IN THE COURT OF COMMON PLEAS

FRANKLIN COUNTY, OHIO

)
OHIO ASSOCIATION OF ) CASE NO. 09 CV6663
INDEPENDENT TITLE AGENTS, et )
al., ) JUDGE HORTON
)
Plaintiffs, )
) PLAINTIFFS’ MEMORANDUM IN
vs. ) OPPOSITION TO DEFENDANT’S
) MOTION FOR SUMMARY
) JUDGMENT
MARY JO HUDSON, DIRECTOR, )
OHIO DEPARTMENT OF )
INSURANCE, )
)
Defendant. )

Now comes the Plaintiffs, the Ohio Association of Independent Title Agents

(OAITA) and Eagle Land Title Agency, Inc. (“Eagle Land Title”) by and through their

undersigned counsel of record and pursuant to Local Rule 12.01 of the Local Rules of

Practice for the Franklin County Court of Common Pleas hereby submit their Response

Memorandum in Opposition to Defendant’s Motion for Summary Judgment.

Respectfully submitted,

______________________________
Robert B. Holman, Esq. (0072480)
HOLMAN, FRANK & MCDONALD
P.O. Box 46390
Cleveland, Ohio 44146
Phone: (440) 232-9911
Fax: (440) 439-2308
E-Mail: rholman@hfm-law.com

One of the Trial Counsels for Plaintiffs

1
 RESPONSE MEMORANDUM

I. INTRODUCTION

The ODI’s analysis in support of its Motion for Summary Judgment misses a

critical fact. The Revised Code already contains an express provision which

unequivocally bars prohibited parties and their subsidiaries from acting as an agent of a

title insurance company -- O.R.C. § 3953.21(B). (Emphasis added). By promulgating

OAC 3091-7-04 and creating a new definition for the term “control,” the ODI has

attempted to expand and change the legislative definition of the term “subsidiary” within

O.R.C. § 3953.21(B) to permit prohibited persons and their subsidiaries to own financial

interests in title insurance agencies.

The term “subsidiary” is not defined in Chapter 3953 of the Revised Code. But a

“subsidiary” is defined in O.R.C. § 3901.32(F) as “an affiliate controlled by such person,

directly or indirectly, through one or more intermediaries.” (Emphasis added).1 The

term “affiliate” is also not defined in Chapter 3953 of the Revised Code. But the

ordinary and plain meaning of the term “affiliate” is “an affiliated person or

organization.”2 One certain way companies affiliate with another is through stock

ownership. Thus, co-ownership of a title insurance agency by a prohibited person or

through a subsidiary is illegal under O.R.C. § 3953.21(B).

The ODI has no answer for this conclusion. All it can point to is OAC 3901-7-04

which attempts to rewrite O.R.C. § 3953.21(B) and create permission for prohibited

persons and their subsidiaries where none was ever intended. The purpose of OAC 3901-

7-04 as stated in the rule is to “establish ownership and licensing standards for title

1
See O.R.C. § 3901.32(F).
2
http://www.merriam-webster.com/dictionary/affiliate (visited May 26, 2010)

2
insurance agents and agencies in accordance with division (B) of section 3953.21 of the

Revised Code, which prohibits certain persons from acting as agents for a title insurance

company.”3

Instead of defining what actions the ODI considers to be “acting as a title agent”

through an administrative rule, the ODI promulgated OAC 3901-7-4 to define “control,”

a term that does not appear in O.R.C. § 3953.21(B), and thereby created a means to allow

prohibited parties and their subsidiaries to act as agents of title insurance companies

and engaging in the business of title insurance. The ODI cannot create authorization

where the Ohio General Assembly mandated complete prohibition by use of the term

“subsidiary.”

