Business Litigation

The Worker’s Compensation Act’s handling of the statute of limitations can be a perplexing area. This is especially true when there is a medical service provider seeking payment from an employer for an outstanding bill. The Court of Appeal just recently addressed this issue.

In Indiana Spine Group, PC v. Pilot Travel Centers, LLC , on August 2003, Anthony Wetnight sustained a work-related injury while working for Pilot Travel Centers, LLC (“Pilot”). Indiana Spine Group (“ISG”) provides medical services to employees who are injured during the course of their employment. Pilot authorized Mr. Wetnight to receive two medical treatment services from ISG in 2004. ISG sent Pilot a bill for the two services totaling $38,556.00. Pilot made four partial payments to ISG, the last partial payment on June 2008, leaving an unpaid balance of $21,750.96. On June 2009, ISG filed an Application for Adjustment of claim for Provider’s fee (“Application”) with the Worker’s Compensation Board (“Board”) for the purpose to recover the remaining balance on the bill. The Board dismissed ISG’s Application due to the fact that the Application was filed outside the two year statute of limitation set forth in Indiana Code § 22-3-3-27. The Court of Appeals reversed the Board's decision, stating that Indiana Code § 22-3-3-27 and Indiana Code § 22-3-3-3 of the Worker’s Compensation Act did not apply to ISG’s Application.

On appeal, Pilot argued that the term “compensation” in Indiana Code § 22-3-3-3 included medical services, which encapsulated what ISG provided. The Court of Appeals disagreed and determined that the plain meaning of the word “compensation” referred to “employee benefits, not payment to health care providers.”  The Court of Appeals then evaluated the plain language of Indiana Code § 22-3-3-27. The Court stated that “this section establishes a two-year statute of limitation for ‘modification’ of an award due to a ‘change in conditions’.” In this situation there was never a change of conditions, which required a modification of the award of worker’s compensation benefits, which made the previous statute inapplicable. The Court determined that the appropriate statute to apply was Indiana Code § 34-11-1-2, which provided “[a] cause of action that . . . is not limited by any other statute[,] must be brought within ten (10) years.” The Court reasoned that “the legislature enacted the general statutes of limitation for the very purpose of supplying a statute of limitation when one has not otherwise been provided by a more specific statutory scheme”; therefore, ISG timely filed its Application before the Board.

Appellate attorneys may take it as a bad sign when their advocacy is described as "ostrich-like" by an appellate court and even worse when the court's opinion uses an unflaterring image like the one above to illustrate the point.

In a terse six-page opinion, Chief Judge Richard Posner of the U.S. Court of of Appeals for the Seventh Circuit criticized counsel for failing to address precedent directly applicable to the forum non conveiens issue presented in two appeals (addressed simultaneously by the Court). Judge Posner wrote:

When there is apparently dispositive precedent, an appellant may urge its overruling or distinguishing or reserve a challenge to it for a petition for certiorari but may not simply ignore it. We don't know the thinking that led the appellants' counsel in these two cases to do that. . . . Whatever the reason, such advocacy is unacceptable.

The ostrich is a noble animal, but not a proper model for an appellate advocate.

It is indeed difficult to imagine the reasoning underlying a strategy of ignoring applicable authority, whether cited by an opponent or not.  The Rules of Professional Conduct prohibit such a strategy, but beyond that it is poor advocacy. It may require thought and creativity, but in many instances plausible, if not meritorious, reasons can be articulated as to why existing precedent does not apply, or if all else fails, was wrongly decided.

The decision is in Monica Del Carmen Gonzalez-Servin, et al. v. Ford Motor Company, No. 11-1665, and was issued on November 23, 2011.

by Steven M. Badger 

A deal is a deal, right?  That is not always true when the deal is a fee agreement between a lawyer and a client.  With interest in alternative fee arrangements growing among lawyers and clients, Indiana law firms should keep in mind that their fee agreements remain subject to scrutiny of the Indiana Supreme Court. 

A recent disciplinary decision of the Indiana Supreme Court teaches Indiana lawyers two lessons about non-hourly fee arrangements:  First, a deal is most definitely NOT a deal when a lawyer would obtain an unconscionable windfall.  Second, a lawyer may be required to renegotiate a fee agreement that would otherwise produce an unconscionable benefit for the lawyer.

In In re Everett E. Powell, II, No. 49S00-0910-DI-426, the Indiana Supreme Court suspended a lawyer for charging an unreasonable contingent fee. The client, T.G., engaged Powell to seek the removal of a trustee of a trust established for T.G.'s benefit.  The trust was put in place by T.G.'s first lawyer, Ross, to hold the proceeds of a personal injury settlement for T.G.  The trust was created to keep T.G. (and her domineering partner) from quickly wasting the settlement proceeds, about $42,000.  Ross was the trustee (because he could not find another qualified person to do it) and had refused T.G.'s earlier, repeated demands for the money in the trust. 

When Powell contacted Ross, he readily agreed to resign as trustee and handover those duties to Powell.  Soon after he became successor trustee, Powell withdrew the trust funds, paid two-thirds of the funds to T.G., and kept his one-third contingent fee.  As a result, Powell received a contingent fee of over $14,000 for 15 hours of work.

