Oral Argument Previews

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Tuesday, Oct. 4, 2011

Paul Jones et al. v. Centex Homes, Case no. 2010-1826
10th District Court of Appeals (Franklin County)

John T. Flynn et al. v. Fairview Village Retirement etc. et al., Case no. 2010-1881
8th District Court of Appeals (Cuyahoga County)

State of Ohio v. Daniel Ginley, Case no. 2010-1925
8th District Court of Appeals (Cuyahoga County)

Artisan Mechanical, Inc. v. James Michael Beiser et al., Case no. 2011-0052
12th District Court of Appeals (Butler County)

Disciplinary Counsel v. Joseph G. Stafford, Case no. 2011-0408
Cuyahoga County


Can Builder's Legal Duty to Construct Home In 'Workmanlike Manner' Be Waived in Sale Contract?

Paul Jones et al. v. Centex Homes, Case no. 2010-1826
10th District Court of Appeals (Franklin County)

ISSUE:  Are provisions in a new home purchase contract enforceable against the buyer if they require as a condition of the sale that the buyer must waive the builder’s common law duty to construct the home “in a workmanlike manner,” and immunize the builder from liability for any defect in materials or workmanship that was not specified in a separate limited warranty document that was not seen by the buyer before signing the contract?

BACKGROUND: Paul Jones and Latosha Sanders and Eric and Ginger Estep purchased new houses built by Centex Homes in Franklin County. Both couples later found that steel joists used in the construction had become magnetized, resulting in magnetic fields that distorted cathode ray TV pictures, interfered with the use of cordless telephones and corrupted computer hard drives inside their new homes.

When the buyers contacted Centex to seek remediation of the problem, Centex responded that their claims were not covered under the limited warranty that had been accepted  by the buyers when they signed their sale contracts. The contract language required as a condition of the sale that the buyers waive “all expressed or implied warranties” and “all other claims” for post-sale repairs or modifications to the property except those specifically set forth in a separate limited warranty document that was available for inspection by the buyers at a separate location, but was not provided to them prior to or at the time they signed their sale contracts.

The buyers filed suit against Centex in the Franklin County Court of Common Pleas asserting claims for breach of contract, breach of express warranty, breach of implied warranty and failure to perform in a workmanlike manner.  Centex filed a motion for summary judgment dismissing all of the buyers’ claims based on the provisions of the purchase contracts. The trial court entered summary judgment in favor of Centex, holding that the contract the buyers  had signed barred their implied and express warranty claims, and that they had waived Centex’s common law duty to perform in a workmanlike manner.  Because the limited warranty referenced in the purchase contract did not cover magnetized joists, the court held that the buyers were without a remedy against Centex for that defect.

On review, the 10th District Court of Appeals affirmed the ruling of the trial court. The court of appeals held that the implied duty to construct a new home in a workmanlike manner can be waived under Ohio law if the waiver is clear, unambiguous and conspicuous. While it found that the sales contracts signed by the buyers did not meet the latter requirements, the 10th District held that when the contract was read in combination with the limited warranty document that was available to the buyers but which they had not reviewed, those documents did clearly and unambiguously waive “all claims” other than those covered by the limited warranty, including the builder’s common law duty to perform in a workmanlike manner.

The buyers sought and were granted Supreme Court review of the 10th District’s decision.

Attorneys for the home buyers argue that prior decisions of this Court, including Mitchem v. Johnson (1966) and Velotta v. Landscaping Inc. (1982) have held that lawsuits alleging that a builder has violated its duty to construct a home “in a workmanlike manner using ordinary care” are not claims subject to contract law principles, but are rather tort causes of action “based on a duty imposed by law.” While there appear to be no prior Ohio court decisions addressing the specific question of whether a builder’s legal duty of workmanlike construction can be waived through terms of a contract, the buyers argue that waivers like the ones in the Centex contract are contrary to the public policy of the state to protect unsophisticated buyers from being induced to forfeit common law rights through boilerplate language in a purchase contract that was written by the seller and that the buyer has no ability to negotiate.

