IN THE SUPREME COURT OF OHIO

DONALD J. CASSERLIE, et al.,

Appellants,

vs.

SHELL OIL COMPANY, et al.Appellees.

Case No. 2007-1408

On Appeal from the CuyahogaCounty Court of AppealsEighth Appellate District

MERIT BRIEF OF APPELLANTS DONALD J. CASSERLIE, et al.

ROBERT E. SWEENEY CO., L.P.A.Bernard Goldfarb (#0007719)(COUNSEL OF RECORD)Sean Kelly (#0075442)Suite 1500 Illuminating Building55 Public SquareCleveland, Ohio 44113Tel. 216-696-0606Fax. 216-696-0732

THE O'QUINN LAW FIRMAnthony E. FarahTex. Bar No. 24007172N.Y. Registration No. 44887892300 Lyric Centre440 LouisianaHouston, Texas 77002Tel. 713-223-1000Fax. 713-222-6903

BAKER & HOSTETLER, LLPThomas R. Lucchesi, Esq. (COUNSELOF RECORD) (0025790)Lora M. Reece, Esq. (0075593)1900 East 9th Street, Suite 3200Cleveland, Ohio 44114-3485

BAKER BOTTS LLPJ. Michael Baldwin, Esq.910 LouisianaHouston, Texas 77002-4995

COUNSEL FOR DEFENDANTS-APPELLEES

COUNSEL FOR PLAINTIFFS-APPELLANTS

TABLE OF CONTENTSPaQe

TABLE OF AUTHORITIES .......... ....................................................................................ii

STATEMENT OF FACTS .................................................................................................1

A. Factual Background ..........:...............................................................................1

B. Procedural Background .....................................................................................4

ARGUMENT ...................................................................................... ................................ 5

Proposition of Law No. I:

The definition of Good Faith under the UCCincorporating an "honesty in fact" component requiresa subjective inquiry ...............................................................................................5

A. Introduction .......................................................................................................5

B. Canons of Statutory Construction .....................................................................7

C. Master Chemical, Tom-Lin, and the Court of Appeals Opinion ....................14

D. Shell's Argument is Misleading and Designed to Confuse the Issue ... .........18

CONCLUSION .....................................:..........................................................................23

APPENDIX Aox. Page

Notice of Appeal ............................................................................................................... l

Order from the Cuyahoga County Court ofCommon Pleas Granting Motion for Summary Judgment ...............................................4

Opinion from the Eighth Appellate District Affirming Judgment ..................................14

OHio REv. ConE ANN. § 1301.01 (West 2008) ..............................................................56

OHio REv. CoDE ANtv. § 1302.01 (West 2008) .............................................................68

OHIo RLv. CoDE ANN. § 1302.18 (West 2008) ..............................................................76

Laws of Ohio 129 v. S 5 (Effective 7-1-1962) ................................................................79

i

TABLE OF AUTHORITIES

Cases

Alan's ofAtlanta, Inc, v. Minolta Corp., 903 F.2d 1414, 1425-26 ( 11th Cir. 1990)........ 13

Allapattah Serv., Inc. v. Exxon Corp., 61 F. Supp. 2d 1300, 1307 (S.D. Fla. 1999) ........ 13

Blackstone Subaru, Inc. v. Subaru ofNew Eng., Inc., 1993 WL 818780, at *7 n. 20(Mass. Super. Oct.22, 1993) . ........................................................................................ 11

Bob's Shell, Inc. v. O'Connell Oil Assoc., Inc., 2005 U.S. Dist. LEXIS 21318 (D. Mass.

August 31, 2005 ) ........................................................................................................... 11

Buckeye Check Cashing, Inc. v. Camp, 159 Ohio App. 3d 784, 787, 825 N.E.2d 644, 646(Ohio Ct. App. 2005) .... .................................................................................................. 9

Cagle's Inc. v, Valley Nat'l. Bank, 153 F.Supp.2d 1288 (M.D. Ala. 2001) ...................... 10

Cason v. Texaco, Inc., 621 F. Supp. 1518, 1521 (M.D. La. 1985) ................................... 13

Columbus Checkcashiers, Inc. v. Stiles ( 1990), 56 Ohio App.3d 159, 565 N.E.2d 883..... 7

Community Bank v. Ell, 564 P.2d 685, 691 (Or. 1977) ...................................................... 9

Cotran v. Rollins Hudig Hall Internat., Inc. 948 P.2d 412, 421 (Cal. 1998) .................... 10

E. Ohio Gas Co. v. Public Utils. Com., 39 Ohio St.3d 295, 299, 530 N.E.2d 875, 879(Ohio Ct. App. 1988) ... ................................................................................................. 12

Fort Knox Nat'l Bank v. Gufstafson, 385 S.W.2d 196, 200 (Kent. App. 1964) ....... ........ 13

Gillenwater v. Mid-Am. Bank & Trust Co., 870 P.2d 700, 704 (Kan.Ct.App.1994).......... 9

Gustafson v. Alloyd Co., 513 U.S. 561, 568, 115 S.Ct. 1061, 1066, 131 L.Ed.2d 1, 11(1995) .............................................................................................................................. 8

In re Davis, 68 B.R. 205, 217 (Bankr. S.D. Ohio 1986) ................................................... 14

Jaser v. Fisher, 783 A.2d 28, 35 (Conn. 2001) .................................................................. 9

Marcoux v. Shell Oil Prods. Co., LLC, No. 01-11300-RWZ (D. Mass. Oct. 25, 2004)... 11

ii

Master Chemical Company v. Inkrott, 55 Ohio St. 3d 23, 563 N.E. 2d 26 (Ohio 1990). 14,

15, 16

Reid v. Key Bank of S. Maine, Inc., 821 F.2d 9, 15 (1st Cir.1987) ..............:...................... 9

San Tan Irr. Dist. v. Wells Fargo Bank, 3 P.3d 1113, 1117 (Ariz. Ct. App. 2000).......... 10

Sloan v. Standard Oil Co., 177 Ohio St. 149, 153, 203 N.E.2d 237, 240 (Ohio 1964).... 13

Smith v. Halvorsen, 273 N.W. 2d 146, 151 (S.D. 1978) ................................................... 16

State v. Grays, 2001 WL 1671161 (Ohio Ct. App. December 6, 2001) ............................. 5

State, ex rel. Cleveland Electric Illum. Co., v. Euclid, 169 Ohio St. 476, 479, 159 N.E.2d756, 759 (1959) ............................................................................................................. 12

Takacs v. Baldwin (1995), 106 Ohio App.3d 196, 665 N.E.2d 736 ................................... 5

TCP Indus., Inc. v. Uniroyal, Inc., 661 F.2d 542, 548 (6th Cir. 1981) ............................. 13

The Hartford v. Tanner, 910 P.2d 872, 880 (Kan. 1996) ................................................... 9

Tom-Lin Enters, Inc., et al v. Sunoco, Inc. 349 F.3d 277 (6th Cir. 2003) ........................ 15

Travelers Cas. and Sur. Co. v. Citibank (South Dakota), N.A., 2007 WL 2875460 (M.D.Fla. Sept. 28, 2007) ......................................................................................................... 9

Valley Nat. Bank v. P.A.Y. Check Cashing, 875 A.2d 1056, 1066 (N.J. Super. Ct. Law.Div. 2004) ..................................................................................................................... 10

Vermont Morgan Corp. v. Ringer Enter., Inc., 92 A.D.2d 1020, 1021 (N.Y. App. Div.1983 ............................................................................................................................... 13

West Branch Tank & Trailer, Inc. v. Searfoss, 1998 WL 2016554 (Mich. App. March 10,1998) . ............................................................................................................................ 10

Youngstown Club v. Porterfield (1970), 21 Ohio St.2d 83, 86, 255 N.E.2d 262, 264........ 7

Statutes

Ala. Code § 7-3-103(a)(4) ................................................................................................. 10

Laws of Ohio 129 v. S 5 (Effective 7-1-1962) .................................................................. 19

Oxio REv. CODE ANN. § 1301.01 cmt. 19 (West 2008) ..................................................... 6

iii

OHIO REV. CODE ANN. 1301.01(S) (West 2008) ...................................................... 6, 8, 15

OHio REv. CODE ANN. 1302.01(2) (West 2008) ................................................................ 5

OHio REv. CODE ANN. 1302.18 (West 2008) ........................................ I 5

U.C.C. § 2-305(2) . .............................................................................................................. 5

U.C.C. 1-201 (19) ............................................................................................................. 16

UCC § 2-305 ..................................................................................................................... 14

Other Authorities

10 UNIFOxM COMMERCIAL CoDE DRAFTs 239-40 (E. Kelly comp. 1984) ....................... 20

12 UNIFORM COMMERCIAL CODE DItaFTs 55-56 (E. Kelly comp. 1984) ......................... 20

14 UNIFORM COMMERCIAL CODE DRAFTS 86-88 (E. Kelly comp. 1984) ..........................22

42 OHIO JuR. 3d 535-537, Evidence and Witnesses, Sec. 238 ......................................... 12

BLACK'S LAW DICTIONARY (6 Ed.1990) 468 ...................................................................... 7

BLACK's LAw DICTIONARY (6 Ed. 1990) 693 ..........::...................................................... 5, 8

Hearing Before the Enlarged Editorial Board January 27-29, 1951, 6 BUB. LAw. 164

(1951) ................................................................................................................ 19, 20, 21

Larry T. Garvin, Credit, Information, and Trust in the Law of Sales: The Credit Seller's

Right ofReclamation, 44 UCLA L. REv. 247, 249 n.9 (1996) ..................................... 19

Treatises

WILLIAM L. PROSSER & W. PAGE KEETON, PROSSER AND KEETON ON THE LAW OF TORTS728 (5th Ed. 1984) . ................................................................................................. 10,11

iv

STATEMENT OF FACTS

A. Factual Background

This case arises from the franchise relationship between Shell Oil Company and

its successors (collectively, "Shell") and its independent dealers in the greater Cleveland

area. Shell intended to, and did, force its dealers out of business using the open price

provision in its contracts with the dealers to price wholesale gasoline in such a way as to

guarantee that the dealers could not survive. At the same time Shell set high wholesale

prices to its dealers, it was selling gasoline at its company-owned Shell stations at prices

lower than wholesale.

The Appellant dealers were contractually obligated to purchase wholesale

gasoline from Shell pursuant to the open price term in their contracts. (Supp. 113, 174.)

Shell retained for itself the power to set the price for gasoline. The contract requires the

Appellant dealers purchase and sell only "Shell-branded" gasoline. (Supp, 112.)

Most importantly, Shell controls Appellants' margin - or profit - on gasoline

sales. Using various techniques at various times, Shell allowed Appellants only a 6 to 8

cent margin. (Supp. 221.) Shell also set Appellants' wholesale gasoline price, rent,

minimum purchase amounts, and consequently, Appellants' profitability. Shell used the

enormous control it had over Appellants' businesses to make them unprofitable.

Based upon their own documents and admissions, Shell planned on eventually

eliminating their lessee-dealer channel of operations in Cleveland so Shell could

completely take over Appellants' businesses. (Supp. 208.) Federal legislation, however,

stood in the way - the Petroleum Marketing Practices Act. 15 U.S.C. § 2801 et seq. (the

"PMPA"). Under the PMPA, Shell cannot simply fail to renew a lessee-dealer's

1

contracts at the expiration of their term. Rather, should Shell wish to terminate that

lessee-dealer, it must first allow that dealer an opportunity to purchase the station. (Supp.

347.) To circumvent the PMPA, Shell began marketing retail gasoline through company-

owned Shell stations operated by its joint venture with Lyden Oil Company called True

North Energy. Shell would often sell gasoline at retail from these outlets for less than it

charged Appellants for wholesale gasoline. (Supp. 191-206.) When the Appellants'

businesses became unprofitable and thus unsustainable because the wholesale gasoline

prices that Shell charged the lessee-dealers were unreasonably high, Shell took the

stations back at little or no cost.

Using its bad faith pricing tactic, Shell ensured that Appellants could not keep up

with competition: 60% or more of Appellants' competition in Cleveland has a

significantly lower cost basis for gasoline. (Supp. 290.) Appellants' competition

generally pays "rack price" plus about 2 cents for transportation costs. (Supp. 290.)

Appellants' wholesale gasoline cost was always significantly higher than rack. (Supp.

290.) To expedite Appellants' losses, Shell frequently sets its retail price for gasoline at

its company-owned Shell stations lower than its wholesale price to Appellants. (Supp.

191-206.)

Shell's strategy worked, accomplishing through bad faith pricing what Congress

sought to prevent with the PMPA. Over 40 dealers instigated this action eight years ago.

Only 4 remain in business as lessee-dealers. There is no doubt that the lessee-dealeis

decimated ranks were the result of Shell's acts; Shell's own documents prove Shell's

motive and affirmative intent to drive Appellants out of business using gasoline pricing.

Shell initiated the Strategic Marketing Initiative, or "SMI" in 1998. (Supp. 286.)

2

Ostensibly, the core concept behind the SMI was to change Shell's reliance on fuel

revenue and transform the company from a fuel seller to a "convenience retailer," thus

operating exclusively through its own company Shell stations. (Supp. 373.) To do this,

Shell would "grow" "company operated, territory developer alliance, and total site

franchise" channels. (Supp. 321.) These channels were ideal for Shell because it gave

them gasoline as well as other revenue, plus the ability to influence street price and

control retailing. (Supp. 321.) Thus, Shell would shut-down all of its dealers, and replace

them with Shell company-owned stations. This way, Shell would get all the profit from

food, alcohol, etc., and not just gas and rent. But the SMI was more than just a revenue

plan for Shell.

The SMI was also Shell's plan to eliminate its dealers. The SMI is replete with

euphemisms: For example it states that Shell would "optimize" retailers such as

Appellants. (Supp. 324.) "Optimize" in this context is Shell's euphemism for

"eliminate." Optimizing dealers produced two-fold benefits for Shell. Not only did it

allow Shell to generate additional non-fuel sources of revenue, it also enabled Shell to

control the street price and retailing for these sources. (Supp. 321.) These benefits foster

Shell's ultimate goal, of course, of moving away from its heavy reliance on fuel margins

to sharing all revenue generated at any service station site. (Supp. 321.)

Shell, pursuant to the SMI, decided to restructure the Cleveland market. To do so,

Shell selected a new form of business - a joint venture/TDA.1 (Supp. 339.) In fact,

Cleveland (along with Central Ohio) would be the test market for Shell's new TDA.

I TDA stands for Territory Developer Alliance. In a TDA Shell joint ventures witha local gas station retailer, such as co-Appellee Lyden Oil Company. Each contributesassets to the venture and shares joint management of the venture.

3

(Supp. 348.) This joint venture would be the ideal vehicle to eliminate the Cleveland

lessee-dealers. During the formation of the True North joint venture, Shell executives

clearly contemplated eliminating the dealers by creating competition in the form of True

North stations. In one startling document, Shell projects increased profits from nothing

other than reclaiming dealer stores. Termed "Channel Conversion Uplift," the formation

of the True North joint venture spelled the end for Cleveland's lessee-dealers. (Supp.

286.)

B. Procedural Background

This is an appeal from summary judgment. On April 13, 2005, the trial court

granted summary judgment against Appellants' open price term claim, holding that

Appellees' subjective intent to set prices designed to drive Appellants out of business was

not a breach under U.C.C. § 2-305. (Appx. 4.) The substantial (and irrefutable) evidence

of Shell's intent to set prices designed to drive Appellants out of business was therefore

irrelevant. Discovery had been stayed in this action on all other claims. The trial court

denied Appellants' motion to lift the stay of discovery. The court denied Appellants'

Rule 56(F) motion to conduct discovery before answering Appellees' motion for

sunnnary judgment. On June 2, 2006, the court granted summary judgment against

Appellants' remaining claims. The trial court signed fmal judgment on June 2, 2006.

Appeal to the Eighth Appellate District, Cuyahoga County followed. Appellants

argued that the statutory definition of good faith in R.C. 1302.18 (U.C.C. § 2-305)

concerning honesty in fact was violated when the seller sets the price in an open-price

term contract with malum subjective intent. (Appx. 22.) The Court of Appeals disagreed

with Appellants, disregarded the language of the statute, and held that no subjective

4

analysis was applicable to Appellants' good faith claims. (Appx. 24.) The Court of

Appeals' opinion was journalized on June 22, 2007 and designated for publication.

(Appx. 16.)

Appellants timely filed a notice of appeal to this Court, and submitted their

Memorandum in Support of Jurisdiction on August 1, 2007. (Appx. 1.) On November

21, 2007 this Court accepted the appeal on Appellants' Proposition of Law No. I.

ARGUMENT

Prouosition of Law No. I: The definition of Good Faithunder the UCC incorporating an "honesty in fact"component requires a subjective inquiry.

A. Introduction

The foundation for Appellants' pricing claim is based upon the open price term in

their contracts with Shell. Under R.C. 1302.18 (U.C.C. § 2-305(2)), where the contract

does not contain a set price for goods, leaving the price open and to be fixed by one of the

parties, such a price "means a price for him to fix in good faith."2 See Oxto REV. CoDE

ANN. 1302.18 (West 2008). The definition of good faith applicable in this case apphes

under Article 2 of the U.C.C., is set forth in R.C. 1302.01(2) and states:

(2) "Good faith" in the case of a merchant means honesty infact and the observance of reasonable commercialstandards of fair dealing in the trade.

Oxio REv. CoDE ANN. 1302.01(2) (West 2008).

2 As an initial matter, Appellants note that "good faith" should always connote asubjective inquiry. Even the Court of Appeals, in a non-U.C.C. case conceded that "goodfaith" necessarily requires a subjective inquiry. "We recognize that `good faith' has beendefined as an honest belief, the absence of malice and the absence of design to defraud orto seek an unconscionable advantage; it connotes an honesty of intention and freedomfrom knowledge of circumstances which would put the party acting in good faith oninquiry." State v. Grays, 2001 WL 1671161 (Ohio Ct. App. December 6, 2001) citing,Takacs v. Baldwin (1995), 106 Ohio App.3d 196, 665 N.E.2d 736; BLACK's LAwDICTIONARY (6 Ed. 1990) 693.

The plain language of Article 2's definition contains two components: "honesty

in fact" and "reasonable commercial standards." Both components must be satisfied in

order for an open price to be a good faith price. Each component requires a different

analysis - honesty is subjective; reasonable commercial standards are objective. This

only makes sense, because if both required only an objective test, the statute would be

tautologically redundant.

Moreover, the subjective nature of the honesty component is emphasized by the

use of the good faith definition in the other Articles of the U.C.C. In these instances,

courts have uniformly held that to detemune "honesty" a court must employ a subjective

test.

Specifically, under R.C. 1301.01(S) the definition of good faith reads:

(S) "Good faith" means honesty in fact in the conduct ortransaction concemed.

OHto REv. CODE ANrr. 1301.01(S) (West 2008). This definition is virtually identical to

the one appearing in Arkicle 2.3 Because the language is identical, the interpretation of

each should also be identical. Where R.C. 1301.01(S) requires a subjective test to

determine honesty, so too should R.C. 1302.01(2). It is axiomatic that the same words in

one part of a statute should have the same meaning when used in a different part of the

same statute.

3 In fact the official comment to this definition explains that "`Good faith',whenever it is used in the Code, means at least what is here stated." OHio REV. CODEANN. § 1301.01 cmt. 19 (West 2008) (emphasis added). Comment 19 goes on to explainthat other sections of the code include this standard, plus more - such as good faith in thecase of a merchant also requiring observance of reasonable commercial standards. Id.Honesty in fact is the bare minimum required for good faith under the U.C.C., and manysections require more than just mere honesty.

6

Thus neither Shell's extra-textual argument nor the Court of Appeals' convoluted

opinion can overcome application of the canons of statutory construction which require a

subjective analysis of Shell's conduct relative to Appellants' pricing claim. An analysis

of the statutory language, using sound canons of statutory construction, compels a

determination that R.C. 1302.01(2)'s language denotes a subjective test. As set forth

below, when a subjective test is applied against the evidence of Shell's intentional

elimination of Appellants, Shell's breach of contract becomes evident. This analysis also

has the benefit of comporting with common sense: how can an open price, specifically

calculated to drive a contractual partner out of business, be a "good faith" price?

B. Canons ofStatutory Construction

1. Plain and Ordinary Meaning of Honesty

Though the Court of Appeals struck out and re-wrote Ohio law, it should have

resolved this case by simply applying well-established canons of statutory construction.

The crucial issue is whether the phrase "honesty in fact" under R.C. 1302.01(2) requires a

subjective test. It does.

"In construing statutes, it is customary to give words their plain ordinary meaning

unless the legislative body has clearly expressed a contrary intention." Youngstown Club

v. Porterfield (1970), 21 Ohio St.2d 83, 86, 255 N.E.2d 262, 264. "Honesty in fact" is

defined as the absence of bad faith or dishonesty with respect to a party's conduct within

a commercial transaction. Columbus Checkcashiers, Inc. v. Stiles (1990), 56 Ohio

App.3d 159, 565 N.E.2d 883. Dishonesty, is the "[d]isposition to lie, cheat, deceive, or

defraud." Bi.Acx's LAW DICTIONARY (6 Ed.1990) 468.

7

Against this definition, the subjective nature of the test is thrown into sharp-relief.

Lies and fraud schemes are intentional acts. A lie is defined as "an intentional statement

of an untruth designed to mislead another." Id. at 922. Fraud, as every first year law

student learns, is an intentional tort where the scienter of the tortfeasor is an essential

element of the tort. WILLIAM L. PROSSER & W. PAGE KEETON, PROSSER AND KEETON ON

TItE LAw OF ToRTS 728 (5th Ed. 1984). Where a tort is intentional, the mental state - or

intent of the tortfeasor - is an essential element of the claim. Id. Mental state is only

known by determining the actor's subjective intent.

This Court should therefore interpret "honesty in fact" under R.C. 1302.01(2)

according to the plain meaning of the term. The plain meaning of honesty includes a

subjective mental state.

2. Same Words in Different Parts of Statute Given Same Meaning

Another elementary canon of statutory construction is to give a term a consistent

meaning throughout a piece of legislation. Gustafson v. Alloyd Co., 513 U.S. 561, 568,

115 S.Ct. 1061, 1066, 131 L.Ed.2d 1, 11 (1995). The phrase "honesty in fact" appears in

the "definitions" section of other articles of the U.C.C. Under R.C. 1301.01(S) the

definition of good faith reads, "honesty in fact in the conduct or transaction concerned."

Oxio REv. CODE ANN. 1301.01(S) (West 2008). Thus, the definitions of "good faith"

and "honesty in fact" as defined under the R.C. 1301.01(S) should be identical to the

definitions under R.C. 1302.01(2) because the words are the same.

Courts everywhere have determined that honesty in fact requires a subjective

analysis under the various state U.C.C. analogues to R.C. 1301.01(S). In Buckeye Check

Cashing, the appellate court noted that the "`honesty in fact' requirement, also known as

8

the `pure heart and empty head' doctrine, is a subjective test[.]" Buckeye Check Cashing,

Inc. v. Camp, 159 Ohio App. 3d 784, 787, 825 N.E.2d 644, 646 (Ohio Ct. App. 2005).

Courts everywhere acknowledge that the good faith / honesty test is a subjective one:

• Connecticut: "[Good faith] is a subjective standard of honesty of fact in the

conduct or transaction concerned, taking into account the person's state of mind,

actual knowledge and motives ... Whether good faith exists is a question of fact to

be determined from all the circumstances." (Internal quotation marks omitted.)

Jaser v. Fisher, 783 A.2d 28, 35 (Conn. 2001).

• Florida: "good faith" is both a subjective and objective inquiry - that is, whether

the holder accepts the instrument with both "honesty in fact" and under

"reasonable commercial standards." Travelers Cas. and Sur. Co. v. Citibank

(South Dakota), N.A., 2007 WL 2875460 (M.D. Fla. Sept. 28, 2007).

• Oregon: The "honesty in fact" prong is subjective. Community Bank v. Ell, 564

P.2d 685, 691 (Or. 1977).

• Rhode Island: Good faith, under a subjective standard, is defined as "honesty in

fact." Reidv. Key Bank of S. Maine, Inc., 821 F.2d 9,15 (1 st Cir.1987).

• Kansas: "In dealing with good faith arguments against lenders by borrowers, ...

the test of good faith is subjective and requires only honesty in fact." The

Hartford v. Tanner, 910 P.2d 872, 880 (Kan. 1996). Thus, in order to prevail in

Kansas on a breach of duty of good faith claim, the party so alleging must offer

proof of dishonesty by the other party. See Gillenwater v. Mid-Am. Bank & Trust

Co., 870 P.2d 700, 704 (Kan.Ct.App.1994).

9

• Alabama: "`Good faith means honesty in fact in the conduct or transaction

concerned.' Ala. Code § 7-3-103(a)(4). It appears from the definition provided

that good faith is meant to be determined on a subjective basis. Moreover, the

court adopts the reasoning in Cagle's Inc. v. Valley Nat'l. Bank, 153 F.Supp.2d

1288 (M.D. Ala. 2001) on the issue of whether a subjective standard of good faith

applies."

• California: "`Good faith' is commonly thought of as subjective in essence.°'

Cotran v. Rollins Hudig Hall Internat., Inc. 948 P.2d 412, 421 (Cal. 1998).

• New Jersey: For purposes of establishing a defense to a claim of breach of

warranty of presentment for a holder presenting a check with a fictitious payee for

payment by the drawee, the element of the holder's "honesty in fact" is

determined by looking to the mind of the particular holder, which is a subjective

standard and not a prudent man standard. Valley Nat. Bank v. P.A.Y. Check

Cashing, 875 A.2d 1056, 1066 (N.J. Super. Ct. Law. Div. 2004).

• Arizona: "Honesty in fact" is tested by a subjective standard, inquiring into the

actual state of mind of the party. San Tan Irr. Dist. v. Wells Fargo Bank, 3 P.3d

1113, 1117 (Ariz. Ct. App. 2000).

• Michigan: "Good faith" therefore has both a subjective component i.e., "honesty

in fact" and an objective component i.e., "reasonable commercial standards."

West Branch Tank & Trailer, Inc. v. Searfoss, 1998 WL 2016554 (Mich. App.

March 10, 1998).

• Massachusetts: Good faith under chapter 93B "requires something more than

commercial reasonableness, something on the order of subjective honesty in fact

10

and purity of motive." See Blackstone Subaru, Inc. v. Subaru of New Eng., Inc.,

1993 WL 818780, at *7 n. 20 (Mass. Super. Oct.22, 1993).

Moreover, numerous courts have ruled that the subjective test applies in U.C.C. 2-

305 claims like the one now before the Court. On December 8, 2004, a jury retumed a

verdict in favor of Shell lessee-dealers in the United States District Court for the District

of Massachusetts in Marcoux v. Shell Oil Prods. Co., LLC, No. 01-11300-RWZ (D.

