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Tuesday, Dec. 16, 2008
HealthSouth Corporation v. William W. Wilkins [Richard A. Levin], Tax Commissioner of Ohio, Case no. 2007-2281
State Board of Tax Appeals
State of Ohio v. Sonny Hatfield, Case no. 2008-0045
11th District Court of Appeals (Ashtabula County)
Olympic Holding Company, L.L.C., et al. v. ACE Limited et al., Case no. 2008-0200
10th District Court of Appeals (Franklin County)
Ricky M. Torchik v. Jeffrey M. J. Boyce et al., Case no. 2008-0534
4th District Court of Appeals (Ross County)
Disciplinary Counsel v. Kimberly Jo Kellogg-Martin, Case no. 2008-1771
Logan County
May Company Obtain Tax Refund Based on Prior Overstatement of Taxable Assets In Fraud Scheme?
HealthSouth Corporation v. William W. Wilkins [Richard A. Levin], Tax Commissioner of Ohio, Case no. 2007-2281
State Board of Tax Appeals
ISSUE: Is a company eligible for a refund of back-year Ohio business property taxes based on a claim that prior management intentionally overstated the actual value of property on the company’s tax return as part of an accounting fraud scheme to disguise the company’s true financial condition?
BACKGROUND: In this case, the state tax commissioner denied a requested refund of $236,000 in Ohio business property taxes paid by the HealthSouth Corporation for the 2002 tax year. HealthSouth appealed the commissioner’s ruling to the State Board of Tax Appeals (BTA), which overruled the commissioner and granted the refund. The tax commissioner has exercised his right to appeal the BTA’s ruling to the Supreme Court.
Attorneys for the tax commissioner argue that the BTA’s ruling ignores that fact that, in its refund application and appeal to the BTA, HealthSouth admitted that the overpayment of 2002 taxes for which it was seeking a refund was not the result of an accidental error or mathematical mistake in stating the value of the company’s assets. Rather, it was the result of a deliberate overstatement of assets that was part of an accounting fraud scheme designed to mislead investors and government regulators about the company’s true financial condition.
They note that both the Alabama and Connecticut Supreme Courts have denied similar property tax refunds that HealthSouth sought in those states, and assert that no court in any jurisdiction has ever held that a taxpayer is entitled to a refund based on an intentional fraudulent filing. They urge the Court to adopt as a rule of law in Ohio that a taxpayer is legally estopped (barred) from claiming a tax refund when the overpayment underlying the refund request was a result of the taxpayer’s own deliberate fraudulent action.
Attorneys for HealthSouth respond that the tax commissioner’s determination denying a refund did not raise the issue of estoppel by fraud, but instead stated only that the evidence HealthSouth had submitted to the commissioner was legally insufficient to support a refund. They argue that the BTA ruling reversing the commissioner properly addressed only the sufficiency of the evidence. After determining that the records produced by HealthSouth had credibly established that its 2002 tax return included “fictional assets” that did not actually exist, they contend, the BTA correctly ordered a refund based on its finding that Ohio’s tax statutes do not impose tax liability on non-existent assets.
Contacts
Barton A. Hubbard, 614.466.5967, for the State Tax Commissioner.
Nicholas A. Ray, 614.442.8885, for HealthSouth Corporation.
Is Court’s Admission of Evidence About Defendant’s Past License Suspensions Reversible Error?
State of Ohio v. Sonny Hatfield, Case no. 2008-0045
11th District Court of Appeals (Ashtabula County)
ISSUES:
- In a jury trial on a charge of aggravated vehicular homicide, does the admission of evidence of the defendant’s multiple past driver license suspensions, despite the defendant’s offer to stipulate that he was under a current suspension at the time of the crash, constitute reversible error that requires a new trial?
- When blood-test evidence is introduced to prove that a defendant acted “recklessly” (rather than to prove that he was driving while intoxicated), is the state required to offer supporting expert testimony to establish that the act of driving would constitute reckless conduct by a person with the residual level of cocaine disclosed by the defendant’s blood test?
