When Baseball is a Bone Breaking vs. a Heart Breaking Experience, who is Responsible?

By: Stephen D. Richman, Senior Counsel-Kohrman, Jackson & Krantz, PLL

While a good deal of the heartbreak from our beloved Cleveland Indians just missing another World Series victory is behind us, some fans have had more than their hearts break as a result of an Indians baseball game.

In the recent case of Rawlins v. Cleveland Indians Baseball Co., Inc., 2015 Ohio 4587 (Cuyahoga County) the Eighth District Court of Appeals was faced with the question of whether the owner of property (the Cleveland Indians) was liable for injuries sustained by Keith Rawlins during an Indians baseball game.

Besides being “die hard Indians fans,” this article is in our real estate blog because it deals with the general issue of “premises liability”. Generally, in Ohio, all property owners/occupants are responsible for maintaining safe conditions for the people visiting their property and can be held liable for certain injuries on their property. The degree of responsibility (“duty of care”) depends on multiple factors, most notably who has entered on to the land, be it a social guest/invitee, a licensee, or a trespasser.  The duty of care might be as easy as posting a sign, and as costly as re-paving a parking lot to change its grade.

Of course, there are always exceptions to the general rule, and this holds true with regard to premises liability.

One such exception worthy of discussion is the one at issue in the Rawlins case, known as “the Baseball Rule.” The Baseball Rule is actually the name for the more recognizable defense to premises liability negligence claims (i.e., primary assumption of the risk) in sporting event situations. Under this doctrine, a plaintiff who voluntarily engages in a recreational activity or sporting event assumes the inherent risks of that activity and cannot recover for injuries sustained in engaging in such activity unless the defendant acted recklessly or intentionally in causing the injuries. Injury claims resulting from a foul ball at a baseball game, tripping on a root during a nature night hike, or from a roller skating collision are examples of negligence claims which could be effectively barred by the defense of assumption of the risk.

Are there exceptions to the exception? Are there specific circumstances caused by the property owner that call into question whether or not the injured party truly assumed the risk?

These were the basic issues presented to the Eighth District Court of Appeals in Rawlins.

The facts of the case are as follows: In July of 2012, Keith Rawlins bought tickets for himself and his daughter to the Indians game against Baltimore. It was a night game, with a fireworks show scheduled for after the game. The tickets Rawlins purchased were for seats located on the third-base side of the field in Section 171 and, therefore, were subject to closure for the post-game fireworks show. In his complaint, Rawlins alleged that at the top of the ninth inning, an usher ordered them to immediately vacate their seats. In a later deposition, however, Rawlins testified that an usher came to the end of the row where he and his daughter were seated and “just stood there with her arms folded” “or hands on her hips” and stared at him, seemingly delivering a message to move. Nevertheless, when Rawlins and his daughter left their seats at the top of the ninth inning, Mr. Rawlins was struck by a foul ball. Rawlins maintained that the accident occurred because they were ordered out of their seats due to the post-game fireworks show.

In November, 2013, Rawlins filed a negligence action against the Cleveland Indians as a result of injuries Rawlins sustained after he was hit by the foul ball. In November, 2014, the Cleveland Indians filed a motion for summary judgment (basically, this is a request for an early dismissal of an action based on law), contending that the action was barred by the defense of primary assumption of the risk. In January, 2015, the trial court granted the Cleveland Indians’ motion for summary judgment. Rawlins then appealed to the Cuyahoga County Court of Appeals.

Rawlins argued that the doctrine of primary assumption of the risk does not apply when there are attendant circumstances caused by the property owner that are not inherent to the game of baseball. Rawlins claimed that the order to move out of their seats constituted the attendant circumstances.

In arriving at its decision to overrule the trial court’s decision of summary judgment in favor of the Cleveland Indians, the court in Rawlins first analyzed cases that applied the general rule and supported the position of the Indians, namely, that “baseball is an inherently dangerous activity and that the spectator is in the best position to protect him or herself from injury at a baseball game.” According to the Rawlins court, “The consensus of … opinions is to the effect that it is common knowledge that in baseball games hard balls are thrown and batted with great swiftness, that they are liable to be thrown or batted outside the lines of the diamond, and that spectators in positions which may be reached by such balls assume the risk thereof. This theory is fortified by the fact that such spectators can watch the ball and can thus usually avoid being struck when a ball is directed toward them.”

