7th Circuit Court of Appeals
Civil – Breach of Contract
Benton County Wind Farm LLC v. Duke Energy Indiana, Inc.
The 7th Circuit Court of Appeals reversed a decision requiring Duke Energy to pay for power generated by a local wind farm only if it passes to a lower grid, deciding instead that the energy company is contractually obligated to pay for any generated power regardless of transmission issues.
In 2005, Benton County Wind Farm opted into Duke Energy’s offer to buy 100 megawatts of renewable energy at a price high enough to enable potential sellers to finance the construction of wind turbines. As part of the deal, Duke was required to pay Benton for all power delivered over the next 20 years while Benton was required to deliver to power lines owned by Northern Indiana Public Service Co. or other locations designated by the Midcontinent Independent System Operator.
Benton built a 100-megawatt facility that began operating in 2008. At that time, it was the only wind farm in its area and NIPSCO’s facilities could carry its entire output, while Duke purchased and paid for all the energy the wind farm could produce. However, as the years progressed more wind farms were being built and were increasing their capacities to 1,745 megawatts.
Until February 2013, MISO allowed wind farms to deliver to the grid regardless of what other producers, such as coal or nuclear energy producers, were doing, which forced other classes of producers to cut back. But in March 2013, the rules changed and wind farms that were constructed after 2005 were put on a par with other classes of producers, costing Benton its status as a must-run facility.
Duke responded by bidding exactly $0 all the time to keep Benton’s power on the grid. Any time that bid was rejected, MISO instructed Benton not to deliver any power, an order that equated to an order not to generate power and has led to the wind farm delivering power only 59 percent of the time.
In district court, Duke argued that when MISO told Benton to stop delivering power, it did not owe the wind farm anything, while the wind farm countered that Duke could put its power on the grid by making a negative bid, thereby displacing other producers’ power. When Duke opts not to do so, Benton argued that it owes liquidated damages under their contract. The district court sided with Duke and ruled that the energy company only has to pay for power delivered to the “Point of Metering” where it is measured and passes to the local grid.
In its appeal to the 7th Circuit, Benton relied on a portion of its contract with Duke that read, in part, “In the event that Buyer fails to accept delivery of all of the Electrical Output at the Point of Metering, whether due to Buyer’s failure to obtain Transmission Service … then Buyer shall pay to Seller liquidated damages … .”
Based on that and other language in the contract, Judge Frank Easterbrook wrote that the idea that Benton could not be paid if energy never crosses the point of metering and never counts toward the output is unfaithful to the contract because only some, not all, reasons for Duke’s failure to take the energy excuses its obligation to pay Benton.
Easterbrook pointed specifically to the portion of the contract that required Duke to pay Benton “due to Buyer’s failure to accept Transmission Service,” language that mirrors the situation Duke and Benton found themselves in, he said. When MISO changed the rules in March 2013, Benton was being told to stop production 41 percent of time because transmission was unavailable at the price Duke was willing to offer.
“It is only a matter of time until more capacity is built, whether by Duke or someone else,” Easterbrook wrote. “And (the contract) tells us that, until that happens, Duke must pay Benton.”
The parties also signed a second contract that required Duke to work “reasonably” with Benton. Easterbrook wrote that the second contract would only be relevant if it entitled Benton to a larger recovery, but that is not the case.
However, Judge Richard Posner wrote in a separate opinion that he concurred with the findings related to the first contract, but also wrote that he disagreed with the panel’s discussion of damages for the breach of the second contract.
“(Benton) had the incentive under both contracts to have fallback protection in the form of a liquidated damages clause,” Posner wrote.
The case was remanded with instruction to determine the relief to which Benton is entitled.
Indiana Supreme Court
Criminal – Fourth Amendment/Traffic Stop
Mary Osborne v. State of Indiana
Although a police officer believed that a Hamilton County woman could have been injured after being stuck under her car, the facts surrounding the situation did not lend themselves to an emergency situation that could justify the “warrantless intrusion” of stopping the woman’s car after she drove away, the Indiana Supreme Court held.
Mary Osborne was at a gas station in Fishers when she became stuck under her vehicle. Officer Jason Arnold received a call from dispatch about Osborne’s situation and drove toward the gas station to investigate, but dispatch informed him that Osborne had freed herself and driven away before he arrived.
As he was pulling into the gas station, Arnold saw Osborne’s car leaving. He began to follow her and did not see any driving infractions or criminal conduct, but still chose to initiate a traffic stop because he was “concerned that (she) potentially could have been seriously injured.”
