Chris Haus Auto Sales L.L.C. v. Dept. of Job & Family Servs.

[Cite as Chris Haus Auto Sales L.L.C. v. Dept. of Job & Family Servs., 2018-Ohio-4341.]

IN THE COURT OF APPEALS OF OHIO

TENTH APPELLATE DISTRICT

Chris Haus Auto Sales, LLC, :

Appellant-Appellant, :
No. 17AP-896
v. : (C.P.C. No. 17CV-5930)

Ohio Department of Job and Family : (REGULAR CALENDAR)
Services et al.,
:
Appellees-Appellees.
:

D E C I S I O N

Rendered on October 25, 2018

On brief: Betras, Kopp & Harshamnn, LLC, Brian P. Kopp,
and Jennifer M. Reghetti, for appellant. Argued: Jennifer M.
Reghetti.

On brief: Michael DeWine, Attorney General, and
Susan M. Sheffield, for appellees. Argued: Susan M.
Sheffield.

APPEAL from the Franklin County Court of Common Pleas
DORRIAN, J.
{¶ 1} Appellant, Chris Haus Auto Sales, LLC ("CHAS"), appeals from a decision of
the Franklin County Court of Common Pleas affirming a decision of the Ohio
Unemployment Compensation Review Commission ("the Commission") finding CHAS was
the successor in interest to Ron Haus Motorcars, Inc. ("RHM") for purposes of
unemployment compensation liability and contribution rate. Because we conclude the
Commission's decision was not in accordance with law, we reverse and remand.
I. Facts and Procedural History
{¶ 2} This appeal involves the question of whether the Commission properly
determined that CHAS, operated by Chris Haus, is the successor in interest for purposes of
No. 17AP-896 2

unemployment compensation liability and contribution rate of RHM, which was operated
by Chris Haus's father, Ron Haus. CHAS, which does business as "Haus Auto Group," was
incorporated by Chris in October 2010. At the time, Chris was also an employee of RHM.
During 2010 through 2012, CHAS and RHM operated out of the same building in Canfield,
Ohio, with CHAS leasing the building from RHM beginning in 2011. RHM filed a petition
for bankruptcy on September 2012, and the bankruptcy proceeding closed on February
2013. In April 2013, Chris purchased the building where RHM had previously operated
from a court-appointed receiver.
{¶ 3} In May 2016, CHAS sent a letter to the Ohio Department of Job and Family
Services ("ODJFS") asserting CHAS had overpaid on its unemployment compensation fund
contributions from 2013 through 2016 due to an inaccurate contribution rate and
requesting repayment. On September 1, 2016, the ODJFS Office of Unemployment
Compensation notified CHAS of its determination of CHAS's liability and contribution rate,
indicating that CHAS had been found to be the successor in interest of RHM for purposes
of unemployment compensation law. CHAS filed an appeal of that determination, arguing
it was a separate and distinct entity from RHM. Appellee, Director of ODJFS ("the
Director") issued a reconsidered decision ("the Reconsidered Decision") affirming the
determination of CHAS's liability and contribution rate as the successor in interest to RHM
because the evidence was sufficient to demonstrate all of the trade or business of RHM had
been transferred to CHAS. CHAS appealed the Reconsidered Decision to the Commission,
and a Commission hearing officer conducted a hearing on the appeal. Following the
hearing, the Commission issued a decision affirming the Reconsidered Decision and
concluding that CHAS was the successor in interest to RHM because substantially all of the
business of RHM was transferred to CHAS.
{¶ 4} CHAS appealed the Commission's decision to the Franklin County Court of
Common Pleas pursuant to R.C. 4141.26(D). The common pleas court affirmed the
Commission's decision, holding there was reliable, probative, and substantial evidence to
support a conclusion that CHAS was the successor in interest to RHM by operation of law
pursuant to R.C. 4141.24(F).
II. Assignment of error
{¶ 5} CHAS appeals and assigns the following single assignment of error for our
review:
No. 17AP-896 3

The Franklin County Court of Common Pleas erred in
affirming the decision of the Unemployment Compensation
Review Commission, as its decision that Chris Haus Auto
Sales, LLC is a successor-in-interest to Ron Haus Motorcars,
Inc. is not supported by reliable, probative, and substantial
evidence and is not in accordance with the law.

