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Wednesday, Oct. 17, 2007

Shiloh Automotive, Inc. v. William W. Wilkins [Richard A. Levin], Tax Commissioner of Ohio, Case no. 2006-1384
Board of Tax Appeals

State of Ohio ex rel. American Legion Post 25 v. Ohio Civil Rights Commission and Jim Petro [Marc Dann] as Atty. General, Case no. 2006-2263
12th District Court of Appeals (Fayette County)

Jack R. Advent, Executor of the Estate of Valijean D. Advent, Deceased v. Allstate Insurance Company et al., Case nos. 2006-2271 and 2006-2393
10th District Court of Appeals (Franklin County)

State of Ohio v. Daniel J. Fugate, Case no. 2006-2289
10th District Court of Appeals (Franklin County)


Company Contests Tax Board Ruling That It Understated Value of Recently Acquired Assets

Shiloh Automotive, Inc. v. William W. Wilkins [Richard A. Levin], Tax Commissioner of Ohio, Case no. 2006-1384
Board of Tax Appeals

ISSUE: Did the Board of Tax Appeals (BTA) err in ruling that “inside” knowledge by the seller of business assets about the finances and business plans of the buyer of those assets rendered the sale not “at arm's length,” and therefore rendered the price paid by the buyer not the presumptive real value of the acquired property for tax assessment purposes?

BACKGROUND: In a line of property tax cases decided over the past several years, the Supreme Court has held that, when there has been a recent “arm's length” sale of taxable property by a willing buyer to a willing seller, the price paid by the buyer in that sale is generally presumed to be the true value of the property for tax assessment purposes. The Court has held that an “arm's length” sale is a sale in which each party acts voluntarily (i.e., without compulsion or duress) and in its own self-interest, and which generally takes place in an open market.

In this case a privately held company, MTD Products Inc., controlled approximately 51 percent of the stock of a publicly owned corporation, Shiloh Industries, and held five of nine seats on Shiloh's board of directors. In 1998, MTD began to explore the possibility of selling its Automotive Division, which generated 10 to 15 percent of its overall revenues. Because Shiloh's business activities included steel-processing and metal finishing for the automotive industry that was complementary to the metal-stamping operations of MTD's Automotive Division, MTD approached Shiloh's management and board of directors with a proposal for Shiloh to buy the assets of the MTD Automotive Division and combine them with its own auto-related operations. After negotiations between the companies, the Shiloh board of directors voted (with the MTD-appointed directors abstaining) to buy the MTD Automotive Division for $20 million in cash plus an additional $20 million of stock in a newly created subsidiary called Shiloh Automotive, which combined the acquired MTD assets with Shiloh's auto-related operations.

When Shiloh Automotive filed its Ohio property tax returns for the 2000 and 2001 tax years, it listed the value of the manufacturing facilities and equipment it had acquired in the MTD buyout based on the stated portion of the overall purchase price that was allocated to plant and equipment in the purchase agreement. In reviewing Shiloh's tax returns, the state tax commissioner rejected Shiloh's valuation of some of the acquired equipment as too low, and assessed additional tax liability based on the commissioner's higher valuation. Shiloh appealed the commissioner's determination to the State Board of Tax Appeals (BTA). The BTA partially affirmed and partially reversed the commissioner's ruling. It declined to accept the stated price of the MTD equipment set forth in the purchase agreement as the true value of that property based on a finding that the sale was not an arm's length transaction because of the companies' close relationship prior to, during and after the sale. The board also held that the commissioner's higher valuation had not made proper allowance for depreciation of some of the acquired assets, and remanded the case to the commissioner for an appropriate adjustment.

Shiloh has exercised its right to appeal the BTA's ruling to the Supreme Court. Attorneys for the company point to the abstention of the MTD-appointed directors from the actions of the Shiloh Industries board during its review and approval of the proposed sale and note that each company retained its own outside legal and financial experts to obtain independent advice regarding the value of the MTD assets. They argue that court decisions interpreting the “arm's length” requirement at issue in this case have not imposed a requirement that the buyer and seller have no prior relationship, but only that each party act without compulsion or duress and in its own self interest. They say those requirements were met in the MTD-Shiloh asset sale, and accordingly the tax commissioner should be required to accept the sale price of those assets as set forth in the purchase agreement as the true value of that property for tax purposes.

