7th Circuit Court of Appeals
Russell Pontinen v. United States Steel Corporation
7th Circuit: No disability violation against man with seizure disorder who lost job offer
A federal court didn’t err when it awarded summary judgment to a major steel producer who rescinded a job offer to a man with an uncontrolled seizure disorder, the 7th Circuit Court of Appeals has ruled.
Russell Pontinen has experienced three or four seizures during his lifetime and began seeing a neurologist in 2014. After a possible seizure in August of that year, Dr. Abu‐Aita put him on medication.
Each February from 2015 to 2017, Pontinen saw Abu-Aita for follow‐up appointments. During those appointments, Pontinen repeatedly asked his doctor to take him off the medication, but the neurologist told him he needed to take it due to having a higher risk of having seizures at any time.
But in 2017, Abu‐Aita relented, determining, “Since it is his decision to get off the medication I will reduce the Depakote 1000 mg every night for a month and if no seizures to 500 mg every night for a month and if no seizure to stop it.”
A few months later, Pontinen applied to work as a “utility person” at United States Steel Corporation’s Midwest Plant in Portage. Those who hold the position “operate … equipment and perform tasks that support the various production and service units.” Additionally, they perform “general labor duties that include the use of torches, shovels and other hand tools,” and control “mobile equipment, in a heavy industrial environment,” which is “safety‐sensitive” and “safety‐critical.”
Pontinen received an employment offer that was contingent upon passing a pre‐placement fitness‐for‐duty examination. Before the exam, he disclosed on a health form that he’d had four seizures in his life. Then, during the examination, nurse practitioner Jennifer Ntovas wrote Pontinen had “stopped Depakote [without] neurologist approval.”
Ntovas then sought information from Abu‐Aita, who returned the form with a box checked that indicated his medical findings “are not expected to affect the safety or health as it relates to the job.” He also had Pontinen undergo an EEG, a form of a brain scan, which found “no focal, lateralized, or epileptiform discharge noted” — a normal result.
Another consideration USS makes in assessing whether an applicant is qualified for the utility person position is whether they meet the requirements of the U.S. Department of Transportation’s Federal Motor Carrier Safety Administration Medical Handbook, which sets certain physical qualifications for drivers of commercial motor vehicles. One such qualification is that the driver “[h]as no established medical history or clinical diagnosis of epilepsy or any other condition which is likely to cause loss of consciousness or any loss of ability to control a commercial motor vehicle.”
Generally, the regulations require an unmedicated driver to be seizure‐free for 10 years. However, a driver with a diagnosed seizure disorder can apply for a reduction of the requirement to eight seizure‐free years, on or off medication. If the driver is taking medication, the type, dosage and frequency must be stable for two years.
Based upon the DOT regulations, the health form, the physical examination and Abu‐Aita’s response and treatment notes, Ntovas and USS Medical Director Dr. Philippa Norman determined work restrictions for Pontinen, which the U.S. Steel human resources department determined could not be accommodated. Thus, in July 2017, USS notified Pontinen that “based on the results of [his] pre‐placement fitness for duty examination,” his offer of employment was rescinded.
Pontinen sued USS in the U.S. District Court for the Northern District of Indiana for disability discrimination under the Americans with Disabilities Act. He argued USS illegally discriminated against him on the basis of a real or perceived disability when it rescinded his employment offer.
The steel producer filed a motion for summary judgment, which the district court granted because Pontinen’s “uncontrolled epileptic condition would have posed a direct threat to the health and safety of himself and others while working at USS.”
On appeal, the 7th Circuit determined USS provided undisputed evidence that if it hired Pontinen for the position, his seizure disorder would pose a direct threat to himself and others at the steel plant.
“Because all of the factors weigh in favor of finding that there is a direct threat, we are compelled to reach that conclusion,” Judge Michael Kanne wrote for the 7th Circuit, citing Branham v. Snow, 392 F.3d 896 (7th Cir. 2004), throughout the opinion. “While Pontinen can point to a few pieces of evidence that support the idea that he has been doing well, he cannot point to evidence that creates a genuine dispute of material fact with regard to whether USS’s decision to rescind his employment offer because he constituted a threat to himself and others was proper.”