The court in Rawlins, however, also analyzed a prior Supreme Court of Ohio decision (that it believed dispositive of the Rawlins case) that seemingly establishes an exception to the “primary assumption of the risk rule”. That case is Cincinnati Baseball Club Co. v. Eno, 112 Ohio St. 175, 147 N.E. 86 (1925). In Eno, the spectator was injured by a baseball during the intermission of a double-header that was hit by a player practicing near the unscreened portion of a stadium grandstand. The Ohio Supreme Court concluded that the facts in Eno presented a materially different situation from the general rule, and that there was a question of fact whether the stadium owner was responsible for allowing players to practice in close proximity to the grandstand during an intermission when the scheduled games were not being played.

Citing other Ohio Supreme Court decisions that followed Eno, the court in Rawlins also recognized that “In many situations, as in Eno, there will be attendant circumstances that raise questions of fact whether an injured party assumed the risk in a particular situation.”

The Cleveland Indians disagreed with Rawlins’s attendant circumstances theory. The ball club contended that fireworks shows are a common phenomenon of modern baseball, and introduced precedent in the form of a Second Appellate District case that held that even though a patron was distracted by a mascot when the patron was hit by a foul ball, mascots are part of, and inherent to baseball and accordingly, the patron still had a duty to be vigilant.

In overruling the trial court, the court in Rawlins agreed that there is an exception to the primary assumption of the risk doctrine (as applied in the Eno case), however, it held that whether or not the Indians did in fact order Mr. Rawlins from his seat, and whether or not the order to relocate because of the fireworks was an attendant circumstance not inherent to baseball were questions of fact that would need to be heard by the trial court.

In other words, based upon the holding in Rawlins, “under the assumption of the risk doctrine, the sponsor of a sporting event has a duty “‘not to increase the risk of harm over and above the inherent risk of the sport,’” and whether or not the risk of harm is so increased is a genuine issue of fact.

So what is the moral of this story? Simply remember that hot coffee is hot, a fish entrée is bound to include bones, and baseballs are bound to be flying overhead during a baseball game, which in the 21^st century includes mascots, fireworks and hopefully more World Series games for the Cleveland Indians.

New Provision in Ohio Law May Help Secured Lenders Protect Their Mortgage Lien During Bankruptcy

In the past couple of years, I’ve written about the cost to lenders when there are technical errors in their recorded security documents, such as mortgages, and how they chose to correct those errors. See “Mortgage Execution in Ohio: the Twilight Zone where a person can both ‘know’ and ‘not know’ the same information” and “Lenders Beware: Mortgage Errors Can Really Cost You.”  

 

Bankruptcy trustees have filed numerous adversarial proceedings in Ohio seeking to remove a secured lender’s preference on mortgaged real property by asking the court to void mortgage on a technical defect in the acknowledgement clause. Courts have frequently sided with the bankruptcy trustees in these cases, holding that the defective acknowledgement in the mortgage due to its failure to strictly follow the requirements in RC §5301.01 renders the mortgage not entitled to be recorded (even though it was) and therefore it did not provide constructive notice (even though the trustee had actual notice). Recent legislation might just change the outcome of many of these cases.

 

The Legacy Trust Act (the “Act”) became effective March 27, 2013. Sub H.B. 479, which included the Act, also included modifications to other statutes to complement the Act.  RC §317.08 [Records to be kept by county recorder.] provides for the various types of records to be kept by the county records, which includes, among others, deeds, mortgages, leases, land installment contracts, affidavits and the like, and was amended by the Act to add a new category for transfers, conveyances or assignments of any type of “tangible or intangible personal property…”. The Act also amended RC §1301, the general provisions affecting commercial transactions to added a new section, RC §1301.401 [Effect of recording documents.]

