Recent Business Law Cases
See Enforceability of Contractual Attorneys' Fee Provision
Piercing the Corporate Veil
In Winegar v. Creekside Crossing Home Sales,
2008-Ohio-5835, the Fifth District court of appeals reversed a jury verdict finding a corporate
officer personally liable for poor construction workmanship. The plaintiff's argued that the officer had failed to identify the corporate
capacity in which he was acting. The court explained the law as follows:
Generally, a corporate officer will not be held
individually liable on any contracts, either written or oral, which are entered into on behalf of the corporation. O'Neill v.
United States (D.C.Ohio 1968), 281 F.Supp. 359; Centennial Ins. Co. of New York v. Vic Tanny Internatl. of Toledo, Inc. (1975),
46 Ohio App.2d 137. Two limited exceptions, however, remove a corporate officer from the protection of the corporate fiction
and will allow a finding of individual liability: 1) piercing the "corporate veil," Bucyrus-Erie Co. v. Gen. Prod. (C.A.6, 1981),
643 F.2d 413; and 2) the failure of a corporate officer to identify the corporate capacity in which he is dealing with regard to
a specific business transaction, Spicer v. James (1985), 21 Ohio App.3d 222; Boutell v. Patriarch Computers and Copiers (Dec. 2, 1993),
Cuyahoga App. No. 64149, unreported. In this case Mr. S.D. Bush signed the contract for "Creekside Crossing Home Sales"
as dealer under the written purchase order. The court concluded that S.D. Bush sufficiently identified himself as acting in a
representative capacity. [Note: the court clearly stated the law, but how the court applied the law to the facts is not clear.
The opinion does not state that "Creekside Crossing Homes Sales" is a corporation, and in fact it is not findable as a corporation or
limited liability company by search of the Secretary of State's web site. ]
In Dombroski v. WellPoint,
Inc., 119 Ohio St.3d 506, 2008-Ohio-4827, the Ohio Supreme Court modified the so-called Belvedere test for
when it is appropriate to pierce the corporate veil and impose liabilty on shareholders or officers set forth in
Belvedere Condominium Unit Owners' Assn. v. R.E. Roark Cos., Inc. (1993), 67 Ohio St.3d 274,
617 N.E.2d 1075. Dombrosoki sued the parent insurance company for bad faith in denying certain treatment the insurer
deemed "investigational." Although the court refused to allow the corporate veil to be pierced in this case, the
court modified the second prong of the Belvedere test to make is somewhat easier to pierce corporate veils. The
Belvedere test now is: The corporate form may be disregarded and individual shareholders held liable for wrongs committed
by the corporation when (1) control over the corporation by those to be held liable was so complete that the
corporation has no separate mind, will, or existence of its own, (2) control over the corporation in such a manner as to
commit fraud, an illegal act, or a similarly unlawful act against the person seeking to
disregard the corporate entity, and (3) injury or unjust loss resulted to the plaintiff from such control and wrong."
All three prongs of the test must be met for piercing to occur.
See also, our discussion of Premier Therapy LLC v. Childs, 2016-Ohio-7934.
Letter of Intent / Commitment
However, in Espyville of Pennsylvania
v. Ron-Bon, Inc., 2016-Ohio-1304, the 11th District Court of Appeals affirmed the trial court's refusal to enforce a
contract for the sale of a business based upon either the letter of intent or a purported accepted draft of the purchase agreement.
As to the letter of intent, the court said that the letter did not contain all essential terms, so if was insufficient to constitute
an enforceable contract. In exchanging contract drafts,
the buyer's lawyer presented a draft that contained terms objectionable to seller. The seller changed the terms, one of which
was the scope of the business being sold, signed the changed contract, and sent it back. The buyer's lawyer returned the contract
in a red-lined
version, but changed the scope of the business being sold back to a previous version and changed some other items.
After receiving that draft, the Seller told the buyer's lawyer the deal was off.
The buyer's lawyer then had the buyer sign seller's previous version and attempted to enforce it as a contract. According to the
trial court and the court of appeals, the transmission of the red-lined version was a counter-offer. When Seller rejected the
counter-offer and said the deal was off, there was no longer an offer on the table for buyer to accept.
In Champion Gym & Fitness, Inc.
v. Crotty, 2008-Ohio-5642, the Second District Court of Appeals reversed a summary
judgment holding that there were genuine issues of fact whether the conditions of a "commitment letter" were met and
sufficient to constitute a binding contract. In Ohio, an agreement to agree is not always unenforceable as a contract.
The buyer of a fitness business attempted to cancel the purchase of a business after signing a commitment letter and making a
$40,000 down payment. There was a genuine issue of fact whether the buyer had successfully negotiated a new lease with the
landlord for the business which was a condition of the commitment letter. The lesson: a document that is intended as a
letter of intent may be binding without appropriate qualifying language.
