Tuesday, Oct. 27, 2015
Talawanda City School District Board of Education (et al.) v. Joseph W. Testa, Tax Commissioner of Ohio (et al.), Case no. 2014-1798
Ohio Board of Tax Appeals
Mary Marcum v. State of Ohio, Case nos. 2014-1825 and 2014-2122
Fourth District Court of Appeals (Gallia County)
American Municipal Power, Inc. v. Bechtel Power Corporation, Case no. 2014-1847
U.S. District Court for the Southern District of Ohio
Terry L. Martin v. State of Ohio, Case no. 2014-2028
Second District Court of Appeals (Montgomery County)
Is School Property Leased to Farmer Exempt from Property Taxes?
Talawanda City School District Board of Education (et al.) v. Joseph W. Testa, Tax Commissioner of Ohio (et al.), Case no. 2014-1798
Ohio Board of Tax Appeals
ISSUES:
- Is real property owned by board of education exempt from taxes under R.C. 3313.44 regardless of the property’s use?
- Does R.C. 5709.07(B) exempt leased property from taxes when the rental income is used exclusively to support a school district?
- Should 2010 changes related to the leased property have been considered by the tax commissioner and in the appeal to the Board of Tax Appeals (BTA)?
BACKGROUND:
The Talawanda City School District Board of Education bought 154 acres in 2009 to build a new high school. The board filed an application with the Butler County auditor in January 2010 to exempt the school’s property from taxes.
At that time, the board was leasing 34 acres to a local farmer who grew corn and soybeans on the land for a short period. That lease was terminated, but another local farmer leased 17 acres from the school beginning in June 2010. During the two-year lease, the board charged the farmer $65 per acre annually, or $1,105 each year.
In March 2012, the tax commissioner approved the tax exemption for most of the school property, but denied the exemption for the farmed land concluding that it was a commercial use of the property. The school board appealed to the BTA, which agreed with the commissioner in a September 2014 decision. The board submitted an appeal to the Ohio Supreme Court.
School Board’s Positions
Attorneys for the school board assert that a 1931 amendment to the Ohio Constitution eliminated the provision that property wouldn’t be taxed when used exclusively for a public purpose. They contend that the Ohio Supreme Court confirmed this interpretation in Denison University v. Board of Tax Appeals (1965). The Court ruled the amendment altered the state’s tax system and gave the General Assembly the power to enact tax exemptions, they maintain.
They then point to R.C. 3313.44, which was amended in September 2010 to read: “Real or personal property owned by or leased to any board of education for a lease term of at least fifty years shall be exempt from taxation.” They argue the law’s plain language excludes real property owned by a board of education from taxes regardless of how the property is used.
“The General Assembly, even after the 2010 amendment, clearly has decided not to include a public purpose requirement in R.C. 3313.44,” they write in the brief to the Court. “It merely requires that a board of education own real property in order for the tax exemption to apply.”
A statute the tax commissioner and BTA relied on defines whether private property is exempt from taxes when used as a school in certain situations. The school board’s attorneys counter that the law doesn’t apply in this case because the Talawanda schools are public.
They add, though, that the school is permitted under R.C. 5709.07(B) to receive rent for a lease on the property and still remain free from property taxes. They explain that the rent supported the school and its educational purpose. For example, the high school’s science classes, as well as others, visited and worked on the farm to learn.
Tax Commissioner’s Responses
Attorneys for the state tax commissioner argue that property must be used for public school purposes to qualify as tax exempt under R.C. 3313.44. They maintain the statute doesn’t apply to property leased from a school board for nonpublic uses. The Ohio Supreme Court has never exempted property from taxes under the school board exemption unless the land is used exclusively for purposes of the public school, they claim citing a 1948 decision from a Cincinnati school district.
The 1965 Denison ruling didn’t address case law establishing that a school’s property must be used for a public purpose to qualify for a tax exemption and didn’t change the meaning of the relevant statutes, they assert. They cite a 2010 Ohio Supreme Court decision, Anderson/Maltbie Partnership v. Levin, which they argue also concluded that publicly held land leased or otherwise used for profit isn’t exempt from taxes.
In their view, the legislature must specifically exempt a certain use of public property in state law. Otherwise, no tax exemption applies, they maintain. The school board has the burden to show the statutory authority that entitles it to avoid taxation on the land used for farming, they argue.
They add that rental income from property to advance a school’s purpose isn’t the same as using that property for a public purpose. As a result, R.C. 5709.07(B) doesn’t exempt the farmed land from taxation, they conclude.