The arguments contained in the ODI’s Motion for Summary Judgment belie the

stark reality of the title insurance industry and its direct impact on Ohio’s title insurance

consumers. Kickbacks and inducements, as manifested in the form of prohibited person-

owned controlled business arrangements4 (“CBAs”), eliminate competition and raise the

overall cost of insurance for title insurance consumers.5 Most importantly, these types of

business arrangements create inexorable conflicts of interest between the CBA and the

consumer, who in many cases is unaware of the fact that their bank, mortgage company,

3
OAC 3901-7-04(A).
4
The term controlled business arrangements includes title insurance agencies owned directly by prohibited
persons and/or controlled by, either directly or indirectly, a prohibited person.
5
Jack Guttentag, “Real Estate Settlement Services Take Bite Out of Borrowers,” Inman News, September
6, 2005; see also, The Pricing and Marketing of Insurance: A Report of the Department of Justice to the
Task Group on Antitrust Immunities, January 1977, Pages 250-274; “Chapter XII The Title Assurance and
Conveyance Industries” of Real Estate Closing Costs, RESPA, Section 14a, Volume II Settlement
Performance Evaluation prepared by Peat, Marwick, Mitchell and Co. for the Department of Housing and
Urban Development, October 1980; State of California Department of Insurance Bulletin 80-12, December
24, 1980, Subject: Insurance Code Section 12404 - Unlawful Rebates; Title Insurance Advisory Committee
Final Report to the State Board of Insurance, September 1986; Nelson Lipshutz, The Regulatory
Economics of Title Insurance, Praeger Press, Westport, CT, 1994, page 5;

3
real estate firm, referred the consumer’s title insurance business based not upon the

interests of the consumer, but upon the financial interests of the CBA.

The act of giving a kickback or an inducement for the referral of title insurance

business is illegal.6 Ohio’s General Assembly recognized this fact over forty-three (43)

years ago and instituted broad prohibitions to preserve the title insurance industry from

its referral sources (i.e. banks, mortgage companies, real estate firms and any subsidiaries

thereof). For example, the Revised Code contains numerous explicit provisions

concerning the outright prohibition of prohibited persons (i.e. banks, mortgage

companies, real estate firms and any subsidiaries thereof) from entry into the business of

title insurance, including: O.R.C. § 3901.21(E) (making it an unfair trade practice for a

third party, including a prohibited person, to issue stock in an insurance entity promising

a return on profit as an inducement for business); O.R.C. § 3933.01 (making it unlawful

for any person, including a prohibited person, to give or receive stock as inducement for

insurance business); O.R.C. § 3953.25 (making it unlawful for any person, including a

prohibited person, to pay commissions to an unlicensed agent); O.R.C. § 3953.26

(making it unlawful for any person, including a prohibited person, to give any thing of

value as an inducement for title insurance business); and O.R.C. § 3953.21 (making it

unlawful for any unlicensed prohibited person to sell, urge or solicit on behalf of a title

insurance company).

Despite these broad prohibitions, the ODI has chartered a new and different

course away from the mandatory prohibitions contained in the Revised Code. In

particular, the ODI promulgated OAC 3901-7-04 which, according to its stated purpose,

6
O.R.C. § 3953.26.

4
was meant to clarify only the prohibitions contained in O.R.C. § 3953.21.7 Under OAC

3901-7-04, the ODI will not license a prohibited person to become a licensed title

insurance agent or possess a majority interest in a title insurance agency, but it will

permit a prohibited person to own up to forty-nine percent (49%) of a licensed title

insurance agency so long as the prohibited person does not “control” the entity.8

The ODI Director possesses the authority to “adopt, amend, and rescind rules …

necessary to discharge the superintendent’s duties and exercise the superintendent’s

powers.”9 Presumably, OAC 3901-7-04 was promulgated in accordance with O.R.C. §

3901.041. However, the ODI Director’s authority in this regard is not absolute. The

Director may not create law, especially where the legislative intent is clear and

unambiguous.10 O.R.C. § 3953.21 is clear and unambiguous. OAC 3901-7-04 not only

creates new law, it usurps the old law.

While the rule creates new law with its presumption and definition of “control,”

nowhere within O.R.C. § 3953.21 is the word “control” ever used by the legislature.11 In

fact, the language contained in O.R.C. § 3953.21 sets the bar for prohibited person

participation at zero.12 The legislature was abundantly clear with the directive contained

in O.R.C. § 3953.21. No bank, mortgage company, real estate firm or any subsidiary

thereof can act as an agent of a title insurance company.13 (Emphasis added). There is no

presumption. There is no definition of “control”. The law simply bars prohibited

7
OAC 3901-7-04.
8
Id.
9
O.R.C. § 3901.041.
10
If the administrative rule in question adds or subtracts from the legislative enactment, the rule is invalid
as it is in clear conflict with the statute. Hoffman v. State Med. Bd, supra at 378, 865 N.E.2d at 1261; citing
Cent. Ohio Joint Vocational School Dist. Bd. of Edn. v. Ohio Bur. of Emp. Servs., 21 Ohio St.3d 5, 487
N.E.2d 288 (1986).
11
O.R.C. § 3953.21.
12
Id.
13
Id.

