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Full text of "Indiana Law Review"

Indiana 

Law 

Review 




Volume 35 No. 4 2002 



1 y 

2001 SURVEY OF RECENT DEVELOPMENTS 


IN INDIANA LAW 


CONTRIBUTORS TO THIS ISSUE 


The Honorable Chief Justice Randall T. Shepard 


Matthew T. Albaugh 


Charles M. Kidd 


Joseph R. Alberts 


Susan W. Kline 


Kevin W. Betz 


Katherine Amy Lemon 


Ellen E. Boshkoff 


Rosalie Berger Levinson 


Timothy C. Caress 


Jo Ellen Lind 


Leah M. Chan 


Joel M. Schumm 


Jeffrey O. Cooper 


Peter A. Siddiqui 


Douglas E. Cress ler 


P. Jason Stephenson 


Harold Greenberg 


Lloyd T Wilson, Jr. 


Lawrence A. Jegen, III 


' 



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Indiana Law Review 



Volume 35 



2001-2002 




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Indiana University School of Law — Indianapolis 
2001-2002 ADMINISTRATIVE OFFICERS AND FACULTY 

Administrative Officers 

Myles Brand, President of the University. Ph.D. in Philosophy, University of Rochester (New 

Yoric). 
Gerald L. BEPKO, Vice-President for Long-Range Planning, Indiana University; Chancellor, 

Indiana University-Purdue University at Indianapolis and Professor of Law. B.S., 

Northern Illinois University; J.D., ITT/Chicago-Kent College of Law; LL.M., Yale 

University. 
Norman Lefstein, Dean and Professor of Law. LL.B., University of Illinois; LL.M., 

Georgetown University. 
Thomas B. Allington, Associate Dean and Professor of Law. B.S., J.D., University of 

Nebraska; LL.M., New York University. 
JEFFREY W .Grove, Associate Dean, Professor of Law, and Director, China Summer Program. 

A.B., Juniata College; J.D., George Washington University. 
SUSANAH M. Mead, Associate Dean for Academic Affairs and Professor of Law. B.A., Smith 

College; J.D., Indiana University — Indianapolis. 
Cynthia Baker, Director, Program on Law and State Government. B.A., J.D., Valparaiso 

University. 
Elizabeth L. DeCoux, Assistant Dean for Student Affairs. J.D., Mississippi College School 

of Law. 
Angela M. Es?kT>k, Assistant Dean for Admissions. J.D., Indiana University — Bloomington. 
JONNA M. Ka\^, Assistant Dean for External Affairs. J.D., Indiana University — Indianapolis. 
Shannon L. Williams, Director of Career Services. B.S., Indiana University — Indianapolis. 

Faculty 

Cynthia M. Adams, Lecturer in Law. B.A., Kentucky Wesleyan College; J.D., Indiana 

University — Indianapolis. 
Thomas B. Allington, Associate Dean and Professor of Law. B.S., J.D., University of 

Nebraska; LL.M., New York University. 
James F. Bailey, III, Professor of Law and Director of Law Library. A.B., J.D., M.A.L.S., 

University of Michigan. 
Gerald L. Bepko, Vice President for Long-Range Planning. Chancellor and Professor of Law. 

B.S., Northern Illinois University; J.D., ITT/Chicago-Kent College of Law; LL.M., 

Yale University. 
Frank Bowman, Associate Professor of Law. B.A., Colorado College; J.D., Harvard Law 

School. 
Robert Brookins, Professor of Law. B.S., University of South Florida; J.D., Ph.D., Cornell 

University. 
Daniel H. Cole, M. Dale Palmer Professor of Law. A.B., Occidental College; A.M., 

University of Chicago; J.D., Lewis and Clark College; J.S.M,, J.S.D., Stanford Law 

School. 
Jeffrey O. Cooper, ^^^w^wf Professor of Law. A.B., Harvard University; J.D., University of 