 

RC §1301.401 provides that any document referenced in RC §317.08 and any document, the filing of which is required or allowed under Chapter 1309 [Secured Transactions], is a “public record.” This section also states that “[a]ny person contesting the validity or effectiveness of any transaction referred to in a public record is considered to have discovered that public record and any transaction referred to in the record as of the time that record was first filed with the secretary of state or tendered to a county recorder for recording.” (emphasis added)

 

It’s not unreasonable to argue that, based on the language in RC §1301.401, a bankruptcy trustee should be deemed to have had constructive notice of the mortgage at the time it was tendered to the recorder for recording.  Until a court in Ohio addresses the interplay between RC §1301.401 and RC §5301.01, we won’t know which provision will come out on top. However, look for lenders’ counsel to start using this new provision in the Act to buttress their arguments against voiding the lenders’ mortgages.

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Letters of Intent--Nonbinding Agreements or Not?

It's not uncommon for parties to enter into a letter of intent or term sheet prior to proceeding to negotiate a purchase agreement. The purpose of a letter of intent or term sheet is to identify the key terms of a transaction, such as the sale of commercial real estate, upon which the parties mutually agree to negotiate a purchase agreement.

In most situations, I find the use of letters of intent or terms sheets (LOIs) to be useful. It makes sense for parties to ensure they are in agreement on the critical business terms before running up too many legal fees on a purchase agreement to nowhere. I know that others in my profession don't always agree and prefer to go straight to negotiating the purchase agreement. Each transaction is different and it's best to take into consideration the unique characteristics of each deal and exercise common sense. Sometimes it will make sense to negotiate the LOI first and sometimes it won't.

The reason some prefer to skip the LOI is the risk that an LOI, which most consider to be nonbinding, ends up being binding upon the parties when one party doesn't want it to be.

Here are a couple of examples how that can happen....

Many business clients like to negotiate the LOI on their own. On more than one occasion, I've had clients email signed LOIs to me and I cringed when I saw what they agreed to in their LOIs.  If an ill conceived provision was agreed to in the LOI, that party will likely have to live with it.  It is difficult, if not close to impossible, to keep negotiations amicable and moving towards a successful closing when one party starts reneging on terms it had previously agreed to in the LOI.

Sometimes, the LOI is extensively negotiated by each party's counsel and each side proceeds to negotiate the purchase agreement. However, prior to signing a definitive purchase agreement, a better deal comes along for one of the parties to that LOI. That party decides to walk away even though the other party has met every obligation and spent considerable sums to move the transaction along.

The common element in each of these examples is that one party wants out or regrets agreeing to certain terms and conditions and wants a 'do over'.  However, while LOIs generally may not be considered binding, parties are expected to negotiate in good faith. On more than one occasion, a court has enforced an LOI when it determined that a party to it was not acting in good faith.

Potential buyers and sellers of real estate should take care regarding what terms and conditions they agree to in LOIs, and consider bring their legal counsel into the loop before signing on the dotted line.
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A Victory for Property Rights

The Supreme Court delivered a victory for property rights in June with its decision in Koontz v. St. Johns River Water Management issued on June 25, 2013.  The case addressed whether a Florida wetlands district can place excessive conditions on its approval of a land use permit.  Sadly, the circumstances at the basis of this case started back in 1994 and are only now being finally resolved. 

Mr. Koontz is a landowner in Florida who wanted to approximately 15 acres of property that was classified as wetlands. Mr. Koontz wanted to develop 3.7 acres of the land and was willing to deed the other 11 acres to the water management district  for conservation. Sounds like a pretty good deal for the district with 2/3 of the land going for conservation and only 1/3 being developed.

The district refused, wanting all but one acre of Mr. Koontz's land, or in the alternative, allowing him to proceed with the 3.7 acre development, deeding the conservation easement on the 11 acres PLUS paying thousands more to improve some other district land that had nothing to do with his proposed development.

Mr. Koontz refused and sued the district, alleging that its unreasonable exercise of state power was a taking of his property without just compensation. The Florida courts disagreed using some rather upside down logic that since Mr. Koontz was refused the permit, his land wasn't actually taken and therefore he didn't have a claim.

The US Supreme Court disagreed with the Florida court, holding that

"extortionate demands for property in the land-use context run afoul of the Takings Clause not because they take property but because they impermissibly burden the right not to have property taken without just compensation."