Additional Briefs
An amicus curiae brief supporting the school board’s position has been submitted collectively by the Ohio Association of School Business Officials and the Ohio School Boards Association.
- Kathleen Maloney
Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.
Contacts
Representing Talawanda City School District Board of Education: Gary Stedronsky, 513.421.2540
Representing Joseph W. Testa, Tax Commissioner of Ohio, from the Ohio Attorney General’s Office: David Ebersole, 614.644.8909
May Appeals Court Consider Whether Trial Court Imposed Unreasonable Sentence?
Mary Marcum v. State of Ohio, Case nos. 2014-1825 and 2014-2122
Fourth District Court of Appeals (Gallia County)
ISSUES:
- Does the test described by the Ohio Supreme Court in State v. Kalish (2008) apply to the review of felony sentences after amendments were made to R.C. 2953.08(G) in 2011?
- Given the language “[i]n addition to any other right to appeal” in R.C. 2953.08, does R.C. 2505.03 also allow appellate courts to review discretionary sentences to consider whether a trial court abused its discretion?
BACKGROUND:
Two Gallia County sheriff’s deputies, who received on a tip about a “meth lab,” visited a Gallipolis house in late January 2013. They noticed trash bags that were giving off a strange odor on the porch. They knocked on the door of Mary Marcum’s home, where she, her mother, and her two children, 9 and 11, lived. At the deputies’ request, Marcum allowed them to search the premises.
The officers found materials used to make the illegal drug methamphetamine in the trash bags. Marcum told them she had bought one of the ingredients, an over-the-counter decongestant, for her mother. She stated that two friends had stopped by her house a few days earlier asking to make meth there, but she refused to let them. She suspected they left the trash bags on her porch.
Marcum was arrested, and tested positive the next day for methamphetamine and amphetamines. She contended the test results were caused by Adderall and a stimulant, two prescriptions she took.
A jury found Marcum guilty of the illegal manufacture of methamphetamine in the vicinity of a juvenile. The sentencing range for the first-degree felony was no fewer than four, and no more than 11, years in prison. The trial court sentenced her to 10 years, fined her $10,000, and suspended her driver’s license for five years.
Sentence Is Contested
Marcum appealed, arguing the trial court abused its discretion by sentencing her to nearly the maximum prison term. However, the Fourth District Court of Appeals agreed with the conviction and sentence. The Fourth District also determined that its ruling conflicts with decisions from two other appellate courts in the state, and notified the Ohio Supreme Court.
Kalish and Subsequent Amendments to State Law
In State v. Kalish (2008), the Court outlined a two-part test for appeals courts reviewing the sentencing decisions of a trial court. First, the appeals court must decide whether the sentence complied with the relevant statutes and rules. If so, the appeals court then looks at whether the trial court abused its discretion in imposing the sentence.
The primary statute involved in this case, R.C. 2953.08(G), has a complex history. Following Kalish, the U.S. Supreme Court reevaluated an earlier decision and concluded that states could again require judges to make certain factual findings before issuing felony sentences. As a result, the General Assembly amended R.C. 2953.08(G) in 2011 to restore earlier language that had been removed, and the legislature included the sentence, “The appellate court’s standard for review is not whether the sentencing court abused its discretion.”
Is Kalish Test Still Relevant?
Attorneys for Marcum claim the 2011 amendments didn’t affect the Kalish test. That statute applies when sorting out whether a sentence is contrary to law, they state. However, this case, they maintain, is a review of the trial court’s application of R.C. 2929.12, which describes how trial courts imposing a sentence are to consider the seriousness of an offense or the defendant’s likelihood of committing another crime. When an appeals court reviews how a trial court has applied R.C. 2929.12, the correct standard is whether the trial court committed an abuse of discretion in sentencing, not whether the sentence was contrary to law, they argue.
Lawyers from the Attorney General’s Office counter, though, that the 2011 amendments to R.C. 2953.08(G) restored language that specifically forbid the appellate review of a sentence for abuse of discretion. The Kalish test no longer applies when appeals courts are reviewing felony sentences because the legislature mandated otherwise when it changed the law in 2011, they maintain. In their view, the current statute unambiguously prohibits a review of a trial court’s sentence for an abuse of discretion.
Defendant Seeks Review for Abuse of Discretion
Marcum’s attorneys also argue the phrase “[i]n addition to any other right to appeal” in R.C. 2953.08(A) means the options for appealing set forth in that statute “supplement” remedies provided in other statutes. Their position depends on one of those other laws, R.C. 2505.03(A), which states that “[e]very final order, judgment, or decree of a court … may be reviewed on appeal ….”
