Ohio Practical Business Law

How Prepackaged Bankruptcy REALLY Works

TRasmussen@lanealton.com (Teri Rasmussen) — Mon, 01 Dec 2008 18:38:48 -0500

If you've been paying any attention at all to the national news of late, you know that Detroit's Big Three automakers are in deep trouble and that a substantial number of folks seem to think that forcing them into a "prepackaged " bankruptcy is the ANSWER. When I first heard this, I thought this seemed like a pretty good idea .... until I started really thinking about both what can and can't be accomplished with this sort of Chapter 11 bankruptcy proceeding.

So in a two-part post, I want to first explore the nature of the beast those of us in the "biz" call a "prepack" and then focus more specifically on how it might actually operate in the context of the problems being faced by America's automakers. While superfically appealing, a prepack is far from the panacea some seem to think it could be. To understand why, you first have to understand how prepacks work in general.

Prepack Coming of Age. Chapter 11 (and they always are Chapter 11 reorganizations) prepackaged bankruptcies came to the fore about twenty years ago. Many say that Dallas based hospital owner Republic Health Corp. was the first successful prepack with a plan confirmed less than five months later. Prepacks became somewhat more popular during the 1990's in the context of failed LBO's, to implement mass-tort settlements, or as a vehicle to consummate sales or mergers of companies. In the August issue of the Turnaround Management Association's Journal of Corporate Renewal, an article by Douglas Foley and James Van Horn entitled "Prepacks on the Rise in Chapter 11 Bankruptcies Prenegotiated Plans Can Accelerate Reorganization", asserts that there has recently been renewed interest in this variation of Chapter 11 with four filed in 2007 and more than a dozen filed in the first half of 2008.

Companies utilizing the prepackaged option have included Donald Trump's Taj Mahal Casino in Atlantic City, Zenith Electronics, Aurora Foods-Pinnacle Foods merger, and TWA. More recent participants have included Davis Petroleum (Case No. 06-20152, Bankr. S.D. Tex.) (whose plan was confirmed less than a week after filing), Blue Bird Body Co. (Case No. 06-50026, Bankr. D. Nev.), Bally Total Fitness (Case No.07-12395, Bankr. S.D.N. Y.), and Mrs. Fields' Original Cookies (Case No. 08 - 11953 , Bankr. D. Del.) (plan confirmed in less than sixty days after bankruptcy filed).

To promote organization and judicial economy, some jurisdictions such as the Northern District of California Bankruptcy Court and the Southern District of New York Bankrptcy Court have even adopted local rules governing prepackaged bankruptcies.

Prepack Advantages. The hallmark and principal advantage of a successful prepack is a substantial savings in time and disruption as compared with the ordinary Chapter 11 bankruptcy case. The average Chapter 11 case, even a relatively small one, is rarely likely to be completed in less than a year and it can often take two or three years, or even longer, for a company to emerge from Chapter 11. By contrast, prepackaged cases typically take less than six months, thus saving both time and money typically spent on case administration. Conventional wisdom also holds that deterioration of the intrinsic value of a business which is often a consequence of a Chapter 11 filing and the attendant uncertainty is lessened through use of the prepackaged option. (For a general discussion of the general effect of a Chapter 11 bankruptcy on a public company's shareholders, visit the discusssion of "What Every investor Should Know ... Corporate Bankruptcy" on the SEC's website.)

Technically, a prepackaged bankruptcy differs from a prenegotiated bankruptcy in that votes for a plan of reorganization have already been solicited and agreed upon prior to the filing, thereby leaving nothing to chance when it comes to achieving a successful confirmation of the Plan of Reorganization. In a prenegotiated bankruptcy, actual votes or agreements to vote have not yet been reached with the critical mass of creditors, although resolution has typically been reached with those creditors deemed most crucial to success.

The most important characteristic of a prepack (or a prenegotiated bankruptcy) is that the major players in the bankruptcy have come to an agreement among themselves about the most important issues of subsequent financing, lien priority, and the extent to which the debt owing will be discounted or terms of repayment extended. This reduces the potential for the debtor to lose control of the proceeding and allows it to proceed directly to its contemplted reorganized operations. By minimizing the time spent subject to the restrictions and various oversight provisions embodied in the Bankruptcy Code and reaching important agreement before even filing, the liklihood of full blown creditor second-guessing and need to balance the influence of various interests is thought to be significantly and productively decreased.

Nuts and Bolts. Section 1126(b) of the Bankruptcy Code and Bankruptcy Rule 3018(b) explicitly allow prepetiton solicitation of votes for approval of a Plan of Reorganization as long as certain procedures are observed. The key elements to a successful prepetiton solicitation crtical to making a prepack a "go" are:

The proposed plan must have been transmitted to substantially all creditors or equity security holders entitled to vote in a class;
Sufficient time must have been allowed for voting (or in the words of the statute, the time allowed must not be "unreasonably short" which is of courae a case by case judgment call)
Those solicited must have been provided with "adequate information" in connection with the solicitation of their vote.
The provisions of any applicable nonbankruptcy law such as federal securities law governing communication with shareholders of public companies must be complied with.

In essence, a prepack allows the debtor to bypass the lengthy time (starting with a 25 day notice period for a hearing on the Disclosure Statement) involved in getting a disclosure statement approved by the Bankruptcy Court, distributed to creditors, and gathering/tabulating ballots approving or rejecting the proposed Plan of Reorganization. There is of course the risk that the Court will determine after the fact that the prepetition solicitation process did not meet the requirements set forth above; this can happen either as a result of a motion by a party in interest on the Court can make such a finding on its own initiative.

What a prepack does not do, however, is change the requirements concerning creditor approval of a Plan of Reorganization. Pursuant to section 1126(c), a class of "impaired" creditors (i.e. those not being paid in full) will be deemed to have accepted the plan if and only if the creditors in that class voting hold two-thirds in amount and at least a majority in number of claims voted do in fact vote to accept the plan. In addition, pursuant to section 1129(a)(10), the plan cannot be confirmed unless at least one class of impaired creditors vote to accept the plan. there are also the other usual requirements of feasibility and the like.

Prepack Risks and Obstacles. Prepackaged bankruptcies tend to work best where there are a limited number of sophisticated secured creditors involved with whom productive negotiations can actually be had. They tend to work less well when a debtor has a large number of creditors, especially if unsecured, with a variety of different claims ( e.g. trade creditors, employees, landlords, equipment lessors,etc.) entitled to varying treatment under the Bankruptcy Code and which may fluctuate considerably during the period immediately preceding a filing. Large numbers of contingent claims can also be an obstacle for the obvious reason that time must be spent determining how to estimate the amount of such claims.

In addition, by immediately proceeding to the plan confirmation phase, a debtor does lose the benefit of the "breathing spell" provided by the automatic stay which arises immediately upon the filing of the petition. And, of course, it does tip the debtor's hand as to its financial distress (which may often be obvious anyway).

