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Category Archives: Business & Civil Litigation

Myth buster: When is an Ohio Residential Property Disclosure Form required?

Author By Christopher P. FinneyPosted on

We hear a lot of misinformation from prospective sellers and Realtors on when a Residential Property Disclosure Form must be used in Ohio:

  • “I’ve never lived in the house, and thus I am exempt from filling out the form.”
  • “I’m just an investor.  I don’t have to complete the form.”

Neither of these statements is true, so let’s bust these myths and in the process really dig into why a residential property disclosure form is “required” and when it is “required.”

What is the “requirement”?

As an opening proposition, Ohio law does not actually require the use of the Residential Property Disclosure statement. And by this I mean that no one is going to go to jail for failure to use the form, and the civil consequences are generally limited to termination of the contract before closing, if any.

The law in question is Ohio Revised Code Section 5302.30.  It is indeed entitled “Property disclosure form required for all residential real estate transfers.”  But when reading the statute it becomes apparent that the penalty for non compliance is: rescission of the contract, but only prior to the earlier of thirty days after the contract is signed or the date of closing (ORC § 5302.30 (K)(4)):

If a transferee of residential real property subject to this section does not receive a property disclosure form from the transferor after the transferee has submitted to the transferor or the transferor’s agent or subagent a transfer offer and has entered into a transfer agreement with respect to the property, the transferee may rescind the transfer agreement in a written, signed, and dated document that is delivered to the transferor or the transferor’s agent or subagent in accordance with division (K)(4) of this section without incurring any legal liability to the transferor because of the rescission, including, but not limited to, a civil action for specific performance of the transfer agreement.

Ohio Revised Code §5302.30 (K)(2) also provides for rescission if the seller amends the Residential Property Disclosure Form after the contract is signed.

It is always advisable to disclose

Before we get to the question of whether Ohio law requires disclosure, there is another question of whether disclosure is advisable.  The answer is almost always “of course.”

The basis of property defects fraud claims is either (a) a material misrepresentation as to a known defect (i.e., lying about the basement leaking or the presence of termites) or (b) non-disclosure of a known material defect that is not readily open to observation by a buyer.

A full and proper written disclosure inoculates a seller from both of these claims and this is advisable even if the law does not require full disclosure.

What types of transactions are covered?

Section (B)(1) of the statute tells us what types of transactions are covered by the “requirement”:

  1. transfers by sale;
  2. transfers by land installment contract;
  3. transfers by lease with option to purchase;
  4. an exchange of property; or
  5. a lease for a term of ninety-nine years and renewable forever.

Who must provide the form and who is exempt?

So, then, on to the question of who must provide the disclosure and when must it be provided:

The statute provides that it covers all “transferors ” of properties containing one to four dwelling units.  So, this would seem to include otherwise commercial properties that contain under four dwelling units, such as a bar or restaurant with apartments above.

And then the statute contains an extensive list of exemptions from its requirements detailed below, but the exemptions do include:

  • New construction;
  • Transfers from an estate; and
  • Transfers among family members and co-owners or pursuant to a divorce;

The statute does not exempt investors or simply owners who did not live in the property.

Waiver by buyer

Finally, a buyer can waive his right of rescission for a Residential Property Disclosure Form (O.R.C §5302.30 ((K)(3)(c).  And, since this is the only remedy for the failure to deliver the Residential Property Disclosure Form, it is essentially a waiver of rights of the buyer under the entire statute.

Conclusion

So, the myth is busted.  Investors and other owners who did not live in the house (except those administering an estate of a seller) are not exempt from the requirements of the statute.

Appendix

A more complete list of exemptions is below:

(1) A transfer pursuant to court order;

(2) A transfer to a mortgagee by a mortgagor by deed in lieu of foreclosure or in satisfaction of the mortgage debt;

(3) A transfer by a mortgagee, or a beneficiary under a deed of trust, who has acquired the residential real property at a sale conducted pursuant to a power of sale under a mortgage or a deed of trust or who has acquired the residential real property by a deed in lieu of foreclosure;

(4) A transfer by a fiduciary in the course of the administration of a decedent’s estate, a guardianship, a conservatorship, or a trust;

(5) A transfer from one co-owner to one or more other co-owners;

(6) transfer to immediate family members and transfers as a part of a divorce;

(7) A transfer to or from the state, a political subdivision of the state, or another governmental entity;

((8) A transfer that involves newly constructed residential real property that previously has not been inhabited;

(9) A transfer to a transferee who has occupied the property as a personal residence for one or more years immediately prior to the transfer;

(10) A transfer from a transferor who both has not occupied the property as a personal residence within one year immediately prior to the transfer and has acquired the property through inheritance or devise.