III. Analysis
{¶ 6} CHAS appealed the Commission's decision to the common pleas court
pursuant to R.C. 4141.26(D)(2), which provides the common pleas court may affirm the
Commission's determination if, based on consideration of the entire record, it finds the
determination is supported by reliable, probative, and substantial evidence and is in
accordance with law. In the absence of such a finding, the court may reverse, vacate, or
modify the determination, or make other such ruling as is supported by reliable, probative,
and substantial evidence and is in accordance with law. R.C. 4141.26(D)(2). In resolving
evidentiary conflicts, the court must give due deference to the Commission's determination
because as the finder of fact it had the opportunity to observe the demeanor of the witnesses
and weigh their credibility. Valentine Contrs., Inc. v. Dir., Ohio Dept. of Job & Family
Servs., 10th Dist. No. 15AP-86, 2015-Ohio-5576, ¶ 13.
{¶ 7} On appeal from the common pleas court, our standard of review is more
limited. On questions of fact, we consider whether the common pleas court abused its
discretion. Valentine Contrs. at ¶ 14. "When considering appeals involving questions of
successor-in-interest liability, this court has defined 'abuse of discretion' as connoting more
than an error of judgment, but implying a decision that is without a reasonable basis and
clearly wrong." All Star Personnel, Inc. v. Unemp. Comp. Rev. Comm., 10th Dist. No. 05AP-
522, 2006-Ohio-1302, ¶ 13. On questions of law, we exercise de novo review. Valentine
Contrs. at ¶ 14; Slats & Nails Pallets, Inc. v. Ohio Dept. of Job & Family Servs., 10th Dist.
No. 14AP-690, 2015-Ohio-1238, ¶ 8.
{¶ 8} Ohio employers must contribute to the State Unemployment Compensation
Fund. R.C. 4141.09; 4141.23(A). The Director must determine each employer's contribution
rate, which may be a standard rate or an experience-based rate. R.C. 4141.25(A). Under
certain circumstances, an employer may be deemed to be a successor in interest of another
employer for purposes of determining experience and contribution rate. In the present
appeal, the Director and the Commission determined CHAS was the successor in interest
to RHM pursuant to R.C. 4141.24(F).
No. 17AP-896 4

{¶ 9} "Generally, R.C. 4141.24(F) provides two methods by which an employer may
qualify as a successor in interest: (1) by operation of law or (2) through voluntary
application." Resource Title Natl. Agency, Inc. v. Ohio Dept. of Job & Family Servs., 10th
Dist. No. 14AP-39, 2014-Ohio-3427, ¶ 10. The distinction between these two methods, and
the appropriate test to be applied to each, is clearly set forth in the statute:
If an employer transfers all of its trade or business to another
employer or person, the acquiring employer or person shall be
the successor in interest to the transferring employer and shall
assume the resources and liabilities of such transferring
employer's account, and continue the payment of all
contributions, or payments in lieu of contributions, due under
this chapter.

If an employer or person acquires substantially all, or a clearly
segregable and identifiable portion of an employer's trade or
business, then upon the director's approval of a properly
completed application for successorship, the employer or
person acquiring the trade or business, or portion thereof, shall
be the successor in interest. The director by rule may prescribe
procedures for effecting transfers of experience as provided for
in this section.

(Emphasis added.) R.C. 4141.24(F). ODJFS has promulgated different administrative rules
for each method of becoming a successor in interest pursuant to R.C. 4141.24(F). Ohio
Adm.Code 4141-17-04 applies in the case of automatic successorship by operation of law
under the first part of R.C. 4141.24(F), whereas Ohio Adm.Code 4141-17-03 applies in cases
of voluntary successorship under the second part of R.C. 4141.24(F). It is undisputed that
CHAS did not apply to be the successor in interest of RHM. Therefore, the question is
whether the Commission properly found CHAS to be the successor in interest of RHM by
operation of law pursuant to the first part of R.C. 4141.24(F).
{¶ 10} Under the first part of R.C. 4141.24(F), an employer must acquire "all of [the]
trade or business" of the transferring employer to be considered the successor in interest of
the transferring employer by operation of law. This court has held this means the
transferring employer must transfer "all the property integral to its business" to the
acquiring employer in order for the acquiring employer to be the successor in interest by
operation of law. Resource Title at ¶ 18.
{¶ 11} In the present case, the initial determination of liability and contribution rate
issued by ODJFS indicated CHAS was found to be the successor in interest to RHM in
No. 17AP-896 5