Drawing Conclusions. While there are certainly some useful rights and remedies available to Detroit's Big Three should they decide to file Chapter 11 - being able to shed burdensome labor and/or dealer contracts springs to mind - there are also substantial risks - will consumers continue to spend thousands of dollars to buy vehicles from a car company in bankruptcy. Prepackaged bankruptcy seems to be advanced by many of its advocates as a way to maximize the advantages of being a Chapter 11 debtor while eliiminating the "down side" of a bankruptcy filing. I just don't think it's that simple.

So next time I will focus more specifically on how well suited the prepack option really is for Detroit's Big Three and what it might and might not be able to do for them.,

Breaking Radio Silence - My Move to Plunkett Cooney

TRasmussen@lanealton.com (Teri Rasmussen) — Sun, 23 Nov 2008 17:27:54 -0500

It's been more than a month since the last time I posted - the longest I've gone since I started the blog just over a year ago. I even managed to miss doing the traditional "my blog is a year old" celebration! About three weeks ago, I changed law firm affiliations and the logistics of getting everything moved and squared away has been about all I could productively handle.

My new law firm is Plunkett Cooney, a much larger law firm than Lane, Alton & Horst, and is based in Michigan. It has approximately 150 attorneys in offices in Columbus, Ohio (where I'll remain), in Indianapolis, Indiana, as well as in several offices across Michigan. Plunkett Cooney's tagline, garnered I'm told from a survey of clients' perceptions of the law firm, is DETERMINED.... DISTINCTIVE.... FEARLESS and its attorneys strive to deliver a fearlessly determined team of distinctive legal advisors personally committed to achieving the right results desired by each particular client from the boardroom to the courtroom.

For me, the move offers an opportunity to have more "bench strength" in practice areas related to mine such as real estate (in which the Columbus office is particularly strong), as well as to return to doing more work with troubled loans for creditors as I did in the earlier days of my practice. In addition, because the Columbus office is a smaller branch office with only seven attorneys, it allows me to work in the smaller office environment I like while not missing out on the sort of sophisticated substantive practice I most enjoy which is all too often only really available in larger firms. Locationwise, all I did was move my office from the south side of downtown Columbus to the east side of downtown Columbus.

My intent for the blog is to continue writing about topics in business and commercial law. However, I'm sure there will probably be more topics related to bankruptcy, insolvency and workouts as those practice areas occupy more of my time. With the way the economy seems to be going, maybe that's just as well.

As far as my law practice, I will continue to represent privately held businesses and their owners in the Central Ohio area with respect to issues involving business, commercial, corporate, or real estate law. However, especially in the immediate future, I will also be focusing more on representing the interests of lenders and other creditors in commercial foreclosures, workouts and Chapter 11 bankruptcies.

And now, I hope to get back to blogging on a regular basis....

Potato, Potahto, Illegal, Unlawful - Dombroski and New Rules for Piercing the Corporate Veil

TRasmussen@lanealton.com (Teri Rasmussen) — Sun, 05 Oct 2008 20:47:18 -0500

The recent Ohio Supreme Court's decision in Dombroski v. Wellpoint, Inc., 2008-Ohio-4827, has only further complicated the determination whether the corporate veil should be pierced in particular cases. In holding that the second prong of the seminal Belvedere test did not include merely unjust or inequitable acts, but did include "similarly unlawful" acts, the Court did nothing to clarify the circumstances in which corporate veil piercing is appropriate.

I've posted before about Ohio law on piercing the corporate veil, as well as the legal and factual context in which the Dombroski case arises. In a nutshell, the plaintiff alleged bad faith against an insurance company for denying her medical claim. She also sought to hold the insurer's parent company liable on a piercing the corporate veil theory. Because the case had gone up on appeal on the granting of a 12(B)(6) motion to dismiss, the Court assumed that the parent company did in fact control the wholly owned insurance company to such a degree that it had no separate mind, will or existence of its own, thereby satisfying the first prong of Belvedere.

The issue certified for appeal was:

Does the second prong of [the test for piercing the corporate veil set forth in Belvedere Condominium Unit Owners' Assn. v. R.E. Roark Co., Inc. (1993), 67 Ohio St.3d 274, 617 N.E.2d 1075], which states that the corporate veil can be pierced when control of the corporation "was exercised in such a manner as to commit fraud or an illegal act against the person seeking to disregard the corporate entity" also allow the corporate veil to be pierced in cases where control was exercised to commit unjust or inequitable acts that do not rise to the level of fraud or an illegal act?

In answering the question in a 6-1 decision (click here for Office of Public Information summary), the Court responded equivocally, rejecting the most liberal interpretation of the second Bevedere prong, but nevertheless adding additional verbage to the standard:

In view of the reality that shareholders could seriously misuse the corporate form and evade personal liability under the second prong as presentlyworded, we find it necessary to modify the second prong of the Belvedere test to allow for piercing in the event that egregious wrongs are committed by shareholders....

to fulfill the second prong of the Belvedere test for piercing the corporate veil, the plaintiff must demonstrate that the defendant shareholder exercised control over the corporation in such a manner as to commit fraud, an illegal act, or a similarly unlawful act. Courts should apply this limited expansion cautiously toward the goal of piercing the corporate veil only in instances of extreme misconduct. (emphasis supplied)

The Court appears to want to choose a middle ground between the interpretations favored by the Courts of Appeal below. While this conceptually may have been the proper determination, the result seems a bit clumsy and to have added nothing but further confusion. I agree with the dissent of Justice Pfeifer when he concludes the Court has "muddied the waters" and adds:

The new language seems to be pulled from the air. Is there a notable distinction between an"unlawful" and an "illegal" act? Not that the majority identifies. the words appear to be two ways of saying the same thing. Potato, potahto, illegal, unlawful - let's call the whole thing off.

Based on the oral arguments in this case, I had hoped for much more from this decision.

Cubs Cursed by the "Business Judgment Rule"?

TRasmussen@lanealton.com (Teri Rasmussen) — Sat, 20 Sep 2008 22:53:05 -0500

Pinch me - the Chicago Cubs REALLY are in the post-season and .... let's all hold our breath.... might even manage to make it to the World Series for the first time since 1945 and after precisely 100 years, could, just maybe, break the billy goat/black cat curse and win the World Series! .

Of course, most or all of these games will be played at night. And it was twenty years ago today,,, well almost (August 8, 1988 to be precise)... that lights came to Wrigley Field. So I thought it might be a good time to revsit the part of the story about events along the way to Wrigley Field FINALLY getting lights, years after every other Major League baseball team. Especially since the part I want to explore involves an unsuccessful effort to get night baseball at Wrigley and illustrates one way to apply the "business judgment rule" I've just been teaching to my Capital University students. And the irony of talking about getting electric lights just after power has finally been restored to me after doing without for five days due to the incredible windstorm from Ike's remnants which whipped through Central Ohio last Sunday also seems oddly appropriate.

