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Tuesday, May 24, 2011

In the Matter of the Complaint of Worthington Industries, The Calphalon Corporation, Kraft Foods, Global, Inc., Brush Wellman, Inc., and Martin Marietta Magnesia Specialties, LLC v. The Toledo Edison Company, Case nos. 2009-1064, 2009-1065, 2009-1067, 2009-1071, 2009-1072
Appeals from Orders of the Public Utilities Commission

Lisa G. Huff et al. v. First Energy Corporation et al., Case no. 2010-0857
11th District Court of Appeals (Trumbull County)

Thomas Barbee v. Allstate Insurance Company, Case no. 2010-1091
11th District Court of Appeals (Trumbull County)

Medina County Bar Association v. John Brooks Cameron, Case no. 2010-2173

Disciplinary Counsel v. Doreen Cantrell, Case no. 2011-0281


Industrial Customers Challenge PUCO Order Approving Toledo Edison's 2008 Termination of Discounted Rates

Argue 'Special Contracts' Guaranteed Lower Rates Until Transition Surcharge Cancelled

In the Matter of the Complaint of Worthington Industries, The Calphalon Corporation, Kraft Foods, Global, Inc., Brush Wellman, Inc., and Martin Marietta Magnesia Specialties, LLC v. The Toledo Edison Company, Case nos. 2009-1064, 2009-1065, 2009-1067, 2009-1071, 2009-1072
Appeals from Orders of the Public Utilities Commission

ISSUE:  Did the Public Utilities Commission on Ohio (PUCO) act unreasonably or contrary to law when it approved the action of Toledo Edison in unilaterally terminating discounted “special contract” rate agreements with five large industrial customers in 2008 while continuing to include regulatory transition charges in the monthly bills of those customers?

BACKGROUND: At various times during the 1990s, Toledo Edison (TE) entered into PUCO-approved “special contracts” with companies operating large industrial and commercial facilities in TE’s service area. Under those contracts, TE agreed to charge these high-volume users of electric power at a lower per-kilowatt hour rate than the standard rate charged to other, lower-volume customers.  Included among more than 40 TE special contract customers were Worthington Industries, Brush Wellman, Kraft Foods Global, the Calphalon corporation and Martin Marietta Magnesia Specialties.

Pursuant to legislation enacted by the General Assembly in 2000 to begin a transition of the state’s electric power generation industry from a regulated monopoly to a market competition model, TE and other utility companies serving the state were required to submit and obtain PUCO approval of an Electric Transition Plan. As part of these plans, utility companies were authorized to calculate temporary Regulatory Transition Charges (RTCs) to be included in their customers’ bills beginning in 1981 to cover the power company’s costs of transitioning to a market-based operating model.

As part of its electric transition plan approved by the PUCO, TE made a one-time offer to each of its special contract customers to extend their existing reduced-rate agreements, with the inclusion of  commission-approved RTCs, “through the date on which the RTC charges cease.” The five companies listed above were among the special contract customers that accepted TE’s offer and  signed written amendments extending their previously approved discount rate contracts with the utility to the date on which its RTC charges were terminated.

In 2003 and 2005 orders adjusting TE’s tariffs the PUCO stated that TE’s authorization to continue collecting RTC charges would terminate no later the Dec. 31, 2008.  In 2007, TE notified the five companies that their special contracts would terminate on their respective billing dates in February 2008.  Beginning with their March 2008 service period, the companies began receiving electric bills that were calculated at a new, non-discounted rate and also continued to include RTC charges. 

Martin Marietta and the four other special contract customers filed complaints with the PUCO, asserting that TE had breached its 2001 contracts with them and violated statutory requirements by terminating their special contract discount rates but continuing to bill them for RTC charges after the date of termination. They asked the commission to order TE to reinstate their special contract rates until Dec. 31, 2008 or whatever alternative date TE actually ceased collecting RTC charges. The commission reviewed the customers’ complaints and issued an order dismissing them as meritless. After an unsuccessful attempt to have the PUCO reconsider its ruling, the customers exercised their right to appeal the commission’s order to the Supreme Court.

Attorneys for Martin Marietta and the other four appellant companies assert that TE breached its 2001 special contract extensions with them when it unilaterally terminated the discount rates guaranteed in those contracts prior to the specified date, which was the date on which the utility ceased collecting regulatory transition charges.  They argue that no subsequent action by the PUCO authorized TE to unilaterally change the terms of those pre-existing contracts, and that by failing to require TE to comply with its contractual obligations, the PUCO acted contrary to law and its dismissal of their 2008 complaint should be overturned by the Court.

