Thursday, March 13, 2025
In the Matter of the Application of Kingwood Solar 1 LLC, Case No. 2023-1286
Ohio Power Siting Board
Christine Lewis v. MedCentral Health System et al., Case No. 2024-0451
Fifth District Court of Appeals (Richland County)
Samuel Voss v. Quicken Loans LLC and Mortgage Electronic Registration Systems Inc., Case No. 2024-0257
First District Court of Appeals (Hamilton County)
The Huntington National Bank, as administrative agent v. Raymond Schneider, Harold Sosna, and Faye Sosna, Case No. 2024-0208
First District Court of Appeals (Hamilton County)
Did Siting Board Unfairly Deny Permit to Proposed Solar Power Facility?
In the Matter of the Application of Kingwood Solar 1 LLC, Case No. 2023-1286
Ohio Power Siting Board
ISSUES:
- Did the Ohio Power Siting Board redefine the definition of “public interest, convenience, and necessity” in R.C. 4906.10(A)(6) to deny the construction of a large-scale solar energy facility in Greene County?
- Did the Power Siting Board rely too much on the positions of local officials in interpreting the meaning of “public interest” under R.C. 4906.10(A)(6)?
BACKGROUND:
In 2021, Kingwood Solar applied to construct a 175-megawatt solar power generating facility in Greene County between Yellow Springs and Cedarville. The project spans across three townships -- Cedarville, Miami, and Xenia -- and is located on 1,500 acres of land. The company plans to have 410,000 solar panels and associated equipment on 1,200 acres of property it leased from landowners. After negotiations with interest groups and residents, Kingwood agreed to set back the property boundaries of the facility to 250 feet from a residence not participating in the leasing of land. Kingwood agreed to set back the actual equipment generating power from the solar farm 500 feet from any non-participating residence.
The Ohio Power Siting Board staff found the project met all the technical requirements under state law to qualify for a construction and operating permit. The board conducted hearings, and several experts hired by Kingwood explained the virtues of the project and what had been done to minimize impacts on the community and environment. The Ohio Farm Bureau Federation entered into a consent agreement with Kingwood to support the project as long as it met 39 specific conditions recommended by the board staff.
On the day before the board issued its final report, Kingwood maintains that the board’s executive director had a staff member contact the Greene County Board of Commissioners and the township trustees from Cedarville, Miami, and Xenia townships. Those organizations promptly submitted resolutions formally opposing the project, with some township officials indicating there was near universal opposition to the solar farm. A local group known as Citizens for Green Acres formed and expressed its strong opposition to the project, noting it was close to significant area attractions Clifton Gorge State Nature Reserve and John Bryan State Park. The group and local officials expressed concerns about the project’s impact on tourism and preserving the rural, farmland nature of the county.
In December 2022, the board rejected Kingwood’s application. The board determined the facility met all the requirements for a permit, except R.C. 4906.10(A)(6), which states the board must find the project is in the public interest, necessity, and convenience. The board cited the near unanimous local opposition to the project. The board report stated, “that the unanimous opposition of every local government entity that borders the project is controlling as to whether the Project is in the public interest, convenience, and necessity as required by R.C. 4906.10(A)(6).”
Kingwood appealed the decision to the Supreme Court, which must hear this type of appeal.
Denial of Permit Unjustified, Company Asserts
Kingwood Solar argues the evidence presented justified a permit, and that the board’s denial is unlawful. The company maintains the board has shifted its interpretation of “public interest” to respond to local opposition, while ignoring the benefits of the project to not only the local area but the state as well. The company notes it presented estimates indicating the project will produce $55 million to $61 million in local tax revenue over the 35-year projected life of the solar farm, will preserve farmland and protect against commercial or residential development, and will produce clean energy that meets the state’s growing electricity demand.
The company argues the board changed its criteria for meeting the “public interest” by inserting, for the first time, that the opposition of local government entities is “controlling” as to whether a project complies with R.C. 4906.10(A)(6). The company points to past rulings, in which the board has granted permits to projects that have widespread local opposition, and the Court has upheld the board’s decisions. Kingwood points to definitions of “public interest” to mean “the general welfare and rights of the public.” This means “public interest considers the interests of more than just those living on the borders of the project. The company maintains the term “public interest” isn’t the equivalent of “public opinion,” and state policymakers must often make decisions in the public’s interest that aren’t popular with the general public.