Young Lawyer Takes on Mr. Wrigley. I am of course talking about the celebrated case of Shlensky v. Wrigley et al., 95 Ill. App. 2d 173, 237 N.E.2d 776 (1968). In this case, William Shlensky was a minority shareholder of Chicago National League Baseball Cub (inc.) ("Cubs Corporation"), the corporation which owned the Chicago Cubs and operated Wrigley Field. After several years of disappointing financial results, Shlensky became convinced that this trend would continue unless the Cubs "got with the program" and installed lights to play night baseball - just like every single other Major League team had been doing for years. For the short version of the essence of the case, check out this limerick from ContractsProf Blog:

As Wrigley explained to the court,

Pro-ball is a daytime sport,

Night ball you can see

Down at Comiskey

Where the teams out for profit cavort.

So Shlensky, being a red-blooded American sued majority controlling shareholder Phillip K. Wrigley (who held 80% of the shares and was also President) in his capacity as a director of the Cubs Corporation,as well as other directors and the Cubs Corporation itself. The suit was a shareholder derivative action against the directors for negligence and mismanagement. and sought an order requiring the installation of lights at Wrigley Field. Shlensky argued:

While the weekend attendance of the White Sox and the Cubs was about the same, weekday attendance at night games played by the White Sox was much higher than that of the Cubs.
Installation of lights is readily able to get financing and will quickly pay for itself through anticipated greater attendance.
Wrigley was refusing to install lights not because of any concern for the welfare of the Cubs Corporation, but rather because he believed that baseball is inherently a "daytime sport."
The other directors allowed Wrigley to dominate the board and acquiesed in the refusal to install lights even though they knew he wasn't acting in a good faith concern for the best interests of Cubs Corporation, but rather out of an entrenched personal opinion.

Business Judgment Rule in Action. Shlensky contended that these facts demonstrated arbitrary and capricious acts on the part of the directors constituting negligence on their part in failing to exercise reasonable care and prudence in the mangement of corporate affairs of Cubs Corporation. The trial court was not impressed and dismissed the amended Complaint apparently rather summarily without permitting any testiimony.

On appeal, the Illinois Court of Appeals affirmed, concluding that it had no business second-guessing the Cubs Corporation's board of directors. After discussing the essence of the "business judgment rule", including another well known "business judgment rule" case involving Henry Ford and his fight with the Dodge brothers (Dodge v. Ford Motor Co., 214 Mich. 459, 170 N.W. 608 (1909), the Court concluded that in the absence of fraud, illegality, or a conflict of interest, a decision by a board of directors should not be disturbed as long as it had some ratinal basis, evenif in hindsight, the decision was wrong.

In applying the rule to the facts, the Court said:

we are not satisfied that the motives assigned to Phillip K. Wrigley, and through him to the other directors, are contrary to the best interests of the corporation and the stockholders. For eample, it appears to us that the effect on the neighborhood might well be considered by a director who was considering the patrons who would or would not attend the games if the park were in a poor neighorhood. Furthermore, the long run interest of the corporation in its property value at Wrigley Field might demand all efforts to keep the neighborhood from deterioprating. By these thoughts we do not mean to say that the decision of the directors was a correct one. That is beyond our jurisdiction and ability. We are merely saying that the decision is one properly before directors and the motives alleged in the amended complaint showed no fraud, illegality or conflict of interest in their making of that decision.

Then the Court proceeded to dissect Shlensky's other arguments, finding fault with his failure to demonstrate a causal link between night ganes and increased profits or to consider the additional expenses installation of lights and playing of night games might involve.

The Just One Bad Century website "dedicated to the long suffering fans of Chicago's favorite baseball team" (which may become one of my favorite websites) argues that the relative greater success of the Cubs making the post season since lights were installed shows that the Cubs real problem has been so many day games. If so, then perhaps the real curse on the Cubs was the deference given to the baseball purists on the Cubs Corporation who refused to allow lights at Wrigley Field forty years ago.

What If? Of course now less deference is given to directors so the case might come out differently today. But suppose Shlensky had commissioned an authoritative consulatant's report demonstrating quantitatively the substantially greater profitability of night baseball. And that the directors simply ignored this. Would the Court have given Shlensky more of a hearing and been less of an apologist for the directors? In some parallel universe, the Cubs have already won the World Series repeatedly.

The Rest of the Story.... And for those who want to know the rest of the story, check out this timeline of the road to lights at Wrigley Field which has such gems as....

Shlensky was a 27 year old lawyer (somehow that figures) who had owned two shares of Cubs Corporation since he was 14.
In 1941,P.K. Wrigley actually bought lights to be installed at Wrigley Field for 6 PM twilight starts. However, Pearl Harbor intervened and the steel for the light poles was donated to the war effort.
In1982, the public was told the choice was lights or the Cubs would move. A Wrigleyville citizens group named Citizens United for Baseball in the Sunshine (CUBS) was formed to oppose installation of lights.
The first Wrigley Field game under the lights began on August 8, 1988 against the Phillies, but it was rained out after 3 1/2 innings.
Restrictions on the number of night games played still exist.

And finally...

Got my power back on Thursday night and while I realize that's nothing compared to what folks in Texas are dealing with, I will tell you that reading by flashlight does not work nearly as well now as when I was a kid. Also that I apparently spend an awfully lot of time on my laptop in the evenings and need to buy a new battery since the one I have only gives me an houor of juice. On the plus side, I definitely caught up on my sleep and found out how great it can feel not to be sleep- deprived. So I suppose the whole experience was useful.

I will be going to Oregon in a few days for a golf trip with friends so I may or may not get a chance to post before i leave.

Doing "Due Diligence"

TRasmussen@lanealton.com (Teri Rasmussen) — Mon, 15 Sep 2008 18:20:15 -0500

Whether it's multi million or billion dollar merger of public companies like the recent Arby's - Wendy's merger here in Columbus or the stock/asset sale of a large or small privately held company, a crucial part of the transaction is completion of "due diligence." So what is "due diligence" and why does it matter?

Due diligence is about making sure that you really are buying what you think you are. It can be invaluable in uncovering defects which may be deal killers or at least require remediation before closing or a restructuring of the economics of the transaction, It can also be useful in gaining useful information about the overall strengths and weaknesses of the company that you will need once you are in charge of operating the business.

Without "due diligence", a buyer may discover too late that the facilities require enormous capital expenditures to compensate for deferred maintenance. Perhaps the largest customer is very unhappy and in the process of moving its business to another company. The accounts receivable may be well past due and even uncollectible.

In larger transactions, "due diligence" can take months, be extremely costly and involve professionals of many kinds (including attorneys and CPAs). When smaller privately held companies are involved, the process is less complicated, but should not be ignored entirely. For a helpful rundown of what "due diligence" is all about and the process, visit this FAQ.

Every company being acquired and every industry is different so different things will be important in any particular "due diligence" process. However, for a nice overview of the sorts of tgenerally applicable things you should ask about when doing "due diligence", visit "What Does 'Due Diligence' Mean When Buying a Business?" There are also many many good due diligence checklists available on the web. Some of the most important things you should be interested in finding out should include:

Security Interests and liens on the assets being purchased
Unresolved pending or threatened litigation
Financial health of the company, including collectibility of accounts receivable
Identification of the key assets essential to the continued operation of ongoing business being purchased
Current employee benefits and policies
Quality of relationships with customers, vendors, and suppliers
Condition of equipment and facilities
Agreements among owners relevant to the purchase
Saleability of inventory

..... And now I get to go home and see if the electricity knocked out yesterday afternoon by the ferocious wind storm remains of Ike has come on yet. According to the news reports, 2 million people in Ohio are without power and almost 60% of those of us living here in Central Ohio lack electricity. Some estimates are that it may take up to a week to get it all back on. Thankfully, my hot water heater runs on gas so at least there'll be no cold showers.

