In This Issue

• Does an Arbitration Provision Really Keep You Out of Court?
• Annual Bankruptcy Seminar
• Prerecorded Messages Offering "Free" Goods or Services Violate Telephone Consumer Protection Act
• With This Ring … Car, Computer, Tanning Bed and Horses …
  I Hope to Wed
• Should Ohio Make Changes in the Process for Electing Judges?

Does an Arbitration Provision Really Keep You Out of Court?

By Rebecca Roderer Price

Arbitration clauses have become an increasingly popular provision in contracts. The clause is generally included in a contract to avoid the expense and delay that can occur when a dispute between the parties to the agreement results in a lawsuit. However, all parties to a contract should be aware that the Ohio Revised Code permits a party to a contract with an arbitration clause to seek court intervention in certain circumstances. The circumstances in which a party will prevail in a court action are limited, but the prevailing party at the arbitration may incur substantial costs if the opposing party seeks intervention. Increased legal fees and a delay in receiving the award can create headaches for the prevailing party. On the other hand, the losing party to arbitration may have a second bite at the apple.

Ohio courts are left to decide when it is appropriate to vacate an arbitration award, thus diminishing the effect of the parties' agreement to arbitrate a dispute. The losing arbitration party can seek such court intervention by submitting a motion to the court within three months of the arbitration award. Under the Ohio Revised Code, a Court of Common Pleas may vacate an arbitration award upon the motion of a party to the arbitration under the following circumstances:

(A) The award was procured by corruption, fraud, or undue means.

(B) There was evident partiality or corruption on the part of the arbitrators, or any of them.

(C) The arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.

(D) The arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

Additionally, the Revised Code provides that a Court of Common Pleas has authority, upon the motion of a party to the arbitration, to modify the arbitration award if:

(A) There was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award;

(B) The arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matters submitted;

(C) The award is imperfect in matter of form not affecting the merits of the controversy.

Courts must determine whether a party to arbitration has been denied a fundamentally fair hearing. If there has not been a fundamentally fair hearing, the award may be vacated or modified. In arbitration, the arbitrator is the sole judge of the law and facts. Therefore, an arbitration award must be upheld even if the arbitrator's decision is clearly, factually, and legally incorrect. A court may not simply substitute its judgment for that of the arbitrator.

As provided by the Ohio Revised Code, the circumstances in which an arbitration award can be vacated or modified are limited. For example, an arbitrator may be considered partial or corrupt if he has a close, substantial or economic relationship with a party to the arbitration. Although the arbitrator can be legally wrong, the arbitrator cannot act with manifest disregard for the law, or refuse to adhere to an applicable legal principle, which is clearly defined and not subject to reasonable debate. Additionally, an arbitration award can be vacated or modified if an arbitrator exceeds his authority. An arbitrator exceeds his authority if he disregards or modifies unambiguous provisions contained in the agreement between the parties, or adds additional requirements than those the agreement imposes on the parties. Additionally, the arbitrator exceeds his authority if he exercises jurisdiction over an issue that was not submitted to arbitration.

An arbitration award must be upheld if those circumstances set forth in the Ohio Revised Code do not apply. It is not appropriate to vacate or modify an award if an arbitrator does not follow formal rules of procedure and evidence. Additionally, an arbitrator need not explain his/her legal conclusions, but if no court could conceivably come to a same determination as the arbitrator, then the arbitration must be modified or vacated. With respect to judging the facts, an arbitrator's decision must still be upheld, even if it is against the manifest weight of the evidence.

How can a party to arbitration protect the award; or, on the other hand, dispute the award? Parties should consider having the arbitration proceedings recorded. Although this might be an added expense at the time of the arbitration, having a record will greatly assist a court if the losing party moves to modify or vacate the award. The arbitration proceedings are presumed to be regular, absent a transcript, leaving the prevailing party with an arguable advantage if the losing party does seek judicial intervention. However, without a transcript of the proceeding, a court will have to look to affidavits from the parties in attendance to determine what occurred during the arbitration hearing, which is not an ideal basis to support the party's position. A transcript will provide the court with a clear picture of what actually occurred at the arbitration. Of course, in order to best protect yourself, you should consult an attorney before the dispute is arbitrated.

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Prerecorded Messages Offering "Free" Goods or Services Violate Telephone Consumer Protection Act

By Jennifer L. Mackanos

In a recent decision, the Tenth District Court of Appeals held that telemarketing companies that utilize prerecorded messages offering "free" goods, services, or information are in violation of the Telephone Consumer Protection Act ("TCPA") unless, as is required by the TCPA, the recipient has given his express invitation or permission to receive such messages. The decision further emphasizes the importance of adhering to the requirements set forth in the TCPA by telemarketing and other firms who do business via telephone.

