7th Circuit Court of Appeals
Tax – Horse Racing/Hobby
Merrill C. Roberts v. Commissionerof Internal Revenue
An Indiana man who ran a horse racing business had his tax deficiencies for the 2005 and 2006 tax years voided by the 7th Circuit Court of Appeals after Judge Richard Posner ripped apart an opinion by the U.S. Tax Court.
Merrill Roberts became interested in horse racing in 1999 and built a horse track on land he owned in Indianapolis. In 2005, he decided to build a bigger horse training facility, but built it in Mooresville after the city of Indianapolis opposed the construction. The U.S. Tax Court found in 2005 and 2006 he had erroneously deducted the expenses of his horse racing business because it was only a hobby during those years. The court assessed tax deficiencies of $89,710 for 2005 and $116,475 for 2006. In 2007, the court declared it a business, and it has been considered a business ever since.
Posner wrote the decision was “untenable; it amounts to saying that a business’ start-up costs are not deductible business expenses — that every business starts as a hobby and becomes a business only when it achieves a certain level of profitability.” Posner said Roberts’ business did not begin in 2007 but 2005, when he decided to build a large training facility.
He pointed out an inconsistency in the ruling when the Tax Court said Roberts did not purchase the Mooresville property to run a business, but said the business didn’t start until it began functioning at the property. “The judge seems not to have understood that the decision to build the facility, and its construction, are also indications of a profit motive.”
The Tax Court based its ruling off a “goofy regulation” Posner wrote, citing 26 C.F.R. Section 1.183-2, Treas. Reg Section 1.183-2: Activity Not Engaged in for Profit Defined. The regulation says that the court can use another test as long as the court proves the other factors are insufficient.
However, even when using the test, which has nine factors, Roberts’ horse racing venture was a business. All nine factors supported or at least were neutral about his horse racing venture. “It may have been a fun business, but fun doesn’t covert a business to a hobby. If it did, Facebook would be a hobby, Microsoft and Apple would be hobbies, Amazon would be a hobby, etc. ad infinitum,” Posner wrote.
Civil – Prisoner Hearing/Drugs
Curtis T. Ellison v. Dushan Zatecky
The 7th Circuit Court of Appeals ruled a prisoner could not defend the possession of heroin charge against him and thus remanded his case for rehearing.
Officers at Pendleton Correctional Facility claimed they found heroin in Curtis Ellison’s cell and stripped him of 90 days of good time credit. A photo of the heroin, however, shows it was discovered in a cell on the other side of the building from him. Two guards Ellison was unfamiliar with conducted the search. Ellison’s correctional officer told him another officer had incorrectly attributed the heroin to him and requested the officers who conducted the search and the officer who made the mistake show up at Ellison’s hearing.
However, when the day for the hearing came, no witnesses showed up. Ellison said he never did drugs and said the heroin was found in a different cell. However, the hearing officer found him guilty. In District Court, Ellison said he was denied due process but the court thought he was challenging just the sufficiency of the evidence and ruled against him.
The 7th Circuit said Ellison’s petition was read too narrowly, and the court should have included his due process claim as well. It said when a prisoner is denied access to evidence necessary to defend against a charge, the claim is one of due process and not sufficiency of the evidence.
The officers should have been present at Ellison’s hearing, and the judge should have looked at the video of the search more closely, the Circuit Court held. Ellison is entitled to a new disciplinary hearing.
Indiana Supreme Court
Criminal – Jury Trial Waiver
Adam Horton v. State of Indiana
The Indiana Supreme Court reversed and remanded a man’s conviction for Class D felony domestic battery after it found his silence did not constitute a waiver to right of trial by jury.
It also found acknowledging publicly available records as evidence in a trial is minimally sufficient, but is not an encouraged practice and those records should be entered into the court record whenever possible.
Adam Horton was convicted of Class A misdemeanor battery and sought to bifurcate a Class D felony battery charge against him. After he was convicted, the judge asked Horton’s attorney if he would like to waive Horton’s jury trial right on the felony charge. The attorney said yes, and he would like it proceed as a bench trial, but Horton said nothing. Horton was later found guilty of the charge.