In his disciplinary case, Powell argued his contingent fee was reasonable considering the client was a "difficult" one, there was a heightened threat of a future malpractice suit, and there was uncertainty at the time the fee agreement was made both about the amount of funds left in the trust and whether Ross would resist giving up control of the trust.  The Court rejected that argument.  The Court observed that Powell learned very quickly the amount left in the trust and Ross' willingness to step aside as trustee.  The Court stated:

We do not suggest that a contingent fee must be reduced every time a case turns out to be easier or more lucrative than contemplated by the parties at the outset.  But collection of a fee under the original agreement is unreasonable when it gives the attorney an unconscionable windfall under the totality of the circumstances.  On the evidence before us in this case, we conclude that Respondent violated the Indiana Professional Conduct Rule 1.5(a) by collecting a fee that was clearly excessive and unreasonable under the totality of the circumstances.

The vulnerability of the client in Powell was certainly an important aspect of the case that would distinguish it from one involving a sophisticated client.  Yet, Powell is an important reminder for Indiana attorneys to think twice before keeping a contingent fee that is grossly disproportionate to the amount of work performed.

Indiana unemployment insurance contributions are determined based on the past record of unemployment claims against the Indiana employer.  When an Indiana corporation reorganizes to form a new subsidiary, the question may arise whether the subsidiary is a new employer eligible for a lower introductory contribution rate or assumes the same employment experience account rate as its parent and predecessor.  In a recent ruling the Court itself described as "narrow" or limited to the specific facts of the case, the Indiana Supreme Court decided that a company’s newly-formed subsidiaries did not constitute distinct and segregable portions of the business and therefore must pay the same employment experience account rate as their parent company.  

In Franklin Electric Company, Inc. v. Unemployment Insurance Appeals of the Indiana Dept. of Workforce Development, No. 93S02-1102-EX-89, Franklin Electric Co., Inc. formed two new wholly-owned subsidiary corporations, Franklin Electric Manufacturing, Inc. and Franklin Electric Sales, Inc., as part of an expansion and reorganization of its business. Franklin Electric transferred real estate, equipment, and other assets associated with manufacturing to Franklin Electric Manufacturing in exchange for one hundred percent ownership in the new corporation. Franklin Electric transferred all of its sales-related personal property, sales contracts, and other related items to Franklin Electric Sales in exchange for one hundred percent ownership. Subsequently, Franklin Electric started a new employment experience account with a low introductory contribution rate for each subsidiary. A few years later, Franklin Electric, without Franklin Electric Manufacturing as a party, sold a portion of the manufacturing operation to Bluffton Motor Works LLC. The Indiana Department of Workforce Development investigated Franklin Electric and determined Franklin Electric did not transfer to the new subsidiaries a distinct and segregable portion of its organization, trade, or business. Franklin Electric argued its two new subsidiaries were eligible for a 2.7% experience rate as new employers under Indiana Code § 22-4-10-6(c). 

In order for the two subsidiaries to qualify as employers separate from the parent company for purposes of Indiana unemployment insurance, they must prove that they acquired a “distinct and segregable” portion of Franklin Electric’s business. Thus, the Court focused on whether Franklin Electric Sales and Franklin Electric Manufacturing acquired a portion of the business that was separate from Franklin Electric.  The Court considered the following key facts:  Franklin Electric wrote a single check to its payroll provider to fund the wages of employees of all three companies. Also, Franklin Electric provided workers compensation, health insurance, and retirement benefits for all three entities. Finally, Franklin Electric (not Franklin Electric Manufacturing) sold assets to Bluffton Motors that it had previously transferred to Franklin Electric Manufacturing. The Indiana Supreme Court considered all these facts together and decided the two subsidiaries are not distinct and segregable from Franklin Electric and therefore are not employers entitled to a new lower unemployment insurance rate.

The Indiana Court of Appeals will hear oral argument on December 12, 2011, in a case of first impression in Indiana.  The Indianapolis Star v. Jeffrey M. Miller, et al., Case No. 49A02-1103-PL-234, presents the novel question of whether a litigant can compel a non-party newspaper to disclose the identity of an internet user who posted an anonymous comment on the newspaper's website.

Jeffrey and Cynthia Miller allege they were defamed by anonymous user comments posted on the Indianapolis Star's website in response to 2010 news stories about a controversy involving a charitable project Mr. Miller had managed.  The Millers sued the charitable organization (Junior Achievement) and others for defamation in connection with Mr. Miller's ouster from the organization and sent nonparty discovery requests to the Indianapolis Star demanding that the paper identify anonymous authors of allegedly defamatory material posted on the newspaper's website.  (Under the Communications Decency Act, 47 U.S.C. sect. 230, the Star itself is immune from liability for defamatory material posted by third-party users of the Star's website.)  The Star objected to the subpoena, but the trial court ordered the Star to comply.

The Star's appeal will be heard by the following panel of Indiana appellate judges:  Hon. Carr Darden, Hon. Ezra Friedlander and Hon. Nancy Vaidik.  A decision could be expected by early 2012.