The New Franchise Disclosure Document

TRasmussen@lanealton.com (Teri Rasmussen) — Sat, 06 Sep 2008 23:45:36 -0500

Beginning this past July 1, franchisors were required to provide information to would-be franchisees in a new format. The Franchise Disclosure Document (FDD) has now replaced the Uniform Franchise Offering Circular (UFOC) as the vehicle by which potential franchisees are told of the benefits and risks of a particular franchise.

Here is the complete text of the new amended new rule. For those with less familarity with franchising who want to fully understand the rules, the Federal Trade Commission's Statement of Basis and Purpose may be especially helpful.

I've previously posted on The Franchising Route to Starting a Business, including several links to general resources for evaluating franchise opportunities and specific information about how the new FDD differs from the old UFOC. In this post, i want to focus more specifically on the new FDD.

The Federal Trade Commission's website offers a helpful FAQ about the new rule. In addition, this past May, the Federal Trade Commission (FTC) issued a lengthy, but very comprehensive and informative Amended Franchise Rule Compliance Guide.

The Compliance Guide begins by explaining what sort of business relationships constitute a franchise subject to the FTC Amended Rule and the process required for furnishing the required documentation. It also explains the sort of information which must be included and that which is prohibited. The lion's share of this 154 page document consists of an explanation of each of the FDD's required items and includes specific examples of how each item should be completed with sample disclosures and disclosure formats. It also specifies the differences between the UFOC and the FDD with respect to the information now required, In short, whether franchisor or franchisee, this is an extremely useful publication.

Here's another example of the new Franchise Disclosure Document.

Guaranteeing Seven Days of Paid Sick Leave -Ohio's Healthy Families Act

TRasmussen@lanealton.com (Teri Rasmussen) — Wed, 03 Sep 2008 10:10:52 -0500

In addition to what is proving to be an unusually interesting Presidential election campaign, one of the "hot" issues in Ohio this year is a ballot issue called the Healthy Families Act . Voters will be asked to decide whether to enact into law a measure that would force businesses with 25 or more employees to guarantee their employees at least seven (7) days sick leave. Similar measures are apparently playing out all across the country according to the National Partnership for Women & Families. There's also a bill in Congress on the subject as explained by the HR Capitalist blog in the post: Why You May Add 7 Paid Sick Days to Your PTO Policy in 2009.

I am not a labor lawyer and as yet I haven't really digested the proposed law. But last week I actually got a call from one of the factions asking if I was going to write about it. So that got me to thinking about the importance of this proposed legislation to Ohio businesses and made me decide that I probably should make a post about it.

Mike Bowers of the Ideas to Deals blog has an excellent post summarizing the basics of the Healthy Families Act. A Columbus Dispatch editorial supports passage of the law. However, as Ohio Employer's Law Blog's Jon Hyman notes in his post, Governor Strickland's press release against the Healthy Families Act, Ohio's Democratic Governor has come out against the Act. In this press release, Gov Strickland calls the ballot initiative " unworkable, unwieldy, and ,,, detrimental to Ohio's economy."

Solely in the interests of providing information (and not necessarily as an endorsement) here is a fact sheet and an economic impact fact sheet provided to me from those seeking to defeat the measure. If someone wants to send me similar fact sheets in favor, I'll post those too.

Earlier this year, Jon Hyman of the Ohio Employer's Law Blog posted a fairly detailed analysis concluding the measure should be rejected in his post Deconstructing the Ohio Healthy Families Act and received many posted comments. Jon has also promised to post further updates as we get closer to decision day.

In Jon's post, he also gathers some links to organizations interested in the Act, most of which seem to be opposed to the measure. In the interests of full information being out there, here are some other links:

Ohioans for Healthy Families, the group lobbying for the legislation on its Sick Days Ohio website has several news items favoring the Act, explains why one might.believe it's necessary, and how to get involved on that side of the issue
Policy Matters Ohio, a nonproft research organization has also come out in favor of the Act.
Ohio Business Votes, a lobbying group opposing the measure, has an informational website explaining how the Act would negatively affect both employers and employees.

Jon also provides some guidance as to Should businesses be reviewing paid sick leave policies in advance of the Healthy Families Act.

I'm not really sure yet what I think,either professionally or personally. On the one hand it boggles my mind that there are actually businesses of any size out there that don't provide at least this much paid sick leave in this day and age. And it seems fundamental to me that, especially given how long it usually takes to see a doctor once you show up for your appointment, we ought to require this sort of thing.

On the other hand, I am mindful of the burden the Healthy Families Act may place on businesses. And the fact that Gov. Strickland thinks it's a bad idea is also very influential on me.

So for me, the issue is really about understanding how big a burden this places on businesses. If I ultimately conclude it's enormous, then I will probably, reluctantly, be opposed to its passage.

UPDATE: The Healthy Families Act has been pulled from Ohio's November ballot. The push for federal legislation continues.

Competing in a Global World - A "New" Sense of "Placeness"

TRasmussen@lanealton.com (Teri Rasmussen) — Fri, 29 Aug 2008 15:30:39 -0500

Growing up as a university brat I've never really felt like I've ever really been "from" anywhere except perhaps the "Midwest". Which is probably why I found myself so taken with a column by Peggy Noonan which recently appeared in the on-line version of the Wall Street Journal entitled "The End of Placeness" in which Peggy waxes nostalgic for a earlier iconic time when all of us really did have a "home town" that was an instrumental force in making us who we became.

Peggy's thesis is that, in a departure from past politicians, neither Obama nor McCain exudes any "strong sense of place in the sense American politicians almost always have, since Mr. Jefferson of Virginia and Abe Lincoln of Illinois, and FDR of New York, and JFK of Massachusetts." And she says she misses that because it makes the candidates seem "disjointed" , less distinct, and perhaps less easily understood. At the same time, however, she also somewhat contradictorily suggests that this same lack of placeness she laments might have the positive consequence of lessening any pork-barrel spending tendencies.

She goes on to observe - quite correctly in my view -- that both Obama and McCain "are not from a place, but from an experience." Obama is, she says, from "Young... from the town of Smooth in the State of Well Educated" while McCain is from "Military... from Vietnam Township in the Sunbelt State." I would also argue that the unusual VP picks of each candidate in choosing not someone from a "swing state", but rather based on their experience and/or personal characteristics, further supports this conclusion. However, the point Ms. Noonan seems to miss is that American politics is just finally catching up to where we've all arrived a while ago.

Americans have always been more interested in your job than where you're from. It's the first question you ask someone you've just met: "What line of work are you in?" I've been told that Europeans in contrast want to know first about where you and your family are from.