During the bench trial, the state asked the court to take notice of another case file in proving Horton’s prior domestic battery conviction, but never entered that into evidence. Horton didn’t object.
Horton appealed and said he did not waive his jury trial rights. He also said because the sentencing order from the prior conviction was unsigned, insufficient evidence supported the felony domestic battery conviction. The Court of Appeals affirmed the trial court, and the Supreme Court granted transfer.
The state admitted that Horton did not personally waive his rights, but said the court should make an exception because he had just experienced a jury trial and is more aware of the right his attorney attempts to waive on his behalf. Citing precedent from a few cases, the decision written by Chief Justice Loretta Rush said the court could not grant that exception.
“The personal waiver requirement, rooted in Indiana Code section 35-37-1-2 and longstanding precedent, eliminates an intolerable risk,” Rush wrote. “It ensures that a felony prosecution will not proceed to a bench trial against the defendant’s will by demanding direct evidence that waiver is the defendant’s choice. Given the high stakes of erroneous jury-trial deprivation and the low cost of confirming personal waiver, we see no reason to dilute our time-honored personal waiver requirement by ‘back[ing] away from [the] standard practice’ that ‘Indiana trial courts have clearly adopted.’”
The court also ruled it was not an abuse of the trial court’s discretion to admit evidence from Horton’s prior conviction, even though it was not entered into the record. The information was publicly available and the case number was given, so it was easy to look up. However, not including this information makes it harder on appellate courts, so it should be included whenever possible.
Indiana Court of Appeals
Civil Tort – Venue
Michael and Janet Garrison v. Elisha Ford and United Farm Family Mutual Insurance Company
The Indiana Court of Appeals said convenience does not trump precedence and reversed and remanded a transfer of venue that would have taken an auto insurance complaint from Marion to Johnson County.
Michael and Janet Garrison got into an auto accident with Elesha Ford in 2014. In September of 2015, they filed a complaint naming Ford and United Farm Family Mutual Insurance Company as defendants. It was filed in Marion County, but United Farm filed a motion to transfer the venue to Johnson County because that was where Ford lived and where the accident happened. The Garrisons opposed, saying Marion was a county of preferred venue and where Farm Bureau has its principal office. A Marion Superior Court judge granted the transfer, and the Garrisons appealed.
In its decision, the COA said subsection 4 of Trial Rule 75A says a suit should be filed where the principal office is located, which in this case is Marion County. United Farm says a special rule should apply to vehicle collisions, because it is easier to get witnesses, police and jury views there than in the preferred county.
The COA said there can only be one county of preferred venue, and convenience does not trump precedence. “We do not employ a separate rule for the sake of convenience, as Farm Bureau suggests,” Judge L. Mark Bailey wrote for the panel. “‘The balance of convenience, even if it were an explicit factor, is not sufficient to disturb the plaintiffs’ selection of a forum that meets preferred venue requirements,’” he added, quoting Meridian Mutual Insurance v. Harter, 671 N.E.2d 861, 863 (Ind. 1996.)
Criminal – Indigency Hearing/Fees
Mason W. Meunier-Short v. State of Indiana
The Indiana Court of Appeals said an indigency hearing is not required before determining fees in a court case, though it should be conducted at some point, in a case where a man was charged more than $1,000 in court fees without a hearing. It also said the court cannot impose requirements that he maintain a “C” average in his school and have full-time employment.
Mason Meunier-Short removed a shotgun from beneath his father’s bed and, unaware that it was loaded, pointed it at his girlfriend and pulled the trigger. The shot caused severe and life-threatening injuries to the girlfriend when it struck her abdomen. He was arrested and charged with criminal recklessness while armed with a deadly weapon, a Level 6 felony, and a firearm enhancement. The state dropped the enhancement as part of a plea agreement.
