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Tuesday, Jan. 26, 2010

In the Matter of the Application of American Transmission Systems, Incorporated, and The Cleveland Electric Illuminating Company for a Certificate of Environmental Compatibility and Public Need for the Geauga County 138 kV Transmission Line Supply Project, Case no. 2009-0481
Appeal from Order of the Ohio Power Siting Board

Richard Jaques v. Patricia A. Manton, Case no. 2009-0820
6th District Court of Appeals (Lucas County)

Julie Volbers-Klarich v. Middletown Management, Inc., et al., Case no. 2009-0933
12th District Court of Appeals (Butler County)

Meccon, Inc., et al. v. University of Akron, Case no. 2009-0950
10th District Court of Appeals


Did Power Siting Board Act Lawfully In Approving Location of New Geauga County Electric Line?

In the Matter of the Application of American Transmission Systems, Incorporated, and The Cleveland Electric Illuminating Company for a Certificate of Environmental Compatibility and Public Need for the Geauga County 138 kV Transmission Line Supply Project, Case no. 2009-0481
Appeal from Order of the Ohio Power Siting Board

ISSUES:

BACKGROUND: In September 2007, two electric utility companies, American Transmission Systems, Inc. and the Cleveland Electric Illuminating Company, applied to the OPSB for approval of a proposed new above-ground electric service line to be constructed through a portion of Geauga County. The preferred route proposed by the utilities for the new line, which would require the erection of hundreds of new poles and stringing of power cable along them, ran primarily through private property. Under state public utility laws, once the siting of a proposed new power line is approved by the OPSB as necessary and environmentally compatible, the electric company constructing that line is granted an easement over private property that lies within the approved route of the power line, and is empowered to use the governmental power of eminent domain if necessary to acquire possession of and access to the land within that easement.

A group of Geauga County residents through or near whose property the proposed new power line would be constructed, calling themselves Citizens Advocating Responsible Energy (CARE), sought and was granted status as an intervening party and filed documents with the OPSB formally opposing the applicants’ preferred siting of the new line. Among other arguments presented in its pleadings, CARE asserted that the applicants had not given proper consideration to several stretches of state highway and an abandoned railroad right-of-way within the county along which new utility poles and power lines could be erected to connect the terminal points of the new service line without intruding on private property. 

The OPSB appointed an ALJ to conduct a required adjudicatory hearing at which the applicants and opponents of the utilities’ preferred route presented testimony and documentary evidence. That hearing took place over a three-day period in September and October 2008. The ALJ did not prepare or serve the parties with a written report to the OPSB summarizing her findings and conclusions, and recommending approval or denial of the siting application. On Nov. 24, 2008, at its first scheduled meeting following the adjudicatory hearing, the OPSB voted to approve a final order that had been prepared by the ALJ granting the applicants’ application to build the new power line in its preferred location and setting forth 43 specified conditions to ameliorate potential negative impacts of the construction process. 

CARE filed an application for rehearing, alleging that the board had not conducted its own independent analysis of the evidence presented by the parties as required by law, and also arguing that CARE had been denied due process based on the ALJ’s improper sealing of public records at the request of the applicants prior to the adjudicatory hearing and the ALJ’s improper denial of CARE’s motions to unseal some of those documents until three weeks before the discovery cut-off date. The board denied the motion for rehearing.  CARE has exercised its right to seek Supreme Court review of the OPSB’s order authorizing construction of the new power line on or near its members’ properties.

Attorneys for CARE point to language in R.C. 4906.02, the statute establishing and defining the powers of the OPSB, that allows the board to delegate investigation and review of power siting applications to staff members or appointees, but specifies that the board’s authority to grant final approval of a proposed new power line route “shall not be exercised by any officer, employee, or body other than the board itself.”  In this case, they argue, the record shows that there was no meeting or communication of any kind between board members and the ALJ who conducted the evidentiary hearing between the date of that hearing and the Nov. 24, 2008, meeting at which the board approved without any substantive debate or discussion a 50-page final order that had been prepared by the ALJ prior to that meeting. They assert that these facts show that the board did not conduct an independent review and evaluation of the evidence presented by the applicants and CARE, but instead unlawfully delegated its authority to the ALJ, who wrote the board’s order approving the applicants’ siting proposal based exclusively on her own opinions and analysis of the evidence.