Arnold saw no injuries on Osborne’s body, but did notice signs of intoxication. After she failed multiple sobriety tests, she was arrested and charged with Class A misdemeanor operating a vehicle while intoxicated in a manner that endangers a person and Class C misdemeanor operating a vehicle with a blood alcohol concentration of at least 0.08.
Osborne moved to suppress the evidence, claiming that Arnold’s warrantless stop violated her federal and state constitutional protections against unreasonable search and seizure. The trial court denied that motion but the Court of Appeals agreed with her. In oral arguments before the Indiana Supreme Court last month, the state argued that Arnold’s actions were lawful because he genuinely believed that Osborne might have been injured as a result of being stuck under her car.
While the justices did not contend that Arnold’s motives weren’t pure in their opinion, Justice Mark Massa, wrote the facts of the case “‘(do) not establish an exigency sufficient to justify (the) warrantless intrusion’ of stopping Osborne’s car.”
Massa pointed specifically to the Indiana Court of Appeals decision in Trotter v. State, 933 N.E.2d 572, 577 (Ind. Ct. App. 2010), which found that although police officers believed Trotter may have been intoxicated and passed out inside a home, the officers were not met with circumstances that would have caused a reasonable belief that Trotter was in need of emergency assistance.
Similarly, Massa wrote that Osborne had freed herself from the car and was driving normally, and that Arnold did not see her commit any traffic infractions or criminal activity. Those facts do not constitute an emergency that would make Arnold’s stop of Osborne permissible, he said.
“In a close case on these unique facts, we err, if at all, on protecting the privacy rights of Hoosiers against intrusion by the State,” Massa wrote.
The justices also found that the stop was impermissible under Article 1, Section 11 of the Indiana Constitution and reversed the trial court’s denial of Osborne’s motion to suppress the evidence.
Indiana Court of Appeals
Protective Order – Stalking
C.V. v. C.R.
A woman who worked at the Department of Veterans Affairs who obtained a protective order against a patient after he left four notes on her car didn’t prove that the Marine had stalked her and threatened her safety, the Indiana Court of Appeals ruled.
C.R. worked at the VA in South Bend and over the course of seven months, found four notes on her car. The court record doesn’t specify what the notes said, but C.R. testified during the protective order hearing that they talked about her physical attributes and creeped her out. She was able to determine that C.V. left the notes after matching up patient appointment dates and knowing that the author was a Marine.
VA Police spoke to C.V. and told him to stop leaving the notes, which he did. C.R. did not press criminal charges, but filed for a protective order. She represented herself and was unable to lay a proper foundation for the admission of the notes or surveillance video. The trial court did, however, grant the protective order, finding she had shown by a preponderance of the evidence that C.V. had stalked her and that he represented a “credible threat” to her safety.
C.V. appealed the May 2016 order, arguing that C.R. failed to present sufficient evidence to support the issuance of the protective order. The Court of Appeals agreed and reversed. Judge Rudolph Pyle cited Maurer v. Cobb-Maurer, 994 N.E.2d 753, 757 (Ind. Ct. App. 2013) in his opinion, in which the appeals court held a man did not stalk his ex-wife because his wife did not produce specific information about the number of emails he sent or any evidence she asked him to stop contacting her.
Pyle noted that C.V.’s contact with C.R. was relatively vague and not constant, and that C.R. did not produce any evidence that she asked C.V. to stop sending her the notes or that he persisted after she asked him to stop.
Pyle also wrote that the nature of C.V.’s contact appeared to be relatively non-threatening — he left her notes in a public place and the dates happened to coincide with his treatment at the VA.
“These factors might not be dispositive under different circumstances. However, because there was no evidence that the contents of the notes were threatening, we cannot conclude that there was sufficient evidence that a reasonable person would have felt terrorized, frightened, intimidated, or threatened by C.V.’s acts under these circumstances.”
Mental Health – Involuntary Commitment
In the Matter of the Commitment of M.E. v. Department of Veterans Affairs
A trial court’s order mandating the involuntary commitment of a veteran has been vacated after the Indiana Court of Appeals found that the Department of Veterans Affairs failed to follow proper legal protocol in serving documents and did not prove that the veteran posed a risk to himself or others.
M.E., an army veteran living in Marion, has a well-established diagnosis of paranoid schizophrenia. In March 2016, police officers brought M.E. to the Veterans Affairs hospital, and in April, the Department of Veterans Affairs Northern Indiana Health Care System filed an application for emergency detention with the Grant Circuit Court, which granted the application the same day.
Shortly thereafter, the NIHCS filed a petition for regular commitment with a physician’s statement attached, but those documents were not served to M.E. or his counsel. The trial court issued a commitment hearing order April 7, scheduled a hearing for April 12, a notice of rights and procedures and a mental illness summons. Also on April 7, M.E. signed a waiver of right to be present at his commitment hearing.