Even if the Court holds that it is possible for a buyer to contractually waive a builder’s duty to construct a home in a workmanlike manner, the plaintiffs assert that in order to be valid a waiver must be “a voluntary relinquishment of a known right.” In this case, they argue, the contracts were drafted by the builder and demanded that the buyers agree as a mandatory condition of the sale to waive “all claims” other than those included in a document that was  not provided to them. They also note that the Centex contract did not explain or even mention the builder’s common law duty of workmanlike construction, or the potential consequences to buyers of giving up their legal right to enforce that duty.  Thus, they contend that the home buyers in this case did not “voluntarily” surrender a “known” right, and therefore their waivers are not valid.

Attorneys for Centex respond that Ohio courts have long recognized the right of parties to a contract to negotiate the warranty provisions that will apply if the purchaser or consumer of a product later discovers a defect in that product.  In this case, they assert, the contract signed by the home buyers clearly and unambiguously waived any expressed or implied warranty agreement between themselves and Centex other than the limited warranty agreement that Centex made available but which the buyers failed to review before signing the contract. They urge the Court to affirm the rulings of the lower courts that when the home buyers accepted the limited warranty offered by Centex, they waived any other claims based on alleged defects in the materials or workmanship of their homes.

NOTE: The National Association of Home Builders and Ohio Home Builders Association have filed amicus curiae (friend of the court) briefs in support of the position of Centex Homes.

Contacts
Steve J. Edwards, 614.875.6661, for Paul Jones and other home buyers.

Michael G. Long, 614.464.6297, for Centex Homes.

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Is Denial of Motion to Bifurcate Trial of Suit Seeking Both Compensatory, Punitive Damages a 'Final Order'?

When Motion Refers to 2005 Tort Reform Provision

John T. Flynn et al. v. Fairview Village Retirement etc. et al., Case no. 2010-1881
8th District Court of Appeals (Cuyahoga County)

ISSUE: When the plaintiff in a civil lawsuit seeks both compensatory and punitive damages from a defendant, and the defendant files a motion citing R.C. 2315.21(B) and asking the trial court to bifurcate the plaintiff’s claims, is the court’s denial of the motion to bifurcate without stating a reason a “final order” subject to immediate review by a court of appeals under R.C. 2505.02(B)(6) and/or R.C. 2505.02(B)(4)?

BACKGROUND: R.C. 2315.21(B), a statute amended in 2005 as part of “tort reform” legislation, requires Ohio trial courts to grant a  party’s motion for a bifurcated trial in all tort cases tried to a jury in which the  plaintiff seeks to recover both compensatory and punitive damages. In a bifurcated trial, the proceedings are divided into two distinct stages. During the first stage, only evidence and testimony regarding the actual injuries or economic losses claimed by the plaintiff may be presented, and the jury is limited to finding whether and to what extent the plaintiff is entitled to be compensated for those losses. In a second stage that commences only after compensatory damages have been determined, the parties present evidence and testimony regarding alleged wrongdoing by the defendant for which the plaintiff seeks additional damages that are designed to punish the wrongdoer rather than to compensate the plaintiff for his actual injuries.

In this case, John Flynn and Judy Gordon of Cleveland filed suit on behalf of the estate of their mother, Gladys Feran, against Saber Healthcare Group (SHG) and other defendants based on claims that Feran had suffered multiple falls while she was a resident in a nursing home operated by SHG as a result of negligence by the nursing home and its employees. The plaintiffs’ complaint set forth claims for both compensatory and punitive damages.

SHG filed a motion to bifurcate the case, citing R.C. 2315.21(B). The trial court denied the motion without stating a legal basis for that denial.  SHG attempted to appeal the denial of its motion to bifurcate to the 8th District Court of Appeals, but the court of appeals held that the trial court’s action did not fall under  any of the provisions of R.C. 2505.02, the state law that specifies the types of trial court rulings that are “final appealable orders” subject to immediate appellate review. SHG sought and was granted Supreme Court review of the 8th District’s refusal to hear its appeal.

Attorneys for SHG assert that the 8th District erred by failing to accept their appeal under R.C. 2505.02(B)(6), a provision included in S.B. 80 [the same tort reform bill that enacted R.C. 2315.21(B)] which specifically adds to the list of rulings that are “final orders” subject to immediate appeal any ruling by a trial court that determines the constitutionality of a provision of S.B. 80. While the trial court’s order denying SHG’s motion to bifurcate did not explicitly state that it was based on a finding that 2315.21(B) is unconstitutional, they argue that the only reasonable basis for the trial court not to comply with the clear mandate of 2315.21(B) that it must grant a motion for bifurcation was a determination that the statute was unconstitutional because it conflicts with the provision in Ohio Supreme Court’s Rule of Civil Procedure, Civ.R. 42(B), that gives trial courts discretion to either grant or deny motions to bifurcate any trial.