The case is Russell Pontinen v. United States Steel Corporation, 21‐1612.
United States of America v. Edward Gibbs
7th Circuit reverses 16-year drug sentence, finds district court relied on unsubstantiated allegations
Finding federal prosecutors failed to present any evidence to support the allegation that Edward Gibbs confessed to conspiring to distribute 4.5 kilograms of crystal meth, the 7th Circuit Court of Appeals overturned his 16-plus-year sentence and remanded for resentencing at a lower offense level.
Gibbs was indicted on one count of conspiring to possess methamphetamine with the intent to distribute. The indictment alleged only that the conspiracy involved 500 grams or more of a substance containing meth.
Eventually, Gibbs pleaded guilty to the conspiracy charge. However, at the sentencing hearing, an assistant U.S. attorney asserted for the first time that the conspirators had distributed more than 4.5 kilograms. Gibbs refused to agree with that portion of the federal prosecutor’s account, maintaining he was only involved with the 500-gram quantity.
The assistant U.S. attorney made additional allegations at the sentencing hearing, asserting Gibbs had admitted to receiving more than 16 kilos of meth. This, according to court documents, was the first time in the 2.5-year history of the case that the government said the defendant had confessed.
Gibbs objected and his attorney said he did not recall his client confessing. The federal attorney acknowledged she had not been assigned to the case when the alleged confession happened, telling the court she had spoken to the prosecutor previously handling the case and had received notes from a law enforcement officer. However, neither the former prosecutor nor the officer was called to testify.
The Southern Indiana District Court still based its sentence on Gibbs’ conspiring to distribute more than 4.5 kilograms of drugs, which set his base offense level at 38. Ultimately, the federal court found a total offense level of 37 and, with a sentencing range of 235 to 293 months, sentenced Gibbs to 200 months.
If Gibbs had been sentenced for conspiracy involving 2.5 kilograms, his adjusted offense level would have been 35, with a sentencing range of 188 to 235 months.
On appeal, the 7th Circuit panel found the district court’s use of the presentence investigation report did not meet the requirements of Rule 32 of the Federal Rules of Criminal Procedure.
“Without substantiation for the AUSA’s statements, the government failed to meet its burden to prove the uncharged conduct by a preponderance of the evidence. Because the PSR charged Gibbs with an unsupported drug quantity, Gibbs’s denial was enough to shift the burden of proof back to the prosecution,” Judge Diane Wood wrote for the court, citing United States v. Helding, 948 F.3d 864, 870 (7th Cir. 2020).
“At sentencing, the AUSA represented that the prosecution could call as a witness an official who was present for Gibbs’s alleged confession and who had kept notes supporting the uncharged drug quantity,” Wood continued. “But that official was never produced. Thus, in the end the only thing in the record was counsel’s statement. That falls short of proof.”
The case is United States of America v. Edward Gibbs, 20-3304.
Indiana Supreme Court
Lake County Board of Commissioners, et al. v. State of Indiana, et al.
IN justices rule probation officers are state employees, must be defended by IN attorney general
Probation officers are state employees who must be defended by the Indiana attorney general against litigation, the Indiana Supreme Court has ruled, reversing lower court rulings in favor of the state.
Justices reversed and remanded in the case of Lake County Board of Commissioners, et al. v. State of Indiana, et al., 22S-MI-64, a case questioning who would be required to represent and indemnify two probation officers accused of sexual misconductand retaliation.
Lake County had asked the Indiana Attorney General’s Office to defend probation officers Jan Parsons and Miroslav Radiceski against a lawsuit filed in 2015 in the U.S. District Court for the Northern District of Indiana by probationer Lorena Bostic. Bostic filed the federal complaint against the Lake County Board of Commissioners, five criminal judges, Parsons and Radiceski, alleging her constitutional rights had been violated by Radiceski, who was her probation officer.
The attorney general declined, asserting the county was responsible for representing the officers in the federal litigation. That litigation has been stayed pending the result of the Supreme Court’s decision.
Lake County filed for declaratory relief, arguing the state was required to represent and indemnify the probation officers. It moved for partial summary judgment, but the Marion Superior Court and the Court of Appeals of Indiana agreed with the attorney general, prompting Lake County to seek Supreme Court review.