Mass. Oct. 25, 2004). Marcoux involved allegations nearly identical to those raised by

Plaintiffs in the case now before the Court. See id. (stating "Did defendants violate the

U.C.C. by setting the DTW * * * prices in bad faith by charging plaintiffs DTW prices

that were not commercially reasonable?"). Answering the question in the affirmative, the

jury went on to award damages to individual plaintiffs for violation of U.C.C. § 2-305.

See id.

On August 31, 2005, another federal district court in Massachusetts held that an

oil company's intent to push its contractual partner out of business through wholesale

gasoline pricing is a breach of contract under U.C.C. § 2-305. Bob's Shell, Inc. v.

O'Connell Oil Assoc., Inc., 2005 U.S. Dist. LEXIS 21318 (D. Mass. August 31, 2005).

The district court agreed with the same assertion Appellants make here, "that section 2-

305's purpose of preventing price discrimination should bar a supplier from trying to

drive its dealers out of business, not merely remove the good faith presumption. This

would appear to be true in particular where the dealers compete with the suppliers' own

retailers." Id. at *14 (citation omitted).

It is beyond doubt that the honesty in fact requirement of R.C. 1301.01(S)

mandates a subjective inquiry into the mind, motives and intent of the actor. Shell's

11

cases - its so-called "avalanche of authority" - are in reality an anomaly, an aberration in

an otherwise unbroken line of authority. Anomalous too is the Court of Appeals' opinion

in this case. If allowed to stand, that opinion will contravene decades of clear

jurisprudence mandating a subjective inquiry on whether conduct is honest in fact under

the U.C.C.

3. Each Word in Statute to be Given Effect

To accept Shell's argument - and the Court of Appeals' analysis - would be to

render meaningless the phrase "honesty in fact" throughout the U.C.C. This in effect

collapses the two-prongs of honesty in fact and commercial reasonableness into a single,

objective inquiry. This is impermissible.

"It is a basic canon of statutory construction that the General Assembly will not

be presumed to do a vain or useless thing and that language in a statute has a definite

purpose." State, ex rel. Cleveland Electric Illum. Co., v. Euclid, 169 Ohio St. 476, 479,

159 N.E.2d 756, 759 (1959). "[W]ords in statutes should not be construed to be

redundant, nor should any words be ignored." E. Ohio Gas Co. v. Public Utils. Com., 39

Ohio St.3d 295, 299, 530 N.E.2d 875, 879 (Ohio Ct. App. 1988).

4. How to Prove Intent

Of course, a subjective fact like intent must almost always be proven by objective

evidence. Indeed, "a subjective fact [is] seldom susceptible of proof by direct evidence,

and ordinarily it must be ascertained by a consideration of the objective facts and the

inferences fairly to be drawn therefrom." 42 OHIO Jt11t. 3d 535-537, Evidence and

Witnesses, Sec. 238.

Given the subjective nature of the test, intent becomes an issue that must be

12

resolved by the jury, not a court misapplying principles of law on sununary adjudication.

See Sloan v. Standard Oil Co., 177 Ohio St. 149, 153, 203 N.E.2d 237, 240 (Ohio 1964).

It is well-settled law that the parties' intentions when setting an open price term, as well

as the reasonableness of an open price term, are questions for the trier of fact. See TCP

Indus., Inc. v. Uniroyal, Inc., 661 F.2d 542, 548 (6th Cir. 1981).

Numerous courts have ruled in accord with TCP, holding that only a jury may

resolve good faith. See Alan's ofAtlanta, Inc. v. Minolta Corp., 903 F.2d 1414, 1425-26

(11th Cir. 1990) (issues of good faith are credibility issues not appropriate for summary

judgment); Cason v. Texaco, Inc., 621 F. Supp. 1518, 1521 (M.D. La. 1985) (good faith

requires a factual inquiry); Vermont Morgan Corp. v. Ringer Enter., Inc., 92 A.D.2d

1020, 1021 (N.Y. App. Div. 1983) (reasonableness and course of dealings between

retailer and supplier are fact issues because the supplier has superior access to the facts

on which the prices are based); Fort Knox Nat'l Bank v. Gufstafson, 385 S.W.2d 196, 200

(Kent. App. 1964) (good faith issues go to a jury if a claimant presents more than a

scintilla of evidence). This rule is especially applicable when, as here, there are

allegations of double-charging and intent to drive dealers out of business. Allapattah

Serv., Inc. v. Exxon Corp., 61 F. Supp. 2d 1300, 1307 (S.D. Fla. 1999).

5. Conunon Sense Must Prevail

The uncontroverted summary judgment evidence in the court below established

that Shell intended to eliminate its dealers. The evidence demonstrated that Shell

intended to accomplish this scheme through its control over Appellants' wholesale

gasoline price and attendant profit margin. The evidence confinned that Shell was

successful - almost no independent Shell lessee-dealers remain in the Cleveland area.

13

With this evidence - and against a standard requiring "good faith" - it should

have been a simple matter to deny Shell's motion for summary judgment and give this

case to a jury. Common sense dictates that an underhanded attempt to push one's

contractual partner out of business is not within the plain and ordinary meaning of "good

faith."

As one court stated, "Good faith or basic honesty is the very antithesis of

attempting to circumvent a legal obligation through a technicality of the law." In re

Davis, 68 B.R. 205, 217 (Bankr. S.D. Ohio 1986). Yet, this is what happened in the court

below. Shell and the trial court created a "technicality" by misapplying Ohio law and

sanctifying Shell's intentional elimination of its lessee-dealers - a circumvention of the

PMPA and violation of U.C.C. § 2-305. In its haste to dispose of Appellants, the Court

of Appeals placed its imprimatur on the trial court's opinion, and published an opinion

which misconstrues the U.C.C. and stands at odds with this Court's opinion in Master

Chemical Company v. Inkrott, 55 Ohio St. 3d 23, 563 N.E. 2d 26 (Ohio 1990).4

C. Master Chemical, Tom-Lin and the Court ofAppeals' Opinion

As set forth above, this case requires a very simple analysis - the application of

the statute's plain language against the evidence compels a jury trial for Appellants rather

than summary adjudication for Shell. The lower courts, however, relied upon the Sixth

° To add insult to injury, the Court of Appeals offered a second ground for grantingsummary judgment as to certain plaintiffs in this case. Simply ignoring the lawsupporting Plaintiff's position, the Court of Appeals argued that the statute of limitationshad run as to the minority plaintiffs' claims. In the event this Court overturns the Court ofAppeals' decision, Appellants ask it to apply its decision to all Plaintiffs, and in doing soto reconsider the Court of Appeals' granting of sununary judgment on limitation grounds.In any event, nowhere was Shell's discriminatory pricing scheme more apparent than onthe minority East Side dealers.

14

Circuit's misconstruction of Ohio law in Tom-Lin Enters. Inc., et al v. Sunoco, Inc. 349

F.3d 277 (6th Cir. 2003). The Court of Appeals' misplaced reliance on a federal court's

Erie guess of Ohio law is particularly appalling. As set forth below, the Tom-Lin

decision rested completely upon a mistaken interpretation of this Court's opinion in

Master Chemical. However, rather than independently evaluating Master Chemical and

applying it to the facts of this case, the lower courts appear to have relied upon the Sixth

Circuit, rather than this Court, as correctly stating Ohio law.

hi Tom-Lin, a group of Sunoco dealers brought suit against their supplier alleging,

inter alia, breach of open price term contract. The Tom-Lin court correctly noted that

Ohio had defined good faith as follows: "In non-merchant transactions `good faith'

generally means `honesty in fact in the conduct or transactions concerned."' OHio REv.

CODE ANrr. 1301.01(S) (West 2008). The Tom Lin court went on to note language from

the Ohio Supreme Court, which states "honesty in fact does not exist when the actions at

issue are commercially unjustifiable." Master Chemical, 55 Ohio St. 3d at 28, 563

N.E.2d at 31.

Yet, after correctly defining the standard and citing the appropriate authority, both

the Tom-Lin court and the trial court in this case wrongly applied it, holding that the

Master Chemical court's "commercially unjustifiable" language alone determines "bad

faith," pursuant to an objective test. See Tom-Lin, 349 F.3d at 281-82. It appears that the

opinions of the lowers courts in this case and the Sixth Circuit in Tom Lin are rooted in a

twisted and incorrect reading of Master Chemical. That case, contrary to the Sixth Circuit

and the Court of Appeals' interpretation, stands for a heightened standard - an objective

and subjective standard, regarding good faith under Ohio law. In other words, this Court

15

held that even where a party acts subjectively with honesty in fact, it can nevertheless be

liable under an objective standard. Both subjective honesty and objective justifiability

must be met to satisfy good faith.

In Master Chemical, an individual named Inkrott embezzled a total of $ 1,415,000

from Master Chemical Corp. Inkrott was a fiduciary of Master Chemical and had the

authority to conduct the transactions in question. The issue was whether or not the bank

acted in good faith by following Mr. Inkrott's instructions without making any fiirther

inquiry of Master Chemical Corp. This Court noted that good faith is defined in R.C.

1339.03 (e) as "an act when it is in fact done honestly." Master Chemical, 55 Ohio St.3d

at 28, 563 N.E.2d at 31. "This is virtually identical to the U.C.C. § 1-201 (19) definition

of good faith: honesty in fact in the conduct or transaction concerned." Id.

Under the facts of Master Chemical, no suggestion or allegation arose that the

bank had any knowledge of the dishonesty of the transaction or acted with any improper

motive. The Ohio Supreme Court initially noted that, "bad faith has ... been defined as

`that which imports a dishonest purpose and implies wrong-doing or some motive of self-

interest."' Id., citing Smith v. Halvorsen, 273 N.W. 2d 146, 151 (S.D. 1978). Finding that

bad faith in its most blatant form did not exist, the Court looked beyond that obvious

meaning of bad faith and asked whether it was "commercially unjustifiable" for the payee

to disregard and refuse to learn facts readily available. Id.

This standard did not negate any inquiry into any motive of self-interest or

dishonest purpose by the bank. Instead, it added a second tier to the inquiry - even where

there is no actual knowledge, no dishonest purpose and no motive of self-interest, there

may still be bad faith if the actions of the bank were "commercially unjustifiable." In

16

other words, the Master Chemical decision broadened the definition of "bad faith." It

clearly recognized that dishonest purpose, wrongdoing or some motive of self-interest

would constitute bad faith. However, it also extended the definition of bad faith to

include circumstances where there is no actual knowledge, no subjective bad faith, and

no improper motive to include situations where the actions of a bank are nevertheless

commercially unjustifiable.

The decisions of the Tom Lin court and the Court of Appeals' in this case turn

Master Chemical on its head - rather than recognizing the two grounds in which a bank

(or seller) may exercise "bad faith," the Tom Lin court and Court of Appeals replaced the

subjective inquiry with a mere objective one, one turning on "commercial justifiability."

Under this reasoning, a bank (or a seller) could have an evil intent - a motive connoting

dishonesty or self-interest or the like - but because its actions were objectiviely

commerically justifiable, it remains beyond reproach by the courts and beyond redress by

a claimant.

The Court of Appeals here compounded the Tom Lin court's misapplication of

law by agreeing with its dead-wrong and purely result-oriented analysis. Importantly, the

Court of Appeals based its opinion on the erroneous conclusion - the same erroneous

conclusion drawn in Tom Lin - that no subjective test applied to determine whether there

was a breach under R.C. 1301.01(2). Wrote the Court of Appeals here, "The Ohio

Supreme Court has also adopted an objective test for `good faith."' (Appx. at 24.) In

fact, the Court of Appeals' reliance on a purely objective standard is the sole basis for its

opinion.

17

This case is a prime example of an unjust result reached by such reasoning.

Herein, Shell intended to - and did - push its dealers out of business, reclaiming their

stations in circumvention of federal law. It did not matter than 60% of Appellants'

competition had a lower cost basis for wholesale gasoline, nor did it matter that

Appellants' chief competitor, BP, did not retail its fuel through the dealer channel (BP

operated only company stores in Cleveland). Notwithstanding these facts, Shell still

claimed that its wholesale price was within the theoretical range of prices charged by its

competitors. Therefore, Shell argued, its price was commercially reasonable and its

intent to push Appellants out of business was of no consequence. Stripped of their ability

to demonstrate that they were the victims of Shell's evil intent, Appellants' claims failed.

However, had any of the lower courts recognized that a subjective standard also applied

to Appellants' claims, their claims would have been submitted to a jury.

Unfortunately, the Sixth Circuit's mistake in Tom-Lin spawned a ripple effect

causing the Court of Appeals' confusion in this case. That confusion is underscored by

one of the dissenting judges who stated that Tom-Lin "should be abandoned as precedent

in this area of the law." (Appx. at 53.) This Court should disavow Torn-Lin and should

re-assert and clarify its opinion in Master Chemical, requiring both an objective and

subjective analysis when determining good faith under the U.C.C.

D. Shell's Argument is Misleading and Designed to Confuse the Issue

1 . The Le¢islative History Does Not Sunuort A Purely Objective Standard

The surest sign of the weakness of Shell's reading is that, during its jurisdictional

opposition, Shell was not content to urge the Court to rely on the language of a comment

in preference to the language of the relevant statute. Rather, Shell attempted to lead the

18

Court even further from the statute, arguing the Court should look past the plain language

of the comment to the legislative history of the connnent.5 There is no need for this

Court to abandon traditional canons of statutory interpretation.

In any event, the legislative history provides no support for Shell's position, even

assuming it were proper to rely on it to contradict the language both of the statute and the

comment. First, Shell substantially misstates the substance of the legislative history.

What Shell reports as quotations reflecting concepts that the "drafters" "recognized" and

"specifically noted" are nothing of the sort. Rather, the quotations are excerpts from a

brief speech by Bernard Broeker at a January 28, 1951 meeting of the Editorial Board of

the UCC, late in the decade-long process to draft Article 2. Mr. Broeker, however, was

not one of the drafters of Article 2 - that task fell for the most part to Karl Llewellyn

and his wife Soia Mentschikoff.6 Nor was Mr. Broeker a member of the Enlarged

Editorial Board that was considering the UCC at the time. See Hearing Before the

Enlarged Editorial Board January 27-29, 1951, 6 BUs. LAw. 164 (1951) ("UCC

Hearing") (reporting members of that board). Rather, he was merely a spectator,

apparently present in his capacity as a member of an ABA committee. See UCC

Hearing, 6 Bus. LAw. at 167 (mentioning him in a lengthy list of those present at the

meeting in question).

Further, turning to Mr. Broeker's comments, they are not nearly so favorable to

Shell's practices as Shell suggests. Mr. Broeker's basic concern is the obvious one that

5 Appellants note that the Ohio Legislature never adopted the UCC comments intoOhio law. See Laws of Ohio 129 v. S 5 (Effective 7-1-1962). By extension, Appellantsuestion the relevance of Shell's "safe harbor" argument in Ohio.

See, e.g., Larry T. Garvin, Credit, Information, and Trust in the Law of Sales: TheCredit Seller's Right of Reclamation, 44 UCLA L. REv. 247, 249 n.9 (1996).

19

courts would be called upon to determine whether a given price was "reasonable."' But

Shell, so focused on the implications of the legislative history of the comment, omits

mention of the relevant legislative history of the statute itsel£ Shell does not inform the

Court that the draflers' principal reaction to that concern was to revise the statutory text,

altering the standard from one that required a "reasonable price" (the language of the

draft then under consideration, see UCCHearing, 6 Bus. LAw. at 185) to "good faith," as

it was in the subsequent draft (and in all later versions to the present date).$ Thus, Shell's

view that the comment was designed to exempt it from traditional good-faith

requirements directly conflicts with the drafting history of the statute, which in fact

evidences the drafters' considered decision to impose a good-faith requirement in

response to the very concerns upon which Shell relies.

In any event, that concern is not implicated here in any way, since proof of Shell's

cost structure is not directly relevant to the Dealers' claim. As discussed above, their

claim does not turn on the level of Shell's prices (although that level certainly is

relevant). Rather, it turns on the reasons why Shell chose to charge unusually high prices

to Appellants. Thus, in resolving this case, the Court need not consider the relation

7 He explained: "[T]hat gets you into the rate of return of profit, whether you areusing borrowed money, and all those questions." UCC Hearing, 6 Bus. LAW. at 186.8 The UCC Hearing that Shell cites provides only a snippet of the relevant material.To see the entire section and how it changed at this time, compare Uniform CommercialCode: Proposed Final Draft, Text and Comments Edition § 2-305(2) (May 1950),reprinted in 10 UNIFORM CoNtMERCtAL CoDE DRAFTs 239-40 (E. Kelly comp. 1984) ("Aprice to be fixed by the seller or by the buyer means a reasonable price for him to fix andhe has the burden of establishing its reasonableness."), with Uniform Commercial Code:Proposed Final Draft No. 2, Text Edition § 2-305(2) (Spring 1951), reprinted in 12UNIFORM COMMERCIAL CoDE DRAFTs 55-56 (E. Kelly comp. 1984) ("A price to be fixedby the seller or by the buyer means a price for him to fix in good faith.").

20

between the various costs that Shell incurs in producing and distributing gasoline and the

price it charges Appellants.

The response of the drafters to Mr. Broerker's concem demonstrates they did not

entirely accept the views articulated by him. For example, Mr. Llewellyn, the principal

drafter, immediately rejected his view: "I don't agree with Mr. Broeker's interpretation

of the language as it stands." UCC Hearing, 6 Bus. LAw. at 186. More specifically, Mr.

Broeker offered two solutions to the problem he identified. The first would have

explicitly eliminated price-in-effect cases from the statutory reasonableness/good faith

requirement; the second would have stated that the seller would satisfy its burden by

showing "that he has not singled out the particular other party for discrimination," UCC

Hearing, 6 Bus. LAW. at 186. The summary of the meeting indicates the Reporters

"approved" those suggestions "in principle," but that "the Reporters wished to revise the

specific language suggested." UCC Hearing, 6 Bus. LAW. at 186.

The problem for Shell, however, is that the Reporters' revisions were directed at

precisely Shell's point of interest. As an outsider, Mr. Broeker thought it might be

plausible to respond to concerns about the vagueness of a "reasonableness" standard by

suggesting unlimited discretion. The Reporters, on the other hand, drafted and obtained

enactment for a statute that included an express good-faith requirement, with comments

confimiing their view that sellers in all contexts should be subject to some supervision of

21

their discretion.9 It is clear the Reporters never would have approved a solution that did

not constrain the sellers' discretion in a substantial way. See Uniform Commercial Code

§ 2-305 comment 3 (1949 version), reprinted in 6 UNIFORM COIvIMERCIAL CODE DRAFTS

86-88 (E. Kelly comp. 1984) (explaining that the basic purpose of an earlier version of

Section 2-305 was to reject "[t]he uncommercial idea that an agreement that the seller

may fix the price means that he may fix any price he may wish").

2. The "Floodeates" of Litigation is a Fallacy

Shell also argued in its jurisdictional opposition that to acknowledge the

subjective analysis in a U.C.C. good faith claim would open the floodgates of litigation.

This is clearly fallacious. As set forth above, a subjective inquiry has been the legal

standard all along. Not until Tom-Lin sufficiently confused the issue has any court

questioned the propriety of a subjective analysis in determining whether good faith exists

in merchant or banking transactions.

Although a subjective standard has clearly applied in Ohio (and elsewhere), there

is no pandemic of good faith litigation swamping the courts and sweeping Ohio. Rather,

only the abnormal and egregious cases go to litigation. This is one. Fortunately, there

are not many organizations that engage in underhanded attempts to force their contractual

partners out of business.

9 The revisions to the comment are apparent from the difference between Comment3 in the May 1950 Uniform Connnercial Code Proposed Final Draft, Text and Comments

Edition, reprinted in 10 UNIFORM CO1vIMERCIAL CODB DRAFTs 240 (E. Kelly comp.1984), and Comment 3 as it appears in the 1952 promulgation of the Uniform

Commercial Code: Official Draft (Text and Comments Edition), reprinted in 14UNIFORM COMMERCIAL CODE DRAFrS 114 (E. Kelly comp. 1984).

22

CONCLUSION

The Court of Appeals' elaborate legal opinion betrays its result-oriented juridical

nature. It overwrites the plain language of the statute, and overrules the binding

precedent of this Court. It advertises Ohio as a safe haven for embezzlers and greedy

merchants alike. It flies in the face of common sense. This case should be decided on its

merits, not fit to a pre-ordained result.

Appellants herein have endured nearly a decade of litigation, lost their businesses,

and been denied justice. This Court should not countenance Shell's underhanded attempt

to push Appellants out of business. This Court cannot tolerate such a flagrant disregard

of the legislature's intent. Nor should this Court countenance such a perversion of its

binding precedent.

For the reasons set forth herein, this Court must reverse the decision below. A

reversal will effect legislative intent and restore coherence to the good faith standard

applicable not only to the businessmen herein, but also to the many banks and small

businesses throughout Ohio.

Respectfully submitted,

SEAN KELLY^UNSEL OF RECOR,^1)

Bernard GoldfAnthony E. FarahATTORNEYS FOR PLAINTIFFS-APPELLANTS

23

CERTIFICATE OF SERVICE

A copy of the foregoing Merit Brief of Appellants Donald J. Casserlie, et al. has

been served, via U.S. Certified mail, postage prepaid, this ^Z day ofCYAN1t'i4 &V , 2008, upon:

Thomas R. Lucchesi, Esq.Lora M. Reece, EsqBaker & Hostetler, LLP1900 East 9th Street, Suite 3200Cleveland, Ohio 44114-3485

J Michael Baldwin, Esq.BAKER BOTTS LLP910 LouisianaHouston,Texas77002-4995

Ms. Patty LydenLYDEN OIL COMPANY5565 Airport HighwayToledo, Ohio 43615

24

APPENDIX

IN THE SUPREME COURT OF OHIO

DONAI.D J. CASSERLIE, et al.,

Appellants,

vs.

SHELL OIL COMPANY, et al.Appellees.

0^ w` 1408

On Appeal from the CuyahogaCounty Court of AppealsEighth Appellate District

Court of AppealsCase No. CA-06-088361

NOTICE OF APPEAL OF APPELI.ANTS DONALD J. CASSERLIE, et al.

ROBERT E. SWEENEY CO., L.P.A.Sean S. Kelly (#0075442) (COUNSELOF RECORD)Bernard Goldfarb (#0007719)Suite 1500Illuminating Building55 Public SquareCleveland, Ohio 44113Tel. 216-696-0606Fax. 216-696-0732

THE O'QUINN LAW FIRMAnthony E. FarahTex. Bar No. 24007172N.Y. Registration No. 44887892300 Lyric Centre440 LouisianaT-Iouston, Texas 77002Tel. 713-223-1000Fax. 713-222-6903

COUNSEL FOR PLAINTIFFS-APPELLANTS

BAKER & HOSTETLER, LLPThomas R. Lucchesi, Esq.3ohn Heffernan, Esq1900 East 9th Street, Suite 3200C7eveland, Ohio 44114-3485

BAKER BOTTS LLP3. Michael Baldwin, Esq.910 LouisianaHouston, Texas 77002-4995

COUNSEL FOR DEFENDANTS-APPELLEES

AUG 0 1 z0D7

CLERK OF COURTSUPREME COURT OF OHIO

1

Notice of Appeal of Appellant Donald.J. Casserlic, et al.

Appeiltints, Donald J. Casserlie, et a]., hereby give notice of appeal to the

Supreme Court of Ohio from the judgment of the Cuyahoga County Court of Appeals,

Eighth Appellate District entered in Court of Appeals case No. CA-06-088361 on June

22,2007.

This case is one of public or great general interest.

Respectfully submitted,

ard oldfarAnthony E. FarahATTORNEYS FO4^PLAINTIFFS-APPELLANTS ''

2

CERTTFICATE OF SERVICE

A copy of the foregoing Notice of Appeal has been served, via regular U.S. mail,postage prepaid, this 4ri day of 2007, upon:

Thomas R. l..ucchesi, Esq. 3John Heffernan, EsqBaker & Hostetler, LLP1900 East 9th Street, Suite 3200Cleveland, Ohio 44114-3485

J Michael Baldwin, Esq.BAKER BOTTS LLP910 LouisianaHouston, Texas 77002-4995

Ms. Patty LydenLYDEN OIL COMPANY5565 Aiiport HighwayToledo, Ohio 43615

2

3

STATE OF OHIO )) SS:

CUYAI-YOGA COUNTY )

DONALD J. CASSERLIE, et al.,

Plaintiffs,

vs.

SHELL OIL COMPANY, et. al.,

Defendants.

IN THE COURT OF COMMON PLEAS

CASE NO. CV 390222

JOURNAL ENTRYAND OPIIVION

Timothy P. McConnick, J.:

This matter is before the Court upon the motion of De^endants Shell Oil

Company, Equilon Enterprises LLC, and True North Energy, c. for Summary

Judgment in their favor on Plaintiff' s bad-faith pricing claims

Defendants have filed a multi-count complaint against defendants seeking to

recover based upon their contractual relationship with defendants. This court bifurcated

the proceeding and presently pending is defendants' motion for partial summary

judgment as to the alleged unfair pricing claims. As will be discussed below,

defendants' motion for summary judgment is well-founded and the Court grants partial

summary judgment as to these claims.

The Plaintiffs

In the original complaint, Plaintiffs sought relief against defendants on the

theory that defendants set the open price term for gas in order to drive them out of

business so that defendant could then convert the operations to company-owned

VO13310 P00306 4

I

facilitiGs., These original plaintiffs, for the most part, leased these facilities from

defendants. These plaintiffs are referred to as "lessee-dealers." Within the original

group of plaintiffs, five of the plaintiffs own their own facilities, but purchased their

gasoline from defendants through a supply agreement. For purposes of this analysis,

however, the legal principles under which the pricing claims are addressed are not

differertt. These plaintiffs will be collectively referred to as the Original Complaint

(OC) plaintiffs.

In a third amended complaint, eleven additional plaintiffs were added to the

lawsuit. These new-party plaintiffs alleged that defendants charged them a higher price

for gasoline due to their race. This group of plaintiffs will be referred to as Third

Amended Complaint (TAC) plaintiffs.

The DeFendants

Defendant Shell sold gasoline to plaintiffs from 1995 through 1997. Thereafter,

defendant Equilon Enterprises, a tirnited liability company formed by defendants Shell

and Texaco Inc., assumed this contractual responsibility.

In November 1999, defendant True North Energy, an entity formed by

defendants Equilon and the Lyden Company, became the distributor of Shell-branded

gasoline.

Statute of Limitations

In the third amended complaint, the TAC plaintiffs were added to the lawsuit..

Their claims were identical to the claims set forth in the original pleading, except in one

respect. The TAC plaintiffs alleged in addition that they were charged a higher DTW

price based upon their race and the location of their stations in the inner city of

Cleveland and East Cleveland.5

Defendants answered the complaint, denying the allegations of liability and set

forth thie affirmative defense of the statute of limitations. Defendants argue that thc

claims get forth in the third amended complaint May 10, 2002 do not relate back to the

date of Ithe filing of the original complaint (August 25, 1999). Additionally, defendants

argue that the applicable limitation on actions is four years as opposed to fifteen years.