Kingwood asserts the board’s executive director sought statements in opposition to the project from local officials at the last minute and after the board’s staff was inclined to recommend the project. The board hasn’t allowed Kingwood to question the director about why the opinions were solicited, the company asserts, and the board has failed to explain why local opposition is “controlling” in this case when that hasn’t been the standard in prior cases considering alternative energy projects.
Benefits of Project Balanced Against Local Impact, Board Maintains
The board argues it didn’t find the resolutions from the local governments to be the controlling factor in whether the project met the “public interest, convenience, and necessity” standard, but they were among many viewpoints it considered. The board indicated it focused on the “vigor and rationale” of the resolutions, including arguments that the facility doesn’t conform with land-use planning guidelines for the area, and it could potentially impact natural recreational areas, such as the nearby state park, nature reserve, and the Little Miami River.
The board notes the term “public interest” isn’t defined in the laws for permitting new projects. It points to a U.S. Supreme Court decision, which describes the phrase “public interest, convenience, and necessity” to be “a supple instrument for the exercise of discretion by the expert body” charged with carrying out legislative policy. The board argues the General Assembly has granted that level of discretion to the siting board, which uses its discretion when evaluating whether a project is in the public interest. The board notes the Ohio Supreme Court has previously ruled it wouldn’t second-guess the board’s decisions unless they were unreasonable.
The board found the project would dramatically change the character of the rural community and would be contrary to the county’s goal to preserve agricultural uses and prime farmland. The board argues that taking public input into account when determining whether a project is in the public interest isn’t unreasonable and isn’t isolated to Kingwood’s application. The board cites other applications for projects it denied for not being in the public interest. The board maintains that in each case it weighs the project benefits against its potential impacts to determine whether the project is in the public interest. The board argues it didn’t change its definition of “public interest,” but rather applied its judgment, as it is empowered to do, and found the project wasn’t in the public’s interest.
Friend-of-the-Court Briefs Submitted
Several amicus curiae briefs supporting both Kingwood’s and the board’s positions were submitted. Briefs in the case were also filed by intervening parties that participated in the matter before the siting board.
Briefs supporting Kingwood were filed by:
- Columbiana County Board of Commissioners, Columbiana County Soil and Water Conservation District, and Franklin Township Board of Trustees, jointly.
- International Brotherhood of Electrical Workers Local 82.
- Ohio Chamber of Commerce.
- Ohio Independent Power Producers.
Briefs in support of the board were submitted by:
- Cedarville Township Board of Trustees, Miami Township Board of Trustees, Xenia Township Board of Trustees, Citizen for Green Acres Inc., Krajicek Family Trust, and 15 members of Citizens for Green Acres, jointly.
- Greene County Board of Commissioners.
- Ohio Senate.
– Dan Trevas
Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.
Contacts
Representing Kingwood Solar I LLC: Michael Settineri, mjsettineri@vorys.com
Representing the Ohio Power Siting Board: Stephen Funk, sfunk@ralaw.com
Representing the Greene County Board of Commissioners et al.: Jack Van Kley jvankley@vankley.law
Could Patient Name Doctor in Amended Malpractice Lawsuit?
Christine Lewis v. MedCentral Health System et al., Case No. 2024-0451
Fifth District Court of Appeals (Richland County)
ISSUES:
- Does R.C. 2323.451 only allow the addition of newly discovered claims and defendants within 180 days after the end of a medical malpractice case’s statute of limitations?
- Does R.C. 2323.451 allow for the addition of defendants after the statute of limitations who were identified in the initial complaint but whose names were not known?
BACKGROUND:
In February 2022, Christine Lewis was admitted to the emergency department of MedCentral Health System, which does business as OhioHealth Mansfield Hospital. She was treated primarily by three medical providers who weren’t employed directly by Mansfield Hospital. Dr. Anand Patel, employed by Mid-Ohio Physicians, treated Lewis. Two nurses, one employed by Pluto Healthcare Staffing and another by TotalMed, provided nursing care.
During her treatment, Lewis was medicated and left alone in her hospital bed. While under sedation and without supervision, Lewis fell out of her hospital bed and onto the floor. Her neck fractured, and she required surgery.
Eight months later, Lewis filed a medical negligence lawsuit against Mansfield Hospital and 10 healthcare providers listed as unknown “John Does.” Mansfield Hospital answered the complaint and denied it was liable for her injuries. Lewis received medical records from the hospital, and her attorneys provided the information to another doctor to review for the lawsuit. The doctor provided an affidavit, which is required for such medical lawsuits, that found the negligence of the unnamed providers in the emergency department caused Lewis’ injuries.