5
persons and their subsidiaries from acting as an agent in the business of title insurance.

(Emphasis added).

The ODI questions whether there is or is not a provision in the Revised Code that

prohibits certain entities from being “silent” partners or minority shareholders in order to

make the case that the ODI can substitute its judgment for that of the legislature.14 The

question is moot. The legislature was clear. The legislature did not permit “control” of

title insurance agencies by prohibited persons under any circumstance. Otherwise, it

would have explicitly said so in the statute. The legislature did not create a presumption

to favor prohibited person participation in title insurance agencies. Again, otherwise, it

would have explicitly said so in the statute. The only thing the statute does is to bar

prohibited persons and their subsidiaries from access to the business of title insurance,

which is defined to include solicitation, negotiation preliminary to execution, etc.15 All

things that suggest a preference for the strenuous prohibition against prohibited person

and their subsidiaries from participation in title insurance agencies.

How then did the presumption in favor of prohibited persons and their

subsidiaries in the business of title insurance and the definition of “control” suddenly

appear on the scene after over forty (40) years of non-existence? The answer is that the

ODI arbitrarily created both terms by administrative rule. By creating a presumption

where no such presumption previously existed and creating a definition of “control” to

subvert the statutory definition of “subsidiary,” the ODI has created a burden of proof

seemingly favoring prohibited person participation in title insurance agencies that never

14
Defendant’s Motion for Summary Judgment.
15
O.R.C. § 3953.01(B)(2) & (3).

6
existed in the statute and thereafter completely undermines its efficacy. As there is clear

conflict between the rule and the statute, OAC 3901-7-04 must be invalidated.

II. LAW AND ARGUMENT

a. A Prohibited Person May Not Act as an “Agent” of a Title Insurance

Company.

O.R.C. § 3953.21 expressly states that a prohibited person may not act as an agent

of a title insurance company/underwriter.16 The ODI reads the above-cited section to

permit a prohibited person to own a minority financial interest in a licensed title

insurance agency.17 There is no such permissive language in the Revised Code. Instead,

the ODI created it by rule.

The term “agent” is not defined in Chapter 3953 of the Revised Code.18 The ODI

points to the definition of “agent” found in O.R.C. § 3905.01(D) which states that an

“agent” is “any person that, in order to sell, solicit, or negotiate insurance, is required to

be licensed under the laws of this state … .”19 By virtue of the ODI’s own definition,

prohibited persons cannot sell, solicit, negotiate, steer, or direct title insurance business

for a title insurance company and they cannot be licensed.20 Yet, selling, soliciting,

negotiating, steering and directing title insurance business is precisely what a prohibited

person with a forty-nine percent (49%) interest or less does with a CBA.21

Normally, where a term is not defined in the statute, the term shall be given its

natural and legal meaning.22 Even assuming the common law definition of the term

16
O.R.C. § 3953.21(B).
17
OAC 3901-7-04; see also, Defendant’s Motion for Summary Judgment.
18
O.R.C. § 3953.01.
19
O.R.C. § 3905.01(D); see also, Exhibit D to Plaintiffs’ Motion for Summary Judgment.
20
O.R.C. § 3953.21(B).
21
See Exhibit A, attached to Plaintiffs’ Motion for Summary Judgment.
22
The term agent was not defined in the statute. The Ohio Supreme Court has reasoned that: “the term
‘agent’ should therefore be given its natural and legal meaning, that given it by the courts, and derived from

7
“agent,” it is impossible to imagine how the legislature’s language in O.R.C. § 3953.21

was anything other than a complete bar to the participation of prohibited persons in the

business of title insurance. Under common law, acting as a representative, including

owning an interest in a title insurance agency, makes one an “agent” for purposes of

O.R.C. § 3953.21(B).23 Under the common law definition of “agent,” prohibited person

co-ownership of a title insurance agency is prohibited by O.R.C. § 3953.21.

