Tuesday, May 8, 2018
Daniel Stolz v. J.B. Steel Erectors et al., Case no. 2017-1245
U.S. District Court, Southern District of Ohio
Trumbull County Bar Association v. John H. Large, Case no. 2018-0250
Trumbull County
Disciplinary Counsel v. Harlan D. Karp, Case no. 2018-0254
Cuyahoga County
Thomas Dundics et al. v. Eric Petroleum Corporation et al., Case no. 2017-0448
Seventh District Court of Appeals (Mahoning County)
Is Law Barring Injured Worker’s Negligence Lawsuits Against Subcontractors Unconstitutional?
Daniel Stolz v. J.B. Steel Erectors et al., Case no. 2017-1245
U.S. District Court, Southern District of Ohio
ISSUE: Is R.C. 4123.35(O) unconstitutional if it prevents a subcontractor’s employee who is injured while working on a self-insured construction project from filing a negligence lawsuit against another subcontractor?
BACKGROUND:
This is the second time the U.S. District Court for the Southern District of Ohio has submitted a certified question to the Ohio Supreme Court regarding the negligence lawsuit of a worker injured during the 2012 construction of Horseshoe Casino in downtown Cincinnati. Daniel Stolz of Kentucky worked for Jostin Construction as a concrete finisher. He was pouring concrete when a floor collapsed and he fell 25 feet. Messer Construction was the project’s general contractor. The project required several subcontractors including Jostin, J&B Steel Erectors, D.A.G. Construction, and TriVersity Construction.
Before the project began, Messer was authorized by the Ohio Bureau of Workers’ Compensation (BWC) to self-administer the workers’ compensation for its employees and all subcontractors that were enrolled on the job. After Stolz was injured, he participated in Messer’s self-insured workers’ compensation program and received benefits. Stolz then filed a negligence lawsuit in U.S. district court against Messer, J&B Steel, D.A.G., Triversity, and other subcontractors. Another of Stolz’s coworkers who was injured in the accident filed a similar negligence lawsuit against the same contractors in Hamilton County Common Pleas Court.
Messer and the subcontractors asked the common pleas court to dismiss the case, arguing the subcontractors had immunity from lawsuits by workers of other subcontractors on a self-insured construction project. Citing R.C. 4123.35(O), the court granted summary judgment to the companies. The federal district court judge considering the Stolz case ruled immunity in R.C. 4123.35(O) applied to Messer, but not to the subcontractors. The judge recognized his decision conflicted with the Hamilton County court and submitted the conflict to the Ohio Supreme Court.
In 2016, the Ohio Supreme Court ruled that subcontractors enrolled in a self-insured construction project are immune from tort claims made by the employees of other enrolled subcontractors and that Stolz can’t accept workers’ compensation benefits and also sue for negligence against the other subcontractors.
Stolz then amended his complaint in federal court, claiming that the Ohio Supreme Court’s interpretation of R.C. 4123.35(O) was unconstitutional for several reasons. The district court sent the issue to the Ohio Supreme Court, asking if its decision was legal under the U.S. and Ohio constitutions. The Court agreed to consider the question.
Contractors Say Ruling Constitutional
J&B Steel Erectors and the other subcontractors that Stolz sued reject Stolz’s argument that the Ohio Supreme Court’s interpretation of R.C. 4123.35(O) is unconstitutional. The contractors notes the Supreme Court’s earlier decision determined that the provision created a “legal fiction” that considered a self-insuring general contractor to be the single employer of all the workers on the project for workers’ compensation purposes. Under Ohio law, certain large-scale projects were permitted to use this process, and for the casino project, Messer would self-insure the workers’ compensation. The subcontractors that bid for work on the job didn’t pay premiums into the state workers’ compensation fund. Instead, Messer it would guaranteed cover the costs of any work injury while the subcontractors would lower their bids to reflect the relief from having to include workers’ compensation premiums as part of their operating costs.