At the high court’s invitation, the Association of Indiana Counties Inc., the Indiana Association of County Commissioners and the Indiana County Councils Association joined together to file an amicus brief. The Probation Officers Professional Association of Indiana Inc. filed separately.
In a unanimous Feb. 22 decision, the justices held that probation officers are state employees for purposes of Indiana Code § 4-6-2-1.5, which requires the attorney general to defend state employees. They further found that a plain reading of four relevant statutes supports the conclusion that probation officers are state employees and “inextricably linked to the judiciary,” including I.C. 11-13-1-1(c), 11-13-1-3, 11-13-1-8 and 11-13-1-9.
To summarize, the high court concluded the statutory framework indicates that probation officers are state employees under the general statute requiring the attorney general to defend state employees and that they are directly responsible to the appointing trial court — a state entity.
“The Judicial Conference — another state entity — sets the standards for hiring, provides probation-related resources and training, oversees probation programs, and sets officers’ minimum compensation,” Indiana Chief Justice Loretta Rush wrote for the unanimous court. “By contrast, counties have no control over the performance of a probation officer’s duties. And though counties are responsible for probation officers’ salaries and some expenses, they must consult with the court to determine how much to pay and can access several state funding sources to help pay those salaries.”
The justices further concluded that Indiana courts have previously determined probation officers are court employees and that probation departments are state entities.
Although the general statute requiring the attorney general to defend state employees should apply to probation officers, the justices held that “the legislature could override this requirement by enacting a more specific statute that orders a different entity to either defend or pay the legal expenses of probation officers.” However, the Legislature has not done so.
The high court disagreed with the state’s assertion that I.C.11-13-1-1(c) covers legal expenses “incurred as a result of” the officers being sued “in the performance of their duties.” But it noted the statute includes two important limitations: First, the Legislature did not make counties responsible for all expenses, and second, the covered expenses are only those stemming from a probation officer’s duties, which are listed in section 11-13-1-3.
Also, the court concluded that in addition to being consistent with the Legislature’s statutory scheme and its precedent, applying the general statute was the more efficient and equitable path.
However, the justices noted that finding a general statutory duty on the part of the attorney general to represent probation officers still allows the attorney general to decline representation where circumstances warrant.
The trial court’s grant of summary judgment to the state was thus reversed and remanded for further proceedings.
Court of Appeals of Indiana
Denver Lee Murray v. State of Indiana
No constitutional violation when defendant ordered to smile for jury, COA rules
The Wells Circuit Court didn’t violate a methamphetamine dealer’s Fifth Amendment rights when it ordered him to show his teeth to a jury to demonstrate he was the same person that was in an incriminating video, according to the Court of Appeals of Indiana.
In February 2020, in exchange for a reduction in the length of his probation, Nathan Romine agreed to serve as a confidential informant and assist the Adams County/Wells County Drug Task Force with controlled buys. Romine learned through a mutual friend that Denver Lee Murray was willing to sell drugs and reached out to him over Facebook, where he eventually obtained Murray’s phone number.
After meeting with detectives from the Wells County Sheriff’s Department, Romine arranged to purchase 14 grams of meth for $300 in Bluffton, and the deal was executed. Romine later arranged a second purchase, and law enforcement installed audio and video equipment inside his vehicle to record the transaction.
During the second exchange, Murray got into Romine’s car in a gas station parking lot, and Romine gave him $300. Murray left with the money, but he never delivered the promised meth. Murray also never returned the cash to Romine, and he eventually stopped responding to Romine’s communications.
Five months later, the state charged Murray with Level 2 felony dealing in methamphetamine and Level 6 felony theft.
The trial court conducted a three-day trial in March 2021, and as a precaution against COVID-19, required everyone in the courtroom to wear face masks.
But during Romine’s testimony, the trial court instructed Murray to remove his mask, and Romine identified Murray as the individual who sold him the meth. Romine also testified that although Murray had a full beard at the time of trial, he did not have a beard when they met in February 2020.
Detectives similarly provided in-court identifications of Murray. The state entered the video of the second transaction into evidence, which showed the person who entered Romine’s car wore sunglasses, a hat and a hood. He also had crooked teeth.
