DTCI: The summer best-of caselaw survey

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Ian Goodman

By Ian Goodman

Try as he might, this author is regularly challenged to keep up with caselaw as it’s handed down. But this is the practice of law, and staying current on opinions is among the most important ways to serve clients. Because he saves caselaw blasts, this author consumes lots of articles that survey noteworthy caselaw. The readers should sit back and learn about three opinions that have been found noteworthy.

Berg v. Berg, 170 N.E.3d 224 (Ind. 2021)

Berg is a divorce case, but its holdings on when — and if — what happens at mediation can be used as evidence and in enforcing a contractual warranty provision are instructive for any litigator. Berg is also a good reminder of why it is critical for lawyers to read (or read about) opinions that on first glance would appear inapplicable to their practice. The author is not a family law attorney. This piece is written by the chair of DTCI’s Business Litigation Section. But Berg is every bit as relevant to a business litigator as it is to a seasoned divorce lawyer.

In Berg, the wife petitioned for a divorce. Before mediation, the parties prepared and exchanged a balance sheet that reflected their respective financial portfolios. At mediation, that balance sheet was a foundational piece of a settlement agreement regarding the disposition of marital property. In that agreement, both parties warranted that their balance sheets accurately reflected their financial portfolios. The settlement agreement was incorporated into the trial court’s dissolution decree.

Eventually, the wife moved to set aside the judgment and filed a motion to correct errors, arguing that husband had omitted a stock account from the balance sheet and, therefore, that the judgment was based on fraud, misrepresentation or mistake. The husband moved to strike the balance sheet from evidence, arguing it was inadmissible mediation evidence. The Indiana Supreme Court analyzed the application of Ind. R. Evid. 408 and Ind. A.D.R. Rule 2.11 to the dispute. It held that the contents of the balance sheet were “facts,” as contemplated and excluded by Rule 408, that “established the point from which the parties would negotiate at the mediation itself.” 170 N.E.3d at 228-29. Thus, the court held that “[i]nformation exchanged specifically to assist in mediation, but disclosed prior to mediation, falls under Rule 408.” The court then considered A.D.R. Rule 2.11(B)(2), which provides that evidence that is discoverable outside mediation is not inadmissible just because it is used at mediation. But, finding A.D.R. Rule 2.11(B)(2) inapplicable, the court held that what was on the balance sheet reflected the parties’ valuation of property for negotiation purposes. In other words, it was not discoverable outside mediation.

The court’s work was not yet done. In the mediated agreement, the husband had warranted that his portion of the balance sheet was true and correct. The wife argued that it was not and pled what the court characterized as a “collateral breach-of-contract claim.” 170 N.E.3d at 231. The husband argued that the warranty was “mutual” because both parties had warranted the same thing and that, accordingly, both parties had assumed responsibility for the truth of the factual assertions in the agreement. The court disagreed, stating that were it to accept the husband’s argument, the “clause would be meaningless because neither party would be able to enforce it.” Id. This, the court held, could not have been the parties’ intent in entering the settlement agreement and therefore the trial court had properly granted the wife’s motion to correct error.

The application of Berg to all litigation is plain. What is said at mediation is confidential and inadmissible as evidence. Berg states that a mediating party does not have Trial Rule 60(B) redress if it enters a settlement agreement based on a representation its adversary has made at mediation that it later determines was false. Essentially, Berg says, that is an assumed risk of negotiating at mediation. In the business litigation arena, it is easy to see this applied to a representation made by a party at mediation regarding damage it has incurred, such as attorney fees and an agreement that results from that. Or perhaps the parties stipulate to certain facts for purposes of mediation. Per Berg, in either case, a party cannot change the outcome.

The court’s holding regarding contractual warranties is no less significant. Mutual warranties, which is how the Indiana Court of Appeals characterized the provision at issue (see 151 N.E.3d 321), are relatively common contractual provisions. Although rejected by the Supreme Court, the Court of Appeals’ holding on this front is understandable. It reasoned that the parties had both assumed responsibility for the facts they had warranted, so if the factual assertions were untrue, both would have breached the warranties. But ultimately, doesn’t the Supreme Court have to have gotten this one right?

City of Fishers, Indiana v. DIRECTV, No. 20-3478, 2021 WL 3073368 (7th Cir. 2021)

This case is interesting. It is about the federal abstention doctrine, with which the readers are familiar and which they have also litigated, right? Probably not so right. In this case, several Indiana cities filed a putative class action in Marion Superior Court, seeking a declaration that Netflix and other similar platforms owed them past and future franchise fees under the Indiana Video Service Franchises Act, Ind. Code § 8-1-34, et seq. That’s another law defense lawyers practice, right? Well, this author doesn’t, so here is a 7th Circuit primer: “By the Act’s terms, anyone offering ‘video service’ must enter into a franchise agreement with the Indiana Utility Regulatory Commission in exchange for use of a public right-of-way,” and, “For years, traditional cable and communications companies like Comcast and AT&T have signed the franchise agreements and paid the required fees.” 2021 WL 3073368, at *1 (internal citation omitted). But this was enacted in 2006, a year after this author got his first camera phone, so it is more than a bit outdated. The date matters because streaming providers like Netflix and Hulu have not been applying for franchise agreements, which means they have not been subject to the act’s fee requirements. With this lawsuit, several Indiana cities sought to remedy that gap.