The trial court sentenced Meunier-Short to two years in the Department of Correction, with one suspended to probation. It also imposed $1,099 in costs and fees and ordered Meunier-Short to maintain a “C” average in the school he was attending after his release.
Meunier-Short argued on appeal the trial court abused its discretion by assessing fines, costs and fees without first conducting an indigency hearing. However, the COA disagreed and said the court can assess fines without conducting an indigency hearing first, but must conduct one before the conclusion of Meunier-Short’s probation. The state argued a hearing would be superfluous, but the COA said Indiana Code required one, and there is conflicting information about Meunier-Short’s ability to pay.
However, Meunier-Short did get a break when the COA said the trial court lacked the statutory authority to impose a $200 substance abuse fee and a $200 alcohol and drug countermeasures fee. The COA said the code that requires the substance abuse fee does not include offenses against persons in it and the code that requires the countermeasures fee does not include criminal recklessness.
Meunier-Short also challenged the order requiring him to maintain a “C” average in school when he got out of prison. The COA said although it would be good for Meunier-Short to return to school and do well in his program, the court can’t order him to maintain full-time work and have a “C” average in his school. The court didn’t see how requiring both relates to his conviction of criminal recklessness.
Therefore, the court remanded the order to the trial court with instructions to give Meunier-Short the option to either maintain full-time employment or faithfully pursue a course of study that will equip him for suitable employment.
Miscellaneous – Tax Sale/Error
Paul Angel v. Vanderburgh County Treasurer and Townsquare Media LLC
The Indiana Court of Appeals reversed a Vanderburgh Superior trial court, ruling a man can claim a refund after the property he bought at a tax sale was reclaimed by the owner due to a clerical error.
Paul Angel bought property at a tax auction for $5,500. However, previous owner Townsquare Media filed a motion for relief from the tax deed order when it found a clerical error resulted in the county assessor’s office sending tax notices to the wrong address, which is why the taxes were not paid. Townsquare’s motion was granted.
Later that year, Angel filed a motion to establish the redemption amount, arguing that he should get a refund from the money he paid for the sale. Townsquare said the motion was final judgment, and he did not submit a timely request for issue of the surplus. The trial court found in favor of Townsquare, and Angel appealed.
Angel argued Indiana Code 6-1.1-25-12 provided he was entitled to recover amounts set forth in the statute and that if he’s not reimbursed, Townsquare would receive an inequitable windfall.
The COA found Angel was a grantee of the deed under the code’s definitions. Moreover, Angel was entitled to recover the amount paid because the code specified as such. The taxes were unpaid at the time of sale and Angel had acquired a lien on the property as grantee of the tax deed.
The court remanded the order to the trial court for a determination of how much Angel should recover.
Criminal – Fourth Amendment/Marijuana
Toddrick Ogburn v. State of Indiana
The Indiana Court of Appeals reversed a man’s conviction of marijuana with intent to deliver in an amount greater than 10 pounds after it found the trial court abused its discretion by admitting evidence that violated his Fourth Amendment rights against unreasonable searches and seizures.
Toddrick Ogburn was convicted of the Class C felony after police searched his ex-wife’s truck and found two bundles of marijuana weighing over 20 pounds each as well as a Western Union receipt signed by him. Officers said he admitted the marijuana belonged to him. Police were on the scene after they responded to a report of burglary and found the front door of the apartment ajar and the first floor window broken.
Ogburn had other charges against him dismissed after the trial court found the evidence against him was obtained during an illegal search. He filed a motion to dismiss the evidence found in the truck as well, but that was denied. During his trial, Ogburn denied speaking to the police at all and denied living in the apartment that was searched. The trial court convicted him of the felony and Ogburn appealed.
The state said Ogburn should not be allowed to challenge the search of the Chevy Tahoe because he denied having a possessory interest in the vehicle at trial, and thus judicial estoppel applies. But the COA thought otherwise. It said Ogburn did not prevail on the position at trial when the court found Ogburn guilty, necessarily finding Ogburn did have a possessory interest. Also, the argument raises the issue of standing, which was not brought up at the trial level and therefore cannot be brought up at this level.
