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Category Archives: Miscellaneous

What do all of these contingencies mean? Strategies for buying a home in a competitive market without abandoning all reason

Author By Casey A. JonesPosted on

With interest rates dropping, the housing market is becoming even more saturated with buyers. Practically speaking, that means that buying a home has, once again, become super competitive and provisions that were once a “given” in Contracts to Purchase are now being eliminated in favor of making the offer more appealing to sellers, including the removal of financing, appraisal, and inspection contingencies.

But what is not always understood is what happens if these contingencies are removed and things go south.

I have had at least three clients or potential clients call me in the past month with varying levels of “buyers’ remorse.” Either they had simply changed their minds, or they had agreed to waive the inspection contingency altogether, or they had agreed to pay significantly more than the property’s appraised value – and, now, they wanted to walk away. Each of these clients were under the understandable, but mistaken belief that they could simply forfeit their earnest money and everyone would go their separate ways. Unfortunately, it is not so simple.

Financing Contingency

This contingency allows you to justifiably terminate a Contract if you are unable to obtain financing. If you are getting a loan/outside financing (versus paying cash for the property), you NEED to keep this contingency. This protects you in the event you lose your job, or experience a significant change in your income or financial situation. Buyers are generally required, however, to apply for financing within a set number of days and to act in good faith in attempting to obtain financing. In other words, if you experience a change of heart, ghosting your lender so that they deny your financing is likely not a feasible strategy.

Appraisal Contingency

We most often see this contingency removed in cash purchase situations. When using outside financing, your lender will almost certainly require that the home appraise for the purchase price or for the purchase price less the amount you are planning to put “down” (i.e., pay out of pocket at closing). Buyers (in both cash and financed transactions) sometimes add provisions that they will pay $“x” or “x”% over the appraised value to make their offer more competitive. What this means is that the Buyer agrees to bring the difference between the appraised value and amount for which the property was required to appraise to closing. If this contingency is removed entirely or amended to allow for a certain amount above the appraised value, the buyer may be contractually obligated to pay significantly more than the fair market value of the home, resulting in a negative equity situation.

Inspection Contingency/”As-Is” Purchase

Removal of the inspection contingency is, by far, the most popular among buyers seeking to make their offers more competitive. This can be done in a few ways: 1) designating the purchase “as-is” or stating that inspections are for “informational purposes only,” 2) forfeiting the right to terminate based on inspections, and 3) waiving inspections altogether.

  • An as-is purchase does not necessarily mean that you waive inspections. It can also mean that you are performing inspections but that you will not seek repairs or a price reduction from the seller based on what you may find during inspections (or that you will only seek repairs/a reduction based on defects or conditions estimated above a certain dollar value). Under an “as-is” purchase or when inspections are for “informational purposes only,” you can still maintain the right to terminate based on the inspections. However, the contract language should be clear as to what is intended as the above terminology can be somewhat ambiguous.

 

  • The inverse of No. 1 above, buyers sometimes agree that they will perform inspections but they will not terminate based on the inspections. Instead, they will allow the seller the opportunity to “fix” any defective conditions. Candidly, this can create a whole host of issues. For example, what happens if there is a dispute between seller and buyer as to whether the issue was fixed or fixed properly? What if the seller refuses to drop the price or fix a condition, or disagrees that it is defective? Under a prototypical inspection contingency, the buyer could terminate in this situation (i.e., where no agreement can be reached between the parties) but, here, the buyer has ostensibly forfeited its right to terminate. While there could be defenses to the enforceability of such forfeiture, it could also be quite expensive to litigate that issue to conclusion.

 

  • Finally, buyers in a competitive market often waive inspections altogether. This means they will not perform any due diligence as to the physical condition of the property. While this can allow for a faster closing and obviously sounds great to the seller, it is very risky if things go awry. Under such circumstance, the buyer will have essentially no recourse if they discover a defect after closing, the exception to this harsh result being if they can prove that (a) the seller knew about the defect, (b) the buyer did not know about the defect, (c) the defect would not have been discovered had the buyer performed reasonable inspections (e., it was a “latent” defect and not an open and obvious one), (d) the seller did not disclose the defect on the Residential Property Disclosure Form or otherwise misrepresented the same, and (e) the buyer suffered damages as a result. These are the elements of a cause of action for fraud and are not easily proven. Further, unless the cost of remedying the defect is at least $30-40,000+, it is often not financially worthwhile to pursue given the legal/expert fees and expenses. A buyer can seek reimbursement for its attorney’s fees upon satisfying the elements of fraud, but such reimbursement can never be fully guaranteed.