However, M.E.’s counsel did not learn of the documents until a day later when the VA’s counsel called him, so counsel had to request that the documents filed with the court be sent to him, and the hearing was continued to April 20.
At the hearing, Dr. Masood Kahn, a staff inpatient psychiatrist at the hospital, testified that M.E. had a history of hallucinations, had been admitted to the acute mental health unit at least 31 other times and had been physically restrained in the past. But M.E. testified that he did not know why he had been taken to the hospital and also said he was capable of paying his rent and taking care of himself, despite his mental constraints. Regardless, the court issued an order of regular commitment finding him to be mentally ill, dangerous and gravely disabled, so M.E. appealed.
M.E. argued that the VA failed to serve him with the documents it filed with the trial court, that the waiver he signed was invalid and that the involuntary commitment was not warranted because the V.A. failed to establish that he exhibited a grave disability or dangerousness to himself.
The Indiana Court of Appeals agreed, writing that a proof of service is required for all civil commitment cases, and the fact that M.E. appeared at the hearing by counsel is insufficient to prove service.
Further, the court wrote that M.E.’s waiver was invalid because “any waiver presented to and signed by an individual who has been involuntarily detained, and is alleged by the VA to be mentally ill, cannot be valid.”
Finally, the appellate court wrote that because Khan had testified in court that it had been three years since M.E. had been physically restrained and that he had provided no facts as to how M.E. may be dangerous, the doctor had not proven that M.E.’s behavior constitutes a substantial risk that he would harm himself or others. Additionally, the Court of Appeals agreed with M.E. that there was no clear and convincing evidence to establish a grave disability.
Small Claims – Jurisdiction
Kathy Salyer v. Washington Regular Baptist Church Cemetery v. Kristy Sams
A woman’s fight to bury her mother in a burial site that she had purchased but that was mistakenly resold will continue after the Indiana Court of Appeals found that a small claims court did not have jurisdiction to grant her injunctive relief.
In 1982, Kathy Salyer purchased five contiguous gravesites in Washington Regular Baptist Church Cemetery. Her father, and first and second husbands were buried in three of the sites, and Salyer intended to bury her mother in the northern-most gravesite and herself between her two husbands.
However, Salyer later discovered that a person named Lowell Johnson had been buried in the site intended for her mother. The cemetery admitted that it had inadvertently sold the site for the burial of Johnson after Salyer had already purchased it, but because Johnson’s family objected to his relocation, the cemetery took no action.
Salyer took the issue to small claims court, alleging theft and arguing that she was entitled to treble damages, attorney fees and court costs. She also demanded that Johnson’s body be moved. Johnson’s daughter, Kristy Sams, was an intervening third party. At the bench trial, Salyer testified that her mother had died, so she had her body cremated and buried in the same gravesite as her father.
In its May 2016 order, the court found that the best way to correct the problem was to compensate Salyer with a burial site south of her burial site, to refund her $75 for the purchase of the northern lot and to reimburse her for $94 in court costs. However, the court also found that because Salyer had already cremated her mother and buried her with her father, specific performance was not warranted.
The Ripley Superior Court denied Salyer’s motion to correct error, so she appealed, arguing that because the cemetery wrongfully buried Johnson in her gravesite, it must relocate him. She pointed specifically to Indiana Code 23-14-59-2, which holds, in part, that when a wrongful burial occurs, “the cemetery owner shall: at the expense of the cemetery owner, correct the wrongful burial … as soon as practical after becoming aware of the error.”
Although the Indiana Court of Appeals agreed that a court may order a cemetery to perform its duty under that statute, it also held that under the preceding statute, which finds that cemetery owners are not liable in any action for a burial in the wrong lot, the trial court did err in holding the cemetery liable for damages in Salyer’s case.
Further, the appellate court wrote that I.C. 23-14-59-2 constitutes an order to specific performance or injunctive relief, and that the decision to give Salyer another burial site also constitutes an order for injunctive relief. However, small claims courts do not have jurisdiction to enter orders to specific performance or injunctive relief under Indiana statute.
Thus, the order was reversed and the case remanded for consideration of transfer to the Ripley Superior Court’s plenary docket.
Mortgage Foreclosure – Ability to Pay
L. Ray Yeager and Phyllis L. Yeager v. Deutsche Bank National Trust Company, as Trustee of the Residential Asset Securitization Trust 2005-A1, Mortgage Pass-Through Certificates, Series 2005-A Under the Pooling and Servicing Agreement Dated March 1, 2005
A Floyd County trial court cannot order debtors to make monthly payments toward a mortgage, taxes and insurance premiums in a foreclosure case without first holding a hearing on the debtors’ ability to pay, a divided Indiana Court of Appeals held.
