Ohio Department of Job and Family Services, Appellee-Appellant,
Delphi Automotive Systems, LLC, Appellant-Appellee.
from the Franklin County Court of Common Pleas, C.P.C. No.
Brief: Michael DeWine, Attorney General, and Eric A. Baum,
for appellant. Argued: Eric A. Baum.
Brief: Vorys, Sater, Seymour and Pease, LLP, Jonathan R.
Vaughn, and Michael J. Ball, for appellee. Argued: Michael J.
1} Appellant before this Court and appellee before
the Franklin County Court of Common Pleas, the Ohio
Department of Job and Family Services ("ODJFS")
appeals a decision of the Franklin County Court of Common
Pleas entered on November 5, 2014 which reversed a decision
of the Unemployment Compensation Review Commission
("UCRC"). We find the court of common pleas entered
a judgment that contained legal error in impermissibly
narrowing the plain meaning of the phrase "at the time
of the transfer." Because the court of common pleas did
so, it abused its discretion in considering whether the UCRC
decision was in accordance with law and supported by
reliable, probative, and substantial evidence and we reverse.
FACTS AND PROCEDURAL HISTORY
2} In an agreement dated July 30, 2009, and signed
on August 5, 2009, General Motors Company and Delphi
Corporation, among other entities, entered into a
"MASTER DISPOSITION AGREEMENT" with DIP HOLDCO,
("DIP") and other parties whereby DIP would acquire
certain assets of Delphi Corporation. (Apr. 8, 2014 UCRC
Admin. Records at 455-607.) This agreement was part of a
modified plan for reorganization of Delphi Corporation
approved by the United States Bankruptcy Court for the
Southern District of New York and had an effective date of
October 6, 2009. Id. at 609-13, ¶ 3.
3} Insofar as this reorganization affected Ohio and
the case at hand, a number of state unemployment compensation
forms were completed showing the disposition of various
component businesses of Delphi Corporation, specifically
Delphi Automotive Systems Services LLC, Delphi Automotive
Systems Human Resources LLC, and Delphi Diesel Systems
Corporation (collectively "Old Delphi") transferred
to a company which, for simplicity, we shall refer to as
"New Delphi.",  Id. at 438-42. Among these
forms was one which marked "yes" to the query,
"Did you acquire a portion (less than 100%) of a trade
or business from an employer with which your business has
common ownership, management, or control?" Id.
at 390, 442. These forms were completed and signed on a
variety of dates in Fall 2009. See id. at 438-42. On
the effective date of the transaction, October 6, 2009,
Delphi published a press release in which it asserted,
"Rodney O'Neal [who became President and CEO of
Delphi Corp. in 2007] will remain President and CEO and the
current leadership will continue to manage the company's
global operations." Id. at 396, 406. A
biography of Rodney O'Neal produced from New Delphi's
investor relations page relates that O'Neal was Director
of the Board since May 2011, "became President and Chief
Executive Officer of [New Delphi] effective October 6, 2009,
" and served as Old Delphi's President and CEO since
January 2007. Id. at 406.
4} On June 20 and July 6, 2011, based on the common
management or control of Old Delphi and New Delphi, the UCRC
issued rate determination decisions that accorded Old
Delphi's higher tax rate (rather than the lower rate for
new companies) to New Delphi for the years 2009-2011.
Id. at 10, 12-24. On July 19, 2011, Delphi sought
reconsideration of the rate adjustments for 2009 and 2010.
Id. at 5-9. The letter seeking reconsideration
maintained that the forms admitting common ownership,
management, or control were erroneous. Id. at 6. The
letter represented that New Delphi was incorporated in
Delaware on August 21, 2009. Id. at 5. It also
represented that at the time of the transfer of assets from
Old Delphi to New Delphi, the officers of the new company
were David Miller and Jeff Fortizzi. Id. The
directors and corporate officers of Old Delphi, the letter
claimed, departed on October 6, 2009 and "[u]pon new
board member approval, the corporate officers of New Delphi
were appointed." Id.