The streaming services removed the case to the Southern District of Indiana based on diversity jurisdiction and the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(a) and (d), respectively. The cities conceded the district court had subject matter jurisdiction but moved to remand based on the comity abstention doctrine. The 7th Circuit got this case after the district court granted the cities’ motion and the streaming services appealed. Ordinarily, 28 U.S.C. § 1447(d) bars appellate review of a case that is remanded to the state court where it was filed. But this case fit the exception articulated in Quackenbush v. Allstate Insurance Co., 517 U.S. 706 (1996), where SCOTUS held that abstention-based remand orders were reviewable under 28 U.S.C. § 1291.

Citing Levin v. Com. Energy, Inc., 560 U.S. 413 (2010), the court explained that the comity abstention doctrine “counsels lower federal courts to resist engagement in certain cases falling within their jurisdiction,” including those challenging state taxation of commercial activity, “on the understanding that revenue collection is a core function of state governments.” 2021 WL 3073368, at *2.

Easy, right? The cities wanted the act interpreted in such a way that would result in the streaming providers paying the cities, and that sounds a lot like a tax, so back to Marion Superior Court they went. Well, sort of. The act does not impose a direct tax; it charges a fee. But because that fee mostly ends up in the cities’ general accounts, the court held that the fee amounted to a tax because it yielded revenue for the cities. That, buttressed by the fact that “the district court’s involvement will impact the fiscal affairs of local governments — the principal concern of Levin,” the court held that a Levin-guided comity abstention analysis was warranted.

With little difficulty, the court affirmed the district court’s remand of the case. This act is an Indiana General Assembly-designed administrative scheme over which agencies had authority. Therefore, the court held that Indiana, not federal, courts should preside over its enforcement. In addition, the court favored remand because the streaming companies, by invoking federal jurisdiction, were trying to improve their competitive position over companies that offered more traditional media services and were paying fees that the streaming services were not. Lastly, the court agreed that an Indiana court was better positioned to decide the case. The streaming providers argued otherwise, citing their federal-law-based defenses. But the court disagreed, citing the “foundational principle of our federal system: State Courts are adequate forums for the vindication of federal rights.” 2021 WL 3073368, at *6 (citing Burt v. Titlow, 571 U.S. 12 (2013). Later in the opinion, the court cited another “foundational feature[]” of our constitutional system: “respect for dual sovereignty and caution against interfering with traditional state functions, like taxation.” 2021 WL 3073368, at *8.

Could the readers be any more interested in this case? The answer is yes because it also includes an always-welcome reminder about preserving issues for appeal. The streaming services made several arguments on appeal that they omitted in the district court. This, the court held, amounted to the “insurmountable and independent hurdle” that was waiver. 2021 WL 3073368, at *7.

Certainly, City of Fishers, Indiana presents a niche legal doctrine — one that most lawyers probably will not see in their practices. But it is a very interesting case. This is an opinion where in one paragraph the good old days of our parents’ bloated cable bills are remembered nostalgically and how laws of 15 years ago were passed before our credit cards bills included charges from ten different streaming services. Then the next paragraph addresses the foundational principles of our federal system: dual sovereignty, leaving states to themselves and the like. For a finale, the 7th Circuit even made a prediction, stating that “[t]he Supreme Court is sure to say more about the limits of comity abstention in years to come.” 2021 WL 3073368, at *8.

AO Alfa -Bank v. Doe, No. 20A-MI-2352, 2021 WL 1991701 (Ind. Ct. App. 2021)

There’s always time for caselaw with practice pointers, and AO-Alfa-Bank has got a few on foreign subpoenas. The facts of the case are really something (Russian hackers, DNC headquarters, anonymous researchers), but they are not important for purposes here. Readers should review them in their downtime.

The plaintiff sued the defendants in a Florida state court and served a Florida subpoena for the deposition of a researcher who lived in Indiana. But the plaintiff neither submitted the subpoena to a clerk of an Indiana court nor sought to have an Indiana clerk serve it. Still, after she got it, the researcher, in Monroe Circuit Court, successfully moved to quash the subpoena. The plaintiff appealed.

The Indiana Court of Appeals sua sponte considered the issue whether the trial court had subject matter jurisdiction to consider the matter and held it did not. This was because the (very technical) Uniform Interstate Depositions and Discovery Act, Ind. Code § 34-44.5-1, et seq., governs foreign subpoenas and provides that a subpoena being given to a clerk of court in the discovery state is a “necessary act that invokes the jurisdiction of the discovery state.” Because the plaintiff failed to do this, the foreign subpoena was not domesticated in Indiana and the Monroe Circuit Court had no authority to enforce it.

The takeaway is this: The Uniform Interstate Depositions and Discovery Act, technical as it is, is indispensable for foreign subpoenas.

Happy surveying.•

Ian Goodman is with the Indianapolis firm of Pagnelli Law Group and chairs the DTCI Business Litigation Section. Opinions expressed are those of the author.

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