With respect to the relation back of the claims of the TAC plaintiffs, defendants

are correct. An amended pleading may relate back to the date of the filing of the

original complaint under Civil Rule 15(C) if "through mistaken identity or misnomer"

an action has been filed by, or against, the wrong party. Littleton v. Good Samaritan

Hospital & Health Center (1988), 39 Ohio St.3d 86.

This is not the situation in the present case. A review of the third amended

complaint reveals that the TAC plaintiffs were aware of the nature of their claims and

the identity of the potential defendants as far back as 1994. Therefore, Rule 15(C) of

the Ohio Rules of Civil Procedure is of no avail to the TAC plaintiffs and their price

discrimination claims are deemed filed as of the date of the filing of the third amended

complaint, to wit-May 10, 2002.

Defendants farther assert that a four-year statute of limitations applies to these

claims. Under RC 1302.98(A), an action for breach of contract for the sale of goods

must be commenced within four years after the cause of action has accraed. According

to defendants, a four-year limitation period would bar any claims arising from events

occurring prior to May 10, 1998.

The TAC plaintiffs assert that the fifteen-year statute of limitations provided by

RC 2305.06 should apply. Specifically, plaintiffs alleged that the contracts with

VO13310 P00308 3 6

defend Ints do not solely concern the sale of goods, but instead are "for operation of

automobile service stations and associated facilities."

The test for deterniining "the inclusion in or exclusion from sales provisions [of

RC §1302] is whether the predominant factor and purpose of the contract is the

rendition of service, with goods incidentally involved, or whether the contract is for the

sale of goods, with labor incidentally involved." Allied Industrial Service Corp. v.

Kasle Iron & Metals, Inc. (Ohio App. 6 Dist., 1977), 62 Ohio App.2d 144, 147.

Applying this test to the price discrimination claims, it is clear that the sale of

gasoline pursuant to the Dealer Agreements, and in particular paragraph eight of that

agreement, is the predominant factor giving rise to the relationship of the parties.

Although other obligations flow from the various agreements between the parties, the

critical factor giving rise to this relationship, as well as the price discrimination claims,

is the sale of defendants' gasoline products. Therefore, the four-year statute of

limitations governs these claims.

To the extent the new-party plaintiffs seek relief for claims arising prior to May

10, 1998, such claims are barred by the affirmative defense of statute of limitations.

The four-year statute of limitations also applies to the OC plaintiffs' claims, thus

barring claims arising from events that occurred prior to August 25, 1995.

Unfair Pricing Claim as to the Original Complaint Plaintiffs

The gist of the unfair pricing claims brought by the OC plaintiffs against the

various defendants arises from the difference in price defendants charged for gasoline

sold to wholesale distributors, known as "jobbers," as opposed to lessee-dealers.

7

Jobbers are independently owned oil companies that own and develop their own

service stations. Jobbers operate their own fleet of trucks and pick up and deliver their

own gasoline. Defendants sell Jobbers gasoline at the posted "rack price." On the other

hand, l issee-dealers receive their gasoline at their service stations delivered by

defendants. The pricing system charged to lessee-dealers is known in the industry as

Dealer Tank Wagon (DTW) pricing system.

The OC plaintiffs contend that the DTW price charged by defendants when

compared to the rack price charged jobbers was not set in good faith in violation of RC

1302.18. The OC plaintiffs further contend that defendants were motivated to drive

them out of business so that defendants could convert these locations to company-

owned facilities.

This exact issue was addressed by the Sixth Circuit Court of Appeals in Tom••

Lin Enterprises, Inc. v. Sunoco, Inc. (US Ct. App. 6' Dist., 2003), 349 F.3d 277, 281.

In that case, various franchisees and open-dealers objected to the dual pricing system

involving DTW pricing and rack pricing. Much like the OC plaintiffs here, the

plaintiffs alleged that the DTW price was set higher than the rack price in a subjectively

bad-faith manner in order to drive them out of business.

In granting defendants summary judgment, the Sixth circuit, holding that the test

of whether a price is set in bad-faith is an objective one, stated: [u]nder Ohio law, to

show that a merchant-seller lacks good faith in fixing a price pursuant to a contract with

an open price term, it must be shown that the price was not fixed in a commercially

reasonable manner and, moreover, that the pricing was commercially unjustifiable.

These are two distinct issues, and both involve an objective analysis of the merchant-

seller's conduct." Id., 281-282.

Therefore, the court in Tom-Lin engaged in an objective analysis as to whether

the DTW price vis-a-vis the rack price was set in a commercially unreasonable manner.

uaL 33 10 POO 3 10 5 8

The co^rt found that it was commcrcially reasonable to have a dual pricing system,

recogn^zing the difference in responsibilities between jobbers and direct-supply dealers.

In order to show that defendants set the open price term in a commercially

unreasonably manner, it must be shown that defendants DTW was not within the range

of its competitors in the market area. Defendants have submitted the affidavit testiniony

of Johtl Umbeck, PhD, which establishes that the DTW price set by defendants was

within ^e range set by its competitors in the relevant market area. Plaintiffs have failed

to rebul this evidence.

As such, defendants' motion for partial summary judgment is granted as to the

OC plaintiffs.

Unfair Pricing Claim as to the Third Amended Complaint Plaintiffs.

As set forth previously, eleven new-party plaintiffs were included in the third

party complaint. The TAC plaintiffs set forth similar claims as the original plaintiffs,

but also brought additional claims that they were charged higher DTW prices, as

compared with other DTW prices, on the basis of race. Specifically, the TAC plaintiffs

alleged that from 1993 to 1999, defendants increased the wholesale prices in their

pricing district, "which encompasse[d] the most racially segregated and poorest

neighborhoods in the east side of Cleveland and East Cleveland." Third Amended

Complaint, 47.

With respect to these claims, defendants have asserted the affinnative defense of

statute of limitations, arguing that any claims that arose four years prior to the filing of

the third amended complaint (May 10, 2002) are time-barred. As previously discussed;

a four-year statute of limitations applies to the TAC plaintiffs' claims, thus, defendants

9are correct in asserting that claims arising prior to May 10, 1998 are time-barred.

iAdditionally, the TAC plaintiffs, in the Third Amended Complaint admit that

the price disparity was temporarily remedied in 1998 through a temporary price

restoration and rebate. Third Amended Complaint, 49. The TAC plaintiffs also admit

that the pricing disparity was pennanently remedied in 1999. Id., 50.

As the TAC plaintiffs have no remainingprice-disparity claims, defendants are

entitled to sununary judgment as to the TAC plaintiffs.

Releases

Defendants have further moved for summary judgment as to the claims of

plaintins S. Daymut, A. Gray, N. Gray, C. Green, E. Peterson, and J. Wise on the basis

that these plaintiffs have released their claims against defendant True North, while A.

Mohanimed released his claims against all defendants.t

This Court previously determined 14 separate releases were valid and dismissed

the bad i -faith pricing claims of those plaintiffs. The operative release language of the

releas6 at issue is the same as that of the dismissed releases, and should likewise

operate to release these plaintiffs' claims against the respective defendants.

The releases at issue provide that the individual plaintiff and True North are

released from "all claims and demands which each has against the other ... arising

directly or indirectly under, out of, or in connection with: (a) each terminated agreement

and relitionship specified above, (b) each terminated agreement between the parties

relating to the operation of the automobile service station or motor fuel dispensing

facility located at [the specific address], and the relationship established under the

1 Plaintiff R. Serraglio voluntarily dismissed his claims without prejudice on October 8, 2004, and thus, isno longer a party to the case.

13 3{ Q PG 0 3`-i 2: 7 10

agreements; or (c) any consignments, sales, or deliveries of branded motor fuels and

other products to Dealer." Defendants' motion, Exh. J. The releases make an exception

for the "claims of Dealer asserted in the matter entitled Casserlie, et al v. Sliell Oil

Compd ny, et. al., pending in the Court of Common Pleas, Cuyahoga County, Ohio ...

that arise exclusively out of the conduct of Shell Oil Company. Id. In contrast,

defendant A. Mohammed released defendants from "all claims and demands" and did

not except any of the claims asserted in the present litigation. Id., Exh. J, Tab 7.

It is well established under Ohio law that a settlement and release agreement is

valid and enforceable contract designed to terminate litigation. Bedinehaus v. Bureau

of Workers' Comnensation (Ohio App. 1 Dist.), 2001 WL 300734, 11. The language of

theseleases at issue is unambiguous and thus, is not open to extrinsic evidence. Shiffrin

v. Forefit City EnteMrises (1992), 64 Ohio St.3d 635. It is clear from the language of

the relelases that plaintiff A. Mohammed released his claims against all defendants, and

plaintif'fs S. Daymut, A. Gray, N. Gray, C. Green, E. Peterson, and J. Wise released

their cl:4ims against defendant True North.

Thus, defendants are entitled to summary judgrrient as to plaintiff A.

Mohatrimed, and defendant True North is entitled to summaryjudgment as to plaintiffs

S. Dayrlnut, A. Gray, N. Gray, C. Green, E. Peterson, and J. Wise.

Supplelnental Authority

The parties have submitted additional briefing on Marcoux v: Shell Oil Prods:

Co LLC, No. 01-11300-RWZ (D.Nlass. Oct. 25, 2004). Although plaintiffs are correbt

11

(

in their interpretation of the Massachusetts District Court decision, it is not the law of

Ohio atid does not govern the action herein.

Conclusion

For the above-stated reasons, the Court finds that defendants Shell Oil

Company, Equilon Enterprises LLC, and True North Energy, Inc. are entitled to the

requested relief. Defendants' Motion for Partial Summary Judgment on plaintiff's bad-

faith pricing claims is granted. Judgment entered in favor of Defendants.

IT IS SO ORDERED.

DATE! Aprilt-! , 2005CCORMICK, JuDSECEIVED FOR FILIN

APR 13 2005

CERTIFICATE OF SERVICE

A copy of the foregoing Ruling on defe dants' Motion for Summat'y Judgment

1 da ri12005 to:of AM il thil U S ps yaar . .has been forwarded by regu

Bernard Goldfarb1500 llluminating Bldg.55 Public Sq.CleveT2nd, Ohio 44113

John O QuinnJohn L i'eachAnthor^y FarahO'Quinn, Laminack & Pirtle2300. Lyric Centre Building440 LouisianaHouston, Texas 77002

J. Michael BaldwinBaker Botts LLP3000 One Shell Plaza910 LouisianaHouston, Texas 77002

Thomas LucchesiJohnHeffernanBaker & Hostetler, LLP3200 National City Center1900 East 9"' StreetCleveland, Ohio 44114

9

(

liiii iifi iiiiC.nSl?cv -99_390222

I IUNAI,I ) J C'ASSIikI,ll•:vs.

SI Ilil.l, OIL (H)MI'ANY-I•^ f AI.

1 SON6

JUIHiIiTIMOIIIY MCC0I2M(('AI:(x)1'1 '_(K' !US'I•ICIiCICNTI•:12I x K'K I•;'I' llAll i: 04/ 1.1.f?005DEFENDANTS' SHELL OIL COMPANY, EQUILONENTERPRISES LLC, AND LLC TRUE NORTH ENERGY'SMOTION FOR PARTIAL SUMMARY JUDGMENT. FILED03/015r2004. IS GRANTED.

BOOK 3310 PAGE 03060314 04113/2005NOTiCE ISSUED

I flrst Cla;s M.ul II U S I'us.taAc I';ud II Cleveland. OH II Permd No 19f? I

---`----- I

1eROM:I ClIYA1LLk)A I:I:IINI'1 -r'f-'IIRT(1FIYIMMON 1'LEAS

I JP:RAI.II li flliflltiI' L'LAAK Of Clll lx'IS

il ISrICP. CYNtRR ..nuuT'111wRN

I l W UNE'ANIU SI

t-LVV4:LAN11, UI I MI11

....... .. . ._...___-.___---.__

TO:BERNARD S GOLDFARB1500 ILLUMINATING BUILDING55 PUBLIC SOUARECLEVELAND, OH 44113

13

Ju1d22 2007

^ou^^^ ^^^ AV^^ubi of 0GIC. F1.Tl=I APPlLLA'1'I:. DISI'IZICI'

COUNTY OlFCIJ YA I IOGA

JOURNAL ENTRY AND OPINIONNo. 883G].

DONALD J. CASSERLIE, ET AL.

PLAINTIFFS-APPELLANTS

vs.

SHELL OIL COMPANY, ET AL.

DEFENDANTS-APPELLEES

JUDGMENT:AFFIRMED

Civil Appeal from theCuyahoga County Court of Common Pleas

Case No. CV-390222

BEFORE: Cooney, J., Celebrezze, A.J., and B)ackmon, J.

1Z.CLEASED: May 31, 2007

JOU1tNAALI%ED: JUN 2 2'2007

CA06088361 46128699

11111111111111111111111111111111111111111111111111

14Yq10637 PG0700

-1-

n'.I"I'O ItNEYS ]?OIt AI'I'19LLAN'I'S

I;ci narcl S. Goldfarb

Liobcrl, I. Swccanc:y Co., L.P.A.

55 Public Square, Suite 1500Cleveland, Ohio 441.1.3

Pro I-Iac Vice:

John M. O'QuinnAnthony E. FarahJohn R. Leach, IIIThe O'Quinn Law Firm2300 Lyric Centre440 LouisianaHouston, Texas 77002

Robert L. Steinberg1330 Post Oak Blvd., Suite 2801Houston, Texas 77002

ATTORNEYS FOR APPELLEES

For Shell Oil Company:

Thomas R. LucchesiLora M. ReeceBaker & Hostetler, L.L.P.1900 East Ninth Street, Suite 3200Cleveland, Ohio 44114-3485

John M. HeffernanJanik & Dorman, L.L.P.9200 South Hills Blvd., Suite 300Cleveland, Ohio 44147-3521

(Continued on next page)

`lgL0637 P0070 1 15

1'ro i(ac Vice:

NIic:Ii:AC1 J. I;;ilclwin

lia lccr Botts, 1... L.1'.3000 Onc Shell Plra•r..a910 Louisiana

Houston, Texas 77002-4995

For Lyden Oil Cotnpany:

Patty Lydenc/o Lyden Oil Company5565 Airport HighwayToledo, Ohio 43015

FILED AND J0URNALIZEDPER APP. R. 22(E)

dUN 2 2 2007ALD E. FUERST

CLER 7HECOU OFAPPEALSBY DaP.

APdYOUIdCEB4Eid'r OF DECf6IOPiPERAPP. R. 22(B), 221D) AND 26(A)

RECEIVED

MAY 3 1 2007

QERALD H.pUERBT

C 0 TH RT OF APPEALSCA06088361 45698376 DM

I11111111tII IIIII11111111111111111111111111111IIIIN.B. This entry is an announcement of the court's decision. See App.R. 22(B), 22(D)and 26(A); Loc.App.R. 22. This decision will be journalized and will become thejudgment and order of the court pursuant to App.R. 22(R) unless a motion forreconsideration with supporting brief, per App.R. 26(A), is filed within ten (10) days ofthe announc:ement of the court's decision. The time period for review by the SupremeCourt of Ohio >;h^t11 begin to rttn upon the journalization of this court's announcementof decision by the clerk per App.R. 22(E). See, also, S.Ct. Prac.R. 11, Section 2(A)(1).

V"637 P,G0702 16

QO1.;Ll!;E,N CONWAY CUbIV]:Y, J.:

1.'laitil:il7a-apliellants, 0onald (7asserlie, et al., appeal l:hc trial cunrt.'s

dc;cisioixgr<tntiul sw^ituaryjudf inent in f cvorot defend,ints aphellecs, Shcll Oil

Company, et al.' 1'inding no merit to the appeal, we affirm.

I. Procedural Background

In 1999, Donald Casserlie and twenty-four other Cleveland-based Shell Oil

Company lessee-dealers (collectively referred to as "dealers") filed suit against

Shell and its partners. The complaint alleged economic duress, false

representation, breach of contractLbad faith, breach of fiduciary duty, and fraud.

In 2002, twelve additional plaintiffs (the "new plaintiffs") were added. In

addition to the allegations set forth by the original plaintiffs, the new plaintiffs

further alleged that they were charged a higher price by Shell for gasoline based

on their race and the urban location of their gas stations.

In 2002, the parties agreed to bifurcate the proceedings and move forward

only on the bad faith claims. The parties also agreed to stay discovery until

those claims had been resolved.

'Dcfendants-aphellees are Shell Oil Company, Equilon Isntcrprises, the Lyden

Company, and'Lrue NorLh Psncrgy. J.n 1997, Sliell and'I'exaco, Ine. formed FquilonEnterprises. ln 1999, Equilon and 1.yden E'ormed'1'rue North Lnergy.

't(1LU637 P,U0703 17

.J.

/1ff,c:r almoet two years of disc:overy, She]I nnovcd for 1a<crl.ial st.unmary

jud;;nwnt ou thc; dcalers' bad f'aith claiin. 'I'lic tririI conrl: f;ranl:cd 5licll's motion

as to all plaintiffs finding that the original plainl.iffs failed to re.but Shell's

evidence of fair pricing and as to the new plaintiffs bec:ause their claims were

barred by the statute of limitations. The trial court also granted summary

judgment to defendant-appellee True North Energy as to the claims of six of the

plaintiffs who had signed releases and for all defendants as to one plaintiff who

had signed a release as to the defendants.

In 2005,.Shell moved for su_mmary,judgment as tothe remaining claims

which the trial court granted. The dealers and new plaintiffs now appeal,

raising six assignments of error.

II. Factual Backeround

Since 1995, Shell, Equilon, and True North Energy have each, at various

times, sold Shell-branded gasoline to the dealers and the new plaintiffs. The

dealers leased their service stations from Shell and agreed to purchase gas only

from Shell at wholesale prices.2 The dealers had an agreement with Shell which

included both a lease for the station and a "dealer agreement," which controlled

the price they paid for gasoline. `l'hat price is referred to as a "Dealer '1`an]c

Z Sonic of the plaintiffs were "opcn-dcalors" wlao ownccl tlrcir slations but had a dcaleragrecincnt will S}Shc to purchasc Shall's gasolinc.

181'M:)637 N00704

;S-

W.-rS an" ("l)'PW") price, which includes both I:he f:uol arxl iLs c.lelivery. 'I'he D'1'W

pricing provision is an °e Suai pricc Lcrrn" governed by statute. Shell's

rc:friLionship wiLh its lessc:c-clealers is also governed by the federal Pat.roleum

Marlceting Practices Act ("PMI.'A"), which regulates the grounds for Lermination

and nonrenewal of petroleum franchise relationships. 15 U.S.C. §§ 2801-2806.

The dealers alleged that Shell's joint venture with True North Energy was

the beginning of the inove away from leasing stations to dealers and toward

company-owned stores that would allow the company to profitably shift from

being a manufacturer to becoming a convenience retailer. The dealers charged

that Shell's actions were intended to drive them out of business so that Shell

could replace them with more profitable company-owned or independently

operated stations. The dealers also alleged that they could not compete with

True North Energy because it often sold gas at retail prices to the public for less

than it sold to them at wholesale.

The new plaintiffs.alleged that Shell sold gas at a higher wholesale price

merely because they were minorities with stations in low income and

predominantly minority neighborhoods.

Il[. Issues On Anneal

The dealers raise six assigninents of error that relate to the court's two

opinions granting summary judt;ment to Sllell.

Vfl1^063 I ^^p lp^ 19

A.

AppcllaCe revic:w of summ:vY J:ulk;menP, is c3 : r:ovo. Grcafton u. Ohi,o Ed ison

Co., 77 Ohiu St.}ir( 102, 105, 1.996-Ohio-3r36, 671 N.h;.2e1 24 1; Zentri.lz U. I,cc Pine

.'L'ru.ch Sales & L'qrcipnnerat (1998), 124 Ohio App.3d 581., 58;"i, 706 N.E.2d 860.

1'he Oliio Supreme Court set forth the appropriate test in Zivich u. Mentor

Soccer Club, 82 Ohio St.3d 367, 369-370, 1998-Ohio-389, 696 N.E.2d 201, as

follows:

"Pursuant to Civ.R. 56, summary judgment is appropriate when (1)there is no genuine issue of material fact, (2) the moving party isentitled to judgment as a matter of law, arid (3) reasonable mindscan come to but one conclusion and that conclusion is adverse toth.e no.nmoving Rartx,.-sa.i_d-party__ being_-entitled to. have theevidence construed most strongly in his favor. Horton v. HarwickChem. Corp., 73 Ohio St.3d 679, 1995-Ohio-286, 653 N.E.2d 1196,paragraph three of the syllabus. The party moving for summaryjudgment bears the burden of showing that there is no genuineissue of material fact and that it is entitled to judgment as amatter of law. Dresher v. Burt, 75 Ohio St.3d 280, 292-293, 1996-Ohio-107, 662 N.E.2d 264, 273-274."

Once the moving party satisfies its burden, the nonmoving party "may not

rest upon the mere allegations or denials of the party's pleadings, but the party's

response, by aff.Iclavit or as otherwise provided in this rule, must set forth

specific facts showing that there is a genuine issue for trial." Civ.R. 56(E);

Mootispa.cu u.1s'chsteira , 76 Ohio St.3d 383, 385, 1996-Ohio-389, 667 N.E.2d 1197.

Doubts are to he resolved in favor of the nonmoving party. Murphy u.

ReynoldsLcr.rg, G`i Ohio St.3d 356, 358-359, 1992-Ohio-95, 604 N.1i7.2d 138.

20µ1O 637 P00706

.A,_Cxorlf?rir.h Pric:ing

I n thc fi rst ..rssiginnent nf a:r'rvr, Llre derrlcr•ti argue t.hrr l: thc trial c:ot.n•t. erred

in granting Shcll's motion for surnrnary judgment as to their claim tha(: Shell

employed bad faith in pricing its gasoline.

R.C. 1.302.18 (U.C.C. § 2-305) allows parties to conclude a contract for sale

even though the price is not settled. This is commonly referred to as "open price

term" and these types of contracts are commonly used in the gasoline industry

because of the fluctuating and volatile pricing of gas.

.. R_C1,.1302.18 ,gpverns open price terms_and states, inpertinent part;

"(A) The parties if they so intend can conclude a contract for sale eventhough the price is not settled. In such a case the price is areasonable price at the time for delivery if:

(1) nothing is said as to price; or

(2) the price is left to be agreed by the parties and they fail toagree; or

(3) the price is to be fixed in terms of some agreed market or otherstandard as set or recorded by a third person or agency and if itis not so set or recorded.

(B) A price to be fixed by the seller or by the buyer means a price forhim to fix in good faith."

As related to the instant case, good faith is defined at R.C. 1301..01(S) as

"lionesty in fact in the conduct or transaction concerned." Good faith is also

clei'inecl by B.C. 1302.01(A)(2), which states that "good faith in the case o[' ir

V1 063 7 P.80707 21

mcrc.liant incans lioiiesP.y in fact and tho observance of reasonable commercial

sCnuclnrcls of' fair cla;iliiih in t.ltc t.r<ccle."

'l.'hc p;irf.ic:s clo not dispute that Shell has the riglit, under the dealcr

agreements to fix the DTW price at which the dealers must buy its gasoline and

that the D'PW price must be set in good faith in accordance with the above

provisions. Instead, the dealers allege that the open price term set forth in their

dealer agreement was set in bad faith, in violation.of Ohio law.

The dealers maintain that Shell violated its duty of good faith by setting

its DTW price too high with the intention of driving the dealers out of business.

Shell argues that it set prices in good faith, and that the DTW price was set to

compete with its major competitor in the Cleveland market, British Petroleum.

To determine the DTW price, Shell states that it utilized "price administration

districts" ("PADs"), which divided the Cleveland market into districts. Shell

claims it monitored the street prices of its competitors within each PAD and

would, as necessary, adjust the DTW price at which it would sell gas to its

dealers.3

'Afler Tnie North Encrgy becamo lhc clisti-ibutor of Shell t;as, the pricing sti-ticturc changed.True North Energy dicl nol einploy lhe use ofPADs in setting its DTW prices. Snstead, Truc North

L" nergy set pric.es bused on the "nick price."

k010 637 Po0708 22

.7.

'l.`he dealers point to t,lie f'ollowint; f:indings from their export report to

suppurt thoir ar};Lunent that Ishc: I)TW price was set in had faith: (1) 1.he 7)TW

price itself, (2) the "captive" nature of the relationship between Sliell and its

franchisces, and (3) the fact that many dealers lost profits and eventuall,y went

out of business.

1. Objective Test

The dealers urge this court to adopt both an objective test and a subjective

test to determine whether Shell acted in good faith in setting the DTW price.

Sh,Qll, maintains that. th court should employ only an objective test that

considers simply whether its DTW price met reasonable commercial standards.

The dealers and Shell cite various cases that support their interpretation of the

law. The dealers urge this court to adopt the objective/subjective distinction

adopted by a few states and federal districts, contrary to Ohio law and to the

Sixth Circuit holding in Tom-Lin Enters. v. Sunoco, Inc. (6th Cir. 2003), 349 F. 3d

277, 278.

The dealers maintain that the law mandates that we consider Shell's

motivation in setting prices, or in other words, consider the manner or intent

behind alleged price differentials. That intent, the dealers argue, was to drive

them out of business. llltliough the decision in 1'om-Lin is not binding oil this

court, it is persuasive, and we cannot ignore its sound ana]ysis. As the Tom-hin

234113 6 37 F0 0709

-S•

cc: urt itol:acl, Ohio courts havc; ulrc.uly spolcon oti the propwr dcfirtition of "good

GtiP.ll" in rcaaf.ioii to t.rans;lct.lons hatween two nurcllanl.s:

°i'lic [applicable] merchant detinition of `ggood 1'cllt.il' 1' A k inc:orporates

thc honost,y in fact clelinition from [R.C.] 1301.01(S) and adds an

additional requirement--`the observance ofreasonable standardsof fair dealing in the trade.' Id: [R.C.] 1.302.01.(A)(2). Thus, under

Ohio law, to show that a nierchant-seller lacks good faith in fixinga price pursuant to a contract with an open price term, it niust beshown that the price was not fixed in a commercially reasonablemanner and, moreover, that the pricing was comrnerciallyunjustifiable. These are two distinct issues, and both involve anobjective analysis of the rnerchant-seller's conduct." Id. at 281.

The Ohio Supreme Court has also adopted an objective test for "good

- -_faith." 1Vlaster Chem-ical Corp. u.bakrott (f990), 55-OliioS£ 3d_23;-563 N:E:-23 2-6;

G.F.D. Enterprises, Inc. v. Nye (1998), 37 Ohio St.3d 205, 525 N.E.2d 10. In

Needham v. Provident Bank (1996); 110 Ohio App.3d 817, 831, 675 N.E.2d 514,

this court adopted an objective test and stated that in order to find that the

seller failed to act in good faith in its dealings, this court must determine

whether any alleged acts were "commercially unjustifiable."