Lawsuit: Adrien Broner KO’d, robbed man

Author By Christopher P. FinneyPosted on

Our firm is pleased to serve as Plaintiff’s counsel in the assault case against Cincinnati Boxer Adrien Broner.

From today’s Enquirer our own Chris Finney is quoted:

“Adrien seems to have a penchant for walking around town and slugging people,” said Carson’s attorney, Chris Finney. “We want it to stop.”

Read about it in today’s Enquirer here.

Advanced commercial real estate law: Letters of intent, memoranda of understanding, and scribbles on the back of an envelope in Ohio

Author By Casey A. JonesPosted on

 

As a real estate attorney, I many times take for granted that experienced real estate professionals — Realtors, lenders, and investors — understand the fundamentals of real estate law.  And many times I am proven wrong in that assumption.

Just a few weeks ago, I again learned this lesson from real-life experience.

In that scenario, the parties signed a document entitled “letter of intent” for a million-dollar-plus property.  The document identified the property in question, the purchase price and the timing for the closing.

Later, the seller obtained another offer on the property and took the position that our “Letter of Intent” was not binding.  We took the opposite position and vigorously acted to enforce the newly-formed contact.

How is that so?

Statute of Frauds

First, we have extensively explored on this site the requirements of every state in the union that contracts for the purchase and sale of real estate (i) must be in writing and (ii) must be signed by the “party to be charged” therewith (i.e., the party who is to be sued on the contract). Grafton v. Cummings, 99 U.S. 100, 106 (1878); Smith v. Williams, 396 S.W.3d 296, 298 (Ky. 2012); Sanders v. McNutt, 72 N.E.2d 72, 75 (Ohio 1947). You may read more about that here.

What writing constitutes a contract?

Virtually any document that evidences a meeting of the minds between parties on the material terms of a transaction and that complies with the statute of frauds will be a binding contract for the purchase and sale of real estate. McGeorge v. White, 174 S.W.2d 532, 533 (Ky. Ct. App. 1943); Beasley v. ANG, Inc., 10th Dist. Franklin No. 12AP-1050, 2013-Ohio-4882, ¶ 8 (Ohio Ct. App., Nov. 5, 2013).

The title of the document does not matter.  The paper on which the contract is memorialized does not matter.  Whether it is written in pen, pencil, or crayon does not matter.

It simply matters that the material terms are in the document, the document is in writing and the document bears the signature of the “party to be charged therewith.”

Memoranda of understanding and letters of intent

Certainly, though, a document entitled so innocuously as a “letter of intent” or a “memorandum of understating” would not in and of itself be a binding agreement, right?  Wrong.

Sometimes the terms of a document — such as a letter of intent or memorandum of understanding — may say in the text that it is not binding upon the parties unless and until they sign a contract drafted by their attorneys and signed by the parties.  In such instance, by its own terms, the document is not a binding contract. See, e.g., John Wood Group USA, Inc. v. ICO, Inc., 26 S.W.3d 12, 17 (Ct. App. Tx. 2000) (“the parties expressly stated that the letter agreement ‘is not binding,’ with the exception of certain enumerated paragraphs”); Christ v. Brontman, 175 Misc. 2d 474, 477 (S.Ct. N.Y. 1997) (“Generally, if the language in the contract so provides, a real estate sales agreement which is subject to the approval of attorneys is not binding and enforceable until approved by the attorneys.”).

But in the absence of such “saving” language, a writing is a binding agreement on the terms set forth in such writing.

Again, the title of a document, or its brevity, could lead a buyer or seller to believe it is intended to be non-binding, and simply preliminary.  Buyers and sellers are lulled into erroneous understanding that the informal nature of the document, the shortened text, and/or the title mean that the document is not binding unless and until further documentation follows, carefully reviewed or drafted by counsel.  This is simply false as a matter of law.