This decision is significant as the government at all levels can be rather creative in finding more ways to extort property from landowners.  However, I'm troubled that the decision was only 5-4. We are only one Supreme Court justice away from the government being able to further burden with impunity people's ability to use their own land.
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Learning a Lesson the Hard Way -- Why paying attention to the paperwork and contract terms matters

Many people in business are not big on paperwork, and some get down right annoyed with lawyers who want to direct their attention to every little detail. Often I have to ask a client the same question several times and in many different ways in order to pry out of him or her the information I need in sufficient detail to complete my task.  That lack of attention to certain details and not appreciating their importance can get a company into trouble.

Below is an example of a 'hot mess' waiting to happen.....

Certain commercial property is owned by a company. The principals of that company will often have a separately owned company that provides property management services to the commercial property. While these two company are owned by the same person , by law, each company and the owner all have separate legal identities and each will carry their own insurance coverage with typical exclusions and notice requirements.

Property owner, through its management company, retains a general contractor to provide construction services on the property.  The general contractor is owned by an affiliate of the property owner, or is otherwise a longtime business associate. Standard contracts are signed as may be required by lenders, but no one is reading them very closely, because they are all related or are long time friends who trust each other. Certificates of insurance would also be provided. Again, never really looked at that closely. General contractor then contracts with certain subcontractors for parts of the construction work. This work should also be subject to contracts with specific requirements for insurance coverage that adds the general contractor and property owner as additional insureds on the subcontractor's insurance. The certificates of insurance are obtained and tossed in a file without any real review. After all, general contractor and the subcontractor have worked together on many jobs over the years without a problem. 

During the construction, an employee of one of the subcontractors injures himself. He's rushed to the hospital and recovers fully. At the time of the accident, property owner, contractor and subcontractor all fail to notify their respective insurance carriers of the accident. While no claim has been filed (yet), it's a potential claim and statutes of limitation can run 1-2 years.  Insurance policies typically have requirements that the insured notify the insurance company within a specified period of time after the event or risk losing coverage.

11 months pass by and the employee files a lawsuit. He names everyone, including the property owner, property management company, general contractor and subcontractor. Property owner and property management company each notify their insurer, who first threaten to not cover the lawsuit due to failure to timely notify them. They also look to the general contractor's insurance.  The general contractor's insurance refuses to cover it due to failure to timely notify it and other exclusions. It directs general contractor to look to the subcontractor's insurance. Subcontractor failed to add general contractor and property owner as additional insureds so its insurance company washes its hands of the mess. No one bothered to review the certificates of insurance  to verify that they were complete and now it is too late. Insurers for property owner and property management company turn on the general contractor and counter sue his company. They do not care about the long working relationship or other affiliation between the companies.  First lesson to be learned -- never underestimate how low an insurer will stoop to get out of covering a messy claim.

The general contractor is left exposed with no coverage at all and having to sue the subcontractor for reimbursement of potential losses. Business relationships are strained to the limited.

Worse, no one will be reimbursing general contractor for the massive legal fees he incurs to protect his interests. If the case goes all the way to trial, the fees could run into six figures.  That is what I call a rather expensive lesson to learn that the paperwork is important, to read and follow contracts and to keep the insurance agent on speed dial.  
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FAILURE TO FILL-IN A BLANK MAY RENDER CONTRACT UNENFORCEABLE

(on the facts of Bertovich v. St. John, 2012-Ohio-475)

What is the Statute of Frauds?

In Ohio (and most other jurisdictions), the “Statute of Frauds” (originating from a 1619 Act of Parliament) basically establishes that certain contracts must be memorialized in a signed writing to be enforceable. Specifically, Ohio’s Statute of Frauds (ORC §1335.05) provides, in pertinent part that: “no action shall be brought …upon a contract or sale of lands… or interest in or concerning them,… unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith...”. There are limited, “equitable” exceptions to the rule, such as “part performance”, “unjust enrichment” and “promissory estoppel” that courts have imposed in order to avoid unfair legal remedies. See “An Oral Contract to Buy Real Estate is not Worth the Paper it is not Written on” — Ohio Real Estate Blog, April 30, 2010.