Even though R.C. 2953.08(G) states that appellate courts are to review a felony sentence to determine whether it is “contrary” to statute, they contend that R.C. 2505.03(A) gives an appeals court the authority to reject a sentence if the trial court instead abused its discretion.
Under that standard, they argue, an unreasonable, arbitrary, or unconscionable sentence can be reversed, and the Supreme Court shouldn’t prohibit appeals courts from overturning sentences for these reasons. Noting that producing meth near children is clearly dangerous, they point out that the minimum sentence for illegally manufacturing the drug already increases from three to four years when it takes place in the vicinity of a juvenile. They add that one box of decongestant would make a small amount of meth, Marcum’s crime was at the less serious end of the spectrum, she had only two minor legal offenses before this conviction, she is unlikely to reoffend, and she maintains her innocence. Given these factors, they conclude that the trial court abused its discretion when it sentenced her to 10 years in prison.
State Maintains Law Bars Abuse of Discretion Review
The state’s attorneys dispute the interpretation of “[i]n addition to any other right to appeal” in R.C. 2953.08(A). The distinction, they assert, is between the right to appeal a sentence, as explained in R.C. 2953.08, and the right to appeal a conviction, which is covered in other statutes.
“In addition to appealing a felony sentence under R.C. 2953.08, defendants have a right to appeal their convictions under other provisions,” they write in the brief to the Court. “Marcum attempts to give those words more meaning than intended. They do not authorize a wholesale right to appeal, but acknowledge that, in addition to appealing their sentences under R.C. 2953.08, defendants still have the right to appeal their convictions.”
The statute Marcum relies on, R.C. 2505.03(A), gives appeals courts jurisdiction to review cases, but indicates nothing about the standard of review the courts must use, the state’s attorneys argue.
They add that even if Marcum’s sentence was reviewed for an abuse of discretion, she would still lose. Her 10-year sentence was within the statutory range, and they maintain that the judge considered relevant factors in arriving at a reasonable sentence, including signs that Marcum may have been using meth and that explosive remnants of a meth lab were left on her porch while her children were inside the house.
- Kathleen Maloney
Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket (2014-1825 and 2014-2122).
Contacts
Representing Mary Marcum from the Ohio Public Defender’s Office: Stephen P. Hardwick, 614.644.1622
Representing the State of Ohio from the Ohio Attorney General’s Office: Eric E. Murphy, 614.466.8980
Are Limits on Liability in Contract Unenforceable if Party Commits Reckless Conduct?
American Municipal Power, Inc. v. Bechtel Power Corporation, Case no. 2014-1847
U.S. District Court for the Southern District of Ohio
ISSUE: Does reckless conduct, as defined in Anderson v. Massillon (2012), render a limitation of liability clause in a contract unenforceable?
BACKGROUND:
The federal district court hearing this case has submitted the question above to the Ohio Supreme Court for consideration. The federal court has stated the issue involves an interpretation of state law critical to the main dispute in the federal case. The Supreme Court agreed to review the issue.
American Municipal Power (AMP), a wholesale power supplier for municipalities, contracted in January 2009 with Bechtel Power Corporation to develop plans for and to build a coal-fired power plant on the Ohio River in Meigs County. As part of the contract’s “trend provision,” Bechtel was hired to pinpoint possible developments that might affect the cost or schedule set out in the $2.3 billion estimate for the project. The contract limited Bechtel’s liability early in the project to $500,000.
In October 2009, Bechtel informed AMP that the project cost would be more than $1 billion higher than the estimated cost. AMP cancelled the project.
The supplier then sued Bechtel in federal court in February 2011 and asserted, among other claims, that Bechtel violated the contract’s trend provision, costing AMP $97 million. In a summary judgment on the contract’s liability limits clause, the federal district court concluded that the limit was enforceable and capped AMP’s potential damages award at $500,000. AMP asked the federal court to submit the question to the Ohio Supreme Court for review before any trial.
Power Supplier’s Contentions
Attorneys for AMP argue that a contract’s limit on liability is enforceable unless a party acts in a willful, wanton, or reckless manner. The issue in this case is only whether a party’s recklessness makes a liability limit in a contract unenforceable.
They point to multiple statutes in Ohio law in which benefits or protections that would limit liability are invalidated when wanton or reckless conduct is involved. They contend that the legislature’s use of this standard clearly shows such conduct violates public policy. By adopting a reckless standard for contract disputes about whether to uphold a liability limit, the Court would further that public policy, they maintain.