Attorneys for the PUCO respond that rate adjustment orders it approved in 2003 and 2005 pursuant to applications filed by Toledo Edison restructured the original 2001 schedule under which TE was permitted to collect its regulatory transition charges.  They point to a provision in the commission’s 2003 order that gave the company’s special contract customers a 30-day window within which to extend their discounted rates until Dec. 31, 2008. Because Martin Marietta and the other four appellant companies in this case failed to apply for this extension, they say, they became subject to a 2005 order in which the PUCO approved an agreement between TE and other industrial users that terminated all special contracts that were extended in 2003 as of Dec. 31, 2008, but terminated those contracts that had not been extended in 2003 as of February 2008.

Contacts
Craig I. Smith, 216.561.9410, for the appellant special contract utility customers.

Thomas W. McNamee, 614.466.4396, for the Public Utilities Commission of Ohio.

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Does Power Company's Contract With Trimming Service Create Duty to Protect Third Party from Falling Tree?

Where Tree That Caused Injury Did Not Pose Risk to Power Line

Lisa G. Huff et al. v. First Energy Corporation et al., Case no. 2010-0857
11th District Court of Appeals (Trumbull County)

ISSUE: Does a contract in which a tree-trimming service agrees to plan and conduct its work in trimming vegetation near power lines “to adequately safeguard all persons and property from injury” create a duty by the tree-trimmer or the power company to protect a third party from the falling of a tree that was not removed because it did not threaten power lines?

BACKGROUND: In June 2004, during a period of high winds, the trunk of an 80-foot maple tree located in rural Trumbull County near Ohio Edison electric transmission lines split, and the upper portion of the tree fell on to a nearby roadway. Lisa Huff, a pedestrian who was walking past the property at that moment, was struck by the falling tree and severely injured. A subsequent inspection of the tree showed that it had suffered internal decay near the point at which the trunk split.

Huff and members of her family filed suit seeking damages from the owner of the property on which the tree was located and the township in which the property was located. Huff also named as defendants Ohio Edison, its parent company, FirstEnergy, and Asplundh Tree Expert Company, the contractor hired by Ohio Edison to monitor and trim trees that interfered with or posed a threat to Ohio Edison’s power lines. The plaintiffs’ complaint alleged that the fallen tree had rotted because of damage to the trunk caused by missing branches on the side facing Ohio Edison’s power lines, branches that they believed had been trimmed three years earlier by Asplundh when it was on the property and removed two other trees under its contract with the power company.

Ohio Edison, FirstEnergy and Asplundh moved for summary judgment dismissing the claims asserted against them.  The trial court granted summary judgment in favor of all three defendants, holding that no evidence proffered by the plaintiffs showed that the tree that fell posed a threat to Ohio Edison’s power lines or that it had been trimmed or inspected when Asplundh last visited the property in 2001. The court also found that neither Asplundh nor Ohio Edison/FirstEnergy had notice or knowledge of a dangerous condition of the tree, and therefore none of those defendants had a contractual duty to protect Huff or any other third party against the tree’s unforeseeable collapse in a wind storm.

The plaintiffs appealed.  On review, the 11th District Court of Appeals affirmed summary judgment in favor of FirstEnergy, but reversed the trial court and remanded the case for further proceedings on the claims asserted against Ohio Edison and Asplundh.

The court of appeals noted that the vegetation management contract included a promise by Asplundh “to adequately safeguard all persons and property from injury” in carrying out its tree-trimming duties. While a narrow interpretation of that contract language would limit Asplundh’s duty to protect third parties during the brief time periods in which its workers were actually performing tree-pruning or removal work on the property, the court of appeals found that the same language also could be interpreted more broadly to require protection of persons and property that were present on or passing by a property after Asplundh’s workers left the property. Because an award of summary judgment requires a finding that there is no material question of fact that could establish a defendant’s liability, the 11th District held that Asplundh and Ohio Edison were not entitled to summary judgment because a judge or jury might interpret their contract language to extend a duty of protection to Huff.

Ohio Edison and Asplundh sought and were granted Supreme Court review of the 11th District’s ruling.

