Appellate Law Blog

Where an attorney no longer represents a client but is still owed legal fees for prior services performed, the attorney may assert a retention lien over the files of the client’s case and is not required to turn over key documents upon the request of the client’s new counsel. If a trial court determines that the documents must be produced, it must simultaneously provide security for the payment of the former attorney’s fees.

This holding extends from Grimes v. Cockrom, No. 45A03-1008-CT-491, a Court of Appeals case in which a client’s new counsel issued a subpoena duces tecum to her client's former attorney in order to compel him to produce medical records paramount to a medical malpractice claim, a matter on which the attorney had previously worked.   The former attorney moved to quash the subpoena and argued that, similar to the right recognized by a mechanic’s lien, the common law of Indiana recognizes an attorney’s right to retain the documents of a former client until that client’s fees are paid. The trial court denied the attorney’s motion to quash, ordered him to produce the records, and an interlocutory appeal followed.

The Court of Appeals agreed with the former attorney that Indiana recognizes an attorney’s right to a retention lien that operates similar to the lien granted to a mechanic with unpaid service fees. If a client wishes to obtain key documents from a former attorney, a trial court has the authority to compel production of the documents, but must also provide a security to assure that the attorney’s fees will be paid in exchange for the documents’ production. The Court, in citing to Bennett v. NSR, Inc., 553 N.E.2d 881, 882 (Ind. Ct. App. 1990), acknowledged that “[l]awyers are merely afforded the same advantage enjoyed by workmen who labor on behalf of others. It is considered equitable that lawyers be allowed to retain documents and other personal property of their clients until paid.” In Grimes, because the client disputed the amount of fees owed to the former attorney, the Court remanded the case and ordered that a hearing be conducted to determine the proper amount of fees owed and that a security be provided to the attorney in that amount in exchange for the production of the medical records.

In an action brought against a governmental entity, a complaining party must have suffered something more than a general concern or disagreement with a policy, the Court of Appeals held today. The holding extends to suits brought under Indiana statutes which expressly state who may bring a claim arising under the law.

In Klosinski v. Cordry Sweetwater Conservatory District, No. 07A01-1008-PL-429, the plaintiff complained that a county conservatory district was acting outside of its statutory duties and had failed to construct sanitary sewer facilities and keep the community lakes’ coves free of sediment. The plaintiffs lived within the district and the trial court found that they had standing to sue because “[t]he Klosinskis own property in the District; they and their property are subject to and affected by the District’s rules and regulations; and they pay assessments or fees for the services provided by the District.” After denying most of the plaintiff’s requests for injunctions, the trial court issued a general injunction against the conservatory, prohibiting it from establishing or enforcing any rule that does not further its statutory purpose, an issue the defendant conceded. Both parties appealed.

On appeal, the district challenged the plaintiffs’ standing to sue on the grounds that they had not been aggrieved by any actions of the district and the plaintiffs appealed the denial of several requested injunctions. In deciding the issue of standing, the Court of Appeals looked to the language of the statute which described the parties who may sue. The statute states that “[a]n interested person adversely affected by an action committed or omitted by the board in violation of this chapter may petition the court having jurisdiction over the district to enjoin or mandate the board.” After noting that no case had yet interpreted the phrase “[a]n interested person adversely affected,” the Court followed Huffman v. Office of Envtl. Adjudication, 811 N.E.2d 806 (Ind. 2004), which interpreted similar language in a different statute. The court in Huffman interpreted the phrase “aggrieved or adversely affected” and found that "to be ‘aggreived or adversely affected,’ a person must have suffered or be likely to suffer in the immediate future harm to a legal interest, be it a pecuniary, property, or personal interest.” After noting that the Klosinskis had identified “no specific controversy with the District,” the Court concluded that “[o]ur supreme court recognized in Huffman that general standing principles are inapplicable where a statute identifies who may pursue an administrative proceeding,” and that “[t]o be ‘adversely affected,’ the Klosinskis must have more than a generalized concern. They must identify a specific harm to a pecuniary, property, or personal interest. Simply arguing they are taxpayers is insufficient.” The Court reversed the trial court’s determination that the plaintiffs had standing to sue and affirmed its denial of injunctions.

In an opinion dissenting in part and concurring in part, Judge Baker expressed dissatisfaction with the Court’s determination that the plaintiffs were not an aggrieved party, as described in the statute, because as a resident of the district in question, they are directly affected by the actions of the conservatory and should be able to bring a claim against such an entity.