They point out that only a few weeks after refusing to consider this case, the 8th District held in Havel v. Villa St. Joseph that a trial court’s denial of a motion to bifurcate was a final appealable order under R.C. 2505.02(B)(6),  and proceeded to hear and decide that appeal.  They also argue that, even if the Court does not find the trial court’s order is a constitutional ruling appealable under R.C. 2505.02(B)(6), the ruling denying bifurcation in this case is final and appealable under another provision of the same statute, R.C. 2505.02(B)(4) which authorizes immediate appeal of any trial court order that denies a provisional remedy under circumstances in which the moving party would not have a meaningful remedy via an appeal after the underlying lawsuit is fully decided.

Attorneys for Flynn and Gordon respond that the motions by SHG that were denied by the trial court were not “motions for bifurcation” pursuant to R.C. 2315.21(B), because they asked the court to take actions that are beyond the requirements of the statute. They note that SHG’s motions: 1) asked the trial court to “bifurcate plaintiffs’ claims for compensatory and punitive damages” rather than merely bifurcating the trial of those claims by the same jury; and 2) asked the court to exclude from the hearing of the compensatory damage claims “any evidence that relates to the issue of punitive damages,” whereas the statute precludes from the first stage of a trial only “evidence that relates solely to the issue of whether plaintiff is entitled to recover punitive damages.”

Because the motions denied by the trial court went beyond the scope of relief mandated under R.C. 2315.21(B), the plaintiffs assert, they were not motions the court was required to grant under that statute, and nothing in the trial court’s decision denying those motions determined the constitutionality of the statute or any other provision of S.B. 80.  Accordingly, they urge the Court to affirm the 8th District’s decision that the trial court order denying the defendants’ motions was not a “final” order under R.C. 2505.02(B)(6) or any other provision of law.

Contacts
Brant E. Poling, 216.456.8800, for Saber Healthcare Group LLC.

David H. Krause, 216.830.1000, for John T. Flynn and Estate of Gladys Feran.

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Is Proof of Threat by Defendant Required Before Court May Grant Motion to Call Recanting Victim as 'Court's Witness?'

In Domestic Violence Case Where Recanting Victim is Only Witness to Crime

State of Ohio v. Daniel Ginley, Case no. 2010-1925
8th District Court of Appeals (Cuyahoga County)

ISSUE: A provision of Ohio’s Rules of Evidence, Evid.R. 614(A), authorizes the state’s trial courts, on their own initiative or on the motion of a party, to call a person to testify as a “court’s witness” in a proceeding. Such a witness is called to testify and initially questioned by the court, rather than by either of the opposing parties in the case, and both sides then have the ability to cross-examine the witness and to introduce evidence calling into question the truthfulness or accuracy of the witness’ testimony − for example, by comparing the content of the witness’ statements in court to contrary statements the witness made about the same events at an earlier time. This case questions whether a trial court erred in refusing to call a domestic violence victim as a “court’s witness” after she recanted her earlier statements to police, leaving the state with no alternative way to prove the charges against her accused abuser.

The case involves the criminal prosecution of Daniel Ginley of Westlake for multiple alleged acts of domestic violence against his live-in girlfriend, Melissa Mathis. The charges were based on a complaint filed with police by Mathis after she was hospitalized in April 2010 for injuries she alleged were inflicted by Ginley. Mathis gave police a detailed account of the incident that led to her hospitalization, and also described five prior incidents dating back to December 2009 in which she said Ginley had beaten her, forcibly prevented her from leaving her home, and taken away her cell phone so that she could not call for help.

Based on Mathis’ complaint, the Cuyahoga County prosecutor obtained grand jury indictments against Ginley on six counts of domestic violence and single counts of kidnapping, felonious assault and disrupting public services.  Before Ginley’s trial, however, Mathis contacted the prosecutor through a private attorney and recanted her statements to the police, indicating that she had “made up” all of the alleged incidents and would testify to that effect if called as a witness at Ginley’s trial. Following her recantation, Mathis refused to meet or have any further contact or communication with the prosecutor’s office except through her attorney.

