Court Opinion

ID: 4275380
Source: CourtListenerOpinion
Date Created: 2018-05-15 19:46:56.887407+00
Date Added: 2024-06-11T14:33:52.321118
License: Public Domain

[Cite as Cleveland Plating, L.L.C. v. Dept. of Job & Family Servs., 2018-Ohio-1915.]

                              IN THE COURT OF APPEALS OF OHIO

                                   TENTH APPELLATE DISTRICT

Cleveland Plating, LLC,                                 :

                 Appellant-Appellee,                    :
                                                                           No. 17AP-785
v.                                                      :                (C.P.C. No. 17CV-91)

Ohio Department of                                      :           (REGULAR CALENDAR)
Job and Family Services,
                                                        :
                 Appellee-Appellant.
                                                        :

                                            D E C I S I O N

                                       Rendered on May 15, 2018

                 On brief: Weston Hurd, LLP, and Douglas R. Unver, for
                 appellee.

                 On brief: Michael DeWine, Attorney General, and
                 Laurence R. Snyder, for appellant.

                  APPEAL from the Franklin County Court of Common Pleas

LUPER SCHUSTER, J.
        {¶ 1} Appellant, the Ohio Department of Job and Family Services ("ODJFS"),
appeals from a judgment of the Franklin County Court of Common Pleas reversing a
decision of the Ohio Unemployment Compensation Review Commission ("commission")
finding that appellee, Cleveland Plating, LLC ("Cleveland Plating"), is a successor in interest
to The Barker Products, Co., Inc. ("Barker Products"). For the following reasons, we affirm.
I. Facts and Procedural History
        {¶ 2} Barker Products was an electroplating company that operated at a facility on
East 134th Street in Cleveland, Ohio, and JPMorgan Chase Bank, N.A. ("JPMorgan Chase")
was its secured creditor. In March 2015, JPMorgan Chase foreclosed on the assets of Barker
No. 17AP-785                                                                               2

Products. Cleveland Plating purchased Barker Products' assets from JPMorgan Chase, and
it hired most of the employees who had worked for Barker Products. Within two weeks
after purchasing the assets, Cleveland Plating resumed operations at the East 134th Street
facility.
        {¶ 3} In July 2016, ODJFS notified Cleveland Plating that it had determined
Cleveland Plating is a successor in interest to Barker Products, effective March 13, 2015.
Cleveland Plating requested reconsideration, and the director of ODJFS affirmed the
successor in interest determination in August 2016. Cleveland Plating appealed the
director's decision to the commission, and the commission held a hearing regarding the
appeal on December 1, 2016. Six days later, the commission issued a decision affirming the
director's determination. Pursuant to R.C. 4141.26, Cleveland Plating appealed the
commission's decision to the trial court, and the trial court reversed the decision of the
commission. The trial court concluded that Cleveland Plating is not a successor in interest
to Barker Products.
        {¶ 4} ODJFS timely appeals from the trial court's decision.
II. Assignment of Error
        {¶ 5} ODJFS assigns the following error for our review:
               The lower court erred as a matter of law when it reversed the
               Decision of the Ohio Unemployment Compensation Review
               Commission finding Cleveland Plating, LLC to be a successor
               in interest pursuant to R.C. 4141.24(F).

III. Standard of Review
        {¶ 6} The common pleas court's standard of review for appeals from decisions of
the commission affecting the liability of an employer to pay unemployment compensation
contributions or the amount of such contributions is set forth in R.C. 4141.26(D)(2). This
statute states in pertinent part that a common pleas court may affirm a decision of the
commission "if it finds, upon consideration of the entire record, that the determination or
order is supported by reliable, probative, and substantial evidence and is in accordance with
law." R.C. 4141.26(D)(2). "Reliable" evidence is dependable; that is, it can be confidently
trusted. In order to be reliable, there must be a reasonable probability that the evidence is
true. "Probative" evidence is evidence that tends to prove the issue in question; it must be
No. 17AP-785                                                                                 3