Attorneys for the tax commissioner urge the Court to affirm the holding of the BTA. They assert that Shiloh's claims that it paid the fair market value for MTD's assets are undermined by the parties' admission that no other potential buyers were contacted or asked to submit bids. They argue that the abstention of some board members from voting on the sale and the retention of outside advisers by the parties does not overcome the strong presumption that a transaction is not “at arm's length” when the seller of property is a majority stockholder in the prospective buyer's company, and has in-depth knowledge of the buyer's finances and business plans.

Contacts
Charles M. Steines, 216.586.7211, for Shiloh Automotive, Inc.

Barton Hubbard, 614.466.5967, for the Ohio Board of Tax Appeals.

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Must Civil Rights Commission Subpoena Witness for Respondent Prior to Filing of Complaint?

State of Ohio ex rel. American Legion Post 25 v. Ohio Civil Rights Commission and Jim Petro [Marc Dann] as Atty. General, Case no. 2006-2263
12th District Court of Appeals (Fayette County)

ISSUE: Does the state law authorizing the Ohio Civil Rights Commission to subpoena witnesses and evidence during investigations of claimed discriminatory conduct require the Commission to issue a subpoena requested by a respondent (a party accused of discriminatory conduct) before the commission has made a probable cause finding or has filed a formal complaint against that respondent?

BACKGROUND: When it receives a complaint from an individual alleging that he or she has been the victim of unlawful discrimination, the Ohio Civil Rights Commission (OCRC) is empowered to conduct an investigation of the complainant's allegations and, based on the information obtained during that investigation, make a determination that there is or is not probable cause to believe that the respondent (accused party) engaged in discriminatory conduct. If a probable cause finding is made, the commission is then required to attempt to conciliate the dispute by helping the parties negotiate an end to the discriminatory conduct. If conciliation efforts are unsuccessful, the commission then enters an administrative complaint charging the respondent with violation of state civil rights statutes, and the case enters adjudication.

The OCRC's authority under R.C. 4112.04(B)(3)(a) includes the power to “issue subpoenas to compel access to or the production of premises, records, documents, and other evidence or possible sources of evidence or the appearance of individuals.” The following section of that statute states: “Upon written application by a respondent, the commission shall issue subpoenas in its name to the same extent and subject to the same limitations as subpoenas issued by the commission.”

In this case a former employee of American Legion Post 25 in Washington Courthouse, Carol Van Slyke, filed a complaint against the Legion with the OCRC alleging that the executive director of the post had sexually harassed her and, when she complained about his conduct, the Legion had fired her in retaliation. When contacted by OCRC, the Legion asserted that it fired Van Slyke after it received an anonymous letter identifying her as a former felony offender, and stating that the Legion believed it could not continue to employ her to serve liquor because that activity violated the terms of her probation.

Before a probable cause determination had been made in the case, the Legion's attorney requested that OCRC issue a subpoena on the Legion's behalf compelling Van Slyke's parole officer to meet with him and answer questions. The commission refused, citing commission rules that authorize the issuance of a subpoena on behalf of a respondent only if and when probable cause of a violation has been found and a formal complaint has been filed against the respondent. The commission did issue a subpoena to the parole officer on its own behalf and interviewed him. The Legion's attorney asked to review the information the parole offier had provided to the commission, but OCRC denied that request. The commission subsequently found probable cause that Van Slyke's firing was retaliatory and attempted unsuccessfully to reconcile the parties. An administrative complaint was then filed, initiating judicial proceedings in the case.

One day before the official complaint was entered, the Legion's attorneys filed a court action in Fayette County Common Pleas Court seeking a writ of mandamus to compel OCRC to issue a subpoena on the Legion's behalf compelling the parole officer to meet with them and answer their interrogatories. The trial court denied the writ. On review, however, the 12th District Court of Appeals overruled the trial court and issued a writ requiring the commission to issue the subpoena requested by the Legion. In its decision, the 12th District held that R.C. 4112.04(B)(3)(b) requires the OCRC to issue subpoenas requested by a respondent during the investigative stage of a case “to the same extent and subject to the same limitations as subpoenas issued by the commission.”

The commission, represented by the Ohio Attorney General's office, has appealed the 12th District's ruling to the Supreme Court. They argue that the investigative stage of a civil rights case is comparable to a grand jury proceeding in a criminal case. They note that while a prosecutor is authorized to issue subpoenas and compel testimony before the grand jury in order to determine whether a criminal offense has been committed, no comparable subpoena power is available to the subject of a grand jury investigation until after an indictment has been returned charging the defendant with an offense. They assert that the subject of an OCRC investigation does not become a “respondent” until a formal complaint has been filed against him, and they urge the Court to uphold the OCRC rule limiting subpoenas on behalf of respondents to the adjudicative stage of a case. They contend that affirmance of the 12th District's ruling would allow parties charged with discrimination to delay and impede investigations by turning the fact-gathering process into an adversarial proceeding before there has been a preliminary finding of probable cause for the case to proceed.