Under the self-insured arrangement, the Ohio Supreme Court applied the “fellow servant rule,” which stemmed from the Court’s 1983 Kaiser v. Strall decision. In Kaiser, the Court found that an injured worker whose injuries were covered by workers’ compensation couldn’t seek additional compensation by filing a negligence lawsuit against a co-worker who caused the injury. The subcontractors argue that the Supreme Court found R.C. 4123.35(O) extended the concept to workers from different subcontractors when they are all working together under one general contractor on one large project.
“Just as Mr. Stolz would not be permitted to maintain an action against a fellow Jostin worker under traditional workers’ compensation, he is not permitted to maintain an action against any other fellow employees on the Project under R.C. 4123.35(O),” the subcontractor’s brief states.
The subcontractors maintain the law meets the constitutional requirements of ensuring equal protection and due process and that Stolz isn’t denied any fundamental right by the legislation. They argue the law meets the requirement that it must be rationally related to a legitimate government interest. They assert the law meets the state interest by ensuring injured workers, even those of the smallest of subcontractors, are able to return to work through the benefits of workers’ compensation, and meets the government’s interest in “protecting the economic viability of Ohio employers who participate in large scale construction projects.”
Worker Maintains He Has Right to Sue
Stolz maintains that many Ohio employers and employees are under the misconception that workers’ compensation provides “full and complete” compensation for injuries and losses suffered by an injured worker. He notes that only a percentage of the injured workers’ compensation is paid as benefits, and workers are deprived the right to recover other damages they incur from the injuries. They are unable to seek any punitive damages against a business or person that caused the injury, he argues.
He maintains that the Supreme Court’s interpretation of R.C. 4123.35(O) denies injured workers equal protection. He asserts that only the general contractor, Messer, is immune from a negligence lawsuit under the self-insurance for large-scale projects. If workers’ compensation was funded for the project under the traditional scheme, then each subcontractor would pay its own premiums into the state insurance fund, he explains. Under that arrangement, an injured worker can sue a subcontractor that isn’t the worker’s employer, and the other workers for the subcontractors would not be considered his “fellow servants,” Stolz concludes.
Stolz points to the dissenting opinion in the 2016 Supreme Court decision that found nowhere in the law does it indicate the subcontractors enrolled in the project are entitled to immunity, and argues the General Assembly was aware that granting immunity would create a disparity between the rights of workers on traditionally funded projects and those under the large-scale self-insured projects.
Stolz also takes issue with the subcontractors’ claim that the law is related to a legitimate government interest. He argues that it might be in the best interest of contractors or the insurance companies covering the contractors, but the state has no interest in protecting negligent subcontractors or their employees from lawsuits. He adds that the provision isn’t in the best interest of the BWC because if a worker can successfully sue a subcontractor for negligence, the BWC would have the right to recover the money it spent on the workers’ injuries from the subcontractor.
Friend-of-the-Court Briefs
An amicus curiae brief supporting the subcontractors’ position has been submitted by State of Ohio on behalf of the BWC. The state’s brief points to the Kaiser decision and notes the Supreme Court has already restricted an injured workers right to sue a co-employee. The state maintains the law simply extends the principle to employees of different contractors working on the same project. Messer, the general contractor, also filed an amicus brief supporting the subcontractors.
Parties Presenting Arguments
Two subcontractors named in Stolz’s lawsuit, Pendleton Construction Group and Terracon Consultants, didn’t submit merit briefs in the case and aren’t able to participate in oral arguments.
- Dan Trevas
Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.
Contacts
Representing Daniel Stolz: Stephanie Day, 513.621.2100
Representing J&B Steel Erectors et al.: Coleen Blandford, 513.381.0656
Attorney Discipline
Trumbull County Bar Association v. John H. Large, Case no. 2018-0250
Trumbull County
A Trumbull County lawyer who has been suspended from practicing law twice since 2009 is contesting a Board of Professional Conduct recommendation for his permanent disbarment.
A three-member board hearing panel concluded that John H. Large violated several of the rules governing Ohio lawyers during his representation of two clients. The panel recommended that Large be indefinitely suspended. However, the full board is recommending the Ohio Supreme Court permanently disbar Large.
