The Tenth District Court of Appeals recently decided the case of Williams v. Gray Guy Group, L.L.C., 2016-Ohio-8499 (10th Dist. Franklin). It started when the Plaintiffs, Mr. and Mrs. Williams, hired the Defendant, Gray Guy Group, L.L.C., to complete a $39,350.00 remodel job on their home. To put it mildly, the Gray Guy Group did a terrible job. It was a nightmare for the Plaintiffs.
The basic facts were as follows:
{¶ 2} Reading from the magistrate’s December 16, 2014 decision, we can summarize the facts of the case. The parties entered into a contract on July 3, 2012 for Gray Guy Group to remodel the Williams’ residence for the sum of $39,350.00 The remodeling work was an abject total failure and an inspection from the city of Columbus was required. The inspection found the Williams’ home to be uninhabitable. The involvement of the city resulted in Gray Guy Group’s summary and unilateral withdrawal from the remodeling job. The Williams had already paid $60,700.70 to Gray Guy Group before its departure.
{¶ 3} The Williams were displaced from their home. They spent $3,771.82 to store their personal property. A new contractor was hired in an attempt to complete the original remodeling job and to render the house habitable at a cost of $75,721.14. To pay these additional costs, the Williams withdrew money from a retirement account which resulted in an IRS penalty assessment of $15,144.22.
The Plaintiffs filed a lawsuit, but Joe Gray, the owner of Gray Guy Group, ignored it. He eventually tried to file an Answer and appear in Court on behalf of the company, but the Court struck the Answer and did not allow this because companies have to be represented by an attorney and cannot represent themselves “pro se.” So the Plaintiffs got a default judgment. From what I can tell, they only sued for violation of the Ohio Consumer Sales Practices Act (CSPA). Eventually, lawyers from an Ohio insurance defense firm got involved and started representing the Defendant, most likely because he had insurance and the insurance company found out about the lawsuit.
The Franklin County Common Pleas Magistrate found a violation of the Ohio Consumer Sales Practices Act, based on the non-performance or unworkmanlike performance of the contract by Gray Guy Group. The Magistrate further found that the availability of the treble damage provision of R.C. 1345.09 was appropriate. The Magistrate found the total recoverable compensatory damages to be $556,013.64 and recommended an award of that amount, plus $4,689.00 for attorney fees. Of importance, $30,000.00 of the total $556,013.64 was for “incidental damages” the Plaintiffs suffered as a result of being forced to “live with various relatives and foregoing family social visits and celebrations at their home for an extended period of time.” Sounds fair to me, but this award was ultimately reduced to $5,000.00 for reasons explained below. Gray Guy Group then filed objections to Magistrate’s recommendations, which were overruled, and then appealed to the Tenth District.
On appeal, the Defendant argued that the entire judgment was improper, asserting as error, inter alia, that default judgment was improper due to improper service, that the damages were too high because the Williams were awarded the amount they paid to Gray Guy Group PLUS the amount they paid to the contractor who fixed the mess and completed the job, that the judgment was void because it was against an LLC that no longer existed, that no specific CSPA violation had been found, that the Plaintiffs had not shown what they were required to show in order to obtain an award of treble damages, that consequential damages were inappropriate, that the $30,000.00 should be reduced to $5,000.00 and that the noneconomic damages should not be trebled.
The analysis the Tenth District went through is an excellent primer on how the CSPA works. The Court rejected all of the Defendant’s arguments except as follows: the Court reduced the $30,000.00 “incidental damages” award to $5,000.00 (but found it should nonetheless be trebled), and found that the damages should be further reduced by $39,500.00, the amount the Williams were supposed to pay Gray Guy Group for the remodel (since they should not get a completed remodel AND get their money back, the Court reasoned).