Near the end of its case-in-chief, the state asked the trial court to direct Murray to show the jury his uncovered face and his teeth to demonstrate that he had the same distinctive set of teeth as the person in the video. Murray objected on the basis that being compelled to do so would constitute a violation of his Fifth Amendment right against self-incrimination.
The trial court initially ruled Murray would have to take off his face mask and face the jury, but it would not require Murray to show his teeth. Following a brief recess, the state approached the bench and stated Murray had “somethin’ in his mouth” that was “gonna change his facial appearance.”
Murray explained he had a “homemade” retainer in his mouth that he wore because he was embarrassed by the look of his teeth. The state renewed its motion for Murray to show the jury his teeth, and the court ruled he would be required to take the appliance out and smile for the jury.
The jury returned a verdict of guilty on the dealing count but not guilty on the theft count. But Murray had absconded by this point, so the trial court issued a bench warrant after the verdict was read.
In April 2021, Murray was arrested in Huntington County and charged with 12 crimes, including Level 2 felony dealing in meth, Level 5 felony dealing in cocaine and Level 5 felony battery on an officer. He was then transferred to Wells County pursuant to the bench warrant in the instant case.
Murray was later sentenced to 25 years in the Indiana Department of Correction.
On appeal, Murray argued his Fifth Amendment rights were violated and his 25-year sentence was inappropriate. The COA disagreed with both arguments.
“… We find the facts herein more like other cases in which we have held no constitution violation occurred,” Judge Melissa May wrote for the COA, pointing to Springer v. State, 372 N.E.2d 466, 472 (Ind. Ct. App. 1978), reh’g denied, and Flynn v. State 412 N.E.2d 284, 288 (Ind. Ct. App. 1980). “… Moreover, even if requiring Murray to show his teeth to the jury amounted to a violation of the Fifth Amendment, any such error was harmless.”
Given Murray’s criminal history, his failures to abide by the terms of his probation and home detention, additional charges from a separate incident, and the episode with the retainer, among other issues, the Court of Appeals found his sentence was appropriate.
The case is Denver Lee Murray v. State of Indiana, 21A-CR-1495.
Amanda Henry v. Community Healthcare System Community Hospital
COA invites justices to ‘dispel confusion’ in medical privacy case
A woman claiming she experienced invasion of privacy after someone other than her doctor accessed her medical records and shared them with her employer did not sway the Court of Appeals of Indiana differently on its second time hearing the case.
Amanda Henry injured the tip of her ring finger and sought treatment at Community Hospital in Munster in 2018. While at the hospital, X-ray images were taken of Henry’s finger, which had been fractured, and she was advised to take a few days off work at her job as a dog groomer.
When Henry returned to work, her employer showed her and a co-worker X-ray images of Henry’s finger. Henry’s employer’s husband, Ken Laski, was a radiological technician at the hospital and, though not involved in Henry’s care, had accessed the images and shared them with his wife.
Henry filed a complaint against Community Healthcare System Community Hospital alleging general negligence. In 2019, the COA reversed the trial court’s dismissal of the complaint under Trial Rule 12 and remanded for further proceedings in Lake Superior Court.
On remand, the trial court granted summary judgment in favor of the hospital, finding that there was no provision for recovery for emotional damages without satisfying the modified impact rule, and that Henry did not plead intentional tort or pursue a claim under the Indiana Medical Malpractice Act.
After hearing oral arguments in the case for a second time, the COA panel affirmed for the hospital in Amanda Henry v. Community Healthcare System Community Hospital, 21A-CT-2150, in a Feb. 15 decision.
This time, the Court of Appeals found that the trial court navigated caselaw appropriately in addressing “the mixed signals the bench and bar have received from our appellate courts regarding Indiana’s recognition (or not) of the sub-torts of invasion of privacy by intrusion on emotional seclusion and (public disclosure of private facts).”
The COA first concluded that Henry’s claims were for emotional injuries related to her intrusion claim, which are not recognized in Indiana appellate decisions involving invasion of privacy by intrusion into emotional seclusion or solace.