relevant in determining the issue. "Substantial" evidence is evidence with some weight; it
must have importance and value. Our Place, Inc. v. Liquor Control Comm., 63 Ohio St. 3d
570, 571 (1992).
       {¶ 7} This court's role in reviewing a decision of the commission appealed pursuant
to R.C. 4141.26 is narrower than that of the trial court. Miracle Home Health Care, LLC v.
Ohio Dept. of Job & Family Servs., 10th Dist. No. 12AP-318, 2012-Ohio-5669, ¶ 18. As to
issues of fact appealed pursuant to R.C. 4141.26, this court determines only whether the
common pleas court abused its discretion in finding that the commission's decision is
supported by reliable, probative, and substantial evidence. An abuse of discretion requires
more than an error in judgment. To find an abuse of discretion, we must conclude that the
trial court's decision was without a reasonable basis and clearly wrong. Id. However, this
court's review of questions of law is plenary. Kate Corp. v. Ohio State Unemp. Comp.
Review Comm., 10th Dist. No. 03AP-315, 2003-Ohio-5668, ¶ 7.
IV. Discussion
       {¶ 8} ODJFS's sole assignment of error contends the trial court erred in reversing
the commission's finding that Cleveland Plating is a successor in interest to Barker
Products. This assignment of error lacks merit.
       {¶ 9} Under Ohio law, employers must contribute to the unemployment
compensation fund, and ODJFS is charged with determining the rate at which employers
contribute to the fund and maintaining separate accounts for each employer. Kate Corp.
at ¶ 3; R.C. Chapter 4141. "If an employer transfers all of its trade or business to another
employer or person, the acquiring employer or person" is the "successor in interest" to the
transferring employer and assumes the "resources and liabilities" of the transferring
employer's account, and continues the payment of all contributions, or payments in lieu of
contributions, due under R.C. Chapter 4141. R.C. 4141.24(F).
       {¶ 10} R.C. 4141.24(H) empowers the director of ODJFS to "establish procedures to
identify the transfer or acquisition of a trade or business" and to "adopt rules prescribing
procedures for effecting transfers of experience." These procedures are set forth in Ohio
Adm.Code 4141-17. Ohio Adm.Code 4141-17-04(A) provides that a transferee "shall become
a successor in interest by operation of law" where (1) there is "a transfer of all of the
transferor's trade or business" and, (2) at the time of the transfer, "the transferor is liable
No. 17AP-785                                                                                 4

under Chapter 4141. of the Revised Code." Pursuant to Ohio Adm.Code 4141-17-01(A),
" '[t]rade or business' includes all real, personal and intangible property integral to the
operation of the trade or business, and may include the employer's workforce as
applicable." "The transferee, as successor in interest, shall assume all of the resources and
liabilities of the transferor's account," and the director "shall revise the contribution rates
of the transferee to reflect the result of the successorship." Ohio Adm.Code 4141-17-04(B).
       {¶ 11} ODJFS asserts that Cleveland Plating is a successor in interest to Barker
Products pursuant to R.C. 4141.24(F) because it acquired all of the trade or business of
Barker Products. According to ODJFS, the trial court erred in finding that the "transfer"
referenced in R.C. 4141.24(F) must be voluntary for the section to apply. In reaching its
conclusion that Cleveland Plating is not a successor in interest to Barker Products, the trial
court primarily relied on State ex rel. Valley Roofing, L.L.C. v. Ohio Bur. of Workers'
Comp., 122 Ohio St. 3d 275, 2009-Ohio-2684. ODJFS argues that Valley Roofing is
distinguishable and therefore not controlling here.
       {¶ 12} In Valley Roofing, a bank foreclosed on the assets of Tech Valley Contracting,
Inc. ("Tech"). Id. at ¶ 1. Valley Roofing Company, L.L.C. ("Valley") purchased those assets
from the bank and continued the business operation. Id. The Ohio Bureau of Workers'
Compensation transferred Tech's experience rating to Valley based on its finding that
Valley was Tech's successor in interest. Id. The Supreme Court of Ohio found that, based
on the applicable workers' compensation statutory language, Valley was not Tech's
successor in interest. Id. at ¶ 6. The Supreme Court, quoting State ex rel. Crosset Co. v.
Conrad, 87 Ohio St. 3d 467 (2000), stated that the applicable language of 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." Valley Roofing at ¶ 5. This language " 'clearly refers
to a voluntary act of the employer and not the involuntary transfer of the employer's
business through an intermediary bank.' " Id., quoting Crosset Co. at 471. Based on this
observation, the Supreme Court held that Valley was not Tech's successor in interest
because Valley acquired Tech's assets from the intermediary bank that had foreclosed on
the assets. Valley Roofing at ¶ 6.
       {¶ 13} ODJFS asserts that this court, in AWL Transport, Inc. v. Ohio Dept. of Job &
Family Servs., 10th Dist. No. 15AP-674, 2016-Ohio-2954, found that Valley Roofing is not
No. 17AP-785                                                                             5