During pretrial proceedings in the case against Ginley, the prosecutor entered a motion asking the trial court to call Mathis as the court’s witness, which would allow prosecutors to cross-examine her with regard to conflicts between her prior statements to the police and her subsequent recantation. The trial court denied the motion, indicating in its journal entry that “the state has produced no evidence of threats from the defendant to the alleged victim or her family,” and that Mathis had not indicated she would be unavailable to appear and testify at trial.

The state sought leave of the 8th District Court of Appeals to immediately appeal the denial of its pretrial motion based on two different legal arguments: 1) that by refusing to call Mathis as a court’s witness the trial judge had effectively excluded evidence that was essential to the state’s case; and 2) that the trial court had denied the state’s motion as a result of imposing an improper condition for granting it:  i.e., by requiring the state to show that Mathis or her family members had been threatened by Ginley. The court of appeals denied the state leave to appeal the trial court’s action in an entry that included no opinion or analysis of the state’s second legal argument, but simply dismissed it as “moot.”

The state sought and was granted Supreme Court review of the 8th District’s action.

Attorneys for the state point out that it is common for the complaining witness in domestic violence cases to succumb to various types of pretrial pressure, control or manipulation by their abusers and “change their story” to minimize or wholly deny the criminal conduct they reported to police.  Because the victim is frequently the only first-hand witness in such cases, they assert, recantations such as Mathis’ in this case leave the court with no viable way to determine the truth of serious criminal charges except to call the recanting victim as a court’s witness under Evid.R. 614(A) and observe her responses to questioning by the court and cross-examination by the state and defense counsel about her prior conflicting statements.

In this case, they contend, the trial court’s refusal to call Mathis as a court’s witness was reversible error because it was based on the imposition of a requirement that state must first show that Mathis was threatened by the defendant – a requirement that they say is not imposed by any statute, rule, or prior court decision. The state also asserts that the court of appeals abused its discretion by refusing the state leave to appeal without citing any legal reason. They urge the Supreme Court to review the actions of the lower courts in this case in order to clarify for trial court judges across the state when it is proper to grant a motion to call a recanting domestic violence victim as a court’s witnesses under Evid.R.614(A). They also ask the Court to explicitly reject the trial court’s holding that in order to support such motions the state must show that the recanting witness was threatened by the defendant.

Attorneys for Ginley urge the Court to reconsider its decision to hear the state’s appeal in this case. They argue that the trial court ruling denying the state’s motion to call Mathis as a court’s witness was not a “final order” subject to immediate appeal, but was rather an interlocutory order that is not ripe for appellate review until after the court entered a final judgment in the criminal case against Ginley. If the Court does not dismiss the state’s appeal as improvidently allowed, they urge it to hold that the 8th District did not abuse its discretion in denying the state leave to appeal because the issue the state sought to appeal – the trial court’s denial of a pretrial motion to call Mathis as its own witness −  was supported by an opinion six pages long, from which the state has extracted a single sentence referring to the absence of threats by the defendant as if it were the sole basis for the court’s ruling.

Contacts
Matthew Meyer, 216.443.7800, for the state and Cuyahoga County prosecutor's office.

Susan J. Moran, 440.617.1528, for Daniel Ginley.

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When Settlement Agreement Disputed, Must Court Hold Hearing Before Either Enforcing or Refusing to Enforce?

Artisan Mechanical, Inc. v. James Michael Beiser et al., Case no. 2011-0052
12th District Court of Appeals (Butler County)

ISSUE:  When terms of a settlement agreement are disputed in a court action, or a court is asked to rule on whether a settlement agreement existed between the parties, must the court conduct an evidentiary hearing before entering judgment in the case regardless of whether its decision enforces or denies enforcement of the purported agreement?

BACKGROUND: This case arises from a lawsuit filed by a Butler County mechanical engineering firm, Artisan Mechanical Inc., and two of its former employees, James Beiser and Chris Lay, who  left the company and opened their own engineering business.

Artisan sued Beiser and Lay to restrict and remedy what Artisan claimed was unfair competition for the business of several of Artisan’s current or former clients. During pretrial proceedings, Artisan proposed a settlement agreement under which Beiser and Lay would agree not to initiate any bids for the business of two key Artisan clients, Fuji and Veritus Technology Group, during the upcoming  six months and in return Artisan would dismiss its suit and agree not to initiate bids to work on projects for Flavor Systems and Lyons Magnus, two companies that Beiser and Lay sought to acquire as clients, for the same six month period.

