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Wednesday, Sept. 21, 2011

In the Matter of the Application of Buckeye Wind LLC for a Certificate to Construct Wind-Powered Electric Generation Facilities in Champaign County, Ohio, Case no. 2010-1554
Appeal from Decision of the Ohio Power Siting Board

In re: All Cases Against Sager Corporation Sager Corporation, Appellant, Case no. 2010-1705
8th District Court of Appeals (Cuyahoga County)

Sandra Havel v. Villa St. Joseph et al., Case no. 2010-2148
8th District Court of Appeals (Cuyahoga County

Disciplinary Counsel v. Nicholas Matthew Gallo, Case no. 2011-0756
Cuyahoga County

Did State Power Siting Board Err in Approving Plans for Champaign County Wind Farm?

Neighboring Land Owners, County Officials Challenge Board’s Rulings

In the Matter of the Application of Buckeye Wind LLC for a Certificate to Construct Wind-Powered Electric Generation Facilities in Champaign County, Ohio, Case no. 2010-1554
Appeal from Decision of the Ohio Power Siting Board

ISSUE: Did the Ohio Power Siting Board act unreasonably or unlawfully in approving an application by Buckeye Wind LLC for construction of the state’s first large-scale wind-powered electric generating facility?

BACKGROUND:  In 2009, the Ohio Power Siting Board (OPSB) reviewed and approved with some revisions an application for a certificate of environmental compatibility and public need that authorized Buckeye Wind LLC (BW) to construct and operate a wind-powered electric generation facility in Champaign County. As approved, the project calls for the construction of 54 windmill turbines each of which is approximately 490 feet high over an expanse of 9,000 acres leased to the company by 60 different property owners.

Officials of the Champaign County, trustees of several townships affected by the project, and a group of non-participating property owners concerned about potential negative impacts of the facility on them and their land filed objections with OPSB and sought a rehearing of the board’s decision approving the project.  The board denied the motions for rehearing, and the opponents have exercised their right to appeal the board’s ruling to the Supreme Court.

Attorneys for the county and townships assert that the OPSB acted contrary to conditions included in its application when it approved its staff’s judgment that a bond of $5,000 per turbine proposed by Buckeye Wind would “provide adequate funds to repair any damage to public roads resulting from the construction or decommissioning of the proposed facility.”  They point to language in the application that required Buckeye Wind to secure a road bond for the project “through the Champaign County Engineer’s Office,” and argue that this language and the statutory authority of the county engineer to oversee road repairs required that the amount of bond sufficient to cover potential damage to local roadways must be established by the county engineer.  They also assert that the bond amount of $5,000 per turbine is not supported by any evidence in the record of potential repair costs, and is therefore unreasonable and unlawful.

Attorneys for the surrounding property owners, most of whom filed their objections through a non-profit organization called Union Neighbors United (UNU), advance a number of other arguments challenging the OPSB’s approval of the Buckeye Wind application. These include claims that the board unreasonably relied on testimony about potential environmental and economic impacts of the project by a Buckeye Wind official who was not qualified as an expert in many of the areas about which he testified, including potential reductions in surrounding property values, visual interference with adjacent property owners’ enjoyment of their property and the long-term impacts of exposure to turbine noise on nearby residents. UNU also asserts that in adopting a minimum setback of turbines of 541 feet from a non-participant’s property line and 914 feet from a residence, OPSB failed to consider recommendations by the manufacturers of wind turbines themselves indicating that larger setbacks were necessary to avoid undesirable environmental impacts.

Attorneys for the OPSB and Buckeye Wind respond that nothing in the statutes or administrative regulations governing wind-powered generating facilities requires an applicant to post a road repair bond, but said the board included such a requirement when it approved the Buckeye Wind application in order to ensure that  the economic interests of the county and affected townships would be protected. They also point out that the law setting forth the OPSB’s duties, R.C. 4906.13,  prohibits local officials from making determinations that affect a utility facility under the aegis of the board, and thus precludes the Champaign County engineer from determining the amount of a road bond for the Buckeye Wind project.

With regard to UNU’s challenge to the noise standards approved for the Buckeye Wind facility, the OPSB argue that the guidelines approved by the board are supported by an expert study of the project area and consistent with standards set for other, similar facilities. They assert that an alternative, absolute maximum noise limit suggested by UNU would require a setback of approximately 1.25 miles between each wind turbine and the nearest non-participating property ... a space requirement that they say would make it geographically impossible to construct a large wind generating facility anywhere in the U.S. east of the Mississippi River.

Jack A. Van Kley, 614.431.8900, for Union Neighbors United.