What if, after filing a complaint with the court, it is discovered that the defendant named in the suit is not the correct party to be served? The Indiana Court of Appeals recently addressed this issue as well as the time allowed for filing an amended complaint which will relate back to the original, pursuant to Indiana Trial Rule 15(C). 

In Raisor v. Jimmie’s Raceway Pub, Inc., No. 49A05-1010-CT-629, a dispute arose when an underage patron of a local pub allegedly assaulted another pub customer. The victim of the attack attempted to sue the owner of the pub by sending a summons to an address that was registered with the Secretary of State’s office, but the office was vacant and the summons was returned to sender. After a second unsuccessful attempt, the victim’s attorney sent a letter advising the owner of his desire to seek a default judgment against it. The mail carrier delivering the letter noticed that the office was vacant and also that the letter’s address included the name of the pub, which was a few blocks away. The carrier took the letter to the pub, where the true owner read it and asked the attorney for the complaint. The true owner also sent a copy of the suit to the purported owner of the pub, who was unaware of the action. By this time, twenty-three months had passed since the assault and 128 days had elapsed since the filing of the original complaint. The purported owner filed a motion to dismiss on the basis that it was not the true owner of the pub, which the court granted, and the plaintiff filed an amended complaint naming the true owner of the pub. A motion to dismiss/motion for summary judgment was thereafter filed by the true owner, claiming that the two-year statute of limitations for personal injury claims had run, as well as the 120-day period for filing an amended complaint to add a new party. The trial court granted this motion as well.

The Court of Appeals reversed the trial court and explained how the amended complaint rule operates by stating that “[a]s a general rule, a new defendant to a claim must be added prior to the running of the statute of limitations; however, Trial Rule 15(C) provides an exception to that rule by allowing the amendment to relate back to the date of the original complaint under certain circumstances.” The court continued, “[w]here no more than 120 days have elapsed since the filing of the original complaint and (1) where the claim arises out of the same conduct; (2) the substituted defendant has notice such that he is not prejudiced by the amendment; and (3) the substituted defendant knows or should know that . . . the action should have been brought against him,” then the amended complaint will relate back to the original complaint. This case was unique in that the original complaint was filed so far in advance of the running of the statute of limitations that the 120-day amendment rule had passed before the limitations period was over. The Court explained that “[t]he fact that the [plaintiffs] filed their original complaint earlier should not work to penalize them,” and that “we do not believe that the amended trial rule was designed to shorten the period of time that plaintiffs have to file their claims,” but “as long as Trial Rule 15(C)’s requirements are otherwise met within the statute of limitations, the last date to file an amended complaint would be 120 days after the statute of limitations has expired.”

In many real estate transactions, the seller will agree to provide title insurance to the buyer in an attempt to assure the buyer that their title to the property is free and clear of encumbrances. The seller may contact a title insurance company who will then solicit insurance companies to cover the property after investigating its title history.

Such was the case in Meridian Title Corp. v. Gainer Group, LLC, No. 46A03-1006-PL-312, where the trust of a deceased’s estate engaged Meridian Title to procure title insurance on property it intended to sell Gainer Group, a real estate re-seller. After Meridian obtained the insurance from a third-party insurer, the trust presented the information that it had sold more land to Gainer Group than it had intended. At a mediation meeting held by Meridian Title, Meridian’s CEO told Gainer he believed that Gainer had no claim against the trust because of a provision in the contract excluding protection where the buyer does not obtain a survey, which Gainer had failed to do. The trust filed suit against Gainer to recover the portion of property that it had not intended to sell. After initially retaining its own lawyer, Gainer filed an insurance claim with the insurer procured by Meridian and the insurer agreed to provide Gainer’s defense. Gainer then filed this separate suit against Meridian, alleging that Meridian had failed to properly handle its situation and sought to recover the legal expenses it incurred before the insurer took over the defense. Meridian filed a Motion for Summary Judgment, arguing that it owed no further duty to Gainer than the general duty to exercise reasonable care, skill and good faith diligence in obtaining a policy for title insurance.  The trial court denied the motion and this interlocutory appeal followed.