5} A designee of the director of ODFJS denied the
request for reconsideration in a decision mailed on September
7, 2012 based on the finding of common management and
control. Id. at 11. By letter dated October 4, 2012,
Delphi sought an administrative hearing on the matter.
Id. at 30-32. Delphi again indicated that the
admission of common ownership, management, or control was an
error but this time asserted that in the period immediately
after the October 6 effective date of the transaction but
before the "new board" approved "the corporate
officers of New Delphi, " David Miller and Michael Gatto
were in control of New Delphi as its officers. Id.
at 5, 31.
6} On November 6, 2013, the UCRC held a hearing.
Id. at 345-84. At the hearing, both sides agreed
that the rate determination was based on R.C. 4141.24(G)(1)
and that the hearing would, therefore, be limited to that
topic. Id. at 350-51. ODJFS presented no witnesses,
relying instead on its exhibits. Id. at 348-49.
Delphi presented one witness, Mark Rozycki, who was (at the
time of the hearing) the Director of Tax Administration for
New Delphi and had been employed in that capacity since
October 6, 2009. Id. at 352.
7} Rozycki testified that Old Delphi did not sell or
transfer all of its trade or business, just certain assets.
Id. at 362-64. In addition, not all employees
transferred from Old Delphi to New Delphi; 882 of the
original 1, 266 persons employed by Old Delphi were retained
by New Delphi. Id. at 364. However, Rozycki
acknowledged that the October 6, 2009 press release stated
that the executive control of Old Delphi would continue to
New Delphi. Id. at 371-72, 396-97. In addition, he
confirmed that each of the executive officers of Old Delphi
held the same positions in New Delphi after the transaction
was complete. Id. at 354-55. Specifically, he
testified that although the executives of Old Delphi were not
formally appointed by the new board until October 23, 2009
(over two weeks after the October 6 effective date), they
were paid in the interim and carried out their duties as
corporate officers. Id. at 372-73. These officers
acted in their paid capacities but were claimed to be not
"officially" in control. Id. Official
sign-off had to be completed, during the 17-day
pre-appointment period, by Miller and Gatto. Id. at
373. Rozycki was not aware of the details of company
ownership in terms of stock holdings or options, but he
testified that he did not believe ownership was common
between Old Delphi (which was publicly traded) and New Delphi
(which was owned by two hedge funds). Id. at 360,
366-67, 369, 373. He also testified that the board members of
Old Delphi and New Delphi were different persons.
Id. at 369.
8} Following the hearing, in a decision mailed on
November 13, 2013, the UCRC affirmed the rate determination
subjecting New Delphi to the higher tax rate inherited from
Old Delphi rather than the lower rate for new companies.
(Nov. 13, 2013 UCRC Decision, filed in the Franklin County
Court of Common Pleas on December 13, 2013.) In the decision,
the UCRC stated findings of fact in relevant part as follows:
On October 6, 2009, assets that were previously held by [Old
Delphi] were transferred to [New Delphi] through a bankruptcy
reorganization. Approximately 67% of the employees who were
previously employed by [Old Delphi] became employees of [New
Delphi]. Some assets were excluded from the transfer. [New
Delphi] did not receive all or substantially all of the
assets that were previously held by [Old Delphi].
Immediately upon the transfer of the assets, [New Delphi] was
owned and controlled by Silver Point Capital L.P. and Elliot
Associates, L.P., which were two senior creditors of the
business. However, [New Delphi] was managed by the same
individuals who managed [Old Delphi]. The President,
Treasurer, General Counsel and Secretary, and others in
high-level management positions, remained the same. * *
a press release issued on October 6, 2009, Delphi stated,
"Rodney O'Neal will remain President and CEO and the
current leadership will continue to manage the company's
(UCRC Decision at 4.)