In Berjian v. Ohio Bell Tel. Co. (1978), the Ohio Supreme Court ruled that as long as there is no willful or wanton misconduct, a company may limit its liability through a contract. AMP’s attorneys argue the Supreme Court cited no Ohio court decisions when it acknowledged a public policy exception to a contract provision when willful or wanton misconduct takes place. Nor did the ruling state that other types of extreme negligence couldn’t be considered as well.
“Berjian does not specifically address reckless conduct although … an analysis of Berjian’s under-pinnings shows that the inclusion of reckless as an exception along with willful and wanton is entirely consistent with this Court’s opinion in that case,” they write in the brief to the Court. “Reckless conduct, which this Court has now defined in Anderson as requiring a ‘conscious disregard’ and conduct ‘substantially greater than negligent conduct,’ is conduct of the same class as willful or wanton conduct and, accordingly, should be recognized as a public policy exception to enforcement of a limitation of liability clause.”
In Anderson, which involved a wrongful death suit after two people died when a fire truck collided with their vehicle, the Court defined “reckless conduct” as “characterized by the conscious disregard of or indifference to a known or obvious risk of harm to another that is unreasonable under the circumstances and is substantially greater than negligent conduct.” Reckless conduct is a high standard that also should apply to prohibit a party that acts recklessly from receiving the benefits of a contractual liability limit, AMP’s attorneys conclude.
Contractor’s Assertions
Attorneys for Bechtel counter that contractual liability limits are unenforceable only if willful or wanton misconduct is involved, not reckless conduct. In Anderson, they assert, the Court drew distinctions among willful, wanton, and reckless misconduct and clarified that willful and wanton misconduct are higher standards than reckless conduct.
And the Court in Berjian laid out the required standard – willful or wanton misconduct – that must be met before a contract’s liability limit is determined to be unenforceable, they maintain. The reckless standard wasn’t ignored in Berjian; instead, recklessness wasn’t the appropriate standard when reviewing the enforceability of a liability limit, they argue. In their view, Berjian resolves this case.
As far as the legislature, they contend that no statute explicitly articulates a public policy for the specific standard that causes a contract’s liability limits to become unenforceable.
“As the Court made clear in Anderson, the ‘reckless’ and ‘wanton’ standards, as well as other standards, have different meanings and apply in different contexts,” they write in the brief to the Court. “The General Assembly explicitly chooses the ‘willful or wanton misconduct’ standard when it sees fit and explicitly uses the ‘reckless conduct’ or other standards for other occasions. The General Assembly has expressed no policy preference for a ‘reckless’ standard.”
Bechtel’s attorneys also argue that AMP is improperly applying principles of tort cases to contract breaches. The Court, however, has consistently distinguished between the two and applies different standards, they assert.
Consistent with a belief in the freedom of parties to enter contracts, they maintain that the proper standard in contract challenges is whether there has been willful or wanton misconduct. “Public policy understandably allows Ohio courts to set aside limitations of liability for intentional and wanton conduct, but enforces such limits, in those cases where this standard is not met,” they contend. Reckless conduct isn’t a “sufficient basis for courts to intervene” in a contract dispute, they conclude.
Additional Brief Supports Bechtel
An amicus curiae brief supporting Bechtel’s position has been submitted by the Ohio Council of Retail Merchants.
- Kathleen Maloney
Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.
Contacts
Representing American Municipal Power, Inc.: Stephen Fitch, 614.221.2838
Representing Bechtel Power Corporation: William Porter II, 614.464.5448
Does Law Barring Creation of Child Porn Violate First Amendment?
Terry L. Martin v. State of Ohio, Case no. 2014-2028
Second District Court of Appeals (Montgomery County)
ISSUE: Does the statutory definition of “nudity” or the narrower definition described in State v. Young (1988) apply to the state law that prohibits the creation or production of nudity-oriented material involving a minor?
BACKGROUND:
Terry L. Martin of Dayton set an iPod to record and hid it in a pile of towels in a bathroom. He then talked with an 11-year-old girl in the bathroom promising to get her hair done and mentioning that he saw a pair of “sexy” “daisy duke” shorts that made him think of her. With the iPod still recording, Martin left the room. The video showed the girl undressing to take a shower, and drying off and getting dressed afterward. After she left the bathroom, Martin retrieved the device.
The child’s mother discovered the video. Martin was arrested in August 2013 and charged with creating or producing material that shows a minor who was not his child in a state of nudity. He was also charged with possessing criminal tools for using the iPod to record the girl.
