Title: State ex rel. K&D Group, Inc. v. Buehrer

State: ohio

Issuer: Ohio Supreme Court

Document:

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 
State ex rel. K&D Group, Inc. v. Buehrer, Slip Opinion No. 2013-Ohio-734.] 
 
 
NOTICE 
This slip opinion is subject to formal revision before it is published in 
an advance sheet of the Ohio Official Reports.  Readers are requested 
to promptly notify the Reporter of Decisions, Supreme Court of Ohio, 
65 South Front Street, Columbus, Ohio 43215, of any typographical or 
other formal errors in the opinion, in order that corrections may be 
made before the opinion is published. 
 
SLIP OPINION NO. 2013-OHIO-734 
THE STATE EX REL. K&D GROUP, INC., APPELLANT, v. BUEHRER, ADMR., 
APPELLEE. 
[Until this opinion appears in the Ohio Official Reports advance sheets,  
it may be cited as State ex rel. K&D Group, Inc. v. Buehrer,  
Slip Opinion No. 2013-Ohio-734.] 
Workers’ compensation—Successor in interest—Experience rating. 
(No. 2011-1918—Submitted January 8, 2013—Decided March 6, 2013.) 
APPEAL from the Court of Appeals for Franklin County,  
No. 10AP-608, 2011-Ohio-5051. 
__________________ 
Per Curiam. 
{¶ 1} Appellant, K&D Group, Inc., filed a complaint in mandamus in the 
Franklin County Court of Appeals alleging that the Bureau of Workers’ 
Compensation abused its discretion when it transferred part of the experience 
rating of Mid-America Management Corporation (“Mid-America”) to K&D 
Group, Inc., as successor in interest. 
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{¶ 2} For the reasons that follow, we hold that K&D Group, Inc., was 
not a successor in interest for purposes of workers’ compensation law.  Thus, the 
bureau abused its discretion when it transferred part of Mid-America’s experience 
rating to K&D Group, Inc.  We reverse the judgment of the court of appeals and 
issue a writ of mandamus. 
Facts 
{¶ 3} In 2004, K&D Enterprises, Inc., contracted with Fame-Midamco 
Company, L.L.C., through its manager, Mid-America, to purchase an apartment 
complex known as the Euclid-Richmond Gardens.  Prior to the closing, K&D 
Enterprises created a new company, Euclid-Richmond Gardens, Ltd., and 
assigned its rights under the purchase agreement to that new company. 
{¶ 4} Euclid-Richmond Gardens, Ltd., hired appellant, K&D Group, Inc. 
(“K&D Group”), a property-management company, to manage the apartments, 
which were renamed Parkside Garden Apartments.  K&D Group hired some 
former employees of Mid-America and assumed the day-to-day operations of the 
complex. 
{¶ 5} The bureau conducted an audit of K&D Group in 2009 and 
determined that it was the successor in interest to the business operations of Mid-
America.  This determination authorized the bureau to base K&D Group’s 
experience rating, in part, on Mid-America’s past experience, which included a 
large workers’ compensation claim. 
{¶ 6} K&D Group filed a protest, arguing that it was not a successor in 
interest to Mid-America, because it had not been involved in the purchase of the 
apartment complex and it did not acquire anything in the transaction.  Following a 
hearing, the bureau’s adjudicating committee denied the protest.  The committee 
concluded that the bureau had correctly transferred the predecessor’s experience 
to K&D Group as the successor in interest: “The day to day operations of the 
apartment complex remained the same after the purchase.  The K&D Group 
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assumed the prior leases, retained some of the former employees and operated 
under the same manual numbers.”1  K&D Group’s administrative appeal was 
denied.  
{¶ 7} K&D Group filed a mandamus action in the court of appeals.  A 
magistrate concluded that the bureau had not abused its discretion.  The court of 
appeals adopted the magistrate’s decision and denied the writ. 
{¶ 8} This cause is now before this court on an appeal as of right. 
Legal Analysis 
{¶ 9} When determining what an employer’s premium should be, the 
bureau follows the fundamental concept that rates are determined by “projecting 
the experience of the past into the future.”  Fulton, Ohio Workers’ Compensation 
Law, Section 14.4, at 567 (3d Ed.2008).  The bureau groups employers with 
similar operations into classifications based on the risk exposures common to 
those employers.  Each classification is assigned a number known as the “manual 
number.”  Generally, it is the employer’s business that is classified, not the 
separate occupations within the business.  See Ohio Adm.Code 4123-17-08.  The 
bureau also relies on experience rating. 
 
[E]xperience rating [is] a concept used to determine whether a 
particular employer should be assigned premium rates higher than 
or less than the “basic rate” that is assigned to employers within 
the same classification.  In experience rating, the employer’s past 
claims history, or experience, is consulted to compute a rate that 
produces premiums sufficient to pay future claims. 
 
                                                 
1 The term “manual number” refers to the bureau’s classification of an employer’s business 
according to its degree of hazardousness.  Ohio Adm.Code 4123-17-08.   
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State ex rel. Crosset Co., Inc. v. Conrad, 87 Ohio St.3d 467, 473, 721 N.E.2d 986 
(2000). 
{¶ 10} The bureau transferred part of Mid-America’s experience rating to 
K&D Group pursuant to its authority under R.C. 4123.32(C) and Ohio Adm.Code 
4123-17-02.  R.C. 4123.32(C) authorizes the bureau to adopt rules concerning 
premiums in order to safeguard the State Insurance Fund.  The bureau 
administrator may make rules to cover  
 
the rates to be applied where one employer takes over the 
occupation or industry of another * * *, and the administrator may 
require that if any employer transfers a business in whole or in part 
* * *, the successor in interest shall assume, in proportion to the 
extent of the transfer, * * * the employer’s account. 
 