Although we acknowledge that other states have adopted a

objectivelsubjective test, we agree with the Tom-Lin court that it is not within

the provinco of this court to vary from the standard whic}t Ohio courts have

previously established.

Y0 6 37 Po0710 24

_O.

'1'Iirrs, a commercially re-asonable D'PW larice is one within (-.lae range of

ll'l'W pricca claarged by otlrer refinors in tbe iuarlcet and ean be considered a

good Faith price under Olaio law absent some evidencc Lhat Sholl used pricing to

discriminate among its purchasers. 'l.'herefore, for the dealers to show that Shell

acted in bad faith, they must show that the price for gasoline was not fixed in a

commercially reasonable manner and that the pricing was commercially

unjustifiable. Shell will satisfy the good-faith test if its DTW prices are within

the range of the dealer prices of its major competitors.

_The de-alexs_maintain that they are not claiming they were entitled to any

particular DTW price, but that the law forbids Shell to set prices for the

illegitimate purpose of driving them out of business. Because we employ an

objective test, however, we look at the actual price set and not Shell's subjective

intent behind the calculation.

Therefore, to show that a price is commercially unreasonable, the dealers

must "produce background evidence of the manner in which other marketers of

gasoline *** set their prices." See Tom-Lin, supra at 282. Moreover, if the

dealers cannot first show that a price is commercially unreasonable, then they

will not be able to prove that Shell's actions were commercially unjustifiable.

/1lt.hougli not argued in the dealcrs' appellate brief, the gist of their unfair

pricing claims is that Shcll acted in bad faith when it charged them more for its

4.11,O637 f!fiG7I1 25

-L()-

g;asolino Lltan it charL;ecl whwlcs:.ile clis;Lributoi:,;, or °jctbbers." 'I'Irey : Itio allor;e

(.hal.t.hc unf'nir t)ricing arosc fl-om clifTcrcitl.lrricint; for c:ach I'Al),,t irracl.icc 5hc11

admits h.o utiliz.ing.

Jobbers are independenLly-owned oil cotnpanies that own and develop

their own service stations. Shell sells jobbers gasoline aL the posted "rack price,"

as opposed to the DTW price. Part of the discrepancy in the pricing is explained

by the fact that the DTW price includes delivery, whereas the rack price does

not.°

The trial court in the instant case found that this same issue was

addressed in Tom-Lin, supra. In Tom-Lin, the court analyzed whether the DTW

price versus the rack price was set in a commercially unreasonable manner. The

court found that it was commercially reasonable to have a dual pricing system,

and acknowledged the differences between dealers and jobbers. Id. at 285-286.

For the following reasons, we find that the dealers failed to show that the

DTW prices were commercially unreasonable; thus, they cannot show that they

were commercially unjustifiable.

` Jobbers own and operate their own fleet of trucks to makc their own delivcric::.

fbl:Ci b 3 7 PQO 7 1 2 26

-Il.-

2. Reasonable (;nmintercial StrrncJ<crcls

ll'or thc do;alcrs to utcct their Inu-dcn unclcr 1.:102.1.8, thcy must firsl:

prove, with respect to pricing, t:hat. 5hcll violrct.ecl reasonable conunerci::rl

standards of fair dealing in the gasoline marketing industry. See `.I.'oIn-Lin,

supra at 282. This burden requires the dealers to produce evidence of the

manner in which other marketers of gasoline in the Cleveland area set their

prices- See Id. at 282. In other words, the relevant comparison should be the

prices charged by other refiners to their dealers in the relevant market. See

_._Austin .u..._.-Motiua. E'nte.rs.,.._..UC .__._(N_D.-._Ala^ __June 13,,__ 2005)L_No.

2:03-CV-0451-RDP.

The trial court in the instant case found that Shell submitted expert

testimony which established that the DTW prices set by the company were

within the range set by its competitors. The trial court further found that the

dealers' expert failed to rebut Shell's evidence.

The dealers argue that Shell's own evidence established that its DTW price

was not commercially reasonable because Shell's expert's affidavit was

conclusory and based upon suspect data. First, even assuming arguendo that

the affidavit in question was conclusory or based on suspect data, it does not

V10i 6 3 7 PU p 7 1 3 27

-1.2-

f'ollow tho-tt Shr;ll's l)'l'W l:arice was per sc: conunorcially iaaart,:a>:ona ble.' Second,

for sunimmry jucll;nrent purlwsc5, the tloalt:rs may nul. rcst aalaun the mere

allegations or denials of Shell's pleadings, but musl. reItut, t.he evidence Shell

submitted. The dealers contend that they rebutted Shell's evidence with their

own expert evidence.

For the following reasons, we agree with the trial court that the dealers

did not rebut Shell's evidence, even viewing the evidence in a light most

favorable to the dealers.

. .... .... ..AsShelL.states..in.its appellate_-brief, "the-que-stion_is-_notwhether the

actual price charged to [the dealers] on any given day was identical to its

average DTW prices reported in the Lundberg Survey, but instead whether

[Shell's] prices were within the range of its competitors DTW prices."

Rather than provide evidence of the manner in which Shell's competitors

set their prices, the dealers' expert, Stephen Shelton ("Shelton"), argued that he

could find no evidence that Shell considered actual DTW prices from any

competitor in setting its own DTW prices. According to Shelton's affidavit, Shell

failed to "see that the margins provided dealers were adequate to cover

5 Wc find that rcli ancc on the Lundberg Survey cloes not autoroatically roncler Slacll's expert'srcporl eonelusory. "1-he Sixth Circuit has previously reliecl on the Lundberg Survey in analyzingpricing. Clcn* v. BP Oil Co. (6th Cia-. 1998), 137 F.3c1 386. Moreover, thc cJealers cite no authority,other than lheir own axpcrt, to show that the Ltandbarg Survey shoukl not be reliecl on in analyzingDTW prices.

28qU 637 pm 07 1 il

-ts-

[expcnsc.;^ ;rncl m.rlce I>rofii.." 5hclton ;rls;o found Lh;it Shctl's pricin^; was "tnnre

;rhouf. cc;nf.r•nlfint; t.hcir• ric,ilcr-'s t;a;;nlinc rnar;;ins and Lhcroby rnatximizin{;

suhplicr profitahilil:y t.han nurl.clrin, the 1.)'.CW of coml>c:titot-s."

I.n his c.xpert report., Shelton asked many questions and offered few

answers. Although the dealers claimed that PAD pricing was discrirninatory,

Shelton stated that he was not sure whether it was the development of the PADs

or their elimination that was unreasonable. Shelton concluded that dealer

margins were controlled at a level that caused the reduction or elimination of

profit and caused dealers to close.

Shelton's description of the dealers as "captive buyers" required to

purchase Shell-branded gas at Shell's price is not evidence of bad faith. As the

court stated in Shell Oil Co. v. HRN, Inc. (2004), 144 S.W.3d 429, 47 Tex. Sup.

J. 1015 ("HRN"), the lessee-dealers "are only `captive' as a result of their own

choice to become Shell-branded lessee dealers, which involved their agreement

to buy gasoline from Shell at the DTW price, rather than at rack or some other

price. That is the nature of a long-term franchise. Such captivity is therefore the

normal case." Id. at 438.

Shelton's findings are not evidence that Shell acted in bad faith when

fixing its DTW price. The DTW price, the "captive" nature of the franchisee

relationslrip, and the businc;ss losses suffered by the dealers are va rir^t.ions of' Che

V G I o f 6 3 7 GG 0 7 1 5 29

-J.4-

snuie l.lwn o: Shcll':< l.)'I'W l rice wais too 11il;h for the lesscx:•donlers to compete

with ol.licr r;; solinc^ rcl.ailcr^;. H/f.N, supra. '1'lii^ is not. cvidencc of bad faith.

l'hc dc ilcrs :.u-„ue I:I nL t.hls court: should adopt a sul _joctive view of good

faith, but. t.laey fail to focus on what. they claim makes Shell's price commercially

unreasonable.f° In fact, they focused their argument in the trial court entirely

on the alleged conclusory statements of Shell's expert, instead of rebutting

Shell's evidence with evidence that the prices charged by other refiners to their

dealers in the relevant market were lower than what Shell charged. The only

nidence..we. can find in the record of this alleged discrepancy in pricing isp

Shelton's chart outlining the difference, over five random dates, of Shell's

expeit's analysis of pricing compared to their expert's analysis of the same dates.

Similar to the HRN plaintiffs, rather than contest the commercial

reasonableness of Shell's DTW prices, the dealers argue that fact issues exist as

to whether Shell had acted in bad faith by setting its DTW price with the

subjectively improper motive of running dealers out of business.

Therefore, we find the evidence provided by the dealers was insufficient

to raise an issue of fact that Shell's prices were commercially unreasonable.

"I'hc dealers nover .ugucd ihc second prong, that Shell's prices wcrc commorciallyunjustilinblc.

YOlJb3) fr0716 30

.tr,.

'11hus, vc ncccl not exanninc wltcfhur the coinpatty's I)"f'W pric•cs were also

cotntucrc:i;tlly unjttst,ifi;tblt^.

3. '1'hc "Ncw 1'I:.tint:if'fs"

Fi nally, t.he clealers argue that t.he trial court erred in granting suxnmary

judgmcut as i-,o Lhe new plaintiffs named in the tliird amended complaint

because Shell discriminated against these minority lessee-dealers. As will be

discussed in the fourth assignment of error, summary judgment was granted

because the new plaintiffs' claims were time-barred.

Therefore, finding insufficient evidence that Shell set its gasoline prices

in bad faith, we overrule the first assignment of error.

B. Variable Rent Program

In the second assignment of error, the dealers argue that the trial court

erred in granting Shell's motion for summary judgment on their "Variable Rent

Program" claims. They alleged fraudulent inducement, misrepresentation, and

breach of contract based on Shell's VRP program.

The court in E& V Slack, Inc. v. Shell Oil Co. (1998), 969 S.W.2d 565, 567,

provided a thorough description of Shell's Variable Rent Program ("VRP"):

"The VItI' grants reductions in a dealer's monthly rent payment i.f'thedealer's xnonthly gas purchases from Shell exceed a statccli:hreshold volume which is determined anuually for each dealer onan individual basis. The VRP worlcs as follows: once the gasolinepurchase exceeds the thresliold volume, the dealer's contract rc:nt.

^ ^..3YBlUG37 p007 ^ ^ 1

is rcduce(1 hy a ticl: amotmt, I n2l per Rallon for the excess gasolin('..

For cx:ur1l)lc, ifn tlcalcrship sclls 10,000 l;a llons ovcr its t.l resholcl

voltmc:rta rcdt:tion ratcof3 centsa t;allon,the dealcr's moni:hly

rent is reduced by $300. 'I'hc VRP is a voluntar'y prol;rain. 7'hose

dealers who choose not to enter into the program simply pay thecontract rent specit7ed in their Motor Fuel Lease. '1'hc VItP isrenewed annually, although Sliell xnay choose to discontinue theprogram at any tinie."

The dealers claim that Shell manipulated the DTW price to include a

hidden rent charge that was determined by the VRP formula. They further

allege that Shell falsely represented that the VRP program would be a

permanent incentive rebate, thus fraudulently inducing lessee- dealers to join the

program.

We find that, even if these allegations are true, they are barred as a

matter of law by the parol evidence rule and the fact that the dealers could not

have reasonably relied on alleged oral statements made by Shell representatives.

1. Fraudulent Inducement

Generally, courts presume that the intent of the parties to a contract

resides in the language they chose to employ in the agreement. Shifrin u. Forest

City Enterprises, Irtc., 64 Ohio St.3d 635, 638,1992-Ohio-28, 597 N.E.2d 499. If

the contract is unambiguous on its face, courts will not construe the c:ontract's

meaning contrary to its plain terms. Aultmcan Hosp. ilssn. u. Conim.u.rcity Mzd.

Xns. Co. (1989), 4(i Ohio SL.3d 51, 544 N.E.2d 920, syllabus.

N9l()637 0 7 I g 32

1,7-

'I'hc: t,rinr:ipal pi.irposo of the parol evide:nce rule is Lo t) rotects the inter;ril:y

uf wril:l:cn cuntract,s. lsd Sch.ory rC- 5on.s u. Society Nail. 13a.nk, 75 Ohio St..36433,

]996-0hio-1.99, 662 N-A.2cl 1.074. '1'he parol evidence rule, however, does not

preclude a party from presenting extrinsic evidence that he was fraudulently

induced to enter into a written agreement. Galmish u- Cicchini, 90 Ohio St.3d

23, 28, 2000-Ohio-7, 734 N.E.2d 782. Nevertheless, a party may not circumvent

the parol evidence rule by claiming that the fraudulent inducement was a prior

or contemporaneous oral agreement, the terms of which contradict the written

agreement. Id, at 29. An agreement cannot be enforced in preference to a

signed writing that pertains to exactly the same subject matter, yet has different

terms. Id.

Moreover, "a fraudulent inducement case is not made out simply by

alleging that a statement or agreement made prior to the contract is different

from that which now appears in the written contract." Id.; see also American

Seaway Foods u. Knodel (Dec. 20, 1995), Cuyahoga App. No. 68595 (a party may

not prove i'raudulent inducement by citing an oral promise if that promise was

subsequently and expressly disclaimed by the terms of an integrated executed

agreement). Quite to the contrary, attempts to prove such contradictory

assertions is exactly what the rule was designed to prohibit. Galmish, supra at

29, quot.ing, Slianker, Judicial Misuses of Lhe Worr1 1?rxud to 1)e(.'eaL tlte Parol

33^^0637 cr0719

-1f3-

f',viclence Ji.i.ilc and t.hc Statut,o of Frauds (With Sorne C:}x:erti :And Jeers for the

Uhio Su{:^rcme (;ourt,) (t'.i89), 23 Akron L.l.tev. 1, 7.

In thc: instanl: casc:, the initial lease contract between the dealers and Shol I

did not include a variable rent program. The lease stated that the lessee-dealer

must pay the stated contract rent "without deduction." The lease also contained

an integration clause.

The VRP "offer letter" stated that the program would not amend the lease,

could be terminated at Shell's discretion, and that if the VRP program

terminated, the.r_e.nz_as_s_t.atedin:thelease..would apply. _);venthou hgthe VRP

offer letter did not contain an integration clause, parol evidence cannot be

admitted if its effect would be to vary or to contradict the written terms of the

contract. See Aultman Hasp. Assn., supra. There can be no implied promises in

a contract in relation to any matter that is specifically covered by the written

terms of the contract. Jost u. Burr (1990), 69 Ohio App.3d 354, 590 N.E.2d 828,

831, citing Ifachelmacher u. Laird (1915), 92 Ohio St. 324, 110 N.E. 933.

The dealers failed to corroborate any of Shell's alleged promises. Although

they argued that they were barred from conducting full discovery, as alleged in

their sixth assignment of error, they failed to show how additional discovery

would support Cheir claims.

34yyl(163 7 CO0720

.IJ.

'19ic donlc:rs first agrec:d to stay .liscovc ry penclint; l.hc outcome ol'tlio 1>acl

Giit.lt cl..iim. lV1.er the trial cocu-f, 9r.u Lc:cl suminary Jtulginont. as to Llual, clairn,

thcy filod a inot,ion to li(t tlic stay. /\Cter Shell niovocl for surnmary juclgmcnL as

to the remaining claims, Shell filed a cnotion pursuant to Civ.11. 56(F). A review

of that motion and its supporting evidence shows that, even if Shell was able to

discover desired documents, none of the purported documents show that the

dealers were fraudulently induced to enter into the VRP program. In other

words, the dealers never alleged that they could proffer evidence of a

contemporaneous oral agreement that was made in order to induce them to sign

a written contract.

2. Breach of Contract

The dealers also alleged that Shell used the VRP program as a ruse, or

hidden scheme, to collect more rent than provided for in the lease agreements

and, thus, breached its contract with the dealers. To effectuate this scheme, the

dealers alleged that Shell would collect the higher rent by charging higher DTW

prices. The "true rent," they argue, would be higher than the rent stated in the

lease agreement. In other words, they claim that the DTW price they paid for

gas included a hidden rent component.

As noted above, there was no conLractual link lietween Shell's rent and its

DTW prices. 'Phero is no evidence th^ t: nythint; in the dealer agrecment

356 3 7 ^s 0 7 2 1

.20.

controllod or inl.1ueru;ed how SheII calculated its I)'I'W lu-iccS. More-over, the

dcalet•s lcuse ugrcemenL mal:cs no ntenltou of any varistlt c rcnt progrtims or

llow rent would be calculaLod or colloc:tcd. Again, as mentionecl above, the V.ItP

ofl.'er letter was at Shell's disc:rotion and admission into the program did not

amend the lease agreement.

Furthermore, the dealer agreement contained no set formula by which

Shell was required to calculate its DTW price. The DTW price, as discussed

under the first assignment of error, must be 'set in good faith. Even the dealers

_concede tha_t Slrall was required onlytq set the DTW_12rice in good faith, and they

never alleged that Shell promised that its DTW price would be set according to

a particular formula.

The dealers fail to show how Shell could have breached their contracts.

There is no evidence, for instance, that a lessee-dealer who elected to participate

in the VRP program was charged a different DTW price than he would have been

charged had he declined to participate in the program. The evidence shows that

the program was voluntary and discretionary, and did nothing to atnend the

lease agreements. Thus, even assuming Shell used the VRP to introduce a

hidden rent component in the ll'1'W, the dealers were not barmc:d since they

would have paid the samc D'PW whether or not they participated in the VItP

program.

1'9l•U637 C0 0722 36

-21.

'I'herc:fore,, the sec:ond assil;nmenP.of error is uverrulcc.l.

C. "Lxoerionce the t)iffcrena.!'

In the third assignment of error, the ilealors arguc. t.hat the trial court

erred in granLing Shell's motion for summary judgmen.t on their "Experience the

Difference" claims.

"`When two parties have made a contract and have expressed it in a

writing to which they have both assented as the complete and accurate

integration of that contract, evidence, whether parol or otherwise, of antecedent

_uderstandings and negotiations will not be admitted for the purpose of varying

or contradicting the writing."' Layne v: Progressive Preferred Ins. Co., 104 Ohio

St. 3d 509, 2004-Ohio-6597, 820.N.E.2d 867, citing Ed Schory & Sons, supra at

440, quoting 3 Corbin, Corbin on Contracts (1960) 357, Section 573.

The "Experience the Difference" (ETD) program was developed by Shell

as a way to modernize its existing gas stations and transform traditional

automotive repair stations into convenience store stations. If a lessee-dealer

chose to participate in the ETD program, he would most likely pay for the

improvements to the station and Shell would receive a royalty payment for

everything sold in the convenience store. In return, the ETD lessee-dealer would

see an increase in sales volume and profit and also receive a cliscourit to reclucc:

the costs of goods sold in the convenience centers.

37m06 3 7 Pr 0 7 2 3

11s p,irt of P.lic prnt,rani, Shell providcd poi.cntial fr;ancliiticcs a sixl.y-five-

laagc doc:uuwnL, Llic Unifurin l.+'rancllisc Offeriu{; (;i-cul:r ("UVO( ."), Lliat

elisclcrsed all relovant. ccspec;Ls of t.lie ls 1'D program. Frnnc:hisec;5 alsu received a

required Federal '1'rade Commissior warning letter that advised thein to have

the contract reviewed by their lawyer or accountant.

The UFOC included disclosures relating to financing arrangements,

assistance and services to be provided by Shell prior to and during the operation

of the franchise, and rules regarding modification of the ETD agreement.

If_a^te.aler._wished.to_enle_r into_the ETD..agreement with $heIl _he was

required to sign a franchise agreement. The franchise agreement stated that the

franchisee would be an independent contractor and that the franchisee was

solely responsible for setting prices for all merchandise and that the

merchandise had to be purchased from Shell or Shell-approved suppliers. Also,

as part of the agreement, both the franchisee and Shell agreed that Shell would

make no representations as to profit or income.

As part of the franchise agreement, certain stations would be modernized

at either Shell's or the franchisee's cost. If the franchisee chose to pay for the

modernization, Lhe parties entered into a modernization agreement. The

modernization at;reement, provided that the franchisee would liold title to all

v0l 637 t?r0 724 38

.'L;;.

cuuclificatiuns:; ancl Shc;tl would be t;V.cntecl a first, lien socurit;y iriteresl: ua the

ncuclilic;lt.ions.

'1'en ilc:alers brought claims for lraud, frauclulent inducement, and

ccooomic duress related to Shell's Is'.I.'D program. They claimed that Shell

wanted to transform the Cleveland marlcet from traditional automotive service

facilities into modern convenience stores that sell goods instead of perform

automotive repairs. They alleged that many lessee-dealers were told by their

Shell representatives that unless they committed to the ETD modernization

program, Shell would otherwise spend no money to update their stations. They

argued that Shell representatives orally promised that Shell would assist the

lessee-dealers in the procurement of l9w-interest loans and would also grant the

lessee-dealers a security interest in the improvements. This, according to the

dealers, never happened, and many in the Ei TD program were forced to secure

financing from other sources and invest their own savings into converting their

Shell stations.

I

1. Fraudulent Inducement

Similar to the lease agreements, the ETD franchise agreement contained

an integration clause. After a review of the dealers' claims, we find that any

representat,ious that were allegedly auade were directly contradicted by the

integrated written agreemonts.

YY10 6 3/ t?0 0) 2 5 39

The inP.c(;ra f:inn c:lac.tse in i:Iic frtuu:hise at;roenient st.,il:es:

1'his Agrec;iucnL c;ontain all a};reements and cmdersP.andinl;s bctween

franchiscc iuid Shcll nncl covcr the entirc rclat.ionship bc+twcen

the partie5- ***'1.'here are no oral representations, stipulations,

warranties or understandings with, respect to the subject matterof this agrecnient that are not set forth herein. ***`i'o the extentthat the provisions of this Ag.rcernent conflict witli the provisionsof any other agr.eenients between Shell and franchisee, thisagreement shall control and supersede any con(licting provisionsof other agreements. All prior or conteinporaneous promises,representations, agreements or understandings in connectionwith the store are expressly canceled and superseded by thisagreement and shall be of no force and effect."

The UFOC further stated that no representation was being made

regarding profit or income, obtaining management services would be at the

franchisee's expense, and the franchisee was solely obligated to obtain

nierchandise. The UFOC was also silent as to the existence of buying discounts.

With respect to claims made that Shell promised low-interest financing, the

UFOC did not expressly state that Shell would procure financing.

With respect to the claiins regarding the alleged security interest Shell was

to give the dealers for tho improvements they made, the modernization

agreement expressly providecl that if Shell allowed a franchisee to rnodernize his

station, that franchisee was required to grant a security interest to Sholl. 'Phe

modernization agreement also staLed that the francl isee would own and hold

title to the modcrnizat.ion but., in the everit that the franchisa :.igreoment expired

40

l,s,l 1.;6 37 P.8 0 72 6

-,;;.

ur teriniu>:rtcxl for any reasonot.lier Lluur a SlrolI -app rovc:d I:ransfer, the franchisce

woulcl be rcyuirecl to remove any inrl>roveuicnt.s and restore f.he station Lo its

original condition. 'Phc agrcemenL also provided that if the modernization was

noL comploted to Shell's satisfaction, Shell could complete the modernization and

receive full title to and ownership rights in the modernization. 'Phe

modernization agreement also included a standard integration clause similar to

that found in the franchise agreement.

As we stated previously, a party may not circumvent the parol evidence

rule by claiming that the fraudulent inducement was a prior or contemporaneous

oral agreement, the terms of which contradict the written agreement. Galmish,

supra at 29. We find that the trial court correctly granted summary judgment

because the majority of the allegations set forth by the dealers were directly

contradicted by the executed agreements. See Id.; Ed Schory, supra at 440.

The dealers also allege that they were never given the interest in their

modernization as provided for in the agreements. They do not, however, allege

a breach of that contract; thus, we cannot consider the validity of that allegation.

As to the allegation that Shell represented tha t it would help secure financing for

the conversion, we find that the dealers could not have reasonably relied on any

of the alleged representations when considering the terms set forth in the wr. i tt.en

a.rt;reerrrents.

41'YB1i 637 fB0721

.Lh.

'.l'heroforc, wo find that I:he intef,ral:ion clause in t.hc: franchise and

modernization ttl;rcc:mcttt bars t,lic ac:knowledgmenL,of any ot.hcr;tl;reemetit,, oral

or otherwise, I:haL allegedly exisLecl.

2. Economic lluress

To show economic duress, a plaintiff must show: (1) that one side

involuntarily accepted the terms of another; (2) that circumstances permitted no

other alternative; and (3) that said circumstances were the result of coercive acts

of the opposite party. Blodgett u. Blodgett (1990), 49 Ohio St.3d 243, 551 N.E.2d

1249 citin Urban.Plum bing & Heatan Co. u. United States (U.S. Ct. of Claims-.__ _._.._^

1969), 408 F.2d 382, 389-390, quoting Fruhauf Southwest Garment Co. u. United

States (U.S. Ct. of Claims, 1953), 111 F. Supp. 945, 951.

Generally, a threat to do what one is legally entitled to does not constitute

duress. See Maust u. Bank One Columbus. NA. (1992), 83 Ohio App.3d 103, 108,

6149 N.E.2d 765. A person who claims to have been a victim of economic duress

must show that he was subjected to "* * * a wrongful or unlawful act or threat,

* *.*" and that it "* * * deprive[d] the victim of his unfettered will." Blodgett,

quoting 13 W illiston on Contracts (3 Ed. 1970) 704, Section 1617.

The dealers allege that Shell threatened notto spend any money to improve

or upgrade sLations that were not part of the ETD program. 'I'hey further allege

that Slrell e1un refusecl to honor routine maintenance ouligatiorrs, which forced

i

Y9[0 6 3 1 R60 l 2 8 42

27

f.he dealcrs I:o c:ithor convert their st.al:ions to the 1?'I'f) modca or go c ut oP

I)usl rlCSS.

The dealers <lo not allege that they wcre pressured to sign the agroement.

]n fact, Lhe franchise agreement tliey executed states that "prior to the execution

of this agreeinent, franchisee has had ample opportunity to investigat.e all

statements made by Shell relating to the [ETD program]."

We also note that for any evidence that is excluded by the parol evidence

rule relating to the dealers' fraudulent inducements claims, the rule likewise bars

that.sam.e_.evidenc^ftor.n_co.nsideration on_t^ieir, duress claim, See Cf. Neumawa

v. Shimho (Mar. 16, 2000), Cuyahoga App. No. 75940.

A review of the applicable agreements and contracts in the instant case

reveals that, although Shell was permitted to make improvements or modernize

the premises, there was no requirement that Shell do so. The dealers also fail to

show that Shell was obligated to perform routine maintenance or was responsible

for the stations' physical condition. Moreover, there is evidence that many of the

dealers in the instant case chose not to convert their stations into ETD stations

and that some dealers who owned multiple stations chose to convert only some

of their stations, leaving other stations untouched. Thus, we do not find

sufficient ovidence to establish that the clealers were deprived of free wil] or

under duress whcn they signed the franc:hisc and modernization agreements.