Federal Tax Conviction Led to First Suspension
The Trumbull County Bar Association brought the complaint against Large to the board and has maintained that Large has learned little from his prior sanctions by the Supreme Court. In 2009, Large was suspended for one year based on his federal conviction for failing to file personal income tax returns or report his employees’ wages to the IRS. The Court noted in its opinion that Large “demonstrated a pattern of misconduct motivated by his selfish desire to delay payment of his tax obligation,” and caused his employees harm by failing to report their wages to the IRS.
In 2012, Large was suspended for two years, with six months stayed, for violating rules related to the representation of clients, which included not keeping them informed of their cases, not acting diligently in his representation, and acting with dishonesty, fraud, deceit, or misrepresentation. The board reported that in less than two years after his reinstatement to practice law, two clients filed grievances against him with the Trumbull County Bar Association for allegations of misconduct similar to those of his past clients.
Lawyer Fails to Appear at Trial
Susan Seargeant of Morgantown, West Virginia, contacted Large by phone in December 2015, asking him to represent her in a judgment collection effort and in a second collection case in Warren Municipal Court. Large appeared at the initial 2015 hearing and requested a continuance. At that point, Seargeant sent Large all her documents supporting her claims. She didn’t retain copies.
The day before the trial, Large asked the court to move the case because of a scheduling conflict, but he didn’t tell Seargeant the case was moved to later in the month. She called Large on the day before the original trial date for confirmation, but he didn’t respond. She drove from Morgantown to Warren only to discover the case wasn’t being heard.
Later that month, she appeared at the trial, but Large didn’t, and the magistrate required that she represent herself. Because Large had her only copy of the documents, Seargeant defended herself without the benefit of the documents. Two weeks later, the magistrate ruled in Seargeant’s favor, but for a lesser sum than Seargeant argued she had been owed.
Seargeant and Large objected to the magistrate’s decision. The trial court let the decision stand. At the board panel hearing, Large was asked if he accepted responsibility for what happened in Seargeant’s case. Large “bluntly stated he would not,” the board states in its report to the Court.
Attorney Urges Client Filed Lawsuit, then Doesn’t Pursue Case
Large represented John Baryak in legal proceedings surrounding Baryak’s candidacy for Newton Falls City Council. Large advised Baryak that he had grounds to sue two men challenging his candidacy, and Baryak hired Large and paid him a $2,500 retainer. The panel found Large gathered no evidence to make his case, and failed to respond to discovery requests from his opponent. He didn’t inform Baryak about the information requests or the opponent’s motion to have the case dismissed.
In November, 2015, Large dismissed the case and refiled it without Baryak’s knowledge. The opponents resubmitted generally the same informational requests, which Large largely ignored and didn’t report to his client. In 2017, the trial court sanctioned Baryak for more than $10,000 to pay the fees and expenses of his opponents in the first case and jointly sanctioned Baryak and Large for $15,000 for expenses in the second lawsuit.
At the disciplinary hearing, Large acknowledged he violated several professional conduct rules. The panel recommended an indefinite suspension. The full board noted the Court recently, in Toledo v. Harvey (2017), disbarred an attorney who had two prior suspensions in a five-year period, and found it similar to Large’s situation. It recommended the Court disbar Large.
Sanction Too Harsh, Lawyer Responds
Large acknowledges he should be sanctioned for his actions, but states his brief that permanent disbarment is “extreme and does not align with the allegations against” him. Large argues that his clients were left in no worse position than had he not been retained and that there were no allegations of mishandling client funds, committing an illegal act, or acting with a selfish or dishonest motive.
He argues the Court has reserved disbarment for the most egregious misconduct, and while his work was not stellar, he deserves a lesser sanction.
Bar Association Supports Disbarment
The Trumbull County Bar Association’s brief states that Large acted with a selfish and dishonest motive that negatively impacted the cases of his clients and did them harm. The association notes that it was originally in agreement with a lesser sanction until Large expressed no remorse and took no responsibility for his actions at the panel hearing.
The bar association argues that Large learned nothing from his prior suspensions and is before the Court again for even more serious disciplinary violations. The association concludes that Large’s history “demonstrates that compliance with court orders and professional standards are not priorities in his practice of law.”
- Dan Trevas
Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.
