Here is the podcast from today on 550 WKRC Radio with Brian Thomas. The broadcast starts at 69:50.
The discussion in this show again addressed the Finney Law Firm suit on behalf of Tanya Hartman and her business, Gilded Social, a bridal dress shop, who desires a due process hearing on the forced closure of her business in the COVID-19 crisis.
Contact Christopher P. Finney (513.943.6655) if you care to discuss your rights as a business owner under a COVID-19 closure order.
Here is the podcast from today, starting from the top of the show.
The discussion in this show addressed the Finney Law Firm suit on behalf of Tanya Hartman and her business, Gilded Social, a bridal dress shop, who desires a due process hearing on the forced closure of her business in the COVID-19 crisis.
We lost yesterday in getting a Temporary Restraining Order to stop Ohio’s practices without due process. The Judge has called for a Preliminary Injunction hearing for May 11.
Contact Christopher P. Finney (513.943.6655) if you care to discuss your rights as a business owner under a COVID-19 closure order.
Unless you’ve been living under a rock somewhere, chances are the current COIVD-19 pandemic has affected at least one, and likely multiple facets of your life. But how do these circumstances impact contractual obligations made pre-COVID-19? Can the pandemic or the economic turmoil it is has created serve as a justification or excuse for getting out of a contract? For instance, if you contracted to purchase real estate in February, before all of the furloughs and Stay at Home Orders, do you still have an obligation to close on that purchase? While the case law surrounding this question is likely to dramatically expand in light of recent events, the answer could likely be “no” under Ohio law, at least as it stands today.
Four Corners Rule
As an initial proposition, contracts are governed by the “four corners rule,” meaning they will be interpreted consistent with what appears on the face of the document. Chan v. Miami Univ., 73 Ohio St. 3d 52, 57 (1995) (“[A]n instrument must be considered and construed as a whole, taking it by the four corners as it were.”). Where unambiguous, no additional terms will be read into the contract, and the terms that are contained within the document will be given their ordinary meaning. Fidelity & Casualty Co. v. Hartzell Bros. Co., 109 Ohio St. 566, 569 (1924) (“This court cannot make a new contract for the parties where they themselves have employed express and unambiguous terms. In the construction of contracts the language employed must be given its usual and ordinary meaning.”).
Parties to a contract are, thus, bound by the contract’s plain and unambiguous terms and are obligated to do that which they have promised in the contract, subject to certain narrow exceptions…
Contracts often contain “force majeure” clauses. Roughly translated, force majeure is Latin for “superior forces.” Often, you will see this interpreted or referred to as an “Act of God.” What this means in a practical sense is that there is some sort of unforeseeable, intervening circumstance that justifies non-performance under the contract. For example, you have a contract to rent an apartment unit (a lease) but, right before you move in, a bolt of lightening strikes the apartment building and it burns to the ground. Depending on the language of the force majeure clause, this would likely be a qualifying unforeseeable circumstance that could nullify the lease.
Relative to real estate transactions, force majeure clauses are perhaps more often seen in the commercial context than the residential. Many standard realtor’s contracts do not contain such clauses. These clauses may also appear in certain consumer transactions – think contracts for goods or services to be performed.
Consistent with the four corners rule, courts cannot “read in” a force majeure clause where one does not appear on the face of the contract. Therefore, if your contract does not contain a force majeure clause, you likely cannot claim it as a reason for terminating the contract or skirting your obligations thereunder. SeeWells Fargo Bank, N.A. v. Oaks, 2011 Ohio Misc. LEXIS 4812, at *7 (Franklin C.P. June 24, 2011) (rejecting force majeure argument where the contract did not contain a force majeure clause).
Where a contract does contain a force majeure clause, courts are likely to interpret such clauses in a very narrow fashion. Thus, if the clause does not specifically contemplate disease, pandemic, unexpected unemployment, or business closures, it may not provide relief in the specific COVID-19 context.
What about changing financial circumstances or “impossibility” of complying with your obligations, more generally?