Jane A. Napier, 937.484.1900, for Champaign County and Goshen, Salem and Union Townships.

Werner L. Margard, 614.995.5532, for the Ohio Power Siting Board.

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Does Ohio Court Have Jurisdiction to Appoint Receiver For Previously Dissolved Foreign Corporation?

Allowing New Tort Claims Against Company’s Insurance by Ohio Plaintiffs

In re: All Cases Against Sager Corporation Sager Corporation, Appellant, Case no. 2010-1705
8th District Court of Appeals (Cuyahoga County)

ISSUE:  When a company that was incorporated under the laws of another state has been dissolved  under those laws, and the foreign state’s “corporate survival” period for asserting claims against a dissolved corporation has expired, does an Ohio court have jurisdiction to appoint a receiver to “wind up” the company’s affairs in Ohio, thereby enabling new lawsuits to be filed by Ohio plaintiffs seeking recovery for alleged tort damages under the former corporation’s insurance policies?

BACKGROUND:  The Sager Corporation, which was incorporated in Illinois in 1921, used asbestos and asbestos cloth in manufacturing protective clothing items, aprons and safety curtains for use by workers in industrial plants from the 1930s until the early 1980s.  Sager sold its products to customers in Ohio, including the U.S. Steel facility in Lorain. The Sager Corporation was formally dissolved by its owners under the corporation laws of Illinois and ceased doing business in 1998.

In 2007, a former longtime worker at the U.S. Steel plant in Lorain, Commodore Bowens, was diagnosed with mesothelioma, a form of lung cancer commonly associated with exposure to asbestos.  The disease has an average latency period (interval between exposure to asbestos and appearance of symptoms) of from 20 to 40 years.  Bowens filed suit in the Cuyahoga County Court of Common Pleas asserting claims for negligent exposure to workplace asbestos against multiple defendants including Sager. 

Sager moved for summary judgment dismissing Bowens’ claims against it, arguing that the corporation had been dissolved in 1998 and the five-year “corporate survival” period during which claims can be brought against a dissolved corporation under Illinois law had expired in 2003, and therefore Sager could no longer sue or be sued for any liabilities incurred by the corporation during its existence. 

In response, the law firm representing Bowens and other asbestos case plaintiffs, Bevan & Associates, entered a motion asking the trial court to appoint a receiver over the remaining assets of Sager, consisting solely of suspected unexhausted coverage in the company’s insurance policies, on behalf of Bowens and the firm’s other Ohio clients pending the outcome of their suits against Sager.  Over Sager’s objections, the court appointed a receiver and held that Ohio, rather than Illinois law applied to allow the plaintiffs’ tort claims to go forward despite the fact that the corporation no longer existed.

Sager appealed.  On review, the 8th District Court of Appeals affirmed the appointment of an Ohio receiver and held that the trial court’s action did not resurrect Sager as a corporate entity, but merely created a “vehicle” (the receivership) through which Bowens and the other asbestos plaintiffs “will seek recovery from the insurers.”  Sager sought and was granted Supreme Court review of the 8th District’s decision.

Attorneys for Sager argue that state and federal courts have consistently held that issues regarding the existence or legal status of a corporation must be decided according to the law of the state in which that company was incorporated ... in this case, according to the law of Illinois under which Sager no longer exists as a legal entity and cannot be sued. They also assert that the Ohio statute cited by Bowens that empowers Ohio courts to appoint a receiver for a dissolved corporation applies only to companies incorporated in Ohio. They contend that in any case there is nothing over which an Ohio receiver could exercise control because potential coverage in an insurance policy issued to a corporation is not a corporate “asset” subject to receivership or distribution to creditors, and the plaintiffs would have no right to recover directly from Sager’s insurance company even if Sager were found a) to still exist; and b) to be liable for the plaintiffs’ losses.

Attorneys for Bowens and the other plaintiffs urge the Court to affirm the lower courts’ rulings that the damage claims they have brought against Sager are based on injuries that were incurred by Ohio residents while working in this state as a result of exposure to products that Sager sold to Ohio companies,  and therefore those claims may be brought within Ohio’s statutes of limitations for tort actions rather than Illinois’ five-year “corporate survival” law.  They assert that nothing in the Ohio receivership statute invoked by the trial court limits its application exclusively to domestic (Ohio-based) corporations.  Therefore, they contend,  if the plaintiffs’ tort  claims of negligent exposure to asbestos by Sager while the company was doing business in Ohio are proved in court, the plaintiffs will have a right of recovery against any unexhausted coverage in Sager’s corporate insurance policies regardless of whether Sager remains in existence as a corporation.

