Perrysburg Township's $5 million loan to the now-defunct Rossford Arena Amphitheater Authority was a security, but it did not have to be registered with the Ohio Division of Securities, an appeals court ruled yesterday.
The 6th District Court of Appeals' unanimous decision was a blow to the township's long-running battle to recoup the money it loaned to the RAAA in 1999 to help build a hockey arena and amphitheater near
I-75 and the Ohio Turnpike.
In a lengthy opinion, Judges Peter Handwork, Mark Pietrykowski, and Thomas Osowik said the $5 million promissory note was exempt from registration requirements under the Ohio Securities Act because it was not offered for sale to the public.
John Donahue, attorney for the township, had argued that the security should have been registered, which would have made the RAAA liable for the loan.
"If the note was not exempt from registration, then we would be entitled to a $5 million tort-based judgment because it is illegal in Ohio to sell an unregistered, nonexempt security," Mr. Donahue said.
"That entitles you to a return of all the money that you paid to the seller of the note, which in this case was $5 million."
The RAAA never repaid the township because it was unable to secure long-term financing for the arena and amphitheater project, which ultimately was abandoned.
In 2001, the township sued the RAAA, claiming former Rossford Mayor and RAAA President Mark Zuchowski made false and misleading statements and omitted facts when he made his sales pitch to the township.
Since then, the case has bounced around among Wood County Common Pleas Court, the 6th District Court of Appeals, and the Ohio Supreme Court.
One of the initial questions - whether the $5 million loan was a simple loan or a security - was put to rest yesterday by the appellate court.
"We find that both parties referred to the $5 million loan as an 'investment' and not a short-term, collateralized business loan," the judges wrote.
"The loan was clearly intended by all parties as 'seed money' that would ultimately generate business development and more tax revenue for Perrysburg Township.
"In addition, the potential risk to the township, while stated as unlikely at the time, was potentially great. Accordingly, we agree with the trial court that the evidence presented demonstrates that the $5 million promissory note is a security as a matter of law," the judges wrote.
Mr. Donahue said he was uncertain whether the township would appeal the ruling on the registration exemption to the Ohio Supreme Court.
"I've got to give some thought to that. I have to let the court of appeals decision sink in," he said.
"I've got to sleep on it, then talk with my clients to decide, do we appeal it."
Mr. Donahue said that if the township were to appeal, it would be the first such challenge that he's aware of.
"It's hard to believe these exemption provisions of Ohio law have been around since 1929 and never has this specific issue been raised," he said.
"This decision made by this court of appeals is the one and only."
Peter Silverman, an attorney for the RAAA, declined to comment on the ruling.
"We just got the opinion, and we're reviewing it," Mr. Silverman said.
While the RAAA has no assets - the land where the half-built amphitheater stood was sold at sheriff's sale in 2006 - it was insured for errors and omissions.
Any settlement with Perrysburg Township would come from the RAAA's insurance company.
Contact Jennifer Feehan at: email@example.com or 419-353-5972.