Indiana Court Decisions – March 24-April 6, 2022

7th Circuit Court of Appeals

April 6

Niki DaSilva, et al. v. State of Indiana

20-2238

IN Legislature, not state, was employer of women who accused Hill of groping

Three of the four women who accused former Indiana Attorney General Curtis Hill of groping them cannot sue the state under Title VII, the 7th Circuit Court of Appeals has ruled, finding the legislative staffers were employed by the Indiana House and Senate, not the state itself.

Judge Frank Easterbrook wrote for the unanimous appellate panel in Niki DaSilva, et al. v. State of Indiana, 20-2238.

The legal battle between Hill and the four women — former State Rep. Mara Candelaria Reardon and former Indiana legislative staffers Gabrielle McLemore Brock, Niki DaSilva and Samantha Lozano — dates back to March 2018, when Hill and the women all attended an end-of-session legislative party in Indianapolis. In the months following the party, allegations became public that Hill had drunkenly groped the women, although he has consistently denied wrongdoing in the intervening years.

Although a special prosecutor declined to press criminal charges, the Indiana Supreme Court suspended Hill’s law license in May 2020 for 30 days with automatic reinstatement, finding he had committed misdemeanor battery against the women. Hill subsequently lost his reelection bid, with now-Attorney General Todd Rokita beating him out as the GOP candidate for Indiana AG.

Meanwhile, the four women filed a civil suit in the U.S. District Court for the Southern District of Indiana, naming Hill and the state as defendants against Title VII of the Civil Rights Act of 1964, and other federal and state-law claims. The Indiana House and Senate intervened, contending they were the employers of Brock, DaSilva and Lozano, not the state.

Indiana Southern District Judge Jane Magnus-Stinson agreed, dismissing the claims against the state on March 2, 2020. The following June, Hill was dismissed as a defendant, while Reardon was terminated as a plaintiff. Reardon is not a party to the appeal.

During oral arguments in December 2021, lawyer Hannah Kaufman Joseph, representing Brock, DaSilva and Lozano, asked the 7th Circuit to reinstate the Title VII claims against the state. Joseph said the appellate court should revisit Hearne v. Chicago Bd. of Educ., 185 F.3d 770 (7th Cir. 1999), and Holman v. Indiana, 211 F.3d 399 (7th Cir. 2000), and find that the state could be considered
the women’s employer.

But the state, represented by deputy attorney general Aaron Craft, argued there was no reason to revisit Hearne or Holman. But beyond that, Craft argued the 7th Circuit lacked jurisdiction over the case because the plaintiffs moved for entry of partial final judgment in the district court on April 10, 2020, rather than April 1, which he said was the deadline.

Addressing the jurisdictional question first, the 7th Circuit determined it could consider the appeal on the merits.

Acknowledging that Schaefer v. First National Bank of Lincolnwood, 465 F.2d 234 (7th Cir. 1972), and King v. Newbold, 845 F.3d 866 (7th Cir. 2017), require litigants to move for entry of partial judgment under Federal Rule of Civil Procedure 54(b) within 30 days — as opposed to the 39 days here — the 7th Circuit also pointed to Hamer v. Neighborhood Housing Services, 138 S. Ct. 13 (2017). Hamer held that “time limits in the federal rules are not jurisdictional but instead are case-processing rules, which must be enforced if properly invoked
but may be waived or forfeited.”

Subsequently, on remand in Hamer v. Neighborhood Services, 897 F.3d 835 (7th Cir. 2018), the 7th Circuit held that “rule-based time limitations for appeals are ‘properly’ invoked only if asserted in the litigants’ appellate docketing statements.” That requirement
was not met here.

“Indiana did not invoke Schaefer and King until its brief on the merits, which is too late,” Easterbrook wrote. “… More than that: Schaefer and King are questionable if cast as rules setting an outer bound on the time to make motions
in a district court.

“… The problem is seeing a bright-line rule, such as ‘request the judgment within 30 days,’ in an abuse-of-discretion standard,” Easterbrook continued. “Bright-line rules and abuse-of-discretion standards are almost opposite in legal practice.

“… Given Indiana’s tardiness in drawing our attention to plaintiffs’ delay,” he wrote, “we need not decide today whether the 30-day line from Schaefer and King should be abrogated.”

But the women were less successful when the 7th Circuit turned to the merits. Ultimately, the appellate court declined to revisit Hearne or Holman, finding instead that “the entity with hiring and firing authority is the right defendant” for Title VII claims.