O.R.C. § 3953.21 is meant to be read broadly. The statute is not immune to

common sense application. The General Assembly sought to bar prohibited persons

from acting as an agent for a title insurance company -- whether soliciting, selling or

urging the use of a title insurance provider or under the common law definition of the

term “agent.” Either way the term “agent” is defined, the legislature intended to bar

prohibited persons from the business of title insurance, which is conducted through title

insurance companies by agents. In fact, the term “business of title insurance” is defined

to include the very things that a title insurance agency might do in the performance of its

services such as: “transacting, or proposing to transact, any phase of title insurance,

including solicitation, negotiation preliminary to execution … .”24

For the ODI to be correct in its assertion that O.R.C. § 3953.21 tacitly permits

minority co-ownership of title insurance agencies by prohibited persons, the legislature

would then have barred prohibited persons from acting as an agent of a title insurance

company under O.R.C. § 3953.21, but tacitly permitted those same prohibited persons to

the principles of the common law.” “In the absence of statutory definition, it includes a soliciting or other
agent, authorized to act ‘in respect to that branch of its business intrusted [Sic] to him.’” John Hancock
Mut. Life. Ins. Co. v. Luzio, 123 Ohio St. 616, 628, 176 N.E. 446 (1931) citing Mass. Life Ins. Co. v.
Eshelman, 30 Ohio St. 647 (1876).
23
Berge v. Columbus Community Cable Access (1999), 136 Ohio App.3d 281, 301, quoting Restatement of
the Law 2d, Agency (1958) 7, Section 1.
24
O.R.C. § 3953.01(B).

8
engage in the “business of title insurance” with the same statute. This position is

logically untenable. The legislature was clear in barring prohibited persons from acting

in the business of title insurance. A rule which creates a presumption in favor of

prohibited person participation in a title insurance agency and defines “control” to permit

ownership of a title insurance agency is in direct conflict with O.R.C. § 3953.21.

b. The Rule’s Definition of “Control” Conflicts with the Statute’s

Definition of “Subsidiary.”

The only reason the ODI sought to create OAC 3901-7-04 was to expand and add

to the definition of the term “subsidiary” as used in O.R.C. § 3953.21(B) to permit

previously licensed CBAs to continue doing business in Ohio. After all, in the fifteen

years since the ODI issued Bulletin 95-3, which stated that stock dividends and profit

distributions were prohibited “things of value” under O.R.C. § 3953.26, hundreds of

CBAs had already been licensed by the ODI and were openly operating in Ohio. The

obvious obstacle posed by the “subsidiary” definition was no stranger to the ODI or to

the prohibited person community.

In 2000, a few legislators in the Ohio Senate attempted to enact S.B. 281 which

contained a provision that would have removed the phrase “or any subsidiaries

thereof,” from Ohio Rev. Code § 3953.21(B); thereby eliminating the prohibition with

respect to “subsidiaries” of the specified prohibited persons.25 (Emphasis added).

Proposed S.B. 281 never passed and never became law.26 O.R.C. § 3953.21(B) still

contains the same subsidiary terminology as it did in 1967.27

25
Ohio Rev. Code §3953.21(B) and S.B. 281, 123rd General Assembly (As Reported by S. Finance &
Financial Institutions).
26
Id.
27
O.R.C. § 3953.21(B).

9
 On January 1, 2007, the ODI substituted itself for the work of the General

Assembly and emasculated the definition of the term “subsidiary” by promulgation and

enactment of OAC 3901-7-04. In reinventing Ohio law, the ODI created a new definition

of “control” with OAC 3901-7-04, but did not use the only insurance-based definition of

“control” found in O.R.C. § 3901.32(B) that defines a presumption of “control” existing

at ten percent (10%). Instead, the ODI created its own legal presumption of “control” at

fifty percent (50%).28 In response to this obvious difference, the ODI argues that the

definition of “control” found in O.R.C. § 3901.32(B) only applies to insurance holding

companies and has “nothing to do with title insurance.”29 This response underscores the

ODI’s lack of understanding when it comes to the structure of CBAs and the

promulgation of rules to properly interpret the General Assembly’s well-placed

prohibition against their creation.