As noted above, there are a number of ways that each of these contingencies can be crafted, limited, or even removed and the resulting implications can vary widely. This is why it is so critical to consult with an attorney before agreeing to deviate from standard language. If you are found to be in breach of the contract or decide to “walk away” without legally adequate justification, your liability is often not limited to your earnest money – in fact, it can add up to tens, if not hundreds, of thousands of dollars.

There are other options and terms that can be included in an offer to “sweeten the deal” for sellers and help get your offer noticed, even in a competitive market, without jeopardizing the rights and protections that are so vital to buyers.

We can help make sure you understand the potential consequences of the contract language and even draft or revise an offer to make sure you are protected, whether you are working with an agent or purchasing a home on your own. Making a competitive offer does not have to mean taking on substantial additional risk.

Please reach out to Casey A. Jones, Esq. at [email protected] or (513) 943-5673 for assistance.

Employment Law Update: New Federal Trade Commission Rule Bans Noncompete Agreements

Author By Matthew S. OkiishiPosted on

On April 23, 2024, the Federal Trade Commission (“FTC”) released its long-awaited rule concerning the validity of employee noncompete agreements. Following its effective date (projected to be 120 days after April 23, noncompete agreements will be considered a restraint of trade except where they are executed in connection with the sale of a business.

All existing noncompete agreements, with the exception of those signed by  “senior executives” (defined as policy-making employees earning at least $151,164 in annual compensation)  in existence prior to the rule’s effective date, will retroactively become unenforceable, and they will not be permitted going forward.

The rule does not apply to noncompete agreements that were breached prior to the effective date.  So cases currently in court over an alleged breach are not affected by the new rule.

The new FTC rule will also impose an affirmative duty on all employers with existing noncompete agreements to notify workers that those agreements are no longer in effect by the effective date. Because the duty to notify is triggered at the rule’s effective date, employers should make arrangements to ensure compliance with the new rule.

There will likely be legal challenges to the FTC’s authority to make this Rule, so stay tuned. But if it survives it will be a true game changer for American workers.

How a Solid Buy-Sell Agreement Can Avoid a Bad Business Breakup

Author By Todd McMurtryPosted on

Like a prenuptial agreement in a marriage, a buy-sell agreement is a crucial tool for preventing a messy and potentially disastrous business divorce. This goes beyond disputes over division of money and property. A solid agreement can safeguard the continued existence and success of the business you’ve worked hard to build. By stipulating how owners’ shares may be valued and reassigned if any owner leaves the business, the agreement fosters clarity, control and financial security, allowing you to avert unpleasant and interruptive litigation.

A buy-sell agreement offers these benefits in the case of a business divorce:

  • Orderly succession — A buy-sell agreement defines the process for transition, whether the breakup is due to a planned retirement, a sudden disability or unforeseen circumstances like death or bankruptcy. This pre-determined path promotes a smooth transition, minimizing disruption and maintaining business stability.
  • Avoiding costly battles for control — A buy-sell agreement establishes clear procedures for purchasing the departing owner’s interest in the case of a buyout, retirement or death. This saves everyone time, money and stress, allowing the business to focus on productivity.
  • Setting a price for ownership interests — Closely-held businesses are not valued based on market indicators, so ownership shares are difficult to measure in dollar amounts. A buy-sell agreement can set a fixed price or establish a valuation method, providing both the departing owner and the remaining partners with financial predictability. The agreement can also specify a third-party to serve as the valuation expert.
  • Keeping out intruders — Outsiders with incompatible values or interests may wish to take an ownership stake. A buy-sell agreement gives current owners the power to keep them out. It allows co-owners or the business itself the right or obligation to purchase a departing owner’s stake, effectively acting as a gatekeeper against undesirable takeovers.
  • Job stability — A well-crafted buy-sell agreement can provide job security for remaining owners and key non-owner employees. Knowing the business’s future is secure can boost morale and foster a sense of stability within the organization. It can also help in recruiting new talent.
  • Funding the transition — In an ownership dispute, one of the chief issues is how any buyout offer will be financed. The agreement can provide for insurance policies and other financing to be obtained to make sure purchasing owners or the company itself have the funds to pay for the departed owners’ shares.