Contacts
Representing Trumbull County Bar Association: Randil Rudlof, 330.393.1584
Attorney Discipline
Disciplinary Counsel v. Harlan D. Karp, Case no. 2018-0254
Cuyahoga County
The Ohio Board of Professional Conduct recommends a two-year suspension with 18 months stayed for Cleveland attorney Harlan D. Karp. The board found that the attorney neglected an immigration case and lied to his client about its status.
The attorney and the Office of Disciplinary Counsel, which submitted the complaint to the board, had agreed to a fully stayed two-year suspension. In recommending the six-month actual suspension, the panel of the board that reviewed the matter expressed concern about Karp’s repeated misrepresentations about filing important immigration paperwork, which could have serious consequences for his client. The board adopted the proposal to recommend to the Court a two-year suspension, with 18 months stayed.
Dancer Needs to Update Visa to Change Employers
Veronika Gadzheva, a Bulgarian ballroom dancer, entered the United States in May 2015 on an O-1B visa to work for the Fred Astaire Dance Studio in Morristown, New Jersey. The visa was valid until Feb. 27, 2018. Unhappy with her job, Gadzheva looked elsewhere for work, and Londance III Studio in Laguna Niguel, California, offered her a position in July 2015.
A friend referred Gadzheva to Karp, who has a solo practice in Cleveland focused on immigration law. The dancer contacted Karp in July for assistance in having her visa transferred to her new employer. Karp agreed to represent the dancer to file an I-129 petition with U.S. Citizenship and Immigration Services (CIS). He communicated that his fee was $750 and that she also would need to pay the $325 filing charge. Gadzheva shared that she hoped to leave the New Jersey dance studio as soon as possible, and Karp told her she could move once the I-129 was filed.
During August and early September, Gadzheva asked Karp several times about the status of the I-129 filing. On Sept. 11, 2015, Karp told Gadzheva that he had filed the paperwork with CIS. In early October, Gadzheva notified Karp that she was heading to California.
Attorney Says He Filed Paperwork When He Hadn’t
The attorney continued during the next several months to tell the dancer and Patricia West, owner of Londance III Studio, that he had filed the paperwork. West and Karp had a “heated conversation” on April 14, 2016, about the time it was taking to secure the appropriate paperwork. The next day, Gadzheva contacted a Maryland law firm for help handling her immigration paperwork. Karp submitted the I-129 petition the same day.
When preparing the petition, Karp didn’t send the paperwork to West for her signature, but signed for her. The parties agreed that West never gave the attorney authority to sign her name.
Immigration Consequences Uncertain
After Gadzheva left her job at the New Jersey dance studio in October 2015, the studio requested a revocation of the I-129 petition it had filed for the dancer. According to the board’s report, it’s possible but not clear that Gadzheva may have started accruing days of “unlawful presence” in the United States once her prior paperwork was revoked because Karp hadn’t filed a new petition. Unlawful presence in the U.S. can lead to a ban from the country for years.
Based on a new petition filed by the Maryland law firm in July 2016, Gadzheva was granted a new visa. However, because of the gap in her immigration status, she must leave the country to activate the visa, which she is afraid to do because she doesn’t know whether she accrued days of unlawful presence during the time Karp lied about her immigration paperwork.
Disciplinary Counsel Investigates
Gadzheva filed a grievance against Karp with the disciplinary counsel. During the investigation, Karp altered a copy of the I-129 petition to conceal his lack of authority to sign for West, and the disciplinary counsel also found that he improperly used his client trust account (IOLTA) as both a personal and a business account.
The board’s report notes that Karp was diagnosed in 2017 with hypothyroidism and depression. He is taking medication for the conditions and receiving therapy.
Because Karp’s repeated misrepresentations may have grave consequences for Gadzheva, the board recommends to the Ohio Supreme Court that Karp receive a two-year suspension with 18 months rather than all of the suspension stayed, conditioned on treatment and other requirements.