Despite the non-existence of an applicable force majeure clause, one might think that his or her general inability to pay that which they promised under the contract or worsening financial conditions might excuse performance under the contract. While this may seem like a logical conclusion at first glance, the law dictates that “[m]istaken assumptions about future events or worsening economic conditions, however, do not qualify as a force majeure.” Stand Energy Corp. v. Cinergy Servs., 144 Ohio App. 3d 410, 416 (1st Dist. 2001); see also Wells Fargo, at *7-8 (“[E]conomic down-turn is a risk that every business person necessarily undertakes when they enter into a contract . . .That this country incidentally suffered an economic downturn during the term of their contract does not discharge them from their contractual obligations.”). “A party cannot be excused from performance merely because performance may prove difficult, burdensome, or economically disadvantageous.” State ex rel. Jewett v. Sayre (1914), 91 Ohio St. 85, 109 N.E. 636, 12 Ohio L. Rep. 291.
This body of case law generally speaks to “objective” versus “subjective” impossibility. While the law might sanction non-performance based on objective impossibility (i.e., no one could reasonably fulfill their obligations under the circumstances), it typically does not excuse performance based on subjective impossibility (i.e., a particular party cannot fulfill their obligations under the circumstances).
Can challenges posed by COVID-19, independent of financial concerns, create a justification for non-performance?
In the real estate context, for instance, what about the health risks posed by out-of-state buyers or sellers traveling for closings? Fortunately, we live in an era that offers a wealth of technological options here. For example, many title companies are offering “remote” closings. If this is a concern for you, consider reaching out to Ivy Pointe Title for your closing needs, as they offer a staff of experienced title professionals, e-notary licensure in both Ohio and Kentucky, and remote closings, which allow parties to close on real estate transactions from the comfort and safety of their own homes where necessary.
We can help…
All this being said, parties to a transaction can often jointly agree to terminate or delay performance if they so choose, though a subsequent writing may be required to effectuate this agreement in a manner that will be enforceable and protect both sides down the road. If you are party to a transaction and the other side has threatened non-performance where there has been no agreement to terminate or delay, these are likely some of the arguments you will see. On the other hand, if you are concerned about your ability to perform under a contract, there may be additional language within the “four corners” of your contract that could provide some relief. Contracts are exceedingly unique from one another, such that there really is no “one size fits all” approach.
Finney Law Firm has a team of legal professionals with experience ranging from real estate to employment to general commercial law, and we would be happy to review your contract and provide feedback as to your options or help with drafting amendments thereto. Please feel free to reach out to me at (513) 943-5673 or email@example.com to set up a remote consultation.
Additionally, our attorneys have authored a number of blog entries relative to the COVID-19 crisis and hosted webinars as to potential relief for employers, small businesses, and 1099 employees that may also be of interest. And for more on commercial or real estate transactions and “force majeure,” click here.
We hope you are all staying safe and healthy during this unprecedented time.
In a news release yesterday, Ohio Attorney General David Yost warned creditors that CARES Act checks are protected by Ohio state law.
“The stimulus checks were intended to be used during an emergency – to put food on the table, keep the lights on, and a roof over our heads,” Yost said. “It wasn’t meant to pay off an old bill.”
The law to which Yost is referring is Ohio Revised Code Section 2329.66 which exempts property from “execution, garnishment, attachment, or sale to satisfy a judgment or order” under certain circumstances including:
A payment in compensation for loss of future earnings of the person or an individual of whom the person is or was a dependent, to the extent reasonably necessary for the support of the debtor and any of the debtor’s dependents.
ORC Section 2329.66(A)(12)(d).
Ohio Attorney General Yost also posted a NOTICE OF APPLICAPBILITY OF STATE LAW EXEMPTION TO PAYMENTS UNDER THE FEDERAL CARES ACT on his website, which can be found here. According to the Notice:
The payments under the CARES Act are in the nature of emergency support, designed to support basic needs of tens of millions of Americans. This is why debts owed to the Federal and State governments are not being withheld from the payments. Although there is no explicit exemption for CARES Act payments under federal law, Ohio law protects them.
In his notice, Yost indicates that the State of Ohio is reserving the right to enforce this state law against creditors who try to collect against these CARES Act checks.
Watch our blog for more updates, and feel free to contact Rebecca L. Simpson (513.797.2856) for more information.