Pennsylvania. 
Paul N. Cox, Centennial Professor of Law. B.S., Utah State University; J.D., University of 

Utah; LL.M., University of Virginia. 
KennethD. Crews,/! ^50c/a/e Dean of the Faculties for Copyright Management and Professor 

of Law and Library and Information Science. B. A., Northwestern University; J.D., 

Washington University; M.L.S., University of California, Los Angeles; Ph.D., 

University of California, Los Angeles. 
James D. Dimitri, Lecturer in Law. B.S., Indiana University; J.D., Valparaiso University 

School of Law. 
Jennifer Ann Drobac, Associate Professor of Law. B.A., M.A., Stanford University; J.D., 

J.S.D., Stanford Law School. 
George E. Edwards, Associate Professor of Law and Director, Program in International 

Human Rights Law. B.A., North Carolina State University; J.D., Harvard Law 

School. 
Paul J. Galanti, Professor of Law. A.B., Bowdoin College; J.D., University of Chicago. 
Harold Greenberg, Professor of Law. A.B., Temple University; J.D., University of 

Pennsylvania. 



Jeffrey V^ .Grove, Associate Dean, Professor of Law, and Director, China Summer Program. 

A.B., Juniata College; J.D., George Washington University. 
Frances Watson Hardy, Clinical Associate Professor of Law. B.S., Ball State University; 

J.D., Indiana University — Indianapolis. 
Lawrence A. Jegen, III, Thomas F. Sheehan Professor of Tax Law and Policy. A.B., Beloit 

College; J.D., M.B.A., The University of Michigan; LL.M., New York University. 
Henry C. Karlson, Professor of Law. A.B., J.D., LL.M., University of Illinois. 
Robert A. Katz, Associate Professor of Law. A.B., Harvard College; J.D., University of 

Chicago Law School. 
Eleanor D. Kinney, Samuel R. Rosen Professor of Law and Co-Director of the Center for 

Law and Health. B.A., Duke University; M.A., University of Chicago; J.D., Duke 

University; M.P.H., University of North Carolina. 
Andrew R. Klein, Professor of Law. B.A., University of Wisconsin; J.D., Emory University 

School of Law. 
Robert E. Lancaster, Clinical Associate Professor of Law. B.A., Millsaps College; J.D., 

Tulane Law School. 
Norman Lefstein, Dean and Professor of Law. LL.B., University of Illinois; LL.M., 

Georgetown University. 
Gerard'N.Magliocca, Assistant Professor of Law. B.A., Stanford University; J.D., Yale Law 

School. 
Lynn A. McDowell, Clinical Associate Professor of Law. B.S., Indiana University; J.D., 

Indiana University — Indianapolis, 
Deborah McGregor, Lecturer in Law and Assistant Director of Legal Analysis, Research and 

Communication. B.A., University of Evansville; J.D., Georgetown University. 
SusanahM. Mead, Associate Dean and Professor of Law. B.A., Smith College; J.D., Indiana 

University — Indianapolis. 
Mary H. Mitchell, Professor of Law. A.B., Butler University; J.D., Cornell Law School. 
James P. Nehf, Cleon H. Foust Fellow, Professor of Law, and Director, European Law 

Program. B.A., Knox College; J.D., University of North Carolina. 
David Orentlicher, Samuel R. Rosen Professor of Law and Co-Director of the Center for 

Law and Health. A.B., Brandeis University; J.D., M.D., Harvard College. 
Joanne Orr, Clinical Associate Professor of Law. B.S., Indiana State University; J.D., 

California Western. 
H. Kathleen Patchel, Associate Professor of Law. A.B., Huntington College; J.D., 

University of North Carolina; LL.M., Yale University. 
Florence Wagman Roisman, Paul Beam Fellow and Professor of Law. B.A., University of 

Connecticut; LL.B., Harvard Law School. 
Joan M. RuhtENBERG, Clinical Professor of Law and Director of Legal Analysis, Research 

and Communication. B.A., Mississippi University for Women; J.D., Indiana 

University — ^Indianapolis. 
Joel M. Schumm, Lecturer in Law. B.A., Ohio Wesleyan University; M.A., University of 