“(The State) is an employer, surely, because it has employees covered by the law,” Easterbrook wrote. “But it is not plaintiffs’ employer. They were hired, and are supervised, by the House or Senate, which holds the sole power to discipline, fire, or reward them.

“… The State of Indiana as a whole could not oblige the House or Senate to reinstate or raise the salary of any legislative aide. That power belongs to the legislature,” the judge continued. “The State of Indiana as an entity, by contrast, is managed by the Governor and represented in court by the Attorney General, neither of whom has any control over
legislative decisions.”

In arguing the state was their employer, the women said the Indiana House and Senate had no control over Hill and thus could not protect them from discrimination by him. But the Legislature could impeach Hill, Easterbrook noted, and a senior legislative officer could have kicked him out of the March 2018 party.

As for the other two branches of state government, the 7th Circuit noted the Indiana attorney general is not answerable to the governor, while the Supreme Court could do little on its own beyond suspending Hill’s law license.

“Plaintiffs seem sure that the House and Senate will not do anything to protect or compensate them. Maybe, maybe not,” Easterbrook wrote. “And perhaps only Hill is responsible for his conduct, which occurred at a party after working hours. But if the House and Senate seek exculpation, courts can resolve their defenses. That an employer may deny liability or otherwise prove recalcitrant is a reason to obtain the court’s aid, not a reason to sue someone else’s employer instead.

“Hearne and Holman control this issue, and we are not disposed to change course given the support these decisions have received in other circuits,” the appellate panel concluded. “The district court was right to dismiss the Title VII claims against the State of Indiana.”

In addition to the federal lawsuit, all four women are also suing Hill in state court. That case — McLemore, et al. v. Hill, 49D12-2007-CT-022288 — is set for a jury trial in September.

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Indiana Supreme Court

March 24

Harold Arrendale v. American Imaging & MRI, LLC a/k/a Marion Open MRI; Isa Canavati, M.D.; Amy Sutton, N.P.; Allied Physicians, Inc. a/k/a Fort Wayne Neurological Center; Alexander Boutselis, M.D.; John Dean, M.D.; Donald Bruns, M.D.; Marion General Radiology, Inc.; Jon Karl, M.D.; and Orthopaedics Northeast, P.C.

21S-CT-370

IN justices extend independent physician liability to nonhospitals

The Indiana Supreme Court has issued a reversal in a case of first impression, finding that independent physician liability extends to nonhospital facilities that provide patients with health care.

Justices previously heard oral arguments in Harold Arrendale v. American Imaging & MRI, LLC a/k/a Marion Open MRI, et al., 21S-CT-370, on the question of whether the same liability hospitals hold for independent contractor physicians can be extended to nonhospital facilities.

That question stemmed from a case filed by Harold Arrendale, whose primary care physician sent him to Marion Open MRI for scans of his spine in April 2013. Marion Open MRI’s contracted radiologist, Dr. Alexander Boutselis, read Arrendale’s images and missed diagnosis of a fistula, prompting Arrendale to sue.

The Allen Superior Court granted summary judgment to Marion Open MRI, a nonhospital facility, because it found that the ruling in Sword v. NKC Hospitals, Inc., 714 N.E.2d 142 (Ind. 1999), applied only to a hospital’s liability for its contract employees.

But a panel of the Court of Appeals of Indiana reinstated the case, pointing to the “highly persuasive” decision in Webster v. Center for Diagnostic Imaging, Inc., 1:16-cv-02677-JMS-DML, 2017 WL 3839377 (S. D. Ind. Aug. 31, 2017). Webster found no meaningful difference between a hospital and a diagnostic imaging center under Sword.

After granting the petition to transfer, Supreme Court justices concluded that summary judgment for Marion Open MRI was incorrect. The court reversed and remanded, holding that Sword and Section 429 of the Restatement (Second) of Torts’ apparent agency principles apply to nonhospital medical entities that provide patients with health care.

The high court noted that Sword changed the framework of hospital liability through apparent agency by preventing hospitals from insulating themselves from potential liability by using independent contractor physicians while suggesting to the public that their physicians are employed by the hospital.

Siding with Arrendale, the justices concluded there is no meaningful difference between a patient in a hospital or a patient of a diagnostic imaging center regarding the provider’s manifestations and the patient’s reliance. The court pointed to the increased reliance from patients on nonhospital medical entities to meet society’s health care needs.

Given the shift in health care consumption, the high court found that Sword’s Section 429 analysis was applicable to nonhospital diagnostic imaging centers like Marion Open MRI.