43

10' 63 i rC0729

-'L8-

'1'hus, we firid th,it. Lhw clealers have not provided sufficient evidence to

withst.and siunmary judgnicicL on Llu;ir claim for econornic dure:ss.

'.L'hercforc, thc third assi;giunent of error is overruled.

I). Statute of Limitations

In the fourth assignment of error, the new plaintiffs argue that the trial

court erred in granting Shell's motion for summary judgment based on the

expiration of the applicable statute of limitations.

The twelve new plaintiffs, also referred to as "the east side dealers," were

brought into the instant case by the third amended complaint. As set forth

previously, the new plaintiffs set forth the same claims as the original plaintiffs,

but also brought additional claims that they were unlawfully charged higher

DTW prices solely based on the location of their stations, their race, and the race

and economic status of their customers. Specifically, the new plaintiffs alleged

that from 1993 to 1999, Shell increased the wholesale prices in their PAD and

that their PADs encompassed the most racially segregated and poorest

neighborhoods on Cleveland's east side and in East Cleveland.

The trial court found that the applicable statute of limitations barred their

claizns and grarrted suminary judgrnent to Shell.

44I'9i.() 6 37 ra 0 7 3 0

_29.

Un I:lppeiAl, i:he new plaintiffs argue I:liaf: t:he claimti should be t;overnecl by

a fil'teen-ycnr statute of limititions, not. t.lie fotir-yenr statute of limil,ntions

zipplied by t:hc trial court. We disagree.

7.Ba1e of Goods

Pursuant to R.C. 1302.98, an action for a breach of contract for the sale of

--goods-tnust be commenced within four years after the cause of action has accrued.

In the instant case, that would mean that any claims arising before May 10,

1998, would be barred.

e test for tk^. incl sioain or the exclusion from of [R _C..1302] is whether

the predominant factor and purpose of the contract is the rendition of service,

with goods incidentally involved, orwhether the contract is for the sale of goods,

with labor incidentally involved." Allied Industrial Service Corp. U. Kasle Iron &

Metals, Inc.(1977), 62 Ohio App.2d 144, 405 N.E.2d 307. Thus, we must

determine the predominant factor that gave rise to the relationship between the

new plaintiffs and Shell.

The new plaintiffs contend that the fifteen-year statute of limitations

contained in R.C. 2305.06 should apply to this case because their contracts with

Shell did not solely concern the sale of goocls, but also included the operation of

their automobile service stations.

45

VI,0637 C(10731

-3U-

'I'o st.ipporl. thuir claini tlrat tlre foc.--yoar sLaCute: of limit.ations doos riot:

ap]>ly to Llic cont.r,rct.s at, issuc+ in tlle instxnt casr:, Lhc new pL-iinCiffs cite /Itt

R.ustp roo/-irr.g Cenl.er, lrcc. u. Grtlf Odl Corp. (6th Cir. 1985), 755 F.2d 1.23 1- '1'I2c

instant case is easily distinguished fr.om Au Rustproofin.g, in which the court

found that the plaintiff primarily sought relief under thc provisions of its

agreement to provide services.

In the instant case, it is clear that, pursuant to the dealer agreements, the

sale of gasoline is the predominant factor giving rise to the relationship of the

parties. We agree with the trial court that although other obligations flow from

the various agreements between the parties, the critical factor giving rise to the

relationship, as well as the price discrimination claims, was the sale of Shell-

branded gas. Moreover, the new plaintiffs' claims for bad faith pricing arose

exclusively under the open price provision of the dealer agreements, which

related exclusively to the sale of gasoline. -

2. Trig egring Event

The court will determine when a cause of action arose for purposes of the

statute of limitations unless the triggering event is def'ined by the legislature.

Aluniinum Line Prods. Co. u. Brad Srreith Roofing Co. (1.996), 109 Ohio App.3d

246, 254, 671 N.11;.2d 1343, citing U'Striclzer- v. Jim Walter Corp. (1983), 4 Ohio

St.3d 84, 4117 N.E.2d 727, puragraph one of the syllabus.

46

VK@6 3 7 POO 7 3 2'

;il -

l.n h,hc inst,ant case, thc c.ocnt dctcrn ined that i;hc ncw plaintiffs wcrc

riwnrc c^f I:hc n<iture of their clnims nnd I:he irl^ntity ol pot.enl:i;il defendants;i5 Gir

back as 19911. ' l'he new plaintiffs, however, argue that no cvent occurred that

triggered the running of the statut(,- of limitations because Shell kept the Pl1.1)

boundaries and pricing practices a secret. A cause of action, however, accrues

when the breach occurred, regardless of the aggrieved party's knowledge of the

breach. R.C. 1302.98(B).

Thus, the new plaintiffs' lack of knowledge of boundaries or pricing

pxactices.does not affect_the trgeripg-of the_statute of limitations_We also note

that the third amended complaint specifically stated that the east side dealers

(new plaintiffs) began protesting the alleged discriminatory pricing starting in

1994, which belies their claim of a lack of knowledge.

Finally, we agree with the trial court's finding that no claims remain after

1998 because the evidence shows that the price disparity was temporarily

remedied in 1998 and permanently remedied in 1999.

'I'herefore, we overrule the fourth assignment of error.

B. Release of all Claims

ln the fifth assignment of error, the dealers argue that the trial court erred

in granting Shell's motion for summary judgment as to ccrtain dealers who had

executed releases of Cheir clairns. Shell inoved for sinnmary judgment ns to

47µ8L@ 63 7 el;p 733

.g2.

l.wont•y-thrcc of Llw dc,ilc:rs, ar;;uin;^ tl als Llicy had releasccl tlwir cl;iims nlrriinsl:

'1'ruc Norr.h b;neri;y, ancl as t.n two cle^^lcrs who h<id relc,,iscl cl^iinis ^ii;;iinsC all

clclenclants. '19ie trial court al,rcccl r ncl granted summary jud{;ment.

'1'hese dealers argue that, even t:hough they signed releases, the releases

are voidable because they signed under duress.

The releases at issue provide that the individual dealers and True North

are released from:

"all claims and demands which each has against the other ... arisingdirectly or indirectly under, out of, or in connection with: (a) each

agreement and relationshin.* ** b eachterminated_agreement between the parties relating to the operation of theautomobile service station * * *, and the relationship establishedunder the agreements; or (c) any consignments, sales, or deliveriesof branded motor fuels and other products to [the] dealer."

The releases excluded Shell, except for two dealers who released all defendants.

A settlement agreement is a contract which terminates a claim by

preventing or ending litigation; such agreements are valid and enforceable by

either party. Continental West Condominium Unit Owners Assn. u. Ferguson

(1996), 74 Ohio St.3d 501, 502, 660 N.E.2d 431. Settlement agreements are

highly favored in the law. Id., citing State ex rel. Wright u. Weyancl.t (1977), 50

Ohio St.2d 194, 363 N.E.2d 1387.

i

48Ua0637 eTO731i

-3:1-

1.. 1lconomic Uurcati

!1 p;irl.y n ay avuid tlie terms o(' a rclcase: if t.hr)t pr rty ctiii show by eaear

I

and convinciui,; evielencc coercion by the: other party to I.he contract. IJiT'ietrn u.

Di.l'ictro (1983), 10 Ohio App.3d 44, 4(i, 460 N.E.2d 657. Almost every settlement

agreement, however, contains some: modicum of coercion or duress. Blodgett u.

Blodgett (1990), 49 Ohio St.3d 243,246-247, 551 N.E.2d 1249. The prospect of a

trial always involves a degree of risk to both parties, and the law encourages

settlement of disputes. Id. If no ambiguity appears on the face of the instrument,

parol evidence cannot be considered in an effort to create an ambiguity. See

Shifrin v. Forest City Ent., Inc. (1992), 64 Ohio St.3d 635, 638, 597 N.E.2d 499,

501. -

In the dealers' affidavits in support of their claim, they contend that they

were forced to sell their stations to True North Energy because the stations

became financially nonviable. Because the dealers had no alternative but to buy

their gas from Shell, and Shell was charging higher prices than company-owned

stores charged the retail public, their gas sales volume decreased. This led to

lower profits and i'inancial problems.

The dealers also alleged that they could not afford to stay in business and

no third party was interested inbuying their business because all tliey had to sell

49V^^.[^637 N(10735

;Sa

was l.lic declininf; business valmo of' IJ ir a,t.,il.ions. '1.'hus, they arl^ue, Iaho dealers

wcre iinclci- duress and forced Co sell t.licir >,P.;itions, ,it a loss, I^o Shell.

Wc find thc clealers' iffid;iviPS insufficient to withstancl summary

judginent. Evidence that a dealer consultecl an attorney before signing the

document is one factor indicating the party did not suffer duress. Medin.a Supply

Co. u. Corrado ( 1996), 116 Ohio App. 3d 847, 852, 689 N.E.2d 600. The record

shows that the dealers were represented by counsel when they signed their

releases. Moreover, none of the dealers alleged that they were denied the

oppQrtunity,to.kia:ve the.ir..atto, neys review the releases prior to signin.g them.

Even though the dealers alleged that they had no other alternative but to

sign the releases because they could not await the outcome of the litigation in this

tnatter, the inability to await the outcome of litigation does not establish duress.

See Blodgett, supra at 246.

We find that the dealers' statements do not satisfy all the elements of

economic duress. Receiving a "bad deal" does not constitute duress.

Thus, based on the facts of the instant case, we find that the dealers cannot

show that they were under econoniic duress when they signed the releases.

Moreover, we note that none of the dealers returned whatever consideration they

received for their releases; thus, they rnay not rescind their releases. See Maust

50

vRO637 cs0736

-:ifj.

u. ltrr.rt.lc Urte, (;olt nc{ui:;, N.11. (1992), 83 Ohio AI'rl .3d 103, 1.10, (i 1d N.E2d 765,

'76'J.

2_!^ ^ cllanL Chun1-r'--------

'1ie dealers furtlier claim that the trial court erred in finding that

appellant Chan released his claims against all the defendants. Shell points out

that the trial court actually found that Chan did not release Shell or Equilon.

Thus, we find no merit to this argument.

Therefore, finding that the releases werevalid and enforceable, we overrule

thefifth assignment oferror_

F. Discovery

In the sixth assignment of error, the dealers argue that the trial court erred

in denying them the opportunity to conduct substantial discovery on their claims.

As mentioned earlier, the parties agreed to stay discovery on all claims, except

the good faith claim, pending resolution of that claim. Once summary judgment

was granted as to the pricing claims, the dealers moved the court to lift the

discovery stay. The court eventually granted summary judgment as to the

remaining claims and found the dealers' inotion to lift the stay moot.

Ohio policy favors the fullest opportunity to complete discovery. SCegawahi

v. C,leuelnncl Anestlt.csiu C:r-oup, Inc. (1987), 37 Ohio App.3d 78, 523 N.E.2d 902

citing Ros.srnan t. 11,.ossnuin (1975), 17 O11io App.2d 103, 110, 352 N.E.2d '149.

51YBU()637 H0737

-il(i•

'I'1ic tria l court, however, hwdiscrot.ion in controlling the discover.Y process. Id.,

cii.i n,; Slu.le, ex rel. Uraggr^ll u. Ges.warnn.n. (1973), 39 Uhio St..2cl 55, 295 N.li;.2d 659.

An aphclfat.c court. will reverse t.he decision of a trial court whic.h docs not

ullow discovery if the Lrial c:ourt's decision is improvident and affects the

clisc:overing party's substantial riglits. Id., citing Rossman, supra at 110.

I-Iowever, we do not find that to be the case because the dealers' VRP and ETD

claims fail as a matter of law.

Therefore, the sixth assignment of error is overruled.

-&-mxdingly, judgment is affirmed._,_

It is ordered that appellee recover of appellant the costs herein taxed.

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate issue out of this court directing the

common pleas court to carry this judgment into execution.

A certified copy of this entry shall constitute the mandate pursuant to Rule

27 of the Rules of Appellate Procedure.

COLLEEN CONWAYj(^COONT,Y,Wl)G1,

RiZANK D. CI•;hEBItEZGE, Jlt., A.J. CONCUIIS IN JUDGME' N'.l` ONLX (WITHSEPARATE OPINION);PATILICI.A ANN I3LACt<MON, J. CONCURS IN JUDCMP,NT ONLY (WI'I'I-1S1slI'AIZn'.Cls OPINION)

"d G[+l 6 3 7 W 0 7 3 8 52

-37-

VR.ANI^ U. 1t., A.J., (Y:)N(:UIi.ItfN(,:

I at;ree, based oii thc analysis in thc ninjorit.y opinion, t.h;it, the Rrantint; of

the motion for suninary judgment was appropriate in this tnatter. 1. write

separately because I think the plaintiffs should have had the opportunity to have

their day in court, with the ultimate decision left to a jury. This case has

survived eight years of discovery, and it seems there may have been some triable

issues for a jury to decide. However, based upon the solid, well-written analysis

in the majority opinion, I have no choice but to concur in the judgment only.

PATRICIA ANN BLACKMON, J., CONCURS IN JUDGMENT ONLY:

I concur in judgment only and write separately because I believe thatAllied

Indus. Seru. Corp. u. Kasle Iron & Metals, Inc.' and Tom-Lin E, nters., Inc., et al.

u. Sunoco, Inc.Z are wrongly decided and should be abandoned as precedent in

this area of the law. These two cases are tremendous road bloclzs to any dealer's

attempt to have his or her day in court.

Allied Indres. Seru. Corp. involves the statute of limitations which was

raised in appellant's assigned error four. I agree with the dealers' argument that

the ].5 yenrs statute of liinitations for written contr.act.s applies. I believe strongly

(1977), 62 Oliio App.2d 144.

'(Cir. 6 2003), 3W9 F.3d 277.

53

M10637 Pr0739

-38-

tlial. iu cases whure I.I c fr.ancliise rc{,reumcnl: has laoth scrvica!" nnd goods

ilavtalvecl, the application of /lrticle 2 ofthe llnit'or•m Comrnerci,al (;ocle to such

rnixcd contracts sltoulcl be a matter deci.ded by a jury.

Finally,l agree with the dealers that 1'oara-Lin misreads t.he Olrio Supremc

Court's decision in Master Claemical Corp. v. Inhrott.' When improper cnotive in

pricing is at issue, the standard should be both subjective arrd objective good

faith. Subjective intent to drive the dealers out of business is relevant to proving

improper motives, which is honesty in fact. Nevertheless, many circuit courts

-----have-adopted-the-commer.ciall.y^easonable_s.tandard.as_definedin-.Tazn_Linhe-.

bottom line is that the dealers should be allowed to have their day in court;

however, the present state of the law unfortunately does not provide them that

opportunity.

'('1990), 55 Olrio St.3d 23.

54Y^.of>37 eGo74o

;;;,;,,,.,::,:iilf, ^rlf IIoViqi:iyl;

. n ...., ,,.

1

I !lllill^ll6^111lIl^IIIlailll^Illllle^CASE: CV-99-390222

DONALD 1 CASSCIiI.II?VS.

SHGI.I.OIL COMPANY-GI' AI.

llli1l [@416919

JUDGE:IIMOl1IY MCCORMICKROOM: 20C JUSIICE CEM'ERDOCKET DATG: 06127/2007

COURT OF APPEALS OF OHIO...EIGHTIi APPEALLATEDISTRICT. CTY OF CUYAHOGA.... JUDGMENT:AFFIRMED....

i FROM:

I Firsl-Class Mail II U S. Poslage Paid I1 Cleveland, OH II Permit No. 1962 1

i---------- __

I NVMIOpACOUNiV. COURT Of CO^ON PLE.\S

GERAI-0E FiJFASi. (ZEpy, or COURTS

i IUinGECY]!ri]I.(pURTTOWEp

i I Ilq ONiA111O ST

i CLEVELWq011UIIl

TO:ANTHONY FARAH440 LOUISIANASUITE 2300HOUSTON, TX 77002

..naaL;.,. ^....... ... . ^

55

........ Ii:iF^

Page 1

R.C. § 1301.01

rwBaldwin's Ohio Revised Code Annotated Currentness

Title XIII. Conunercial Transactions (Refs & Annos)

12Chapter 1301. General Provisions (Refs & Annos)

^ Defmitions

4 1301.01 General definitions

As used in Chapters 1301., 1302., 1303., 1304., 1305., 1307., 1308., 1309., and 1310. of the Revised Code, unlessthe context otherwise requires, and subject to additional definitions contained in those chapters:

(A) "Action" in the sense of a judicial proceeding includes recoupmettt, counterclaini, set-off, suit in equity, and anyother proceedings in which rights are determined.

(B) "Aggrieved party" nieans a party entitled to resort to a remedy.

(C) "Agreement" means the bargain of the parties in fact as found in their language or by implication from othercircumstances, including course of dealing, usage of trade, or course of performance as provided in sections 1301.11and 1302.11 of the Revised Code. Whether an agreement has legal consequences is determined by Chapters 1301.,1302., 1303., 1304., 1305., 1307., 1308., 1309., and 1310. of the Revised Code, if applicable; otherwise by the lawof contracts.

(D) "Bank" means any person engaged in the business ofbanidng.

(E) "Bearer" means the person in possession of an instrument, document of title, or certificated security payable tobearer or endorsed in blank.

(F) "Bill of lading" means a document evidencing the receipt of goods for shipment issued by a person engaged inthe business of transporting or forwarding goods, and includes an airbill. "Airbill" means a document serving for airtransportation as a bill of lading does for marine or rail transportation, and includes an air consignment note or airwaybill.

(G) "Branch" includes a separately incorporated foreign branch of a bank.

© 2008 Thomson/4Vest. No Claim to Orig. US Gov. Works.56

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R.C. § 1301.01

(H) "Burden of establishing" a fact means the burden of persuading the triers of fact that the existence of the fact is

more probable than its nonexistence.

(I) "Buyer in ordinary course of business" means a person who buys goods in good faith, without knowledge that thesale violates the rights of another person in the goods, and in the ordinary course from a person, other than apawnbroker, in the business of selling goods of that kind. A person buys goods in the ordinary course if the sale tothe person comports with the usual or customary practices in the kind of business in which the seller is engaged orwith the seller's own usual or customary practices. A person who sells oil, gas, or other minerals at the wellhead orniinehead is a person in the business of selling goods of that kind. A buyer in the ordinary course of business maybuy for cash, by exchange of other property, or on secured or unsecured credit and may acquire goods or documentsof title under a preexisting contract for sale. Only a buyer that takes possession of the goods or has a right to recoverthe goods from the seller under Chapter 1302. of the Revised Code may be a buyer in ordinary course of business.A person who acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debtis not a buyer in the ordinary course of business.

(J) A term or clause is "conspicuous" when it is so written that a reasonable person against whom it is to operateought to have noticed it. A printed heading in capitals (as: NONNEGOTIABLE BILL OF LADING) is

if it is in larger or other contrasting type or color."conspicuous." Language in the body of a form is "conspicuous" •In a telegram, any stated term is "conspicuous." Whether a term or clause is "conspicuous" is for decision by the

court.

(K) "Contract" means the total legal obligation that results from the parties' agreement as affected by Chapters1301., 1302., 1303., 1304., 1305., 1307., 1308., 1309., and 1310. of the Revised Code, and any other applicablerules of law.

(L) "Creditor" includes a general creditor, a secured creditor, a lien creditor, and any representative of creditors,including an assignee for the benefit of creditors, a trustee in bankruptcy, a receiver in equity, and an executor oradministrator of an insolvent debtor's or assignor's estate.

(M) "Defendant" includes a person in the position of defendant in cross-action or counterclaim.

(N) "Delivery" with respect to instruments, documents of title, chattel paper, or certificated securities means

voluntary transfer of possession.

(0) "Document of title" includes a bill of lading, dock warrant, dock receipt, warehouse receipt, or order for thedelivery of goods, and any other document that in the regular course of business or financing is treated as adequatelyevidencing that the person in possession of it is entitled to receive, hold, and dispose of the document and the goodsit covers. To be a document of title, a document must purport to be issued by or addressed to a bailee and purport tocover goods in the bailee's possession that are either identified or are fungible portions of an idenfified niass.

(P) "Fault" means wrongful act, omission, or breach.

(Q) "Fungible" with respect to goods or securities means goods or securities of which any unit is, by nature or usageof trade, the equivalent of any other like unit. Goods that are not fungible are fungible for the purposes of Chapters1301., 1302., 1303., 1304., 1305., 1307., 1308., 1309., and 1310. of the Revised Code to the extent that under aparticular agreement or document unlike units are treated as equivalents.

(R) "Genuine" means free of forgery or counterfeiting.

(S) "Good faith" means honesty in fact in the conduct or transaction concemed.

(T)(1) "Holder" with respect to a negotiable instrument means either of the following:

(a) If the instrument is payable to bearer, a person who is in possession of the insh•ttment;

0 2008 Thomson/West. No Claim to Orig. US Gov. Works.57

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R.C. § 1301.01

(b) If the instrument is payable to an identified person, the identified person when in possession of the instrument.

(2) "Holder" with respect to a document of title means the person in possession if the goods are deliverable to beareror to the order of the person in possession.

(U) To "honor" is to pay or to accept and pay, or where a creditor so engages to purchase or discount a draftcomplying with the terms of the credit.

(V) "Insolvency proceedings" include any assignment for the benefit of the creditors or other proceedings intendedto liquidate or rehabilitate the estate of the person involved.

(W) A person is "insolvent" who either has ceased to pay the person's debts in the ordinary course of business orcannot pay the person's debts as they become due or is insolvent within the nieaning of the federal bankruptcy law.

(X) "Money" means a medium of exchange authorized or adopted by a donrestic or foreign govemnient and includesa monetary unit of account established by an intergovernmental organization or by agreement between two or morenations.

(Y) A person has "notice" of a fact when any of the following applies:

(1) The person has actual knowledge of it.

(2) The person has received a notice or notification of it.

(3) From all the facts and circumstances known to the person at the time in question, the person has reason to knowthat it exists.

A person "knows" or has "knowledge" of the fact when the person has actual knowledge of it. "Discover" or "learn"or a word or phrase of similar import refers to knowledge rather than to reason to know. The time andcircumstances under which a notice or notification may cease to be effective are not deternilned by this section.

(Z) A person "notifies" or "gives" a notice or notification to another person by taking the steps that may bereasonably required to inform the other person in ordinary course, whether or not the other person actually comes tolrnow of it. A person "receives" a notice or notification when either of the following applies:

(1) It comes to the person's attention.

(2) It is duly delivered at the place of business through which the contract was niade or at any other place held outby the person as the place for receipt of such conununications.

(AA) Notice, knowledge, or a notice-or notification received by an organization is effective for a particulartransaction from the time when it is brought to the attention of the individual conducting that transaction, and in anyevent from the time when it would have been brought to the individual's attention if the organization had exerciseddue diligence. An organization exercises due diligence if it maintains reasonable routines for conurnmicatingsignificant informarion to the person conducting the transaction and there is reasonable compliance with the routine.Due diligence does not require an individual acting for the organization to communicate information unless thatcommunication is part of the individual's regular duties or unless the individual has reason to know of thetransaction and that the transaction would be materially affected by the information.

(BB) "Organization" includes a corporation, government, governmental subdivision or agency, business trust, estate,trast, partnership, or association, two or nwre persons having a joint or common interest, or any other legal orcommercial entity.

(CC) "Party," as distinct from "third party," means a person who has engaged in a transaction or made an agreementwithin Chapters 1301., 1302., 1303., 1304., 1305., 1307., 1308., 1309., and 1310. of the Revised Code.

© 2008 Thomson/West. No Claim to Orig. US Gov. Works.58

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R.C. § 1301.01

(DD) "Person" includes an individual or an organization.

(EE) "Presumption" or "presumed" means that the trier of fact must find the existence of the fact presumed unlessand until evidence is introduced that would support a fmding of its nonexistence.

(FF) "Purchase" includes taking by sale, discount, negotiation, mortgage, pledge, lien, security interest, issue orreissue, gift, or any other voluntary transaction creating an interest in property.

(GG) "Purchaser" means a person who takes by purchase.

(F1H) "Remedy" means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal.

(II) "Representative" includes an agent, an officer of a corporation or association, a trustee, executor, oradministrator of an estate, or any other person empowered to act for another.

(JJ) "Rights" includes remedies.

(KK)(1) "Security interest" means an interest in personal property or fixtures that secures payment or performanceof an obligation. "Security interest" also includes any interest of a consignor and a buyer of accounts, chattel paper,a payment intangible, or a pronussory note in a transaction that is subject to Chapter 1309. of the Revised Code.The special property interest of a buyer of goods on identifrcation of those goods to a contract for sale under section1302.42 of the Revised Code is not a security interest, but a buyer also may acquire a security interest by complyingwith Chapter 1309. of the Revised Code. Except as otherwise provided in section 1302.49 of the Revised Code, theright of a seller or lessor of goods under Chapter 1302. or 1310. of the Revised Code is not a security interest, but aseller or lessor also may acquire a security interest by complying with Chapter 1309, of the Revised Code. Theretention or reservation of title by a seller of goods notwithstanding shipment or dehvery to the buyer under section1302.42 of the Revised Code is limited to a reservation of a security interest. A lease-purchase agreement as definedin division (F) of section 1351 01 of the Revised Code shall never be intended as security.

(2) Whether a transaction, other than a lease-purchase agreement as defined in division (F) of section 1351.01 of theRevised Code, creates a lease or security interest is determined by the facts of each case; however, a transactioncreates a security interest if the consideration the lessee is to pay the lessor for the right to possession and use of thegoods is an obligation for the terni of the lease not subject to termination by the lessee and if any of the followingapplies:

(a) The original term of the lease is equal to or greater than the remaining economic life of the goods.

(b) The lessee is bound to renew the lease for the remaining econoniic life of the goods or is bound to become theowner of the goods.

(c) The lessee has an option to renew the lease for the remaining economic life of the goods for no additionalconsideration or nominal additional consideration upon compliance with the lease agreement.

(d) The lessee has an option to become the owner of the goods for no additional consideration or nonvnal additionalconsideration upon compliance with the lease agreement.

(3) A transaction does not create a security interest merely because it provides any of the following:

(a) That the present value of the consideration the lessee is obligated to pay the lessor for the right to possession anduse of the goods is substantially equal to or is greater than the fair market value of the goods at the tinie the lease isentered into;

(b) That the lessee assumes risk of loss of the goods or agrees to pay taxes, insurance, filing, recording, orregistration fees, or service or maintenance costs with respect to the goods;

(D 2008 Thonvson/West. No Claim to Orig. US Gov. Works.59

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R.C. § 1301.01

(c) That the lessee has an option to renew the lease or to become the owner of the goods;

(d) That the lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonablypredictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be

performed;

(e) That the lessee has an option to become the owner of the goods for a fixed price that is equal to or greater thanthe reasonably predictable fair market value of the goods at the time the option is to be perfomied.