Lewis didn’t believe she needed to use the service of process rules of the Ohio Rules of Civil Procedure to serve the unknown medical providers with notice of the lawsuit. Instead, she filed an amended complaint in April 2023. Citing R.C. 2323.451, she named Patel, Mid-Ohio Physicians, the two nurses, and their employers as additional parties to the case. The amended complaint was filed 59 days after the one-year statute of limitations for filing a medical negligence lawsuit.
Patel and Mid-Ohio asked the Richland County Common Pleas Court to dismiss the case against them, arguing the statute of limitations had expired. They noted that R.C. 2323.451, a relatively new law enacted in 2019, only applies when adding unknown defendants and claims that weren’t identified in the original complaint. They maintained that Lewis knew the defendant's identity, an emergency department doctor, but didn’t know his name. The law doesn’t apply to this scenario, and Lewis had one year to utilize Civ.R. 15 to discover Patel’s name and serve him and Mid-Ohio with a lawsuit, they argued.
The trial court agreed and dismissed the doctor and the practice from the lawsuit. Lewis appealed to the Fifth District Court of Appeals, which reversed the decision.
Patel and Mid-Ohio appealed to the Supreme Court, which agreed to hear the case.
Lawsuit Improperly Amended, Doctor Argues
Patel notes this is the first time the Court will address R.C. 2323.451. The 2019 law permits a plaintiff to amend a medical malpractice lawsuit after the statute of limitations expires but requires Lewis to follow Civ.R. 15(D), the doctor asserts. The rule is to be used to add additional claims or defendants. While Patel wasn’t known by name to Lewis at the time she listed him and his employer, Mid-Ohio, as John Does in the lawsuit, they are original parties, not new defendants, the doctor argues. Civ.R. 15(D) required Lewis to attempt to serve Patel and Mid-Ohio by naming them as “party unknown,” the doctor notes, and Lewis could have worked through the known party, Mansfield Hospital, to attempt to serve them, Patel maintains.
Because Lewis didn’t follow the civil rule and Patel and Mid-Ohio are not new defendants, R.C. 2323.451 didn’t give her the right to add their names to the lawsuit after the one-year deadline, Patel argues. The doctor maintains that the Fifth District has improperly extended the statute of limitations by six months. If the ruling stands, a plaintiff could use a fictitious name of a defendant, like John Doe, even when the plaintiff knows the actual defendant’s name, and extend the time to file a lawsuit by simply adding the actual name in an amended complaint after the deadline, he argues. He asserts that is not what the legislature intended when it enacted the law.
Patel maintains the purpose of the new law is to allow for parties to conduct discovery after the lawsuit is filed and then provides extra time for a plaintiff to unearth any previously unknown claims or providers who may have committed negligence. This isn’t the case for Lewis, who knew all the providers but didn’t know the names or employers of those she was suing, he argues.
Law Allows Adding Identities of Providers, Patient Argues
Lewis explained the bill creating R.C. 2323.451 was introduced by former Rep. Robert Cupp, who had served as a Supreme Court justice before rejoining the legislature. Cupp testified the bill was intended to reduce the need to sweep unnecessary defendants into a lawsuit when the suit is filed. Instead of using a “shotgun” approach to send summonses to 10 unknown John Does providers, Lewis argues the new law allowed her to withhold those filings until she was able to discover the identities of the specific providers she wanted to sue.
Lewis maintains the trial court misread the law and failed to acknowledge that it allows an extra 180 days “to discover the existence or identity of any other potential medical claim or provider.” She argues she added the identities of Patel and Mid-Ohio, which is allowed under the law. The new law only required her to use the Civ.R. 15 process to amend her complaint, and there wasn’t any requirement in the law forcing her to attempt to serve Patel and Mid-Ohio before their names were known. She also notes nothing in the law prevents adding the identity of a defendant, even if the defendants were somehow included in an earlier complaint but not named.
Friend-of-the-Court Briefs Submitted
An amicus curiae brief supporting Patel’s and Mid-Ohio’s position was submitted by the Ohio Association of Civil Trial Attorneys. Another amicus brief supporting the doctor was submitted jointly by the American Medical Association, Ohio Hospital Association, Ohio Osteopathic Association, and Ohio State Medical Association. The Cleveland Academy of Trial Attorneys and the Ohio Association for Justice filed a joint amicus brief supporting Lewis.