Attorneys for the American Legion argue that the plain language of the statute requires the commission to issue subpoenas requested by respondents on exactly the same basis as it issues subpoenas for its own purposes. In this case, they assert, the commission failed to meet its obligation when it refused to subpoena Van Slyke's parole officer for them, or to share the results of OCRC's questioning of the parole officer during the investigatory stage of the case. They argue that this refusal placed them at a great disadvantage in attempting to negotiate a settlement during the conciliation stage, which could have prevented the filing of a formal discrimination charge against them.

Contacts
William P. Marshall, 614.466.8980, for the Ohio Civil Rights Commission and Ohio Attorney General's office.

James A. Kiger, 740.335.5271, for American Legion Post 25.

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Did Former Version of Auto Insurance Law Bar Cut In UM/UIM Policy Limits For Two Years?

Jack R. Advent, Executor of the Estate of Valijean D. Advent, Deceased v. Allstate Insurance Company et al., Case nos. 2006-2271 and 2006-2393
10th District Court of Appeals (Franklin County)

ISSUE: In determining the amount of uninsured/underinsured motorist (UM/UIM) coverage provided in an Ohio auto insurance policy in September 2002, should a trial court apply the version of R.C. 3937.18 that was in effect prior to October 2001, or an amended version of that statute that took effect Oct. 31, 2001?

BACKGROUND: Under the version of Ohio's UM/UIM insurance law in effect from September 2000 to October 2001, the limits of UM/UIM coverage in an Ohio auto insurance policy were presumed to be the same as the limits of personal injury liability coverage in that policy unless the insurer could produce an express written offer and rejection or agreement to reduced limits of UM/UIM coverage signed by the policyholder. That version of the law also set a minimum period of two years from the date a policy was issued or renewed during which the insurer could not eliminate or change coverage limits or terms in the policy without an express agreement to that change by the policyholder.

S.B. 97, legislation which took effect Oct. 31, 2001, eliminated the requirement of a written offer and rejection or acceptance of reduced limits in UM/UIM coverage below the personal injury liability limits in the same policy.

In September 2002, Valijean Advent of Columbus was killed in a traffic accident caused by the negligence of another driver. After collecting the $100,000 limit of liability coverage in the at-fault driver's policy, Ms. Advent's husband, Jack Advent, filed a claim seeking recovery of an additional $200,000 from the UIM coverage in the Advents' own auto insurance policy issued by Allstate. The Advents originally purchased that policy in March, 1989. Allstate denied the claim, noting that while the limits of personal injury liability coverage in the Advents' policy were $300,000 per person and $500,000 per event, the company had reduced the limits of UM/UIM coverage in that policy to $50,000 per person and $100,000 per event at the onset of the first six-month premium period following the enactment of S.B. 97, and had indicated that change in the declarations page of the policy renewal notice it sent to the Advents at that time.

Advent filed suit in the Franklin County Court of Common Pleas, arguing that he and his wife were entitled to UM/UIM coverage equal to the personal injury liability limits of their policy because they had never signed any document refusing to maintain UM/UIM coverage at the same level as the liability coverage in their policy or agreeing to a reduction in UM/UIM coverage. Allstate entered a motion for summary judgment, asserting that the passage of S.B. 97 had eliminated the requirement of an express agreement to reduced UM/UIM coverage and the Advents' had “accepted” the reduced coverage listed in the declarations page of their policy when they renewed the policy by paying the renewal premium in March 2002, after the effective date of S.B. 97. The trial court granted summary judgment in favor of Allstate. On review, the 10th District Court of Appeals affirmed the trial court's ruling.

Advent appealed the 10th District's decision to the Supreme Court, which agreed to hear arguments in the case. Attorneys for Advent contend that the most recent two-year renewal period for the Advents' 1989-issued policy ran from March 2001 to March 2003, which means that the pre-S.B. 97 version of R.C. 3937.18 in effect at the time of that renewal was the law applicable to the Allstate policy at the time of Ms. Advent's fatal accident in September 2002. Under that version of the law, they note, Allstate was barred from altering any of the terms or coverage limits in the Advents' policy for two years without a written agreement that it did not obtain from them. And absent an express written refusal or agreed reduction of UM/UIM coverage, they argue, the pre-S.B. 97 version of the law contractually obliged Allstate to provide UM/UIM coverage of $300,000 per person/$500,000 per event until the expiration of the policy renewal period in March 2003.