No business founders want to think of the possibility of a breakup in the foreseeable future. Nevertheless, engaging in some effective planning at the onset can avert a painful and costly ordeal later on. An experienced business divorce attorney can help you put a well-structured buy-sell agreement in place, one that you can safely rely upon for years to come.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; [email protected]; 513.797.2850.

When Can an “Opinion” Become a Defamatory Statement?

Author By Todd McMurtryPosted on

Defamation is publishing a false statement that causes harm to another person’s or organization’s reputation. A defamation lawsuit can be brought only if the statement is an assertion of fact, not an opinion. Certainly, statements of opinion can tarnish reputations, but in the United States, opinions are protected by the constitutional right of free speech. However, sometimes a statement that purports to be an opinion is capable of being construed by an audience to have a factual basis. If so, and if the statement is false, it can amount to defamation.

One of the most problematic situations in defamation cases is when a statement mixes opinion and fact. A simple statement of opinion is based on underlying facts that have been established. But a mixed statement intertwines opinions with undisclosed or implied facts — or in recent parlance, “alternative facts.”

To resolve the fact/opinion dilemma, courts use a multi-factor test, analyzing the following:

  • Precision of wording — Courts evaluate whether the language used implies an assertion of fact. If the language is loose, figurative or exaggerated, it may lean toward being an opinion. On the other hand, if the statement contains specific details, it might be treated as an assertion of fact.
  • Verifiability — Factual statements are typically capable of being proven true or false through external sources. Opinions, by contrast, convey the speaker’s own sense of morality, propriety or other personal standards.
  • General context — Courts consider how and where the statement was made, taking into account the medium and its audience. Statements made in an editorial, commentary or opinion piece may be more likely to be considered as expressions of opinion, while statements presented as news reports are typically treated as assertions of fact.
  • Broader context — This level of analysis seeks to ascertain the credibility that might be accorded to the statement by any reasonable reader.

The fact/opinion analysis is especially difficult when it comes to statements made on the internet. Fact and opinion are routinely mixed in postings on social media platforms like Facebook, Twitter and Tik-Tok and discussion forums like Reddit, Quora and Digg. These online apps serve as news aggregators, and there is little or no effort by their hosts to control content. Posters often express opinions while linking to sources of uncertain veracity, thereby potentially spreading misinformation.

Despite the challenges posed in evaluating statements made on those new forms of media, the opinion defense is still a force to be reckoned with in defamation cases. Nevertheless, it is not bullet-proof. An experienced defamation attorney can demonstrate how statements alleged to be opinions might contain or imply untrue statements of fact for which you may be entitled to recover damages.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; [email protected]; 513.797.2850.

Random thoughts on the Ohio tax valuation process

Author By Christopher P. FinneyPosted on

Now that new Auditor’s valuations are out in Hamilton, Butler, Clermont and Montgomery counties (as well as another 20-25 counties throughout Ohio), our firm is experiencing a record number of calls and emails on property tax valuation challenges.  We also have taught four seminars on the topic just in the past week to more than 200 participants.  Based upon our experience and questions raised in these seminars, here are some random thoughts, hopefully providing some wisdom on the topic:

  1. Most — if not all — of our calls and emails start with this line: “I am calling [writing] because the Auditor raised my valuation by xx% from last year.”  OK, that’s interesting and certainly may seem extreme, but (a) it is utterly the wrong starting point and (b) it is completely irrelevant to our analysis and that conducted by the Board of Revision.
  2. The reason this is entirely irrelevant is that (a) a property owner in 2024 (for their 2023 valuation) is entitled to have his property valued at fair market value as of January 1, 2023.  Fair market value is defined as “what a reasonable buyer would pay a reasonable seller, neither party being under undue duress or motivation.”  This is the same valuation formula in which buyers, sellers, lenders, Realtors and appraisers typically engage.  You are not entitled to a lower number because it was lower last year and (b) thus, comparing a newer (and possibly proper) valuation to an earlier incorrect valuation places the analysis in the wrong framework.  The question is not to compare to last year’s valuation.  Rather, the question is: Does your current valuation reflect the value of the property as of January 1, 2023 (the valuation date in question for challenges this year)?
  3. Property owners, including homeowners, are frequently lulled into a belief that they have a statutory right to a lower valuation than “fair market value” — that the Auditor or Board of Revision somehow look at valuation differently than those transactional parties.  This simply is not so.  So, getting the first tax bill at full fair market value can be a jolt.
  4. To my surprise, I received an email last year from a friend and former client who lives in Western Hills: “How could the Auditor think property values have increased 30% over the past three years?”  My response: “Maybe because the nation is experiencing an unprecedented housing boom and Cincinnati/Hamilton County are ground zero of the boom.”  His response: “I had no idea.”  My response: “Do you live under a mossy rock?  It’s been in the newspaper three times per week for the past three years.”  You really do need to be out of touch not to understand the aggressive housing market that has existed some the pandemic began.
  5. The previous blog entries I wrote indicating that tax rates would roll back nearly the same percentage as the average valuation increases turns out not to be accurate.  The rate rollback certainly is there, but it is smaller than I expected and it varies by property categories (commercial, agricultural and residential) and by taxing district — school district and city, village, and township.  Our quick analysis, for example, is that in the City of Cincinnati/Cincinnati Public Schools (the largest taxing district in southwest Ohio) valuation went up 26.65% and the rate rollback was slightly more than 10%, yielding an overall average tax hike of 16.05%.
  6. For many property owners, we are recommending that they not challenge their valuation.  Despite the sticker shock of all of this, most residential properties and certain commercial properties (such as apartment buildings and industrial/warehouse buildings) have in fact soared in value.  Remember, the Board of Revision can INCREASE a valuation as well as provide a REDUCTION, so be careful about asking them to take a close look at your valuation.
  7. This is so also because frequently, the cost of the proceeding (maybe $2,500 for a residential property and $10,000 for a commercial property) exceeds the available savings.  We recommend paying a small sum to an appraiser to get a preliminary valuation before deciding if you want to proceed further, comparing the 3-year savings (a “win” is guaranteed by law to last at least three years) to the out-of-pocket costs.
  8. Unless a recent sale is involved, we generally recommend against proceeding without an appraisal.  For recently arm’s length sales, the sale price is the proper valuation.
  9. When reacting to your new tax valuation, remember that this is a cumulative increase since the last revaluation three years ago.  If we had an average of 8.0% property valuation growth during those three years, the compounded valuation hike would be 25%, and 10% per year would be a 33% bump.  So, (to that fellow who lives under a mossy rick in Western Hills) it’s not hard to see how Auditors in southwest Ohio are seeing average increases of 30% to 40% over the triennial.

If you need help with an Ohio or Kentucky property valuation challenge, or to learn more about the process, contact Chris Finney (513.943.6655) or Jessica Gibson (513.943.5677).

Protecting the Rights of Nursing Mothers: FLSA Protections for Employees to Pump Breast Milk at Work

Author By Samantha B. IsaacsPosted on

The decision to breastfeed your baby is a personal one, and many mothers choose to provide this valuable nourishment to their infants. However, the commitment to breastfeeding can pose challenges when returning to work. Fortunately, the Fair Labor Standards Act (FLSA) includes important protections for those employees who need to express milk in the workplace, ensuring that women can continue to provide for their children without sacrificing their career.

In 2010, Section 7 of the Fair Labor Standards Act of 1938 (29 U.S.C. 207) was amended to require employers to provide a nursing mother reasonable time to express breast milk after the birth of her child. Under what has become known as the “Break Time for Nursing Mothers” provision, employers are required to provide a reasonable break time to new mothers for one year after the child’s birth.  Importantly, the law stipulates that the space provided for expressing milk must be “shielded from view and free from intrusion” by coworkers and the public. Therefore, a bathroom does not meet the requirements under the FLSA. Instead, a private, non-bathroom space that is clean and safe must be provided for employees to pump during the workday.