Lot Reservation Agreements

This same logic extends to “Lot Reservation Agreements” in the context of a buyer-builder relationship.  A one-paragraph agreement that seems to be just a quick way to tie up a piece of property for a few weeks or months could in fact give rise to binding obligations assuming the agreements comply with other contract principles.

Principle extends to other agreements

Although the focus of this article is the purchase and sale of real estate, its contents could just as well apply to other legal transactions such as real estate leases, options, easements and license agreements, and to non-real estate transactions such as equipment leases, and the sale of a company or its assets.

The back of an envelope

We learn in law school that a buyer and seller can memorialize a contractual agreement on any type of paper, including the back of a used envelope.

About 20 years ago, to my surprise, I ended up being involved in a “back of the envelope” case.  There, the buyer sat on one side of a table and the seller’s Realtor was on the other side of a table.  The Realtor wrote out some basic bullet-point contract provisions, being the address of the subject property, the price and the closing date, on the back of a used legal-sized envelope.  The buyer, on the other side of the table, signed the document upside down! — he didn’t even bother turning around the writing and reading it.  A judge found that that crazy-looking instrument constituted a contract binding upon that buyer.

The lesson: It simply does not matter what kind of paper the contract is memorialized upon or even where and how the terms are written on that piece of paper.

Conclusion

As we frequently caution our clients, “it’s a dangerous world out there.”  You must carefully consider the consequences of your actions and those acting on your behalf.

 

Catch me if you can: How to steal real property

Author By Christopher P. FinneyPosted on

After 30 years as a real estate attorney, I thought I had seen everything: Bill Erpenbeck, mortgage fraud, short sale fraud, and the massive fraud perpetrated on America by Wall Street in the housing crisis.  Indeed, well before the mortgage crisis hit with full force, I authored a continuing education course entitled “Fraud” and taught it to thousands of Realtors, builders and lenders exposing rampant fraud in the residential and commercial real estate industry .

But still I was shocked in the past two years to be personally involved in two cases involving outright theft of real property right here in Hamilton County.  One of those cases is highlighted in the Cincinnati Enquirer here.

Background: The passive, unilateral nature of our property recording system

Assuming that the Hamilton County Commissioners’ abolition of registered land has been effective (read here), the land registration system is entirely passive from the County’s perspective in both Ohio and Kentucky.  This system of land record recordation is typical throughout the nation.  What this means is that by and large the government officials responsible for accepting documents for recording do just that — they accept what is presented to them, and then index them.  They do nothing at all to check their validity.

To transfer real property, one simply brings in for recordation a deed that is purportedly signed and acknowledged (notarized) by the current owner.  In Ohio, the Auditor will transfer the real estate on his records and “green light” the deed for recording by the Recorder.  The County Recorder simply time-stamps and records whatever original instruments are presented to him in proper form and with a property legal description.  In Kentucky, the County Clerk performs these same functions.

It is no one’s job at the Auditor’s office or Recorder’s office to verify signatures — or even to check that the notary public acknowledging the signature is licensed by the state.

The system is “passive” in that the offices receive the instruments for recording, and as long as their grantor information lines up with public records, they index and record the transfer on their records.

Just prepare and sign a deed transferring property into your name

So, the new scam I have seen is follows this pattern:

  1. The fraudster forms a limited liability company that he owns and controls.  Anyone can do this with an attorney, through LegalZoom.Com or even just by completing simple forms available from the Secretary of State of each state.  (NOTE: Each state requires each LLC to have a “statutory agent” to receive formal legal notices, but many states — including Ohio do not require the ownership of the LLC to be publicly identified.  Kentucky does require LLC ownership to be disclosed.)
  2. The criminal then finds a suitable real property — presumably one that has vacant and neglected for some time.
  3. Then, the fraudster prepares a deed transferring that property into the name of his new LLC.
  4. He signs that deed or finds someone to sign it, and has it acknowledged (notarized).
  5. The notary public is required by law to verify that the signer of the deed, but many simply do not.  Further, if the target property is in a corporate name, it is unusual for the notary to check that the signer has authority in fact to sign for the seller.  (NOTE: In the fraud referenced in the article linked above above, he himself acted as the notary, and signed someone else’s name to the deed in place of the actual owner.)
  6. That fraudster then markets the property for sale and quickly — for consideration — transfers the property to a new buyer, pocketing the cash and disappearing into the woods.