Litigation attorneys perform much of their work outside the courthouse. There is law to research, documents to review, and motions to write – all of which can be completed remotely with the right technology. But sooner or later, litigation makes it way to the courthouse for a motion hearing or a trial. As the COVID-19 pandemic spreads across the country, trials have been postponed, depositions canceled, and discovery deadlines ignored. What are we – and our clients – to do while the nation weather’s the storm inside our homes?
New legislation on litigation deadlines
Fortunately, the legislature and judiciary have reacted quickly to the developing pandemic and provided much needed guidance. On March 27, 2020, Governor DeWine signed H.B. 197 into law, effectively tolling all statutes of limitations and other deadlines under Ohio law until the state of emergency is lifted or July 30, 2020 – whichever comes sooner.
How do the extensions work?
Statutes of limitation prevent a litigant from having her claims heard in court if she files her case beyond the statutory deadline. In Ohio, for example, an individual has one year from the date of discovering a medical malpractice claim to file a lawsuit. If the would-be-plaintiff files after the expiration of the one-year-period, her case will be dismissed no matter how compelling or meritorious it may appear.
So, how do the new tolling provisions impact our hypothetical med-mal plaintiff? Let’s assume she discovered the malpractice on May 9, 2019. She would then have until May 9, 2020 to file her lawsuit. H.B. 197 now tolls the deadline, retroactive to March 9, 2020 when Governor DeWine issued the state of emergency. Let’s assume the state of emergency is lifted on June 1, 2020. In that case, none of the days between March 9, 2020 and June 1, 2020 will count against our plaintiff. She had two months remaining to file her case when the state of emergency was issued, and she continues to have two months to file from the date the order is lifted. In this scenario, our plaintiff has until August 1, 2020 to file her case.
Changes to Civil and Local Rules affect deadlines
But, in addition to statutory deadlines imposed by the state legislature, the practice of litigation is governed by a litany of deadlines imposed by the judiciary. The Rules of Civil Procedure allow defendants 28 days in which to file a response to a complaint. Local county courts have rules that establish how long a litigant has to file a response to a motion. Each judge sets a calendar order for each case, specifying when discovery is to be completed, dispositive motions are to be filed, experts are to be identified, and when trial is to take place. The list goes on.
To address these issues, the Supreme Court of Ohio issued its own order on March 27, 2020 which tolls the time requirements set forth in all rules promulgated by the State’s high court. The Supreme Court’s Order also applies retroactively to March 9, 2020. Thus, if a defendant’s response to a complaint was due on March 16, 2020, that response will now be due one week after the Court’s Order expires.
What’s happening in practice?
Trial court judges and attorneys are also working to address specific issues on a case-by-case basis. For instance, some in-person hearings can be handled on conference calls, allowing the parties to advance the case where practical. But if your case involves a health care provider, or an entity crippled by the pandemic, the case will likely be put on hold for the duration of the fight.
In my practice alone, I have had two trials, three mediations, and several depositions all postponed indefinitely. Fortunately, the Finney Law Firm has invested significant resources in technology over the last few years which has allowed us to adapt our practice to meet the needs of our clients while working remotely. We are leveraging cloud-based technology to review and edit documents, obtain electronic signatures, and host video conferences with our clients and colleagues. We can conduct depositions remotely, using videoconferencing technology, when opposing counsel and the particular circumstances of the case allow.
If your case can be advanced in this time, we have the means and wherewithal to do so. Hopefully, sooner than later, we will be able to passionately advocate for our clients in the courts. Until then we are committed to helping our clients navigate the pandemic, and their cases, in these trying times.
Congratulations is due to Finney Law Firm attorney Matt Okiishi who successfully sued today to force the Hamilton County Health Department to allow our client, Amazon Beauty Supply store in Finneytown, to remain open for business during the COVID-19 crisis.
The store, which sells beauty supplies, also markets soap, shampoo, other essential products and, most importantly, the much-sought-after N95 masks. The Hamilton County Health Department, noting that the store also sells non-essential supplies, had ordered them to be shuttered for the duration of the crisis, which for now extends through the end of May.
The business, an existing client of Finney Law Firm, asked us to sue to force the County to allow them to stay in business. We filed suit within 24 hours of first being contacted, and this afternoon our attorneys reached agreement with the attorneys from the Hamilton County Prosecutor’s office to remain open. The case was assigned to Judge Jody Luebbers who essentially told the parties to work the matter out amicably. The parties did so, which included an agreement on the number of customers that would be permitted in the store at any one time.