Punitive Damages -- Liability of Employer
If an employee driving a truck causes an accident and leaves the scene of the accident, can the employer be held
liable for punitive damages based upon the acts of the employee? In
Estate of Beavers v. Knapp,
175 Ohio App.3d 758, 2008-Ohio-2023, a truck driver making a turn saw a motorcycle lose control and start
sliding under the semi trailer. The truck driver panicked and sped up, running over the cyclist, and leaving
the scene of the accident. The driver later falsely denied that he had been involved in the accident. On learning
about the accident in the newspaper, the employer ordered the employee back into town to talk to the police and fired
the employee upon learning of the employee's conduct. A jury awarded punitive damages against the employee and
separate punitive damages against the employer. The Franklin County Court of Appeals held that the employee's act of
leaving the scene of the accident and covering up supported an award of punitive damages; however, without some
participation or ratification by the employer, the employer could not be held liable for punitive damages. The court
noted that the employer had a written policy prohibiting employees from leaving the scene of an accident
and the employer promptly terminated the employee upon learning of the violation of the policy. The court also noted,
however, that some courts of appeal in Ohio, apparently contrary to Ohio Supreme Court authority, have l
iberally awarded punitive damages against an employer merely because of wanton, or present, or malicious intent
on the part of the employee, particularly if there were any facts suggesting that the employer had ratified
the employee's conduct.
Interest on Judgment
The Ohio Supreme Court has now firmly established the principle
that a business may not impose an interest rate on unpaid invoices by merely stating an interests rate on the invoice
itself. Any interest rate other than the legal rate (set annually by the Ohio Tax commissioner) must the established
by a contract agreed by the parties. The Court rejected the lower courts' rulings that an interest rate agreement was
established by receipt of invoices stating the rate without objection, a procedure that may sometimes establish contract
terms in a commercial transaction under the Uniform Commercial Code, RC 1302.10.
Minster Farmers Coop. Exchange Co.,
Inc. v. Meyer, 117 Ohio St. 3d 459, 2008-Ohio-1259. The ruling reversed the contrary cases we previously
reported here: Minster Farmers
Cooperative Exchange Company, Inc. v. Meyer (3d Dist. App.), 2006-Ohio-1886, and
Minister Farmers Cooperative
Exchange Company, Inc. v. Dues(3rd Dist. App.), 2006-Ohio-1887.
Harwood v. Weiss
(8th Dist. App.), 2005-Ohio-5542, trial court had a duty to vacate a cognovit judgment when there was evidence that the payments
on the judgment had been mailed via certified mail, but the checks remained uncashed and the certified mail was returned unclaimed.
Defense of payment may be raised as a meritorious defense in a motion seeking relief from a cognovit judgment.
Business Law Developments in Specfic Areas:
Liability for Acts of Drunk After Serving Him or Her Liquor
The Ohio Supreme court summarized the law in a 2001 case. Click here for the court's excellent summary of the law along with the complete text of Revised Code Section 4399.18 as of July 1, 2010.
Full article here.
Workers' Citizenship / Immigration Status
President Bush signed an Executive Order on June 6, 2008 requiring federal
contractors to confirm that their employees can legally work in the United
States. The Homeland Security Department is operating a web-based
E-Verify system. (Click on link.)
Most employees currently fill out I-9 forms and submit accompany documents
to employers who determine whether the worker has met federal requirements.
With the E-Verify system, employers enter a name and social security number
into a computer using the internet.
Business groups claim that the system is a burden on employers and that
there will be misidentification of workers. There is also the question of
whether an employer who is not a federal contractor violates employee
privacy by doing more than conforming with the established I-9 procedure.
Ohio's Minimum Wage Amendments
Effective January 1, 2007, Ohio's Constitution
features a new minimum wage applicable to all employers. The minimum wage will be indexed to the consumer price index,
but the precise mechanism is, at best, unclear. Employers must keep records and make them available to the employee
or to a person acting on the employee's behalf upon request. There are severe penalties for
noncompliance with the minimum wage. Employees have a right to recover three times any back wage underpayments
and collect attorneys' fees. Employers will have no right to collect attorneys' fees unless the employee's suit is
found to be frivolous. If an employer is found to have retaliated against an employee for questioning the wage rates,
the courts are required to award an amount sufficient to deter future misconduct at a minimum rate of $150 per day.
An employer who appeals an adverse decision cannot get a stay of judgment on appeal.
Business Entities: Corporations, Limited Liability Companies,
Alternative Dispute Resolution Law
Real Estate Law Developments
Banks and Banking
Consumer Protection Law
Ucker & Hemmer LLC represents small and large businesses in the Columbus, Worthington and
all over Ohio.
David W. T. Carroll handles business representation.
Nonprofit & Charitable Solicitation Law
Personal Injury Law
Real Estate Law
Workers' Compensation Law
CUH Law Blog
Selected Business Law Articles:
Drug Free Workplace
Should You Incorporate?
Protecting Yourself from Corporate Liability.
What is a Limited Liability Company?
So You think you Have a Corporation.
Charging Interest on Unpaid Invoices
Ohio's New Hire Reporting Requirement
When to Arbitrate