In its opinion, the Indiana Court of Appeals found that an insurance agent’s (Meridian) duty “does not extend beyond merely procuring insurance for the insured unless the insured can establish the existence of an intimate, long-term relationship with the agent, or some other special circumstance.”   Due to the standard nature of the transaction performed by Meridian, the court found there to be no intimate, long-standing relationship between Meridian and Gainer Group. The court did, however, find that there was a special circumstance present that would trigger an extended duty to advise on the part of Meridian. Because of the property dispute between the seller and the buyer of the property involved, and because of Meridian’s effort to resolve the dispute by holding a mediation conference, there was enough evidence to trigger an extended duty on the part of Meridian to advise Gainer Group regarding the title for which it obtained insurance. But because Meridian offered advice to Gainer by referencing the contract provision and stating its opinion that Gainer did not have a successful claim, the Court held that Meridian met its extended duty to Gainer and reversed the trial court’s denial of summary judgment.

On Tuesday the Indiana Supreme Court reversed a Court of Appeals' decision that affirmed the granting of a new trial in a case involving a jury verdict that rewarded an accident victim damages for the costs of physical therapy sessions and initial medical consultations. In its opinion in Walker v. Pullen, No. 64S05-1101-CT-0006, the Supreme Court expressed the importance of a strict application of Indiana Trial Rule 56(J).

The case arose out of a car accident that occurred in the drive-through lane of a Dunkin’ Donuts in Valparaiso, Indiana, in which the defendant’s foot slipped off the brake pedal while in line and rear-ended the plaintiff’s car. Several days later, the plaintiff saw a doctor complaining of neck pain and had several treatments over the course of a few months. He wasn’t treated for neck pain again until three years later and there was conflicting testimony as to the relationship between the drive-through accident and the cause of the later pain. One expert testified that the pain could be related to the accident while another claimed that it was caused by walking on crutches after having unrelated knee surgery. The plaintiff sought damages of $25,000 and, while the jury ruled in his favor, it only awarded him just over $10,000 for “P.T. & inital [sic] medical assessment.” The plaintiff then filed a motion to correct error, citing that his physical therapy costs and medical assessments totaled $12,500. The trial court granted the motion and ordered a new trial on the issue of damages only. The Court of Appeals affirmed.

The Supreme Court, after granting transfer, reversed the decision and directed that the jury verdict be reinstated. The Court cited to Trial Rule 56(J), which states, “when granting a new trial because the verdict does not accord with the evidence, judges must ‘make special findings of fact upon each material issue…’” and “’[s]uch findings shall indicate whether the decision is against the weight of the evidence or whether it is clearly erroneous as contrary to or not supported by the evidence….’” The trial court in this case granted the motion for a new trial because “it believed the verdict did not accord with the evidence.” This does not comply with the high standard of the rule that the verdict be “against the weight of the evidence” or that it was “clearly erroneous.” The Court made certain to explain the importance of giving due deference to the decisions of juries in this state, stating that the “arduous and time-consuming requirements [are] to assure the public that the justice system is safe not only from capricious or malicious juries, but also from usurpation by unrestrained judges.” Thus, because the jury could have reasonably believed that the damages granted were only those that were the result of the defendant’s negligence and that the remainder of the damages were unrelated to the accident, its verdict should be reinstated as the rule of the case.

The Court of Appeals held this week that leased employees are to be considered joint employees of all corporations involved in the leasing of the worker. As a result, leased employees injured on the job should be given the same treatment as traditional employees and cannot recover for their injuries beyond what is offered through worker’s compensation benefits.

In Taylor v. Ford Motor Co., No. 49A02-1007-CT-823, James Taylor was a thirty-year employee at an Indianapolis Ford factory before retiring in February 2007. Two years prior to his retirement, the factory was taken over by a subsidiary of Ford but Taylor remained a Ford employee. He returned to work later in August 2007 at the same factory, but as an employee of Visteon Corporation leased to work for the new subsidiary. The next year, Taylor was injured after being struck by a forklift operator who was an employee of the subsidiary. Taylor applied for and received worker’s compensation benefits before suing the employee, the subsidiary, and Ford for negligence. The trial court dismissed the suit for lack of subject matter jurisdiction and Taylor appealed.