The system is further undermined because office supply and stationary shops will produce a notary seal for anyone — or for a fictional name — without checking if that person is in fact a registered notary public.  Thus, the signer and the notary public can be fictional on a deed.

Experienced real estate professionals are shocked this could happen

I have had the chance over the past year to tell the story before audiences of experienced Realtors of two separate frauds in Hamilton County in which I personally participated — once representing the actual owner whose property was “stolen” in this fashion and once representing the end buyer.  In each instance, the Realtors were shocked and dismayed that our land title registration system could be so easily gamed.  But it can and does happen.

How buyers can protect themselves

As we have explained here, when buying real property there are only two layers of protection for the buyer: (i) the Seller, who makes broad promises by means of a general warranty or limited warranty deed has continuing obligations to the owner under that deed to assure that title is “good,” and (ii) the coverage provided by an owner’s policy of title insurance.

Many sellers have “nothing to their name,” and thus the promises they make under warranty deeds could be worthless — and it is difficult for a buyer to ascertain whether a seller has the means to stand behind their promises.  Thus, when I sit at a closing table and hear a buyer tell me why they have no need for an owners’  policy of title insurance — or worse, for their Realtor to explain that it is worthless — I cringe.  I don’t want to argue to convince a buyer to purchase something that I am selling and profiting from, but at the same time  I do know there are risks the buyer is undertaking if he does not obtain that coverage.  The “theft of real property” described above is one of these risks that is difficult or impossible for the closing agent to detect, but one fully covered by title insurance.

The end of the stories

We mention two scenarios above where our clients were victims of property theft.  In the first instance, our client was the buyer — and he had purchased an owners’ policy of title insurance.  Thus, he was made whole by the underwriter as son as the real owner made a claim to title to the real estate.  In the second instance, our client was the owner at the time of the “theft.”  He instituted a “quiet title” action to recover record ownership of his property and won a default judgment against the wrongdoer, vesting title back in the rightful owner’s name.  That client elected not to pursue the tortfeasors — the thieves, the notary, the closing agent — any further to save time and money.

Conclusion

The moral to this story is twofold: (i) don’t kid yourselves, it is dangerous out there, and (ii) title insurance covers a multitude of “sins” when real estate title goes bad.

Let Finney Law Firm and Ivy Pointe Title, LLC help you avoid and insure over these risks of real estate investing.  Call Rick Turner of Ivy Pointe Title with any questions at 513-943-5660.

Commercial Leasing: ABCs of HVAC

Author By Isaac T. HeintzPosted on

In the commercial leasing world, the provisions regarding the maintenance, repair and replacement of the heating, ventilating, and air conditioning system (HVAC) are often a point of contention. The reason for this is that the repair and replacement of the HVAC can be expensive, and the scope of the repair and replacement can be directly affected by the actions (or inaction) of the tenant. This summary will review some of the considerations and suggest possible resolutions to consider to address the HVAC.

Typical Landlord Lease

The initial draft of a typical retail commercial landlord’s lease will pass all costs associated with the maintenance, repair and replacement of the HVAC through to the tenant. From a practical perspective, this type of clause may not properly allocate the costs of the HVAC to the tenant based on the tenant’s use of the system. For example, this type of clause may require the tenant to pay for costs for a system that is damaged prior to tenant’s lease, or could result in the tenant having to replace the system in the last month of the term. From a landlord’s perspective, this type of clause may result in the tenant attempting to prolong the life of the HVAC beyond its useful life to avoid having to pay for the replacement of the unit.

Condition on Commencement

The condition of the HVAC on the commencement of the lease can affect the required costs associated with the maintenance, repair and replacement. If the HVAC is new, then there should be a warranty on the system and the tenant should seek a lease clause ensuring the warranty is passed through to the tenant. If the HVAC is not new, the tenant should have the HVAC inspected to determine the condition of the system and predicted useful life. If there is a concern regarding the condition of the HVAC, the tenant should consider negotiating some type of warranty and/or limit on the costs for repair/replacement for the system by the landlord (e.g. annual cap, etc.).

Maintenance, Repair and Replacement

The lease should allocate the responsibility for the maintenance, repair and replacement of the HVAC between the landlord and the tenant. If the landlord is relying on the tenant for the maintenance, the landlord should consider requiring tenant maintain a contract with an HVAC service provider for biannual or quarterly service. If the landlord is relying on the tenant for the maintenance and/or repair of the HVAC, the landlord should consider requiring tenant maintain a log regarding the same as a condition of the lease. The landlord will want to review any maintenance agreement or repair log on a regular basis to ensure that they are being maintained.