9} The UCRC then reasoned:
[New Delphi] can be deemed a successor in interest  if a
portion of the business of [Old Delphi] was transferred to
[New Delphi], and [New Delphi] was under substantially common
ownership, management, or control as [Old Delphi].
** * The Review Commission finds that [New Delphi] was an
employer at the time of the transfer as 67% of the employees
were transferred to [New Delphi]. Further, Section
4141-17-01(C) of the Ohio Administrative Code defines
"successor in interest" to include any person or
employer as defined by Section 4141.01(A)(1) of the Ohio
Revised Code that is or becomes an employer and that acquires
a trade or business under Rules 4141-17-02 to 4141-17-05 of
the Ohio Administrative Code. Even assuming that [New Delphi]
was not an employer at the time of the transfer, it
subsequently became an employer soon after the transfer. * *
** * [U]nder Section 4141.24(G)(1) of the Ohio Revised Code,
the transferee assumes the unemployment experience
attributable to the transferred trade or business if, at the
time of transfer, both "employers" are under
substantially common ownership, management, or control. In
this case, [New Delphi] was, at the time of the transfer,
under substantially the same management as the transferred
business. Individuals in key management positions, such as
the President, Treasurer, and General Counsel and Secretary,
continued to manage [New Delphi]. On October 6, 2009, Delphi
issued a media release which stated that "Rodney
O'Neal will remain President and CEO and the current
leadership will continue to manage the company's global
operations." Therefore, based on the evidence presented
in this case, the Review Commission finds that [New Delphi]
was under substantially common management as [Old Delphi] as
of October 6, 2009, which was the date of the transfer. In
addition, the Review Commission finds that [New Delphi]
acquired a portion of the trade or business of [Old Delphi].
(Decision at 5-6.)
10} On December 13, 2013, Delphi appealed the
decision to the Franklin County Court of Common Pleas. Both
parties to the administrative appeal submitted briefing, and,
on November 5, 2014, the common pleas court issued a decision
reversing the finding of the UCRC. (Nov. 5, 2014 Common Pleas
Decision.) The common pleas court noted that the UCRC
decision "was based upon the Commission's
conclusions that (i) Old Delphi and New Delphi were under
substantially common management at the time of the transfer
and (ii) New Delphi was an employer at the time of the
transfer of a portion of Old Delphi's trade and/or
business to New Delphi on October 6, 2009." (Com. Pl.
Decision at 1.) The common pleas court concluded that the
phrase "at the time of transfer" is limited to the
exact moment of transfer, neither pre-transfer nor
post-transfer. Id. at 10. Having narrowly
interpreted the field of inquiry, the common pleas court
stated "there is no evidence in the record that prior to
or at the time of the transfer there was any common, let
alone substantial, ownership, management or control of Old
and New Delphi." Id. at 8; see also
id. at 4, 10-11. It also concluded, "[t]here is no
evidence in the record that New Delphi was an employer, as
defined by R.C. 4141.01(A)(1) and used in R.C. 4141.24(G), at
the time of the transfer." Id. at 11; see
also id. at 4.
11} ODJFS now appeals.
ASSIGNMENT OF ERROR
12} ODJFS assigns a single error for our review:
As the Review Commission found, Old Delphi funneled certain
of its assets to a hedge fund, only to reroute them to New
Delphi 17 days later. But because the same management team
made executive decisions throughout the process, the trial
court improperly made factual findings, and thus abused its
discretion, in determining that New Delphi was not an
"employer" and did not have common ownership,
management, and control of the business at the time of the
STANDARD OF REVIEW
13} R.C. 4141.26 instructs that the court of common
pleas, when reviewing a decision of the UCRC:
[M]ay affirm the determination or order complained of in the
appeal if it finds, upon consideration of the entire record,
that the determination or order is supported by reliable,
probative, and substantial evidence and is in accordance with
law. In the absence of such a finding, it may reverse,
vacate, or modify the determination or order or make such
other ruling as ...