They also argue that the board’s order should be voided on the basis that the ALJ improperly granted motions by the applicants to seal important parts of its application based on unsubstantiated claims that those documents contained trade secrets and/or confidential infrastructure information excluded from public disclosure by federal anti-terrorism statutes. They allege that the ALJ failed to make specific findings required by the state Public Records Act before sealing documents that are presumed to be available for public examination absent such findings. While some of the sealed documents were ultimately disclosed to CARE, they assert, that disclosure was withheld until so late in the hearing preparation process that its attorneys were unable to fully review and analyze those documents in time to develop effective responsive arguments.

Attorneys for the OPSB respond that the fact that the board’s order was drafted by the same person who conducted the adjudicatory hearing does not demonstrate that board members did not carefully review and analyze the ALJ’s proposed terms and conditions for approval prior to adopting them at the Nov. 24, 2008, board meeting. They note that the ALJ was not legally required to prepare a written report summarizing her findings of fact and conclusions of law and serve it on the parties prior to the Nov. 24, 2008, board meeting unless the board requested such a report, which it did not do. With regard to the sealed records, the board points out that no objections to its motions to seal certain documents in its application as confidential were entered at the time those motions were granted, and contend that the ALJ followed federal anti-terrorism protocols in withholding documents disclosing the specific locations of key electric utility infrastructure until CARE signed required non-disclosure agreements.  In any case, they argue, CARE ultimately had access to the sealed documents it sought weeks before the evidentiary hearing date, and has not shown any material prejudice it suffered as a result of delay in accessing those records.

Contacts
Thomas J. Lee, 216.241.2838, for Citizens Advocating Responsible Energy.

Thomas G. Lindgren, 614.466.4395, for the Ohio Power Siting Board.

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Does 2005 Law Bar Evidence Informing Jurors About Write-Offs That Reduced Plaintiffs’ Medical Bills?

Or is Supreme Court Ruling on Prior Collateral Source Rule Still Applicable

Richard Jaques v. Patricia A. Manton, Case no. 2009-0820
6th District Court of Appeals (Lucas County)

ISSUE:  In 2006, the Supreme Court of Ohio held in Robinson v. Bates that the common law collateral source rule in force in Ohio in 2001 did not bar the defendant in a personal injury lawsuit from informing jurors that the plaintiff’s actual outlays for medical expenses were less than the original amounts billed to the plaintiff because of write-offs accepted by health care providers. Effective in April 2005, the legislature adopted a new collateral source statute, R.C. 2315.20, which does not permit a defendant to introduce evidence of benefits a plaintiff received for his injuries from his own insurance or from other outside sources if the source of those payments has a legal right to subrogation, (i.e., if the plaintiff will be obliged to pay back money he received from that source from the proceeds of any court judgment or settlement he obtains from the defendant).

In this case, the Court is asked to determine whether its 2006 holding in Robinson that write-offs on a plaintiff’s medical bills are admissible at trial applies only to personal injury claims that arose before the effective date of R.C. 2315.20, or if the Robinson ruling continues to allow evidence of medical write-offs in cases that arose after the new collateral source law took effect.

BACKGROUND: Richard Jaques was injured in a December 2005 traffic accident for which the other driver, Patricia Manton, admitted liability. When the parties could not agree on the amount of damages, Jaques filed suit against Manton seeking recovery for his medical injuries, lost wages and pain and suffering. During pretrial proceedings, Jaques sought and was granted a motion barring Manton from informing the jury that while he had been billed a total of $21,874 for medical treatments arising from the accident, his health care providers had accepted $7,484 as payment in full for those services based on their contractual agreements with his health insurance provider, Medical Mutual of Ohio.

A jury subsequently awarded Jaques damages totaling $25,000, with $15,500 of that amount designated for medical expenses, $4,500 for lost wages and $5,000 for pain and suffering. After the jury’s verdict was returned, Manton moved for a new trial on the basis that the judge had erred in not allowing her to introduce evidence about the write-offs on Jaques medical bills. The trial court denied the motion and certified the jury’s verdict.