Several lessons, practice pointers, and observations can be gleaned from this case:
1. Noneconomic damages under the CSPA are trebled, just like economic damages are, for an effective maximum of $15,000.00. This is important to know because it might not be totally clear to a practitioner just reading 1345.09(B) for the first time. The Court cited to Whitaker v. M.T. Automotive, Inc., 111 Ohio St.3d 177, 2006-Ohio-5481, 855 N.E.2d 825, ¶ 22 (2006), wherein the Supreme Court of Ohio ruled that “because actual damages and compensatory damages are equivalent, Mouse, 120 Ohio St. at 610, 167 N.E. 868, and because compensatory damages can consist of both economic and noneconomic damages, we hold that the actual damages proven, whether economic or noneconomic, are subject to trebling under R.C. 1345.09(B).” Whitaker even suggests that punitive damages may be appropriate in a CSPA case. Whitaker, at ¶ 23 (“R.C. 1345.09(A)’s use of the unmodified term ‘damages’ seems to allow for an award of punitive damages for a CSPA violation committed with actual malice. Any award for punitive damages, however, would not be subject to trebling under R.C. 1345.09(B), because punitive damages are not ‘actual damages.'”).
2. The landmark, olde English case of Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Rep. 145 (1854), which hearkens back to 1L Contracts class, is good law in Ohio. The Tenth District cited it here, as follows:
Consequential damages may also be awarded if they may reasonably “ ‘be supposed to have been contemplated by the parties as the probable result of such breach.’ “ White Oak., quoting Devereux v. Buckley & Co., 34 Ohio St. 16, 20 (1877), citing Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Rep. 145 (1854).
This is important to know, as it may increase the damages available in simple breach of contract cases.
3. In Ohio, sketchy contractors and other business people cannot evade liability by using a fictitious name or doing business under the name of a company that does not exist. Here, the Tenth District explained:
{¶ 15} “Pursuant to R.C. 1329.10(C), a plaintiff may commence or maintain an action against a party named only by its fictitious name.” Family Med. Found., Inc. v. Bright, 96 Ohio St.3d 183, 2002–Ohio–4034, syllabus. A plaintiff may then enforce the resulting judgment against the user of that fictitious name. Brown Bark II, L.P. v. Coakley, 188 Ohio App.3d 179, 2010–Ohio–3023, ¶ 28 (10th Dist.). A sole proprietor doing business under a fictitious name thus does not create an entity distinct from the person operating the business. Id. Rather, “[t]he individual who does business as a sole proprietor under one or several names remains one person, personally liable for all his obligations.” Patterson v. v. & M Auto Body, 63 Ohio St.3d 573, 575 (1992). Where, however, a court enters a judgment against a non-entity and the plaintiff knew the identity of the sole proprietor behind the fictitious name, the judgment rendered against that non-entity is void as the lawsuit “was never properly commenced.” Id. at 577.
{¶ 16} In this case, appellant has presented itself as Gray Guy Group, L.L.C. and only now does it raise this issue that it is non sui juris. The Williams only knew appellant as Gray Guy Group, L .L.C., and that is who they named as a defendant in the lawsuit. We hold that the Williams may enforce the judgment against appellant as a user of the name Gray Guy Group LLC. “[A] defendant should not be allowed to profit by the confusion resulting from its having done business under a fictitious name.” Family Med. Found. at ¶ 11. (Quotations omitted.)
4. Unworkmanlike conduct, or failing to complete a job as promised, can be enough to establish a CSPA violation. This case will eventually be placed in the Attorney General’s Public Inspection File, along with other cases to this effect. This is key to obtaining treble damages under the CSPA.
5. It is crucial to follow all procedural rules. In this case, the Defendant inadvertently failed to file a copy of the transcript of the proceedings in front of the Magistrate when objecting to the Magistrate’s Decision. The transcript was later allowed to be filed, but the Judge did not reconsider the decision. Likewise, while it did not ultimately matter, the Plaintiff did not present evidence of cases in the Attorney General’s Public Inspection File establishing that the violations committed by the Defendant have previously been found to violate the CSPA (this is necessary to be awarded treble damages). Consumer law attorneys in Ohio need to be especially cognizant of this requirement.The best practice is to file a notice specifying the cases to be presented at trial, and then we order certified copies of those cases well ahead of trial. Also, it would have been prudent for the Plaintiffs to sue Joe Gray individually, in addition to Gray Guy LLC. The entire damages award could conceivably have been wiped out on this basis. Better safe than sorry. Also, if the Plaintiffs could have alleged fraud, they may have been able to uphold the entire $30,000.00 in noneconomic damages on that basis (though it is unclear if they had facts they could have alleged that would have constituted a valid claim for fraud). See also Thompson v. Knobeloch.