Insurance holding companies are defined as “two or more affiliated persons, one

of which is an insurer.”30 An insurer is defined as “any person engaged in the business of

insurance.”31 Based upon these definitions, the insurance holding company section,

insofar as it provides a definition of presumed “control,” has everything to do with

CBAs and the title insurance industry. (Emphasis added). The ODI overlooked O.R.C. §

3901.32(B) when it promulgated OAC 3901-7-04.

The ODI deflects from its selective interpretation of Ohio law by arguing that it

lacks the ability to interpret these statutes as the General Assembly intended because the

28
OAC 3901-7-04.
29
Defendant’s Response to Plaintiffs’ Motion for Summary Judgment.
30
O.R.C. § 3901.32(C).
31
O.R.C. § 3901.32(D).

10
statutes themselves do not refer specifically to title insurance.32 Simply put, the ODI

cannot “connect the dots” unless the line is drawn for them. The ODI’s argument is

disingenuous on its face.

Based upon the statutory framework established by the General Assembly, a

prohibited person’s participation in a title insurance agency is prohibited. The ODI may

not like the administrative outcome of that fact, but under Ohio law, it has no other

choice but to view it that way. Since 1967, the prohibitive feature of the title insurance

industry has been and remains to be the law in Ohio.

c. Ownership Dividends That Are Derived From Title Insurance

Commissions Are Prohibited Inducements.

The ODI is incorrect in its generalization of Plaintiffs’ argument concerning

prohibited person-ownership and control of title insurance agencies. Nowhere in

Plaintiffs’ Motion for Summary Judgment have they argued that only title insurance

agents may own an interest in a title insurance agency or otherwise control that entity.33

Ohio law only makes it unlawful for prohibited persons to own or control a title

insurance agency.34 OAC 3901-7-04 clearly conflicts with Ohio law on this point; which

is why the rule must be invalidated.

32
Defendant’s Motion for Summary Judgment at 2. (“Nothing in the Revised Code requires title insurance
agencies to be wholly owned by licensed title insurance agents. Nothing in the Revised Code prohibits title
insurance agencies from selling equity shares. Nothing in the Revised Code prohibits unlicensed equity
owners in a title insurance company from sharing in the profits and losses of the agency in proportion to
their ownership.”)
33
Defendant’s Motion for Summary Judgment at 2; see also, Plaintiffs’ Motion for Summary Judgment.
34
O.R.C. § 3901.21(E) (cannot sell stock to a third party promising to returns or profits as an inducement to
insurance); O.R.C. § 3953.21 (banks, mortgage companies, real estate firms and any subsidiaries thereof
may not act as an agent for title insurance company); O.R.C. § 3953.25 (commissions can only be shared
with licensed title insurance agents); O.R.C. § 3953.26 (prohibits the giving of any thing of value as
inducement for title insurance business); ODI Bulletin 95-3 (defines “valuable thing” to include stock
dividends and distributions of profit).

11
 The ODI, by virtue of its statements in support of its Motion for Summary

Judgment, possesses an incredibly narrow view of how CBAs impact the title insurance

industry. The ODI views the capital investments of prohibited persons in title insurance

agencies as benign interests unrelated to their impact on the referral of business in an

ordinary real estate transaction.35 The ODI sees no connection between the related

statutes cited by Plaintiffs because the current Superintendent, ignoring a previous and

still valid ODI Bulletin, does not believe co-ownership of a title insurance agency by a

prohibited person, who refers its title insurance business to that title insurance agency, is

an inducement.36 This position is dangerously naïve and directly contradictory to the

legislative intent found in the Revised Code.