Limited Parties To Argue Case
MedCentral Health Systems and the two nurses didn’t file merit briefs in the case and will not 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 Anand Patel and Mid-Ohio Emergency Physicians LLP: Kevin Norchi, kevin.norchi@fmglaw.com
Representing Christine Lewis: Louis Grube, leg@pwfco.com
Were Homeowners Barred From Filing Class Action for Mortgage-Related Violations in 2020?
Samuel Voss v. Quicken Loans LLC and Mortgage Electronic Registration Systems Inc., Case No. 2024-0257
First District Court of Appeals (Hamilton County)
ISSUES:
- Did a statute not yet in effect at the time a court certified a class action prohibit people from recovering the penalty for a lender’s delays in recording the release of their mortgages?
- Must a party alleging a late filing demonstrate an actual injury, or does the statute prohibiting late filings establish standing?
BACKGROUND:
Ohio law requires that when a mortgage is paid off, the borrower’s lender must record within 90 days that the mortgage was paid, or “satisfied.” If the payoff and release of the mortgage isn’t filed in the county recorder’s office in 90 days, the borrower or the property’s current owner can recover actual damages caused by the delay and a penalty of $250.
On Feb. 5, 2020, Samuel Voss bought his first house in Cincinnati from Donald Dow. Four years earlier, Dow obtained a loan to purchase the home from Quicken Loans, now known as Rocket Mortgage. Dow’s mortgage was registered with Mortgage Electronic Registration Systems.
After Dow sold the house to Voss, Rocket Mortgage had 90 days – until May 5, 2020 – to record in the appropriate county recorder’s office that the mortgage was released because Dow’s loan had been paid. In that three-month timeframe, the COVID-19 pandemic led to office closures, and Rocket Mortgage’s mortgage release team in Detroit was sent home to work remotely.
Dow’s mortgage release was recorded on May 27, which was 22 days after the 90-day deadline. A delay can create a legal lack of clarity regarding the ownership of the property. In August 2020, Voss filed a class action in Hamilton County Common Pleas Court against Rocket Mortgage. On behalf of the group, Voss sought the statutory penalty of $250 for each of the company’s alleged violations.
The case moved to federal court for consideration of a claim, then returned to state court in August 2021. Rocket Mortgage asked the trial court for summary judgment, arguing Voss lacked standing, or the right to sue, because he suffered no actual harm from the delay. The trial court denied the motion, reasoning that standing was established by the relevant statute and no proof of injury was needed. The court also found that a trial was necessary to determine whether the company’s alleged violations of the law were excusable because of the pandemic, as Rocket Mortgage had argued.
Homeowner Asks Court To Approve Nearly 1,500 as Class Members
In June 2022, Voss asked the court to certify a statewide class of 1,476 late mortgage loan releases, which he said Rocket Mortgage filed with county recorder’s offices after the 90-day deadline. According to Rocket Mortgage, all but 13 of those releases were delayed in 2020.
After a hearing, the trial court certified the class on Feb. 8, 2023. Before the certification, in December 2022, the General Assembly passed legislation that in part amended the mortgage release statute, R.C. 5301.36. The changes prohibited people from collecting the $250 penalty through a class-action lawsuit if the violations happened in 2020. The updated law took effect on April 7, 2023, after the trial court had certified the class.
Rocket Mortgage appealed the trial court certification to the First District Court of Appeals, which upheld the ruling. The First District determined that the trial court applied the law in effect at the time of its ruling. R.C. 5301.36 also gives standing to parties such as Voss and the class members when mortgage releases are filed late, the appeals court concluded.
Rocket Mortgage appealed to the Ohio Supreme Court, which accepted the case.
Lender Argues Bar on Class Actions for Missed Deadlines in 2020 Applies to This Case
Rocket Mortgage asserts that the changes made to R.C. 5301.36 are procedural. The law regulates mortgage-release class actions, which is a procedure through which a statutory remedy, the $250 penalty, may be collected, the company notes. The revisions were “a classic procedural amendment,” because they simply require that recovery of the $250 penalty for 2020 violations must be pursued in an individual lawsuit rather than a class action, the company’s brief argues. It states the Court has ruled procedural amendments to a law can apply to a procedural aspect of a case that hasn’t yet occurred. The company maintains that the Court has interpreted the same in cases where a criminal offense has occurred or a claim has been filed before a law’s effective date, but the trial takes place after that date. Because the decision whether damages will be awarded in this case would happen after the April 2023 effective date of the amendments, they apply to this case, the company contends.