Manton appealed the denial of her motion for a new trial, arguing that the trial court had erred by failing to follow the Supreme Court’s 2006 ruling in Robinson that write-offs on medical bills were admissible at trial. On review, the 6th District Court of Appeals affirmed the action of the trial court.

In its decision, the court of appeals observed that the collateral source rule analyzed by the Robinson court was the rule in force in 2001when that plaintiff’s injuries occurred, but that Jaques’ injuries had occurred after the legislature adopted the new rule in R.C. 2315.20 that specifically excepts from   disclosure at trial any evidence about amounts payable to the plaintiff from outside sources if the source of those payments had a right of subrogation. Because Jaques’ insurance contract with Medical Mutual included a subrogation clause, the 6th District held that R.C. 2315.20 barred Manton from introducing any evidence disclosing amounts paid by Medical Mutual to Jaques’ health care providers.

Manton’s attorneys sought and were granted Supreme Court review of the 6th District’s ruling.

They point to the Court’s specific holding in Robinson that amounts written off of a medical bill by a doctor or hospital do not qualify as a “benefit” payable to the plaintiff, and are therefore not barred from disclosure under the collateral source rule, because no one actually paid the difference between the amount originally billed by a service provider and the amount accepted as payment in full. They argue that the goal of the state’s civil justice system is to ensure that injured parties are “made whole” for their losses, and argue that the rulings by the trial and appellate courts in this case allowed Jaques to collect a “windfall” by concealing from jurors the fact that his original medical bills dramatically overstated the amounts that were actually paid to health care providers for the treatments he received. 

They also note that the Court was aware of the 2005 enactment of R.C. 2315.20 when it issued its 2006 ruling in Robinson, and argue that nothing in the Robinson opinion suggests that its analysis of write-offs on medical bills was intended to apply only to pre-R.C. 2315.20 cases.

Attorneys for Jaques urge the Court to uphold the trial and appellate courts’ holdings that: 1) admitting evidence of the amounts written off by Jaques’ medical service providers and the amounts actually paid to them by Medical Mutual on his behalf would have disclosed to the jury benefits Jaques received from a third party as a result his accident injuries; and 2) under the plain language of R.C. 2315.20, because the payments made on Jaques’ behalf by Medical Mutual were subject to a subrogation clause in the insurance contract, Manton was barred by law from introducing evidence about those payments at trial.

They point to a footnote in the Robinson opinion specifically stating that the Court was not analyzing the collateral source rule set forth in R.C. 2315. 20, because the claims asserted by the plaintiff in the Robinson case arose four years before the new statute was enacted. They argue that reversal of the trial and appellate decisions in this case would amount to judicial nullification of the specific statutory language barring evidence of third-party payments that are subject to subrogation. They also contend that the rule of law proposed by Manton would grant a “windfall” to parties that negligently cause injury to others, because it would allow them to obtain a dramatic reduction in the damages assessed against them at trial for the sole reason that their victims had the foresight to pay for insurance protection from their own pocket.

NOTE:  Amicus curiae (friend of the court) briefs supporting the position of Jaques have been submitted by the Ohio Association for Justice and several private law firms. Amicus briefs supporting the position of Manton have been submitted by the Ohio Association of Civil Trial Attorneys.

Contacts
Alan B. Dills, 419.249.7100, for Patricia Manton.

Michael D. Bell, 419.843.2001, for Richard Jaques.

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When Vendor Collects Fictitious ‘Tax,’ May Customer Sue Vendor Directly for Fraud, Deceptive Sales Practice?

Or Is Recovery Available Only from Alleged Taxing Entity?