“We acknowledge that certain health information is meant to remain private and that there are laws protecting against the disclosure of same, most notably the Health Insurance Portability and Accountability Act of 1996,” Senior Judge John Baker wrote. “Henry makes a good argument as to why intrusion into emotional solace in general should be recognized, especially in terms of medical breaches. Yet, in her particular case, we cannot grant her the relief she seeks.”
The Court of Appeals concluded similarly on the PDPF issue, assuming that PDPF is not yet recognized in Indiana. It also invited the Indiana Supreme Court “to do as Chief Justice Rush and Justice Goff argued” in their dissent of F.B.C. v. MDwise, Inc., 131 N.E.3d.143, 143 (Ind. 2019), and “dispel any confusion surrounding the sub-tort.”
As to Henry’s negligent retention claim, the COA affirmed that the trial court properly concluded that no duty could be imposed based on an examination of Laski’s prior instances of misconduct by receiving notice of parking violations and by repeatedly being tardy.
Lastly, it held that because Indiana does not recognize invasion of privacy by intrusion into emotional seclusion or solace, Henry’s claim for emotional damages could not survive.
Edgar Pimentel, Jr. v. State of Indiana
COA: No error in failure to preserve syringe for jury trial examination
A man was not denied due process when a syringe found in his car was not preserved for examination during a jury trial against him, the Court of Appeals of Indiana has ruled.
During an overnight shift in June 2020, Portland Police Officer Eric Fields saw Edgar Pimentel Jr. and two others acting suspiciously near a downtown theater. When asked what they were doing, Pimentel told the officer they were doing laundry and that a white car parked nearby was theirs.
Fields circled to the back of theater and spent the next three hours conducting surveillance of the parking lot. During that time, he observed several people approach both sides of the white car, remain there for a short period, then walk away.
When Fields again approached the car, he saw Pimentel and a woman in the vehicle who “started reaching around” inside. The officer smelled marijuana and subsequently ran a K-9 around the car, who alerted to presence of narcotics.
The officer asked Pimentel and the passenger to step out of the vehicle. Fields believed Pimentel was “intoxicated on narcotics” and noticed small marks and scabs on his arms consistent with “[t]rack marks from shooting up with a hypodermic needle.”
A search of the car revealed a capped syringe with an attached needle in the front passenger seat, multiple empty plastic baggies and a metal spoon with a burnt residue on it, and another capped syringe with an attached needle inside a bag in the back seat.
Another officer took the woman to jail and found a bag with one gram of fentanyl in her bra. Meanwhile, Fields at the police station uncapped the syringes and verified there were needles attached.
He recapped the syringes and photographed them together, but the needles were not visible in the photographs due to the caps. The syringes were subsequently disposed of for safety concerns.
Pimentel was charged with Level 5 felony possession of a narcotic drug for possessing the fentanyl and Level 6 felony unlawful possession of one syringe. However, the charging information did not identify which syringe Pimentel was being charged with unlawfully possessing.
He moved to dismiss the syringe charge, arguing the state had denied him due process because it had failed to preserve a syringe for him to examine. The Jay Circuit Court denied the motion, and a jury convicted him on all charges. He was also adjudicated as a habitual offender. An appellate panel affirmed the convictions in Edgar Pimentel, Jr. v. State of Indiana, 21A-CR-994, first finding that the trial court did not err in denying Pimentel’s motion to dismiss the unlawful possession of a syringe charge.
The appellate court concluded the facts in Pimentel’s case were distinguishable from Roberson v. State, 766 N.E.2d 1185 (Ind. Ct. App. 2002), trans. denied. In the case at hand, Fields did not give a subjective opinion describing the character of the evidence, but instead gave eyewitness testimony that the syringe had a needle attached to it.
“The testimony was objectively binary in nature; the syringe either had a needle attached to it or it did not,” Judge Rudolph Pyle wrote. “… We note that although Officer Fields should have photographed the syringe while it was uncapped so that the needle would have been visible, the officer’s failure to do so does not render the syringe materially exculpatory.”
Although the syringe fit the definition of potentially useful evidence, the COA concluded Pimentel had neither alleged nor established that the Portland Police Department acted in bad faith when it disposed of the syringe. Coupled with a lack of evidence suggesting the police department was otherwise acting in bad faith, the court concluded Pimentel’s due process rights were not violated.