What writing is sufficient to satisfy the Statute of Frauds?

More perplexing than whether or not a writing exists, is the question of what writing is sufficient to satisfy the Statute of Frauds? The general law in Ohio is that in order for a real estate contract to comply with the Statute of Frauds, it is necessary that the signed contract or memorandum: (1) identify the subject matter; (2) establish that a contract has been made (both parties to the contract must assent to its terms and have a “meeting of the minds” as to those terms); (3) identify the subject matter of the contract (i.e. the property); and (4) state the essential terms with reasonable certainty.

What are the essential terms of a real estate contract?

In Ohio, courts have identified the essential terms of a real estate contract as: “the identity of the parties to be bound; the subject matter of the contract; consideration; a quantity term and a price term”. What is not essential? According to recent Ohio court decisions, a written contract for the sale of land need not include the character of the deed to the executed, specify who should pay taxes on the sale or state whether a mortgage must be given to secure the purchase money in order for the contract to still comply with the Statute of Frauds. Additionally, the contract does not violate the Statute of Frauds because the writing does not state a specific date of performance (i.e. closing date) or because of the failure to designate the nature of the interest being conveyed (See, e.g., Davis v. Meyers, 2012-Ohio-1518 (in such case, the buyer is entitled to demand that a marketable title shall be given).

Should buyers and sellers be that concerned?

With all this court authority seemingly watering down the Statute of Frauds, should buyers and sellers be that concerned regarding the specifics of their contracts (beyond price, and identification of the property)? The answer is definitely YES, for two basic reasons. First, the general rule in Ohio is that when the parties have clearly agreed to the “critical terms” of a real estate transaction, the court may determine on its own the meaning of any ambiguous or uncertain terms. While courts will typically factor in to their decisions, what they believe the parties mutual understanding to be, the custom or practice in the trade, and other established legal principles, more often than not, a court’s determination of the parties’ understanding does not match up with the parties actual understanding and someone goes home from court unhappy.

The second reason for concern is that there is no hard and fast rule or finite list as to what is and what is not an “essential” term of a real estate contract. While we know that price and property description are essential terms, and that the closing date is a non- essential term, there are limitless provisions that could be deemed essential by a court of law, the absence of which could render the contract unenforceable.

Fill in (or delete) those blanks!-Bertovich vs. St. John, 2012-Ohio-475

One recent example of why you should worry about missing terms in a real estate contract is the holding in the recent Eight District Court of Appeals case of Bertovich vs. St. John, 2012-Ohio-475. The Bertovich decision involved a residential form contract that included the following provisions: “Seller agrees to comply with any and all local governmental point-of-sale laws and/or ordinances. Seller will promptly provide Buyer with copies of any notices received from governmental agencies to inspect or correct any current building code or health violation. If applicable, Buyer and Seller shall have _____ days after receipt by Buyer of all notices to agree in writing which party will be responsible for the correction of the building code or health violations. In the event Buyer and Seller cannot agree in writing, this agreement can be declared null and void by either party”. A handwritten addendum to the contract provided the following language: “Buyer shall assume all costs associated with and related to the sale of the property and transfer of title”.

The issue (as between Buyer and Seller) in Bertovich centered around who was to pay for point-of-sale violation repairs. The Seller argued that the addendum clause, requiring buyer to pay for all costs, included the obligation to pay for any point-of-sale repairs. The Seller explained that the parties did not fill in the blank in their contract because that section was inapplicable, and the addendum should have erased any doubt as to responsibility for costs and repairs. The Buyer argued that it was only planning to assume the repair cost of the driveway which was already known, not the costs to cure point-of-sale violations. According to the Buyer, the Seller had the legal obligation to comply with point-of-sale laws, so there was no need to fill in the blank regarding point- of-sale inspection repairs. When the Seller told the Buyer he would not pay for any such repairs, the Seller cancelled the inspection, and the Buyer repudiated the agreement. Thereafter, the Buyer bought a house from a different seller and sued St. John for damages.