While this provision to the FLSA is a vital step towards creating a more supportive and inclusive workplace for women who are committed to both their careers and children, it is important to note the limitations of the law. First, employers with fewer than 50 employees are not subject to these requirements if they can demonstrate that providing the necessary accommodations would create an undue hardship for their business operations. Additionally, an employer is not required to compensate an employee for the break time that is needed to pump. However, an employee must either be “completely relieved from duty” or paid for the break time.

On December 29, 2022, President Biden signed the PUMP Act into law as part of the Consolidated Appropriations Act, 2023. The law amended the FLSA to extend coverage of the right to express milk at work to nearly all employees covered by the FLSA regardless of whether they are exempt from minimum wage and overtime requirements, with the exception of certain employees of railroads, airlines, and motor coach carriers. If an employer fails to abide by the law, employees must provide the employer with notice of the violation and ten days to remedy the issue.  If an employer fails to remedy the violation, the employee may be entitled to damages.

Mothers should not have to choose between their professional lives and their role as caregivers. Therefore, if you are a breastfeeding mother and your employer is not providing the necessary accommodations, it is important to know your rights.  Employers and employees should consult experienced legal counsel to be fully advised of their rights and obligations under the law. For assistance in this important area, feel free to consult the Employment Team at the Finney Law Firm.

Red Flags That Your Lawyer May Be Committing Malpractice

Author By Todd McMurtryPosted on

Legal malpractice is easy to define but often hard to spot as it occurs. In general, it means a lawyer failed to exercise the accepted professional standard of care for the type of matter being handled, and that this failure caused the client harm. The problem is that malpractice may not be suspected by the client until the case ends unsatisfactorily.

If you’re involved in a legal matter, noticing the signs of possible legal malpractice by your attorney can put you in better position of averting a negative result. Here are some red flags you can be on the alert for:

  • Foot dragging — If your lawyer seems to be delaying any aspect of your case, it could be a sign of lack of industry or preparedness. Some delays are to be expected, but an unexplained or extended lapse of time could risk missing the statute of limitations, which can cripple your case.
  • Missed deadlines — Worse than foot-dragging is failing to serve or file pleadings or other documents on time. The negative results can include court-imposed sanctions or possible case dismissal. You can keep tabs on your lawyer’s compliance with deadlines by demanding to be copied on all pleadings and filings.
  • Failure to communicate — This is perhaps the most telltale sign of a lawyer mishandling a case. Failure to advise you of significant events or issues can be detrimental. If your lawyer is not keeping you updated and/or is not returning calls or answering emails, it may signal negligence.
  • Failure to obtain consent — Your lawyer must seek your input and approval when it comes to taking actions that could significantly affect your case’s outcome. This is another reason for demanding that you be copied on correspondence and court filings.
  • Failure to heed instructions — You entrust your lawyer with overall management of your case, but that does not mean he or she can disregard your wishes. The attorney can advise you that adhering to them might not be beneficial but ultimately must follow your instructions.
  • Conflicts of interest —You should be alert to any actions taken by your lawyer that may indicate a lack of loyalty to you. If your lawyer has failed to disclosed a potential conflict, it may constitute malpractice.
  • Settlement pressure — Although a negotiated settlement can be beneficial, you should be on guard if your lawyer seems unwilling or unable to fully explain why. Urging you to accept a settlement without full disclosure of risks and alternatives is unethical and may be harmful.

There are many other indicators of legal malpractice, such as your lawyer seeming unprepared in court, unclear about the current state of pertinent law or at a disadvantage while arguing or trying your case. Recognizing these signs and promptly consulting with an experienced professional malpractice attorney can protect your rights.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; [email protected]; 513.797.2850.

What Is Minority Shareholder Oppression That Can Lead to Litigation?

Author By Todd McMurtryPosted on

Many businesses have only a few owners or shareholders. This is particularly common among closely held businesses. It is the owners who decide major issues such as selling or purchasing assets, merging with another company or declaring dividends. However, not all owners are equal. Individuals who own the majority of the shares have the greater say on these decisions. Minority shareholders have limited power, but they are nonetheless entitled to certain rights. When these rights are infringed, it may constitute shareholder oppression that creates a legal right of action.

