7th Circuit Court of Appeals
Criminal – Sentencing Guidelines/Identify Theft
United States of America v. Timmothy Williams
An Indiana man convicted of stealing the Social Security numbers of more than 10 people must be sentenced to less time in prison because of a recent Supreme Court of the United States decision, the 7th Circuit Court of Appeals ruled in a five-page opinion.
Timmothy Williams’ sentence will be significantly reduced, the Circuit Court ruled, because he was sentenced under guidelines calling for longer incarceration that were revised after Williams committed the crimes.
Williams pleaded guilty in U.S. District Court for the Northern District of Indiana, Hammond, to an 11-count indictment charging him with identity theft, making a false statement to an IRS agent and aggravated identity theft. He was sentenced to 56 months in prison, compounded by an additional 24 months because there were more than 10 victims. In a per curiam opinion, a panel of the Circuit Court ruled that there would have been no constitutional problems with the sentence under prior 7th Circuit precedent.
“While this case was on appeal, however, the Supreme Court held that applying the guidelines in effect at sentencing violates the ex post facto clause if it raises the defendant’s imprisonment rage,” the court wrote, citing Peugh v. United States, 133 S.Ct. 2072, 2078 (2013).
The panel remanded the case to Northern District Chief Judge Philip P. Simon with instructions to resentence Williams to 30 to 37 months in prison.
Criminal – Sentence/Supervised Release
United States of America v. Steven J. Perry
In a case of first impression for the 7th Circuit Court of Appeals, the court agreed with its fellow Circuit courts that prior time served for violations of supervised release is not credited toward nor limits the statutory maximum a court may impose for subsequent violations of supervised release pursuant to 18 U.S.C. Section 3583(e)(3).
The District Court in South Bend sentenced Steven Perry to a five-year term of imprisonment as well as a 10-year term of supervised release in 2013. This was the second time Perry had violated the terms of his supervised release imposed in 2005 based on his 2003 offense. The probation officer mistakenly stated in his report that Perry was subject to the statutory minimum five-year term of imprisonment mandated by the current version of Section 3583(k).
But this was an error, the 7th Circuit held, because Perry was subject to the version of this statute in effect at the time of his initial offense. That version of Section 3583(k) authorized a maximum sentence of only two years; the amended version the probation officer relied on did not take effect until July 27, 2006, and is not retroactive.
Perry argued that this maximum two-year term of imprisonment should be reduced by the three months that he served in prison in 2009 for a prior violation of his supervised release. The statute he relies on 18 U.S.C. Section 3583(e)(3) was amended in 2003 to include the phrase “on any such revocation.” Before the amendment was added, the Circuit courts interpreted this statute to allow credit time toward the maximum term of imprisonment authorized by statute. But since that amendment, every appellate court to address this issue has determined that language eliminates the credit time. The 7th Circuit agreed with its fellow Circuit courts.
The judges remanded for the District Court to sentence Perry to no more than two years imprisonment and to determine his conditions of supervision.
Indiana Supreme Court
Civil Plenary – Common Law Sovereign Immunity
Veolia Water Indianapolis, LLC, City of Indianapolis, Department of Waterworks, and City of Indianapolis v. National Trust Insurance Company and FCCI Insurance Company a/s/o Ultra Steak, Inc., et al
The Indiana Supreme Court held that for-profit, private company Veolia Water is not entitled to common law sovereign immunity from liability for damages resulting from a fire that destroyed an Indianapolis Texas Roadhouse restaurant in 2010.
When Indianapolis firefighters arrived at the restaurant, they were delayed in fighting the fire because of several frozen hydrants. As a result, the restaurant was a total loss. At the time of the fire, Veolia Water Indianapolis LLC was responsible for operating the city’s water utility pursuant to an agreement with the city. The restaurant’s insurers brought this lawsuit, alleging the hydrants froze because the private companies to whom Veolia licensed access failed to properly close the hydrants.
The trial court held that the city is not entitled to common law sovereign immunity or statutory sovereign immunity under the Indiana Tort Claims Act regarding the water supply and that Veolia is not entitled to common law sovereign immunity on the matter. The Court of Appeals reversed and held that the two entities are entitled to common law sovereign immunity.
The COA urged the Supreme Court to take this case to rule on the growing use and complexity of public-private contracts. The justices relied on Metal Working Lubricants Co. v. Indianapolis Water Co., 746 N.E.2d 352 (Ind. Ct. App. 2001), and a test outlined by the 5th Circuit Court of Appeals to affirm the trial court’s decision that Veolia isn’t entitled to sovereign immunity.