Attorneys for Ohio Edison and Asplundh argue that under their contract, Asplundh was obliged to trim or remove only trees and vegetation that interfered with or threatened Ohio Edison’s power lines, and the only party to whom Asplundh owed a contractual duty of care for on-the-job safety was Ohio Edison. They cite prior Ohio court decisions that they say have consistently held that a third party such as Huff cannot be entitled to a benefit under a contract when none of the actual parties to the contract intended to provide such a benefit. They also contend that no reasonable judge or jury could find Ohio Edison or Asplundh liable for injuries caused by the unforeseeable failure during a wind storm of a tree that was undisputedly not a threat to power lines, and therefore was not covered by their vegetation management contract to begin with.

Attorneys for Huff and the other plaintiffs respond that the contract language cited by the 11th District required Asplundh to plan and conduct its vegetation management activities in a way that would “adequately safeguard all persons ...” and did not limit that obligation to the immediate time period during which Asplundh was physically present on a property or was actually performing tree trimming or removal work. They also point out that Ohio Edison did not rely exclusively on the judgment of Asplundh’s crews to determine which trees should be trimmed or removed and whether such work had been properly performed, because the utility company employed its own experts whose fulltime job was to follow up on and where necessary seek remedial action if Asplundh failed to perform its tree trimming and removal activities according to the contract standards.

In this case, they assert, it is undisputed that pursuant to its contract with Ohio Edison, in 2001 Asplundh removed two trees near the one that fell on Huff. They argue that the 11th District’s ruling properly allows the plaintiffs to argue to a judge or jury that Asplundh and/or the power company’s own expert were negligent in not removing the remaining tree, which  had missing branches on the side facing the power lines, making it unbalanced at the top and susceptible to falling toward the road where Huff was injured.

Contacts
John T. Dellick, 330.744.1111, for Ohio Edison Co.

Clifford C. Masch, 216.687.1311, for Asplundh Tree Expert Co.

David J. Betras, 330.746.8484, for Lisa Huff et al.

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Does Deadline for Filing Underinsured Motorist Suit Run From Date of Accident, or Date Underinsurance Was Determined?

Where Underinsurance Not Established Until Prior Lawsuit Resolved

Thomas Barbee v. Allstate Insurance Company, Case no. 2010-1091
11th District Court of Appeals (Trumbull County)

ISSUE:  When a provision in an auto insurance policy requires an insured person to file suit to recover underinsured motorist coverage within three years after an accident that causes injury, is that provision enforceable against a policyholder when the existence of an underinsured driver in the case was not established until a court deciding liability claims against multiple defendants allocated liability for the policyholders’ injuries among those defendants 32 months after the accident?

BACKGROUND:  The case involves a multi-car accident that occurred in October 2002 that caused injuries to multiple members of the Barbee family of Lorain County while they were traveling in Wisconsin.  In the accident, two vehicles occupied by the Barbee family members were struck by two other vehicles that had collided with each other on the opposite side of a freeway and then swerved across the median and into traffic going the opposite direction. The drivers of the vehicles that crossed the median were Danielle Skatrud, who was killed in the crash, and Vaughn Larson, who was driving in his capacity as a federal government employee at the time of the accident.

The Barbees were covered by two auto insurance policies that they owned, one issued by Nationwide Insurance Co. and the other by Allstate. They sought and received medical payments benefits under those policies, and also notified Nationwide and Allstate of the possibility that they might later enter claims for underinsured motorist coverage depending on whether the coverage limits of Skatrud’s and Larson’s auto insurance policies were sufficient to cover all of the Barbees’ damages.

Because Larson was covered by the U.S. government’s self-insurance plan, the Barbers filed suit in federal district court in Wisconsin seeking recovery for their damages.  If the federal court determined that Larson was 50 percent or more liable for the Barbees’ injuries, the federal self-insurance policy under which he was covered would not only cover Larson’s share of the damages awarded to the plaintiffs, but would also make up any shortfall in Skatrud’s coverage − thereby eliminating any basis for the Barbees to seek “underinsurance” coverage under their own policies.

In June 2005, the district court ruled that Larson was  30 percent liable for the Barbees’ injuries, and that Skatrud was liable for 70 percent.  In December 2005, the court set the dollar amount of damages the Barbees were entitled to recover from each of the defendants. The $75,000 limit of liability coverage available under Skatrud’s policy was less than the amount awarded against her. Skatrud’s insurer paid the full amount of her liability coverage to the plaintiffs on a pro-rata basis and was  dismissed from the case. Because Larson’s liability was less than 50 percent, the federal self-insurance plan paid the Barbees the full amount awarded against Larson, but did not make up the shortfall in their recovery from Skatrud.