Channel 12 carried the story this afternoon, and the video featuring attorney Matt Okiishi is here.
“There’s little more rewarding in the law,” said Finney Law Firm founder Chris Finney, “than standing an errant government official up in front of a Judge and making him account for his behavior. Today attorney Okiishi enjoyed that exercise and achieved the desired end for our client.”
For help when you need to stare down an over-zealous government actor, contact Matt Okiishi (513.943.6659).
In response to the COVID-19 pandemic crisis gripping the nation, today Ohio Governor Mike DeWine issued an executive order addressing commercial leases and commercial mortgages in Ohio. However, from our perspective, the Order is not intended to have any binding effect, and he would have no authority under Ohio law to issue such a binding order if he so desired.
Here are the components of the order, each of which he labels as a “request,” not an Order at all:
Requesting that landlords suspend commercial lease payments for at least 90 days for “small business commercial tenants in the State of Ohio that are facing financial hardship due to the COVID-19 pandemic.”
Requesting that landlords also provide a moratorium on evictions of small business commercial tenants for a term of at least 90 consecutive days.
Requesting that mortgage lenders of Ohio-based properties forbear on collection or enforcement of such mortgage for a period of at least 90 days.
As with our prior blog on the stay-at-home Order, the Order does not seem to have any direct legal effect, but rather is designed to encourage restraint and cooperation in this difficult time all of the world is encountering.
With the advent of the COVID-19 Crisis, Finney Law Firm and Ivy Pointe Title have quickly stepped to the plate, with technology that allows for the practice of law with appropriate social distancing, with attorneys who focus on practice areas to help their clients, and with cutting edge information on emerging programs to help businesses and individuals in need.
Technology allowing for electronic interaction
Finney Law Firm and Ivy Pointe Title have carefully developed the tools to be prepared for a day such as this:
DocuSign allows for execution of documents from your computer. By federal and state law, e-signed documents are fully enforceable as with “inked” documents. Our team is licensed and trained in DocuSign technology for all documents in which clients will allow an electronic signature.
Electronic notary. Finney Law Firm and Ivy Pointe Title contracted with one of only a handful of licensed e-notaries in Ohio for exclusive provision of e-notary services. Using the platform DocVerify, we have the strongest technology to allow real estate closings and other transactions to proceed. By Ohio law, it is permissible to have documents signed and acknowledged (notarized) without person-to-person interaction via electronic signature and electronic notary.
Electronic payments. We use e-billing and credit card payments (and wire transfers and EFTs) for clients who prefer this method of billing and payment.
Electronic discovery and electronic depositions. Your litigation does not need to stop because of the COVID-19 crisis. Most of the work pre-trial can still move forward using e-mail, Zoom.US or Microsoft Teams for depositions, and motion work that can be electronically filed with almost all Courts.
Work-from-Home. If you do need to visit our offices, you will find that most of our professionals are not at their desks. Rather, they are safely (for you and them) working from home with the latest technology including Microsoft Surface laptops, Microsoft Teams Video Conferencing, Microsoft Office 365 data in the cloud, so we can access your data from anywhere in the planet, but with tremendous Microsoft security technology and backups.
Practice areas to help your business
Our business lawyers are up to date and prepared to help you through the thicket of issues that arise or are heightened with the COVID-19 crisis:
Attorney Isaac T. Heintzis proficient in contract interpretation, including how to enforce or avoid obligations under a lease or other agreement. He has already written purchase agreements with COVID-19 contingencies to extend due diligence periods to the declared end of the crisis. As you might expect, Isaac has also had many clients initiate their estate planning, or finish long-delayed estate planning work.
Attorney Stephen E. Imm heads our employment law group, and is advising clients on a myriad of new COVID-19 legislation and addressing employment law claims under previously existing law and the new enactments.
Attorney Bradley M. Gibson heads our litigation group which is dealing with a multitude of business-to-business disputes, including those arising because of the COVID-19 crisis.