Cincinnati; J.D., Indiana University School of Law — Indianapolis. 
E. Gary S?ITK.0, Associate Professor of Law. A.B., Cornell University; J.D., Duke University 

Law School. 
James W. Torke, Carl M. Gray Professor of Law. B.S., J.D., University of Wisconsin. 
James Patrick White, Professor of Law. A.B., University of Iowa; J.D., LL.M., George 

Washington University. 
Lawrence P. Wilkins, Professor of Law. B.A., The Ohio State University; J.D., Capital 

University Law School; LL.M., University of Texas. 
Lloyd T. Wilson, Jr., Lecturer in Law. B.A., Wabash College; M.A., Duke University; J.D., 

Indiana University — Bloomington. 
Mary T. Wolf, Clinical Professor of Law and Director of Clinical Programs. B.A., Saint 

Xavier College; J.D., University of Iowa. 
R. George Wright, Professor of Law. A.B., University of Virginia; Ph.D., Indiana University; 

J.D., Indiana University School of Law — Indianapolis. 

Emeriti 

Edward P. Archer, Professor of Law Emeritus. B.M.E., Renesselaer Polytechnic Institute; 

J.D., LL.M., Georgetown University. 
Agnes P. Barrett, Associate Professor of Law Emerita. B.S., J.D., Indiana University. 



Clyde Harrison Crockett, Professor of Law Emeritus. A.B., J.D., University of Texas; 

LL.M., University of London (The London School of Economics and Political 

Science). 
Debra a. Falender, Professor of Law Emerita. A.B., Mount Holyoke College; J.D., Indiana 

University — Indianapolis. 
Cleon H. Foust, Professor of Law Emeritus. A.B., Wabash College; J.D., University of 

Arizona. 
David A. Funk, Professor of Law Emeritus. A.B., College of Wooster; J.D., Case Western 

Reserve University; M.A., The Ohio State University; LL.M., Case Western Reserve 

University; LL.M., Columbia University. 
Helen P. Garfield, Professor of Law Emerita. B.S.J. , Northwestern University; J.D., 

University of Colorado. 
William F. Harvey, Carl M. Gray Professor of Law & Advocacy Emeritus. A.B., University 

of Missouri; J.D., LL.M., Georgetown University. 
W. '^ILUMAHodes, Professor of Law Emeritus, A.B., Harvard College; J.D., Rutgers, Newark. 
William Andrew Kerr, Professor of Law Emeritus. A.B., West University; J.D., LL.M., 

Harvard University; B.S., Duke University. 
William E. Marsh, Professor of Law Emeritus. B.S., J.D., University of Nebraska. 
Melvin C. Poland, Cleon H. Foust Professor of Law Emeritus. B.S., Kansas State University; 

LL.B., Washburn University; LL.M., University of Michigan. 
Ronald W. POLSTON, Professor of Law Emeritus. B.S., Eastern Illinois University; LL.B., 

University of Illinois. 
Kenneth M. Strolid, Professor of Law Emeritus. A.B., J.D., Indiana University — 

Bloomington. 

Law Library Faculty 

James F. Bailey, III, Professor and Director of Law Library. A.B., J.D., M.A.L.S., University 

of Michigan. 
Richard Humphrey, Reference Librarian. A. A., Brewton-Parker Junior College; B.A., 

Georgia Southwestern College; M.L.S., University of Kentucky. 
Wendell E. JOHNTING, Assistant Director for Technical Services. A.B., Taylor University; 

M.L.S., Indiana University. 
Bruce Kleinschmidt, Reference Librarian. B.A., Furman University; J.D., University of 

Louisville; M.L.S., University of North Texas. 
Chris E.Long, Catalog Librarian. B.A., Indiana University; M.A., Indiana University; M.L.S., 

Indiana University. 
MahnazK. MoSH^EGH.Acquisition/Serials Librarian. B.A., National University of Iran; M.S., 

Tehran University; M.A., Ball State University; M.L.S., Ph.D., Indiana University. 
Miriam A. Mv^HY, Associate Director of Law Library. B.A., Purdue University; J.D., M.L.S., 

Indiana University — Bloomington. 
KlYOSHI Otsu, Computer System Specialist. A.A., Parkland College; A.B., M.S., C.A.S., 

University of Illinois. 