The distinction between prohibited person ownership interests in title insurance

agencies and non-prohibited person ownership interests in title insurance agencies is

simple to understand. By virtue of the statutory framework in Ohio, if an unlicensed co-

owner of a title insurance agency does not refer title insurance business to the title

insurance agency, the ownership interest possessed by the unlicensed co-owner in that

agency is passive and not an inducement and is not otherwise prohibited by the

aforementioned Ohio statutes.37 After all, an “inducement” only occurs when there is

something to actively “induce.” The “inducement” depends, in part, upon the status of

the parties to the transaction and the motive for why the parties are there.38 When the

title insurance agency is co-owned by a prohibited person, the intended result or motive

35
Defendant’s Motion for Summary Judgment.
36
Defendant’s Motion for Summary Judgment at 7.
37
O.R.C. § 3953.26; see also, O.R.C. § 3953.21.
38
The term “inducement” is defined as the act of bringing about a desired result. See
http://wordnetweb.princeton.edu/perl/webwn?s=inducement (visited May 24, 2010); see also, Equitable
Life Assur. Soc. Of U.S. v. Robinson, 147 N.E.2d 648 (1957) (“Inducement” may be and often is motive for
entering into contract, and is not to be confused with consideration for contract itself).

12
of the inducement (i.e. sharing of profits derived from title insurance commissions where

the recipient of those profits is a prohibited person) is possible and illegal. The Ohio

General Assembly was clear in its distaste for prohibited person participation in the title

insurance industry by virtue of O.R.C. §§ 3953.21, 3953.25, 3953.26 and the monoline

restrictions found throughout Title 39.39 Ohio law also prohibits the provision of title

insurance commissions to those who are not licensed as title insurance agents, such as

prohibited persons.40

For an example of how these important statutes work, consider a bank that owns a

forty-nine percent (49%) interest in a title insurance agency CBA. Banks typically

require a title insurance consumer to purchase a loan policy of title insurance as a

requirement of their agreement to lend on a particular transaction.41 When the bank owns

a portion of the CBA that issues the required title insurance policy, the distribution of

profits from the CBA, which includes commissions generated from the sale of policies

required by the bank, becomes an improper inducement prohibited by O.R.C. § 3953.26

because a thing of value is being exchanged by the CBA to the bank as an inducement for

their title insurance business. This practice is illegal. The same is true for real estate

firms, mortgage companies and their subsidiaries. The inducement or motivation for

entering into the CBA is to give a prohibited person access to stock dividends and profit

distributions, derived principally from title insurance commissions, without a license.

Again, this type of motivation or inducement is illegal.

39
O.R.C. § 3953.26.
40
O.R.C. § 3953.25.
41
http://www.federalreserve.gov/pubs/settlement/default.htm (visited April 30, 2010); see also,
http://www.hud.gov/offices/hsg/ramh/res/sc2sectf.cfm (visited April 30, 2010) (“Title insurance is usually
required by the lender…”)

13
 The ODI is resting the entire defense of its contradictory rule on the premise that

prohibited person co-ownership of title insurance agencies is not an inducement for title

insurance business in derogation of Ohio law.42 To say that stock dividends and

distributions of profit in a title insurance agency is not an inducement for the referral of

title insurance business is to turn the realities of the title insurance world on its head. An

Ohio title insurance agent receives or retains, as a commission, eighty percent (80%) or

as high as ninety percent (90%) of the total title insurance premiums generated from the

sale of title insurance.43 Title insurance premiums are the single largest source of

revenue for a title insurance agent or a title insurance agency in Ohio.44 The title

insurance commissions retained or paid to the title insurance agent or agency by the title

insurance company/underwriter makes up over eighty percent (80%) of the profits

generated by title insurance agencies in Ohio.45 Given that title insurance commissions

make up most, if not all of the net profit of a title insurance agency, a division of those

insurance commission-profits with non-title agents violates the prohibition of O.R.C. §

3953.25. Making the ODI’s arbitrary distinction that stock dividends and profit

distributions, derived substantially from title insurance commissions, is not an

inducement effectively permits any person who cannot get licensed as a title insurance

agent to gain direct access to the business of title insurance by buying in. After all, a

forty-nine percent (49%) interest in a title insurance agency does not require a license or

an examination. Further, the ODI no longer collects data on CBAs to determine if a title

42
Defendant’s Motion for Summary Judgment at 7 - 12.
43
Exhibit A, attached to Plaintiffs’ Motion for Summary Judgment.
44
See Exhibit A, attached to Plaintiffs’ Motion for Summary Judgment.
45
Id.

14
insurance agency is currently operating with the involvement of a prohibited person.46

Once a rule like OAC 3901-7-04 is created, the original purpose behind the statutory

framework -- to stop prohibited person access -- is destroyed. The General Assembly did

not cede that power to the ODI. Thus, the rule must be invalidated.

d. OAC 3901-7-04 Permits The Payment of Title Insurance Commissions

to Unlicensed Prohibited Persons.