Perhaps it's just part of heritage. We were settled by people who had so little tie to the Old World that they were willing to pack up and take a lengthy and sometimes dangerous ocean voyage to a new place they'd never even seen, knowing that they probably would never see anyone they left behind again. Once here, we kept moving West to seek new opportunities or to start over once again. When you think about it this way, it's really no wonder that we care more about what work you're doing now than where you've been.

Technology has just accelerated this tendency. The "end of placeness" in the geographic sense is already quickly disappearing, if indeed it has not already entirely departed, from the business world.

Today, it is relatively common for geographically disbursed employees of a single company - and not just big multinational companies - to work together on projects. Someone in Ohio barely gives it a second thought that their "team" at work consists of folks in Denver, or NYC, or Seattle, and perhaps abroad as well. Through the magic of e-mail, shared computer files and networks, and conference calls (both video and the old fashioned basic telephone call), we've grown very accustomed to -- and perhaps, have even grown to value -- working across geographic space and time.

Personally, I'm more than O.K. with the "end of placeness", whether in politics or business. For better or worse, it's a "global" world out there and we can't afford, as a nation or individually, not to participate fully.

The "end of placeness" also puts more emphasis on skills and "what's inside" someone -- when you first grow to know a person over web communication, its difficult to react to personal characteristics the way we sometimes do. In this way, perhaps race and gender discrimination will lessen.

And for people like me who've moved around a lot, it makes a lot more sense. I'm not from Wisconsin (where I was born), Tucson (where I spent my toddler years), Nashville (where I sent my childhood and preteen years), Iowa (where i went to high school and college), or Michigan (where I went to law school). And although I've now lived longer in Ohio than anywhere else in life by a long shot, because it didn't start until after I graduated from law school, I'm not really from here either. I am from Academia in Suburban Middle Class much more than I'm from any of these geographic locations.

In reality, all we've really done is redefine what "placeness" is. Placeness can be about whether you're internet savvy or not, how much you care about and take action to advance being "green", how your job makes you think, or any number of other things. All of these are in fact more relevant to who the person before us is than geographic "placeness."

So while Ms. Noonan is correct in her observations, I don't think it makes the candidates, or any of the rest of us, "disjointed". If anything, the "end of placeness" in a geographic sense has simply caused us to use more relevant "placenesses". That, I think, is a good thing.

Personal Update - A Teaching Gig for TGR

TRasmussen@lanealton.com (Teri Rasmussen) — Wed, 27 Aug 2008 20:50:34 -0500

It's been a while since my last post, much longer than I would like. But since I'm not quite ready to continue my usual substantive posts, I thought I should ay least explain the hiatus,

I've been doing the blog for 9 or 10 months now and have really enjoyed it, but Summer is a really tough time to keep to my blogging schedule. There's so much I like to do outdoors during Summer - sailing, golf, festivals, gatherings with friends, to name just a few. And of course, watching the Olympics and now the political conventions. So there's that. And then the occupational hazard of getting really busy at work with matters for clients has reared its head recently.

But the main reason I haven't been posting according to my usual schedule is that I will be teaching an undergraduate class at Capital University's School of Management and Leadership called Business Law II. It starts tomorrow evening from 6 to 9 PM, and from what I've been told, is a relatively small class student wise and will mostly have adult students trying to finish a degree. It's a hand-off from my former law partner Steve Martin who used to teach the class and still teaches several other classes for Capital University and elsewhere.

The class meets once a week on Thursday evening through mid-December. It covers the basics of Business Associations (partnerships, corporations, LLCs), some Uniform Commercial Code in the form of UCC Article 3 & 4 (Checks and Negotiable Instruments), UCC Article 9 (Secured Transactions), very quickly UCC Articles 5 (Letters of Credit), UCC Article 7 (Documents of Title, including Warehouse Receipts and Bills of Lading), and UCC Article 8 (Securities), and a smattering of other business law, including Securities Regulation, Bankruptcy, Labor & Employment, and whatever else we wind up having time for.

I am very excited about this opportunity because it marries what I pretty much do every day in my law practice with the different environment and perhaps more theoretical approach of academia. However, I have also been very mindful of my responsibilities as teacher and have spent much of the last few weeks boning up on the more esoteric aspects of these subjects and making the very real practical decisions about what to cover when and how. Consequently, between golf, work, and this new gig, there hasn't been much time lately for the blog.

I'm hopeful that can change soon. I'm very familar with the material I'll be teaching and have certainly done seminars from time to time on different aspects of what I'll be teaching in the next few months. Yet the prospect of doing the equivalent of a seminar a week for the next 14 or 15 weeks can be at least a little intimidating at first. Hence my absence from the blogosphere of late.

So tomorrow's the day, the inaugural day of my formal teaching career. I hope to be back to blogging on a regular basis soon - I do have a few draft posts in the pipeline. For now, however, I just want to get this new opportunity off to a good start!!!

Business Courts - Coming to an Ohio Court Near You (Maybe)

TRasmussen@lanealton.com (Teri Rasmussen) — Thu, 07 Aug 2008 14:05:22 -0500

If you wait long enough, all things old become new again. For a brief four year period over 150 years ago, Ohio had a statutory “commercial court” in which business oriented disputes were resolved. Now a new four-year pilot program will try the idea out again.

New Age of Business Courts

Ohio is among many jurisdictions experimenting with the concept of specialized courts for “business” disputes. One of the driving forces behind this trend seems to be the impression/assumption that having such a specialized court is instrumental in attracting and retaining businesses to a state. This article about New Hampshire's recent jump on to the business court bandwagon gives you the flavor of this sentiment.

The 200-year-old Delaware Court of Chancery is of course the grand-daddy of them all. However, Chicago, Manhattan, and North Carolina have had such courts for more than a decade and Rhode Island, Massachusetts, Las Vegas, Reno, Atlanta, Boston, and Pittsburgh have also instituted business courts in some form. Most recently Maine and South Carolina have implemented programs. Colorado and Michigan are currently giving serious consideration to the possibility. For more information, visit the following:

Terrific (!!!) Mississippi Secretary of State Policy and Research Division June 2008 summary/survey of business courts throughout the United States and other resources, including this useful executive summary
Central Florida Complex Business Litigation Courts
North Carolina Business Court
Maine Business and Consumer Court
2005 University of Maryland School of Law survey of existing business and technology courts

Lee Applebaum has penned a very informative article published in the March/April 2008 issue of the American Bar Association’s Business Law Today magazine entitled “The ‘New’ Business Courts: Responding to Modern Business and Commercial Disputes” which provides an excellent overview of the new trend towards specialized business courts. As Lee explains, the new “business” courts tend to have jurisdiction extending beyond the traditional equity jurisdiction exercised by the Delaware Court of Chancery. In addition to the variety of procedural approaches various jurisdictions have taken in establishing “business” courts and/or “commercial dockets”, the scope of cases accepted differs from one court to another.

The same issue also has a number of other articles focusing on business/commercial and other specialized courts, both in the U.S. and elsewhere in the world.