The TCPA prohibits the transmitting of unsolicited advertisements by a prerecorded voice without previously obtaining the express invitation or permission of the recipient of the message. In Charvat v. Crawford (Nov. 4, 2003), 155 Ohio App.3d 161, a consumer received two virtually simultaneous telephone calls, one on each of his two home lines, which he recorded via equipment attached to the telephones. Both of the messages were identical prerecorded messages that gave the recipient the option of receiving "free information" regarding earning money working from home by simply pressing the number "one" button on the recipient's touchtone phone. The message also gave the recipient the opportunity to hang up by pressing the number "two" button.

An advertisement is not simply an offer to sell something; it can be found in any message that is part of an overall marketing plan.

The consumer left his name and address information, indicating that he did want the free information sent to him. He also obtained the telephone numbers from where the calls were placed. In this way, the consumer was able to identify the telemarketing firm. He then brought action against the firm in the Franklin County Court of Common Pleas.

The defendants moved for summary judgment prior to trial, arguing that their prerecorded messages did not violate the TCPA because they did not attempt to sell goods, property or services. Rather, the defendants argued, their telephone recordings merely provided the receiver with "an opportunity to obtain information" if the receiver so chose. The plaintiff consumer argued that the recordings were intended for a commercial purpose and contained unsolicited advertising as the term was used under the TCPA. The trial court agreed with the defendants and granted their motion for summary judgment.

On appeal, the Tenth District Court of Appeals boiled the issue down to this: did the prerecorded telephone messages offering free information contain an unsolicited advertisement as that term is used in the TCPA? The Court of Appeals held that the messages did indeed contain an unsolicited advertisement, and therefore they violated the TCPA's prohibition against such messages. In so holding, the Court turned to the Federal Communications Commission Report and Order In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Report and Order (2003), 18 F.C.C.R. 14014. Specifically, the Court analyzed the section entitled "Offers for Free Goods or Services; Information-Only Messages", which in pertinent part provides:

The TCPA's definition [of unsolicited advertisement] does not require a sale to be made during the call in order for the message to be considered an advertisement. Offers for free goods or services that are part of an overall marketing campaign to sell property, goods, or services constitute ‘advertising the commercial availability or quality of any property, goods, or services.' Therefore, the Commission finds that prerecorded messages containing free offers and information about goods and services that are commercially available are prohibited to residential telephone subscribers, if not otherwise exempted.

The Court then declared "the application of the prerecorded message rule should turn, not on the caller's characterization of the call, but on the purpose of the message." The Court held that a prerecorded telephone message that contains "free offers and information about services, and that asks the consumer to call a toll-free number to learn more, is an unsolicited advertisement under the TCPA if sent without the called party's express invitation or permission." The Court then determined that based on the evidence in the record, the telephone messages at issue did all of those things and therefore summary judgment for the defendants was unwarranted.

Notably, Justice Sadler, in her partial concurrence and partial dissent, discussed the defendants' argument that they had obtained the consent required by the TCPA to transmit their advertisement by giving the consumer the option of pressing the number "one" on the telephone's touchtone keypad. It was only after the consumer pressed the "one" button that the actual offer of free information was disseminated, they argued, and when the consumer pressed that button consent was obtained. Justice Sadler pointed out that this argument was unavailing, as the comments from the same Federal Communications Commission Report and Order relied upon by the majority stated that "[p]urporting to obtain consent during the call, such as requesting that a consumer ‘press one' to receive further information, does not constitute the prior consent necessary to deliver the message in the first place, as the request to ‘press one' is part of the telemarketing call."

This decision should be noted by all firms, telemarketing and otherwise, who solicit business via the telephone. An advertisement is not simply an offer to sell something; it can be found in any message that is part of an overall marketing plan. Thus, without obtaining prior consent from consumer recipients of such messages, a company puts itself at risk of being found to be in violation of the TCPA by sending these types of messages via telephone.

