7th Circuit Court of Appeals
Civil Tort – Insurance/Jurisdiction
State Farm Life Insurance Co. v. Troy Jonas, et al.
A man who claimed State Farm Insurance Co. owed him a higher rate of interest and attorney fees had his case dismissed because the controversy did not exist when the lawsuit began.
Troy Jonas filed suit against State Farm after the insurance company delayed paying him the proceeds of his ex-wife’s life insurance policy. He asked the District Court to award him the proceeds plus 18 percent interest and attorney fees.
However, Jonas conceded there was no justiciable controversy when he filed this lawsuit. State Farm contested the payment of the proceeds to Jonas and said it had filed an interpleader under 28 U.S.C. 1335.
Jonas acknowledged State Farm filed the suit before the 60-day deadline from when he filed his claim and, thus, before the rate of interest stepped up from 2 percent to 18 percent as provided by Texas law. (At the time of her death, the ex-wife had been living in Texas, Jonas and the children were living in Indiana and State Farm is incorporated in Illinois.)
Yet, Jonas argued that once the 60th day passed, the controversy arose concerning whether the insurance company was liable.
“The problem with that contention is that a case or controversy must exist when a suit begins – and on that date there was no live controversy,” Judge Frank Easterbrook wrote. “If disputes about attorneys’ fees and interest during the litigation could create a justiciable controversy, then no case could be dismissed for lack of one, if only because the winner of every suit is presumptively entitled to costs under 28 U.S.C. 1920.”
The 7th Circuit pointed to rulings by the Supreme Court of the United States which held that awards of legal fees and other post-filing procedural events could not supply a case or controversy.
“When this litigation began, there was no justiciable controversy,” Easterbrook wrote. “The current disputes about the rate of interest and whether State Farm must pay the attorneys’ fees that Troy has incurred in his litigation do not retroactively create jurisdiction.”
The 7th Circuit Court of Appeals vacated the decision. It also remanded the case with instructions to dismiss for lack of subject-matter jurisdiction.
Criminal – First Impression/Recorded Evidence
United States of America v. Tommy Webster
What a South Bend man said to another suspect while they were alone in the back of a police cruiser was recorded by an in-car video camera and properly presented to a federal jury, a panel of judges decided in a matter of first impression for the 7th Circuit Court of Appeals.
The panel affirmed Tommy Webster’s drug and firearm convictions for which he was sentenced to 14 years in prison. Webster owned a marijuana grow house and was convicted of possession with intent to deliver cocaine and possession of a firearm as a convicted felon.
Police followed an anonymous tip to Webster’s house in March 2011 and encountered him there. Webster was carrying about $2,300 in cash, and police noticed a strong odor of marijuana. Inside his house, they found 50 marijuana plants and cocaine after executing a warrant.
Webster and another suspect were placed in the back cage of a police cruiser before and during the search for about two-and-a-half hours, according to the record. Most of that time a police corporal was in the car with them, but when he left for about eight minutes, Webster made several statements that connected him to the house.
Because Webster’s defense counsel strategically did not object to the admission of the recording, the panel reviewed only for plain error. For purposes of their analysis, the judges assumed Webster had a subjective expectation of privacy while alone with another suspect in the back of the police car.
“(T)he insurmountable obstacle to his claim is in the objective portion of the test – whether the expectation is one that society accepts is reasonable,” Circuit Judge Ilana Rovner wrote for the unanimous panel. “Although our circuit has not yet addressed this question, six circuits have done so over the last two decades and all have held that there is no objectively reasonable expectation of privacy in a conversation that occurs in a squad car.
“… Given the nature of the vehicle and the visible presence of electronics capable of transmitting any internal conversations, the expectation that a conversation within the vehicle is private is not an expectation that society would recognize to be reasonable. We agree with those circuits, and hold that conversations in a squad car such as the one in this case are not entitled to a reasonable expectation of privacy, and therefore the recording of the conversation is not a violation of the Fourth Amendment.”
Rovner wrote that the holding applied only to squad cars similarly equipped and not, for instance, to a design in which officers were separated from suspects by Plexiglass that allowed them to see, but not hear, conversations.
The panel affirmed the convictions and sentence handed down by Judge Robert L. Miller of the District Court for the Northern District of Indiana, South Bend Division. The 7th Circuit also rejected Webster’s other arguments that the court erred by allowing into evidence lab results on the seized drugs and his argument that the evidence was insufficient to support his conviction.