In reviewing the dismissal de novo, the Court of Appeals agreed with the trial court decision. The defendants relied on Indiana Code Sec. 22-3-6-1(a), which provides that “[b]oth a lessor and a lessee of employees shall each be considered joint employers of the employees provided by the lessor to the lessee for purposes of [The Indiana Worker’s Compensation Act].” The Workers Comp Act provides the sole remedy for employees injured while at work and bars lawsuits brought as a result of the injuries, unless they were caused by someone who is not a fellow employee. The court determined that the language of IC § 22-3-6-1(a) was unambiguous and that it plainly stated that leased employees should be treated in the same manner that other employees are treated. The court cited to the concern of leased employees potentially recovering twice for their injuries by applying for Worker’s Compensation benefits and then suing for negligence.  The court upheld the decision and dismissed the case for lack of subject matter jurisdiction.

On appeal from a bench trial judgment in favor of a purchaser who backed out of a condominium purchase because their inspection revealed that no power was being delivered to several outlets in the condo, the Court of Appeals reversed the trial court’s judgment and determined that the problem complained of did not constitute a major defect.

In Fischer v. Heymann, No. 49A04-1004-PL-231, the seller of a condo unit entered into a purchase agreement with a buyer that allowed for the buyer to conduct an inspection of the property before closing the deal and included that the buyer could terminate the agreement if it found what could be termed a “Major Defect” that the seller was unable or unwilling to remedy. After hiring an inspector and conducting the inspection, it was found that several outlets around the residence were not receiving power. The inspection report classified this problem as a “major concern” which was the highest level of alert on the report. The buyers presented the report to the seller who, through an agent, said that she would not be able to remedy to problem by the stated closing date and requested a two-week extension. The buyers did not grant the two-week extension and instead gave the seller several extra days to fix the problem. The day before the extension was to expire, the buyers entered into a new agreement with another seller and instructed their agent not to deliver their termination letter to the first seller until the extension period had ended. The seller eventually fixed the power issue in what turned out to be a minor repair but after receiving the termination letter, and sued the buyer for specific performance or, in the alternative, damages including attorney's fees and costs.

In its opinion, the Court of Appeals cited to the language in the contract, stating that termination could be sought for a “major defect” and determined that the buyers must have “reasonably believed” that the defect was major. The court held that the defect in the condo was not of the major variety and also held that the buyers were not able to claim that they held a reasonable belief because the inspection report, despite listing the power issue as a “major concern,” also stated that it might be easily fixed. Because the buyer did not hold a reasonable belief that there was a major defect, as defined within the contract agreement, the trial court’s decision was reversed and remanded to determine the seller's fees and costs.

In a dissenting opinion, however, Judge Brown focused on the fact that the seller did not remedy the issue until after the agreed upon closing date (and subsequent extension) had passed. Because the remedy did not take place within the time frame listed in the agreement, and because the contract also contained a “time is of the essence” clause, the dissent believed that the agreement should have been struck down and the trial court's decision should have been upheld.

In a medical malpractice action based on negligence, where a juror failed to initially disclose a potential bias but later admitted the possibility that one existed, the Court of Appeals held that, if a hearing is not granted at trial to investigate the juror’s prejudice, a new trial must ensue.

In Thompson v. Gerowitz, No. 49A05-1005-CT-296, a doctor was sued for the wrongful death of a patient after the doctor’s performance of a stem cell procedure. During voir dire, the process by which prospective jurors are questioned, attorneys for the doctor asked the pool of jurors if any among them held biases against medical professionals that would affect their decision-making processes. No juror spoke up during voir dire, but after voir dire had concluded and the trial court had announced the selected jury, a juror offered up the information that she was a widow and had tried to “go after the doctor for negligence.” The trial judge, after discussing this statement with the attorneys, referenced presiding over more than 250 jury trials and said “I think the jury is a good one, and I am sure it will be just fine for both sides . . . .” After trial, the jury returned a verdict for the plaintiff and the doctor appealed.

In its opinion, the Court of Appeals acknowledged that the juror’s statement “was specific, substantial evidence showing a juror was possibly biased,” and continued, “[a]t that point, it was incumbent upon the trial court to conduct a hearing, out of the presence of the remainder of the jury” to investigate further if the juror’s statement indicated bias and if such a hearing would itself create a bias in the juror. The trial court should have then allowed the doctor’s attorneys to challenge the juror for cause and declare a mistrial if bias was found. Because the trial court judge allowed the case to continue uninterrupted, the Court of Appeals remanded the case for a new trial.

In a decision handed down earlier this month, the Supreme Court refused to give a ruling on an issue that was described as being “within the special expertise of the Tax Court.” The decision comes from a rehearing of an earlier case holding that capital contributions are not automatically exempt from Indiana’s use tax.