The Barbees filed claims with Nationwide and Allstate seeking to recover under the underinsured motorist coverage in their own policies for the amount of the court-awarded damages that they were unable to collect from Skatrud’s estate.  The parties were unable to negotiate a settlement.

In January 2007, the Barbees filed suit in the Lorain County Court of Common Pleas seeking a declaratory judgment that they were entitled to recover under the underinsured motorist provisions in their policies with Nationwide and Allstate. The insurance companies moved for summary judgment dismissing the Barbees claims on the basis that they had not filed suit with the time limit set forth in the policies, which was three years after the date of the accident that caused their injuries. The Barbees filed cross motions for summary judgment. 

The trial court granted summary judgment in favor of the Barbees, holding that the three-years-after-the-accident deadline set forth in the policy was in conflict with two other policy provisions stating that 1) no underinsured motorist claim would be paid until after a policyholder had fully litigated all direct claims against the at-fault driver; and 2) no lawsuit could be brought against the insurer unless the claimant had first complied with all requirements of the policy. The trial court found that the three-year limitations period set forth in the policy was not enforceable against the Barbees because there was no “underinsured” loss, and thus no cause of action for them to file a lawsuit against their own insurers, until December 2005, when the federal court awarded damages against Skatrud’s estate that were greater than the $75,000 limit of her liability insurance.

The insurance companies appealed.  On review, the 9th District Court of Appeals affirmed the trial court’s decision. Nationwide and Allstate sought and were granted Supreme Court review of the 9th District’s decision.

Attorneys for the insurance companies argue that the plain language of their policies informed the Barbees that they must file a lawsuit to seek underinsured motorist coverage within three years after the date of the accident. They assert that there is no conflict or ambiguity between that requirement and the separate policy provisions that state the insurer will not pay an uninsured motorist claim until all other sources of recovery have been exhausted, because one provision addresses when suit must be filed while the other addresses the separate issue of when benefits, if found to be payable, will be paid. They contend that nothing prevented the Barbees from filing suit against them prior to the completion of the federal court action, and having that action stayed pending the allocation of liability between Skatrud and Larson.  Because the Barbees failed to take that action, the insurers argue, they failed to comply with the deadline specified in their policies and are therefore contractually barred from pursuing the underinsurance claims at issue in this case.

Attorneys for the Barbees respond that in multi-defendant cases such as this one, the rule of law advocated by the insurance companies would force a policyholder to file suit against his insurer for underinsured motorist coverage at a time when there was no legal basis for such a claim − because there would be no way for an injured party to know which defendant was liable for what amount of damages, and therefore which, if any, of the defendants did not have insurance coverage sufficient to cover those damages. 

They urge the Court to affirm the holdings of the trial court and the 9th District that an insurance policy  limitations period for seeking underinsured motorist coverage is ambiguous and unenforceable when it conflicts with a separate policy provision requiring exhaustion of all other sources of recovery before underinsured coverage can be sought, and when enforcement of the policy deadline would require the policyholder to file a lawsuit before he or she had any current justiciable claim against the insurance company, but merely the possibility of a claim based on events that may or may not happen in the future.

Contacts
Joyce V. Kimble, 330.253.8877, for Nationwide Mutual Insurance Company.

Henry W. Chamberlain, 216.575.9000, for Matthew Barbee and other Barbee family members.

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Attorney Discipline

Medina County Bar Association v. John Brooks Cameron, Case no. 2010-2173

The Board of Commissioners on Grievances & Discipline has recommended that the license of Medina attorney John B. Cameron be suspended for six months for professional misconduct in his handling of a civil lawsuit filed against him by an expert witness that Cameron had agreed to pay for consulting services.

The board found that in March 2007 Cameron entered into a written contract with Michael Wright and his company, Safety Through Engineering (STE), to provide expert witness services in a slip-and-fall case in which Cameron represented the plaintiff. Shortly after receiving an invoice from STE for $7,008 in early April 2007, Cameron dismissed his client’s complaint but failed to pay the consultant’s bill. He subsequently entered into an agreement with STE to pay off the invoice in monthly installments of $500, but failed to make any of the promised payments for more than a year.

In June 2008 STE retained attorney Adam Webber, who filed suit against Cameron to collect the unpaid invoice. When Cameron failed to file an answer to the complaint, Webber entered a motion for default judgment in favor of STE.  On the day before the hearing on the default motion, and despite knowing that STE had retained Webber as its attorney, Cameron made a direct phone call to STE president Wright. During that phone conversation, Cameron offered to enter into a new agreement to pay off the invoice in installments.

