Case Title: State ex rel. Valley Roofing, L.L.C. v. Ohio Bur. of Workers Comp.

Citation: 2009-Ohio-2684

Docket Number: 20080067

State: ohio

Court: Ohio Supreme Court

Date: 2009-06-16T00:00:00Z

Document:
[Cite as State ex rel. Valley Roofing, L.L.C. v. Ohio Bur. of Workers’ Comp., 122 Ohio St.3d 
275, 2009-Ohio-2684.] 
 
 
 
THE STATE EX REL. VALLEY ROOFING, L.L.C., APPELLEE, v. OHIO BUREAU OF 
WORKERS’ COMPENSATION, APPELLANT. 
[Cite as State ex rel. Valley Roofing, L.L.C. v. Ohio Bur. of Workers’ Comp., 
122 Ohio St.3d 275, 2009-Ohio-2684.] 
Workers’ compensation — Successor in interest — Experience rating. 
(No. 2008-0067 — Submitted March 10, 2009 — Decided June 16, 2009.) 
APPEAL from the Court of Appeals for Franklin County, 
No. 07AP-181, 2007-Ohio-6277. 
__________________ 
Per Curiam. 
{¶ 1} PNC Bank foreclosed on the assets of Tech Valley Contracting, 
Inc. (“Tech”).  Appellee Valley Roofing Company, L.L.C. (“Valley”) bought 
those assets from PNC and continued the business operation.  When Valley 
applied for workers’ compensation coverage, appellant Ohio Bureau of Workers’ 
Compensation, as part of the process, transferred Tech’s experience rating to 
Valley, finding that Valley was Tech’s successor in interest.  Valley objected and 
eventually filed a complaint in mandamus in the Court of Appeals for Franklin 
County. 
{¶ 2} The court granted a writ of mandamus.  Relying on State ex rel. 
Crosset Co., Inc. v. Conrad (2000), 87 Ohio St.3d 467, 721 N.E.2d 986, the 
appellate court found that because the bureau had abused its discretion in 
determining that Valley was Tech’s successor in interest, the bureau could not 
transfer Tech’s experience rating to Valley. 
{¶ 3} This cause is now before this court on the bureau’s appeal as of 
right. 
SUPREME COURT OF OHIO 
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{¶ 4} A successor in interest, under R.C. 4123.32(C), assumes “in 
proportion to the extent of the transfer * * * the [prior] employer’s account and 
shall continue the payment of all contributions due under this chapter.” One 
element of this account is the experience rating, which factors into an employer’s 
merit rating for workers’ compensation premium purposes. 
{¶ 5} We have defined 
“successor 
in 
interest,” 
for 
workers’ 
compensation purposes, as a “transferee of a business in whole or in part.”  State 
ex rel. Lake Erie Constr. Co. v. Indus. Comm. (1991), 62 Ohio St.3d 81, 83-84, 
578 N.E.2d 458.  This definition, however, does not apply if the business assets of 
the predecessor entity have been purchased from a bank and not directly from that 
employer.  As we stated in Crosset, “the specific language of R.C. 4123.32(D) 
[now R.C. 4123.32(C)] * * *, i.e., ‘employer transfers his business in whole or in 
part or otherwise reorganizes the business,’ is plain and unambiguous.  The 
language of the statute clearly refers to a voluntary act of the employer and not 
the involuntary transfer of the employer’s business through an intermediary 
bank.”  Crosset, 87 Ohio St.3d at 471, 721 N.E.2d 986. 
{¶ 6} Valley did not purchase Tech’s assets from Tech.  It acquired them 
from an intermediary bank. Under Crosset, Lake Erie’s definition of “successor in 
interest” does not apply. Accordingly, Valley cannot be considered to be Tech’s 
successor in interest and cannot be assigned Tech’s experience rating. 
{¶ 7} The judgment of the court of appeals is affirmed. 
Judgment affirmed. 
 
MOYER, C.J., and PFEIFER, O’CONNOR, and LANZINGER, JJ., concur. 
 