In Indiana Dep’t of State Revenue v. Belterra Resort Indiana, LLC, No. 49S10-1010-TA-519, the Department of Revenue imposed a use tax of almost $2 million on Belterra due to its acquisition of a riverboat from its parent company. Belterra argued that the acquisition counts as a capital contribution, which the Department has ruled in the past as not subject to the tax. The court used what is called the “step transaction” doctrine to find that the acquisition constituted a retail transaction and was subject to the tax penalty. Belterra sought rehearing of that decision, arguing that, even if they were subject to the penalty, they shouldn’t have to pay because Indiana law says that a penalty for failure to pay taxes is waivable if the failure to pay is the result of a reasonably held belief that payment isn’t necessary.

The court said that that “the Indiana Tax Court was established to develop and apply specialized expertise in the prompt, fair, and uniform resolution of state tax cases” and that it “extends cautious deference” to decisions that should fall within such expertise. The court remanded the case to the Tax court to resolve the issues of whether or not Belterra exhausted all of its administrative remedies, whether they are subject to the tax, and if the penalty should be paid.

A negligence claim against CVS Pharmacy and one of its pharmacists was allowed to go forward in accordance with a ruling by the Indiana Court of Appeals today. The court ruled that a legal duty exists for a pharmacist to warn patients of risks involved with the taking of certain medications.

In Kolozsvari v. John Doe, M.D., No. 32A04-1008-CT-525, the plaintiff was prescribed OsmoPrep, a medication used in preparation for colonoscopies, and took the prescription to CVS to have it filled. While filling the prescription, the pharmacists received a warning screen on the computer stating that, because of the plaintiff’s age, there was a risk involved with prescribing the medication. The pharmacists dismissed the warning and filled the prescription without relaying the warning to the plaintiff. The following day, the plaintiff believed that the medication hadn’t prepared her well enough for the procedure and the doctor advised her to refill the prescription and try it again. She took the second prescription back to the pharmacy and relayed the information that she felt a tingling sensation in her body and asked if it was caused by the medication. The pharmacist said that it was not and refilled the prescription, ignoring a second warning relating to the risk involved with refilling the prescription so quickly. The pharmacy also had access to the plaintiff’s medication history and was on notice that she was routinely taking hypertension medication that is known to conflict with the colonoscopy drug. After taking the medication one more time, the plaintiff awoke the next morning to severe tingling and went to the hospital, which informed her that she had suffered a kidney failure and would need to be on dialysis indefinitely or receive a transplant.

In a negligence action against her doctor, nurse, CVS, and the pharmacist individually, the trial court granted summary judgment against the plaintiff, stating that there existed no duty of the pharmacist to warn patients of medication risks. The Court of Appeals reversed the trial court’s decision, stating that “CVS and [the pharmacist] had a duty of care to [the plaintiff] either to warn [her] of the side effects of OsmoPrep or to withhold the medication in accordance with Indiana Code section 25-26-13-16 and Pharmacy Board rule 1-33-2.” The Court of Appeals remanded the case to the trial court for further proceedings.

In Beneficial Indiana, Inc. v. Joy Properties, LLC, No. 02A05-1005-PL-260, the Indiana Court of Appeals held a mortgagee’s interest in defaulted property to be superior to that of a quitclaim deed beneficiary.

In 2003, Beneficial Indiana was granted a security interest by an executed mortgage relating to real estate owned by Ronald and Cheryl Osten. In 2008, after the Ostens failed to pay property taxes, Allen County held an auction sale to recoup the tax dollars owed. The Ostens failed to exercise their rights to reclaim the property before the expiration of a one-year redemption period, leaving a surplus of $42,462.20. After Beneficial Indiana filed a motion asking for the surplus funds to be held pending court action, citing the Osten’s defaulted mortgage, the Ostens executed a quitclaim deed to Joy Properties granting them their interest to the property.

In an action between the two parties, the court explained that Beneficial Indiana’s security interest in the property was extinguished by the tax sale, but then followed the proceeds and attached to the surplus money. The deed executed by the Ostens only granted Joy Properties an interest in the real estate subject to Beneficial Indiana’s mortgage lien, meaning the surplus should have been given to Beneficial Indiana to satisfy the defaulted mortgage.