“As a growing number of patients depend on non-hospital providers for their health care, this gap in our common law allows for non-hospital medical entities to purport to offer a unified health care operation, yet still escape potential Restatement Section 429 liability by using independent-contractor physicians,” Justice Steven David wrote. “We find it problematic that non-hospital medical entities like Marion Open MRI can purport to provide a unified operation and urge potential patients to ‘[s]ave $$ on your next MRI!’, while insulating themselves from prospective liability by having independent contractor radiologists read and interpret patient images.”

Justices also noted that being subject to the Medical Malpractice Act is voluntary, and a health care provider that fails to qualify under the act is subject to liability without regard to the act and its protections.

In applying Sword to nonhospital medical facilities, the high court noted that it was persuaded, like the COA, by many of the Indiana Southern District Court’s observations in Webster.

Finally, the court concluded that genuine issues of material fact exist as to whether Boutselis was an apparent agent for Marion Open MRI.

“As a matter of first impression, we hold that a non-hospital medical entity, including a diagnostic imaging center like Marion Open MRI, may be held liable for the negligent acts of its apparent agents, and expressly apply Sword’s apparent agency rules to such entities,” David concluded. “We therefore reverse summary judgment in Marion Open MRI’s favor and remand for further proceedings consistent with this opinion.”

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March 29

Terry L. Abbott v. State of Indiana

21S-PL-347

Forfeited funds can’t be released for defense, but summary judgment for state was inappropriate

A trial court cannot release money seized from a defendant back to the defendant for the purpose of funding his or her defense, the Indiana Supreme Court has ruled. However, the forfeiture action in question will continue after the high court reversed summary judgment for the state.

Justice Steven David wrote the opinion that partially reversed and affirmed the Elkhart Superior Court in Terry L. Abbott v. State of Indiana, 21S-PL-347. Indiana Chief Justice Loretta Rush concurred and dissented in part.

Appellant Terry Abbott was convicted of several felony drug-related offenses after police executed a search warrant of his home in 2015 following two controlled buys during which Abbott sold drugs to a confidential informant. Police seized marijuana, methamphetamine, hundreds of pills containing amphetamine and Xanax, drug paraphernalia, several firearms and $9,185 in cash during the search.

As Abbott’s criminal case was pending, a civil forfeiture action was filed against him under Indiana’s racketeering forfeiture statute, Indiana Code § 34-24-2, seeking forfeiture of the cash and firearms.

The Elkhart Superior Court denied Abbott’s request for the appointment of counsel at public expense after his attorney withdrew from the forfeiture proceeding. The trial court later granted the state’s motion for summary judgment in the forfeiture action.

But a split Court of Appeals of Indiana reversed, with the majority concluding Abbott could use $8,923 from the seized money to fund his defense. Judge Nancy Vaidik partially dissented and opined that she would not allow Abbott to use the seized cash to pay for an attorney.

The COA also affirmed the denial of Abbott’s request for appointed counsel.

In a divided decision, the Indiana Supreme Court held that the racketeering forfeiture statute does not permit a court to release funds seized in a forfeiture action so the defendant can hire counsel in that same action.

The high court found the COA’s interpretation to be inconsistent with the statute’s structure and the legislative intent underlying Indiana’s forfeiture scheme. Considering the legislative goals underlying forfeitures generally, the court concluded the Indiana General Assembly did not intend for the racketeering forfeiture statute to permit a court to release the seized res to the defendant to defend the forfeiture action.

Even so, the justices reversed the grant of summary judgment in the state’s favor, finding that decision was improper given the genuine issues of material fact that exist as to whether the seized funds were part of Abbott’s alleged racketeering activity.

“Abbott’s designations, showing lawful income and testimony that much of the seized cash was for a lawful purpose — purchasing a motorcycle — create the requisite ‘conflicting inferences’ to ‘preclude summary judgment,’” David wrote, citing Hughley v. State, 15 N.E.3d 1000 (Ind. 2014). “… Accordingly, Abbott’s sworn statements create sufficient factual issues to be resolved at trial.”

But the high court affirmed the denial of Abbott’s request for appointed counsel, “even if ‘exceptional circumstances’ may have existed.”

“Given the facts, we cannot say that the trial court erred when finding that Abbott was unlikely to prevail in the forfeiture action, nor was its decision to deny Abbott’s request for appointed counsel ‘clearly against the logic and effect of the facts and circumstances,’” the high court wrote.

Rush broke from her colleagues on the appointed counsel issue, arguing that denying Abbott’s request for counsel was clearly against the logic and effect of the facts and circumstances before the trial court.

The chief justice opined that the trial court’s denial of counsel, premised on its merits determination, was an abuse of discretion. She argued that unique characteristics of in rem forfeiture actions constrain Abbott’s ability to show a likelihood of prevailing in his defense, and that his defense undermines the trial court’s merits determination.