Indiana Law Review 



Volume 35 2002 Number 4 

Copyright © 2002 by the Trustees of Indiana University 

TABLE OF CONTENTS 

SURVEY 

I. Introduction 

Making Good Law Requires More Lawyers 

Randall T. Shepard 1111 

11. Supreme Court Review 

An Examination of the Indiana Supreme Court Docket, 
Dispositions, and Voting in 2001 

Kevin W.Betz 1117 
P. Jason Stephenson 

III. Appellate Practice 

A Year of Transition in Appellate Practice 

Douglas E. Cressler 1133 

IV. Civil Procedure 

Recent Developments in Civil Procedure 

JoEllen Lind 1157 

V. Commercial and Consumer Law 

Indiana's Revised Article 9 and Other Developments 
in Commercial and Consumer Law 

Matthew T. Albaugh 1239 

VI. Constitutional Law 

State and Federal Constitutional Law Developments 

Rosalie Berger Levinson 1263 

VII. Contracts and Sales of Goods 

Recent Developments in the Indiana Law of Contracts 
and Sales of Goods 

Harold Greenberg 1297 

VIII. Corporate Law 

Corporate Law: A Year in the Life of Indiana Corporate Law 

Leah M. Chan 1321 

IX. Criminal Law and Procedure 

Recent Developments in Indiana Criminal Law and 
Procedure 

Joel M. Schumm 1347 



X. Employment Law 

Survey of Employment Law Developments for Indiana 
Practitioners 

Susan W. Kline 1369 
Ellen E. Boshkoff 

XL Evidence 

The Continuing Complexity of Indiana Rule 
of Evidence 404(b) 

Jeffrey O. Cooper 1415 

XIL Product Liability 

Survey of Recent Developments in Indiana 
Product Liability Law 

Joseph R. Alberts 1427 

XIIL Professional Responsibility 

Survey of the Law of Professional Responsibility 

Charles M. Kidd 1417 

XIV. Property Law 

Fulfilling the Deterrent and Restitutionary Goals of 
the Security Deposits Statute and Other Developments 
in Indiana Property Law 

Lloyd T. Wilson, Jr. 1501 

XV. Taxation 

Developments in Indiana Taxation 

Lawrence A. Jegen, III 1541 
Peter A. Siddiqui 

XVL Tort Law 

Recent Developments in Indiana Tort Law 

Timothy C. Caress 1583 
Katherine Amy Lemon 



Volume 35 Number 4 



Making Good Law Requires More Lawyers 



Randall T. Shepard* 



Introduction 

While we lawyers largely think of ourselves as people who "practice" law, 
the fact is that we "make" law regularly during the course of our work. Lawyers 
and judges do this by interpreting statutes, resolving litigation, and forging 
common law as a matter of course. 

Lawyers also make law in a rather different setting. Legislative bodies at all 
levels of government have long been places where the voters sent lawyers to 
represent them in much greater proportion than the number of lawyers in the 
population. The contribution of lav^ers to legislative deliberations has been a 
good and important one for the whole of society. We are in danger of losing it. 

L Oh, Really? 