When a plaintiff alleges enhanced injury as a result of a product’s design, the Indiana Supreme Court held in Green v. Ford Motor Co., No. 94S00-1007-CQ-348, that the fact-finder can only apportion fault to the injured party if the fact-finder concludes that the fault of the injured party is “a proximate cause of the harm for which damages are being sought.” 

The decision comes from the court’s consideration of a lawsuit filed by Nicholas Green against Ford Motor Co. arising out of an accident in which Green’s car hit a guardrail before flipping down an embankment, leaving Green as a quadriplegic. He argued that his 1999 Ford Explorer’s defective and unreasonably dangerous design caused the injuries, while Ford responded that his own negligence contributed to the car’s leaving the road in the first place.

The court accepted review from the United States District Court for the Southern District of Indiana to resolve the single question of whether “in a crashworthiness case alleging enhanced injuries under the Indiana Products Liability Act, the finder of fact shall apportion fault to the person suffering physical harm when that alleged fault relates to the cause of the underlying accident.” After considering this question, the court answered in the affirmative but restricted the language of the question, requiring the fault to be a proximate cause of the harm for which damages are sought.   There are two collisions in auto accidents, as recognized in cases alleging enhanced injuries as a result of product defectiveness. The first occurs when a plaintiff’s negligence causes him to be caught in an accident. In the context of the case, Green sought relief from the injuries that resulted from the “second collision” of the crash, involving a manufacturer’s failure to exercise reasonable care by designing a defective product. The court’s narrowing of the question means that a plaintiff’s negligence must have contributed to the “second collision” as well as the first in order to be considered by the fact-finder.

The Court of Appeals held last week that a real estate agent representing a buyer in a transaction only owes the selling party a duty of honesty and a duty of not knowingly giving out false information, pursuant to Indiana statutory law.

In Likens v. Prickett’s Properties, Inc., a buyer’s agent in a real estate transaction contacted a seller independently to encourage acceptance of the buyer’s offer. The agent represented to the seller that, although closing would have to wait several months until the buyer was able to secure enough cash for the purchase, the buyer presented a good offer and would make rental payments to the seller on the property until closing. The agent also told the seller that the buyer deposited $10,000 in escrow, which was to be held in the form of a bank letter of guarantee of funds. After closing did not occur by the date specified and the bank letter was determined to be fraudulent, the seller sued the agency, the buyer, and the agent for negligence and fraud.

The trial court granted summary judgment in favor of the real estate agent on both counts, citing Indiana Code § 25-34.1-10-11, which states that a licensee (a real estate agent) representing a buyer “owes no duties or obligations to the seller or landlord except that a licensee shall treat all prospective sellers or landlords honestly and not knowingly give them false information.” The statute also states that the agent bears no responsibility to ensure the financial stability of the buyer. The Court of Appeals, in affirming the granting of summary judgment, explained that because there was no statutory duty owed to the seller, there could be no negligence claim. The seller failed to appeal the summary judgment as it related to the fraud claim, so no further investigation of the agent’s knowledge needed to be conducted.

J.K. Harris, a tax resolution company with several offices in Indiana, lost its ability to argue against a class action suit brought against it by an Indiana resident whose tax issues were not resolved by the company, the Court of Appeals of Indiana held today in J.K. Harris & Co. v. Sandlin, No. 49A05-1003-CT-184.

The rationale behind the forfeiture of argument stems from Harris’s five and a half month absence from the litigation. Harris failed to appear before the court several times before the trial court ordered locks to be placed on the doors of the Indiana locations of the business. 

In an appeal of the court’s denial to set aside default judgment against it, Harris argued that it did not receive adequate notice of the proceedings, even though it was served with the plaintiff’s complaint. The Court of Appeals concluded that because Harris did not raise the argument during trial, it waived any ability to make the argument on appeal. The court similarly dismissed Harris’s claim that the contract signed by the plaintiff stated that any disputes between the parties would be resolved in arbitration. The court held that by ignoring the pending litigation, Harris, in effect, acted as if it was not interested in pursuing the arbitration claim and, therefore, could not stand by the arbitration clause in the contract. The court remanded the case for further class determination, but sided with the plaintiff on all other accounts.

By Steven M. Badger*
email: sbadger@boselaw.com

            The United States Court of Appeals for the Seventh Circuit heard oral argument on January 14, 2011 in a case of first impression that will decide whether a high school athletic association may require media organizations to buy licenses for internet streaming of high school athletic events.