Additionally, the dissenting chief justice said the trial court’s alternative reasons for denying counsel “do not withstand even deferential review.”

“At its core, the civil appointment-of-counsel statute anticipates that not all cases should be treated alike. Thus, we need not — and should not — treat incarcerated, indigent, civil-forfeiture defendants like Abbott as akin to all other civil litigants,” Rush wrote. “To be sure, exceptional circumstances surrounding forfeiture actions will not in all cases render a trial court’s decision to deny counsel an abuse of discretion. But for the reasons provided above, they do here.”

The high court remanded the case for further proceedings.

The Virginia-based Institute for Justice, which argued the case before the Indiana Supreme Court, reacted to the court’s decision in a news release, saying the decision “reaffirms the principle that Hoosiers are due their day in court” while also “effectively den(ying) many of them the help of an attorney.”

“Mr. Abbott is like many property owners who cannot afford to hire an attorney to fight for their rights,” IJ attorney Marie Miller, who argued the case, said in the news release. “This decision allows forfeiture cases to remain woefully lopsided: the state with all its resources on one side and an unrepresented, oftentimes-impoverished property owner on the other.”

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Court of Appeals of Indiana

March 31

The Trustees of Indiana University v. Justin Spiegel; The Trustees of Purdue University v. Elijah Seslar, Zachary Church, Jordan Klebenow, and Luke McNally

21A-CT-175

COA allows students’ COVID breach complaints against IU, Purdue to proceed

Lawsuits filed by students at Indiana and Purdue universities alleging breaches of contract when the schools moved to online learning because of the COVID-19 pandemic will proceed, the Court of Appeals of Indiana has ruled.

In March 2020, Indiana Gov. Eric Holcomb issued a series of executive orders declaring a public health disaster emergency, imposing social distancing and stay-at-home requirements and allowing educational institutions to continue operations — but only for purposes of facilitating distanced learning. IU and Purdue moved all in-person classes online for the rest of the spring semester, which ended in May, closed campus facilities and urged students to return to their homes.

Students at the universities filed class-action complaints, one against IU and two against Purdue, alleging the schools breached contractual promises for in-person instruction, services, activities, housing and meals. They requested prorated refunds of tuition, student fees and room and board fees as damages. The complaints also alleged the universities were unjustly enriched by retaining those funds.

IU filed a motion for judgment on the pleadings, which was denied in full, and Purdue filed motions to dismiss for failure to state a claim, which were largely denied.

In a consolidated appeal, the universities argued the trial courts erred in denying the motions.

Finding no error, the COA affirmed in The Trustees of Indiana University v. Justin Spiegel; The Trustees of Purdue University v. Elijah Seslar, Zachary Church, Jordan Klebenow, and Luke McNally, 21A-CT-175

First, the COA determined the plaintiffs’ complaints sufficiently stated claims for breach of implied contract and unjust enrichment regarding tuition and student fees.

Regarding the implied contracts, the plaintiffs argued that the universities and students bargained for in-person instruction, services and activities in exchange for tuition and student fees, and that the schools breached that agreement by transitioning to online instruction and closing campus facilities, thus depriving them “of the benefit of the bargain for which they had already paid.”

While the universities contended the governor’s executive orders made it legally impossible for them to fulfill in-person instruction, the COA opined that the “viability of this affirmative defense is premature at this stage of the proceedings.”

“If indeed the executive orders discharged the Universities’ duty to perform their obligations under the contract, then ‘claims for unjust enrichment may lie,’” Judge Terry Crone wrote for the appellate court.

The COA also determined the plaintiffs in the Purdue case sufficiently stated claims for breach of express contract regarding room and board fees.

Purdue argued that the plaintiffs’ allegations were undermined by their own admissions elsewhere in their complaint, that “some University housing would remain open for students who needed to remain on campus” and that “food options on campus would be continued.”

“There is no indication that the Church plaintiffs were among those students with ‘extenuating circumstances,’ and it is up to the trier of fact to determine whether offering ‘very limited’ dining options was a breach of the parties’ contracts,” Crone wrote.

Finally, the COA declined to address the enforceability of Indiana Code § 34-12-5-7 for the first time on appeal.

In April 2021, after the trial courts issued their rulings and after the universities filed a motion with the COA for consideration of their interlocutory appeals, Holcomb signed Public Law 166-2021, which was made retroactive to March 1, 2020.

