McGlinchey Commercial Law Bulletin

When can a third party attack an agreement? The Bullet Point: Volume 2, Issue 1

January 2, 2018

U.S. Bank v. Courthouse Crossing Acquisitions, LLC, 2d Dist. Montgomery No. 27648 2017-Ohio-9231.

This was an appeal of a trial court’s decision to grant summary judgment to the plaintiff-mortgagee in a residential foreclosure action. The defendant, a junior lienholder, argued that summary judgment was not appropriate because issues of fact existed concerning the plaintiff’s standing to foreclose.

The trial court disagreed and on appeal the Second Appellate District affirmed. The Second Appellate District found that the defendant, a nonparty to a pooling and servicing agreement, lacked standing to challenge the plaintiff’s compliance with the agreement and, moreover, that compliance with a pooling and servicing agreement was irrelevant to a plaintiff’s standing to foreclose under Ohio law.

The Bullet Point: This case highlights a growing split among Ohio courts regarding if, and when, a nonparty to a pooling and servicing agreement or assignment of mortgage can attack the plaintiff-mortgagee’s compliance with the agreement or document. The majority of courts, including the Second Appellate District, have found that nonparties to these agreements, like homeowners or junior lienholders, lack standing to challenge compliance with a pooling and servicing agreement or the validity of an assignment of mortgage. A minority of courts, including the Tenth Appellate District, have found that in certain circumstances, such nonparties would have the ability to challenge these instruments.

Fed. Natl Mtge. Assn v. Brown, 7th Dist. Columbiana No. 16 CO 0008, 2017-Ohio-9237.

This was an appeal of a trial court’s decision to grant summary judgment to the plaintiff-mortgagee in a residential foreclosure action.

On appeal, the defendant-borrower raised various issues contesting the judgment, including arguing that the trial court erred in denying his motion to strike the summary judgment affidavit filed by the plaintiff. Specifically, defendant-borrower argued that the affidavit should be struck because the affidavit was executed approximately one month after it was notarized. The Seventh Appellate District affirmed the trial court’s decision denying the motion to strike, noting that a trial court is afforded significant discretion in admitting documents and affidavit into evidence and that because the affiant adequately demonstrated her personal knowledge, it was not an abuse of discretion to consider the affidavit when ruling on the summary judgment motion.

The Bullet Point: On its own, a clerical error in an affidavit will not be sufficient to reverse a trial court’s decision to deny a motion to strike the affidavit from the record. Rather, if the clerical error is clear and if the affidavit otherwise establishes that the affiant has the requisite personal knowledge to attest to the facts contained therein, then the affidavit complies with Civ.R. 56(E) and is proper summary judgment evidence.

Diller v. Miami Valley Hospital, 2d Dist. Montgomery No. 27342, 2017-Ohio-9051.

This was an appeal of the trial court’s decision to grant summary judgment to the defendant-hospital in a sex discrimination case. Plaintiff claimed that she was employed as a uniformed officer at the hospital. A few years later, she was promoted. She alleged that she performed her new job duties in a satisfactory manner and always received good performance reviews. Plaintiff alleged that a new supervisor who engaged in sexual harassment was then hired. She reported this to the hospital and began to investigate claims that the supervisor was sexually harassing other employees as well. When the hospital discovered her investigation, plaintiff claims it falsely accused her of workplace infractions, which eventually led to her termination.

Plaintiff then filed suit alleging claims for sexual harassment and retaliation, and eventually the trial court granted judgment in favor of the hospital. Plaintiff appealed, but the Second Appellate District affirmed, noting that her sexual harassment claim based on a hostile work environment failed as a matter of law because the evidence did not establish that the harassment was severe and pervasive, but, rather, appeared to be, at best, isolated incidents.

The Bullet Point: R.C. 4112.02(A) makes it an unlawful discriminatory practice “[f]or any employer, because of the * * * sex * * * of any person, * * * to discriminate against that person with respect to hire, tenure, terms, conditions, or privileges of employment, or any matter directly or indirectly related to employment.” “A plaintiff may establish a violation of R.C. 4112.02(A)’s prohibition of discrimination ‘because of * * * sex’ by proving either of two types of sexual harassment: (1) ‘quid pro quo’ harassment, i.e., harassment that is directly linked to the grant or denial of a tangible economic benefit, or (2) ‘hostile environment’ harassment, i.e., harassment that, while not affecting economic benefits, has the purpose or effect of creating a hostile or abusive working environment.”

* * * “In order to establish a claim of hostile-environment sexual harassment, the plaintiff must show (1) that the harassment was unwelcome, (2) that the harassment was based on sex, (3) that the harassing conduct was sufficiently severe or pervasive to affect the ‘terms, conditions, or privileges of employment, or any matter directly or indirectly related to employment,’ and (4) that either (a) the harassment was committed by a supervisor, or (b) the employer, through its agents or supervisory personnel, knew or should have known of the harassment and failed to take immediate and appropriate corrective action.”

Cheatham IRA v. Huntington Natl Bank, 6th Dist. Lucas No. L-16-1292, 2017-Ohio-9234.

This was an appeal of the trial court’s denial to certify a class action against defendant-bank related to a municipal bond managed by the bank. The plaintiffs alleged that the bank, in charge of the bond that was to fund the construction of a nursing home, mismanaged the project and did nothing to protect the bondholders, while collecting substantial sums of money as compensation. Plaintiffs sought to certify a class action for breach of contract against the bank, and the bank opposed, arguing that the proposed class did not have common questions of law or fact and that the plaintiffs failed to show that a class action was a superior method to resolving the controversy.

The trial court agreed, finding that different questions of law and fact predominated the purported class and that class certification was inappropriate. On appeal, the Sixth Appellate District disagreed and reversed the trial court’s decision. In so ruling, the court found that under R.C. 1308.16, a subsequent bond purchaser acquires a cause of action that arose prior to the time the bondholder acquired a bonds and that because of this, common questions of law and fact did predominate between those proposed plaintiffs that invested funds in the municipal bond both before and after the purported violations by the bank.

The Bullet Point: One of the requirements of a class action is that “questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.”

Under R.C. 1308.16, a purchaser of a certificate or stock acquires all rights in the security that the transferor had to transfer. Here, the Sixth Appellate District found that the cause of action asserted by the proposed class constituted a “right in the security” within the meaning of R.C. 1308.16 based upon the specific language of the bond proceeding, i.e., the agreement setting forth the terms and conditions of the bond. Because the court found that a cause of action fit the definition of a “right in the security” in this case, it found that questions of law or fact common to the class predominated over individual questions and that class certification was appropriate.