Indiana Tax Court
Tax – Sales Tax Refunds
SAC Finance, Inc. v. Indiana Department of State Revenue
A finance company that purchased car loans at a discounted price is entitled to recoup all the sales tax on the loans which have since gone into default.
SAC Finance bought installment sale contracts from Superior Auto Inc. at a 30 percent market discount. After some customers subsequently defaulted on their contracts, SAC filed three claims with the Indiana Department of State Revenue for a refund of the Indiana sales tax that Superior had paid.
However, the department of revenue denied SAC 30 percent of each refund claim. In part, the state argued it properly removed market discount income from SAC’s Indiana bad debt deduction because Indiana Code 6-2.5-6-9(d) must treat market discount income as interest which is the same way it is treated for federal income tax purposes.
The Indiana Tax Court rejected this argument and found the department erred in denying the 30 percent of the three refund claims.
The Tax Court held that excluding market discount income from the Indiana bad debt calculation under I.C. 6-2.5-6-9(d) is incompatible with the purpose of the state exclusions from the federal bad debt deduction.
“If (I.C. 6-2.5-6-9(d)) were to exclude market discount income as if it were interest, the Indiana bad debt deduction for an assignee using the Market Discount Rules would not equal the debt that was unable to be collected due to the default,” Judge Martha Blood Wentworth wrote. “Indeed SAC is already limited by the federal starting place to recoup no more sales tax than the amount paid to the Department. Thus, to allow a second haircut by treating market discount income as excludable interest would result in a windfall to the Department.”
Tax – Tax Refund/Seized Property
Virginia Garwood v. Indiana Department of State Revenue
The Indiana Department of Revenue improperly denied a refund of the value of 240 dogs seized by the state from an alleged Harrison County puppy mill, the Indiana Tax Court ruled.
In the latest order in a long-running dispute, Senior Judge Thomas Fisher denied the state’s motion for summary judgment from Virginia Garwood’s claim that the state owed her $122,684.50, the value of her dogs, cash and checks seized in 2009. “(T)he Court cannot conclude that the Department properly denied Garwood’s refund claim as a matter of law,” Fisher wrote.
Attorney General Greg Zoeller used tax warrants to seize the animals in what he described at the time as an “Al Capone” method of taking down puppy mills.
The tax warrants demanded more than $142,000 in sales taxes the state claimed were owed by Virginia and Kristin Garwood, but those warrants later were voided. The Garwoods pleaded guilty in May 2010 to Class D felony charges of failing to pay sales taxes. They later paid taxes and demanded a refund of the value of the seized animals that the state ended up selling to the U.S. Humane Society for $300.
“Garwood subsequently explained that the Department’s allegedly improper ‘closed door’ sale of her animal inventory to the U.S. Humane Society pursuant to invalid jeopardy tax assessments entitles her to relief. … Consequently, even if the Court found that the provision of goods or services does not constitute a tax payment under Indiana Code § 6-8.1-8-1, the Department would not be entitled to an entry of summary judgment because Garwood has presented a claim for which this Court can provide relief. … As such, Garwood’s claim for compensatory damages will be heard in the Tax Court without a jury,” Fisher wrote.
“The Court will issue, under separate cover, an order scheduling this matter for further proceedings.”
Indiana Supreme Court
Adoption – Grandparent Rights
In Re the Adoption of B.C.H.
See story on page 8.
Agency Action – Civil Rights/Retaliation
Fishers Adolescent Catholic Enrichment Society, Inc. v. Elizabeth Bridgewater o/b/o Alyssa Bridgewater
Finding the Indiana Civil Rights Commission overstepped its authority, the Indiana Supreme Court has vacated the organization’s final order regarding an “intra-group squabble” over a dinner menu.
The split decision issued concludes a dispute where the appellate bench disagreed as to whether a dinner was an educational activity.
The discrimination claim originated when Elizabeth Bridgewater requested that the Fishers Adolescent Catholic Enrichment Society serve her daughter a special meal for the group’s All Souls’ Day Masquerade Ball dinner dance. FACES denied the request but approved Bridgewater’s subsequent suggestion that her daughter be allowed to bring her own dinner.
However, Bridgewater later went back to her original request and when she was again turned down, she filed a complaint with the commission. Bridgewater charged FACES discriminated against her daughter due to her disability of a food allergy. After FACES expelled the Bridgewater family, the mother filed another complaint, alleging the expulsion was an unlawful retaliation for filing the first discrimination claim.