Ohio's New "Business" Courts

About a year ago, Ohio Chief Justice Thomas Moyer appointed a Task Force to study the best method for establishing commercial litigation dockets in Ohio’s trial courts. The Ohio Supreme Court has now approved a pilot program permitting Common Pleas Courts in five counties to voluntarily institute business courts pursuant to new temporary rules 1.01 to 1.11 of the Rules of Superintendence of the Courts. Carolyn Kobus, a law clerk at my law firm this summer, prepared an excellent summary of these rules.

Business First (which continues to persist in requiring paid access to its archives) gave this update as to Ohio generally and Hamilton County in particular. Hamilton County has already moved forward with the plan and Franklin County is currently considering how to implement business courts. The Ohio Supreme Court's Temp. Sup R. 1.03 sets out the sorts of cases that will be accepted; they are:

formation, governance, dissolution, or liquidation of a business entity
rights or obligations between or among the owners, shareholders, partners, or members of a business entity, or rights and obligations between or among any of them and the entity
Trade secret, non-disclosure, non-compete, or employment agreements involving a business entity and an owner, sole proprietor, shareholder, partner, or member thereof
rights, obligations, liability, or indemnity of an officer, director, manager, trustee, partner, or member of a business entity owed to or from the business entity
Disputes between or among two or more business entities or individuals as to their business or investment activities relating to contracts, transactions, or relationships between or among them, including without limitation the following:

Transactions governed by the uniform commercial code, except for consumer product liability claims
purchase, sale, lease, or license of, or a security interest in, or the infringement or misappropriation of, patents, trademarks, service marks, copyrights, trade secrets, or other intellectual property;
purchase or sale of a business entity or the assets of a business entity;
sale of goods or services by a business entity to a business entity
Non-consumer bank or brokerage accounts, including loan, deposit, cash management, and investment accounts
Surety bonds and suretyship or guarantee obligations of individuals given in connection with business transactions;
purchase, sale, lease, or license of, or a security interest in, commercial property, whether tangible, intangible personal, or real property
Franchise or dealer relationships
Business related torts
Cases under antitrust laws;
Cases relating to securities, or relating to or arising under federal or state securities laws
Commercial insurance contracts, including coverage disputes.

There is also a specific list of cases which the “business” court will not hear; these are:

Personal injury, survivor, or wrongful death matters
Consumer claims against business entities or insurers of business entities, including product liability and personal injury cases, and cases arising under federal or state consumer protection laws;
occupational health or safety, wages or hours, workers’ compensation, or unemployment compensation
occupational health or safety, wages or hours, workers’ compensation, or unemployment compensation
Matters in eminent domain;
Employment law cases
Cases in which a labor organization is a party
Cases in which a governmental entity is a party
Discrimination cases based upon the United States constitution, the Ohio constitution, or the applicable statutes, rules, regulations, or ordinances of the United States, the state, or a political subdivision of the state;
Administrative agency, tax, zoning, and other appeals;
Petition actions in the nature of a change of name of an individual, mental health act, guardianship, or government election matters
Individual residential real estate disputes, including foreclosure actions, or non-commercial landlord-tenant disputes
domestic relations, juvenile, or probate division of the court
jurisdiction of a municipal court, county court, mayor’s court, small claims division of a municipal court or county court, or any matter required by statute or other law to be heard in some other court or division of a court
Any criminal matter, other than criminal contempt in connection with a matter pending on the commercial docket of the court

Will Ohio's Business Courts Work?

One weakness I see in the pilot program is the assignment procedure for getting the case to a “commercial docket judge.” It relies upon the attorneys involved in the case to file appropriate motions to have the case transferred, and if they fail to do so, by the judge presiding over the case. To me it seems like it would have been a whole lot easier to have the case designated as a “commercial” case when filed and routed directly to the appropriate judge from there. In Franklin County, cases such as foreclosure, professional tort, and other particular sorts of cases are already separately designated by specific letter abbreviations included in the case number they are given.

In addition, while the temporary rule requires a ruling on the transfer motion with two days, as well as decisions on other motions within 60 days, I’m a bit skeptical as to how often that will actually happen in reality.

On balance, however, I support the concept of “business” courts. Throughout most of my career much of my litigation experience has occurred in federal bankruptcy court. I have always appreciated the fact that you could proceed to deal with the particular issue involved rather than having to begin each time by educating the judge as to the entire philosophical and structural framework of applicable law.

In addition, over time, as a “regular” down at bankruptcy court, attorneys come to understand the likely range of results emanating from particular recurring fact patterns. This allows attorney to offer better counsel and advice to clients as to the relative merits of settling or pushing forward with the case. That in turn promotes judicial economy as more cases are resolved by the parties now that they have greater certainty as to possible outcomes.

I hope that the Franklin County Common Pleas judges agree to participate in the pilot program.

UPDATE: The Daily Reporter, the daily legal newspaper in Columbus, reports that Franklin County judges will join Hamilton County in a pilot commercial docket program. Cuyahoga County, where Cleveland is located, is also expected to approve participation in the pilot program. The pilot program is supposed to be implemented by early 2009 and would remain in effect through July1, 2012.

UPDATE: The University of Maryland School of Law Journal of Business and Technology's website has an up to date summary of Recent Developments in State Business and Technology Courts which briefly explains the status in more than twenty states and also has some interesting recent news briefs. (Hat tip to Rush Nigut of Rush on Business for this link.)

UPDATE: The Cuyahoga Common Pleas Court is now on board for the pilot program. Check out this informative Q & A on business courts appearing in The Cleveland Plain Dealer.

Adverse Possession and How Good Fences May Not Make Good Neighbors

TRasmussen@lanealton.com (Teri Rasmussen) — Tue, 05 Aug 2008 23:21:22 -0500

For some reason lately, I've had several questions come up that basically come down to I/my neighbor has built a fence across/used property belong to the adjacent property for years, the arrangement is now causing some sort of problem, and now someone wants to know if they can claim this land/if they can throw the interlopers off the land being "borrowed".

So I'd already decided to post on this topic when lo and behold the Ohio Supremes issue an opinion on precisely this question in Evanich v. Bridge, 2008-Ohio-3820. (As always, the Ohio Supreme Court's Office of Public Information has issued an excellent summary of the decision.) This case answers the question: does it matter if the use/occupation of the other person's land was unintentional, i.e. do you have to intend to take something you know is not yours? In finding that the intent of one person to possess the land of another person is determined by an objective rather than subjective standard, the Ohio Supremes may have thrown a new wrinkle into the analysis.

Adverse Possession Defined. This sort of situation raises what lawyers call "adverse possession" - which is one of the few concepts from law school not directly part of my practice that I seem to remember all these years later. The short answer is that it takes a a REALLY LONG TIME for "adverse possession" to kick in to alter the ownership rights to real property.

The longer answer is that the fence or other use of someone else's real property must be "open and notorious" for a number of continuous years that varies somewhat from state to state. In Ohio, the magic number is 21 years. Ohio courts require that the use/occupation of the land be such as to put the true owner on notice that someone is asserting an adverse/hostile claim to the property. Thus if the use/occupation of the land was done with the express or implied permission of the true owner, "adverse possesssion" cannot be established.