Attorneys for the parties exchanged several emails indicating general agreement on the settlement terms.  Artisan informed the court that the “case has settled” and dismissed its suit, but also suggested several non-substantive changes in a written draft of a settlement agreement that had been prepared by Beiser and Lay’s attorney. Beiser and Lay’s attorney emailed back that they agreed to the proposed changes, and urged Artisan to note its changes in the draft and send back a signed copy.  Artisan did not send the requested signed document.

Approximately two months after the last exchange of communications between the parties, Artisan learned that Beiser and Lay were performing work for Fuji. When Artisan inquired about that work, Beiser and Lay responded that because the parties had not signed a written document setting forth specific terms of a settlement to which both sides agreed, there was no settlement agreement and they had proceeded to seek and obtain new work from Fuji.

Artisan filed a new lawsuit, alleging among other claims that Beiser and Lay had entered into a binding oral settlement agreement and that their new contract with Fuji was a breach of that agreement.  Beiser and Lay moved for summary judgment dismissing the breach of contract claim on the basis that there was no enforceable agreement between the parties, and therefore they could not have breached any such agreement. The trial court granted summary judgment in favor of Beiser and Lay based on the parties’ written pleadings, without conducting a hearing. 

Artisan appealed the trial court’s action to the 12th District Court of Appeals, arguing that the trial court was required to conduct a hearing before granting summary judgment in the case. In a 2-1 decision, the 12th District rejected Artisan’s argument and affirmed the trial court’s summary judgment order. The 12th District subsequently certified that its decision was in conflict with rulings of the 6th and 10th District courts of appeals on the same legal issue.  The Supreme Court agreed to review the case to resolve the conflict among appellate districts.

Attorneys for Artisan argue that the case must be remanded to the trial court for further proceedings because the trial court and 12th District failed to follow the Supreme Court of Ohio’s 1997 holding in Rulli v. Fan Company that when a court considers a dispute over the existence or non-existence of a settlement agreement, the court is required to conduct an evidentiary hearing “prior to entering judgment.” In this case, they say, the trial court committed procedural error by entering summary judgment in favor of Beiser and Lay without first holding a hearing at which the parties could argue the merits of their respective positions.

Attorneys for Beiser and Lay respond that the 12th District considered and properly rejected the applicability of Rulli to this case.  They urge the Court to affirm the 12th District’s determination that Rulli requires a hearing to be held on the validity of a purported settlement agreement before a trial court orders that such an agreement be enforced.  They assert that nothing in Rulli imposes a similar hearing requirement when a trial court reviews a purported settlement and finds that there was no meeting of the minds between the disputants, and therefore there is no agreement to be enforced.

Contacts
Timothy G. Pepper, 937.228.2838, for Artisan Mechanical Inc.

Anthony G. Covatta, 513.621.8210, for James Beiser and Chris Lay.

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Attorney Discipline

Disciplinary Counsel v. Joseph G. Stafford, Case no. 2011-0408
Cuyahoga County

The Board of Commissioners on Grievances & Discipline has recommended that the license of Cleveland attorney Joseph G. Stafford be suspended for 12 months, with the full term of suspension stayed, for professional misconduct in his representation of clients in two different divorce cases.

The board found than in one case Stafford engaged in conduct involving deceit or misrepresentation when, after failing to file a timely challenge to a prenuptial agreement proffered by his client’s husband, Stafford induced the court to allow the filing of an “amended complaint” for the stated purpose of joining new parties but which also inserted new language disputing the prenuptial agreement without disclosing that fact to the court.

In a second case, the board found that Stafford recklesssly impugned the integrity of a judge by including in his client’s pleadings accusations that the judge had intentionally used his office to intimidate Stafford’s client and Stafford himself when those accusations were unsupported by the facts.

Stafford has filed objections to the board’s findings.  He argues that the board’s determinations that he violated disciplinary rules were not supported by clear and convincing evidence, and asks the Court to dismiss the complaint against him without any finding of misconduct.

The Office of Disciplinary Counsel, which prosecuted the complaint against Stafford before the board of commissioners, urges the Court to affirm the rule violations found by the board and, in light of Stafford’s dishonest motives and failure to acknowledge the wrongfulness of his actions, to impose an actual suspension of his law license for at least 12 months.

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

Lawrence A. Sutter III, 216.928.2200, for Joseph G. Stafford.

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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.