Thomas W. Bevan, 330.650.0088, for Commodore Bowens and other plaintiff clients of Bevan & Associates.

Bruce P. Mandel, 216.583.7020, for Sager Corporation.

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Is Law Mandating Bifurcated Trials When Tort Plaintiffs Seek Both Compensatory and Punitive Damages Unconstitutional?

Based on Conflict With Court Rule That Gives Judges Discretion in All Cases

Sandra Havel v. Villa St. Joseph et al., Case no. 2010-2148
8th District Court of Appeals (Cuyahoga County)

ISSUE: R.C. 231521(B), a “tort reform” statute enacted in 2005, requires Ohio trial courts to grant a  party’s motion for a bifurcated trial in all tort cases where 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 decided, the parties present evidence and testimony regarding alleged wrongdoing by the defendant for which the plaintiff seeks additional damages designed to punish the wrongdoer rather than to compensate the plaintiff for his injuries.

In this case, the Court is asked to decide whether R.C. 2315.21(B) unconstitutionally infringes on the exclusive authority of the Supreme Court to adopt and impose procedural rules governing the conduct of trials in state courts. Specifically, the Court has agreed to consider whether R.C. 2315.21(B) conflicts with Rule 42(B) of the Ohio Rules of Civil Procedure, which gives trial court judges discretion to either grant or deny motions for  bifurcated proceedings in any civil action.

The case involves a suit for medical malpractice, wrongful death, and violation of the Ohio Nursing Home Patients’ Bill of Rights  brought by Sandra Havel as the personal representative of the estate of John Havel, against the Villa St. Joseph and Village of Marymount nursing homes and several other Cleveland-area medical facilities. The complaint alleges that John Havel developed skin ulcers that required surgery while he was recuperating from hip surgery at Villa St. Joseph, contracted a bacterial infection of those ulcers following surgery and relocation to a different medical facility, and died several months later as a result of complications from that infection. Havel’s complaint sought both compensatory and punitive damages.

The defendants filed a motion to bifurcate the presentation of evidence and the jury’s consideration of Havel’s compensatory damage claims from the presentation of evidence and consideration of the punitive damage claims. The court denied the motion to bifurcate. The defendants appealed, arguing that the trial court was required under R.C. 2315.21(B) to grant motions to bifurcate in all tort cases seeking both compensatory and punitive damages. The 8th District Court of Appeals affirmed the ruling of the trial court, holding that the statute was unconstitutional and therefore of no force or consequence because it was in conflict with Civ.R. 42(B) which gives judges discretion to grant or deny motions seeking “a separate trial of any claim ... or of any separate issue” based on factors set forth in the rule.

The 8th District subsequently certified that its ruling  was in conflict with a 2009 decision, Hanners v. Ho Wah Genting Wire & Cable in which the 10th District Court of Appeals upheld R.C. 2315.21(B) against a similar constitutional challenge. The Supreme Court has agreed to hear the case to resolve the conflict between appellate districts.

Both parties agree that the constitutionality of the statute hinges on two disputed points:
1) Whether the statute establishes a substantive right, in which case the statute takes precedence over a judicial rule; or the statute merely sets forth procedural guidelines for the exercise of a right, in which case judicial rules prevail over legislative enactments.
2) Whether there is an irreconcilable conflict between the statute and a judicial rule, in which case the Supreme Court’s rulemaking authority prevails; or if the rule and statute can be harmonized, in which case both should be given effect.

Attorneys for the defendants argue that, although whether a trial will be conducted in one or two parts may appear to be a procedural matter, uncodified language in the bill enacting R.C. 2315.21(B) made it clear that the legislative intent underlying the statute was to secure the substantive due process rights of defendants against the injustice that occurs when jurors hear and consider evidence of a defendant’s alleged wrongdoing prior to their establishment of compensatory damages – which should be based exclusively on the actual harm or loss demonstrated by a plaintiff regardless of other considerations.

The defendants also argue that the conflict between the statute and Civ.R. 42(B) is not irreconcilable  because the statute affects only a limited subset of civil cases in which a) the plaintiff seeks both compensatory and punitive damages and b) a party moves to bifurcate the trial.  They point out that in all other cases the statute does not interfere in any way with the discretion granted to judges by Civ.R. 42(B) to grant or deny motions to bifurcate, and therefore the provisions can both be given effect by applying the judicial rule in all cases except the limited subset of trials that the legislature has determined should be subject to a different standard.