On the first complaint, the commission ruled FACES did not commit an unlawful discriminatory practice because it provided a reasonable accommodation for Bridgewater’s daughter’s dietary needs. On the second complaint, the commission did find FACES discriminated by booting the Bridgewater family from the organization.
The Indiana Court of Appeals agreed the dinner dance fell under the purview of the commission because the activity was related to education.
Three justices and the chief justice of the Supreme Court took a narrower view of the statute’s language which gives the commission the authority to review discriminatory practices as they “relate to … education.” The majority held the dinner dance was a “quasi-religious social function” rather than an educational one and, therefore, fell outside the commission’s mandate.
“Here, the claim of retaliatory discrimination is predicated on Mrs. Bridgewater’s assertion of a claim that the failure to provide special food constituted disability discrimination,” Justice Brent Dickson wrote for the majority. “Because this disability discrimination claim is not related to education and thus falls outside the Commission’s enforcement powers, the derivative retaliatory discrimination claim is also beyond the Commission’s authority to impose any remedial sanctions against FACES.”
The court concluded the commission had exceeded its statutory authority because neither the disability discrimination claim nor the retaliatory discrimination claims were related to education.
Justice Robert Rucker concurred with the majority’s ruling that Bridgewater’s disability discrimination claim must fail because the alleged discriminatory practice does not relate to education. However, he dissented with the majority view that the retaliation claim depends on a discrimination claim.
“The facts of this case make clear the Bridgewater complaint was certainly not ‘meritless’ as the majority contends,” Rucker wrote. “And the Commission was quite correct in entertaining and providing remedy in favor of the Bridgewaters when FACES expelled the family in retaliation for filing the complaint in the first place.
“Second, the retaliation language in the statute itself says nothing about an alleged ‘meritorious’ complaint,” Rucker continued. “Instead it tasks the Commission with the responsibility of ‘investigat(ing) complaints alleging discriminatory practices’ and giving it authority to prevent retaliation ‘because the person filed a complaint, testified in any hearing before this commission, or in any way assisted the commission in any matter under its investigation.’ I.C. § 22-9-1-6(d), (g).”
Indiana Court of Appeals
Civil Tort – Medical Malpractice/Expert Testimony
Lloyd G. Perry v. Anonymous Physician 1, Alias Medical Group 1, Inc., Anonymous Physician 2, et al.
The Indiana Court of Appeals chastised a pro se litigant for supporting his medical malpractice claim with only a “perfunctory and self-serving” affidavit instead of submitting expert testimony.
Lloyd Perry filed a proposed malpractice complaint against multiple defendants with the Indiana Department of Insurance in 2010. However, the medical review panel found the conduct of the physicians and hospitals did not cause Perry’s injuries.
Accordingly the Allen Superior Court granted the defendants’ motion for summary judgment.
The Court of Appeals noted when the health care providers moved for summary judgment, Perry responded by only submitting a brief and did not provide expert testimony to rebut the review panel’s opinion.
In an extensive footnote, Judge Melissa May pointed out that pro se litigants are held to the same rules of procedure as licensed attorneys and therefore must cite authorities, statutes or parts of the record on appeal.
“We will not consider an assertion on appeal when there is not cogent argument supported by authority and references to the record as required by the rules,” May wrote. “… Nor will we become an advocate for a party or address arguments that are inappropriate or too poorly developed to be understood. As we may not become an advocate for Perry, we must conclude he has waived his argument on appeal.”
The Court of Appeals held plaintiffs are required in medical malpractice cases to provide expert opinion evidence in order to defeat summary judgment when the medical review panel has determined there was no breach of duty of care.
In a typical negligence action, the defendant’s conduct is judged against what a reasonable man would do under the circumstances. But the Court of Appeals noted a medical malpractice case involves questions of science and professional judgment that are outside the comprehension of the layperson.
“We therefore do not believe a medical malpractice plaintiff may defeat summary judgment with nothing more than a ‘perfunctory and self-serving’ affidavit that specifically controverts the moving party’s prima facie case,” May wrote for the court. “Perry offers no argument that he provided the required expert opinion testimony and the record does not reflect he did.”
Civil Plenary – Insurance
FLM, LLC v. The Cincinnati Insurance Company, et al.
Despite having agreed to pay $1.7 million, an insurance company may have to provide more money to satisfy a claim from the owner of a contaminated property.
FLM LLC had sought indemnification from The Cincinnati Insurance Co. for environmental problems that arose on its Indianapolis property after 10,000 tons of sand from a Chrysler foundry was left there.