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With This Ring … Car, Computer, Tanning Bed and Horses … I Hope to Wed

By Eve M. Ellinger

How, in a year and a half, can one man: be seriously injured in an accident; become engaged to a married woman; move in with his fiancé and her mother; buy an engagement ring, a car, a computer, a tanning bed, and horses for his fiancé; pay off his fiancé's mother's car loan and make improvements to her mother's house; spend $180,000 — the entire amount of the settlement money he received as a result of the accident — in less than six months; tell his fiancé that he is going to sue her mother for the money he spent on the home improvements; have his fiancé break their engagement because he is suing her mother; sue both his ex-fiancé and her mother for the return of the gifts he gave them because they were conditioned upon marriage; and be left with only an engagement ring at the end? The Fourth District Court of Appeals in Cooper v. Smith (2003), 155 Ohio App.3d 218, 2003-Ohio-6082, addresses this issue.

In Cooper, the Court of Appeals had two questions to answer: (1) If a person gives a gift in contemplation of marriage and the marriage does not occur, is the person entitled to recover the gift? (2) If the person is entitled to recover the gift, is this right absolute or subject to limitations?

The Court identified five possible approaches to answering the above questions. Under the first approach, the person giving the gift is denied recovery if the beneficiary was legally married to someone else at the time these two people became engaged. (footnote 1) The first approach is based on the premise that an agreement to marry where one person is already married is void as contrary to public policy. The Court refused to adopt this approach because it provides benefit to one and punishment to the other for conduct disrespectful to the institution of marriage.

The second approach treats all gifts given during the engagement period as irrevocable inter vivos gifts. (footnote 2) This approach encourages a person to think twice before giving an extravagant gift.

The third approach discussed by the Court provides that an engagement ring is a conditional gift but all other gifts are irrevocable inter vivos gifts unless the gifts were expressly conditioned on the subsequent marriage. (footnote 3) This approach recognizes that an engagement ring symbolizes a couple's promise to marry, thereby implying a condition only with respect to an engagement ring.

The fourth approach, the fault-based approach, permits the person who gave the gift to recover the gift, so long as he or she did not unjustifiably break the engagement. (footnote 4) This approach tries to prevent a gift giver from being rewarded by breaking a promise.

Finally, under the fifth approach, a gift given in contemplation of marriage is returned to the person giving the gift in the event that the marriage does not occur, regardless of who broke the engagement. (footnote 5)

The Fourth District Court of Appeals determined that the third approach (the engagement ring is a conditional gift, but all other gifts are irrevocable inter vivos gifts unless these gifts were expressly conditioned on the subsequent marriage) is the best approach. The engagement ring symbolizes a couple's promise to marry one another, while any other gift does not have symbolic meaning and is nothing more than a "token of love and affection".

In this case, the woman returned the engagement ring and was permitted to keep the car, computer, the tanning bed, and the horses. As for her mother, the Court affirmed the Trial Court's determination that the home improvements, car payments, and $10,000 cash were not given upon any condition and therefore were final and absolute. Because of his implicit assumptions, the man was left with only the engagement ring.

The moral of the story: assume nothing, for we all know what happens when assumptions are made. Unfortunately, this man learned this lesson the hard way. If one is contemplating the giving of a gift with the intention of it being conditioned upon marriage, the condition must be directly and distinctly stated.

1  See Morgan v. Wright (1963), 219 Ga. 385, 133 S.E.2d 341; Lowe v. Quinn (1971), 27 N.Y.2d 397, 318 N.Y.S.2d 467, 267 N.E.2d 251; Hooven v. Quintana (1980), 44 Colo.App. 395, 618 P.2d 702.

2  Albinger v. Harris (2002), 310 Mont. 27, 48 P.3d 711; Heiman v. Parrish (1997), 262 Kan. 926, 942 P.2d 631 (Marquardt, J., dissenting).

3   Albanese v. Indelicato (1947), 25 N.J. Misc. 144, 51 A.2d 110; Gikas v. Nicholis (1950), 96 N.H. 177, 71 A.2d 785.

4  See Wion v. Henderson (1985), 24 Ohio App.3d 207, 494 N.E.2d 133. See also, Curtis v. Anderson (Tex.App.2003), 106 S.W.3d 251; Spinnell v. Quigley (1990), 56 Wash.App. 799, 785 P.2d 1149.

5  See Lyle v. Durham (1984), 16 Ohio App.3d 1, 473 N.E.2d 1216; McIntire v. Roukhorst (1989), 65 Ohio App.3d 728, 585 N.E.2d 456; Patterson v. Blanton (1996), 109 Ohio App.3d 329, 672 N.E.2d 208.

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Should Ohio Make Changes in the Process for Electing Judges?