Landlord’s Concerns

The landlord will not want to cover the payment for costs of the repair and/or replacement of the HVAC if the system is damaged by the tenant. For example, if the tenant fails to regularly change the filters or props open the doors of the premises causing damage to the system, the landlord will not want to cover the cost of repairing or replacing the system. The landlord will want to limit any warranty and/or agreement to cover costs to exclude damage to the HVAC caused by the tenant.

Replacement of HVAC

Most tenants are not thrilled with the possibility that they will have to pay for the replacement of the HVAC towards the end of the term. This can lead to a tenant attempting to bandage the HVAC to avoid the replacement. A better solution may be for the landlord to agree to pay for the replacement, and have the tenant reimburse a proportionate share of such costs for the remainder of tenant’s term. This should create an incentive for the tenant to seek the replacement of the HVAC when the repair costs are high and/or functionality of the system is compromised.

Summary

Although not uncommon, a simple clause in a commercial lease requiring the tenant to maintain, repair and replace the HVAC may not properly allocate the costs between the parties or be in the best interest of the landlord. A clause addressing the HVAC that takes into consideration the interests of the tenant and the landlord can help avoid conflict between the parties regarding the HVAC. Further, it will reduce the incentive of the tenant to seek a new location at the end of the term if the tenant faces the prospect of having to replace the HVAC if they continue operations at the premises. So, both the landlord and tenant have an incentive to think through the HVAC clauses at the beginning of the leasing relationship.

Chris Finney to present to Cincinnati Bar Association: Empowering the Client in Decision making Along the Way

Author By Christopher P. FinneyPosted on

One of the core values of the Finney Law Firm is empowering the client in decision making on their legal matters, be they litigation or transactions.  From the law firm perspective, it takes a constant, repeated, and consistent effort to communicate the status and options to a client, and to empower the client to make decisions — good decisions — for the future of his legal affairs.

Chris Finney has been invited to present to fellow attorneys at the Cincinnati Bar Association’s “Brown Bag Luncheon” series with the topic “Empowering the Client in Decision making Along the Way” on Wednesday, February 10 from noon to 1 p.m.

We are proud to have developed and implemented aggressive strategies to place the client in the driver’s seat as a legal matter progresses.

For more information on this course, please contact the CBA at (513) 699-1397.

Cuyahoga County Court of Appeals analyzes primary and implied assumption of the risk in case involving a foul ball at the Cleveland Indians fireworks night

Author By Finney Law FirmPosted on

A recent Cuyahoga County Court of Appeals case distinguishes implied assumption of the risk with the primary assumption of the risk/recreational activity defense discussed in an earlier post here, and recently at Eugene Volokh’s Washington Post blog here.

In July 2012 a spectator was injured by a foul ball at a Cleveland Indians game. As discussed in my earlier post, the Cleveland Indians would generally be immune from liability for the fan’s injuries. However, in Rawlins v. Cleveland Indians Baseball Company, Inc., 2015-Ohio-4587, the Cuyahoga County Court of Appeals found that the trial court erred in granting summary judgment in favor of the Indians on the basis of the doctrine of primary assumption of the risk.

Reds fans may recall that during fireworks Fridays at the Reds games, the ushers and public address announcer wait until after the final out before asking fans near the fireworks to move from their seats. As Sam Wyche once said, “You don’t live in Cleveland.” The ushers at the Indians game may have jumped the gun in moving fans out of certain sections in preparation for the fireworks show. I say may have because there was conflicting testimony in depositions. The original complaint alleged that Rawlins was ordered from his seat, but during his deposition he testified that the usher merely stared at him with her hands on her hips, and that he had overheard other people saying the ushers were telling people to leave their seats.

Primary Assumption of the risk means that in activities which involve risk, each participant (or spectator) assumes the risk for any injury resulting from the risk associated with that injury. As the Court in this case referred to it, the Baseball Rule means that getting hit by a foul ball is a risk normally associated with going to a baseball game – whether you are sitting in your seat or walking to the refreshment stand (or being distracted by the San Diego Chicken). But, when you are being ordered to leave your seat before the final out of the game in preparation for the post-game fireworks show, the club has created a circumstance outside the normal routine of baseball game attendance. In those cases, the club may be liable for injuries resulting from being hit by a foul ball.