Rocket Mortgage also argues that Ohio court rules for civil cases require trial courts to anticipate any difficulties that might arise during the course of a class action. When deciding whether to certify the class, the trial court shouldn’t have ignored amendments to a statute pertinent to the case and about to take effect, the company contends. Because the class members were unlikely to prevail in a class action because of the law’s prohibition on 2020 violations, pursuing an individual lawsuit was “superior” to a class action for each member of the class, Rocket Mortgage asserts.
Homeowner Contends Trial Court Properly Applied Law at Time Class Was Certified
Voss reiterates that the class was certified in February 2023, a few months before the changes to R.C. 5301.36 prohibiting class actions for 2020 violations went into effect. He contends no trial court has a duty to anticipate and apply a change in the law before its effective date.
He also disputes that the awarding of damages is the procedural part of a class action. In his view, the class certification is the procedural step, and the trial court completed that step in February 2023. Voss argues Rocket Mortgage wants the new law applied retroactively to this case. The legislature is barred by the Ohio Constitution from enacting a substantive law that applies retroactively. To analyze the issue, courts follow a two-part test, Voss notes. First, the statute is examined to determine whether the General Assembly expressly stated that the law was retroactive. If it did, courts in the second step look at whether the amendment is substantive or procedural. If the amendment is substantive, then the law is unconstitutionally retroactive.
The General Assembly didn’t make the changes to the mortgage release law retroactive. As a result, Voss argues that the analysis stops there, and the changes to the law only apply to class certifications after the effective date.
If the Court considers the second step – whether the law is substantive – the answer is yes, Voss maintains. The law takes away the right of the class members to recover the statutory penalty for a violation of their rights, he argues. Removing that right also has a substantive impact because it isn’t feasible for an individual to pursue a lawsuit worth $250 and also doesn’t allow recovery of attorney fees, Voss maintains. His brief notes that Rocket Mortgage’s net income for the year 2019 was $89.1 million. In 2020, low-interest rates led to many more property sales, and Rocket Mortgage’s net income by the end of the year was exponentially more – $9.4 billion, the brief states.
Voss maintains the changes to the statute also violate Ohio court rules for class actions. A purpose of class-action lawsuits is to increase efficiency in the courts, and that purpose is undermined if a law dictates that people can only pursue individual lawsuits when the law is violated, he contends.
Lender Maintains That Homeowners Had To Show Actual Injuries
Rocket Mortgage also argues that Voss suffered no concrete injury because the company filed Dow’s release of the mortgage 22 days late. Voss only learned of the delayed recording of the release later from his attorney, the company states. It maintains that no one asked to examine Voss’ title to the property during the 22-day period and none of his title documents were disseminated. Nor did Voss argue he suffered some psychological harm from the risk of someone coming across the inaccurate title information, the company states. As the First District acknowledged, the delay didn’t affect Voss’ ability to live, rent, or use the house or to pay his mortgage. Without any concrete harm, Voss lacked standing to file the class action, Rocket Mortgage asserts.
Even if a statute can on its own establish the standing necessary to file a lawsuit, the U.S. and Ohio constitutions require that a plaintiff must also suffer an actual injury, the company contends. But assuming for the sake of argument that a statute alone can confer standing, the statute must mention who has standing, and R.C. 5301.36 doesn’t, Rocket Mortgage argues. The company points to ProgressOhio.org, Inc. v. JobsOhio (2014), where the Court ruled that a statute doesn’t confer standing on its own when it makes no mention of standing and is silent about who has it. Because Voss didn’t establish his standing to file the class action and didn’t show that all other class members suffered a concrete injury, the case should be dismissed, Rocket Mortgage concludes.
Homeowner Counters That Statute Gives Them Right To Sue
In Ohio, there are several ways to prove standing to file suit, and one of them is when standing is conferred by statute, Voss counters. No actual injury is required, other than the violation of the legal interest protected by the statute, he maintains. R.C. 5301.36 explains that the borrower who is selling or the current owner can file a civil lawsuit if the 90-day deadline isn’t met.