Eventually, the parties agreed to an interpleader motion which paid FLM $1.7 million. Then, FLM filed a summary judgment asserting Cincinnati Insurance’s commercial general liability policy has separate $1 million limits for property damage coverage and personal injury coverage.
Marion Superior Court disagreed. It granted Cincinnati Insurance’s motion to reconsider and strike all references to property damage coverage from its prior order. The trial court also issued an order denying FLM’s summary judgment motion as to separate coverage limits.
The Indiana Court of Appeals reversed and remanded with instructions to enter summary judgment in favor of FLM.
The Court of Appeals found the commercial general liability policy offered by Cincinnati Insurance does have separate $1 million limits for personal injury coverage and property damage coverage.
Also, the Court of Appeals stated it was unaware of any rule of law that prevents an insurance company from providing overlapping coverage and the policy in the case does not prohibit it under the facts of this case.
The panel pointed to Indiana Court of Appeals Judge Cale Bradford’s reasoning in the first appeal, FLM, 973 N.E.2d 1167 (Ind. Ct. App. 2012), which found that ambiguity in the policy could be referring to actions or the unintended consequences of those actions. Bradford held that the ambiguity must be resolved in favor of the coverage.
In this appeal, the Court of Appeals found property damage coverage is available under Cincinnati Insurance’s policy and that the plain language of the policy allows for different coverages arising from the same occurrence.
Post Conviction – Perjury/Voting Violation/Theft
Charles P. White v. State of Indiana
Former Indiana Secretary of State Charlie White, convicted of voter fraud and removed from office, had three of his six convictions overturned by the Indiana Court of Appeals and will have to serve his sentence of one year of electronic home monitoring.
White raised several arguments on appeal, including insufficient evidence, errors in jury instructions, prosecutorial misconduct and ineffective counsel. However, he was most successful on the claims he did not raise.
The Court of Appeals found two double-jeopardy violations. It noted White did not make these arguments on appeal but the court was raising the issue sua sponte because a double-jeopardy violation implicates fundamental rights.
The 55-page opinion was written by Chief Judge Nancy Vaidik and was unanimous.
Specifically, the Court of Appeals concluded White was convicted and punished twice for making a false statement regarding his address on his voter registration. Also, he was convicted and punished twice for voting in the wrong township during the May 2010 primary election. It reversed one conviction for perjury and one conviction for voting in the wrong precinct and remanded to the trial court to vacate the convictions.
In the footnotes of its 55-page opinion, the Court of Appeals highlighted problem areas in the state statute and recommended the Legislature amend.
First, it pointed to Indiana Code 3-14-3-1.1(1) which requires the individual submit multiple materially false, fictitious or fraudulent applications. White contended that to violate the statute, an individual would have to turn in several applications. The state argued that interpreting the statutes to require more than one application would lead to absurd results and excuse a legitimate instance of voter fraud.
The Court of Appeals noted the code is written in the plural and nudged the Legislature to amend the language.
Second, the Court of Appeals recommended the Legislature examine I.C. 3-5-2-3 which regulates paper ballots, ballot cards or ballot labels. White asserted the statute does not apply in his case because he used electronic voting, and even the state conceded the statute does not account for new voting technology.
The Court of Appeals held that since electronic voting systems will be used increasingly in the future, the Legislature should amend the statute’s definition of “ballot” to be more inclusive.
The Court of Appeals reversed White’s perjury conviction for putting the wrong address on his marriage license application. The court found his street address was not material to the application. However, the appellate court pointed out that supplying false information to the Circuit Court clerk when applying for a marriage license is a felony. It hinted the conviction might have stood if White had been charged with furnishing false information instead of perjury.
The Court of Appeals affirmed White’s other convictions for perjury, voting in the wrong precinct and theft. It also concluded White’s attorney, Carl Brizzi, was not ineffective.
Civil Plenary – Breach of Contract/Due Process
Jeffrey Hewitt v. Westfield Washington School Corp; Board of School Trustees of Westfield Washington School Corp., et al.
A Westfield elementary school principal fired in 2011 for a consensual sexual relationship with a teacher he supervised won an appeal of his lawsuit against the school corporation, which had been granted summary judgment by the trial court.