Surely this cannot be so, says the reader, even the lawyer-reader. The 
legislature is full of lawyers. It used to be so. In fact, at the very first session of 
the General Assembly, a quarter of the forty members were lawyers.' Further, 
a random review of 1 94 1 legislators who served between 1816 and 1 899 showed 
that 536 were lawyers. By the 1 980-8 1 session of the Indiana General Assembly, 
the numbers were still substantial. There were twenty-nine lawyers in a total 
membership of 150 legislators, for a percentage of just under twenty percent. 
Likewise, the 1 990-91 session of the legislature had twenty-three lawyers. While 
there were still twenty-three lawyers in the General Assembly of 2001-02, we 
have just experienced a sweeping loss: six of the thirteen lawyers in the House 
have left or announced they will not seek re-election. 

This dramatic drop in the number of lawyers has been masked by the 
participation of lawyers in very prominent roles. We have now had three lav^ers 
in a row serve as speaker of the House of Representatives, for example.^ And the 
minority leader of the House has recently tended to be a lawyer. These 
legislators put a lawyer's face before the public and the profession as 
representing the legislative body, and we tend to lose track of the declining trend. 

Indiana is not unique in experiencing an exodus of lawyer- legislators. For 
example, the percentage of lawyers in the Maryland legislature has dropped from 
thirty-eight percent in 1966 to just eleven percent today .^ The same is true in 



* Chief Justice of Indiana. A.B., 1969, Princeton University; J.D., 1972, Yale Law 
School; LL.M., 1995, University of Virginia School of Law. 

1 . A Biographical Directory of the Indiana General Assembly 1816-1 899, at 437 
(Rebecca A. Shepherd et a! . eds., 1980) (compiled from biographical sketches ofthe legislators who 
were listed as members ofthe first General Assembly). 

2. In reverse order, these were Rep. John R. Gregg (D-Sandbom), Rep. Paul S. Mannweiler 
(R-Indianapolis), and Rep. Michael Phillips (D-Boonville). 

3 . See Janet Stidman Eveleth, Where Have All the Lawyer Legislators Gone?, Mary. B. J., 
Nov.-Dec. 2001,at50. 



1112 INDIANA LAW REVIEW [Vol. 35:1111 



Wisconsin, where lawyers are only eleven percent of the current Wisconsin 
legislature/ Similar phenomena exist in a number of other states: Arkansas' 
legislature is comprised of only fourteen percent lawyers;^ Idaho lawyers 
represent only seven percent of the legislature;^ and Kansas has experienced a 
decline of more than fifty percent in lawyer-legislators over the past forty years7 
It appears that this development has not affected the U.S. Congress,^ 

II. Why Is This Occurring? Time and Money 

All professions represented in the legislature face the challenge of serving 
the public and meeting their private obligations to family and vocation. 
However, there are a unique number of causes for the reduction in the number of 
lawyers serving. I offer here four that fit my observations of the trend. 

A. Hardly Part-Time 

First, while Indiana continues to hold to the notion that it has a "part-time 
citizen legislature," the fact is that the time demands on persons serving as 
legislators are hardly part-time and they grow more consuming by the year. 
During the legislature as it existed in the 1 960s, for example, an elected legislator 
could expect to spend two months in Indianapolis during a representative's 
twenty-four month term of office. Since 1971, the General Assembly has met 
every year, and the sessions run until March 15 in even-numbered years and until 
April 15 in odd-numbered years. Thus the number of months during a term that 
a representative should expect to spend largely in Indianapolis has roughly 
tripled as a result of the decision to hold annual sessions. Moreover, the number 
of special sessions has grown. A listing of the years in which special sessions 
have called legislators away from their homes since I960 tells this story well 
enough: 1963, 1967, 1977, 1981, 1983, 1987, 1989, 1991, 1993, 1997, and 
perhaps 2002. 

Beyond the commitment of time to session days, members of the General 
Assembly confront a growing need to go to the capitol for inter-session business. 
For example, the "2001 Roster of Interim Study Committees and Statutory 
Commissions and Committees," lists ninety-eight groups examining issues 



4. See George C. Brown, Lawyers as Legislators: With Fewer Lawyer-Legislators Making 
Wisconsin Laws, Attorneys Involvement in the Legislative Process Is a Must, Wis. LAW., Sept. 
2001, at 3. 