“Despite the arguments that the City and Veolia advance, we are persuaded by the Insurers’ claim that the profit motive of Veolia — a for-profit, private company operating a public water utility under contract with a governmental unit — precludes extension of the common law sovereign immunity to which the City is entitled. Therefore, Veolia is not entitled to common law sovereign immunity on the Insurers’ claims that it failed to provide an adequate supply of water from which to fight the fire. The case against Veolia may proceed; although the Insurers’ case may not be successful on its merits, or even reach the merits, their case survives Veolia’s Rule 12 motion,” Justice Steven David wrote.
David encouraged trial courts to look to the 5th Circuit test for guidance when these kinds of issues arise in court.
The justices also affirmed that the city is not entitled to statutory sovereign immunity from liability regarding the inadequate water supply, but found the city is entitled to common law sovereign immunity.
Juvenile – CHINS
In the Matter of S.D., Alleged to be a Child in Need of Services, J.B. v. Indiana Department of Child Services
The Indiana Supreme Court reversed the finding that a child with special needs is a child in need of services after ruling that the circumstances of this case don’t support that the mother needed the court’s coercive intervention to address concerns in the CHINS petition.
Mother J.B. has five children, including S.D., who at 2 years old required hospitalization in Indianapolis for cardiomyopathy. She was placed on a ventilator, and given a tracheostomy and gastrostomy. As a result of her hospitalization, J.B. moved her other children from Gary to Indianapolis.
The Department of Child Services initiated CHINS proceedings regarding all of the children because J.B. failed to enroll them in school and had become disengaged from S.D.’s care plan. She allowed the state to remove the four siblings from her care to focus on S.D.’s treatment.
But J.B. found stable housing and the four children were returned to her care. The petition regarding S.D. continued because, although S.D. was ready to come home, J.B. had not met the training requirements regarding care of S.D. for her to be released. The hospital would not discharge S.D. until mother and a second caregiver completed significant medical training. S.D.’s grandmother initially was going to be the second caregiver, but DCS did not approve her based on a background check. The next person chosen as the second caregiver was unable to complete a 24-hour practice session at the hospital because of her work schedule.
“Mother’s most significant failure—to complete the home-care simulation—appears as much a product of DCS’s intervention as it is a sign of her need for that intervention,” Justice Loretta Rush wrote, pointing out that DCS’ disapproval of the grandmother required the mother to “go back to the drawing board” to recruit someone else.
“S.D. and her siblings were legitimately in need of services when DCS filed its petitions. But by the fact-finding hearing, Mother had voluntarily addressed all but one of those concerns to the trial court’s satisfaction. In view of that judgment, the remaining evidence fails to show that Mother was likely to need the court’s coercive intervention to complete that final item — and when that coercion is not necessary, the State may not intrude into a family’s life. We therefore reverse the trial court’s judgment that S.D. was a child in need of services.”
Civil Tort – Hazing/Personal Injury
Brian Yost v. Wabash College, Phi Kappa Psi Fraternity- Indiana Gamma Chapter at Wabash College, Phi Kappa Psi Fraternity, Inc., and Nathan Cravens
See page 1.
Indiana Court of Appeals
Civil Tort – Municipality/Damages
The Board of Commissioners of the County of Jefferson v. Teton Corporation, Innovative Roofing Solutions, Inc., Gutapfel Roofing, Inc. and Daniel L. Gutapfel
The Indiana Court of Appeals adopted the “majority approach” in a waiver of subrogation issue and concluded a southern Indiana county waived its right to subrogate any and all claims covered by its property insurance. Jefferson County sued contractors after its courthouse caught fire during renovations in 2009.
Jefferson County entered into a contract with Teton Corp. to renovate the building and subcontract work to several companies. The contract prepared by the American Institute of Architects stated that Jefferson County, as owner of the project, should obtain separate insurance. Instead of obtaining separate property or builder’s risk insurance for the project, the county relied on its existing property and casualty insurance. The county also did not tell Teton that it wasn’t getting the separate insurance. The contract also required Teton to obtain contractors liability insurance.
During renovations, a fire broke out in May 2009 causing more than $6 million in damages. The county relied on its general insurance policy, but that did not cover all of the damages.
The county sued Teton and other defendants involved in renovations, claiming negligence, breach of implied warranties and breach of contract. The defendants argued Jefferson County agreed to provide insurance for the project and waived its subrogation rights against them, so the county can’t recover damages that were caused by the fire.
In granting the defendants’ motion for summary judgment, the trial court ruled that the county as owner of the project was to obtain insurance and that insurance would be the source of compensation in the event of a loss. The contract also says every party would waive the right to seek recovery of the loss covered by the insurance policy.
Jefferson County conceded that pursuant to the terms of the AIA contract, subrogation is barred when a property owner seeks to recover damages to its insured “Work” property, but maintains that “this case involves damage to non-Work property.” And therefore, Jefferson County argues that under the AIA contract, Teton was responsible for procuring insurance to cover damages for claims “other than to the Work.”