The ODI would have this Court believe that stock dividends and profit

distributions generated from the revenues of title insurance agencies bear no relationship

to title insurance commissions which can only be paid to licensed title insurance agents.47

The ODI’s argument struggles with needless semantics. A prohibited person cannot be

licensed as a title insurance agent.48 Thus, it cannot enjoy title insurance commissions in

any form.49 Since 80% to 90% of a title insurance agency’s profits are derived from title

insurance commissions, any stock dividends and profit distributions are mainly

commissions in origin. To say that the stock dividend or profit distribution process of a

title insurance agency somehow launders or cleanses the taint attached to the prohibited

person’s receipt of these monies is erroneous and again, naïve. O.R.C. § 3953.25 makes

it clear that commissions are to be paid only to title insurance agents. (Emphasis added).

Prohibited persons cannot be licensed and thus cannot enjoy the fruits of a title insurance

agent’s labor. OAC 3901-7-04 clearly conflicts with the O.R.C. § 3953.25 and therefore

must be invalidated.

e. ODI Bulletin 95-3 is Still Valid and Binding.

46
See Proposed Amended OAC 3901-7-01.
47
Defendant’s Motion for Summary Judgment at 8.
48
O.R.C. § 3953.21(B).
49
O.R.C. § 3953.25.

15
 On August 1, 1995, then-ODI Director Harold T. Duryee, issued Bulletin 95-3 to

provide title agents and title insurance companies with assistance in complying with

O.R.C. § 3933.01 and § 3953.26.50 ODI Bulletin 95-3 states that stock ownership and

distributions of partnership profits are considered inducements under O.R.C. § 3953.26.51

In February of 2009, the ODI Director attempted to promulgate OAC 3901-7-06,

known as the “title insurance inducements” rule.52 The draft versions of the rule

incorporated many of the definitions found in ODI Bulletin 95-3, except that it sought to

limit the term “valuable thing” to stock dividends and distributions of partnership profits

not directly related to percentage of ownership.53 The ODI withdrew the proposed rule.

Since the current ODI Director has neither rescinded Bulleting 95-3 or

promulgated a replacement rule, the interpretations as set forth by the ODI in Bulletin 95-

3 place OAC 3901-7-04 in direct conflict with O.R.C. § 3953.26.

CONCLUSION

For the foregoing reasons Plaintiffs are entitled to judgment as a matter of law.

Even in the light most favorable to Defendant, it is undisputed that OAC 3901-7-04

clearly conflicts with the Ohio Revised Code and only this Court can stop the ODI’s

unauthorized exercise of legislative authority. As there is clear conflict with the statute,

the administrative rule is invalid. Accordingly, Plaintiffs’ Motion for Summary

Judgment must be granted and Defendant’s Motion for Summary Judgment should be

denied.

50
ODI Bulletin 95-3, Exhibit D to Plaintiffs’ Motion for Summary Judgment.
51
Id.
52
See Draft Proposed Rule OAC 3901-7-06, attached to Plaintiffs’ Reply Brief in Support of their Motion
for Summary Judgment as Exhibit A.
53
See Id. at Proposed OAC 3901-7-06(7).

16
 Respectfully submitted,

_______________________________
E. Bruce Hadden, Esq. (0031753)
Hadden Co., LPA

______________________________
Robert B. Holman, Esq. (0072480)
Holman, Frank & McDonald

_______________________________
Gregory W. Happ, Esq. (0008538)
Attorney at Law

Trial Counsels for Plaintiffs

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 CERTIFICATE OF SERVICE

A copy of the foregoing Memorandum in Opposition to Defendant’s Motion for

Summary Judgment was served via ordinary U.S. Mail, postage prepaid, this 28th day of
May, 2010 to the following counsels of record:

W. Scott Myers, Esq.

Sean M. Culley, Esq.
Assistant Attorneys General
Health and Human Services Section
30 East Broad Street, 26th floor
Columbus, OH 43215-3400

____________________________
Robert B. Holman, Esq. (0072480)
One of the counsels for Plaintiffs

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