accordance with R.C. 4141.24(F) and Ohio Adm.Code 4141-17-04. Although the
determination notice did not indicate which part of R.C. 4141.24(F) applied, the reference
to Ohio Adm.Code 4141-17-04 establishes it was a determination that CHAS was the
successor in interest to RHM by operation of law under the first part of R.C. 4141.24(F).
This conclusion required a finding that CHAS acquired all of the trade or business of RHM.
R.C. 4141.24(F). Similarly, in the Reconsidered Decision affirming the initial
determination, after reviewing the evidence, the Director concluded "[a]ll these factors
combines [sic] are sufficient to demonstrate a transfer of 'all of the trade or business' as
contemplated by the statute." (Nov. 16, 2016 Director's Reconsidered Determination at 3.)
{¶ 12} Unlike the initial determination and the Reconsidered Decision, however, the
Commission does not appear to have relied on the standard set forth in the first part of R.C.
4141.24(F) in its decision on appeal from the Reconsidered Decision. The Commission
quoted the full statute in setting forth the relevant law and stated in the reasoning section
of the decision that "[s]ection 4141.24(F) of the Ohio Revised Code provides that if an
employer transfers all or substantially all of its trade or business to another employer or
person, the acquiring employer or person shall be the successor in interest to the
transferring employer." (June 7, 2017 Decision at 5.) Thus, the Commission appears to have
disregarded the distinction between automatic successorship by operation of law under the
first part of R.C. 4141.24(F) and voluntary successorship by application under the second
part of R.C. 4141.24(F). After reviewing the evidence, the Commission reached the
following conclusion:
Section 4141.24(F) of the Ohio Revised Code provides that an
employer can be considered a successor in interest if the
employer or person acquires substantially all of an employer's
trade or business. The weight of the evidence has established
that Chris Haus Auto Sales, LLC, acquired substantially all of
the business of Ron Haus Motorcars, Inc. Based on the
evidence, Chris Haus Auto Sales, LLC, was correctly
determined to be a successor in interest to Ron Haus Motor
Cars, Inc. and the 2012-2016 contribution rates have been
properly computed for Chris Haus Auto Sales, LLC.

(Emphasis added.) (June 7, 2017 Decision at 6.) As noted above, it is undisputed that CHAS
did not submit an application for successorship of RHM. Therefore, by applying the
"substantially all" standard contained in the second part of R.C. 4141.24(F), the
Commission applied the wrong test to determine whether CHAS was the successor in
No. 17AP-896 6

interest of RHM by operation of law. Pursuant to the first part of R.C. 4141.24(F), the
appropriate test would have been whether CHAS acquired all of the trade or business
integral to the business of RHM.
{¶ 13} The common pleas court affirmed the Commission's decision, concluding it
was supported by reliable, probative, and substantial evidence and in accordance with law.
In reaching this conclusion, the court found the evidence demonstrated that CHAS became
the successor of RHM by operation of law, citing R.C. 4141.24(F) and Ohio Adm.Code 4141-
17-04. However, the common pleas court does not appear to have recognized the
Commission applied the statutory standard for voluntary successorship by application,
rather than the standard for automatic successorship by operation of law.
{¶ 14} Because the Commission applied the incorrect statutory standard in
determining whether CHAS had automatically become the successor in interest to RHM by
operation of law, the Commission's decision was not in accordance with law and the
common pleas court erred by affirming the Commission's decision. On remand, the
common pleas court should enter a decision reversing the Commission's decision and
remanding the matter for application of the appropriate statutory standard.
{¶ 15} Accordingly, we sustain CHAS's single assignment of error.
IV. Conclusion
{¶ 16} For the foregoing reasons, we sustain CHAS's single assignment of error and
reverse the judgment of the Franklin County Court of Common Pleas and remand this
matter to that court for further proceedings in accordance with law and consistent with this
decision.
Judgment reversed
and cause remanded.

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