In support of its argument, Jefferson County relied on Midwestern Indemnity Company v. Systems Builders, Inc., 801 N.E.2d 661 (Ind. Ct. App. 2004), which concluded that under the AIA contract there is a distinction between work and non-work property, and the scope of the waiver is limited to damages to the work property.
The interpretation of the waiver provision has been litigated in other jurisdictions and the Court of Appeals, but not made it to the Indiana Supreme Court. After examining caselaw, Judges Paul Mathias and Edward Najam affirmed, ruling the “majority view” is the better approach to risk allocation in construction projects in general, which rejects the “work” v. “non-work” approach.
They believed adopting the “minority, non-Work distinction” used previously by the Indiana Court of Appeals would “throw many projects into protracted litigation, possibly even years after project completion and acceptance.”
“Each and every major construction project adds both value and risk to the owner’s property. Section 11.3.1 of the AIA contract therefore requires owners to insure their interests in the construction project at least to the value of the underlying contract.
The AIA contract expressly requires property owners to separately insure these interests and, in order to facilitate the completion of the project without delaying and debilitating litigation, to obtain an ‘all-risk’ insurance policy that waives the carrier’s rights to be subrogated to any loss arising within the extremely broad coverage described in the contract. If the owner does not secure such insurance, then it still waives its subrogation rights for any loss described within the AIA contract that it sustains,” Mathias wrote.
Judge Elaine Brown dissented, believing the court should uphold the minority approach as outlined in Midwestern. By adopting the majority approach, the majority in this case has prevented the county from being able to attempt to recoup damages to non-work property from Teton’s liability insurer based upon alleged negligence.
Civil Plenary – Contract/Material Breach
State of Indiana, acting on behalf of the Indiana Family & Social Services Administration v. International Business Machines Corporation
The Indiana Court of Appeals has reversed a Marion County judge’s finding that IBM did not materially breach the contract it had with the state to modernize its welfare system. As a result, the appeals court ordered a determination of damages to the state.
The state and IBM entered into a billion-dollar contract to update and modernize Indiana’s welfare system in December 2006. But the process was plagued with problems and the state ended the 10-year contract in October 2009 “for cause,” in part because of IBM’s “numerous and repeated quality and timeliness failures.”
When the contract was terminated, Indiana had paid IBM nearly $437 million, plus $4.4 million for disengagement services.
The state and IBM sued each other – the state sought $170 million; IBM wanted at least $52 million. Marion Superior Judge David Dreyer in July 2012 awarded IBM $52 million, plus $10 million in prejudgment interest. He found that IBM did not materially breach the contract.
But two of the three judges on the appeals panel found this was an error, that he should have considered IBM’s failures to meet federal program targets in determining whether to terminate the contract for cause. They also held that the economic downturn and flooding that hit Indiana in 2008 should not have been considered as reasons to excuse IBM’s performance because the contract provided IBM with a remedy in the event of these issues.
“We find that the heart of this contract was to provide services to the poor in a way that complied with federal law,” Chief Judge Nancy Vaidik wrote. “In this respect IBM’s performance, as the trial court explained, ‘consistently missed the mark.’ This substandard performance by IBM, $437 million and 36 months later, went to the essence of this contract.”
The COA upheld that IBM is entitled to the $40 million in assignment fees, despite the material breach because these fees represent value to the state in the ability to assume certain subcontracts, as well as that deferred fees are not payable to IBM in the event the contract was terminated for cause.
The state no longer has to pay the $2.5 million in early termination close out payments because of IBM’s breach, but it must pay the $9.5 million for the equipment it kept after cancelling the contract.
IBM is not entitled to $10.6 million prejudgment interest, the court held. The judges remanded for a determination of the amount of fees IBM is entitled to for change orders 119 and 133 and to determine the state’s damage and offset any damages awarded to IBM as a result of its material breach.
Judge Ezra Friedlander dissented in part, believing that IBM did not materially breach the contract and that IBM can recover transition fees.
Criminal – Public Intoxication Statute
Rodregus Morgan v. State of Indiana
The Indiana Court of Appeals has found that the portion of the public intoxication statute enacted in 2012 that uses the term “annoys” is void for vagueness. As such, it reversed a man’s conviction for public intoxication that was based on annoying behavior.
Indianapolis Metropolitan Police officer Brycen Garner arrested Rodregus Morgan after believing him to be intoxicated. Garner found Morgan’s brother yelling at Morgan at a bus stop after Morgan would not wake up. Garner woke Morgan up to have him leave the shelter and saw his eyes were blood shot and glassy, and he was unsteady.
While Garner completed paperwork, Morgan yelled and continued to be agitated. The state charged him with Class D felony intimidation and Class B misdemeanors public intoxication and disorderly conduct.
The officer identified Morgan’s behavior as “annoying” when he placed him under arrest.