controlling law for the purpose of determining whether an employer is a successor in
interest under R.C. 4141.24(F). Additionally, ODJFS contends that this court, in Ohio Dept.
of Job & Family Servs. v. Delphi Automotive Sys., LLC, 10th Dist. No. 14AP-971, 2017-
Ohio-809, determined that the method of asset transfer is always inconsequential to the
applicability of R.C. 4141.24. ODJFS thus argues that transfers may be voluntary or
involuntary under that statute. We disagree.
       {¶ 14} In AWL Transport, a party requested that this court extend the rationale of
Valley Roofing to that case, which involved a successor in interest determination in the
unemployment compensation context. In regard to this request, this court first noted that
Valley Roofing, and State ex rel. K&D Group, Inc. v. Buehrer, 135 Ohio St. 3d 257, 2013-
Ohio-734, which applied Valley Roofing, "are not controlling on our issue here" because
they are workers' compensation cases.       AWL Transport at ¶ 27.        This court then
emphasized, however, that an extension of the rationale of Valley Roofing was not
supported by the record because the transfer of assets was not through an intermediary
bank and appeared "to have been a voluntary approach to avoiding bankruptcy and layoffs
and dissolving a business in financial hardship." Id. Thus, while ODJFS is correct that the
AWL Transport decision noted the differing context in which the Valley Roofing case arose
(workers' compensation versus unemployment compensation), this court ultimately
declined to extend the rationale of Valley Roofing because the evidence in AWL Transport
showed that the transfer of assets was voluntary. Id.
       {¶ 15} ODJFS's reliance on Delphi Automotive is also unavailing.             Delphi
Automotive involved a bankruptcy reorganization in which a portion of an employer's trade
or business was transferred to another employer. The primary issue in that case was
whether, for the purpose of R.C. 4141.24(G)(1), there was common management between
the asset transferring employer and the asset acquiring employer "at the time of the
transfer." Delphi Automotive at ¶ 20. This court noted that a "transfer" may be a "process"
that involves a "third party through which the transfer occur[s]." Id. at ¶ 19. However,
Delphi Automotive did not involve a transfer of assets through a foreclosing intermediary
bank and there was no discussion or analysis in that case of whether a bankruptcy
reorganization could be considered involuntary for the purpose of R.C. 4141.24. Thus,
ODJFS's reliance on Delphi Automotive is misplaced.
No. 17AP-785                                                                                  6

       {¶ 16} Although Valley Roofing is distinguishable because that case was a workers'
compensation case and this case concerns an unemployment compensation statute, the
rationale applied in that case is directly applicable here. As to the issue of a business
"transfer," Valley Roofing involved essentially the same statutory language as found here.
The workers' compensation statute at issue in Valley Roofing provided that an acquiring
employer is a successor in interest if an "employer transfers a business in whole or in part
or otherwise reorganizes the business." (Emphasis added.) Former R.C. 4123.32(C). As
outlined above, the statute at issue here states that if an "employer transfers all of its trade
or business" to another employer or person, the acquiring employer or person is the
successor in interest to the transferring employer. (Emphasis added.) R.C. 4141.24(F).
       {¶ 17} In Valley Roofing, the Supreme Court found that the above italicized
language in former R.C. 4123.32(C) (now in R.C. 4123.32(B)) plainly and unambiguously
refers to a voluntary act of the employer. In accord with Valley Roofing, we find that the
pertinent language of R.C. 4141.24(F) is plain and unambiguous—this statute only applies
to an employer's voluntary transfer of all of its trade or business to another employer or
person and does not apply to the involuntary transfer of the employer's business assets
through an intermediary bank. Because Cleveland Plating acquired Barker Products' assets
from an intermediary bank that had foreclosed on those assets, R.C. 4141.24(F) is
inapplicable. Therefore, we conclude that the trial court correctly determined that the
commission erred in finding that Cleveland Plating is a successor in interest to Barker
Products pursuant to R.C. 4141.24(F).
       {¶ 18} Accordingly, we overrule ODJFS's sole assignment of error.
V. Disposition
       {¶ 19} Having overruled ODJFS's sole assignment of error, we affirm the judgment
of the Franklin County Court of Common Pleas.
                                                                          Judgment affirmed.

                          BROWN, P.J., and SADLER, J., concur.