Additionally, the appellate panel found sufficient evidence to support Pimentel’s convictions, noting a jury could reasonably infer his capability and intent to maintain dominion and control over both the fentanyl and the syringe.
State of Indiana v. Jarod Deangelo Johnson
COA allows state to prosecute man after federal acquittal on related charge
A trial court erred when it dismissed state charges against a man who was acquitted in federal court on a charge stemming from the same incident, the Court of Appeals of Indiana has ruled.
On April 15, 2019, Jarod Deangelo Johnson was scheduled to go on trial for felony charges involving “Amber,” a woman known to T’Anna Green.
The day before the trial, as Green walked home from her job, her path was blocked by a car in which Johnson’s brother, Jaron Johnson, and his mother, Patricia Carrington, were riding. Jaron exited the car and forced Green into the backseat, where her eyes were covered.
During a stop, Green was dragged to a deserted area, where Jarod Johnson appeared, demanded to know Amber’s whereabouts and told Green to “give me the address or I’m going to do to you what I did to Amber.” Green was then shot. Green heard Johnson say, “Ma, she ain’t dead,” after which she heard several more gunshots and felt herself being shot again.
Green was left alone but was later able to make it to a house where she secured help. Subsequent investigation showed Johnson’s ankle monitor pinged in the area where Green reported being shot and around the time she reported the shooting had occurred. Police found duct tape, blood and four shell casings in that area, and Green identified Johnson, Jaron and Carrington from photos.
On April 16, the state filed an information in Cause 45G01-1904-F1-16, charging Johnson with attempted murder, two counts of kidnapping, aggravated battery, battery by means of a deadly weapon, battery resulting in serious bodily injury and intimidation. A month later, Johnson was indicted in the United States District Court for the Northern District of Indiana on a single federal kidnapping charge.
The state moved to dismiss the F1-16 charges due to the federal charge having been filed, and the Lake Superior Court granted the motion.
Prior to Johnson’s federal trial, Jaron and Carrington each pleaded guilty to one count of federal kidnapping. But Johnson was later acquitted of the same charge in federal court.
The state then refiled an information in Cause 45G01-2104-F1-027, charging Johnson with offenses identical to those it had charged in F1-16 but without the two kidnapping charges. Johnson filed another motion to dismiss, arguing that pursuant to Indiana’s double jeopardy statute, his acquittal on the federal kidnapping charge barred his prosecution on the F1-27 charges.
The Lake Superior Court agreed and granted the motion, but the Court of Appeals reversed and remanded for trial.
“In reaching these conclusions, we observe, as did the trial court in its remarks from the bench, that there is scant Indiana caselaw applying (Indiana Code) section 35-41-4-5,” COA Judge Patricia Riley wrote. “Although both parties cite to several Indiana state cases in support of their appellate arguments, none of the authority cited by either party involves a state prosecution following a federal acquittal on charges pertaining to conduct that occurred on the same day involving the same victim over an approximately two-hour timespan.
“Nevertheless, our approach today is grounded in settled law, as set forth above, that Indiana statutory double jeopardy analysis centers on comparing the conduct alleged in the charging instruments,” Riley continued. “We are unconvinced by the rationale relied upon by the trial court and as argued by Johnson on appeal that the State may not prosecute him for the charged state offenses because ‘both the state and federal prosecutions involve the same conduct and series of events that occurred over a relatively short period of time on April 14, 2019,’ as no Indiana cases to date stand for the proposition that the Indiana double jeopardy statute bars prosecution under circumstances such as those presented here, and it is unclear to us whether the trial court’s analysis was based primarily on its comparison of the factual allegations contained in the federal and state charging instruments.”
Additionally, the COA rejected Johnson’s arguments that the United States’ factual summary of the federal kidnapping case, proffered as part of a motion seeking the admission of statements by Jaron and Carrington, and the factual bases supporting Jaron’s and Carrington’s guilty pleas showed that the state was attempting to prosecute him here for the same conduct involved in the federal case.
The appeals court also rejected Johnson’s contention that because the U.S. presented evidence and argument relating to his participation in the events that will be presented at his trial on the state charges, the state charges are based on the same conduct as the federal charge.