5. See Don HoUingsworth, The Decline of the Lawyer Legislator, ARK. Law., Spring 200 1 , 
at 5. 

6. Tom Moss, Being a Lawyer Legislator, ADVOCATE, Dec. 2000, at 1 8. 

7. Paul T. Davis, The Kansas Legislature Needs You!, J. KAN. B. ASS'N, May 2000, at 5. 
The Kansas Bar Association has taken a proactive stance against the dramatic decline in lawyer 
legislators and actively sought out lawyers to run for office. See id. 

8. Based upon my research, fifty-two members of the current U.S. Senate have law degrees. 
See The United States Senate, Senators of 1 07th Congress, available at http://www.senate.gov/ (last 
visited May 13,2002). 



2002] MAKING GOOD LAW 1113 



ranging from education to rail corridor safety. By contrast, there were just sixty- 
five such committees at work in 1985. While the number of such committee 
assignments is sometimes criticized in the press, what topics should the General 
Assembly choose not to examine in the relatively more orderly and intense way 
that study committees have provided. The death penalty? Medicaid? Economic 
development? 

The days consumed by such activities are but one way to assess the overall 
weight of the task of serving in the General Assembly. Measuring growth in the 
number and relative complexity of issues on the legislature's agenda by the 
volume of legislation ultimately passed is another way, though not a particularly 
sophisticated one. In 1941, the legislature passed enough pages of laws to fill one 
volume. In 1971, it passed enough law to fill two volumes. By 2001, four 
volumes were required to capture the work product of the General Assembly.^ 
While we often are blithe to say that the republic would be better off if fewer 
laws were adopted, the fact is that these measures are most often the product of 
some level of public demand. 

B. Lawyer Hours Not Billed 

And, of course, as Abraham Lincoln said, "A lawyer's time and advice are 
his stock in trade."^° Time the lawyer spends in Indianapolis hearing citizen 
testimony or laboring over bills during session is time the lawyer cannot spend 
billing hours at the law office. This problem is plain enough to see. What is not 
so plain, as a lawyer in the House recently explained to me, is that clients 
perceive the lawyer is gone even more often than the lawyer actually is gone. 
Because something about the legislature is so often in the news even when the 
body is not in session, citizens figure their lawyer is out of town and, at least, at 
the margin, call soiriebody they figure is home to handle their problems. 

This aspect of the decline is virtually a reverse of the impulse which once 
worked to lead some to seek public office. Throughout much of the history of 
the legal profession, lawyers did not advertise their services, either because the 
club frowned on the practice or because bar rules or state laws prohibited doing 
so. Thus, a good way to raise a lawyer's visibility in the community was to run 
for office. If you won, great. If you did not win but acquitted yourself 
honorably, then at least your name was on the public's mind the next time a 
potential client ran down through the Yellow Pages. Of course, the U.S. 
Supreme Court decided that lawyer advertising would "offer great benefits" to 
the public, including a potential for "dramatically lower" costs for legal services 



9. The pages of adopted laws were 973 for 1 94 1 , 2275 for 1 97 1 but probably because of a 
change in typestyle or format, the 2001 number would only be 2801. 

1 0. Sterling v. Philadelphia, 1 06 A.2d 793, 795 n.2 ( 1 954). The dissent in this case spins an 
interesting yarn on the authenticity of this quote, claiming its origin is actually from the Allen Smith 
Company, an Indianapolis plaque manufacturer. Sterling, 106 A.2d at 804 (Musmanno, J., 
dissenting). 



1114 INDIANA LAW REVIEW [Vol. 35:1111 



and should thus be declared a First Amendment right." Thus, lawyers now do 
all sorts of advertising, and there is hardly a need to run for office in order to 
place your name on billboards. 