Later that day, Cameron had his attorney file a motion in the trial court stating that Cameron and STE had settled the dispute, but in case the complaint was not dismissed immediately by STE, asking for a continuance of the default hearing pending execution of the purported settlement agreement. The court granted the requested continuance. STE subsequently advised the judge that Wright had not agreed to Cameron’s proposal to pay the debt in installments and intended to proceed with the default proceedings unless Cameron made immediate payment of the full amount owed.

In a subsequent affidavit filed with the court six weeks after his phone call to Wright, Cameron repeated his earlier representation that the dispute had been settled and that Wright had agreed to dismiss his complaint in exchange for installment payments.  A grievance was subsequently filed with the Medina County Bar Association, resulting in a hearing before the disciplinary board.

In its report to the Supreme Court, the board concluded that Cameron’s conduct violated both the state disciplinary rule that requires an attorney to communicate with an adverse party who is represented by legal counsel only through that party’s lawyer; and the rule that prohibits an attorney from knowingly making a false statement of material fact or law to a legal tribunal.

Cameron has filed objections to the disciplinary board’s findings and recommended sanction. He asserts that he first attempted to reach Webber by phone on the day before the default hearing but was unable to do so, and that his purpose in contacting Wright directly was to not to negotiate a settlement but rather to discuss STE’s continuation as his client’s expert witness in the slip-and-fall case, which had recently been refiled. He also asserts that both the motion he filed with the court on the day before the default hearing  and his subsequent affidavit accurately stated his understanding of his telephone conversation with Wright. He argues that the board’s conclusion that those statements were knowingly false or misleading is not supported by the evidence, and urges the Court to dismiss the complaint against him or impose a less severe sanction than an actual six month suspension.

In response to Cameron’s objections, the Medina County Bar Association urges the Court to affirm the conclusions of law and the sanction recommended by the disciplinary board after it reviewed all of the evidence and evaluated the credibility of Cameron and the other witnesses. Bar counsel asserts that Cameron produced no evidence except his own testimony to support his claims that he attempted to reach Webber before contacting Wright directly, that his call to Wright was in regard to litigation of the previously dismissed slip and fall case, or that his improper conversation with Wright resulted in a settlement agreement between the parties. Counsel also points out that Cameron repeated his inaccurate claim that the dispute had been settled in a sworn affidavit filed with the trial court six weeks after he was specifically advised by Webber that Wright had not agreed to the settlement terms Cameron had proposed.

Contacts
John Porter, 330.225.7646, for the Medina County Bar Association.

D. Cheryl Atwell, 330.434.6002, for John B. Cameron.

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Attorney Discipline

Disciplinary Counsel v. Doreen Cantrell, Case no. 2011-0281

The Board of Commissioners on Grievances & Discipline has recommended that Willoughby attorney Doreen Cantrell be permanently disbarred for violations of state attorney discipline rules arising from her convictions on felony counts of possession of cocaine and grand theft.  The theft counts were based on Cantrell’s falsification of official documents in order to illegally obtain Section 8 public housing benefits.

In recommending that Cantrell’s law license be permanently revoked, the board noted the aggravating factors that she is already serving an indefinite suspension imposed in May 2010 for prior acts of misconduct, acted in this case with a dishonest or selfish motive, and failed to appear for the board’s hearing of the charges against her.

Cantrell has filed objections to the recommended sanction of disbarment. She asks the Court to consider medical documentation submitted along with her objections indicating that she suffers from mental health and chemical dependency issues that contributed to her rule violations and also to consider that she has made good faith efforts to make restitution for financial losses to others caused by her misconduct.

The Office of Disciplinary Counsel, which prosecuted the charges against Cantrell before the board, urges the Court not to give weight to the medical evidence she has submitted for the first time in her objections to the board’s report. They argue that any such evidence could and should have been submitted before Cantrell’s hearing so that it could be evaluated by the board and subject to review and cross examination by opposing counsel. They also assert that the medical documents submitted by Cantrell do not meet the Court’s established standards for evidence that may be considered in mitigation of guilt or punishment in an attorney discipline case.

Contacts
Jonathan E. Coughlan, 614.461.0256, for the Office of Disciplinary Counsel.

Doreen Cantrell, pro se, no current contact information available.

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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.

Parties interested in receiving additional information are encouraged to review the case file available in the Supreme Court Clerk's Office (614.387.9530), or to contact counsel of record.