Attorney Richard P. Turner runs Ivy Pointe Title and in that capacity has been using every tool at our disposal to continue to close your transactions “accurately and on time, every time.” These include closings respecting social distancing, and we stand prepared to be one of the first agencies in Ohio to implement fully electronic closings. We also can do drive-by closings where you come to our office and sign documents from your car, or we come to you and you can sign them on our car hood.
Attorney Christopher P. Finney heads our public interest practice, and the host of issues addressing government-to-business and government-to-individual interaction arising from the COVID-19 crisis.
We are working furiously to meet the needs of our clients in this fast-emerging crisis. Let us know how we can help you or your small business navigate these turbulent waters to come to the other side safely and profitably.
And our hope is that each of you remain healthy throughout this pandemic.
Most Courts have taken a hiatus for an unknown period of time in response to the COVID-19 crisis for most (but not all) trials and live hearings, but nonetheless, litigation work with the team at Finney Law Firm still marches on. (For example, emergency Probate guardianship hearings still are proceeding and criminal proceedings cannot be stayed indefinitely due to Constitutional speedy trial requirements).
Components of litigation
Litigation at the trial level typically consists of four components, (a) the initial pleadings (Complaints, and Motions to Dismiss or an Answer), (b) discovery (consisting of document production, written interrogatories and requests for admission), (c) motion work and then (d) pre-trial and trial work.
Certainly the initial pleading stage and the discovery can be completed without any person-to-person interaction.
For the initial pleading stage, we can exchange documents and emails and interview the client over the phone or on a web chat. We then prepare the pleading and can, in most jurisdictions, file it electronically or via fax. If not, it can be mailed in.
Typically, the first phase of discovery is written discovery, wherein each side asks the other for relevant documents, paper and electronic, and certain questions in the form of interrogatories and “requests for admissions.” This can all, of course, occur, without any personal meetings. Again, we can gather documents from the client electronically and can interact over the telephone or computer.
Depositions are somewhat trickier, but we have consulted with our Court Reporter, and they assure us that both in-state and out-of-state depositions can be conducted using Skype, Teams or Zoom.Com without any two people being in the same room.
Thus, each component of discovery can be “socially distant” and not endanger any of the litigants, their counsel or the Court reporter.
Again, motion work is mostly in writing. In federal Courts, evidence at the motion stage is admitted via a Declaration that does not need to be sworn before a notary public. The attorney does need to maintain an original signature of the Declarant in his files, but that can be mailed between the client and counsel. Audio-visual materials may need to be physically filed with the Court, but again that can be addressed through the mails. State Court evidence is admitted via Affidavit, which means it does need to have a notary public personally witness the signature, but there are notaries still working throughout the COVID-19 crisis.
Certain motions by statute or by Court Rule require evidentiary hearings or in-person argument (Restraining Orders, Rule 11 Motions, and hearings on Motions to Set Aside Settlement). However, other than limited statutory exceptions, litigants do not have a right to have an in-person appearance before a Judge on motions. As a result, the trial Courts could proceed with their work by either eliminating hearings on motions entirely or calling for motion hearings to be held via web or telephone.
Many cases are resolved on motion work, including Default Motions, Motions to Dismiss and Motions for Summary Judgment. If so, the case is “over” or on to the Court of Appeals (see below) without any person-to-person contact.
Thus, all motion work could easily be handled without person-to-person contact or even live court appearances.
Pretrial and trial
Herein lies the rub. Ohio law and the US and Ohio Constitution require that all trials — civil and criminal — be conducted in public and that means in-person attendance. If this crisis progresses, we suspect that our government officials may feel compelled to allow both litigants and observers to appear via web cam. (Surprisingly, that change was just recently more or less unilaterally-declared by the Ohio Attorney General for meetings of public bodies in Ohio.)
But until that change occurs, litigation could well be jammed-up indefinitely at the trial stage. And because it will require Constitutional action, that could take some time and procedural maneuvering as well.
Appeals work at the Ohio and federal Courts of Appeals and Supreme Courts historically is mostly done via paper filings, appellate briefs and occasionally motion work. But by tradition, not by any constitutional or statutory requirement, Appellate Courts have held oral arguments on the merits of an appeal. This is not a right of litigants and therefore the tradition of oral arguments can be waived or modified (such a conference calls or web cams) by the Courts, and if this crisis is protracted, we expect them to do so.