Allstate urges the Court to affirm the trial and appellate court rulings that the post-S.B. 97 version of the law was applicable at the time of Ms. Advent's fatal accident. Because S.B. 97 took effect in October 2001 and specifically eliminated the requirement of an express refusal or agreement to reduced UM/UIM coverage, they argue, the legislation allowed insurers to simply offer reduced coverage, as Allstate did in the March 2002 renewal terms it sent to the Advents, and allowed policyholders to accept that change by paying the premium quoted by Allstate for the coverages stated on the declarations page. Allstate also contends that the “policy renewal period” applicable to their coverage of Ms. Advent was the six-month period from March 2002 to September 2002 for which the Advents had paid their most recent renewal premium. They note that Mr. Advent has admitted that he was aware of the lower limits of UM/UIM coverage listed on that premium statement.

Contacts
John M. Gonzales, 614.882.3443, for Jack R. Advent.

Monica L. Walter, 614.228.6885, for Allstate Insurance Company.

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When Sentences Are Concurrent, Must Pretrial Jail Time Be Counted Against All Sentences?

State of Ohio v. Daniel J. Fugate, Case no. 2006-2289
10th District Court of Appeals (Franklin County)

ISSUE: When a criminal defendant charged with more than one offense has remained in jail in lieu of bond while awaiting trial, and that defendant is subsequently sentenced to serve concurrent terms of imprisonment for the charged offenses, must the sentencing court deduct the pretrial jail time served by the defendant from all of the concurrent terms of imprisonment to which he has been sentenced?

BACKGROUND: Criminal defendant Daniel Fugate of Columbus spent 213 days in jail in lieu of bond while awaiting trial on charges of burglary and theft. The Franklin County Court of Common Pleas sentenced him to a term of two years in prison on the burglary and theft charges. At the same hearing, the court also found that Fugate had violated the terms of his community control from a prior conviction, and sentenced him to a one-year prison term for the probation violation, with that sentence to be served concurrent with (at the same time as) the two-year sentence for burglary and theft. The judge credited all of the 213 days Fugate had been in jail awaiting trial toward the one-year probation violation sentence, and zero days of his “time served” against the two-year burglary and theft sentence.

On review, the 10th District Court of Appeals rejected Fugate's claim that his pretrial jail time must be credited against both his one-year and two-year concurrent sentences, and affirmed the action of the trial court. Fugate sought Supreme Court review of the lower court rulings, and the Justices have agreed to her arguments in the case.

Fugate's attorneys cite the requirement in R.C. 2967.191 that an offender's prison term “shall be reduced” by “the total days that the prisoner was confined for any reason arising out of the offense for which the prisoner was convicted and sentenced.” Because Fugate was held in jail in lieu of bond for all three offenses for which he was subsequently sentenced, they assert, the law requires that his 213 days of pretrial jail confinement must be credited against his sentences for all three convictions. They point out that because his one-year sentence was ordered to be served concurrently with the two-year sentence, Fugate was actually sentenced to serve two years in prison. By denying any credit for his pretrial jail time against the two-year sentence for burglary and theft, they assert, the trial court unlawfully deprived him of any reduction in his actual time of imprisonment.

They also argue that the trial and appellate court rulings in this case violate the equal protection provisions of the U.S. and Ohio constitutions, because those rulings result in an offender (like Fugate) who cannot post bond being imprisoned for a substantially longer time than an offender who committed identical crimes and received identical sentences – simply because the latter was financially able to post bond and thereby avoid pre-trial incarceration.

The state, represented by the Franklin County prosecutor's office, argues that because Fugate was sentenced in two different cases with different case numbers, one involving his burglary and theft offenses and a separate case arising from his probation violation, the trial court was not required to credit jail time served against both sentences despite the fact that those sentences were to be served concurrently. Prosecutors also assert that, because Fugate's lawyer did not object to the allocation of jail time credit at the time he was sentenced, Fugate waived (forfeited) his right to raise that issue on appeal unless he can show that the allocation was “plain error.” In light of differing court of appeals decisions regarding the appropriate allocation of jail time credit involving probation violations, they contend, the 10th District properly found that the trial court's allocation of jail time credit in Fugate's case was not plain error, and the trial court's action should therefore be affirmed.

Contacts
Paul Skendelas, 614.719.8867, for Daniel Fugate.

Kimberly M. Bond, 614.462.3555, for the State of Ohio and Franklin County prosecutor's office.

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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.