In November 2004, L. Ray Yeager and Phyllis Yeager executed a promissory note in favor of First Bank Inc., promising to make monthly payments of $1,871.61 and a mortgage granting a security interest in their residential real estate in Floyd County in favor of First Bank and Mortgage Electronic Registration Systems Inc.
A July 2011 assignment of the mortgage assigned it to Deutsche Bank. In January 2012, Deutsche filed a complaint for foreclosure of note and mortgage alleging that the Yeagers had defaulted on the promissory note by failing to make payments. A default judgment and decree against the Yeagers was entered in July 2012.
Then in March 2016, the bank filed for payment of mortgage, taxes and insurance premiums and requested that the Floyd Superior Court issue a provisional order requiring the Yeagers to make payments of $1,871.61 on the note and mortgage, as well as requesting that the couple be ordered to make property tax payments and provide proof of insurance premium payments and of a hazard insurance policy. The trial court issued the provisional order, and the Yeagers provided proof of payment of property taxes and insurance.
The couple then appealed, arguing that the trial court had abused its discretion by failing to conduct an inquiry into their ability to pay prior to issuing the provisional order, thus violating their due process rights. But the bank argued that such a hearing was not required and that the order was authorized by statute. Deutsche Bank also said due process could not have been violated because “no protected interest is implicated” and because the Yeagers failed to “identify injuries to person, property, or reputation.”
Two Indiana Court of Appeals judges agreed with the Yeagers, finding that the trial court had issued the provisional order before the couple had responded to the bank’s motion. Further, the appellate court pointed out that the relevant statute provides, in part, that “the amount of the monthly payment … shall be determined by the court, which may base its determination on the debtor’s ability to pay.”
“While the statute does not expressly require a hearing, it is implicit that the court have the necessary information on which to base its determination…,” Judge Elaine Brown wrote for the majority. “The record contains no evidence of the Yeagers’ current financial situation, such as earnings from any employment, income from other sources, or other assets.”
Judge Paul Mathias dissented, writing that the majority opinion presumes that trial courts are required to consider a debtor’s ability to pay, when such an obligation does not exist in state statute.
Indiana Tax Court
Tax – Income Tax
The University of Phoenix, Inc. v. Indiana Department of State Revenue
The University of Phoenix Inc. can depose the former commissioner of the Indiana Department of State Revenue in a case related to the school’s income taxes after the Indiana Tax Court found that the former commissioner did not warrant a protective order to prevent him from testifying.
In November 2014, the University of Phoenix initiated a tax appeal alleging that the Indiana Department of State Revenue’s assessment of an additional gross income tax and interest for the period between Aug. 31, 2009, and Aug. 31, 2011, violated state statutes regulating sourcing provision for service revenue. The university claimed that the department had erred in computing its alleged tax liability by sourcing some of its online tuition service revenue to the state based on a market or customer-based test, not a costs-of-performance test as required by state law.
During discovery, the department filed a discovery enforcement motion in October 2016 that asked the Indiana Tax Court to bar or reschedule a deposition of former department commissioner Michael Alley scheduled for Oct. 28. The court quashed the subpoena, but advised that he could be deposed at a later date.
The school again subpoenaed Alley to appear for deposition on Nov. 29. The Department of Revenue responded with a motion for protective order, arguing that such an order was necessary to protect Alley from “burdensome and oppressive” deposition.
Further, the state agency argued that University of Phoenix had already deposed three other witnesses, obtained testimony on the same topics it would ask Alley about, and admitted it would not question him about the actual issues in the case. Instead, the school planned to depose Alley on the 2014 Tax Competitiveness and Simplification Report, the department’s interpretation of the costs-of-performance sourcing test, its studies and reports related to that test, and its studies and reports related to market or customer-based sourcing.
But in her denial of the department’s motion, Tax Court Judge Martha Blood Wentworth wrote that Alley’s deposition would be relevant to the case because his responses could contain answers related to the question of whether the department could legally use market or customer-based sourcing tests in sourcing the school’s online tuition service revenue.
Additionally, Wentworth wrote that the department’s other witnesses had provided little information on the topics the school planned to depose Alley on, so his deposition could provide additional information.
Finally, the judge pointed out that because Alley is the retired commissioner, he is no longer the high-ranking official in the department who would generally be protected from depositions, according to Hunt v. State, 546 N.E.2d 1249, 1252 (Ind. Ct. App. 1989).•