BACKGROUND: Sonny Hatfield of Ashtabula was responsible for a two-vehicle traffic accident in which the other driver was killed. Hatfield admitted to police that he had consumed alcohol, marijuana and cocaine at a party from 11 to 17 hours before the crash. Blood tests administered several hours after the crash showed that Hatfield had a blood alcohol level of zero and residual traces of metabolized cocaine in his blood system.
He was subsequently charged with both vehicular homicide and aggravated vehicular homicide, with the latter charge increased from a third-degree to a second-degree felony based on the specification that Hatfield was driving on a suspended license at the time of the crash. At trial, Hatfield’s attorneys offered to stipulate (admit) the fact that his license was under a current suspension at the time of the crash, but asked the trial court to bar the state from introducing into evidence Hatfield’s past driving record, which showed a history of six prior license suspensions. The trial court denied the motion, and the state introduced evidence of Hatfield’s suspension history over his objection. The state also introduced testimony informing the jury that Hatfield had admitted using alcohol and drugs the night before the crash, and reporting that his post-crash blood test had been positive for cocaine.
The jury found Hatfield guilty on both counts. The trial court sentenced him to 18 months in prison on the vehicular homicide count and to eight years on the aggravated vehicular homicide count, with the terms to be served concurrently. Hatfield appealed his convictions and sentence, asserting multiple claims of error by the trial court. On review, the 11th District Court of Appeals held that the trial court had erred in allowing the state to introduce evidence of Hatfield’s prior license suspensions because those suspensions were irrelevant to whether or not he was acting recklessly at the time of the current crash. The appeals court ruled that allowing the jury to be informed about his multiple past suspensions was unfairly prejudicial and required that he receive a new trial because that evidence was likely to dispose jurors to find Hatfield guilty on the current charges based on his prior bad acts rather than on the relevant evidence introduced at trial.
The court of appeals also ruled that, while evidence that Hatfield had used alcohol and cocaine a number of hours before the crash was relevant to determining whether he had acted recklessly, the state had not met its burden of proving recklessness beyond a reasonable doubt because it failed to introduce supporting expert testimony to establish that the amount of cocaine in his blood at the time of the crash was likely to have affected his driving ability.
The state sought and was granted Supreme Court review of the 11th District’s rulings. Attorneys for the state argue that, even if admission of Hatfield’s prior driving record into evidence was improper, the court of appeals erred in ruling that mistake required a new trial without first conducting “harmless error” analysis to determine whether the state had introduced other admissible evidence sufficient to support Hatfield’s convictions. They also dispute the 11th District’s holding that the test results showing metabolized cocaine in Hatfield’s blood were not sufficient to prove that he was acting recklessly by driving a car. They point out that evidence was presented to establish that police technicians who conducted the blood test followed approved procedures, and assert that additional expert testimony about Hatfield’s actual condition of the time of the accident was not necessary because he was not charged under the section of the vehicular homicide law applicable to crimes committed while a driver is “under the influence” of alcohol or drugs.
Attorneys for Hatfield respond that the court of appeals correctly followed the U.S. Supreme Court’s 1997 holding in Old Chief v. U.S. that evidence disclosing a defendant’s prior bad acts is unfairly prejudicial and grounds for reversal when that evidence is presented to prove the defendant’s legal status if the defendant has offered to stipulate to his legal status. In this case, they say, the only relevant fact the state needed to prove regarding Hatfield’s driving record was that he was under suspension at the time of the crash. Because Hatfield offered to stipulate to that fact, they contend, Old Chief required the trial judge to grant his motion to bar the state from presenting irrelevant information about his other, unrelated suspensions to the jury. Having determined that the improperly admitted evidence was likely to have prejudiced jurors, they argue, the court of appeals was not required to conduct harmless error analysis before ordering a new trial.
Contacts
Shelly M. Pratt, 440.576.3662, for the state and Ashtabula County prosecutor’s office.
Joseph A. Humpolick, 440.998.2628, for Sonny Hatfield.
Does ‘Statute of Frauds’ Bar Lawsuit Over Abandoned Business Deal In Which Contract Was Not Signed?