An Example. A few years ago I represented a client interested in selling a portion of some commercial acreage he owned to another party who intended to construct a manufacturing facility on the real property. Because the portion of the property being conveyed did not directly abut a public street, access was understandably a critical issue in the transaction for the buyer.

Some years before a private drive had been constructed along the edge of the property being retained which could be extended to the portion destined for the new owner. So the easy answer would seem to be simply to grant an easement to the buyer to provide access. Unfortunately, when it came time to prepare the proper legal description for the easement and the survey showing the roadway had been examined, it turned out that a portion of the private drive had been constructed on the other side of the property line separating my client's property from his adjacent neighboring landowners' property. Half the road had been constructed on the neighbor's vacant land.

Aside from the obvious lesson that this is why it really is important to have a survey done before undertaking construction or purchasing real property, this illustrates how adverse possession can come about. You can't get more "open and notorious" than running slabs of concrete across someone else's land, right? On the other hand, why complain if someone else wants to build something potentially useful to you on your land, but doesn't bother to charge you for doing it? In addition, the encroachment of the drive onto the adjacent property probably was inadvertent.

In this particular case, the requisite time period had not yet expired. However, it had been some time since the roadway had been constructed without objection and but for the desire to sell the property at that particular point, I think it quite likely that nothing would have disturbed the situation.

Evanich Case. The recent Evanich case is interesting because it involves a set of facts that has probably been played out many many times. After the Evanichs bought certain real property, they built a house on it and then in 1967 began doing some rather elaborate landscaping. Based on where they thought the property line was, the Evanichs installed a split rail fence, decrative rail ties, and various plantings along what they thought was the edge of their lot. When the neighboring property was sold ten years later, the landscaping was in place.

For some reason, the Evanich's neighbors decided to get a survey in 2002. When that survey was done, it was discovered that the landscaping encroached on the neighbor's property by approximately 97/10,000 of an acre. The neighbors then asked the Evanichs to remove the landscaping and they refused. The lawsuit ensued.

The trial court saw it Evanich's way, as did a majority of the Court of Appeals, and held that the Evanichs could keep the landscaping because they had successfully satisfied the elements of adverse possession. The dissenting Court of Appeals judge felt that the Evanichs had failed to demonstrate the requisite intent required to claim adverse possession since they never really intended to take their neighbor's land.

The Ohio Supreme Court also sided with the Evanichs, saying

In a claim for adverse possession, intent is objective rather than subjective in determining whether the adversity element of adverse possession has been established, and the legal requirement that possession be adverse is satisfied by clear and convincing evidence that for 21 years the claimant possessed property and treated it as the claimant’s own. This has been the law in Ohio for over 140 years, and we are unwilling to alter a rule that has successfully directed the application of the doctrine of adverse possession for so long.

The court of appeals concluded that the Evaniches had acted in a way consistent with true ownership by installing landscaping that included railroad ties, stone blocks, fencing, bushes, flowers, and at least one tree. It held that the Evaniches possessed the necessary intent based on their exclusive control over the property for 35 years. (emphasis supplied)

Analysis. Without giving it a heckuva lot of thought, I probably have assumed up to now that you had to have some sort of actual intent to take what's not yours to establish adverse possession - how else could it really be "adverse"? However, sticking with only the outward consequence of actions leading to adverse possession certainly does make it easier to apply a bright line test.

Ultimate Lesson. The ultimate lesson here is that if your neighbor puts up a fence along your mutual property line or starts driving over your property, it's probably worth your time to either (1)determine for sure where that property line is so you don't lose that land; or (2) make it extremely obvious that if there is an encroachment, you're letting it stay there permissively.

UPDATE: for further analysis of the Supreme Court's decision in Evanich, visit this post entitled "Ohio Supreme Court Rules that Possession of Another's Property by Mistake, Still 'Adverse' Possession" by Stephen D. Richman of the Ohio Real Estate Blog.

The Trouble with "Get Rich Quick" Real Estate Schemes

TRasmussen@lanealton.com (Teri Rasmussen) — Tue, 29 Jul 2008 15:01:58 -0500

Unless I’ve somehow agreed to get up at the crack of dawn to play golf, Sunday morning is a lazy relaxing time for me - definitely a law free zone. I gradually become aware that I’m awake. The cats and I have a little “quality” time while I lie in bed watching the CBS Sunday Morning television news magazine. Eventually I rouse myself to get showered and go downstairs to read the newspaper while watching one of the Sunday morning news talk shows.

THE HOOK. After the politicians have had their debates, an infomercial typically comes on next which I sometimes leave on whilst I'm preparing lunch. This week, it’s “JOHN BECK'S FREE & CLEAR REAL ESTATE SYSYTEM" which promises me that I can profitably invest in all manner of real estate by spending only a few hundred dollars at government “tax sales”. I’ve seen part of this infomercial on other Sunday mornings, but this time I became intrigued and went on a mission, in part because a client had recently been asking me some questions about real estate investments.

For only $39.95, the infomercial promised to send me a kit explaining how I too could make wads of money -- just like the folks giving testimonials -- by taking advantage of government tax foreclosure sales most people don't even know exist. According to the infomercial, by using the special "Free & Clear Real Estate System", I will be able to buy tax foreclosure properties for "pennies on the dollar" and own them "free and clear" with no monthly payments. The infomercial also tells me that all I have to do to get these properties is pay the back taxes owed on them and assures me there are many properties in my area I could get. Numerous examples were shown of houses bought for only a few hundred dollars, but worth far more. And of course there's a money-back guarantee!!!

TAKING A CLOSER LOOK. Having long been an adherent of the “if it sounds too good to be true, it probably is” school of thought, I found it difficult to believe this “system” actually worked, but was nevertheless curious. As an attorney with substantial experience in real estate and foreclosure law, it also just didn’t square with what I thought I knew about Ohio law in this area. But I’m always willing to learn new things….

So I decided to investigate. Google and the internet are a wonderful tool!! It wasn’t long before I found a website called Infomercialscams.com with page after page of complaints about this very program. Among the least of the issues with the “Free & Clear Real Estate System” was that the $39.95 apparently wasn’t a one-time fee as the program certainly implied, but instead was a recurring monthly charge. There was also heart-wrenching story after story of people induced to part with thousands of dollars to "upgrade" to more intensive training and/or who vainly tried to cancel the entire transaction. Well, if I had been inclined to shell out some money just to check it out, I certainly wasn’t going to do it anymore.

But I was still confused about how this would work even in theory. The idea is that because county governments need the tax money to provide necessary services to citizens, they have the power to sell property on which taxes have not been paid. OK, so far so good – that’s all true and some Ohio counties do indeed have annual tax lien sales. That, however, is where reality stops.

A quick look at the Ohio Revised Code (See ORC 5721.30 through 5721.43) and a little more internet research. I soon determined that while I suppose it’s possible (though I think unlikely) this “buy at tax sales” plan might work in other states, it CERTAINLY DOESN’T WORK IN OHIO!!!