First, most litigation work that does not require the Judge’s involvement (hearings on motions and trials) can proceed in typical fashion with attorneys working from their home or office. We expect that if this crisis extends into summer, the Courts will free up the logjam by modifying rules to allow at least motion hearings via conference call or web-conferencing. If the crisis extends into the fall, the courts may need to consider evidentiary matters coming into the record in ways other than in-person testimony, including Affidavits, video depositions and Skype, Teams or Zoom video conferencing.
With the raging COVID-19 crisis and its economic fallout, the question that we are fielding the past few days is:
How can I get out of my contract to do “X”?
Each of the three analyses below hinges on the language of the contract. Thus, “it depends.”
First, with respect to contracts to buy companies, real estate or other assets, consider the contingencies in the contract. For example, read here and here for easy “exits” from Cincinnati Area Board of Realtors residential contracts for buyers.
“Force majeure” provisions
But what about leases, long-term supply contracts, employment contracts, construction contracts and other commercial contracts?
Many such contracts contain what is known as a “force majeure” provision that essentially contemplates precisely the situation in which we find ourselves today: Some unexpected exigency such as war, famine, or pandemic.
In its essence, a force majeure clause is a contract provision that excuses a party’s performance under a contract when certain circumstances beyond their control arise, making performance impracticable, impossible or illegal. These clauses are common in complex commercial contracts, such as a commercial lease (and we really don’t expect to actually use them). Yet here we are and they can be a business-saving resource in determining how to proceed.
Can this provision excuse your performance and let you “get out of” a contract? Well, as you might expect your attorney to say: “it depends.” It depends on the language of the contractual provision.
Here is a sample force majeure provision from a commercial contract:
In the event a party shall be delayed or hindered in or prevented from the performance of any obligation (other than a payment obligation) required under this contract by reason of strikes, lockouts, inability to procure labor or materials, failure of power, fire or other casualty, acts of God, disease, restrictive governmental laws or regulations, riots, insurrection, terrorism, war or any other reason not within the reasonable control of such party, then the performance of such obligation shall be excused for a period of such delay, and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay.
Would such a provision allow a tenant to terminate a lease? Would it allow an employer to terminate an employment contract for a term? Would it allow a manufacturer to avoid its obligations under a supply contract?
In this contractual language, we have the specific exceptions of “disease,” “acts of God,” and “restrictive governmental laws.” Since we have a disease that is arguably an “act of God,” and government-imposed shutdowns, it would seem that there are multiple bases upon which to argue for termination. But there could be countervailing arguments as well. For example, payment obligations are not excused in this sample language.
Some courts have applied force majeure clauses very narrowly, meaning that the specific occurrence has to be contemplated by a force majeure provision. Thus, is the word “disease” in your force majeure clause? Well, COVID-19 would seem to fit tightly within that definition, but does it? Hamilton County, for example, as of this writing, has no reported cases, and yet tens of thousands of people have been thrown out of work because of the fear of pandemic.
Mere diminished performance or increased expenses to perform alone likely would not be a sufficient basis to excuse performance and invoke a force majeure clause.
Business Interruption Insurance
Do you have business interruption insurance that would cover the COVID-19 pandemic consequences?
If you were prescient or cautious enough to buy business interruption coverage, that usually covers only a direct physical loss such as a fire, flood or earthquake. Some policies require that a loss be specifically designated, while other policies have no such requirement.
In the case of COVID-19, it may be tough to prove a direct physical loss but what if a workplace is contaminated and unusable due to a COVID-19 outbreak?
Possibly, business interruption coverage could be invoked if a supplier shuts down and can’t supply product or parts due to COVID-19
Before triggering contingencies, invoking a force majeure provision or making a claim for insurance coverage, consider the following:
Are alternative means to perform your contractual obligations.
Will the other party to the contract consider mitigation of the performance problem, such as a rent reduction or other part-performance?
Could the parties reach a mutual agreement to terminate a contract or delay performance?
Virtually overnight, our firm and our clients have found ourselves in the middle of single worst crisis in perhaps 100 years. The first option should be to work towards accommodation with the other party to the contract. Beyond that, we have the options set forth above to consider for relief in this incredibly challenging environment.
Call one of our skilled and experienced attorneys if you want to explore your legal options or pursue one of these remedies.