(4) For purposes of division (KK) of this section, all of the following apply:

(a) Additional consideration is not nominal if, when the option to renew the lease is granted to the lessee, the rent isstated to be the fair market rent for the use of the goods for the term of the renewal detemrined at the time the optionis to be performed or, when the option to become the owner of the goods is granted to the lessee, the price is statedto be the fair market value of the goods determined at the time the option is to be performed. Additionalconsideration is noniinal if it is less than the tessee's reasonably predictable cost of performing under the leaseagreement if the option is not exercised.

(b) "Reasonably predictable" and "ren aining econoniic life of the goods" are to be determined with reference to thefacts and circunvstances at the time the parties entered into the transaction.

(c) "Present value" means the amount as of a date certain of one or more sums payable in the future, discounted tothe date certain. The discount is determined by the interest rate specified by the parties if the rate is not manifestlyunreasonable at the time the parties entered into the transaction. Otherwise, the discount is determined by acommercially reasonable rate that takes into account the facts and circumstances of each case at the time the parties

entered into the transaction.

(LL) "Send" in connection with any writing or notice means to deposit in the mail or deliver for transn ission by anyother usual means of communication with postage or cost of transmission provided for and properly addressed andin the case of an instrument to an address specified on it or otherwise agreed, or if there be none to any addressreasonable under the circumstances. The receipt of any writing or notice within the time at which it would havearrived if properly sent has the effect of a proper sending.

(MM) "Signed" includes any symbol executed or adopted by a party with present intention to authenticate a writing.

(NN) "Surety" includes guarantor.

(00) "Telegram" includes a message transmitted by radio, teletype, cable, any mechanical method of transmission,

or the like.

(PP) "Term" means that porfion of an agreement which relates to a particular matter.

(QQ) "Unauthorized" signature means one made without actual, implied, or apparent authority and includes a

forgery.

(RR) Except as otherwise provided with respect to negotiable instraments and bank collections under sections1303.32, 1304.20, and 1304.21 of the Revised Code, a person gives "value" for rights if the person acquires them in

any of the following manners:

(1) In return for a binding commitment to extend credit or for the extension of immediately available credit whetheror not drawn upon and whether or not a charge-back is provided for in the event of difficulties in collection;

(2) As security for or in total or partial satisfaction of a preexisting claim;

© 2008 Thomson/West. No Claim to Orig. US Gov. Works.60

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R.C.§ 1301.01

(3) By accepting delivery pursuant to a preexisting contract for purchase;

(4) Generally, in return for any consideration sufficient to support a simple contract.

(SS) "Warehouse receipt" means a written or electronic receipt issued by a person engaged in the business of storing

goods for hire.

(TT) "Written" or "writing" includes printing, typewriting, or any other intentional reduction to tangible form.

(2001 S 74, eff. 7-1-01; 1999 H 283, eff. 9-29-99; 1996 S 155, eff. 8-15-96: 1994 S 147, eff. 8-19-94; 1992 H693, eff. 11-6-92; 1988 H 421: 1984 S 283; 1980 H 736; 1978 S 85; 131 v S 48; 129 v 13; UCC 1-201)

HISTORICAL AND STATUTORY NOTES

Ed. Note: Former 1301.01 repealed by 129 v 13, eff. 7-1-62; 1953 H 1, eff. 10- 1-53; GC 8295.

Amendment Note: 2001 S 74 rewrote this section. See Baldwin's Ohio Legislative Service Annotated, 2001, p 6/L-

1169, or the OH-LEGIS or OH-LEGIS-OLD database on Westlaw, for prior version of this section.

Amendment Note: 1999 H 283 inserted "written or electronic" in division (SS).

Amendment Note: 1996 S 155 removed references to Chapter 1306 from the introductory clause and fromdivisions (C), (K), (Q), and (CC); and made changes to reflect gender neutral language.

Amendment Note: 1994 S 147 rewrote divisions (T) and (X); deleted "or indorsement" after "signature" indivision (QQ); and substituted "1304.20" for "1304.14" and "1304.21" for "1304.15" in division (RR). Priorto

amendment, divisions (T) and (X) read:

"(T) 'Holder' means a person who is in possession of a document of title, a certificated instrument, or an investmentsecurity drawn, issued, or indorsed to him, to his order, to bearer, or in blank.

"(X) 'Money' means a medium of exchange authorized or adopted by a domestic or foreign government as a part of

its currency."

UNIFORM COMMERCIAL CODE (UCC)

1978:

Reason for Change

(9) [(I)] The new language fits in with changes as to nunerals in Section 9- 103 [RC 1309.031 which are explained inthe references to nilnerals in the Reasons for Change and Comments [ 1978 and 1961 Commentary] to that section.

(37) [(KK)] The omission of the term "contract rights" conforms to the elinrinafion of that tenn from Article 9 [RCCh 1309]. See Reasons for Change under Section 9-106 [1978 Commentary under RC 1309.011.

1961:

Official Comment

1. "Action". See similar defmirions in Section 191, Uniform Negotiable Instruments Law; Section 76, Uniform

Sales Act; Section 58, Uniform Warehouse Receipts Act; Section 53, Uniform Bills of Lading Act. The defmition

has been rephrased and enlarged.

2. "Aggrieved party". New.

© 2008 Thomson/West. No Claim to Orig. US Gov. Works.61

Page 7

R.C. § 1301.01

3. "Agreement". New. As used in this Act the word is intended to include full recognition of usage of trade, courseof dealing, course of perfortnance and the surrounding circumstances as effective parts thereof, and of anyagreement pernutted under the provisions of this Act to displace a stated mle of law.

4. "Bank". See Section 191, Uniform Negotiable Instnunents Law.

5. "Bearer". From Section 191, Uniform Negotiable Instruments Law. The prior defmition has been broadened.

6. "Bill of Lading". See similar defuutions in Section 1, Uniform Bills of Lading Act. The definition has beenenlarged to include freight forwarders' bills and bills issued by contract carriers as well as those issued by common

carriers. The defmition of airbill is new.

7. "Branch". New.

8. "Burden of establishing a fact". New.

9. "Buyer in ordinary course of business". From Section 1, Uniform Trust Receipts Act. The defmition has beenexpanded to make clear the type of person protected. Its major significance lies in Section 2-403 [RC 1302.441 andin the Article on Secured Transactions (Article 9) [RC Ch 1309].

The reference to minerals and the like n akes clear that a buyer in ordinary course buying minerals under thecircumstances described takes free of a prior mortgage created by the sellers. See Conunent to Section 9-103 [RC

1309.031.

A pawnbroker cannot be a buyer in ordinary course of business because the person from whom he buys goods (oracquires ownership after foreclosing an initial pledge) is typically an ordinary user and not a person engaged in

selling goods of that kind.

10: "Conspicuous". New.1'lus is intended to indicate some of the methods of making a term attention-calling. Butthe test is whether attention can reasonably be expected to be called to it.

11. "Contract". New. But see Sections 3 and 71., Uniform Sales Act.

12. "Creditor". New.

13. "Defendant". From Section 76, Uniform Sales Act. Rephrased.

14. "Delivery". Section 76, Uniform Sales Act, Section 191, Uniform Negotiable Instruments Law, Section 58,Uniform Warehouse Receipts Act and Section 53, Uniform Bills of Lading Act.

15. "Document of title". From Section 76, Uniform Sales Act, but rephrased to eliminate certain ambiguities. Thus,by making it explicit that the obligation or designation of a third party as "bailee" is essential to a document of title,this defmition clearly rejects any such result as obtained in Hixson v. Ward 254 I11. App 505 (1929) . which treateda conditional sales contract as a document of title. Also the defmition is left open so that new types of documentsmay be included. It is unforeseeable what documents niay one day serve the essential purpose now filled bywarehouse receipts and bills of lading. Truck transport has already opened up problems which do not fit the pattemsof practice resting upon the assumption that a draft can move through banking channels faster than the goodsthemselves can reach their destination. There lie ahead air transport and such probabilities as teletype transmissionof what may some day be regarded commercially as "Documents of Title". The definition is stated in terms of thefunction of the documents with the intention that any document which gains commercial recognition asaccomplishing the desired result shall be included within its scope. Fungible goods are adequately identified withinthe language of the definition by identification of the mass of which they are a part.

Dock warrants were within the Sales Act definition of document of title apparently for the purpose of recognizing a

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valid tender by means of such paper. In current commercial practice a dock warrant or receipt is a kind of interimcertificate issued by steamship companies upon delivery of the goods at the dock, entitling a designated person tohave issued to him at the company's office a bill of lading. The receipt itself is invariably nonnegotiable in formalthough it may indicate that a negotiable bill is to be forthcoming. Such a document is not within the generalcompass of the definition, although trade usage may in some cases entitle such paper to be treated as a document oftitle. If the dock receipt actually represents a storage obligation undertaken by the shipping company, then it is awarehouse receipt within this Section regardless of the name given to the instrament.

The goods must be "described", but the description may be by marks or labels and may be qualified in such a way asto disclaim personal knowledge of the issuer regarding contents or condition. However, baggage and parcel checksand similar "tokens" of storage which identify stored goods only as those received in exchange for the token are notcovered by this Article.

The definition is. broad enough to include an airway bill.

16. "Fault". From Section 76, Uniform Sales Act.

17. "Fungible". See Sections 5, 6 and 76, Uniform Sales Act; Section 58, Uniform Warehouse Receipts Act.Fungibility of goods "by agreement" has been added for clarity and accuracy. As to securities, see Section 8-107[RC 1308.061 and Comment.

18. "Genuine". New.

19. "Good faith". See Section 76(2), Uniform Sales Act; Section 58(2), Unifonn Warehouse Receipts Act; Section53(2), Uniform Bills of Lading Act; Section 22(2), Uniform Stock Transfer Act. "Good faith", whenever it is used inthe Code, means at least what is here stated. In certain Articles, by specific provision, additional requirements aremade applicable. See, e. g., Secs. 2- 103(1)(b), fRC 1302.01(A)(2)1 7-404 fRC 1307.281. To illustrate, in theArticle on Sales, Section 2-103 IRC 1302.011, good faith is expressly defmed as including in the case of a merchantobservance of reasonable conunercial standards of fair dealing in the trade, so that throughout that Article wherevera merchant appears in the case an inquiry into his observance of such standards is necessary to determine his goodfaith.

20. "Holder". See similar definitions in Section 191, Uniform Negotiable Instruments Law; Section 58, UniformWarehouse Receipts Act; Section 53, Uniform Bills of Lading Act.

21. "Honor". New.

22. "Insolvency proceedings". New.

23. "Insolvent". Section 76 (3), Uniform Sales Act. The three tests of insolvency- "ceased to pay his debts in theordinary course of business," "cannot pay his debts as they become due," and "insolvent within the meaning of thefederal bankruptcy law"--are expressly set up as alternative tests and must be approached from a conunercialstandpoint.

24. "Money". Section 6(5), Uniform Negotiable Instrwnents Law. The test adopted is that of sanction ofgovernment, whether by authorization before issue or adoption afterward, which recognizes the circulating mediumas a part of the official currency of that govemment. The narrow view that money is liniited to legal tender isrejected.

25. "Notice". New. Compare N.I.L. Sec. 56. Under the definition a person has notice when he has received anotification of the fact in question. But by the last sentence the act leaves open the time and circumstances underwhich notice or notification may cease to be effective. Therefore such cases as Graham v. White-Phillips Co.. 296U S. 27. 56 S.Ct. 21. 80 L.Ed. 20 (1935), are not overmled.

26. "Notifies". New. This is the word used when the essential fact is the proper dispatch of the notice, not its receipt.

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Compare "Send". When the essential fact is the other party's receipt of the notice, that is stated. The secondsentence states when a notification is received.

27. New. This makes clear that reason to know, knowledge, or a notification, although "received" for instance by aclerk in Depar[ment A of an organization, is effective for a transaction conducted in Department B only from thetime when it was or should have been connnunicated to the individual conducting that transaction.

28. "Organization". This is the definition of every type of entity or association, excluding an individual, acting assuch. Definitions of "person" were included in Section 191, Uniform Negotiable Instruments Law; Section 76,Uniform Sales Act; Section 58, Uniform Warehouse Receipts Act; Section 53, Uniform Bills of Lading Act;Section 22, Uniform Stock Transfer Act; Section 1, Uniform Trust Receipts Act. The defmition of "organization"given here includes a number of entities or associations not specifically mentioned in prior definition of "person",namely, governinent, governmental subdivision or agency, business trust, trust and estate.

29. "Party". New. Mention of a party includes, of course, a person acting through an agent. However, where anagent comes into opposition or contrast to his principal, particular account is taken of that situation.

30. "Person". See Comment to defmition of "Organization". The reference to Section 1-102 [RC 1301.021 is tosubsection (5) of that section [Subsection (5) not enacted in Ohio].

31. "Presumption". New.

32. "Purchase". Section 58, Uniform Warehouse Receipts Act; Section 76, Unifomr Sales Act; Section 53, UniformBills of Lading Act; Section 22, Uniform Stock Transfer Act; Section 1, Uniform Trust Receipts Act. Rephrased.

33. "Purchaser". Section 58, Uniform Warehouse Receipts Act; Section 76, Uniform Sales Act; Section 53,Uniform Bills of Lading Act; Section 22, Uniform Stock Transfer Act; Section 1, Uniform Trust Receipts Act.Rephrased.

34. "Remedy". New. The purpose is to make it clear that both remedy and rights (as defined) include those remedialrights of "self help" which are among the most important bodies of rights under this Act, remedial rights being thoseto which an aggrieved party can resort on his own motion.

35. "Representative". New.

36. "Rights". New. See Comment to "Remedy".

37. "Security Interest". See Section 1, Uniform Trust Receipts Act. The present defmition is elaborated, in viewespecially of the complete coverage of the subject in Article 9 [RC Ch 1309]. Notice that in view of the Article theterm includes the interest of certain outright buyers of certain kinds of property. The last two sentences giveguidance on the question whether reservation of title under a particular lease of personal property is or is not asecurity interest.

38. "Send". New. Compare "notifies".

39. "Signed". New. The inclusion of authentication in the definition of "signed" is to make clear that as the term isused in this Act a complete signature is not necessary. Authentication may be printed, stamped or written; it may beby initials or by thumbprint. It may be on any part of the document and in appropriate cases may be found in abillhead or letterhead. No catalog of possible authentications can be complete and the court must use common senseand commercial experience in passing upon these matters. The question always is whether the symbol was executedor adopted by the party with present intention to authenticate the writing.

40. "Surety". New.

41. "Telegram". New.

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42. "Term". New.

43. "Unauthorized". New.

44. "Value". See Sections 25, 26, 27, 191, UpifonnNegotiable Instruments Law; Section 76, Uniform Sales Act;Section 53, Uniform Bills of Lading Act; Section 58, Uniform Warehouse Receipts Act; Section 22(1), UniformStock Transfer Act; Section 1, Uniform Trust Receipts Act, All the Uniform Acts in the conunercial law field(except the Uniform Conditional Sales Act) have carried defmitions of "value". All those definitions provided thatvalue was any consideration sufficient to support a simple contract, including the taking of property in satisfactionof or as security for a pre-existing claim. Subsections (a), (b) and (d) [(RR)(1), (2), and (4)], in substance continuethe definitions of "value" in the earliei acts. Subsecflon (c) [(RR)(3)] makes explicit that "value" is also given in athird situation: where a buyer by taking delivery under a pre-existing contract converts a contingent into a fixedobligation.

This deflnition is not applicable to Articles 3 and 4; [RC Ch 1303 and 1304], but the express inclusion ofimmediately available credit as value follows the separate definitions in those Articles. See Sections 4-208, 4-209,3-303 [RC 1304.14. 1304.15, 1303.321 . A bank or other financing agency which in good faith makes advancesagainst property held as collateral becomes a bona fide purchaser of that property even though provision may bemade for charge-back in case of trouble. Checking credit is "invnediately available" within the meaning of thissection if the bank would be subject to an action for slander of credit in case checks drawn against the credit weredishonored, and when a charge-back is not discretionary with the bank, but may only be made when difficulties incollection arise in connection with the specific transaction involved.

45. "Warehouse receipt". See Section 76(1), Uniform Sales Act; Section 1, Uniform Warehouse Receipts Act.Receipts issued by a field warehouse are included, provided the warehousenian and the depositor of the goods aredifferent persons.

46. "Written" or "wdting". This is a broadening of the definition contained in Section 191 of the UniformNegotiable Instruments Law.

LEGISLATIVE SERVICE COMMISSION

1961:

This section contains forty-five definitions which are intended to be applicable in each article of the UniformCommercial Code (Chap. 1301. to 1309.) but which are subject to specific provisions contained in the individualarticles.

(1) [(A)] somewhat broadens the definitions found in RC 1301.01(B), 1315.01(A), 1323.01(A), and 4965.01(A) byadding provisions as to recoupment "and any other proceedings." Compare RC 2307.01 which defines action as an"ordinary proceeding... by which a party prosecutes another for the redress of a legal wrong, enforcement of a legalright or the punishment of a public offense."

(2) [(B)] The definition of "aggrieved party" is new.

(3) [(C)] This definition has no present statutory counterpart and should be contrasted with the defntition of"contract" in RC 1301.01(11).

(4) [(D)] is in accord with RC 1301.01(C) and with the more detailed definition contained in RC 1101.01(A).

(5) [(E)] is somewhat broader than the definition found in RC 1301.01(D) in that it has been expanded to coverdocuments of title or security as well as negotiable instruments.

(6) [(F)] The definition of "Bill of Lading" expands the defuution found in RC 4965.01(B) in that contract carriers

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and bills issued by freight forwarders are included. The definition of "A Bill" is new.

(7) [(G)] The definition of'"branch" is new.

(8) [(H)] is new.

(9) [(I)] The provision as to "buyer in ordinary course of business" is comparable to RC 1316.01(A) and should alsobe compared to RC 1311.62 which speaks of merchandise sold in the ordinary course of business. The provision asto "buying" is broader than that found in RC 1315.01 (B) but should be contrasted with RC 1301.01(P) which definespurchase to include taking as a nwrtgagee or pledgee.

(10) [(J)] The defnrition of "conspicuous" is new.

(11) [(K)] The defuiition of "contract" is new but see RC 1315.04.

(12) [(L)] The definition of "creditor" is new.

(13) [(M)] is merely a rephrasing of RC 1301.01(C).

(14) [(N)] is in accord with RC 1301.01(G), 1315.01 D, 1323.01(B), and 1705.01.

(15) [(O)] represents a rephrasing of RC 1315.01(F). It has been worded so as to remove any doubt as to therequirement of an obligation of a third person as bailee.

( 16) [(P)] is in accord with RC 1315.01(G).

(17) [(Q)] The first section is essentially the same as RC 1315.01(H) and 1323.01(C) which define "fungiblegoods"; see also RC 1315.07. The provision as to fangibility by agreement is new.

(18) [(R)] The definition of"genuine" is new.

( 19) [(S)] is in accord with RC 1315.01(V). 1323.01(N), 1339.01(B), 1705.01(J) and 4965.01 N.

(20) [(T)] changes RC 1323.01(E) and 4965.01 F to include all persons whether or not they have the "right ofproperty therein." RC 1301.01(H) defines holder in terms of negotiable instruments.

(21) [(U)] The definition of "honor" is new.

(22) [(V)] The defmition of "insolvency proceedings" is new.

(23) [(W)] The definition of "insolvent" is siniilar to RC 1315.01(W); see also RC 2911.04 and 1701.01(0).

(24) [(X)] is new, but compare RC 1301.080 which is phrased in ternvs of "current money in which payment is tobe made." This subsection is designed to make it clear that the use of the term is not limited to legal tender.

(25) [(Y)] is new but conrpare RC 1301.58 which deals with the question of what constitutes notice of a defect.

(26) [(Z)] is new.

(27) [(AA)] is new.

(28) [(BB)] The definition of "organization" may be compared with the defuiltion of "Person" found in RC1301.01(L), 1315.01(L), 1323.01(H), 1339.01(D), 1705.01(C), and 4965.01(I) in regard to its scope.

(29) [(CC)] The definition of "party" is new.

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(30) [(DD)] The definition of "person" is sinrilar to the definition found in RC 1301.01(L), 1315.01 L, 1323.01(H),

1339.01(D), 1705 01(C), and 4965.01 I; see also RC 1.02(B).

(31) [(EE)] defines "presumption." The Ohio Supreme Court has defined presunrption as a"mle of law which the

law makes upon a given state of facts." Brunny Admx v Prudential Life Insurance Co of America, 151 OS 86, 84NE(2d) 536 (1949); Glowacki v North Western Ohio Railway and Power Co. 116 OS 451. 157 NE 21 (1927). In

accord as to rebuttal of presumption see 21 OJur 2d, Evidence § 3102.

(32) [(FF)] The definition of "purchase" broadens the definition found in RC 1315.01(P), 1316.010) 1323.01(I),

1705.01(D), and 4965.01 to include taking by gift or any other voluntary transfer.

(33) [(GG)] has broadened the defmition found in RC 1315.01(0), 1316.01(K), 1323.01 J, and 4965.01(K) toinclude one who takes by gift or other voluntary transfer.

(34) [(HH)] The defmition of "remedy" is new and is designed to make it clear that the right of "self-help" is

included.

(35) [(II)] The definition of "representative" is new and is designed to cover any situation where one person is "inpower to act for another."

(36) [(JJ)] The definition of "rights" is new; see annotation to subsection 34 [(HH)].

(37) [(KK)] The defntition of "security interest" is new but is intended to encompass the traditional Ohio devicessuch as chattel mortgages and conditional sales, RC 1319.01 through 1319.99, factors liens, RC 1311.59 through1311.65, trust receipts, RC 1316.01 through 1316.31 and use of accounts receivable financing, RC 1325.01 through1325.08. The provisions removing leases from the rules goveming security interests unless it is found that the partiesintended such an effect are in general accord with present law. 9 OJur 2d, Chattel Mortgages § 5, 10.

(38) [(LL)] The definition of "send" is new.

(39) [(MM)] The definition of "signed" is new.

(40) [(NN)] The definition of "surety" is new. Compare RC 3929.14 which pemuts guarantee companies to act assureties. Sureties are govemed by RC Chapter 1341. while guarantee companies are covered in Chapter 3929.

(41) [(00)] The defmition of "telegram" is new. Compare Baldwin's revision of Bouvier's Law Dictionary.

(42) [(PP)] The defmition of "term" is new.

(43) [(QQ)] The defmition of "unauthorized signature or indorsement" is new.

(44)(a) [(RR)(1)] is new, but subsections (44)(b), (c) and (d) [(RR)(2), (3), and (4)] are in accord with RC 1301.27,1316.01(0), 1323.01(L), and 4965.01(L) which define value in temvs of consideration sufficient to support a simplecontract and include an antecedent or preexisting debt. RC ] 325.01(L) is also in accord.

(45) [(SS)] The defmition of "warehouse receipt" is new but see RC 1323.01(K) and 1323.02 which merely statethat a warehouseman may issue a warehouse receipt.

(46) [(TT)] The definition of "writing" is broader than RC 1.02(D), 1301.01(N) and (0) which define writing orwritten to include printed or printing in that it includes typewriting or other intentional reduction to tangible form.

R.C. § 1301.01, OH ST § 1301.01

Current through 2007 File 45 of the 127th GA (2007-2008),

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cBaldwin's Ohio Revised Code Annotated Currentness

Title XIII. Commercial Transactions (Refs & Annos)

Chapter 1302. Sales (Refs & Annos)

K.

Definitions, General Construction, and Subject Matter

N+ 1302.01 Definitions

(A) As used in sections 1302.01 to 1302.98 of the Revised Code, unless the context otherwise requires:

(1) "Buyer" means a person who buys or contracts to buy goods.

(2) "Good faith" in the case of a merchant means honesty in fact and the observance of reasonable commercialstandards of fair dealing in the trade.

(3) "Receipt" of goods means taking physical possession of them.

(4) "Seller".means a person who sells or contracts to sell goods.

(5) "Merchant" means a person who deals in goods of the kind or otherwise by the person's occupation holds theperson out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whomsuch knowledge or skill may be attributed by the person's employment of an agent or broker or other intermediarywho by the agent's, broker's, or other intermediary's occupation holds the person out as having such knowledge or

skill.

(6) "Financing agency " means a bank, fmance company, or other person who in the ordinary course of businessmake IFN11 advances against goods or documents of title or who by arrangement with either the seller or the buyerintervenes in ordinary course to make or collect payment due or claimed under the contract for sale, as bypurchasing or paying the seller's draft or making advances against it or by merely taking it for collection whether ornot documents of title accompany the draft. "Financirig agency" includes also a bank or other person who sinularlyintervenes between persons who are in the position of seller and buyer in respect to the goods.

(7) "Between merchants" means in any transaction with respect to which both parties are chargeable with theknowledge or skill of merchants.

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(8) "Goods" means all things (including specially manufactured goods) which are movable at the time ofidentification to the contract for sale other than the money in which the price is to be paid, investment securities, andthings in action. "Goods" also includes the unbom young of anintals and. growing crops and other identified thingsattached to realty as described in section 1302.03 of the Revised Code.

Goods must be both existing and identified before any interest in themcan pass. Goods which are not both existingand identified are "Future" goods. A purported present sale of future goods or of any interest therein operates as acontract to sell.

There niay be a sale of a part interest in existing identified goods.

An undivided share in an identified bulk of fungible goods is sufficiently identified to be sold although the quantityof the bulk is not determined. Any agreed proportion of such a bulk or any quantity thereof agreed upon by nuniber,weight, or other measure may to the extent of the seller's interest in the bulk be sold to the buyer who then becomesan owner in conunon.

(9) "Lot" means a parcel or a single article which is the subject matter of a separate sale or delivery, whether or not itis sufficient to perform the contract.

(10) "Commercial unit" means such a unit of goods as by commercial usage is a single whole for purposes of saleand division of wbich materially impairs its character or value on the market or in use. A commercial unit may be asingle article (as a machine) or a set of articles (as a suite of fumiture or an assortment of sizes) or a quantity (as abale, gross, or carload) or any other unit treated in use or in the relevant n arket as a single whole.

(11) "Contract" and "agreement" are limited to those relating to the present or future sale of goods. "Contract forsale" includes both a present sale of goods and a contract to sell goods at a future time. A "sale" consists in thepassing of ritle from the seller to the buyer for a price. A "present sale" means a sale wbich is accomplished by the.making of the contract.

(12) Goods or conduct including any part of a perfonnance are "confomvng" or conform to the contract when theyare in accordance with the obligations under the contract.

(13) "Ternilnation" occurs when either party pursuant to a power created by agreement or law puts an end to thecontract otherwise than for its breach. On "termination" all obligations which are still executory on both sides aredischarged but any right based on prior breach or performance survives.