By Stuart W. Harris

Over the past several years, there has been a debate in Ohio and other states on what reforms are necessary to improve the process of electing judges. Some say that the election of judges is problematic and instead advocate a merit selection system. Others maintain that electing judges is crucial, and reforms can be made to the way judges are elected. Needless to say, after two Ohio Supreme Court cycles, the situation has, by all accounts, gone from bad to worse. In 2000 and 2002, negative campaign commercials abounded and enormous amounts of money were spent in the Ohio Supreme Court races.

Ohio became a state in 1802, and for 48 years under the Ohio Constitution, the Ohio General Assembly selected our state judges. In 1851, the framers of Ohio's Constitution determined that electing judges would result in greater accountability. Based on the continuing problems observed in the last several election cycles, that accountability may be giving way. Accordingly, under the leadership of Chief Justice Moyer, a judicial reform conference titled, "Judicial Impartiality: The Next Steps," was convened in 2003 to explore a variety of issues related to judicial reform. At issue were judicial qualifications, term lengths, voter education, public funding and independent campaign finance disclosure. The goal was to propose extensive reform recommendations intended to strengthen and bolster an independent and impartial state judiciary.

The full report was recently completed and is available on the web at www.thenextsteps.org. The web site also has a section for members of the public to offer comments on the reforms. The reforms would need to pass the legislature, and the provision affecting the term length for judges may require an amendment to Ohio's Constitution.

Under the reform proposals, the minimum experience requirement for most judicial offices would be increased. Currently, judicial candidates at any level must have practiced law for only six years to be eligible as a judicial candidate in Ohio. Under the reform proposals, trial court candidates would need 10 years, appellate court candidates would need 12 years, and Supreme Court candidates would need 15 years of experience. The report also includes a proposed requirement that judicial candidates complete 40 hours of coursework designed specifically for prospective judges. Additionally, the report proposes an increase in the salaries paid to Ohio judges by indexing the salaries to comparable federal judges and including annual cost-of-living adjustments. Finally, the report's most sweeping provision would extend judicial terms to 10 years for full-time trial court judges and 12 years for appellate judges and Supreme Court justices.

The last provision may also be the most controversial. According to Chief Justice Moyer, "extending judicial terms in state counts will allow our judges to spend less time campaigning and more time serving the public." Major Ohio newspapers have offered a less favorable view adding that elections are a useful check on incompetent judges and the public should not have to wait so long to remove them.

It is important to note that merit selection is not a part of this proposal, but may ultimately be part of the debate. There is legislation pending in the Ohio General Assembly on merit selection. Ohio voters have shown little support for an appointed judiciary. The most recent proposal for a merit selection system was on the ballot in 1987 and lost by a 2-1 margin. While longer terms for judges may be an acceptable compromise between merit selection and elected judges, there undoubtedly will be discussions that will focus on the issue of merit selection. The American Judicature Society, a strong advocate of merit selection, has contributed greatly to this debate. Just over half of US states have some form of merit selection. The American Judicature Society frames the debate in the following fashion:

What is "merit selection" of judges?

Merit selection is a way of choosing judges that uses a nonpartisan commission of lawyers and non-lawyers to locate, recruit, investigate, and evaluate applicants for judgeships. The commission then submits the names of the most highly qualified applicants (usually three) to the appointing authority (usually the governor), who must make a final selection from the list. For subsequent terms of office, judges are evaluated for retention by either a commission or by the voters in an uncontested election.

What's wrong with electing judges? Isn't that the democratic way?

What's democratic about having to choose from more than 100 candidates to fill 40-odd judicial seats, as voters in one urban area did recently? Democracy requires an informed choice, and with the large number of candidates in some areas, it is impossible for even the best-intentioned voters to be well informed. At the same time, in many jurisdictions, candidates run unopposed and voters have no choice at all.

Other problems arise in judicial elections. Public expectation of getting a fair hearing in the courts is a cornerstone of the judicial system, so it is essential that judges be impartial and free of economic and political pressure.

[See American Judicature Society website www.ajs.org]

The clear consensus is that reforms are necessary. Under Chief Justice Moyer's leadership, the reforms outlined in "Judicial Impartiality: The Next Steps," will be helpful. Future reforms could include merit selection. Perhaps merit selection could be implemented for the Ohio Supreme Court and elections could continue for the trial courts and appellate courts with the reforms outlined in the report. All these considerations will assist in the quest to improve Ohio's process of electing judges. The great trial lawyer Roscoe Pound best describes this quest:

"Putting courts into politics and compelling judges to become politicians, in many jurisdictions, has almost destroyed the traditional respect for the bench."

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