Julie Volbers-Klarich v. Middletown Management, Inc., et al., Case no. 2009-0933
12th District Court of Appeals (Butler County)

ISSUE:  When a vendor has collected from its customers amounts represented to the customer as county and municipal excise taxes, despite the fact that no such taxes existed at the time:

BACKGROUND: In August of 2002, Julie Volbers-Klarich and members of her family stayed at a Hampton Inn hotel in Fairfield, Ohio owned by Middletown Management Inc. When she paid for the room, Volbers-Klarich alleges that in addition to state sales tax, her bill included additional charges identified by the hotel as being for Butler County and Fairfield municipal excise taxes. Volbers-Klarich subsequently learned that Butler County did not begin charging an excise tax on hotel rooms until Sept. 30, 2003, and that the City of Fairfield has never imposed an excise tax on hotel rooms.

Attorneys representing Volbers-Klarich and seeking to represent other Hampton Inn customers who had allegedly been charged the non-existent excise taxes filed a class action lawsuit in the Butler County Court of Common Pleas. The plaintiffs sought recovery from Middletown Management for the amounts they paid for the fictitious taxes, and also asserted claims for additional damages from the hotel owners based on allegations of civil fraud, violation of the state Consumer Sales Practices Act (CSPA) and other causes of action. Middletown Management filed a motion for summary judgment dismissing all of the plaintiffs’ claims, which was granted by the trial court.  In its ruling, the court cited prior court decisions holding that persons seeking to recover alleged improper or excessive tax payments do not have a direct cause of action against a vendor who collected the tax, but must instead seek recovery from the taxing entity in whose name the tax was collected.  The court also held that because Volbers-Klarich had not submitted a hotel receipt or any other documentary evidence showing that she had in fact been charged the alleged fictitious taxes, her fraud and CSPA claims against the hotel owners had not been plead with the required degree of particularity, and were also subject to summary dismissal.

On review, the 12th District Court of Appeals affirmed the action of the trial court. While acknowledging that the two primary court decisions relied on by the trial judge involved a vendor’s improper calculation or collection of state sales tax, the court of appeals found that the legal reasoning of those decisions was applicable to the alleged improper collection of local excise taxes, and applied even where the tax collected by a vendor was fictitious.

Volbers-Klarich sought and was granted Supreme Court review of the 12th District’s decision.

Her attorneys argue that the prior decisions relied on by the trial court and 12th District are not applicable to her complaint because those cases involved alleged improper or excessive state sales tax that a vendor had collected from its customers and duly forwarded to the state. Because the vendor was collecting a tax authorized by law and the alleged overpayments had been passed on to the state tax commissioner, they contend, the courts in those cases properly required the plaintiffs to seek recovery of alleged overpayments from the tax commissioner rather than the vendor. They also point out that while the legislature has provided plaintiffs with a mechanism for pursing recovery of improperly collected taxes from the state by suing in Ohio Court of Claims, that mechanism is not available to plaintiffs who must pursue civil actions against a city or county. 

In this case, they allege, the fraudulent “tax” payments obtained from Volbers-Klarich and other Hampton Inn customers were not authorized by law, and the amounts paid to the vendor were clearly not forwarded to any taxing entity because the alleged “taxes” did not exist.  Therefore, they argue, the plaintiffs can assert no valid legal claims against Butler County or the City of Fairfield for taxes those entities never levied or collected, and the lower courts erred in denying them the opportunity to pursue recovery from the only party that caused and profited from their economic loss, which is Middletown Management.

Attorneys for Middletown Management urge the Court to affirm the lower court rulings that only the state and its political subdivisions have the authority to levy and collect taxes, and that vendors merely act as agents of a taxing entity in collecting sales and excise taxes from their customers.  Even where a vendor has improperly collected tax payments from customers in the name of a taxing entity, or has collected but not forwarded tax payments to the taxing entity, they assert, Ohio courts have determined that consumers may only obtain a refund of such payments from the governmental entity in whose name the tax was assessed.

Contacts
Kenneth J. Ignozzi, 937.223.8888, for Judy Volbers-Klarich.

James C. Frooman, 513.651.6800, for Middletown Management Inc. & Middletown Innkeepers Inc.

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May Unsuccessful Bidder on Public Contract Sue State to Recover Costs of Bid Preparation?

Or Are ‘Disappointed’ Bidders Limited to Injunctive Relief?