(14) "Cancellation" occurs when either party puts an end to the contract for breach by the other and its effect is thesame as that of "tennination" except that the cancelling party also retains any remedy for breach of the wholecontract or any unperformed balance.

(B) Other definitions applying to sections 1302.01 to 1302.98, inclusive, of the Revised Code are:

(1) "Acceptance", as defined in section 1302.64 of the Revised Code;

(2) "Banker's credit", as defmed in section 1302.38 of the Revised Code;

(3) "Confnrned credit", as defined in section 1302.38 of the Revised Code;

(4) "Cover", as defined in section 1302.86 of the Revised Code;

(5) "Entrusting", as defined in section 1302.44 of the Revised Code;

(6) "Identification", as defmed in section 1302.45 of the Revised Code;

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(7) "Installment contract", as defined in section 1302.70 of the Revised Code;

(8) "Letter of credit", as defined in section 1302.38 of the Revised Code;

(9) "Overseas", as defmed in section 1302.36 of the Revised Code;

(10) "Person in position of a seller", as defined in section 1302.81 of the Revised Code;

(11) "Sale on approval", as defmed in section 1302.39 of the Revised Code;

(12) "Sale or retum", as defmed in section 1302.39 of the Revised Code.

(C) As used in sections 1302.01 to 1302.98 of the Revised Code, "check" and "draft" have the meaning set forth insection 1303.03 of the Revised Code, "consignee" and "consignor" have the meaning set forth in section 1307.01 ofthe Revised Code. "consumer goods" has the meaning set forth in section 1309.102 of the Revised Code, and"dishonor" has the meaning set forth in section 1303.62 of the Revised Code.

(D) The terms and principles of construction and interpretation set forth in sections 1301.01 to 1301.14 of theRevised Code. are applicable to sections 1302.01 to 1302,98 of the Revised Code.

(2001 S 74, eff. 7-1-01: 130 v H 1, eff. 1-23-63; 129 v 13; UCC 2-103 to 2-106)

fFN11 Prior and current versions differ; although no amendment to this language appears in 2001 S 74, "make"appeared as "makes" in 130 v H 1.

HISTORICAL AND STATUTORY NOTES

Amendment Note: 2001 S 74 rewrote this section which prior thereto read:

"(A) As used in sections 1302.01 to 1302.98, inclusive, of the Revised Code, unless the context otherwise.requires:

"(1) 'Buyer' means a person who buys or contracts to buy goods.

"(2)'Good faith' in the case of a merchant means honesty in fact and the observance of reasonable commercialstandards of fair dealing in the trade.

"(3) 'Receipt' of goods means taking physical possession of them

"(4)'Sellex' means a person who sells or contracts to sell goods.

"(5)'Merchant' means a person who deals in goods of the kind or otherwise by his occupation holds himself out ashaving knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledgeor skill may be attributed by his employment of an agent or broker or other intermediary who by his occupationholds himself out as having such knowledge or skill.

"(6)Financing agency' means a bank, 8nance company, or other person who in the ordinary course of businessmakes advances against goods or documents of title or who by arrangement with either the seller or the buyerintervenes in ordinary course to make or collect payment due or claimed under the contract for sale, as bypurchasing or paying the seller's draft or making advances against it or by merely taking it for collection whether ornot documents of title accompany the dra8. "Financing agency" includes also a bank or other person who similarlyintervenes between persons who are in the position of seller and buyer in respect to the goods.

"(7) Between merchants' nieans in any transaction with respect to which both parties are chargeable with theknowledge or skill of inerchants.

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"(8) 'Goods' means all things(including specially manufactured goods) which are movable at the time ofidentification to the contract for sale other than the money in which the price is to be paid, investment securities, andthings in action. 'Goods'also includes the unbom young of animals and growing crops and other identified thingsattached to realty as described in section 1302.03 of the Revised Code.

"Goods must be both existing and identified before any interest in them can pass. Goods which are not both existingand identified are'future' goods. A purported present sale of future goods or of any interest therein operates as acontract to sell.

"There may be a sale of a part interest in existing identified goods.

"An undivided share in an idenfified bulk of fungible goods is sufficiently idenfified to be sold although the quantityof the bulk is not determined. Any agreed proportion of such a bulk or any quantity thereof agreed upon by number,weight, or other measure may to the extent of the seller's interest in the bulk be sold to the buyer who then becomesan owner in common.

"(9) 'Lot' means a parcel or a single article which is the subject matter of a separate sale or delivery, whether or not itis sufficient to perform the contract.

"(10)'Commercial unit' means such a unit of goods as by commercial usage is a single whole for purposes of saleand division of which materially impairs its character or value on the market or in use. A connnercial unit may be asingle article (as a machine) or a set of articles (as a suite of fumiture or an assortment of sizes) or a quantity (as abale, gross, or carload) or any other unit treated in use or in the relevant market as a single whole.

"(11) 'Contract' and'agreement' are linilted to those relating to the present or future sale of goods. 'Contract for sale'includes both a present sale of goods and a contract to sell goods at a future time. A 'sale' consists in the passing oftitle from theseller to the buyer for a price. A'present sale' means a sale which is accomplished by the making ofthe contract.

"(12) Goods or conduct including any part of a perforntance are "conforndng" or conform to the contract when theyare in accordance with the obligations under the contract.

"(13)'Termination' occurs wben either party pursuant to a power created by agreement or law puts an end to thecontract otherwise than for its breach. On'temrination' all obligations which are still executory on both sides aredischarged but any right based on prior breach or perfortnance survives.

"(14) 'Cancellation' occurs when either party puts an end to the contract for breach by the other and its effect is thesame as that of'temilnation' except that the cancelling party also retains any remedy for breach of the whole contractor any unperfomred balance.

"(B) Other definitions applying to sections 1302.01 to 1302.98. inclusive, of the Revised Code are:

"(1) 'Acceptance', as defined in section 1302.64 of the Revised Code;

"(2) 'Banker's credif, as defined in section 1302.38 of the Revised Code;

"(3)'Confirmed credit', as defined in section 1302.38 of the Revised Code;

"(4)'Cover', as defined in section 1302.86 of the Revised Code;

"(5)'Entmsting', as defined in section 1302.44 of the Revised Code;

"(6)'Identification', as defined in section 1302.45 of the Revised Code;

"(7)'Installment contracf, as defined in section 1302.70 of the Revised Code;

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R.C. § 1302.01

"(8) 'Letter of credif, as defined in section 130238 of the Revised Code;

" (9) 'Overseas', as defined in section 1302.36 of the Revised Code;

"(10)'Person in position of a seller', as defined in section 1302.81 of the Revised Code;

"(11)'Sale on approval', as defined in section 1302.39 of the Revised Code;

"(12)'Sale or return', as defmed in section 1302.39 of the Revised Code.

"(C) As used in s0ctions 1302.01 to 1302.98, inclusive, of the Revised Code. 'check' and'draft' have the meaning setforth in section 1303.03 of the Revised Code,'consignee' and'consignor' have the meaning set forth in section1307.01 of the Revised Code,'consumer goods' has the meaning set forth in section 1309.07 of the Revised Code,and'dishonor' has the meaning set forth in section 1303.62 of the Revised Code.

"(D) The tenns and principles of construction and interpretation set forth in sections 1301.01 to 1301.14, inclusive,of the Revised Code, are applicable to sections 1302.01 to 1302.98, inclusive, of the Revised Code."

UNIFORM COMMERCIAL CODE (UCC)

1961:

Official Comment

UCC 2-103

1. The phrase "any legal successor in interest of such person" has been eliminated since Section 2-210 [RC 1302.131of this Article, which limits some types of delegation of performance on assignment of a sales contract, makes itclear that not every such successor can be safely included in the defmition. In every ordinary case, however, suchsuccessors are as of course included.

2. "Receipt" must be distinguished from delivery particularly in regard to the problents arising out of shipment ofgoods, whether or not the contract calls for making delivery by way of documents of title, since the seller mayfrequently fulfill his obligations to "deliver" even though the buyer may never "receive" the goods. Delivery withrespect to documents of title is defined in Article 1 [RC Ch 1301 ] and requires transfer of physical delivery.Otherwise the many divergent incidents of delivery are handled incident by incident.

UCC 2-104

1. This Article [RC Ch 1302] assumes that transactions between professionals in a given field require special andclear rules which n ay not apply to a casual or inexperienced seller or buyer. It thus adopts a policy of expresslystating r¢les applicable "between merchants" and "as against a merchant", wherever they are needed instead ofmaking them depend upon the circumstances of each case as in the statutes cited above [Sections 15(2), (5), 16(C),45(2) and 71, Uniform Sales Act, and Sections 35 and 37, Uniform Bills of Lading Act]. This section lays thefoundation of this policy by defining those who are to be regarded as professionals or "merchants" and by statingwhen a transaction is deemed to be "between mercbants".

2. The term "merchant" as defined here roots in the "law merchant" concept of a professional in business. Theprofessional status under the defmition may be based upon specialized knowledge as to the goods, specializedknowledge as to business practices, or specialized knowledge as to both and which kind of specialized knowledgemay be sufficient to establish the merchant status is indicated by the nature of the provisions.

The special provisions as to merchants appear ornly in this Article [RC Ch 1302] and they are of three kinds.Sections 2-201(2), 2-205, 2-207 and 2-209 (RC 1302.04(B), 1302.08, 1302.10, and 1302.121 dealing with the statute

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R.C.§ 1302.01

of frauds, firm offers, confirmatory memoranda and modifrcation rest on nornml business practices which are orought to be typical of and familiar to any person in business. For purposes of these sections almost every person inbusiness would, therefore, be deemed to be a"merchant" under the language "who ... by his occupation holdshimself out as having knowledge or skill peculiar to the practices ... involved in the transaction.." since thepractices involved in the transaction are non-specialized business practices such as answering mail. In this type ofprovision, banks or even universities, for example, well may be "merchants." But even these sections only apply toa merchant in his mercantile capacity; a lawyer or bank president buying fishing tackle for his own use is not a

merchant.

On the other hand, in Section 2-314 [RC 1302.271 on the warranty of merchantability, such warranty is implied only"if the seller is a merchant with respect to goods of that kind." Obviously this qualification restricts the impliedwarranty to a much smaller group than everyone who is engaged in business and requires a professional status as toparticular kinds of goods. The exception in Section 2-402(2) [RC 1302.43(B)1 for retention of possession by amerchant-seller falls in the same class; as does Section 2- 403(2) IRC 1302.44(B)1 on entrusting of possession to amerchant "who deals in goods of that kind".

A third group of sections includes 2-103(1) (b) [RC 1302.01(A)(2)], which provides that in the case of a merchant"good faith" includes observance of reasonable commercial standards of fair dealing in the trade; 2-327(1) (c), 2-603 and 2-605 [RC 1302.40(A)(3) , 1302.62, and 1302.63 1 , dealing with responsibilities of merchant buyers tofollow seller's instmctions, etc.; 2- 5091RC 1302.531 on risk of loss, and 2-609 [RC 1302.671 on adequateassurance of performance. This group of sections applies to persons who are merchants under either the "practices"or the "goods" aspect of the definition of merchant.

3. The "or to whom such knowledge or skill may be attributed by his employment of an agent or broker. ..." clauseof the defmition of merchant means that even persons such as universities, for example, can come within thedefinition of merchant if they have regular purchasing departments or business personnel who are familiar withbusiness practices and who are equipped to take any action required.

UCC 2-105

1. Subsection (1) [(A)(8)] on "goods": The phraseology of the prior uniform statutory provision has been changed

so that:

The defmition of goods is based on the concept of movability and the term "chattels personal" is not used. It is notintended to deal with things which are not fairly identifiable as movables before the contract is performed.

Growing crops are included within the definition of goods since they are frequently intended for sale. The conceptof "industrial" growing crops has been abandoned, for under modem practices fruit, perennial hay, nursery stock andthe like must be brought within the scope of this Article [RC Ch 1302]. The young of animals are also includedexpressly in this defmition since they, too, are frequently intended for sale and may be contracted for before birth.The period of gestation of domestic animals is such that the provisions of the section on identification can apply asin the case of crops to be planted. The reason of this defuution also leads to the inclusion of a wool crop or the likeas "goods" subject to identification under this Article [RC Ch 1302].

The exclusion of "money in which the price is to be paid" from the defurition of goods does not mean that foreigncurrency which is included in the defmition of money may not be the subject matter of a sales transaction. Goods isintended to cover the sale of money when money is being treated as a commodity but not to include it when moneyis the medium of payment.

As to contracts to sell timber, minerals, or structures to be removed from the land Section 2-107(1) [RC 1302.03(A)1

(Goods to be severed from Realty: recording) controls.

The use of the word "fixtures" is avoided in view of the diversity of definitions of that term. This Article [RC Ch

1302] in including within its scope "things attached to realty" adds the fiuther test that they must be capable ofseverance without material harm thereto. As between the parties any identified things which fall within that

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Page 7

R.C. § 1302.01

definition become "goods" upon the making of the contract for sale.

"Investment securities" are expressly excluded from the coverage of this Article. It is not intended by this exclusion,however, to prevent the application of a particular section of this Article by analogy to securities (as was done withthe Original Sales Act in Agar v. Orda. 264 N.Y. 248, 190 NE. 479, 99 A.L.R 269 (1934)) when the reason of thatsection makes such application sensible and the situation involved is not covered by the Article of this Act dealingspecifically with such securities(Article 8 [RC Ch 1308]).

2. References to the fact that a contract for sale can extend to future or contingent goods and that ownership incommon follows the sale of a part interest have been omitted here as obvious without need for expression; hence noinference to negate these principles should be drawn from their omission.

3. Subsection (4) [paragraph four of (A)(8)] does not touch the question of how far an appropriation of a bulk offungible goods may or may not satisfy the contract for sale.

4. Subsections (5) and (6) [(A)(9) and (A)(10)] on "lot" and "conmzercial unit" are introduced to aid in the phrasing

of later sections.

5. The question of when an identification of goods takes place is detexnvned by the provisions of Section 2-501 [RC1302,451 and all that this section says is what kinds of goods may be the subject of a sale.

UCC 2-106

1. Subsection (1) [(A)(11)]: "Contract for sale" is used as a general concept throughout this Article [RC Ch 1302],but the rights of the parties do not vary according to whether the transaction is a present sale or a contract to sell

unless the Article expressly so provides.

2. Subsection (2) [(A)(12)]: It is in general intended to continue the policy of requiring exact performance by theseller of his obligations as a condition to lus right to require acceptance. However, the seller is in part safeguardedagainst surprise as a result of sudden technicality on the buyer's part by the provisions of Section 2-508 [RC

1302.521 on seller's cure of improper tender or delivery. Moreover usage of trade frequently pennits commercialleeways in performance and the language of the agreement itself must be read in the light of such custom or usage

and also, prior course of dealing, and in a long term contract, the course of performance.

3. Subsections (3) and (4) [(A)(13) and (A)(14)]: These subsections are intended to n ake clear the distinctioncarried forward throughout this Article [RC Ch 1302] between termination and cancellation.

LEGISLATIVE SERVICE COMMISSION

1961:

UCC 2-103

It should be noted that the general definitions contained in Article I [RC Ch 1301 ], as well as those contained in this

index section, also apply.

(1) (a) [(A)(1)] The defmition of "buyer" is in accord with RC 1315.01(B) except that the former does not include

legal successor in interest.

(1) (b) [(A)(2)] The definition of "good faith" is broader than that contained in RC 1315.01(V) in that "observance

of reasonable commercial standards of fair dealing in the trade" has been added.

(1) (c) [(A)(3)] The defmitioir of "receipt" is new.

(1) (d) [(A)(4)] The defnrition of "seller" is in accord with RC 1315.01(S), except that the reference to successor in

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Page 8

R.C. § 1302.01

interest has been eliminated.

UCC 2-104

Transactions involving merchants are given special treatment in this article; see for example, sections 2-201, 2-205,2-207, and 2-314 (RC 1302.04, 1302.08, 1302.10 1302.27 . This comprehensive treatment is new, although RC

1315.16(B) and 1315.17 C are framed in terms of "sellers of that kind"; see also the reference to custom and usagein RC 1315.72. The definition of "fmancing agency" is new.

UCC 2-105

(1) [(A)(8)] "Goods" are defined to include everything movable at the time of identification, except the money inwhichthe price is to be paid, investment securities and things in action. RC 1315.01(J) defines "goods" in terms ofchattels personal and excludes all money as well as choses in action.

The unbom young of animals, growing crops, and identified things attached to the realty capable of severance inaccord with secfion 2-107 (,RC 1302.03) are made subject to the Uniform Conunercial Code. RC 1315.01(J) seenisto include such attached things if they are severed before sale or if severance is provided for by agreement. Section2-107 (1) fRC 1302.03(A)1 covers "timber niinerals or the like." To qualify as "goods," severance must be made bythe seller before sale. This would appear to limit present Ohio law, though a purported present sale withoutseverance would still be valid as a contract for sale. Section 2-107 (2) [RC 1302.03(B)1 covers growing crops andeverything not covered by (1) fRC 1302.03(A)]. If the things can be severed without material harm to the realty,they constitute "goods" without regard to whom is to sever, and by proper identification a present sale can take placewithout severance. This seems to be in accord with present law, except that the condition of "without material harmto the realty" has been added.

(2) [paragraph two of (A)(8)] is basically the same as RC 1315.06.

(3) and (4) [paragraphs three and four of (A)(8)] are basically the same as RC 1315.07.

(5) [(A)(9)] The definition of "lot" is new.

(6) [(A)(10)] The definition of "commercial unit" is new.

UCC 2-106

(1) [(A)(11)] is similar to RC 1315.02.

(2) [(A)(12)] is new; but see RC 1315.45 and 1315.70.

(3) and (4) [(A)(13) and (14)] are new.

R.C. § 1302.01, OH ST § 1302.01

Current through 2007 File 45 of the 127th GA (2007-2008),apv: by 1/11/08, and filed with the Secretary of State by 1/11/08.

Copr. © 2008 Thomson/West

END OF DOCUMENT

© 2008 Thomson/West, No Claim to Orig. US Gov. Works.75

Page I

R.C. § 1302.18

Baldwin's Ohio Revised Code Annotated CurrentnessTitle XIII. Commercial Transactions (Refs & Annos)

Chapter 1302. Sales (Refs & Annos)

General Obligation and Construction of Contract; Warranties (Refs & Annos)

1302.18 Open price term

(A) The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a casethe price is a reasonable price at the time for delivery if:

(1) nothing is said as to price; or

(2) the price is left to be agreed by the parties and they fail to agree; or

(3) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or

agency and if it is not so set or recorded.

(B) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.

(C) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of oneparty the other may at his option treat the contract as cancelled or hirnself fix a reasonable price.

(D) Where, however, the parties intend not to be bound unless the price be fixed or agreed and it is not fixed oragreed there is no contract. In such a case the buyer must return any goods already received or if unable to do somustpay their reasonable value at the time of delivery and the seller must return any potiion of the price paid on

account.

(129 v 13, eff. 7-1-62; UCC 2-305)

UNIFORM COIvIMERCIAL. CODE (UCC)

1961:

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Page 2

R.C. § 1302.18

Official Comment

1. This section applies when the price term is left open on the making of an agreement which is neverthelessintended by the parties to be a binding agreement. This Article [RC Ch 1302] rejects in these instances the formulathat "an agreement to agree is unenforceable" if the case falls within subsection (1) [(A)] of this section, and rejectsalso defeating such agreements on the ground of "indefmiteness." Instead this Article recognizes the dominantintention of the parties to have the deal continue to be binding upon both. As to future performance, since thisArticle recognizes remedies such as cover (Section 2-712 [RC 1302.8611, resale (Section 2-706 [RC 1302.801) andspecific perfomiance (Section 2-716 [RC 1302.901) which go beyond any mere arithmetic as between contract priceand market price, there is usually a"reasonably certain basis for granting an appropriate remedy for breach" so thatthe contract need not fail for indefiniteness.

2. Under some circumstances the postponement of agreement on price will mean that no deal has really beenconcluded, and this is n ade express in the preamble of subsection (1) [(A)] ("The parties if they so intend") and insubsection (4) [(D)]. Whether or not this is so is, in most cases, a question to be detemvned by the trier of fact.

3. Subsection (2) [(B)], dealing with the situation where the price is to be fixed by one party rejects theuncommercial idea that an agreement that the seller may fix the price means that he may fix any price he may wishby the express qualification that the price so fixed must be fixed in good faith. Good faith includes observance ofreasonable commercial standards of fair dealing in the trade if the party is a merchant. (Section 2-103 [RC

1 1 . But in the nonnal case a "posted price" or a future seller's or buyer's "given price," "price in effect,""market price," or the like satisfies the good faith requirement.

4. The section recognizes that there may be cases in which a particular person's judgment is not chosen merely as abarometer or index of a fair price but is an essential condition to the parties' intent to make any contract at all. Forexample, the case where a known and trusted expert is to "value" a particular painting for which there is no marketstandard differs sharply from the situation where a named expert is to determine the grade of cotton, and thedifference would support a fmding that in the one the parties did not intend to make a binding agreement if thatexpert were unavailable whereas in the other they did so intend. Other circumstances would of course affect thevalidity of such a fmding.

5. Under subsection (3) [(C)], wrongful interference by one party with any agreed n achinery for price fixing in thecontract may be treated by the other party as a repudiationjustifying cancellation, or merely as a failure to takecooperative action thus shifting to the aggrieved party the reasonable leeway in fixing the price.

6. Throughout the entire section, the purpose is to give effect to the agreement which has been made. That effect,however, is always conditioned by the requirement of good faith action which is made an inherent part of allcontracts within this Act. (Section 1-203 [RC 1301.091).

1961:

This section is a further extension of RC 1315.10 and 1315. ] 1, designed to more clearly state the validity of openprice arrangements. Subsections (1) and (4) [(A) and (D)], together, are intended to clear up the ambiguity raised inRC 1315.10 as to whether a contract exists in the absence of a price provision, by maldng the test depend upon theintention of the parties.

(1) (a) [(A)(1)] is similar to RC 1315.10; see 37 OJur, Sales § 26.

(1) (b) [(A)(2)] makes it clear that if the parties later fail to agree on a price, a reasonable price must be paid; seeDomhoff & Joyce Co v Hamilton Fumace Co, 108 OS 25, 140 NE 485 (1923).

(1) (c) [(A)(3)] changes the rule of RC 1315.11 which declares a contract void if a third party who is to determinethe price fails to do so, unless the goods have been delivered. Under this subsection, regardless of whether the

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Page 3

R.C.§ 1302.18

goods have been delivered, the buyer must pay a reasonable price.

(3) [(C)] gives the aggrieved party the right to fix a price or to cancel the contract if the other party to the contractprevented the third party from fixing a price. UnderRC 1315.11 such interference is treated as a breach of the

contract.

R.C. § 1302.18, OH ST § 1302.18

Current through 2007 File 45 of the 127th GA (2007-2008),apv. by 1/11/08, and filed with the Secretary of State by 1/11/08.

Copr. © 2008 Thomson/West

END OF DOCUMENT

© 2008 Thonvson/West. No Claim to Orig. US Gov. Works.78

xnd ace zrlditicaa) iudge of theeolut of zppeals iu We tsaffi d"istrid of Obio,cumpo;rdof Fcanliiu qonntp.

- Sx§ additiaml three judges in the eigUth dishict oourt of appeelss1m11 be da'ted at the geaeral dectloa in 1962 for a term of aix veus,thdr telms to maavem oa s,mrssive dala begin,iag m tLe fitst dxr .ol l+rmaR, 1963. Such a}ditinntl judge i, the tenth district eaurt ofappeals sba0 be electW at the geaual dccfi,a in 1962 fo: a tetm uE six1'c.as begbniag Jaaw7 I, 1953. Such additional judgra in auch distri_-tsrbaII tbceafter be etectcd to 1,314 terms ulsix 1•ears. ..,

In sn:h distsicti aay- tlure judges rlag mn-.p:ise the cuurt of aP2e^hia the liatin; xad dispaa3ma oi wts in temrdrnct sri01 fueb loalrulp ,.f Qredicc and pcoced-,uc zs me}- be aduplal bj the judgcs of suchcvarts.

.1.r judge of thr to,cY af oppealt uca7 be artigned l:3• Ihe chrtfjusrlce ef ekr mprtsrt ceerl te ho;d tcart ia esetker districl aad tka[Q ksldcavt ie tht dfsfrict to u.feich hr !r a.utgned. .

ROGER t7AUD,Speeker af the Aeure of Sep>trcalut(oet•

JOHN W. DONAREY,.PriadBat of the Serate.

Patsed Juae 7, 1961,

A{>a:uied Junx 23, 1961.

MICHAEL V. DiSALLE,. rioDelaer.

The R[I•itml 1Wl+l 6fltbl 11 IG (tlde.'m1J A1GIl the RCtlrd (.Re.

O11i0 L.EGISIATIVE/ ^S^ER''....,..,e

P...It£ pOLt1f1551pN'I.Antnr A..., D'nerter

F+led in the o5m of the Ssrrlasy al Stxtc I. Culembus, O6ia, ua tha23rd da7 of Juae, A. D. 1961.

TED,W, HROWI.,SecreterT of Slrtte.

CBxtiie Septemter 22, 196L

13

(Ammdei Smrte Hdt Iva 5)

Ald AGT

'fo amrs.i aceYe,os Lt1179 tl313S& .1517A1.1E17A3 170177, VO1.t9,t7dt66, 7-P15A6, 7^9.07 11f6AR 731514 m^2d1o37. iadmvqZ1Q5.a,2715D1, 4s0s.t8 md 483S.1y aci to msrl sectiea.-1331.61 tu S^I.IY. udecr0 110L9i m 6t'1394 lutlnzktI7i}3A1 m 136.28, iodaa's 1]0{11 ea L7044% fad.:dre,1}ISAt m L10S.16, l,clasisq 1306A1 -m 130509 'v..tmtse.157M to LI07A0, iuelad,g 1109D1 to I]IB3^ iod,,iTaiJt9A1 tu d36959 iorlvisq 1J43.91 to If1.1A$ iodsaiat a^t2911.43 to 49)lw, iadas3R " m re9wl edim,s IIQSl1 m110514 .iodux:K4 1L1S.1Z m 111513. 1r:Lev4 1301.01 m

' IJOL86. iod.9cq 1313.11 to 1303A7, aludrq 130501 m1]GSS$ indaSvt 13MA1 m 13ND9, bndm!74 1309,61 tu13DIAi, Inemvrt, 131132 m 13a1 iadoslve, 1113.53, to1313.55 inefssir4 1315D1 m 13Liadae3rC 111tiD1 to13I6.11, indaaie. 1319At to 1319.Oa i8elmleM1 1319.05 to1319.93: 'sdu+ivG 13ZID1 to 17Z199, L3mire 1375A1 m

,isr Lt3.£@l, 1.13âAS vN 175iA7. in:Wsrn.I32iA2, l;W17QSDe m 170i2t, iviud Y91L1g, i96SD1to 4963.1i.ivhsisa rnd 496599 tm^ fr- - Cod9 loc tLe Vaspa,eot ca^ tL- Umn:m t'aaasdd Coi, tdrtag m oaaiamaam•.ia1 truwtlimn In ar rq+e8ma pe+eeeal i.so4 eadum4aKS wmd drs domxcqt: oa tlnq

. °4etmmuil pspe,bndcdepoe0sead tenert[1451, bY7C tllLiEfS V'etd,0a'd tepp /a, lolta a( oo'elmaaou ot titl0. msnt,knt uuuifw, aaL cmv enas-sdim4 mc5a1'nr <efrcu saln aE aomads, ds.url PaTerj endwab»rt ris>+s; ttesiii,g /or a,b7k aafia m Ev.-t s+eue. ia

' oakm •••,•^•,•••pi r-Vetetb'i YvorLm, nideare taidiaa0ea o aapa ort uBem prp!m^.a ea* tlaeo^s;memhstlt a deomecn aa3 to asc' e oal•m.m 1Le taw w:imrenpeet tLneto.