Attorney Highlights Circumstances Supporting Lesser Penalty
Karp maintains that “abundant” mitigating factors in his case support a fully stayed suspension. He notes in his objections to the proposed sanction that he has had no prior discipline before this incident in 28 years of practicing law. In addition, at disciplinary counsel’s request, he refunded Gadzheva for his legal fees and the filing charge. His malpractice insurance company also paid the dancer $7,150, the legal fee she paid to the Maryland law firm that took over the case. Karp notes that he admitted his wrongdoing, cooperated with the investigation, entered into extensive stipulations during the disciplinary process, and has acknowledged his remorse and the potential consequences to Gadzheva from mishandling her case. He also demonstrated physical and mental disorders that contributed to his misconduct.
Disciplinary Counsel Favors Fully Stayed Suspension
While not condoning Karp’s misconduct, the disciplinary counsel believes that this “blip” in Karp’s decades-long legal career resulted from his untreated depression and physical disorder. If Karp continues with his treatment and adheres to the recommended conditions for his suspension, the disciplinary counsel trusts that the public will be protected if Karp receives a fully stayed two-year suspension.
- Kathleen Maloney
Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.
Contacts
Representing Harlan D. Karp: Mary Cibella, 216.344.9220
Must Oil and Gas Land Professionals Be Licensed Real Estate Brokers?
Thomas Dundics et al. v. Eric Petroleum Corporation et al., Case no. 2017-0448
Seventh District Court of Appeals (Mahoning County)
ISSUE: Should oil and gas land professionals be required to be licensed as real estate brokers?
BACKGROUND:
Thomas Dundics and his company, Ibis Land Group, were enlisted by Eric Petroleum Corp., an oil and gas exploration and production company in Youngstown, to negotiate and secure oil and gas leases with property owners in northeastern Ohio. Dundics stated that they came to this agreement in July 2010, and that Eric Petroleum, owned by Bruce Brocker, agreed to pay him $10 per acre leased and a 1 percent working interest in oil and gas wells placed on leased land.
In November 2014, Dundics sued Eric Petroleum for breach of contract and other claims, alleging that he did the work for which he was hired but the company only partially compensated him. In a motion to dismiss the complaint, Eric Petroleum argued that Dundics couldn’t sue because he was required to have a real estate license to perform the work. Following a hearing, a magistrate dismissed the case in May 2015, agreeing that Dundics had no real estate license but was required by Ohio law to have one to perform the services for Eric Petroleum. The trial court adopted the magistrate’s ruling.
Dundics appealed to the Seventh District Court of Appeals, which upheld the trial court’s decision. The Seventh District determined that state law prohibits Dundics’ claims because oil and gas leases are interests in real estate under R.C. 4735.21 and, to engage in the activities Dundics argues he wasn’t compensated for, he had to have a real estate broker’s license.
Dundics appealed to the Ohio Supreme Court, which accepted the case for review.
Real Estate Law Doesn’t Apply to Oil and Gas Industry, Dundics Insists
Dundics argues that the real estate licensing requirements described in R.C. Chapter 4735 weren’t designed to include oil and gas land professionals because those professionals perform substantially different services than residential and commercial real estate agents. Applying the definition of “real estate” in R.C. 4735.01 in the context of rights to extract subsurface minerals such as oil and gas creates an ambiguity, Dundics maintains. In his view, the legislature didn’t intend to regulate oil and gas leases in R.C. Chapter 4735.
In the brief to the Supreme Court, he states that requiring oil and gas land professionals to acquire the knowledge needed to become a residential or commercial real estate broker would “put in jeopardy the livelihoods of oil and gas professionals.” The state legislature chose to regulate the oil and gas industry “exclusively” under R.C. Chapter 1509 and expressed a public policy in favor of facilitating oil and gas development, he adds. He contends that the real estate requirements of R.C. Chapter 4735 shouldn’t be imposed on the oil and gas industry.
To support this position, Dundics cites Wellington Resource Group, LLC v. Beck Energy Corp., a 2013 decision from the U.S. District Court for the Southern District of Ohio. That court, Dundics argues, concluded that oil and gas leases aren’t real estate under Ohio law, and it refused to regulate those working in the oil and gas industry based on the provisions in R.C. Chapter 4735.
In 2015, the Ohio Supreme Court decided Chesapeake Exploration, LLC v. Buell. While the Court in Buell stated that oil and gas leases create some effect on the surface property, Dundics contends that the Court’s conclusion doesn’t require oil and gas leases to be regulated under the real estate licensing provisions in R.C. Chapter 4735.