LUNDBERG STRATTON, O’DONNELL, and CUPP, JJ., dissent. 
__________________ 
CUPP, J., dissenting. 
{¶ 8} I respectfully dissent for two reasons.  First, we have long 
recognized — and deferred to — the considerable expertise of both the Industrial 
January Term, 2009 
3 
Commission and the Bureau of Workers’ Compensation in premium matters.  See 
State ex rel. Reaugh Constr. Co. v. Indus. Comm. (1928), 119 Ohio St. 205, 209, 
162 N.E. 800; State ex rel. McHugh v. Indus. Comm. (1942), 140 Ohio St. 143, 23 
O.O. 361, 42 N.E.2d 774; State ex rel. Viox Builders, Inc. v. Lancaster (1989), 46 
Ohio St.3d 144, 545 N.E.2d 895; State ex rel. Minutemen, Inc. v. Indus. Comm. 
(1991), 62 Ohio St.3d 158, 161, 580 N.E. 2d 777.  In this case, the bureau 
determined that Valley Roofing Company, L.L.C. (“Valley”) was the successor in 
interest to Tech Valley Contracting, Inc. (“Tech”), and I do not believe that that 
determination should be disturbed. 
{¶ 9} Second, I also believe that the majority’s reliance on State ex rel. 
Crosset Co., Inc. v. Conrad (2000), 87 Ohio St.3d 467, 721 N.E.2d 986, is 
misplaced.  Crosset does state that Lake Erie Constr. Co. v. Indus. Comm. (1991), 
62 Ohio St.3d 81, 578 N.E.2d 458, does not apply when a successor entity 
purchases the predecessor’s assets from an intermediary bank rather than directly 
from the predecessor itself.  87 Ohio St.3d at 475, 721 N.E.2d 986.  Crosset also, 
however, reaffirmed Lake Erie’s applicability to the transfer of  experience 
ratings, which is the issue now before us. Id. at 474. This, in turn, creates a 
dilemma.  The presence of an intermediary bank supports application of Crosset, 
but the fact that it is an experience rating and not a retrospective-rating plan that is 
at issue favors Lake Erie’s applicability.  Because I believe that the reasoning 
underlying Crosset is flawed, Lake Erie should instead apply. 
{¶ 10} In Crosset, the original company (“Old Crosset”) ceased 
operations when two banks foreclosed on its assets. 87 Ohio St.3d at 471, 721 
N.E.2d 986. TCC Acquisitions then purchased those assets and continued the 
business under the Crosset name (“New Crosset”).  When New Crosset applied 
for workers’ compensation coverage, the bureau transferred Old Crosset’s 
experience rating to it.  New Crosset did not object. 
SUPREME COURT OF OHIO 
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{¶ 11} The bureau also transferred unpaid obligations associated with Old 
Crosset’s participation in a retrospective-rating plan.  A retrospective-rating plan 
is an alternative premium plan under R.C. 4123.29(A)(3) that allows an employer 
to pay a lower annual premium in exchange for the employer’s direct payment of 
actual medical costs and compensation for each claim arising that year.  New 
Crosset challenged that transfer by filing a complaint in mandamus in the Court of 
Appeals for Franklin County. 
{¶ 12} The court of appeals, relying on Lake Erie, defined New Crosset as 
a successor in interest and upheld the transfer.  This court reversed, relevantly 
holding that (1) R.C. 4123.32(D) did not apply to the acquisition of assets from an 
intermediary bank and (2) Lake Erie applied to the transfer of experience ratings, 
not retrospective-rating plans.  Crosset, 87 Ohio St.3d at 475, 721 N.E.2d 986. 
{¶ 13} The majority holding was based on former R.C. 4123.32(D), now 
R.C. 4123.32(C), which states: 
{¶ 14} “[I]f any employer transfers a business in whole or in part or 
otherwise reorganizes the business, the successor in interest shall assume, in 
proportion to the extent of transfer, * * * the employer’s account and shall 
continue the payment of all contributions due under this chapter.” (Emphasis 
added.) 
{¶ 15} The majority’s reasoning was simple:  New Crosset acquired Old 
Crosset’s assets from a bank, not from “any employer.”  The majority feared that 
to approve the transfer under these circumstances “would subject all purchasers of 
assets from secured parties, where the purchasers intended to continue in the same 
business, to liabilities of debtors, even though such purchasers might not have any 
way of determining what, if any, such liabilities might exist.  Chances are that 
before, during, and after forfeiture of assets of a debtor to a secured creditor, even 
the secured creditor may not know or have any way to find out about any 
January Term, 2009 
5 
outstanding obligations junior to the secured creditor’s interest.” Id. at 472, 721 
N.E.2d 986. 
{¶ 16} Unlike Lake Erie, Crosset was not unanimous, and the dissent 
made some thoughtful observations.  The dissent challenged the majority’s 
emphasis on the presence of an intermediary bank for two reasons. It disagreed 
with the majority’s claim that R.C. 4123.32(D) “clearly refers to a voluntary act 
of the employer and not the involuntary transfer of the employer’s business 
through an intermediary bank.” Id. at 471, 721 N.E.2d 986.  The dissent stated 
that Ohio’s commercial code, as contained in R.C. 1336.01(L), defined “transfer” 
as “every direct or indirect, absolute or conditional, and voluntary or involuntary 
method of disposing of or parting with an asset.” Id. at 476-477. 
{¶ 17} The dissent also stressed that “the majority focuses its analysis on 
only half of the statutory phrase that supports the authority of the [bureau] 
administrator.” Id. at 477, 721 N.E.2d 986.  R.C. 4123.32(D) applies, she wrote, 
when “any employer transfers his business * * * or otherwise reorganizes the 
business.” (Emphasis added.)  “Reorganization,” she stated, was a “commonly 
used term for the restructuring of a business that occurs in bankruptcy.  
Employers forced into such proceedings would likely hesitate to describe such 
actions as voluntary.” Id.  This observation also undermines the majority’s 
statement that the presence of an intermediary bank is a critical distinction, since a 
reorganization through bankruptcy would involve some type of intermediary. 
{¶ 18} These observations are insightful, and I agree with the conclusion 
that the Crosset majority read R.C. 4123.32(D) too narrowly.  For these reasons, I 
believe that Valley’s acquisition of Tech’s assets from PNC Bank rather than 
directly from Tech is irrelevant to the issue of Valley’s status as a successor in 
interest. I also note that Crosset devoted considerable discussion to affirming 
Lake Erie’s applicability to the transfer of experience ratings – a point that the 
present majority does not address. 
SUPREME COURT OF OHIO 
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{¶ 19} Accordingly, I would reverse the court of appeals and find that, 
under Lake Erie, Valley is Tech’s successor in interest. 
 
LUNDBERG STRATTON and O’DONNELL, JJ., concur in the foregoing 
opinion. 
__________________ 
Hemmer Pangburn DeFrank, P.L.L.C., Scott R. Thomas, and Robert L. 
Dawson, for appellee. 
Richard Cordray, Attorney General, and Gerald H. Waterman, Assistant 
Attorney General, for appellant. 
______________________