After waiving his right to a jury trial, Martin was found guilty of both crimes. The trial court sentenced him to five years in prison.
Martin appealed, but the Second District Court of Appeals affirmed his convictions. The appeals court noted, however, that its decision conflicted with a ruling from the Fourth District Court of Appeals and informed the Ohio Supreme Court of the conflict. The Supreme Court agreed to review the issue.
Sex Offenses Involving Children
An Ohio law, R.C. 2907.323(A)(1), states that a person will not “[p]hotograph any minor who is not the person’s child or ward in a state of nudity, or create, direct, produce, or transfer any material or performance that shows the minor in a state of nudity” without a proper purpose and the parents’ written permission. In the same statute, subsection (A)(3) bars the possession or viewing of such material without either a proper purpose or parental permission in writing.
Martin’s Claims
Attorneys for Martin focus their argument on the Ohio Supreme Court’s decision in State v. Young (1988). That ruling reviewed subsection (A)(3), the prohibition on possessing or viewing nude images of children. According to Martin’s attorneys, the Court determined the law’s exceptions for child nudity viewed or possessed with a proper purpose or with parental consent effectively narrowed the offense to protect conduct that is morally innocent, leaving only material that is a “lewd exhibition or involves a graphic focus on the genitals.”
Because (A)(1) provides similar exceptions, Martin’s attorneys contend the meaning of nudity in creating and producing child pornography should be narrowed in the same way. As with the free-speech concerns found with the law about viewing or possessing child porn, they maintain that First Amendment concerns also arise in this provision.
“Just as there are morally innocent depictions of nude minors to possess and view, there are morally innocent depictions of nude minors to create and produce,” they write in the brief to the Court. “It is morally innocent for a babysitter to take a picture of a child in the bathtub and to send it to friends or family. It is morally innocent for a preschool teacher to take a picture of a child finger-painting with her shirt off. It is morally innocent to photograph topless or barebottomed children at the beach.”
Without narrowing the meaning of nudity in (A)(1), the statute is overbroad and unconstitutional because it doesn’t allow for the production or creation of morally innocent depictions of children, they assert. If the Court accepts this view, they ask that Martin’s case be returned to the trial court to apply the narrower definition of nudity to his case.
State’s Arguments
Attorneys from the Montgomery County Prosecutor’s Office explain that state law defines nudity as bare breasts, the pubic area, and the buttocks. However, they continue, Young narrowed that definition for the statute that bars viewing or possessing child pornography because the First Amendment permits people to receive information and ideas in private. As a result, viewing or possessing such images is illegal only if the material is lewd or involves a graphic focus on the genitals, they note.
Unlike the viewing/possession statute, no First Amendment right is affected by the law making the creation and production of child pornography illegal, they argue. Therefore, they contend, the definition of nudity doesn’t need to be narrowed for these offenses.
“[E]ven if the words ‘state of nudity’ in (A)(1) and (A)(3) of R.C. 2907.323 are the same, the justification for the Young Court’s decision to restrict the definition of nudity – the offender’s First Amendment interest [–] is not,” they write in the brief to the Court. “In contrast to the right to possess and view what one wishes in the freedom of one’s home, the right to create or produce material that depicts someone else’s nude child without parental consent has not historically been considered a fundamental right.”
They add that creating or producing nude images of children is unprotected expression and that the provision legitimately regulates this conduct. They note that Martin stipulated at trial that he didn’t have parental consent to record the girl and had no proper purpose for making the recording. If the Court would conclude that some liberty interest is jeopardized for persons who create or produce such images, the prosecutors argue those rights would be protected through the exceptions requiring a proper purpose and parental consent. This way, both the alleged offender’s interests and the parents’ rights are protected, they assert.
They maintain that the state clearly has a compelling interest in regulating child pornography, including preventing the sexual exploitation of children. Noting the porn industry’s financial incentives to distribute such images worldwide and the ease today for anyone to do so on the Internet, they conclude that narrowing the definition of nudity in this law on First Amendment grounds is unnecessary.
Attorney General Files Brief
An amicus curiae brief supporting the Montgomery County Prosecutor’s Office’s position has been submitted by the Ohio Attorney General.
- Kathleen Maloney
Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.
Contacts
Representing Terry L. Martin from the Ohio Public Defender’s Office: Valerie A. Kunze, 614.466.5394
Representing the State of Ohio from the Montgomery County Prosecutor’s Office: April F. Campbell, 937.496.7609
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