The police entered the house twice, once for the burglary, and the second time after they obtained a warrant based on a smell of burnt marijuana in the apartment. However, the COA said the warrant should not have been given because the smell was not enough evidence. They did not meet anyone under the influence of marijuana, and there was no proof the smell came from that apartment. Also, the key fob to the truck should not have been obtained because warrants are limited to things which have the suspects’ name or likeness.
The COA also ruled the fruit of the poisonous tree doctrine bars the admission of the marijuana from the car, because the key fob was obtained during an illegal search.
Agency Action – Workers’ Compensation
William Gordon v. Toyota Manufacturing of Indiana
The Indiana Court of Appeals reversed a workers’ compensation board decision and found a man was entitled to the full amount of temporary total disability he requested. His employer did not provide him notice about what would happen if he refused the sedentary job he was offered and the judges held he did not waive the issue.
William Gordon injured his left shoulder and neck while employed at Toyota in 2008. He attempted to return to work eight months after his injury, but left a few weeks later because he was unable to do a sedentary job Toyota placed him in. He had another surgery two years later, and the surgeon in that case expected a full recovery in six months.
The Full Worker’s Compensation Board of Indiana ruled Gordon was entitled to 30 weeks of temporary total disability, taking into account four weeks of recovery for the first surgery and six months of recovery for the second. Gordon had asked for the full two years that he was off work. He appealed.
This is the second time this case has come before the COA. The first time was in 2013 and the COA ruled there was not enough evidence in the record to decide the case. It sent the case back to the Worker’s Compensation Board.
The COA said Gordon terminated his employment because his work-related injuries prevented him from doing even the sedentary job he was offered at Toyota. Because of that, Indiana Code 22-3-3-11 applies, but the board made no determination whether Gordon’s refusal to do the work was justifiable, so the COA cannot rule on that alone.
However, the COA said Gordon was entitled to his full disability benefits because Toyota never gave him a notice setting forth the consequences of the refusal of employment under that section of the code, and thus could not deny him benefits based on Gordon’s refusal to do the work offered to him.
The board found Gordon’s argument on the notice issue was brought up for the first time at the full board arguments and thus he waived the issue. The COA disagreed and said he brought up the argument at the single board member hearing, and the burden shifted to Toyota to show it complied with the statute. Toyota did not present that evidence.
Criminal – Habeas Corpus/Permission
Eddie Love v. State of Indiana
The Indiana Court of Appeals remanded a man’s petition for habeas corpus and ordered the trial court to dismiss his claims after the judges said he improperly filed his petition without permission from the court.
Eddie Love was convicted of two counts of dealing in cocaine in 2006. Since then, he has filed three petitions for post-conviction relief, two in state court and one in federal court, all of which were denied. After his second denial, in which the COA denied permission to file a successive petition, he filed three requests anyway. The COA directed the trial court to consider sanctions for future barred claims and required Love list all of his cases in the future.
His third writ of habeas corpus was started in 2014 in LaPorte County. The case was transferred to Elkhart Circuit Court, at which time Love tried to file a motion to dismiss, but it was denied. The Circuit Court imposed specific filing criteria for future litigation and stripped Love of his credit time earned as an inmate in the Department of Correction.
Indiana Post Conviction Rule 1(12) says before a petitioner can file a successive post-conviction relief petition he must receive leave to pursue a successive petition from the COA or the Indiana Supreme Court. Love repeatedly has not done so, including in the instant case, so the COA ordered the trial court to vacate its judgment and dismiss Love’s petition.
Civil Tort – Statute of Limitations
Kennedy Tank & Mfg. Co. Inc. and Hemlock Semiconductor Corp. and Hemlock Semiconductor LLC v. Emmert Industrial Corporation, d/b/a Emmert International
The Indiana Court of Appeals ruled a federal statute supersedes a state one regarding the time period in which to sue and thus reversed a decision from the trial court which denied a company’s motion to dismiss a claim against it for breach of contract.