Olympic Holding Company, L.L.C., et al. v. ACE Limited et al., Case no. 2008-0200
10th District Court of Appeals (Franklin County)
ISSUE: Under Ohio’s “statute of frauds,” R.C. 1335.05, no party may bring a breach of contract lawsuit against another party for allegedly violating an agreement that will not be completed within one year “unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith ...”
This case involves a complex business arrangement between a group of three Ohio-based title companies collectively known as Olympic Holding Company LLC and a New York-based reinsurance company, ACE Capital Title Reinsurance Co. Over a period of months, the parties negotiated terms of a business venture in which the Olympic companies would jointly acquire ownership of a separate company, the Olympic Title Insurance Company (OTIC), and OTIC would then immediately enter into an advantageous reinsurance contract with ACE that would allow the company to offer title insurance to purchasers of residential and commercial property at substantially below-market premium rates. The agreement included plans for expansion into other states and an aggressive multi-state marketing effort financed by ACE and its parent companies.
Based on ACE’s assurance that it would sign written agreements that had already been drafted setting forth the terms of the joint venture as soon as the OTIC acquisition was complete, the Olympic Holding companies went forward with the purchase of OTIC. When they informed ACE that the acquisition was complete and requested signed copies of the joint venture agreement, ACE advised them that its parent companies had changed their minds and were not willing to commit the resources to underwrite the venture. When the Olympic companies demanded signed copies of the written agreements, ACE refused and informed the Olympic companies that it was abandoning the joint venture.
The Olympic companies sued ACE and its parent companies in Franklin County Common Pleas Court asserting claims for breach of contract, breach of fiduciary duty, fraud, and promissory estoppel. ACE filed motions for summary judgment on all claims, arguing that because it had not signed a written agreement with the plaintiffs, the plaintiffs were barred by the statute of frauds from bringing any legal claims against ACE based on its failure to comply with alleged agreements between the parties. The trial court granted summary judgment dismissing the plaintiffs’ breach of contract and breach of fiduciary duty claims based on the statute of frauds.
The plaintiffs appealed the summary judgment ruling. The 10th District Court of Appeals reversed the trial court and reinstated Olympic’s dismissed claims. In its opinion, the 10th District held that under prior Ohio court decisions, a defendant is barred from raising the statute of frauds as a defense against a breach of contract claim if the evidence shows that the plaintiffs relied upon the defendant’s false declaration that it had already signed a written agreement, or relied on the defendant’s false promise to sign a written agreement.
Attorneys for ACE now ask the Supreme Court to reverse the 10th District’s ruling and reinstate the trial court’s summary judgment in their favor. They argue that the plain language of the statute of frauds bars the Olympic plaintiffs from pursuing breach of contract claims against ACE in the absence of a signed document setting forth the agreement between the parties in writing. They assert that Ohio courts have issued conflicting rulings regarding when a plaintiff may assert claims based on an alleged spoken agreement that was not reduced to writing or signed by the defendant, and urge the Court to reestablish certainty and predictability to Ohio contract law by strictly applying the statute of frauds as it is written.
Attorneys for the Olympic plaintiffs respond that there is no conflict between Ohio court decisions on the issue presented in this case, which is whether a party is barred from using the statue of frauds as a defense when that party has perpetrated a fraud precisely by declaring that it has signed or will sign a written contract, but then refusing to do so after another party has acted in reliance on that promise. They assert that all 12 Ohio Court of Appeals districts, 21 other states that have reviewed the issue and the U.S. Sixth Circuit Court of Appeals have ruled that a defendant that makes a false promise to sign a written agreement that would invoke the statute of frauds is equitably estopped (barred) from using the absence of that signed agreement as a defense against a breach of contract claim.
Contacts
Kathleen M. Trafford, 614.227.1915, for ACE Title Reinsurance Company.
Michael H. Carpenter, 614.365.4100, for Olympic Holding Company LLC.
Does ‘Fireman’s Rule’ Extend Owner’s Immunity to Contractor for Negligent Construction?