OFFER NOT VALID IN OHIO. Here’s why:

1. No Such Sales. Perhaps the most important reason it won’t work here is that Ohio simply doesn’t do a retail “over-the-counter” business in tax lien sales. Since 1997, only counties with more than 200,000 in population are even permitted to have tax lien sales AND all of them sell tax liens once annually solely to an institutional investor as a single lot costing more than a million dollars.

2. The Long Wait. Even if you could participate in a tax lien sale in Ohio, it isn’t the carefree and direct road to quick profits portrayed on the infomercial. While it is true that if property taxes remain unpaid, the county will eventually offer a tax lien certificate for sale with respect to a particular parcel, that is only the beginning of a rather long journey towards making any money.

The tax lien certificate does in fact carry an 18% interest rate plus penalties that are dangled before the uninitiated as the safe, secure, and amazingly large return on investment. What is not disclosed is that having once purchased the tax lien certificate, probably at a discount (i.e. with an interest rate less than 18%), you CANNOT do anything with it for TWELVE MONTHS.

What you hope happens is that the delinquent taxpayer somehow has an upturn in his financial fortunes and suddenly becomes able to pay off the taxes, plus interest and penalties – in the unlikely event this happens, then yes, you will make money. However, you are not permitted to contact the delinquent taxpayer during this period and must just wait and see. In at least some counties, payment plans are offered to those delinquent taxpayers wishing to redeeem their property, thus further delaying your ability to profit on the investment. In addition, during this period, you may also find yourself dealing with zoning and nuisance issues associated with the property.

3. Working Through Foreclosure of the Lien. If the property is not “redeemed” during this year following your purchase of the tax lien certificate, then you have the “opportunity” to foreclose on your tax lien certificate and finally get possession of the property. However, you must do so within three years. In addition, Ohio is a “judicial” foreclosure state which means that you can’t just schedule a sale of the property and be done with it. No, a foreclosure action requiring a court filing fee of probably at least $200, has to be filed in the local Court of Common Pleas and wind its way through the courts. For a fee, generally around $3,500, you can use the services of the County Prosecutor to get this done; it’s also possible for you to engage the services of a lawyer in private practice although I rather doubt there would be any savings with this approach. By this time you should be adding up the time and expense and wondering why anyone would want to do this. But there's more......

4. Minimum Bids Required. So, assume that you finally get through the foreclosure litigation in a timely manner, perhaps in only a few months. Now what? Can you still get real estate at a fraction of its true fair market value? Nope. Under Ohio law, property sold at foreclosure sale must be appraised (more court costs) and offered for a MINIMUM BID of TWO-THIRDS of its VALUE. If no one is willing to pay the minimum bid, then the property will be reappraised and offered at a somewhat lower price, but probably not enough less to make it worthwhile.

5. Dealing with Lenders "Bidding It In". Maybe you think buying property at two-thirds of its value still sounds like a good deal, especially if you can immediately “flip” it. Unfortunately, the likelihood of getting the property for that little is not particularly good in practice. Usually, there will be at least one mortgage on the property as well as possibly some judgment liens. The bank or financial institution holding the mortgage will not infrequently “bid it in”, meaning that until it bids more than is owed on the mortgage, the lender is essentially playing with “house” money and will not have to come out of pocket to take title to the property. If the property IS worth having, chances are the lender will have figured that out and bid accordingly.

6. If You Don't Believe Me... For the "official" version of what I've just explained, visit the explanations of tax lien sales provided by the Franklin County Treasurer, Hamilton County Treasurer, Cuyahoga County Treasurer, and Lucas County Treasurer.

Look Before You Leap. Every state is different so the strategy might be more viable elsewhere, but there are bound to be some important procedures you should be sure you’re aware of that must be followed before you can realize any profits. Some of those may be similar to what I've pointed out above. In particular, at a minimum, I would suggest determining if the state is a “judicial” foreclosure state like Ohio. If it is, then it will probably take longer and cost more to get to the point where you can sell or take possession of the property. Make sure you really understand ALL the steps that need to be taken for you to get from putting money out to supposedly getting more money back.

My point in going into some detail here is that it’s important to understand fully the process by which you are supposed to get rich before investing even a little hard-earned cash into the deal. Whether it's this "system" or some other way to invest in real estate, or some other "plan" to make lost of money quickly with almost no risk and little effort, it really is BUYER BEWARE out there. If there really was a foolproof method of turning real estate into cash, many more people would be financially independent.

Soo.. now you know how I spent part of my Sunday… Scary, huh?

What DOES It Take to Be a SUCCESSFUL Entreprenuer?

TRasmussen@lanealton.com (Teri Rasmussen) — Thu, 24 Jul 2008 13:19:53 -0500

As I was doing my usual lunchtime surfing and Google Reader review, I came across an interesting quiz presented by Ben Blanquera at the Columbus Tech blog which is supposed to help you decide if you have what it takes to really be an entreprenuer. It asks the usual sorts of questions about being willing to work hard and make sacrifices, but it also asks questions like your birth order and whether you had chores around the house before you were 10. I took the test - my score indicates that I have the "necessary characteristics to be an entreprenuer".

The Small Business Administration's webpage also explores "Is Entreprenuership for You?" and has a checklist to help aspiring entreprenuers answer the question, "Do You Have What It Takes?"

I've also been reading the Napoleon Hill classic, THINK AND GROW RICH which purports to contain the secret needed to identify your goals, obtain whatever you want in life, and join the ranks of the super-successful. Early on he says:

desiring riches with a state of mind that becomes an obsession, then planning definte ways and means to acquire riches, and backing those plans with persistence which does not recognize failure, will bring riches

Do not wait for a definite plan through which you intend to exchange services or merchandise for the money you are visualizing. Begin at once to see yourself in possession of the money, demanding and expecting meanwhile that your subconscious mind will hand over the plan, or plans, you need. Be on the alert for these plans, sand when they appear, put them into action immediately. They will probably "flash" into your mind through the sixth sense, in the form of an "inspiration.

All of which got me to thinking about what it actually DOES take to be an entrprenuer. It almost goes without saying that you must be willing to work incredibly hard and have enormous faith in yourself even when no one else really does. But being a successful entreprenuer has to be more than that.

Some years ago when I was moving my law practice from a large firm to a much smaller one and became more responsible for finding my own work, I asked an attorney I knew from a smaller firm what the biggest difference would be. "The highs are higher and the lows are lower," he said. And I think that is also true for entreprenuers of any kind.

Entreprenuers must have both a dreamer and and hard-headed realist within them. Having the courage and fortitude to endure the uncertainties any new business will face and know the difference between when to forge ahead and when to change course is a special set of talents.

Without a dream and vision, there's really no reason to be out on your own instead of working for someone else. Seeing that dream and vision come true is a feeling unlike any other. However, without the ability to adapt to events and circumstances as they occur and perhaps even modify the vision a bit, the project may stall or fail entirely.

So you have to REALLY WANT IT to stay out there. If you don't, the pain and difficulty of the journey could never be worth the effort and sometime even heartbreak along the way.