“The School has failed to carry the ‘onerous burden’ of showing that there are no genuine issues of material fact and that the School is entitled to a judgment as a matter of law on Hewitt’s breach of contract and due process claims,” Indiana Court of Appeals Judge L. Mark Bailey wrote. “Accordingly, the trial court erred in granting summary judgment in favor of the School. We therefore remand for further proceedings.”
Jeffrey Hewitt’s contract as former principal of Monon Trail Elementary School was the same as those signed by teachers, with the exception of language specifying his administrative role. Consistent with the contract as interpreted under state law, Hewitt should have been allowed a hearing at which he could present evidence, the court ruled. While the school board did allow a private conference before his termination, evidence was excluded.
The school contended that any evidence would have been fruitless because Hewitt had acknowledged the sexual relationship and that common sense dictates inherent problems with a supervisor engaging in such a relationship with a subordinate. The appeals panel, though, found Hewitt’s admission didn’t relieve the school of its duty to provide a hearing described in I.C. 20-28-7.5-2(g).
“Although we do not condone Hewitt’s behavior, we observe that ‘common sense’ may dictate there are ‘inherent problems’ with many relationships and circumstances that could exist within school districts and, from the outside, create an appearance of impropriety or apparent conflict of interest,” Bailey wrote. “… Despite their ‘inherent problems,’ none of these relationships regularly constitute just cause for contract cancellation, presumably because they do not always interfere with the ‘school board’s task of building up and maintaining an efficient school system.’”
The Indiana School Boards Association appeared in the case as amicus for the Westfield Washington defendants.
Miscellaneous – Suspension of Driver’s License/Procedure
Donald Snemis, Commissioner of the Ind. BMV; and Melvin Wilhelm, Prosecuting Atty. v. Joseph P. Mills
A motorist who won a trial court judgment vacating the suspension of his driver’s license didn’t file a brief when the Bureau of Motor Vehicles appealed the decision and, therefore, lost his challenge of the BMV action.
The Indiana Court of Appeals reversed a ruling by Franklin Circuit Judge J. Steven Cox and remanded with instructions to reinstate the license suspension sought by the BMV against Joseph P. Mills. The bureau claims Mills is a habitual traffic violator.
Mills persuaded the trial court to lift the license revocation due to “extreme unfairness.” The BMV notified Mills in January 2012 that his license would be suspended for 10 years based on his qualification as a habitual traffic violator due to an offense in 2008. Mills had argued successfully at the trial court that he no longer presented a danger and his work depended on a significant amount of driving.
But Judge Rudolph R. Pyle wrote for the appellate panel that a recent Supreme Court ruling in a case involving a former state worker, Ind. State Ethics Comm’n v. Sanchez, 18 N.E.3d 988, 991 (2014), applied to Mills’ case.
“Our Supreme Court’s analysis in Sanchez controls the outcome here. The burden of proof is on Mills, who was the petitioner for judicial review in the trial court and is the appellee in this Court,” Pyle wrote.
“However, Mills did not file an appellee’s brief and, as such, cannot have met his burden of proof on appeal. Accordingly, we summarily reverse the trial court’s decision and remand with instructions that the trial court reinstate the BMV’s adjudication against Mills.”
Civil Plenary – Insurance/Duty to Defend
Peerless Indemnity Insurance Co. v. Moshe & Stimson LLP, Sarah Moshe, and Justin Stimson
A dispute between a brother and sister as their law firm partnership was dissolving was an employment-related matter covered by an insurer’s exclusionary clause, the Indiana Court of Appeals held, reversing a trial court order.
Sarah Moshe and Justin Stimson were partners in Moshe & Stimson LLP in Indianapolis until Moshe told Stimson she intended to leave the partnership. Their professional relationship began to deteriorate. According to the record, Moshe said her brother refused to dissolve the partnership, seized control of firm assets and case files, refused to pay her, and began making accusations about her personal integrity and professional competence.
Moshe ultimately sued Stimson for defamation, an accounting of the firm’s assets, an injunction and damages. The trial court ordered the insurer, Peerless Indemnity, to defend and indemnify Stimson against his sister’s lawsuit.
“On appeal, Peerless argues that the employment-related exclusionary clause is unambiguous and bars coverage. We agree,” Chief Judge Nancy Vaidik wrote. “Because Justin’s alleged actions toward his sister were employment-related, the exclusionary clause applies. We reverse the trial court and remand with instructions to enter summary judgment in Peerless’s favor on the issue of coverage.
“… The policy at issue was designed to protect the siblings in suits brought by third parties – it was not meant to protect one against the other in a suit between the two,” the court held.•