 

 

Pillars of strength: An agreement to agree upon something later is no agreement at all

Author By Christopher P. FinneyPosted on

When drafting leases, contracts and other agreements, frequently my client informs me that a key provision has been negotiated or an impasse has been resolved by making an agreement to negotiate an agreement later.

For example, the question the parties have is: “what is to be the lease rate upon a renewal in five years?”  Or, “what will be the location of a utility easement across land of the seller to serve new property being acquired by the buyer?”  And the answer the parties provide is: “will be negotiated at that time” or “we will decide at a later date.”

These answers are, of course, not answers at all.  And they constitute no agreement at all, for what if the parties fail to agree?

In the lease scenario, five years goes by, and the tenant exercises a renewal option subject to a “will negotiate the rental rate later” provision.  Then, the parties negotiate and cannot come up with an agreement.  Is the renewal effective?  If so, at what rate?  If the parties don’t set some sort of procedure (e.g., an appraiser will decide the rate) or some sort of benchmark (e.g., applying CPI inflation rate since the signing off the lease).  The “agree to something later” formulation is the recipe for conflict if not disaster.

In the easement scenario, the seller agrees to provide water, sanitary sewer and electricity easements after the closing on the property being sold, at a location to be decided between the parties. But what if the seller offers access only at a location costly and inconvenient to the buyer?  What if the buyer demands access in a location that makes the remainder of seller’s property undevelopable?  Again, without some procedure (a neutral third party will arbitrate disputes) or benchmark (as close to the east property line as practical), the agreement to provide agreed utility easements at a later date is a hallow promise and an illusory contract.

Now, if the parties trust one another, have a history of getting along, or have economic motivations to cooperate, it may make sense for parties to an agreement to “agree to agree later,” but don’t labor under the illusion that the agreement reached is in itself meaningful, binding or clear.

 

 

 

Navigating turbulent waters: Seven tips on settlement agreements

Author By Christopher P. FinneyPosted on

Ahhh, the peace that comes with conflict resolution!

Whether at the end of a long and raging litigation battle or at the beginning of a minor dispute, the parties have finally entered into settlement discussions.  This is going to be good, right?  Well, even settlement can be fraught with risks, so let’s be sure to get that one last step right.

Here are some valuable tips about settlement discussions:

1. Oral settlements are binding, unless the parties agree that the settlement agreement must be in writing.

Many of the disputes this firm handles are subject to the Statute of Frauds (such as the purchase and sale of real estate, see here).  As a result, many clients are under the misapprehension that a settlement of a dispute about that transaction is likewise subject to the Statute of Frauds (i.e., that the settlement agreement must be in writing and signed by the parties).  This simply is not true.  If the parties to a dispute reach resolution of the dispute orally, that settlement is binding, at least in Ohio and Kentucky.

Of course, oral agreements can be the source of misunderstanding, fraud in and of themselves (“I never agreed to that!”), being incomplete and being not well-thought-through.   Thus, one should be cautious about entering into oral settlement discussions.

However, many times nothing can get a dispute resolved faster and more commodiously than letting the parties — who many times have a long business relationship — hash things out in person, and even without lawyers.  I don’t want to interfere with those positive interactions, so in such circumstances, I recommend a “letter agreement” between the parties that says that the parties are going to engage in such informal conversations, but that nothing is binding on either of them unless and until they reach a final written agreement, signed by both of them.  The letter agreement should further provide that a waiver of the “written agreement” requirement cannot be amended except in writing.

2.  Be careful who you are releasing or from whom you are getting a release.

To get an effective release, the parties identified in a release can be more important than the release language itself. It goes without saying that a release is only binding upon the parties released and only benefits the released parties.  Make sure the parties with the real claims are the ones subject to the form of release.

Further, we usually include in the releasor class and the releasee class “heirs, successors and assigns” of the parties, as well as their “employees, directors, owners, agents, and attorneys.”

Finally on this point, it is important that the releasor(s) acknowledge and represent that they have not assigned their claim in the litigation.