(Emphases added.) 
{¶ 11} The rule to determine rates for succeeding employers is in Ohio 
Adm.Code 4123-17-02(B)(3), which provides: 
 
Where a legal entity succeeds in the operation of a portion 
of a business of one or more legal entities having an established 
coverage or having had experience in the most recent experience 
period, the successor’s rate shall be based on the predecessor’s 
experience within the most recent experience period, pertaining to 
the portion of the business acquired by the successor. 
 
(Emphasis added.) 
{¶ 12} Thus, for the bureau to transfer the experience rating from a 
predecessor employer to a successor employer, there must be a transfer of 
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business either in whole or in part and the successor employer must be the 
successor in interest.  “[A] successor-in-interest, for workers’ compensation 
purposes, is simply a transferee of a business in whole or in part.”  State ex rel. 
Lake Erie Constr. Co. v. Indus. Comm., 62 Ohio St.3d 81, 83-84, 578 N.E.2d 458 
(1991). 
{¶ 13} K&D Group contends that it is not a successor in interest of Mid-
America.  First, K&D Group argues that it was not a party to the sale of the 
apartments and it did not acquire any assets as a result of the transaction.  But 
neither R.C. 4123.32(C) nor Ohio Adm.Code 4123-17-02(B)(3) requires the 
transfer of assets.  The focus of the statute and the rule is the transfer of business 
operations or labor, not the legal concept of corporate succession.  R.C. 
4123.32(C) (“where one employer takes over the occupation or industry of 
another” [emphasis added]); Ohio Adm.Code 4123-17-02(B)(3) (“[w]here a legal 
entity succeeds in the operation of a portion of a business * * *” [emphasis 
added]).  A business operation may be transferred through methods other than a 
purchase.  For instance, an employer was considered a successor in interest for 
experience-rating purposes when it leased a nursing-home facility and continued 
the ongoing business of the predecessor employer.  State ex rel. Lynnhaven XIV, 
L.L.C. v. Conrad, 10th Dist. No. 02AP-36, 2003-Ohio-825, 2003 WL 462506. 
{¶ 14} Next, K&D Group contends that it cannot be a successor in interest 
to Mid-America, because there was no direct transfer of the business from Mid-
America to K&D Group.  K&D Group relies on State ex rel. Valley Roofing, 
L.L.C. v. Ohio Bur. of Workers’ Comp., 122 Ohio St.3d 275, 2009-Ohio-2684, 
910 N.E.2d 1018, in which this court held that an employer is not a successor in 
interest if the business assets of the predecessor entity are purchased from a bank, 
not directly from the predecessor entity.  Id. at ¶ 5. 
{¶ 15} In that case, Valley Roofing Company, L.L.C., had purchased the 
assets of Tech Valley Contracting, Inc., from PNC Bank after foreclosure and 
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continued the business operation.  The bureau transferred Tech Valley’s 
experience rating to Valley Roofing as a successor in interest.  But this court held 
that Valley Roofing was not a successor in interest, because Valley Roofing had 
acquired the assets from an intermediary bank.  Id. at ¶ 6.  “Successor in interest,” 
as defined in Lake Erie, 62 Ohio St.3d 81, 578 N.E.2d 458, “does not apply if the 
business assets of the predecessor entity have been purchased from a bank and not 
directly from that employer.  * * *  ‘The language of [R.C. 4123.32(C)] clearly 
refers to a voluntary act of the employer and not the involuntary transfer of the 
employer’s business through an intermediary bank.’ ”  Valley Roofing at ¶ 5, 
quoting, State ex rel. Crosset Co., 87 Ohio St.3d at 471, 721 N.E.2d 986. 
{¶ 16} Here, there is no evidence that Mid-America voluntarily 
transferred the business of managing the apartment complex to K&D Group. The 
bureau emphasized that K&D Group hired some former employees of Mid-
America, assumed management of the leases that the prior apartment-complex 
owner had with its tenants, and operates under the same workers’ compensation 
manual numbers as Mid-America.  But these facts are not sufficient to show that 
Mid-America voluntarily transferred its business operation to K&D Group for 
purposes of workers’ compensation.  K&D Group merely contracted with the new 
owner to assume management of the existing apartment complex.  Thus, the 
bureau abused its discretion when it treated K&D Group as a successor in interest. 
Conclusion 
{¶ 17} K&D Group has demonstrated that it has a clear legal right to the 
relief requested because it was not a successor in interest to the business 
operations of Mid-America for purposes of workers’ compensation.  The bureau 
abused its discretion when it transferred part of Mid-America’s experience rating 
to K&D Group based on R.C. 4123.32(C) and Ohio Adm.Code 4123-17-02.  
Thus, we reverse the judgment of the court of appeals and issue a writ of 
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mandamus ordering the bureau to determine K&D Group’s experience rate 
without taking into consideration Mid-America’s experience rate. 
Judgment reversed 
and writ granted. 
O’CONNOR, C.J., and PFEIFER, O’DONNELL, LANZINGER, KENNEDY, 
FRENCH, and O’NEILL, JJ., concur. 
__________________ 
Calfee, Halter & Griswold, L.L.P., Thomas I. Michals, and Jeffrey J. 
Lauderdale, for appellant. 
Michael DeWine, Attorney General, and Stephen D. Plymale, Assistant 
Attorney General, for appellee Bureau of Workers’ Compensation. 
______________________