Shareholder oppression, in order to be actionable, must comprise conduct that is fraudulent, unfair or illegitimate. Being outvoted on a given issue does not constitute oppression. The majority’s action must be inherently unfair and harmful to the minority’s interests. Examples of shareholder oppression include:

  • Income diversion — The majority owners might divert the company’s net profits to themselves to the prejudice of the minority owners. This can be done in a number of ways, some of which are either fraudulent or illegitimate.
  • Share dilution — The majority owners might pass bylaws that reduce the voting power of the minority. This creates an even bigger power imbalance and gives the majority even greater leverage over the minority shareholders.
  • Denial of access — Minority owners might be denied access to the company’s books and records or they might be restricted from attending official company meetings or entering upon company property.
  • Employment — In many small companies, shareholders are also employees. Sometimes the majority will vote to terminate a minority owner’s employment and remove their access to company property and records.
  • Withholding dividends — Owners typically derive a percentage of the company’s net profits based on their shareholdings. Sometimes majority owners vote to keep the dividend within the company rather than distribute profits. Doing so can cause minority shareholders financial hardship. For some owners, company dividends are a large percentage of their income.

Minority shareholders do have remedies. A Kentucky statute allows a shareholder may seek a court order dissolving the company upon showing that the directors or those in control have acted, are acting or will act in a manner that is illegal or fraudulent. In addition, a minority owner can bring a lawsuit asking the court to use its equitable powers to craft a remedy. The court may enjoin or stop the majority from taking further oppressive actions and reverse those that have already been implemented. The court could also order majority members to buy out the minority at a given price. An experienced business litigation attorney can analyze your situation and advise on appropriate action.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; [email protected]; 513.797.2850.

 

May I “stay” collections of a judgment pending the outcome of an appeal?

Author By Christopher P. FinneyPosted on

As clients “play out” the path of their litigation, they may plan on delaying the consequences of a possible loss at trial court for a year or two by “appealing all the way to the Supreme Court.”  Comfortable that they can postpone payment of any possible judgment 24 to 36 months into the future, they continue with the path of defending a suit, they have figured out — before we ever speak about it.

“Stay” typically requires a supersedeas bond; otherwise judgment collections may proceed

However, it’s not that simple.  As a fairly firm proposition of law, there is no “stay of execution” pending the outcome of an appeal unless and until the party against whom judgment is obtained has posed a supersedeas bond in the full amount of the “cumulative total for all claims covered by the final order.” R.C. §2505.09.

… an appeal does not operate as a stay of execution until a stay of execution has been obtained pursuant to the Rules of Appellate Procedure or in another applicable manner, and a supersedeas bond is executed by the appellant to the appellee, with sufficient sureties and in a sum that is not less than, if applicable, the cumulative total for all claims covered by the final order, judgment, or decree and interest involved, except that the bond shall not exceed fifty million dollars excluding interest and costs, as directed by the court that rendered the final order, judgment, or decree that is sought to be superseded or by the court to which the appeal is taken.

In other words, after a party to a case obtains a monetary judgment against another party (typically, but not always, a plaintiff obtains a judgment against a defendant), absent a “stay” issued by the Court, the party holding the judgment may pursue collections against the party against whom judgment has been rendered while the appeal is being briefed, argued and decided.  This means that the prevailing party may pursue foreclosure against real property, garnishment of bank accounts, attachment of wages and other collections actions, notwithstanding the slow process of a pending appeal that the opposing party believes will reverse the trial court judgment.

How a supersedeas bond is obtained

The bond can be issued by a private surety, such as an insurance company.  But the insurance company wants to take zero risk in the issuance of that bond, so they will do so only upon posting of proper security such as cash, accounts containing stocks and bonds, or real estate with sufficient equity.  And the outcome of this is that the eventual bankruptcy of the losing party, hiding of assets, dissipation of assets, death of the losing party, and other intervening events will not impair the collectability of the judgment by the prevailing party.

Posting of real estate as security

Another avenue to a “stay” order is the conveyance of property of adequate value with the Clerk of Courts, R.C. § 2505.11.  And, under 2505.12, exempt from the bond-posting provisions are (i) fiduciaries who already have posted bonds, with surety in accordance with law, (ii) the state of Ohio and its political subdivisions, and (iii) public officers of the state and its political subdivisions who were sued only in their official capacity.

