffs were thus lulled into not giving a thought to the unilateral addition of the arbitration provision . . .” Id. at ¶ 17, quoting Sevier County, 990 F.3d at 481.

Take Action

If you wish to pursue claims that the other party maintains are subject to an arbitration provision, and you do not wish to participate in arbitration, you may have some options. For instance, if you dispute the existence or validity of an arbitration clause, Ohio statute provides a process by which you can assert such dispute. See R.C. 2711.03(B) (“If the making of the arbitration agreement or the failure to perform it is in issue in a petition filed under division (A) of this section, the court shall proceed summarily to the trial of that issue.”). That is, if you dispute that an arbitration agreement exists, you may be entitled to have a court determine that threshold issue before the underlying claims proceeds.

We Want to Help

We recently had a case where a financial institution argued that our client’s claims, filed in state court, were subject to an arbitration agreement and, therefore, moved the court to dismiss our claims and compel arbitration. We disputed that our client had ever received proper notice of any arbitration agreement, much less agreed to the same, under facts very similar to the Sevier County and Gibbs cases discussed above (ironically, the financial institution had previously cited to the District Court case in Sevier County, yet failed to notify the Court when it was overturned by the Sixth Circuit). We moved for a trial under R.C. 2711.03(B), which was granted. After an unsuccessful interlocutory appeal by the financial institution and nearly eighteen months of litigation and discovery on this limited arbitration issue, the financial institution eventually agreed to withdraw its motion to compel arbitration.

While it is not always an easy road, we are passionate about protecting our clients’ rights, including the right to have their claims heard in the proper forum. Unfortunately, consumers are too often “railroaded” by big companies with deep pockets in the litigation process, and it is our desire to make sure every client has access to the tools necessary to hold these companies accountable for their conduct. As is evident from our recent case and the long and arduous battle it took to keep our client’s claims in state court where they belong, we don’t say this lightly – we live it every day in our practice.

If you are considering bringing a claim or have concerns regarding whether an arbitration agreement may apply, we can help you evaluate those questions and explore your options.

Please contact Casey Jones (513.943.5673) if we can help with your litigation or arbitration dispute.

In business and personal commercial dispute resolution, clients come to us who either have been sued by someone and need a defense, or have been wronged by someone and desire to pursue that claim in court. For both, litigation should involve, among other factors, a risk versus reward analysis.

If you pay us “X” in legal fees and “Y” for expenses, will you obtain a better outcome than settling on even unfavorable terms (as a defendant) or walking away from a claim (as a plaintiff)?

Unfortunately, litigation is always a “bad option” for a host of reasons:

• The simple math of the cost of getting the matter before a Judge for resolution.
• The unpredictability of result. Even the best cases (from a defense or prosecution standpoint) are never as clear to a judge or jury as they are to you, and in many cases your attorney, who takes the role of being an advocate who believes in your case and in you.
• When you bring a claim, will the defendant bring a counterclaim that you will need to defend? This is very frequently the path of litigation.
• Related to the foregoing, rarely are cases as one-sided as the client tells us in the initial meeting. There frequently is one stray witness, one stray e-mail, one stray fact that does not make our client look exactly like Snow White when the case goes to trial.
• Litigation disrupts personal life and business affairs. It is messy, time-consuming, distracting to family, neighbors, friends, clients and employees, who may need to testify at trial, gather voluminous documents, and be otherwise be distracted from life and business priorities.
• Litigation has “collateral damage” associated with it: Bad publicity, disruption of partnership affairs, or alienating client and vendor relationships. Years ago, I had a client involved in litigation who was informed after years of study and volunteer activity that he could not serve as a deacon in his church because of his litigation. Another had his name plastered on the front page of the newspaper. A third was told by his bank to do business elsewhere.
• In the middle of litigation can be business failure, death, divorce, insolvency, transfers of assets, etc.  In other words, just because someone appears to have assets that can be seized when a case is commenced, does not mean the assets will be there to collect after three or five years of fighting.

So, the important question for the client is: Is this fight worth these costs, distractions and risks to you?

I say the words “risk” and “reward” and very frequently, I wonder if clients only hear the word “reward.” I wonder if they really thoroughly assess the costs and risks involved in being in a courtroom.

Often, before a case is initiated, clients tell me it is the “principal” of the case, and more power to anyone in our society who acts out of principal. But just as frequently, after bills mount for three months, six months or a year, they would be happy just to settle for the legal fees they have incurred to that point, taking them back to where they started with our firm.  In the rear view mirror, the principal pales in comparison to the cost.  But the other party has spent the same or more in legal fees to get to that point, and is not interested in spending or conceding more on a settlement.

So, when I say litigation is  a “bad option,” I mean it. But the question is whether it is worse than the other options of defending a frivolous case or walking way from a meritorious case that — for a host of reasons — needs to be pursued.

What is a case really worth? As I recall, now-deceased Federal Judge Arthur Spiegel from Cincinnati encouraged litigants in his courtroom to look at a case this way:

• As a Plaintiff, if you won, how much really will you collect?
• And then what is your anticipated percentage chance of winning at trial?
• If your collectible damages are $400,000 and you have a 75% chance of prevailing (no case is a 100% winner), the case has a settlement value of $300,000.
• And then off of that comes the legal fees,  time and expense of moving forward with trials and appeals.
• The same analysis applies to the defense side of a case.

I encourage litigants to make this analysis before they incur $100,000 or more in legal fees and suffer the other adverse consequences of litigation. Unfortunately, rare is the case — exceedingly rare — when both the Plaintiff and the Defendant are both willing to have that discussion before engaging in the mutually assured destruction that litigation almost always becomes.

But from your side, be sure to perform your risk-reward analysis before litigation commences or proceeds too far.