The trial court in Bertovich held (which holding was affirmed by the Eighth District Court of Appeals) that the Bertovich purchase agreement was violative of the Statute of Frauds, and therefore unenforceable. The courts did not focus on whether or not the making of point-of-sale inspection repairs (and the time to determine who is to pay for same) was an essential term of a real estate contract. Rather, the trial court and appellate court looked at the contract as a whole and determined that the terms of the contract (taken together) were not sufficiently certain because they could not provide the basis for determining the existence of a breach and for giving an appropriate remedy. The courts acknowledged that while they did have the authority to determine the meaning of ambiguous or uncertain terms in a contract, they could not make a contract for a buyer and seller by determining what their agreement was with regards to certain, non-ambiguous terms. Since point-of sale-repair was a performance term of the Bertovich contract, and since there was no agreement as to when it was to be performed and by whom, the contract would be deemed unenforceable as a violation of the Statute of Frauds.

To many reviewers of this case, the Bertovich contract was sufficiently clear and should not have been deemed violative of the Statute of Frauds. The contract clearly provided that the Seller was to comply with point-of-sale laws. Most of these laws require the owner/seller to repair any violations. While Mr. Bertovich (the Buyer) did contract to pay “all costs”, that provision is typically interpreted as a closing cost provision (survey, conveyance fee, etc.) not an obligation to cure a seller’s point-of-sale violations. True, there was a blank that was not filled in regarding the time period to agree upon correcting violations after receiving notices to that effect. However, how is that applicable when there were no notices involved? In fact, the clause itself begins with the words “If applicable”. It is difficult to understand how an inapplicable term becomes a missing, essential term of the contract, rendering it unenforceable. Even the Eighth District Court of Appeals recognized the Bertovich decision could have gone the other way by stating: “even assuming there was a contract and a breach, Buyer did not incur any damages”. No ambiguity or argument with these words. It turns out that Mr. Bertovich bought a comparable property in lieu of St. John’s property, and paid less than he would have, had his original deal been completed.

Moral of the Story

The moral of this story? Review carefully all real estate contracts, and fill in all the blanks (if applicable). Delete inapplicable clauses. Clearly establish who is to perform all obligations and who is to pay to fulfill them. A legal professional is best equipped to do this. Having a contract be deemed definite enough to not run afoul of the Statute of Frauds is only half the battle. The other is to “say what you mean precisely, or a judge may tell you what you meant” (See miscellaneous articles under the heading “Watch Your Language” at Ohio Real Estate Blog).

You Got to Know When to File ‘Em (Ohio Foreclosure Actions)

In order to invoke a court’s jurisdiction (i.e. authority to hear a case), a plaintiff must demonstrate a personal stake in the outcome of a lawsuit.  This principle is also referred to as “standing”. In cases to enforce an obligation to pay mortgage debt, such as a foreclosure action, the party who owns the note (i.e. the original lender, or an assignee of the original lender) at the initiation of the action would be the party with standing to sue. With mortgages being assigned “left and right” these days, it is not always easy finding the original note, and savvy defense lawyers have been successful in getting some of these foreclosure actions dismissed.

Knowing when to file foreclosure actions is just as important as identifying who should file. Suppose “Original Lender A” assigns a note/mortgage to “New Lender B” who assigns to “New Lender C” (and New Lender C holds the note and mortgage at the time of judgment), but New Lender C filed the foreclosure action prior to the assignment from New Lender B. Before the recent Supreme Court of Ohio case Fed. Home Loan Mtge. Corp. v. Schwartzwald, Slip Opinion No. 2012-Ohio-5017, the answer depended on which appellate district in Ohio the action was filed in.

The facts of the Schwartzwald case are simple enough. In November 2006, Mr. and Mrs. Schwartzwald purchased a home in Xenia, Ohio and received a mortgage loan from Legacy Mortgage. Legacy then assigned the note and mortgage to Wells Fargo Bank, N.A. (as servicing agent for Federal Home Loan Mortgage Corporation (“Freddie Mac”)). In November 2008, Mr. Schwartzwald lost his job and defaulted on the mortgage loan in January of 2009. While Wells Fargo preliminarily indicated its consent to a “short sale” of the property, Freddie Mac commenced a foreclosure action on April 15, 2009.