While Rocket Mortgage points to ProgressOhio.org, Voss contends that the issue there was the fact that a statute failed to identify who had standing. In this statute, it is clear that the seller and the current owner have standing, he maintains. There also is no support in years of case law for the company’s argument that an Ohio statute must make a specific reference to standing, he argues. For violations of the mortgage release law, Voss maintains that Ohio courts have been certifying class actions for decades for plaintiffs whose allegedly suffered a violation of a right without them needing to show actual injuries.
Voss also rejects the company’s citation to U.S. Supreme Court precedent, which focuses on the need for a concrete injury based on the language of the U.S. Constitution. Like many state constitutions, the Ohio Constitution uses different language, which provides broader rights on standing, including standing based on the infringement of a legal right, Voss argues. Altering Ohio precedent on the issue would leave many without a way to address violations of the law, he concludes.
Amicus Briefs Support Homeowner’s Arguments
Five amicus curiae briefs have been filed in support of Voss’ position. One of the amicus briefs was submitted by the Ohio Attorney General’s Office. The Court will allow the attorney general to participate in the oral argument, dividing time with Voss.
– Kathleen Maloney
Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.
Contacts
Representing Quicken Loans LLC and Mortgage Electronic Registration Systems Inc.: Matthew Blickensderfer, mblickensderfer@fbtlaw.com
Representing Samuel Voss: W.B. Markovits, bmarkovits@msdlegal.com
Representing the Ohio Attorney General’s Office: T. Elliot Gaiser, thomas.gaiser@ohioago.gov
What Was Business Partner’s Financial Responsibility When Loan Defaulted?
The Huntington National Bank, as administrative agent v. Raymond Schneider, Harold Sosna, and Faye Sosna, Case No. 2024-0208
First District Court of Appeals (Hamilton County)
ISSUES:
- What type of financial responsibility did a “Guaranty of Payment of Debt” agreement create – a guaranty or a suretyship?
- In a surety agreement, must the lender disclose information to the surety, who would be responsible for paying a debt, and does the duty exist if the lender doesn’t know the surety is unaware of the circumstances?
BACKGROUND:
Harold Sosna created Premier Health Care Management in 1998. The company owned and operated several nursing homes in southern Ohio for long-term care and care after medical procedures. Sosna also owned JBZ Group, which included real estate companies managed by Premier. Sosna went into business with Raymond Schneider to form the Keller Group, which also operated Premier-managed real estate companies. With the Keller Group, Schneider and Sosna each owned 50% of the company. Schneider maintains he was a silent partner in the Keller Group, and Sosna handled the day-to-day operations and financials of the company.
In 2017, one of Sosna’s nursing homes closed, and the lender declared a loan for Premier in default. In November 2018, Premier obtained a $77 million commercial loan from Huntington National Bank and other lenders. Roughly half of the money went to businesses in the co-owned Keller Group, and the other half went to Sosna’s businesses in JBZ Group.
Because of earlier financial issues with Premier, Huntington required Sosna, his wife, and Schneider to each personally guarantee the full amount of the $77 million loan. The agreement required repayment of the loan from their personal assets if the businesses didn’t make the loan payments. In prior loans, Schneider had signed limited “guaranties” for part of the loan liability , based on his partial ownership in the Keller Group. The new agreement Schneider signed stated he would be 100% responsible for the entire loan if payments weren’t made.
Bank Files Lawsuit To Recover Loan Balance
Huntington states that in February 2020 it notified the Sosnas and Schneider about defaults on the loan. Schneider disputes this, maintaining he wasn’t notified and the communications were only between the bank and Sosna. When the businesses failed to make loan payments, Huntington sued Schneider in June 2020 for breach of contract to force him to personally repay the loan balance. Huntington asked the Hamilton County Common Pleas Court for summary judgment in the bank’s favor for $75.6 million plus interest. Schneider argued that Huntington concealed Sosna’s deteriorating financial condition and the problematic financials of the companies before having Schneider sign the guaranty document, and the bank breached its duty of good faith and fair dealing.
The trial court granted summary judgment to the bank, finding that the personal guaranty Schneider signed meant he was liable and had to repay the debt.
He appealed to the First District Court of Appeals, which reversed and ordered the case back for trial. The First District determined that Schneider had agreed to a “suretyship,” not a guaranty. Under a guaranty, when there is a default, the principal debtor has primary responsibility, and the guarantor’s financial obligation is secondary. If someone agrees to be a surety and there is a default, the signer’s financial obligation arises at the same time as the principal debtor’s obligation. The surety is primarily and joint liable with the principal debtor.