The appellate court is reviewing a lower court decision last June upholding the Wisconsin Interscholastic Athletic Association’s (the “Wisconsin Athletic Association”) policies regulating internet streaming of high school tournament events. Two Gannett newspapers in Wisconsin challenged the licensing policy on First Amendment grounds.  

            The Wisconsin licensing scheme at issue requires any media organization to pay a fee ranging from $250 to $1500 for the right to stream video of any tournament event over the internet. The Wisconsin Athletic Association also reserves to itself “sole discretion” to grant such rights without specifying any standards for the exercise of its discretion.

Under the Wisconsin licensing policy, any media organization that pays the licensing fee and receives internet streaming rights must provide a master copy its video to a private company holding exclusive broadcast rights.   That private company then may market the video and the media organization that made the video is entitled to a 20% share of the proceeds as a royalty.

The lower court observed in its June ruling that “ultimately, this case is about commerce, not the right to a Free Press.” Gannett’s appeal however argues that the Wisconsin Athletic Association’s revenue-generating motive does not trump the media’s First Amendment rights.

Gannett also focuses its constitutional arguments on the unrestricted discretion the Wisconsin Athletic Association reserves for itself to grant licenses to media organizations of its choosing. Gannett contends that if the athletic association wishes to pick and choose which media organizations may stream video over the internet, the First Amendment requires it do so on an even-handed basis without any threat of exclusion based on viewpoint.

An array of national media associations and media companies has joined in supporting Gannett’s appeal through the filing of an amicus curiae (friend of the court) brief. Those supporting organizations include the Newspaper Association of America, the American Society of News Editors, the National Press Photographers Association and The Online News Association. The supporting media companies include Sun Times Media, LLC and Lee Enterprises, Incorporated, among others.

The Wisconsin Athletic Association is supported by two amicus briefs, one by the National Federation of State High School Associations and the other by 10 state high school associations, including the IHSAA.  

            A decision by the Seventh Circuit is expected this summer or fall. Any of the parties could then seek review by the United States Supreme Court. The decisions of the Seventh Circuit Court of Appeals are binding precedent for lower federal courts in the states of Indiana, Illinois and Wisconsin.

*Steve Badger is a partner at Bose McKinney & Evans and represents media organizations and journalists in media law and First Amendment matters.

The Indiana Wage Claims Statute and the Indiana Wage Payment Statute are separate laws that address the same issue. The statutes provide the procedure for payment of employees, but are to be used in separate and distinct circumstances, the Court of Appeals held last week.

In Hollis v. Defender Security Co., No. 49A02-1004-PL-464, Robert Hollis filed suit against his former employer for failure to pay wages in a timely fashion. The court said that in circumstances where an employee has been separated from his former employer, whether voluntarily or involuntarily, the procedure for a claim is the same. The former employee must file a claim under the Wage Claims Statute with the Department of Labor first and seek remedy from that body rather than filing in the court system right away.

The court held that when a current employee has a claim against his employer, the employee is allowed to file suit in the court system right away and pursue action under the Wage Payment Statute. The reasoning for this decision is to keep frivolous lawsuits by disgruntled former employees out of the court system. Should a former employee’s claim make it through the Department of Labor process, the complaint can then be taken into the courts. Because Hollis was separated from his employment at the time he filed suit, he should have pursued the claim within the Department of Labor and under the Wage Claims Statute, and it was because of this that his case was dismissed.

In a case involving the determination of work bonuses being paid as “wages” under Indiana law, the Indiana Court of Appeals held that in circumstances where the bonuses are not related to the amount of time an employee works, are not guaranteed to be paid regularly, and are not granted based on the employer’s financial success, the bonuses do not fall under the wage classification for purposes of Indiana statutes.

While Orlando Quezare was employed as a collections account representative for Byrider Finance, Inc., his employment agreement called for bonus payments if certain percentages were met, each week, regarding the amount of delinquency on his accounts and also if his team of account reps met certain goals.  After he was terminated, Quezare sued Byrider, alleging that the company violated Indiana law by failing to make wage payments within ten business days of the pay period ending date.  Bose McKinney & Evans attorneys Gregory Guevara and Emily Yates argued successfully that the bonus payments did not constitute wages under the statute.