Morgan was convicted of the misdemeanor charges.
He argued that I.C. 7.1-5-1-3, which states that it is a Class B misdemeanor if an individual is intoxicated while in a public place and harasses, annoys or alarms another person, is unconstitutionally vague. The statute doesn’t define “annoys” and there is no objective standard for evaluating what “annoys” constitutes, Morgan claimed.
“ … we find the challenged portion of Indiana’s public intoxication statute to be unconstitutionally vague. Namely, the statute neither requires that a defendant have specifically intended to annoy another, nor does it employ an objective standard to assess whether a defendant’s conduct would be annoying to a reasonable person,” Judge Patricia Riley wrote. “Furthermore, the statute does not mandate that the defendant have been first warned that his behavior was considered annoying conduct. Instead, this section of the statute enables arbitrary and discriminatory enforcement because the illegality of any conduct — no matter how trivial or how substantial — is based solely on the subjective feelings of a particular person at any given time.”
The judges emphasized they are only holding the term “annoying” void for vagueness and removing that from the section does not inhibit the statute’s execution, so the remainder of the section stands.
They also affirmed his conviction for disorderly conduct based on sufficient evidence.
Civil Plenary – Educational Service Providers
Teaching Our Posterity Success, Inc. v. Indiana Department of Education and Indiana State Board of Education
Noting that the Indiana Supreme Court has been divided on this issue – but will take it up soon – the Indiana Court of Appeals has held that it could review the dismissal of a petition for judicial review even though the company filing the petition did not file a complete, certified agency record.
Teaching Our Posterity Success Inc. sought judicial review of the Indiana Department of Education’s and State Board of Education’s decision to remove TOPS from the list of approved supplemental educational services providers.
The DOE sent TOPS a letter stating it reviewed TOPS’ request for appeal and is keeping TOPS off the provider list. It does not contain any factual findings regarding the decision nor does it reference any other document that would contain such findings.
When it filed its petition for judicial review, TOPS included a copy of the letter, which it argued failed to make specific findings and was arbitrary, capricious and an abuse of discretion. The company did not submit additional materials.
The trial court granted the DOE’s motion to dismiss.
Judge Michael Barnes pointed out that the Supreme Court is split on the effect of the failure to timely file the agency record on a petition for judicial review. It has granted transfer to two cases that again present this issue. But in the meantime, Barnes wrote that the panel believes that although best practices is to timely file the entire agency record, where the record is not necessary for review, the dismissal of the petition is not warranted.
Before the trial court, the DOE admitted that the letter was a final agency decision, but on appeal argued the letter may not even be genuine and that another document could exist elsewhere that provided the necessary findings and conclusions.
“The DOE’s argument seems to suggest either of the following: that counsel for TOPS, an officer of the court, knowingly filed a verified petition for judicial review, under penalties for perjury, falsely identifying the letter as DOE’s final agency action, or the DOE has somewhere hidden away in its records a document that lists its findings and conclusions regarding TOPS but never provided it to TOPS,” Barnes wrote. “Neither option is palatable and we decline to entertain them, particularly given that the DOE did not make any such arguments regarding the letter before the trial court.”
The trial court erred in dismissing the petition, so the appeals court remanded this case to the DOE for entry of the statutorily mandated findings and conclusions to accompany its final order.
Criminal – Intimidation
Rakiea McCaskill v. State of Indiana
The Indiana Court of Appeals reversed a woman’s misdemeanor intimidation conviction stemming from her communications with the wife of her baby’s father. The court held that the state was unable to prove she committed intimidation as charged.
Rakiea McCaskill had a one-year-old child with Tamika Matlock’s husband when McCaskill called Matlock four times the evening of Oct. 28 and morning of Oct. 29, 2012, and threatened to beat her up. She also said she was outside of Matlock’s home.
The state charged McCaskill under subsection (a)(1) of the intimidation statute, saying she communicated a threat with the intent that Matlock engage in conduct against her will: to leave her husband and/or cause her husband to leave her.
The Court of Appeals reversed the conviction, noting there is insufficient evidence of McCaskill’s intent because she never specified the reason for her threats toward Matlock. At trial, Matlock admitted she didn’t know why McCaskill wanted to beat her up. The state argued there is enough circumstantial evidence to show intent. It argued that because McCaskill and Matlock do not have a relationship other than through the husband, McCaskill’s aim must have been for Matlock to leave her husband.
McCaskill had been in a relationship with the husband for several years before threatening Matlock, Judge Rudolph Pyle III wrote. It is not clear why McCaskill would suddenly start threatening Matlock with that aim.
The state did argue at McCaskill’s trial for the lesser-included offense of harassment, which is supported by the evidence. As such, the Court of Appeals ordered the Class A misdemeanor intimidation charge vacated and that the trial court enter judgment of Class B misdemeanor harassment.•