Bc ^t esaattd..bythe GtaMrtj Atttseh)7 oJ thl State of Qhw:

Soertoa 1. TLat seMims 131129,13135& 131701, 1317.03, 170127,1701.49, 170156,230506, 2305.07. 230509, 23'J5.14 to 2305.17, inclusivey230.i22, 2715.Oi. 4505.10 aad 4503.'I3 L'e aturldtd. au3 tectiaat L301.01to 1401.14, mclusire, I1001 tn 130298, lodosive, 1303.01 to 130378, in-cluui41J0¢01 to 1304.34, Lulusiee.130501 to 1305.16. i^lusive,130601'tu 1306.09 ineluetve, 1307.0L to 1307A0, inciasire, 1303.01 !o L3b8-%indusice, 130901 In 1303.50, ia:lusic4 1343.01 to 1343.05, indusire, and2911.43 to 2911.49. int3ustc4 of the Reeised Code be enacted to mad astoDaers:..

Ceuenl Befmitlona. •Sec. 1301.01. Ae uaediaGLap:ers 1301^130Z., 1303, 1304;,130S.,

130c.t.,1307.,130g., and 1309. of tbe Itcvised Code, uoleca the c"tert o:ha-air r<quires, and svbiect to add(tional de6aitloui tonhiaed (n' suds

duptep: ... . . . . . . .•.•'(A) °Acliod' in tbe'sanae oi a judidid'racet,ding ind:xles secouQ-

menk wuntealaim, set-o6 eult iu equity, ^wY otlmr proceedinga lawhich rights are detc[mmed. '

^Wa

20-actim to be tal^ aithia a reauonatde 7ime, any eime a•hirh is notmanilrxly uarusaabk may be 8:ed by agreemeat

(B) {1'lut Ps a reasnnabfe tinte for ta&iag any attion depeods outhe oaMe;psaposq ead amaashares of m3r action.

(C) An atdon is t:1¢n "Seaso®bly" n-hm it is txlrcn at or aithinthe tee agrmi oc Qna time it agreed at or teilltia a rersonabls tim^

Cmase of darmg and utage of trade.

stt 1301.11, (A) A eourse of deartog is a sequmce nf preriauamndoet between cthe 6p1^ vhn mesg to a parurniar transacrian Vrhirh is fairly to

pg their ezpressi® aad otfier ^ of rsdentandiscg 5;c in-

ter(9) A asage et trade is any practice or mdbod of dmBng bavings^ reguteriq o.r obserrame in a place, varction, or trade as to (wd'fyaa ewpxtzteon that it vcsll be ahstrred trith cespsf ta the tranraaroa inVo'stim- 1Le esiamr< sud v.ope of sach s vsage are to be prored asfzcts. !f i is esfabfls6ed that rach a asage is embodied 7a a naitten tsadecode arsiavlar Writiag, the i^erpntefion of fbe n•rfting is. for the omw.

(C) A eovcx of dealing betuvxn parties and any usage of trade inthe rronttoa or trade in srhich they sre eagagecl ar of srhtrb they are ashqdd be aaare give partimhrmeattiag to and suppieemmt or qualifyterms of anagr^nt

(D) The exprras zrms of an sgsemaeoi and an appliabfe mmseef duBng o: asage of trede s1uB be watrued cheretv reasonable asaszdstew, with esdsot3xr; bat ahm such coostrrsaioa is tmrrasoaahieexpress lerms oeatre! both comse of dealfag and usage of ttade andmarse rf dmlisg toatrols osa.ge of tnde.

(E) An applirshte nsagc of tndc in the place where any part ofpeformarxe is to ua.w shall br osed in interpretiqg the agcrtmmt as totEatput of the p7fo.-maarz

(F) &idena of a relevant ¢srge di trade aBered by we party •is oot admisst'Ke vdess and uatil he has grrto the otlrer puty wdt aolixas 6x mat t 5rsds mTCient to prcrea: un5ir surprise to the latter.

Stabds of fraitds for kiads of penanal proaerty swt otheeviae eo►,aed

Sec. 13'JI.12. (A) Exce1X in the wa described in division (B ^of this sectim a mvhaet fur the sale of perronal p ro^ry is not eaforeeab(eby nay cf artiaa or defwse befoad Ere thousand do1lars in amoant orralue of remedy tadess there is sarx critiag alddt indiutv thaf a rnn.eraR for sale Iw Ixeo smde tKttrem the partfes at a defined or statedprire, reasooahly ide@i5e3 tlx subjeck mstte , and is signed by the putyagaiart whom esforeemeat is sought or by tas authorized ageat

(B) Dirisi¢o (A) of this eerbon does not s^t.y to mnfracb fartlsr tak oE goods, sniio-^ I,t0204 of the ]terbcd Co.ie, nor of aeemities,se.tioa 13093,1 of the Revised Code, aur to aeemity agreements, seefion130914aftheBeriTeiCode.

Sei. 1301.13. A pa c:ho rasTh ealur'cit resa•retim of righ(s per-tarms a promisea pettvms+n:•e or assen.Y to perfo.-urame fn a tniancrdemaaded or oLfercd bl' the other party docs aot tbereby prejodice therigbts reserved. Sa•L ttords as "wtthtwt prejuditc", "na3tr pro:esP'. usthi like asr sufficlent.

Optian to icaderate at wiB.. See. 130L.14 - i4term proridieg that oae party or his successor in

iaterest suy accelerate paymeat or perfortmme w reqwce mBateral uradditional cvBateral "at. tes^l" or c:lxn he deems himself insecure" or innords of similStr i o:t sbslf Ee'eftstrued to ramn tbat he aha8 havepotser to do oaly i.°e in gaud faith b9ierrs that'the p.•ospect of parmentor pcrtormauce sa hnpaired. The borden of establishing laek ot gaod faitlris on the party against whom-the power I•:s tceea eicecnsed.

Mnnifn...._ '

See. 13=1. (A) As used in sxtioss 1302.01 to I30Z88, indu-siti•e, of the Revised Code, nrilecs c6e coateft o9tensise requires:

(I) "BuTer" mnos z psson wlw b;s3z or eaahxcts to buy goods.(2) "Gnad faith° in the case of a merduat mexns han-sty in fatt and

lbe obseiyance of re2sonahle twr=erdal atandards of lsir drlliag in thetrade..(3) "Receipt".ot goods means tafdng physical pESessiua oI thrm.

(4) "SeBer"mransapnsoawhasrlborm:uacatosellgaods.(5) °h'udunY' mrans a pvsoa Rba deats in goods of the Idn! ar

othernine Iry his oeeupatloa bafda himsdf out as lndttg Imon•ledge or sldCprmdiar to Ibe practice+ or goods ineolved In the tnmeMtiua or to whomaach lvor, fedge or slall may be attrsb•.ued by bis em?!nymmt of an agcator b:oker or othrr infetmediary who by his oavpaboa bofds bimself antas

-

i¢vfog atth ffiorvlsdge o: sMIL .

(6) "F'ms agmey" meaoa a banh, 5nanrs cavpaay, or othrrperson who in the ar ' oo•.use of bwiness mxkrs advaacv agamst goodsor dommmts of titla o_ cho by arrangmarnt with either th: setler or theb•ryei mbervenea in ocdiaa:y course to arake or eo8ect px^ment daa orelaicaed under the'matraet for sale, as by puiehasing a: paFsag the aeller'sdrzfE or ouldng advseces against it or by mrxfy taldag st for collationMtethq ar not domments of tide aeooml'say the drafi.ituadng agency"indadet aLto a btnt or,Clser, peraort who sbmlarly intervenes betrreen per-aoas who are in the pwition oI srJler and buyer ia reapact to tbe goods; (7) "Betaern mtmbaats° meaaa ia aty transaerion with raspeet to

n3ich by,h partiesare chargesble x'tth tlK I.natcledge nr stdll of ine.dtants.(8) "Goods" mnns all thiogs ((sstlnding speually manufacturpl

gucds) n'hicts are mavable at the time of identifieation to the contract for;ak other than the monep ia uiuch 6se price is to he paid, investmeat sc-curitie; and things in aetion. "'Goods" also iadudes the mshocn youngaf aaimz6 and groxing etapsaad uther ident75tddthinga attached torplty as dmnled in section 1302D3 of 1he Revised Code.

zzCrnods m+ut be bath e:tsting and ideaCfied be[ore sn7 iutaeat im them

tan psss. Caods .rSL-h are nct tn'lt eristing aad identrfirid are "fa[mt"poods, A purported prr.mt srle of fWare yuods ar of any interest therrinoperatn ss a contract to se1L

'lmue may be a sale o°. a psrt intaest in existfng idmfified. gvods.

An mdiridetl aha.re in aa idmtified bulk of inag3ble goode is suffi-cimtly idm[iE+zl to be teid although the quant$y of tlae bulk is not de-tmaio-ei. Aay agreed lxcpartion ot such a bulk o: any Qoantity thveofagreed upan by rr.snber, neigtd. ar other meaastae wy to the ezeent a[ theseller's interest in the bulk be sold to the buyes wha thm becnmes an oxoerhi rnmmaa.

(9) "Lnt" mcaas a parcel or a singie extic[e vbich It the subjettmetser u[ a separate ssle or de0rery; chether or swt it is mt£6dest to per-fosm thscon4stf.

(IO) "Cammerd2l unit" tonsat such a unit oS gmda as b7 enm-nrercd nnge is a aingle w'hale far pvrpases of srJe aad dsisfet of whichmahria![y impaire its rbanatcr or rafne on LLse matt8 or fa au A mm-membd uniT toay be a amgle arHde (as a nssddne) or a aet of artldea (saa snite of farmttae or an assottmml of sizes) or a qawBty (as g 6afqgross, or arlaad) or eny oyser amt tratnd jn use or ia the idecantmarket aa .- single nbak.

(11) Caohart" an3'agctemrnt" are limited to those rela6ngtafl,e present or fotme rude of gxdL "Cmtract far sak" iaduder balh apresmt sale of goods and a coatrxa to sdl goad; et a falme dme. A "salt"masists in the passiag o( tnle fnm the odkr to the buycr for a ps[ee. A"prexo; sale mms+ a sale stdeh is saaa,plishrd by the making of thecnatxct.

(12) Goods m m:duct including any part of a pectoemaaoe are"mafocmiag" or coofurm m tbe mntnct .rhm they aro m accardanoeaitb the obfigatioas tmder the coatract.

(13) "Tesmhartion" omuc whm eitfxr pariy parsmnt to a powercrahd by agreeaxnt or tas pub sa end ho-ehe ^ernhact attusaise thartfor its b.-endt. On "terroinsiion" all oldig-etions shi:h are sa'8 e:ecaauy onbo0t sidea are dischargeni but any nglit tased on psior brmcb or per-focrmnx anrrniFes-

(14) °Cam,dlation" oecars atun eithar party pms an md to tfuoontssct far bcead, by tbe other and its effect is the same u tbat of^tamieatiaa erce[K that the aorelling party alsn rtlains anr remedy forbcvrL of flhe ehnie c»ntract ar any m.performed balance.

(B) Othc defin8iaas appiying to sections 13021JI to I30Z.98, m-dusiie, a[ the Reri+ed Code are:

(1) "Acceptancc", as dtfined ia sculma I302.62 of the RevisedCade;

(2) "Radas's credit", as defined in secefon f302.38 of tbe RevisedCode;

(3) "Canfirmel aedit", as defwed in sec.tion 1302.38 0: the RevisedCode;

(4) °Casu", as deflned in srction I302£6 of the Revised Code;

(5) "Ltntrtssting', as defmad in section 1302.44 oE the Revised Code;(6) "Idmtification", as drPmed in- secfio7 tk7Z43 of the Retiaod

Code;{7) ")nrta8ment eoutnrt". as drfined in sstion 1302.70 of the

Revised Cade; , .(8) "Letter of uel'a", as defsacd in aecR3a 1302.38 of the Revised

Codei(9) °Ovecsaas", as defined in section 1302.35 of the Revised Cade;(10) "Persoa in position of a sellet', as d65ntd in sectinn I302 81

of the Revised Code;(LI) "Sale on approval', as d:fined in section 130239 of the Re-

rixd Code;^(12^"3ate or return", as de5med 'm•seclfan 1302.39 of the Re-

(C) As used id serhoas 1302.01 to 1302.98, intlusive, of the Re-rised Code, "cbecY' and °dsa[t" Inre Itu meaning set forth in sectlm1303.03 0( the Resised CadG "masiguee" and "oool-Qnor'• base tbe ruean-iog set [o.-th in sectian 1S07.01 of the RetiA (:ade, "mnsumer goads"bss the, meaoiog aet fa:tb in section 1309.07 of tGe Revised Cadc and"•dishomr" lus t1a: m®niug. set farth in sKmtioa 1303.ts^ of the RotasedCude.

(O) The teems and p:iacip!es Vc canstrurtion and'mterpreCSfion rrt[arth in sertions 130LAt to I301.14 inrlasfre, of the Revised Code, areappUrable to seUions t302.oL to 1362.93, inelusn-k of the Revised Code.

3ee 1302.02. Unlastbeemdeatot8enviserequires6 sectians 13U2.01to I30298, indusireq of the Revised C.ode, npp^y to tsansacliom in gaods;they da nat apply m any traa^attton ^chirb -aftlfo^ in the form of annnconditioasl raxracs m seH or preseat sale Ls iatended to opentc only asa saurig tnusaasion nor da .serliw,s 1302A1 to 13'32-98, indusive, a tbeRevised Code impair or.repeal aay stataie regu[sting sales to cvar.mners,farmus, or otber specified dassrs of bnyers.

Goods to be aeresed from reilty: recordiag.

See 130203. (A) A mntsact for the .sa1c o` tlmb<r, minerals, ort[m b'ke or a strucbue or its matevb to be reauted 6rom realty is acnntrart far the sak of pods within saetiom 1302.01 to 130Z98, iactustre,d the Revined Code, if they are to he severed by the seJlet bud uoa'IaeReanm a purported pcesent ale mereaf tslGrh is not eHe.7ire as a trans-fer of an ioterex in land ta eRectne aily u a rotrart ta seIl

(R) A ca.unact for the srle apart from the land of growiug rrnpe are0tcr things atfached to reatry and caeaftte of sererance xithoat matesialtam t6emo 6ot not described in dhisroa (A) of this sectfun is a contraetfar; the.sale of goods sritbin seetlans 1302.01 to 130298, inclasivr, of theRecised Code, tehetlser the subject matter is to be ,sevaed by the buyerar by the sellrr eem thoag8 it forras part of the «alty at tbe tic.e of

ma 28

rt--r-*•c--,..=t-le walnsN or ctaas..

Sex. 1302.15. (A) II the eaurt ac amtter of taw bads the coe-tnct or xuy dan._ af the matsut to hace been uaco.^,scionable at the tuaeit ¢as smde thc cn:m msy refuse tn eeforce the rottract or it any eniolcestbe remeinder af the caotrart ni8mot tbe aarmscmaldr rhusG or it msyso liedt the appt'.r.aCioa of any raumsionabfe dause as to avoid any sm-mnciooahte rrsd;.

(B) R'bea it is claimM or appyn to 4x murt that the eoatrahoe any eixase thermt mxy be sasu+..•dou--..tae the p.uttes a.ha0 ba aKordeda rawuab!e opportunity to prasmt erideoce as to its convnerdal eefing,purpasc, aad elst to aid aF.e mmt in mahing the det•rmM+r+om

ABaeati® or dirisioa of tiab.

Sec 1342.ib. li'here thr prorisions of arc6oae 1302.01 to 1302.93,inrlmire, of the Rerised Cade alknte a rlsY or a busden aa bttweer< theputim `uatess otbsxise agned° l6e aPrermrnt toay oot enlp a1rJt theaDsatim but may also diride the risk or bardea

Pdoe pryabL 4r mmay. gendh osky, or af5etwia6Sec fYJ2.17. (A) The p:ice taa be made payable ia money or

otbrra5te. ff it is palab}e in .ciwle oz in part ia g.wds each party is a ar9eroftfie goods n-hich he (a to traasfer-

(B) E.ft though aU or part of tbe.price Ss payable in an iaterettin realty the traasler of the goode and the scller's ot+t' rom w70s r3c-emtt to them ae subjxt to uxtioas Lkt7,01 fo 1.D02.9$ "uulasirq of theQeristd Code, but rwt Ihe Isannder of the interest in realty or the tsaas-ferot:a obligatioas im cumnetlim tberenif5.

Opm priee term.

5ee 1302.18. (A) T&, putirs if they so ia7end na condude amiirazt fer.vle evea.thaugb the priee is not setded- fn ssxb a ose thep-tix is a rraso:ahk prioe et the time fce deGrvy cY:

(1) notL'ang is ssid as to price; or(2) tbe psice is leh to be agrrsd bq the parties aad they fail td

agrac; er(3) the price is to be fixed in terms oF aome agreed market or other

standasd as set or recerded by a Orird persoa or agzmy and iE it is aot eosd a rsorded.

(8) A pam to be 6zed by the seBer ar bp the buyv. means a pricefor him tr fir in;ood faith

(C) LVhmafeft to be flred athrnrise than by agteema# ot thepactes fasTs to be fiud.fluoabls fault of onr party the atha mav at hisoptioa trert the cmthzct aa ctocdk,d or ti^ulf fix a reuomhte pcim.

(1)) 1h1:ar, boxeres, tbe putim intmd aot to be bo®d ualcs thep:^ ba fixed or aZrxd and it is nM fixed o: agreed there Is ao waUazera s^sh a use the buyer mmt ratarv aay goads alre:dy reeeitroi ar itun:b!e to do m aaot pay tluir rasonab`-e ,y1un at the dnx of ddiewy andthe se{kr mutt rdura aap por[im of the Price paid oa aarasnt

Oatgap reqa's"msmta, wnd .cdcai.e dadmyp.Sea. 1302.19. (A) A tmn qfiids mevausea the qin.yo.y by the

on1pS o` tbe aelles or the rcquiremws of the buyer peans suds actucloutput or requirements as oay occnt in good faith, except that nn qnaatity

normwaaWf disproportionatt to any stafed estsmat¢ or m the cbsmee ofa s9ted esumate tu any mrmal or othermise wsnparab's prior oatpir: orrequirenents rtmy be tendered or detnaaded.

(B) A tascful t by eithn the s81er or tbe huyer for rx-dndre dealing in the ^ of goods cmttranl imposes anlrss otlsenvi.uagreed an obfigation by the srller to ume besteHorts ta avpply the goods andby the tsaye td ase bxt e8ores to Qromate tlwr aafr.

patirery in aiwe lot or aeveral lota.1M.20. Ualus oBses^sise aprcad all goods ratkd for by a mn-

[wct [or esk most fie tendered in a swg(e ddil'es7 and paymwt is dueo,ly on such tender bt alhere the cirttmstances giee eithfr pastl' the rigidto make or demami ddivrty in lots &e prioe tf ir saa be apywsttmed may bedemauded for earh.lot

Abaance of aped6ed Pbre far d410re27.SOL 130Z2f. Unlas otberrfise ageced:

(A) the a1zce for ddirery af goods is the aeller's p:ar..e o' b•.ssioess orif he Las none Iis residente; but

(B) in a conttact for sale of idatified gowis whicb to the lnwmkdgeof the partie: at the time of ooatracting are ia some othar pSaee, that plareis the pla¢ for their ddIvxry; and

documents of title mar be ddivered tbrough customup batddageaaoel)s.

llhseoee of ayed5a tfine pro►iaiomst mtice of tasnia.tinn.

See. 1592,12. (A) Tbe Lime fo- sldpusmt or delicery• or any otheraction uader a cae3nct rT not prosided in aettioos 1302.01 to 130298, in-ilaslrq of ffie Revised Code or agreod upon s[nlt be a reasomble time.

.. . (B) L1R+ae tbe emtsart for sumessive pe+farmaoca bata iadefusite fn dura[ina ft is va -bdfor a retaonabla time bat tudms othorrv.•ise

s.greed mar be terminated et any tisue by etlur partlc

(C) Temdaa6mt of a^xi hy oae ^ eacept on tbe 6appcmugd an agreed es'eat re3nirra that reraonable mtmntion be rrieaced by theoSsc ^oKy md an agreement dispemiog aith nnti6ntion is incalid if itscprnbsn nvtdd be tmeactscioaable.

Eec. 1392.23. Unless oflnerwise agreed:

arinANugwds wten t6o:+gL the time af shssm eent ts the phthe ottrayer s

vey;

riR

182

tim 4505A9 of tl;eRc.ixd Code, mar hare a a^at aE snr): lien rrzde onthe 6tt of auds atctz6ete of title.

The dvk sha0 mter said notatintt and the date thaeof orrr Eds slbma-tsae " seal of a&ce, and he shall also oote aurb lien and the date sLeieoEan the dnpl"aaee of svne in his files and on thet day sha?L.notitr theregatrer of mo:or cehicles, who shall do l3cmise. The derk tba11 alsomdinte by appro?,iate notatiss oa sr,xis •'• agremtcnt itsdE tha facttbat msch lim lus leto uotcd on the certifirz2 oE tille

\\'hea such a liea is dischasgcd, the ho!der thereot sha0 note adis-tbarge ol same aa the face of the cutifitate of tit]e over his r. goetore.Prior to defi,im" g sub certifinte to the awner, the hotder shafl eitherpresmt [ ta thc 8erk for the pcupeee of hat9ag tlte tkrk aote the tance]-latino of safd lien on th: face of said certificate el title and sspoa therecords oi the derfc. or dsril, a it.h:n tw dals of the deacharge af sudi Gen,ddiev to the derk of the m;snts in rhidt such Geo is recorded a separnter.nllea notice ot dischargc for eads llen, Enr the mr.edtatieo of tarh 5urblim m the reeords cf the clcrk, mohiaing the name of the certi9ote o!tifle haldez, the tsame of the GmBotder, the dalc of the notatiea of the6en, the anmmt of tl•a lxn, a:td the date of the tli,drzrge of the lien a0orer the signat,ue of suds certificd"e hoWer, Tl:e desk, if such eauce0ationappear to he geaniw itiall notE anC31 fERceltaCion an the certffiate oftit[e, aad he shall also onte sstd anaellatlon an lus secords and notifl' thertgisinr, civ slnlt oote such ancdlztioa. ..

se&

Repc'l.

Seenox 2 1LaEeav"3ngsationa13t129,13135$13[7AI,L3[7A3,170127, 1701.45, 170145, 2355.06, 2305.07. 230A9, 2305.14 to 2305.17,indnssx, 7-40527, 271S.01, 4505.10, 4505d3, and stctiasss 1105.11 to110S13, indusim 1115.12 to 1115.15, fnclui,ve, 1301A1 to 130136,iadusise, 1307.01 to 1303.47, Wushre, I303.01 to 130559, ixlclusne,1V7.01 to 1307.09, inelusive, 1309.01 to 1309.05, indusice, 1311.52 to1311.64, imlusief, (3L3.53 to 131J.55, indus'sve, 1315.01 to 13L576, in-dusivr, 1316.01 to 1316.31, indudre, 1319.01 to 1319.05. inc3usinY,1319.05 to 131999, mdasire, 1323.01 to L323.99, indusEst. E325.01 to1325.OS, indusirc, 1335.03, 1339.05 tv 1339.07, induttm 1705.01 toI7IK21, iodudx, 2911.18, 4965.01 to 4965.49, iadusive, and 4965.99 ofthe Rcsaxd Code are hcdry repealed

ffietEee. '

Scatex 3_ This act shall uke e8ect 03 Jdy 1, 1952.

Ttnnsadions eafidlp enttred into hefore ssdt datt: and the rEzhts,

dais and "mtvests Buwing erons thw reruaiu cafid tErmaOer and snay be

terminated, cmapleted, cosuumnsaud or eoforced as re3tdsnd or pcmdtted

Ly any stahde o^ othu lar. auuoeted-or trpea'.ed by Ods Act as though sach

repeal or acsodmrat Isad nat occuried

183

Instsumentv, donwmts, or uotites Lted prso.- to Juty 1, 1962, In ac-cordance uith the law at Ehe time of euch filings s1uII E: dermral to befiled undtr section one of iisfs Act as of the ariginal dale of filiag and maybe cantinued or tesminated as prosided i¢ section oae of tlils act.

ROGER CLOUD,Speoker of tke lioere oJ Represectdfocs,

JOHN W. DONAHEY;

Passed April 27,1961. -

Apptored Idaj 18, 1961.

Dftt,HAEL V. DsSALLfi,Governor.

Presider.t of tke Seuale.

seetiaa,ll]Sbot ani ebe Eusa^-tlaa typt1^yydr t6e xsdaoal r^Ue+s on tY<au*aostF:reot are devgoatrd as prorided b) law.

OEi1O LBGIS1eL79YH SLAYIB G011055IONfaavrx A. Graaerr. Diredn.

. FEled fn the office of the Ssretar7 oF State at Columhus. O.iia, oa tht18th day af ATar, AD.1961.

4ED W. BROWN,Secrettcry of Stcte.

. File Na 65 FSectfce July 1, 1962

eAmm3:d Semte Lqll Ha, 7)

AH ACT

To mart swpLamtss ueioe 37!5?21 d ste Rnised Coderefatne to separate Endiog nf fact end tam.

Be it euatted by !lsr Gexeraf Assncbfl• ot the State of Ohio:

Sr.crtost LThat supplemantv.l sectiun 2315221 of the Recised Cakbe enacled to rend as fa0ovn:

Sey.rate fmd'ings of faet.

See 2315221. t4hcn upon the atatenuots in the pfeadings, or upan tlmoQeoiag sratements of cavnsd, or uyou the txidenee receiced upon thesrsal, a court renders judgment or duttts a serdsct eitLer paltp, rith aview of excepting to the mntt's acliou, ouy reqaest the ourt to slatc inutiting the bcES found separstely tront the anacksiom of tax, 11 sntts a re-