Law firm economics also make a difference in whether lawyers can run for 
office.'^ The level of overhead, a common topic of lament for firms large and 
small, means that firms can hardly afford learning periods for young associates, 
let alone carrying one of the partners for the time necessary to campaign and 
serve in the office.'^ 

C Professional Support 

Finally, lawyer- legislators tell me that they receive very little support of any 
sort from their fellow lawyers. "They call me when they have a client who needs 
help on legislation," one legislator told me, "but 1 really cannot count on any 
substantial support from local lawyers when it comes to election time.""'* 

III. Why DOES IT Matter? 

Many among our fellow citizens, if they knew, would doubtless say that this 
diminution of lawyers in the legislature is not anything worth worrying about. 
Some might indeed celebrate the trend. 

I argue that this trend is bad for two reasons. 

First, it is plainly bad for our profession. More than any other segment of 
society, we lawyers rely on the product of legislative deliberations in the work 
we do solving people's problems. Laws carefully crafted with the active 
participation of the legal mind and experience will doubtless be easier for all of 
us to work with during our daily travails. This joining of authorship and daily 
use is helpful to all for the same reason that Shirley Shideler once told me that 
Barnes & Thornburg's trust and estates lawyers believed that the same lawyers 
who write the instruments should be responsible for their implementation: 
"We'll always be better writers if we know we will have to live with the 
documents we prepare." 

The dramatic decline in lawyer- legislators means that even in those 
committees of the legislature in which the lawyer interest is most intense, most 



U . See Bates v. State Bar of Arizona, 433 U.S. 350, 377 (1977). 

12. One out-going member of the Indiana legislature is a partner in the prestigious Chicago 
law firm of Mayer, Brown, Rowe & Maw. According to the most recent numbers, the average 
profits per partner at Mayer Brown is $725,000. See Four Firms Make Their Debut: The List of 
the 100 Alphabetically, AM. Law., July, 2001, available at http://www.law.com/special/ 
professionals/amlaw/amlawlOO/julyOl/AtoZ.html (last visited May 13, 2002). 

13. See Kyle O'Dowd, Inflation Blues: The Need for a CJA Rate Hike, 25 CHAMPION 60 
(2001 ). Citing a 2000 survey, the author states that non-reimbursable average overhead costs are 
$65 per hour, or extrapolated over 2000 billable hours, $130,000. See id. 

14. Fortunately, there is one form of institutional support — the Indiana State Bar 
Association's BARPAC, which pays special attention to supporting lawyers who become 
candidates. 



2002] MAKING GOOD LAW 1115 



of the policy-makers are not a part of the legal profession. In the 1 12th General 
Assembly, for example, the House of Representatives Committee on Courts and 
Criminal Code has six lawyers and nine non-lawyers. The Judiciary Committee 
has seven lawyers and six non-lawyers; three of the lawyers are not returning to 
the General Assembly next year. 

Second, the public at large is not well served by this paucity of legal voice. 
The special contributions of the legal mind to the deliberations of multi-member 
bodies, our special talent for problem-solving, and our general attitude of 
commitment to the common good seem to me good arguments for why the end 
product in public policy, not just in craftsmanship, is better when a good number 
of our profession are engaged. 

IV. What TO Do? 

I write here to lift up this development for consideration by our profession. 
I have only just begun to think about possible solutions. 

The variety of causes outlined above do suggest some of the ways by which 
the profession might make it easier for its members to participate in the public 
decisions about the future of our state. These ideas flow along lines of economic 
incentives, time relief, support by fellow lawyers, and public recognition. Before 
any such ideas can be spelled out in greater detail, we must widen the circle of 
those interested in working on this problem. 