Ricky M. Torchik v. Jeffrey M. J. Boyce et al., Case no. 2008-0534
4th District Court of Appeals (Ross County)
ISSUE: Does a common law rule that provides limited immunity to the owner or occupant of a property from civil liability for injuries suffered by a policeman or fireman who enters the property in the course of his official duties extend to immunize a contractor whose alleged negligent construction on the property results in injury to a policeman or fireman?
BACKGROUND: In a 1995 decision, Hack v. Gillespie, the Supreme Court of Ohio clarified its ruling in an earlier case, Scheurer v. Trustees of Open Bible Church, holding that in order for a homeowner or occupier of private property to be held liable to a firefighter or police officer who is injured on the owner’s property in the performance of official duties, one of the following conditions must be met: (1) the injury was caused by the owner or occupier’s willful or wanton misconduct or affirmative act of negligence; (2) the injury was the result of a hidden trap on the premises; (3) the injury was caused by the owner or occupier’s violation of a duty imposed by a statute or ordinance enacted for the benefit of firefighters or police officers; or (4) the owner or occupier was aware of the presence of the firefighter or police officer on the premises but failed to warn him of a known hidden danger. The guidelines set forth in Scheurer and Hack have come to be referred to collectively as the “fireman’s rule.”
In this case Ross County sheriff’s deputy Ricky Torchik was dispatched to the home of Jeffrey Boyce to investigate a burglar alarm that had been activated there. Torchik climbed the stairs on one side of a deck at the rear of the home to check on a door, then attempted to descend via a different set of stairs on the other side of the deck. The stairway broke loose from the deck and collapsed under Torchik, who suffered leg injuries as a result of the fall.
Torchik filed suit in the Ross County Court of Common Pleas seeking to recover damages from both Boyce and Daniel Heskett, the contractor who had constructed the stairway that collapsed. Boyce and Heskett both filed motions for summary judgment dismissing Torchik’s claims. The trial court found that Torchik’s complaint raised a material question of fact regarding negligent construction of the stairway, but granted summary judgment in favor of both defendants based on its findings that (1) both Boyce’s and Heskett’s potential liability to Torchik were subject to the fireman’s rule set forth in Hack v. Gillespie, and (2) the facts surrounding Torchik’s injuries did not fall within any of the fireman’s rule criteria imposing liability, and therefore neither defendant could be held liable
Torchik initially appealed the trial court’s rulings involving both defendants to the 4th District Court of Appeals. He subsequently dropped his claim with regard to Boyce, and appealed only the summary judgment dismissing his claims against Heskett. The court of appeals affirmed the trial court’s decision. Torchik sought and was granted Supreme Court review of the 4th District’s ruling.
Attorneys for Torchik argue that the trial and appellate courts erred by extending the fireman’s rule to grant immunity to Heskett. They note that the public policy justification for adoption of the fireman’s rule was that a property owner seldom has advance notice of the sudden arrival of firefighters or police, and should not be held liable for innocent failure to protect or warn them about a hazard on the premises. They point out that, unlike Boyce and the defendant in Hack, Heskett was not the “owner or occupier” of the property where Torchik was injured, and Torchik’s injuries were unrelated to his status as a deputy sheriff, but were rather the direct result of a contractor’s failed duty to construct a stairway so that it would safely accommodate normal and foreseeable pedestrian traffic. Under these circumstances, they contend, there is no public policy justification for extending the fireman’s rule to shield Heskett from liability or to prevent Torchik from asserting the same legal claims against him, including compensatory damages beyond his medical expenses and lost wages, that could be asserted by any guest, neighbor or other person who was injured by the collapse of Boyce’s stairway.
Attorneys for Heskett respond that the lower courts properly dismissed Torchik’s claims against both defendants. They argue that as a contractor hired by Boyce, his construction work was performed as an “agent” of the property owner, and that fact extends the protection of the fireman’s rule to any claims Torchik might assert against Heskett for injuries suffered on Boyce’s property in the course of his official duties. They assert that it would be unfair and illogical to immunize a property owner from liability for injuries to a public safety officer summoned to his property, but deny that same immunity to an agent or contractor of the owner who had no knowledge of or role in the incident that summoned police to the property and triggered the officer’s injuries.