How it really plays out

How does this, then, typically play out?  First, I find that losing defendants don’t just want to “write a check” to pay the judgment.  Rather, they ignore it until collections actions are taken.  Second, I have found that losing parties willfully ignore the plain language of Revised Code §2505.09 and ask for a bond amount less than the “cumulative total for all claims covered by the final order.”  This request, in our experience, is routinely denied.

Then, there are circumstances in which the losing party simply can’t pay the judgment amount and therefore also can’t post a bond in that amount.  In that circumstance, the losing defendant has the option to declare bankruptcy.  In other circumstances, the losing party has no identifiable assets, but he must honestly submit to a judgment debtor examination and tell the prevailing party’s attorney the location of his assets.  It is a bad idea — one we routinely reject — for a losing party to transfer assets to avoid collections upon loss in litigation.  What this means, for example, is moving around assets for the purpose of avoiding the prevailing party from collecting is as bad of an idea as it is appealing.

So, when Gibson Bakery sued Oberlin College for defamation and obtained a $25 million judgment, the Judged ordered a stay of execution pending appeal only upon the posting of a $36 million bond.  Last week, a $1.8 billion judgment was rendered against the National Association of Realtors and two other defendants.  Because the matter litigated is under the Sherman Antitrust Act, the damages are to be tripled, likely bringing the judgment amount to $5.4 billion.  One of the Defendants is a Berkshire-Hathaway company, which certainly has the cash sitting around for that, but will they post that for just one of their subsidiaries and to pay the freight for all of the defendants?  For most parties, including the other two defendants, they simply would not have the assets available to them to post a supersedeas bond of that magnitude.

As litigants want to be on the “offense” in collections, as the defense — against a diligent prevailing party — is no fun and there are few places to turn to avoid “paying up.”

Conclusion

In your business affairs as well as your litigation, be prepared to accept the accept the consequences of your decisions.  In litigation, those consequences can be both unexpected and expensive.  If your plan is to postpone collections until appeals are exhausted, that may mean posting a bond for the value of the judgment.

Proven Ways to Ease the Pain of a Business Divorce

Author By Todd McMurtryPosted on

A business divorce occurs when one or more of the company’s owners or partners leave or is forced out by those with a controlling interest. It can happen for myriad reasons, such as personality conflicts, disagreements on business goals or operating procedures and external changes in economic conditions that hurt the company’s profits. In many ways, a business divorce is like ending a marriage. Assets must be divided and any future obligations among the parties must be decided. The process can be contentious, frustrating and expensive.

However, there are ways to make a business divorce more efficient and less painful. Here are some positive actions that small business owners can take in preparing for a breakup:

  • Proactive planning — The reality is that most startup businesses change ownership or dissolve within a few years. However, entrepreneurs often do not often contemplate restructuring or failing. It is critical to enter the venture with an understanding of those risks and to craft a plan of action in case a business divorce becomes necessary. This can be done through the company’s bylaws or operating agreement. These documents can govern how a business divorce will proceed and specify each owner’s rights and responsibilities both during and after the divorce.
  • Focus on the process — Some owners take business divorces very personally. They will use the divorce as a platform to blame and berate other owners and as a tool to seek retribution. This is shortsighted, as this type of conflict only makes business divorces take longer and cost more. Every owner should focus on making the divorce as clean and orderly as possible. By doing so, the parties can quickly move on to other business opportunities.
  • Hire a mediator — A mediator is an unbiased third party who can help facilitate the settlement of a business divorce. The mediator should be familiar with the company’s line of business and its relevant market. A good mediator will be able to explain the strengths and weaknesses of each party’s legal position, temper unrealistic expectations and increase the chances of the parties negotiating a settlement.  
  • Be flexible — Whether a business divorce is negotiated, mediated or litigated, no party is likely to get everything they want. Divorcing owners should concentrate on coming to an agreement that is fair and reasonable overall. All owners should be prepared to make some concessions. Every hour spent on the divorce is one less hour available for engaging in productive activity.   

An experienced business divorce attorney can advise you about the best options to accomplish the ownership change in your company, whether it involves a buyout of a departing owner, the sale of the owner’s interest or, as a last recourse, the company’s liquidation.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; [email protected]; 513.797.2850.

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