In the opinion of Quezare v. Byrider Finance, Inc., the Court of Appeals held that, in order for bonus payments to be considered wages under Indiana law, the payments must be directly related to the amount of time an employee works, must be paid to the employee with regularity, and cannot be tied to the financial success of the employer.  Because Quezare’s bonuses were tied only to his individual success, were never guaranteed, and also because Indiana case law doesn’t consider team bonuses to be wages, Byrider was not in violation of Indiana law.

In Sheehan Construction Co. v. Continental Casualty Co., No. 49S02-1001-CV-32, the Court reconsidered its opinion by rehearing a previous decision in which the Court ruled in favor of the insured parties. The question in that case was whether the insurance policy covered faulty workmanship by a subcontractor. The Court ruled that it did, but did not address the timeliness of the insured party’s notice to the insurer.  The Court reopened its opinion in order to address this question.

The trial court granted summary judgment in favor of the insurers and the Indiana Supreme Court agreed. The Court reasoned that the basis for the timely notice of claims is to allow the insurer ample time to investigate the claim. In circumstances where the insured party fails to give notice in a timely manner, the Court presumes prejudice. The burden then shifts to the insured party to prove that the insurer was not prejudiced by the failure to report. In the case, the insured parties admitted their notice was untimely and because they produced no evidence to support the contention that the insurer was not prejudiced, the Court granted summary judgment for the insurance company.

The Court of Appeals of Indiana upheld the trial court in a decision granting summary judgment in favor of a firefighter who allegedly made malicious comments during the course of fighting a fire.

Terry Hart, Assistant Fire Chief with the Martinsville Fire Department, was overheard by the son of the plaintiff saying “let it burn” while responding in an assisting capacity to a fire in Washington Township. In a complaint against Hart, as an individual and in his capacity with the fire department, and against the Martinsville Fire Department for negligence, the family who owns the burned property alleged that Hart and the fire department didn’t take proper care in ensuring that the property was protected from the fire. The trial court granted summary judgment in favor of the defendants, citing the common law and black letter rule of governmental immunity. 

In the opinion of Ellis v. City of Martinsville, No. 55A01-1003-CT-141, the court determined that the negligence actions against Hart and the city did not have issues of material fact and granted summary judgment for the municipalities. The court sided with the argument that the fire department cannot be held liable for the decisions made by those in charge of its operations and also that the individuals in charge of making those decisions cannot be held liable as long as the decision is made in the course of employment. Because Hart arrived at the scene in firefighting gear and was paid for his time at the fire, he was determined to be acting in his capacity as a firefighter and, thus, was granted immunity from liability to the homeowners.

The Indiana Supreme Court recently held that, in an insurance dispute regarding defense and indemnification of environmental liability, the uniform approach (a single state’s law governing the entire contract) should be applied, and the state with the “most intimate contacts” will have its law pertain to the contract.

Standard Fusee Corporation (“SFC”) previously operated factories manufacturing emergency signaling flares in Maryland, Indiana, New Jersey, Ohio, California and Pennsylvania while maintaining its headquarters in Maryland. SFC purchased comprehensive general liability policies from two different brokers, holding all communication and discussions regarding the policies in Maryland. After a toxic chemical used in manufacturing its flares was detected in the groundwater near its California facility, SFC was subject to lawsuits which were eventually dismissed because it was determined that SFC didn’t emit the chemical. Afterwards, it voluntarily tested its Indiana facility and found that the chemical may have been emitted at the Indiana location. SFC was granted inclusion into the Indiana Department of Environmental Management’s Voluntary Remediation Program. SFC requested defense and indemnification from the insurers, who denied an obligation. 

SFC sought a declaratory judgment against the insurers and filed for summary judgment that Indiana law governed the policy’s interpretation and also that the insurers had a duty to defend, which the trial court granted. The insurers sought application of Maryland law, as its interpretation would be more beneficial to their position. The Court of Appeals sided with neither party and reversed the trial court’s holding, determining that a site-specific approach should apply to the policy. In National Union Fire Insurance Co. v. Standard Fusee Corporation, No. 49S04-1006-CV-318, the Indiana Supreme Court held that Indiana has long applied the uniform approach to multistate insurance policies. The Court went on to hold that, in order to determine which state’s law governed the contract, a “most intimate contacts” test should be used. Because a single event is not determinative as to which state has the most intimate contacts with the transaction, several factors must be weighed together. Because SFC was located in Maryland, all of the correspondence regarding the insurance took place in Maryland, and because the policies were retained and the premiums were paid in Maryland, the Court held that Maryland law should uniformly apply to the dispute.