Non-settling parties in Indiana class action lawsuits may have a tall hill to climb when attempting to challenge partial settlements to which they are not parties. The Court of Appeals recently decided that a non-settling party must prove plain legal prejudice in order to have standing to challenge a partial settlement.

In Angela K. Farno v. Ansure Mortuaries of Indiana, LLC, et al. , No. 41A01-1007-MF-348, Angela Farno filed a class action lawsuit against Goldberg and others regarding the alleged looting of cemetery trust funds. On June 22, 2010, the trial court issued an order granting preliminary approval of the class action settlement agreement. Goldberg, a non-settling defendant, appealed. During the appeal, Farno quoted a federal court decision in a class action lawsuit that states “[t]he general rule, of course, is that a non-settling party does not have standing to object to a settlement between other parties.” Agretti v. ANR Freight Sys., Inc., 982 F.2d 242, 246 (7th Cir. 1992). The Indiana Court of Appeals held that in order to prove plain legal prejudice, a non-settling party must show that the settlement interfered with its contract rights or its “ability to seek contribution or indemnification” or that the settlement stripped “the party of a legal claim or cause of action, such as a cross-claim or the right to present relevant evidence at trial.” Agretti, 982 F.2d at 247. Goldberg failed to establish plain legal prejudice.

What if after a jury verdict was established one of the parties tries to impeach that verdict with testimony or an affidavit of the jurors who returned it? The Court of Appeals recently addressed this issue and stated that it has long been established in Indiana law that the jury’s verdict cannot be impeached by testimony or from an affidavit of a juror who returned it.

In Martha Sienkowski v. Frederick E. Verschuure No. 46A03-1101-CT-5, after the jury verdict was announced, the plaintiff tried to impeach that verdict with testimony of one juror and an affidavit from another juror in an attempt to receive a new trial. The defendant filed a motion to vacate the judgment and the request for a new trial. The trial court issued its Order, granting the defendant’s motions to strike the letter and affidavit and denying plaintiff’s motion for a new trial. The plaintiff appealed.

 The Court of Appeals reiterated that the jury verdict may not be impeached by the testimony or an affidavit of the juror who returned it. The policy behind this rule comes from Stinson v. State, 313 N.E.2d 699 (Ind. 1974). In Stinson, the Supreme Court showed concern by saying; “If this [c]ourt were to permit individual jurors to make affidavits or give testimony disclosing the manner of deliberation in the jury room and their version of the reasons for rendering a particular verdict, there would be no reasonable end to litigation. Jurors would be harassed by both sides of litigation and find themselves in a contest of affidavits and counter-affidavits and arguments and re-arguments as to why and how a certain verdict was reached. Such an unsettled state of affairs would be a disservice to the parties litigant and an unconscionable burden upon citizens who serve on juries.” The court did recognize exceptions under the Indiana Evidence Rule 606(b) where a juror may testify with respect to certain aspects of the trial. The three exceptions where testimony would be allowed concern: (1) drug or alcohol use by any juror, (2) the question of whether extraneous prejudicial information was improperly brought to the jury’s attention, or (3) whether any outside influence was improperly brought to bear upon any juror. None of those exceptions were present in this case.

When does a federal tax lien attach to real property? The Court of Appeals stated that it is considered attached to the property at the time of assessment, not at the time the tax lien was recorded.

In Charles David Kelly v. National Attorneys Title Assurance Fund, No. 69A04-1104-CT-215, the Kelly Oil Company issued title to real property by way of warranty deed to Kelly on February 19, 2004, and later recorded that deed on February 24, 2004. The IRS made assessments of the Kelly Oil Company for unpaid taxes on November 11, 2002. The federal tax liens were recorded on September 17, 2004. Kelly subsequently conveyed that same real property to the Grays by way of warranty deed. The deed did not disclose the federal tax lien. Attached to the deed was an affidavit stating among other things that there were no liens, orders, and encumbrances on the property. Gray’s insurance company, National Title Assurance Fund, did not find the recorded federal tax lien during the title search. Thereafter, the United States initiated an action to foreclose on the property. The Grays paid the United States $11,667 in exchange for a release of the lien on their property. National Insurance, as a subrogree of the Grays, filed suit against Kelly for breach of warranty of title. The trial court granted National Insurance's motion for summary judgment.

Kelly’s only argument on appeal was that the notices of the federal tax lien were not timely recorded with respect to the conveyance of the property by Kelly Oil Company to himself. The basis of this argument was that the federal tax lien did not attach to the property until it was recorded on September of 2004. The United States Codes sections 6321 and 6322 state that if a person neglects or refuses to pay any tax, the amount shall be a lien against the property, and the lien imposed attaches at the time of assessment. The Court of Appeals explained that the moment the tax assessment was made on November 11, 2002, the federal tax lien attached and the property became encumbered. Thus, Kelly breached his warranty by conveying title that is not free and clear from all encumbrances. The Court of Appeals affirmed.

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.

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.

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.

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.

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.

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.