“The fact that the United States sought to contextualize Johnson’s participation in Green’s kidnapping and his actions after he was in the car, all of which was necessary to respond to Johnson’s defense theory, did not change the fact that Johnson was not charged with, and thus was not placed in legal jeopardy for, any of the conduct forming the basis of the state charges,” Riley wrote. “Accordingly, we are ‘left with a definite and firm conviction’ that the trial court erred when it concluded that the conduct alleged in the State’s F1-27 charges was the same conduct which had formed the basis for the federal kidnapping charge.”
The case is State of Indiana v. Jarod Deangelo Johnson, 21A-CR-1726.
Mary M. Flannagan v. Lakeview Loan Servicing, LLC, City of Indiana Department of Business & Neighborhood Services, and State of Indiana
Homeowner loses appeal seeking to have insurance settlement pay her attorneys
An Indianapolis woman whose property fell into foreclosure after her house burned was unable to convince the Court of Appeals of Indiana that her mortgage allowed for part of the insurance payment to cover her attorney fees.
Mary Flannagan had a mortgage on property in Indianapolis. In February 2017, a fire destroyed the house on the property.
Flannagan retained the firm that was then known as Tate Bowen Daugherty Funk Spandau LLC in June 2017. In October 2018, State Farm Casualty Insurance Co. issued two settlement checks totaling $74,373.23.
However, in July 2018, Lakeview Loan Servicing LLC had initiated foreclosure proceedings on the property. Flannagan filed for declaratory judgment, seeking a declaration that Lakeview and the mortgage servicer, LoanCare LLC, did not “have an interest in the [Hazard Insurance Proceeds], specifically allocated for the Plaintiff’s attorney fees, and/or for a declaration from the Court as to the extent of [Lakeview and LoanCare’s] interest in the [Hazard Insurance Proceeds].”
In April 2020, Flannagan filed a motion for partial summary judgment against Lakeview “on the issue of the amount of money that should be paid to Tate & Bowen from the money paid by State Farm for the fire claim.”
Lakeview responded with a cross-motion for partial summary judgment requesting judgment in the amount of $102,119.17 against Flannagan. Also, the mortgage holder requested an order declaring that LoanCare was entitled to all insurance proceeds issued by State Farm until the judgment was satisfied.
The Marion Superior Court denied Flannagan’s motion and granted Lakeview’s cross-motion. The court entered judgment against Flannagan in the amount of $97,665.37 and ordered that LoanCare was entitled to all insurance proceeds issued by State Farm.
The Court of Appeals affirmed in Mary M. Flannagan v. Lakeview Loan Servicing, LLC, City of Indianapolis Department of Business & Neighborhood Services, and State of Indiana, 21A-MF-2043.
On appeal, Flannagan argued the mortgage did not control the distribution of the entire amount paid pursuant to the State Farm insurance policy because the term “insurance proceeds” was not defined in either the mortgage or policy. She claimed the term referred to the hazard insurance proceeds less the cost of her attorney fees.
As part of her argument, Flannagan asserted that “proceeds” referred to the “net amount received (as for a check or from an insurance settlement) after deduction of any discount or charges.” In addition, she pointed to the Merriam-Webster Dictionary, which defines “proceeds” as including “the total amount brought in.”
However, the Court of Appeals took a close reading of the mortgage and determined the plain language did not support Flannagan’s interpretation of the phrase “insurance proceeds.” In particular, the section of the mortgage titled “Fire, Flood, and Other Hazard Insurances” provided that upon a loss, the insurance company is to make the payment directly to the lender instead of to the borrower and lender jointly, the court ruled.
“The Mortgage does not expressly refer to a partial distribution of insurance proceeds or, at least where the proceeds do not exceed the amount of the mortgagor’s indebtedness, to a distribution of a portion of the insurance proceeds to the lender and a portion of the proceeds to the mortgagor,” Judge Elaine Brown wrote for the appellate court. “Also, the Mortgage does not suggest the amount of insurance proceeds to which the lender is entitled must be reduced by an amount equal to the costs or attorney fees incurred by the mortgagor to secure the proceeds.”•