Attorneys for Havel respond that when the plain language of a statute clearly and unambiguously sets forth a procedural requirement, it is contrary to established rules of statutory analysis and this Court’s past decisions to engage in interpretation of other, uncodified language to determine whether the “legislative intent” underlying the statute was procedural. They assert that plain language of R.C. 2315.21(B) unambiguously sets forth a procedural requirement (i.e., mandatory bifurcation of certain trials) and that requirement conflicts with a procedural rule established by the Supreme Court (i.e., trial judges have discretion to grant or deny a motion to bifurcate the trial of “any claim.”)  In light of the Supreme Court’s exclusive jurisdiction to set procedural rules for the conduct of trials, they contend, the trial and appellate courts in this case correctly found that the judicial rule prevails and refused to follow the conflicting statute.

With regard to the extent of the conflict between the statute and judicial rule, Havel’s attorneys  argue that the defendants have employed a false comparison by enumerating situations in which the statute has no application, and counting them as instances in which there is “no conflict”  between the application of the statute and the Court’s rule.  They assert that the proper standard of analysis is to consider only cases in which both the rule and statute are applicable, (i.e., cases in which  a plaintiff seeks both compensatory and punitive damages and a party moves to bifurcate the trial). In conducting that comparison, they say, it becomes clear that there is no case in which the statute allows a trial judge to exercise his or her discretion under the rule to deny bifurcation, and therefore the conflict between statute and rule is irreconcilable.

NOTE:  Amicus curiae (friend of the court) briefs supporting the position of the defendants have been entered by the Ohio Attorney General on behalf of the state, by the Ohio Association of Civil Trial Attorneys and jointly by the Ohio Hospital Association, Ohio Alliance for Civil Justice and Physician Insurers Association of America.  An amicus brief supporting the position of the plaintiffs has been submitted by the Ohio Association for Justice.  Copies of these briefs and all pleadings in the case are available by following this link http://www.sconet.state.oh.us/Clerk/ecms/searchbycasenumber.asp and entering Case No. 2010-2148 in the search box.

Bret C. Perry, 216.875.2767, for Villa St. Joseph et al.

Blake A. Dickson, 216.595.6500, for Sandra Havel & Estate of John Havel.

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Attorney Discipline

Disciplinary Counsel v. Nicholas Matthew Gallo, Case no. 2011-0756
Cuyahoga County

The Board of Commissioners on Grievances & Discipline has recommended that Cleveland attorney Nicholas Gallo be publicly reprimanded for filing a motion and a sworn affidavit in a Lake County divorce case that accused a judge of professional misconduct based on Gallo’s mistaken identification of the judge’s bailiff as the judge himself.

While finding that Gallo believed the information in the documents to be true and accurate at the time he filed them, and that he promptly withdrew the inaccurate statements as soon as he learned of his mistake, the board found that his conduct violated the state attorney discipline rule that prohibits  making a statement impugning the integrity of a judicial officer “with reckless disregard as to its truth or falsity.” The board also found that Gallo’s filing of a motion for sanctions in a pending case based on his unconfirmed identification of a person he had never seen before violated the disciplinary rule against conduct prejudicial to the administration of justice.

In recommending a reprimand rather than a license suspension as the appropriate sanction, the board noted as a mitigating factor that Gallo had been practicing law for approximately one year at the time of his actions, and relied on the judgment and acted under the direction of senior attorneys in his law firm in drafting and filing the offending documents.

Gallo has filed objections to the board’s findings of rule violations. He argues that the board erred in finding that he acted recklessly in accepting his client’s in-person identification, and his employer’s confirmation from a verbal description over the phone that a man staring at him and his client from the doorway of the judge’s chambers was, in fact, the judge. Gallo also asserts that the motion for sanctions he filed in his client’s divorce case was not based primarily on his mistaken identification of the bailiff as the judge, but rather on what he believed to be frivolous pleadings filed by the judge seeking to intervene in his client’s case – pleadings that were later confirmed by the domestic relations court to be unsupported by law or fact when that court rejected the judge’s motion to intervene.

The Office of Disciplinary Counsel, which prosecuted the complaint against Gallo before the board,

has filed answers to Gallo’s objections. Counsel disputes Gallo’s claims that he did not act “recklessly” by executing a sworn affidavit that falsely accused a judge of intimidating a party in a court case; and did not prejudice the administration of justice by filing a motion claiming that the judge had engaged in a pattern of conduct “intended to intimidate” his client and his law firm without direct knowledge or a sufficient factual basis that those allegations were true.

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

Brent L English, 216.781.9917, for Nicholas M. Gallo.

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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.