On May 15, 2009, Wells Fargo formally assigned the note and mortgage to Freddie Mac, and filed a copy of the same with the trial court who, upon motion for summary judgment, ordered the property foreclosed, and to be sold at sheriff sale. Freddie Mac then bought the property at the sheriff’s sale.

Upon appeal, the Second District Court of Appeals affirmed, concluding that although Freddie Mac lacked standing at the time it commenced the foreclosure action, it cured that defect by the assignment of the mortgage and transfer of the note prior to entry of the judgment of foreclosure. The court of appeals acknowledged and certified that its decision conflicted with the First District Court of Appeals (Wells Fargo Bank, N.A. v. Byrd, 2008-Ohio-4603) and the Eighth District Court of Appeals (Wells Fargo Bank, N.A. v. Jordan, 2009-Ohio-1092). Thus, the “table was set” for Fed. Home Loan Mtge. Corp. v. Schwartzwald to be decided by the Ohio Supreme Court.

The Ohio Supreme Court simply rejected the Second District’s finding that Freddie Mac’s initial lack of standing to sue had been remedied by the assignment of the Schwartzwald’s mortgage and promissory note from Wells Fargo to Fannie Mae after the foreclosure had been filed, and held: “Here, it is undisputed that Freddie Mac did not have standing at the time it commenced this foreclosure action, and therefore it failed to invoke the jurisdiction of the court of common pleas. Accordingly, the judgment of the court of common pleas is reversed and the case is dismissed.”

Good news for the Schwartzwalds? Yes and no. Yes, because the case is dismissed and they get the property back. No, because nothing prevents Freddie Mac, who now is a real party in interest with standing, from filing a new foreclosure action.

RE and Construction Contract Disputes--To arbitrate or go to court, that is the question

It used to be the AIA and other form contracts contained a mandatory arbitration clause. A few years ago, the AIA removed its arbitration clause and the default is now litigation unless the parties specifically select arbitration. However, when negotiating a contract, whether for construction or other real estate matters, the question arises, how to handle disputes.

There are pros and cons to both.  It depends on what's important to the parties.  Here are some factors to consider--

• Privacy - If privacy is important to you, arbitration is the better option. Litigation in court is very public. However, if privacy matters more to one party than the other, then being able to threaten a public court battle can be strategically useful to the other party.
• Costs - Arbitration requires higher filing fees and the parties pay for the arbitrator(s) time.  If the dispute is small, arbitration is less desirable. 
• Speed  - Some say arbitration is faster. Other litigators have told me that arbitration is no longer quicker and cheaper than litigation. Know how quickly arbitration can proceed versus your local court system before agreeing to one approach over the other. One advantage to arbitration in a large, complex case is the ability of an arbitrator to structure the procedures to the specific needs of a case and otherwise move the case efficiently. That may help contain costs in the long run; 'may'--no guarantee.
• Expertise - In arbitration, you can select arbitrator(s) that have some expertise in the subject matter of your contract. Having an arbitrator with the appropriate expertise can help in obtaining a well-informed decision. In litigation, you are randomly assigned a judge whose biggest skill may be in winning elections. Some jurisdictions are moving to create specialized business/commercial courts to help improve the court system on handling these cases.
• Procedural - In litigation, there are rules of civil procedure that address the process and rules of discovery that address how you obtain discover information to be used in trial.  Depending on how you set the parameters for arbitration, you don't automatically have a right to use discovery rules to obtain information. If you have access to all the information and evidence that you need for the hearing, then it may not matters. However, if in order to prove your side you need information that is in the possession of the other side, then you may not have a way to discover that information in the arbitration process unless your agreement provides for it.
• Inclusion of necessary parties - Arbitration is by agreement only. If there is some likelihood that dispute resolution would require the involvement of several parties subject to different contracts, then the dispute resolution provision in each agreement would need to be essentially the same or you would need their agreement to participate. 

There is no one-size-fits-all answer. It depends on what makes sense in a given situation. As a transactional lawyer (i.e., I 'do deals' and never set foot in a court room,) I often find that the best solution is frequently to just work out a reasonable business solution and avoid both.
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