In April 2011, Kennedy Tank Manufacturing Co. hired Emmert International to transport a piece of commercial equipment for $200,000 plus additional expenses Emmert might incur during move. However, Emmert had a number of unforeseeable problems and ended up with additional expenses of almost $700,000 which Kennedy declined to pay.
Emmert sued Kennedy for breach of contract or unjust enrichment. Later, Kennedy moved to dismiss on the grounds Emmert did not bring the action within the 18-month limitations period set forth in 49 U.S.C. Section 14705(a) which it said superseded Indiana’s 10-year limitation period. The trial court said the 10-year period applied.
The COA said the federal 18-month limitation should apply. While Indiana hasn’t ruled on the preemption of the federal limitation, other courts have, and those courts have always ruled when a state limitation was longer than a federal one, the federal one should rule. The COA said that should be the case in Indiana as well, and reversed the trial court decision.
Judge Patricia Riley partially dissented in the decision. She agreed the federal statute preempts Indiana’s state statute, but disagreed with how the court majority resolved Emmert’s estoppel claim. Emmert claimed even if the federal statute applied, its claim should not have been dismissed because Kennedy should be estopped from asserting the statute of limitations as an affirmative defense. Riley said even though Emmert’s argument was devoid of any cogent reasoning and that Emmert technically waived its argument, she thought the issue should be determined on its merits.
“Because the trial court ruled in Emmert’s favor — i.e., it denied Kennedy’s motion to dismiss on its finding that 49 U.S.C. Section 14705 does not preempt the relevant statute of limitations — the trial court did not address Emmert’s estoppel claim in its order. As there is nearly $700,000 at stake in this case, I would remand with instructions for the trial court to conduct further proceedings and make a factual determination as to whether Kennedy should be equitably estopped from asserting a statute of limitations defense.”
Civil Plenary – Pro Se/Attorney Fees
Marion County Election Board and Marion County Board of Voter Registration v. Gregory Bowes, Mark King, Paul Ogden, Zach Mulholland and Brian Cooper
A lawyer who represented himself in his case against two Marion County governmental entities and won is not entitled to attorney fees or compensation of any kind for missed business, the Indiana Court of Appeals ruled.
Gregory Bowes, an attorney in good standing in Indiana, won an Indiana Access to Public Records Act case against the Marion County Board of Voter Registration and the Marion County Election Board. Bowes had sought electronic information on Marion County voters. He ran for Marion County judge in the May 2014 primary as a Democrat, but was not in the top eight of votes. He and several others tried to get on the general election ballot after a federal judge ruled the Marion Superior Court election process unconstitutional.
The trial court ruled Bowes could not recover attorney fees because he litigated the claim pro se, but awarded him expenses of litigation to compensate him for his lost opportunities and employment as an attorney.
The MCVR appealed and said that award was an improper award of attorney fees and that the trial court erred when it awarded Bowes the compensation. Bowes cross-appealed saying the trial court erred in denying his request for attorney fees and abused its discretion in determining the amount of litigation expenses.
The APRA allows prevailing plaintiffs to recover attorney fees, but Bowes is not entitled to them because there are none to recover, Judge Rudolph Pyle III wrote for the panel. “Even if a pro se litigant happens to be a lawyer, no attorney fees are earned unless independent counsel is engaged,” he wrote.
Bowes argued that should be changed because an attorney litigant will not necessarily receive better representation by hiring independent counsel than by litigating pro se, and a pro se attorney would be in a better position to evaluate the merits of a potential claim. However, the COA said the point is not to obtain “better” counsel, but independent counsel.
Pyle noted that pro se lawyers are at an inherent disadvantage for several reasons, and this was the reason for the rule, not the skill of any pro se counsel.
Pyle also wrote that Bowes is not entitled to litigation expenses for missed work or missed opportunities, because there were no expenses when he stopped his business to pursue this litigation.
Bowes is entitled to gain back $828.14 for deposition costs and $147 in litigation expenses, but he did not incur any expenses by voluntarily suspending his practice to pursue this litigation.•