Section 13 of the law provides that “[a] claimant may not bring, and a court may not certify, a class action lawsuit against a covered entity [i.e., the Universities] for loss or damages arising from COVID-19 in a contract, implied contract, quasi-contract, or unjust enrichment claim.”

Despite requests to consider the enforceability of the statute as a court of first instance, the COA declined.

“Here, the issues presented by the trial court’s orders are whether the Plaintiffs’ complaints sufficiently state claims for breach of contract and unjust enrichment, not whether Public Law 166-2021 precludes the Plaintiffs from litigating their claims on a class basis,” Crone wrote. “This issue was raised before the trial court in a similar case involving Ball State University, which is represented by the Universities’ counsel; after a hearing, the court ruled in Ball State’s favor on February 11, 2022, and that ruling is currently being appealed.

“… The Universities in this case may raise the statutory issue in due course before their respective trial courts, just as their counsel did in the Ball State case,” Crone concluded.

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PNC Bank, National Association v. Paul J. Page, et al.

21A-MF-1974

Interest exclusion in foreclosure case based on pandemic emergency orders reversed

A bank seeking to foreclose on an Indiana property can collect interest accrued during the early days of the COVID-19 pandemic despite emergency court orders tolling interest, the Court of Appeals of Indiana has ruled.

In July 2007, Michael Couch executed a $100,000 equity reserve line of credit with PNC Bank’s predecessor in interest, National City Bank, as well as a mortgage to secure payment of a promissory note. A decade later, Couch defaulted
on the note.

PNC responded by filing a complaint, seeking a judicial determination of the sums due pursuant to the note and a decree of foreclosure on the mortgage.

Meanwhile, after the COVID-19 public health emergency was declared in Indiana in March 2020, Gov. Eric Holcomb issued an executive order placing a temporary prohibition on evictions and foreclosures. The order stated, in part, “No provision contained in this Executive Order shall be construed as relieving any individual of their obligations to pay rent, to make mortgage payments, or to comply with any other obligation(s) that an individual may have under a tenancy or mortgage.”

Relatedly, the Indiana Supreme Court in In the Matter of the Petition of the Courts of Marion County for Administrative Rule 17 Emergency Relief, 20S-CB-113 (Mar. 13, 2020), granted a petition for relief filed by the Marion Circuit and Superior courts addressing the ability of litigants and courts to comply with deadlines and rules of procedure.

The high court’s order stated, among other things, that no interest would be due or charged during the tolling period of March 16, 2020, through April 6, 2020. The relief was later extended through Aug. 14, 2020.

Meanwhile, in a memorandum regarding foreclosure and eviction proceedings, the Indiana Supreme Court’s Office of Judicial Administration stated that Holcomb’s executive order “does not relieve individuals of their obligations to pay rent, to make mortgage payments, or to comply with other obligations under a … mortgage.”

In June 2021, PNC moved for agreed and default judgment and a decree of foreclosure seeking judgment against Couch for the balance due of principal plus interest. It alleged he owed an unpaid principal balance of $21,272.60 “together with interest from November 24, 2017 to April 30, 2021, in the sum of $3,434.02, and further interest will accrue from April 30, 2021.”

The Marion Superior Court granted PNC’s motion and entered a default judgment and decree of foreclosure, but based on the governor’s emergency orders, held that “[i]nterest accruing 3/16/20-8/14/20 shall not be included in the judgment amount.”

The Court of Appeals reversed that decision and the denial of PNC’s motion to correct error in PNC Bank, National Association v. Paul J. Page, et al., 21A-MF-1974.

Appellate judges agreed with PNC’s argument that the Indiana Supreme Court “could not have intended [the] sentence regarding interest in [the Emergency Orders] to apply to cases involving private mortgage contracts.”

It cited as instructive the case of Denman v. St. Vincent Med. Grp., Inc., 176 N.E.3d 480 (Ind. Ct. App. 2021), trans. denied, which held, among other things, that the emergency orders did not toll or suspend post-judgment interest provided by Indiana Code § 24-4.6-1-101.

“We find the same reasoning applies here,” Judge Robert Altice wrote. “That is, because our Supreme Court could not, by rule, change substantive law, the Emergency Orders’ instruction — that interest would not ‘be charged or due during the tolled period’ — cannot be construed to suspend the automatic accrual of non-discretionary interest provided by the terms of a private loan instrument and as permitted by statute. Our conclusion is consistent ‘with our practice of presuming that each branch of our government acts within their constitutionally prescribed boundaries.’”

On remand, the COA instructed the trial court to award PNC interest from Nov. 24, 2017, to the date of the judgment at the rate specified in the promissory note, including the period of March 16, 2020, through Aug. 14, 2020.•