“As other Ohio courts have done in analyzing oil and gas leases, this Court should recognize that there is nothing magic in the word ‘lease’ and instead Ohio [c]ourts need to analyze whether it makes any sense to lump these specialized instruments in with other types of traditional leases of surface estates for the goals and intent of the license requirements of O.R.C. 4735.01, et seq.,” Dundics’ brief states.
Independent Oil and Gas Professionals Must Have Real Estate Licenses, Company Contends
Eric Petroleum responds that the definitions and laws in R.C. Chapter 4735 are clear, as the Seventh District determined. Because “real estate,” as defined in the law, includes “any and every interest or estate in land,” the appeals court found that “the right to subsurface oil and gas is such an interest.” The Supreme Court has stated that what isn’t clearly excluded from a law is clearly included, the company notes, adding that the only exception stated in this law is cemetery interment rights.
Disputing the application of Wellington to the issue in this case, Eric Petroleum cites Buell, in which the Supreme Court stated that the legislature “has recently made clear that both licenses and leases of oil and gas rights create an interest in real estate.”
The company also argues that R.C. Chapter 1509, which regulates the oil and gas industry, doesn’t preempt the real estate licensing provisions in R.C. Chapter 4735 from applying. The oil and gas division within the Ohio Department of Natural Resources has stated that it doesn’t get involved in oil and gas lease negotiations, Eric Petroleum maintains. The company asserts that nothing in R.C. Chapter 1509 prevents the regulation of lease negotiations and oil and gas professionals, also referred to as “landmen,” under other statutes. And the Ohio Department of Commerce agrees, the company points out. In a 2011 newsletter, the commerce department’s licensing division stated that “[b]ecause there is no specific exemption or exception in Ohio law, an Ohio real estate license is required to engage in activities as a buyer’s agent when facilitating the negotiations of the purchase or lease of any aspect of the real property on which exploration, drilling or any component of fracking will take place.”
Eric Petroleum also notes that R.C. 4735.01(I) excludes from the real estate licensing requirement companies and their employees that act as real estate brokers or salespersons (that is, acquire oil and gas leases) and those individuals who act in that role for themselves. However, independent oil and gas professionals working to secure leases for third-party companies must be licensed as real estate brokers.
From the company’s research, 15 other oil-and-gas producing states specifically exempt the types of transactions undertaken by Dundics from requiring a real estate license. The other oil-and-gas producing states, including Ohio, encompass oil and gas leases within the definition of real estate, the company maintains.
“[I]t is a matter of policy for the General Assembly to assess whether oil and gas leases, like cemetery interment rights, should be excepted from the R.C. 4735.01(B) definition of real estate, and if independent landmen should be regulated under a separate chapter,” the company’s brief states. “Under the current statutory scheme, oil and gas leases are not excepted, landmen are subject to regulation when negotiating oil and gas leases for another party, and there is no ambiguity that would permit an absurdity analysis.”
The company concludes that requiring independent oil and gas professionals to be licensed will ensure that those professionals meet the educational, legal, and ethical standards for real estate brokers and that the public is protected.
Oil and Gas Associations and Companies Support Dundics
An amicus curiae brief supporting Dundics’ position has been submitted collectively by the following groups:
- American Association of Professional Landmen
- DPS Land Services
- Halo Land Management
- Ohio Oil and Gas Association
- Reserve Energy Exploration Company
- Southeastern Ohio Oil and Gas Association
The groups argue that the Seventh District’s decision “puts independent Ohio landmen in the impossible position of being unable to seek compensation for their services relating to oil and gas leasing without being licensed as real estate brokers, while simultaneously requiring them to obtain a real estate broker’s license that is unobtainable by performing that same oil-and-gas-leasing work.”
- Kathleen Maloney
Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.
Contacts
Representing Thomas Dundics and Ibis Land Group Ltd.: Thomas Hull II, 330.743.1171
Representing Eric Petroleum Corp. and Bruce E. Brocker: Thomas Hill, 330.533.1828
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