Contacts
Frank E. Todaro, 614,242.4333, for Ricky Torchik.
John C. Nemeth, 614.443.4866, for Daniel Heskett.
Attorney Discipline
Disciplinary Counsel v. Kimberly Jo Kellogg-Martin, Case no. 2008-1771
Logan County
The Board of Commissioners on Grievances & Discipline has made findings that former Logan County assistant prosecutor Kimberly Jo Kellogg-Martin violated three state attorney discipline rules in a 2002 rape case by failing to disclose to the defendant’s attorney evidence in her possession that was favorable to the defendant. The disciplinary board has recommended that Kellogg-Martin’s law license be suspended for one year, with six months of that term stayed, as the appropriate sanction for her rule violations.
Attorneys for Kellogg-Martin have entered objections to the board’s findings and recommended sanction. They argue that Ohio’s rules of criminal procedure did not require Kellogg-Martin to disclose to defense counsel preliminary reports by a social worker and a sheriff’s deputy that the victim initially said she was assaulted at a time when she was 13 years old, because independent investigations and corrected statements by the victim and her mother had later clearly established that the assaults actually took place when the victim was under the age of 13, as charged in the defendant’s indictment.
They assert that under Rule 16 of the Ohio Rules of Criminal Procedure, the undisclosed reports would only have been subject to disclosure for purposes of possible impeachment if the victim had testified at trial that the assaults took place at a time when she was under 13. Since the case never went to trial but was resolved through a plea bargain to a reduced charge, they say, Kellogg-Martin was never under an ethical obligation to disclose the reports to defense counsel because she was not legally obligated to disclose them under the rules of discovery applicable to the case.
The Office of Disciplinary Counsel, which prosecuted the charges against Kellogg-Martin before the board, has filed a response to her objections. They ask the Court to affirm the disciplinary board’s holding that Disciplinary Rule 7-103(B) is not co-extensive with the rules of criminal procedure, and does not limit a prosecutor’s obligation to disclose evidence favorable to a defendant only to evidence that the prosecutor has determined to be “credible” or “reliable.” They say the ethical rule imposes a more stringent duty on prosecutors to disclose any evidence “that tends to negate the guilt of the accused, mitigate the degree of the offense, or reduce the punishment.” In this case, they say, prior to entering his guilty plea the defendant specifically requested transcripts of “any and all statements made by the victim” to counselors, law enforcement officers and others to determine if there were conflicts between those statements. By failing to disclose the victim’s initial statements, which set the dates of the alleged assaults at a different time than her later statements, they contend, Kellogg-Martin violated her ethical duty and should be sanctioned accordingly.
The Ohio Prosecuting Attorneys Association and Butler County Prosecutor’s Office have entered separate amicus curiae (friend of the court) briefs urging the Court to overrule the disciplinary board and find that Kellogg-Martin’s conduct was not in violation of the Code of Professional Responsibility. They point to a long line of case law defining the conditions under which prosecutors are and are not required to provide various kinds of evidence to defense counsel in response to pretrial discovery requests, headed by the U.S. Supreme Court’s 1963 holding in Brady v. Maryland that the state must disclose information helpful to the defense only if it is “material either to guilt or to punishment.”
In this case, they contend, Kellogg-Martin had established through other evidence that the victim was clearly under the age of 13 on the dates of her sexual contact with the defendant, and thus the victim’s mistaken early statements to the contrary were not material to his guilt or punishment, and therefore not subject to disclosure. They argue that if the board’s recommendation of a suspension is adopted by the Court, Ohio prosecutors will be faced with a situation in which they cannot follow the well established Brady guidelines for discovery in criminal cases based on the threat that a defendant may pursue disciplinary charges against them for withholding “exculpatory” evidence even though they were not legally obliged to disclose it.
Contacts
Jonathan Coughlan, 614.461.0256, for the Office of Disciplinary Counsel.
Christopher J. Weber, 614.462.5400, for Kimberly Kellogg-Martin.
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.