The appeals court also concluded that Huntington had reason to believe that Schneider was unaware of Sosna’s and Premier’s negative financial information, and a reasonable jury could find Huntington had a duty to disclose the information to Schneider before he signed the financial agreement.
Huntington appealed to the Ohio Supreme Court, which accepted the case.
Bank Argues It Could Pursue Business Partner for Full Debt
Huntington contends that Schneider signed a guaranty. The bank points first to the title of the agreement, “Guaranty of Payment of Debt.” The agreement was made separately with Schneider, a characteristic of guaranty agreements, the bank maintains. It states that suretyships are part of an underlying agreement, which wasn’t the situation here.
Huntington argues that a guaranty doesn’t require the bank to pursue legal action against the principal debtor before proceeding against Schneider. Huntington contends that, regardless of the meaning of a guaranty, Schneider, the Sosnas, and the bank were free to enter a contract, as they did, with different requirements allowing the bank to sue Schneider as soon as there was a default.
Huntington also maintains that if the agreement is determined to be a suretyship, the Court still should reverse the First District. Ohio law placed no duty on Huntington to disclose to Schneider facts that might indicate an increased risk of default in this ordinary commercial transaction, the bank contends. Schneider calls this duty the “doctrine of increased risk.”
Huntington argues that even if there were such a duty in state law, it wouldn’t apply in this case. The bank maintains that Schneider is a sophisticated investor, and the loan was made to his own business partner and their joint and individual businesses. Schneider had reason and opportunity to inform himself about what was going on with the businesses. Although Sosna may not have been willing to be forthcoming about the financials, Schneider never asked the bank, it argues.
Huntington concludes that the agreement Schneider signed clearly states that the bank had the right to proceed against him immediately if there was a default without first trying to collect from Sosna or the businesses.
Business Partner Maintains That Bank Withheld Financial Troubles From Him
Schneider responds that Huntington’s reliance on the document’s title, which includes the word “guaranty,” isn’t conclusive about what type of agreement it was. He notes that the document itself states that the captions “are for convenience of reference only and shall be ignored in interpreting the provisions of this Agreement.”
He argues that Huntington indicates he is responsible only if there was a default on the loan. However, the agreement holds him unconditionally, primarily, and jointly liable for any payment when it is due, not just when there is a loan default, he maintains. Because his unconditional liability doesn’t require the bank to first pursue payment from the borrower or against collateral, the agreement is a suretyship, not a guaranty, Schneider argues.
He maintains that regardless of what it was called, Huntington’s contract imposed duties on him consistent with suretyship. With a surety, Huntington had obligations to disclose the financial issues before letting him assume liability for the full debt, Schneider maintains. He contends that all communications and negotiations for the loan were conducted solely between Sosna and Huntington. He states that Sosna wouldn’t have shared the true details because doing so would have jeopardized securing Schneider’s guarantee on the entire $77 million loan. Schneider asserts that for more than a century, Ohio courts have recognized that before a creditor enters a surety contract, the creditor has a duty of good faith to disclose adverse facts unknown to a third-party surety that would materially increase the surety’s risk in agreeing to the terms.
Schneider’s brief argues that Huntington drafted these terms because it “knew the loan was perilous” with Sosna, and the bank wanted to protect itself from losses likely to occur. According to the brief, Huntington knew Sosna’s personal debt was increasing, and he had a substantial cash flow problem. The brief states that the bank knew, but Schneider didn’t, that Premier also wasn’t paying its current bills or vendors and was “holding checks” totaling hundreds of thousands of dollars because of cash flow issues. Sosna was using money from the Keller Group to pay down a Premier line of credit from another bank. The brief notes that Sosna was convicted of bank fraud in October 2020 for the check floating scheme. Schneider’s brief argues that Huntington was incentivized to secure the loan because it would meet internal business goals, generate $700,000 in fees and revenue, and produce additional revenue if Sosna was convinced to move from a different bank to Huntington.
Additional Briefs Filed in Support of Bank
Amicus curiae briefs supporting Huntington Bank’s position were submitted jointly by the Ohio Bankers League, Ohio Credit Union League, American Bankers Association, and America's Credit Unions and by the Ohio Chamber of Commerce.
– Kathleen Maloney
Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.
Contacts
Representing Huntington National Bank: Michael Gladman, mrgladman@jonesday.com
Representing Raymond Schneider: Richard Wayne, rswayne@strausstroy.com