Meccon, Inc., et al. v. University of Akron, Case no. 2009-0950
10th District Court of Appeals

ISSUE: When a vendor’s bid on a state or local government contract is unsuccessful, and the vendor pursues legal action against a government entity for alleged irregularities in the bidding or award of the contract, is the ‘disappointed’ bidder limited to seeking an injunction to stop execution of the contract, or may that party also seek money damages to recover its bid preparation costs?

BACKGROUND:  In April 2008 the University of Akron invited bids for various phases of construction work on its new football stadium. Meccon, Inc. submitted a bid for the heating, ventilation and air conditioning (HVAC) portion of the contract. In June 2008 the University awarded the HVAC and fire protection contracts on the project to a lower bidder, S.A. Communale. Meccon subsequently filed suit in the Ohio Court of Claims, alleging that the university had violated provisions of the state’s competitive bidding law and the terms of the project bid proposal in making its contract awards to S.A. Communale. In its complaint, Meccon sought a temporary restraining order and temporary and permanent injunctions preventing work on the project from going forward, and also asserted claims for money damages to compensate Meccon for the costs of preparing its bid and “additional costs and damages.”

Before the Court of Claims could hold an evidentiary hearing on Meccon’s motion for a temporary restraining order, the university moved to dismiss the entire action on the basis that the Court of Claims did not have jurisdiction to hear the case. The Court of Claims granted the motion to dismiss, ruling that under a 2006 Supreme Court of Ohio decision, Cementech Inc. v. City of Fairlawn, a disappointed bidder on a public contract may obtain only injunctive relief (as opposed to money damages), and the Court of Claims’ has jurisdiction to hear only cases in which a plaintiff asserts a justiciable claim for money damages against the state. 

Meccon appealed the order dismissing its complaint. On review, the 10th District Court of Appeals reversed and remanded the case to the Court of Claims for further proceedings. In its decision, the 10th District found that the Supreme Court’s Cementech decision only barred disappointed bidders from suing the state to recover money damages for lost profits resulting from alleged bidding irregularities, but did not specifically address other types of money damages a plaintiff might assert, such as the bid preparation costs sought by Meccon in this case. The university sought and was granted Supreme Court review of the 10th District’s ruling.

Attorneys for the University of Akron argue that while the primary issue in Cementech was the eligibility of a disappointed bidder to seek money damages from the state for alleged lost profits, the Supreme Court’s decision in that case examined the wider issue of whether unsuccessful bidders are limited to injunctive relief in actions involving public contracts, and the Court plainly found that they are.  In this case, they assert, the 10th District identified public policy reasons for allowing rejected bidders to recover money damages from the state when proper bidding procedures are not followed, despite the Supreme Court’s rejection of those same public policy arguments in the Cementech case.  They urge the Court to reaffirm its reasoning in Cementech that the primary purposes of the state’s competitive bidding law are to ensure fairness to vendors while minimizing the cost of public construction projects. They argue that those complementary interests are best served by giving unsuccessful bidders the right to sue for injunctive relief that throws out the results of a tainted bidding process, but denying them the ability to sue for money damages that would inevitably come from the pockets of taxpayers.

Attorneys for Meccon point out that Cementech was a case the Supreme Court agreed to hear in order to resolve conflicting rulings by different court of appeals districts on the specific issue of whether a disappointed bidder on a public contract could sue to recover for lost profits. While the Cementech opinion went on to discuss limiting recovery in such cases to injunctive relief, they say, the Court did not explicitly bar any money damages other than lost profits.  Accordingly, they argue, the language in the Cementech opinion suggesting that disappointed bidders are limited to injunctive relief is only dicta (non-binding comment by a court on a legal question not at issue in the case it is deciding), and the 10th District did not depart from binding precedent in finding that there were sound public policy reasons to allow Meccon to pursue its claim for recovery of bid preparation costs in this case.

Contacts
Benjamin C. Mizer, 614.466.8980, for the University of Akron.

Peter D. Welin, 614.469.3200, for Meccon, Inc.

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These informal previews are prepared by the Supreme Court's Office of Public Information to provide the news media and other interested persons with a brief overview of the legal issues and arguments advanced by the parties in upcoming cases scheduled for oral argument. The previews are not part of the case record, and are not considered by the Court during its deliberations.

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