3.  Be careful what you are releasing or what is being released.

As a general rule, when I am representing a defendant who is paying money to settle a claim, I want a full, complete and final release from the plaintiff.  This is so for several reasons, the biggest one being that the plaintiff now knows the “pain threshold” that will get my client to pay money.  If we leave unreleased some of the claims, we have a plaintiff who may well just come back for more.  Further, by paying a plaintiff money, you just help him finance phase two of the litigation.

One exception to this general rule that I consider when representing a defendant, and insist upon when representing a plaintiff, in a dispute relating to the sale of real property, is preserving the warranty covenants that may be contained in a deed for the property.  To me, these are critically important promises from a seller to a buyer, and usually unrelated to other property defects or contract claims.

Additionally, a plaintiff can release claims that do exist as of the time of the settlement, but what about releasing prospective claims?  Typically, it is inappropriate, and may not be possible, to release claims that may arise in the future.

4.  Clear up all ancillary claims and get the litigation dismissed.

In a matter closely related to the “what” of the release, is the issue of clearing up all ancillary disputes in conjunction with a dispute.

Many times a civil claim is attendant with criminal matters, license law complaints, mechanics liens and other impairments of title to real estate, administrative complaints and a host of other sticky issues.  Now, this article is a broad-brush treatment of this issue, and some tricky ethical and other considerations may require very delicately addressing those matters, but when we have the emotional “high” of a settlement, use that Kumbaya moment to put all the bad feelings (and paperwork and proceedings) behind you.

And, of course, make sure the underlying litigation is dismissed concurrent with the settlement.

5. Something I always (almost) forget — the court costs.

So, the defendant is going to pay money and the plaintiff is going to dismiss the lawsuit, but who is going to pay the court costs of the litigation?

In many instances, the court costs are a small number, but in others they can be tens of thousands of dollars.  In any event, it can be the “final insult” or the “icing on the cake” in a settlement.

And in the euphoria and rush of settlement discussions, it is many times the last thing I think of in terms of dispute resolution.  So, I have to remind myself of this component of a settlement.

In my experience, insurance companies routinely pay the court costs as a part of a settlement, but where the litigants have hard feelings or the expenses are significant, it can be a sticking point to have the court costs paid as a part of a settlement.  Thus, the court costs issue should be addressed at the front end of settlement discussions.

6.  Get a mutual release.

Don’t kid yourself that the person writing you a check for settlement may be carefully plotting his retaliation against the plaintiff in another or perhaps even unrelated matter.  “Paybacks are hell,” so they say.

When resolving the dispute for your plaintiff client, ask for a release from the defendant for any claims he may have against the plaintiff as well.  Now, I have had many a defendant say: “if you want a release from me, then pay me some money,” but it is certainly worth seeking such a release.

7.  Indemnities provide unlimited access to your checkbook.

Frequently, defendants paying money to plaintiffs  to settle a claim want the plaintiff to indemnify, defend or “hold harmless” the defendant from claims that may be made by third parties relating to the same events that are subject to the release.

These are not “throw away” provisions or boilerplate.  Rather, they provide open-ended access to a party’s checkbook.  Thus, such provisions could contain the seeds of financial disaster for the plaintiff.  At a minimum, these requests should be carefully considered.  Occasionally, an limited indemnity of “duty to defend” provision may be appropriate, but in most circumstances, requested indemnities are major “red flags” that I reject when representing a plaintiff releasing claims.

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A settlement is a fine end to a dispute, but make sure through these steps that it in fact really the end and really is fine.

Chief Justice’s comments on speedier, more efficient litigation are meaningful for litigants in small cases

Author By Christopher P. FinneyPosted on

Let’s face it, the high cost of litigation drives the outcome for most litigation, as most litigation is low-dollar litigation The vast majority of cases for individuals and business do not involve millions of dollars or momentous constitutional issues.

Thus, Chief Justice’s Roberts comments of today urging trial courts and litigants to achieve a swifter and a more efficient route for litigation has application to the majority of cases this firm handles.

Unfortunately, one party or another to litigation frequently has reason to obstruct the case getting to trial and driving up the cost of litigation.  And, candidly, it seems that some attorneys want to “work a case” — i.e., pull fees from it, before working towards a reasonable settlement.

To work through the thicket of discovery and motions, it frequently falls to the trial judge to move a case along.  Chief Justice Roberts today, among other things, urged trial judges, to do just that.

For our clients, plaintiffs and defendants, that will serve the cause of justice.

 

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