An Examination of the 
Indiana Supreme Court Docket, 
Dispositions, and Voting in 2001* 



Kevin W. Betz** 
P. Jason Stephenson**' 

Even though mandatory criminal appeals still overwhelmingly dominated the 
Indiana Supreme Court' s docket in 200 1 , 4he constitutional change that occurred 
in 2001 in the court's mandatory criminal appeals began to show its effects with 
far less consensus and unanimity in the court's opinions.^ It was expected that 



* The Tables presented in this Article are patterned after the annual statistics of the U.S. 
Supreme Court published in the Harvard Law Review. An explanation of the origin of these Tables 
can be found at Louis Henkin, The Supreme Court, 1967 Term, 82 Harv. L. Rev. 63, 301 (1968). 
The Harvard Law Review granted permission for the use of these Tables by the Indiana Law 
Review this year; however, permission for any further reproduction of these Tables must be 
obtained from the Harvard Law Review. 

We thank Barnes & Thomburg for its gracious willingness to devote the time, energy, and 
resources of its law firm to allow a project such as this to be accomplished. As is appropriate, 
credit for the idea for this project goes to Chief Justice Shepard; but, of course, any errors or 
omissions belong to his former law clerk. We also thank WESTLAW* for its kind willingness to 
allow us free access to its computer resources and assistance in preparing these Tables. 

** Sutherlin & Betz, representing employees and professionals and practicing in the 
appellate area, 1 997-present. Former Chief Counsel and Deputy Commissioner, Indiana 
Department of Environmental Management, 1995-97. Associate, Krieg DeVault Alexander & 
Capehart, Indianapolis, 1990-95. Judicial Clerk for Chief Justice Randall T. Shepard, Indiana 
Supreme Court, 1988-90. B.A., 1982, Indiana University; M.S., 1984, Northwestern University; 
J.D., 1988, Indiana University School of Law— Bloomington. 

*♦* Associate, Barnes & Thornburg, 1 999-present; B.A., 1996, Taylor University; J.D., 
1999, Indiana University School of Law— Indianapolis. 
1. 

DISCRETIONARY TOTAL 

98(47%) 207 

93(59%) 157 

77(56%) 137 

73(55%) 133 

76(62%) 122 

48(41%) 116 

71 (42%) 171 

50(37%) 134 

69(41%) 170 

60(31%) 192 

59(38%) 156 

2. Previously, article VII, section 4 of the Indiana Constitution provided that, in criminal 
cases, all appeals from judgments imposing a sentence of death, life imprisonment or imprisonment 
for a term greater than fifty years was to be taken directly to the supreme court. Because the Indiana 
General Assembly has increased the term of imprisonment for many crimes, the court's docket was 
filling with criminal appeals falling within the scope of article VII ,section 4, notwithstanding that 





MANDATORY 


1991 


109(53%) 


1992 


64(41%) 


1993 


60 (44%) 


1994 


60(45%) 


1995 


46 (38%) 


1996 


68 (59%) 


1997 


100(58%) 


1998 


84 (63%) 


1999 


101 (59%) 


2000 


132(69%) 


2001 


97 (62%) 



1118 INDIANA LAW REVIEW [Vol. 35:1117 



this change would open the court to "people with ordinary family and business 
legal problems" and open the court to take a more significant role in providing 
law-giving criminal opinions.^ 

Apparently, the change in the court's jurisdiction also has had another, 
unintended consequence — the consensus among the justices has decreased 
sharply. The number of split decisions by the court nearly doubled this year. 
The court issued only nine split decisions in 1999, 15 split decisions in 2000 but 
28 split decisions in 2001. Among the split decisions were two plurality 
decisions, both involving civil issues."* Two other split appeals garnered 
majorities only because one or more justices voted to concur in the result only.^ 
Overall, the justices were also less aligned on both civil and criminal appeals as 
compared to the 2000, 1999 or 1998 terms. This jurisdictional change to the 
court's docket occurred in June 2001 . The 2002 docket will have a full year of 
its new jurisdiction and will test whether the decreased unanimity is a result of 
the issues presented to the court. 

The cause for the lack of consensus is not immediately clear. Some had 
hoped that the change in the court's jurisdiction would bring more civil cases to 
its docket. If this had occurred, the logical result would have been less 
agreement because historically the justices have disagreed on civil cases more 
than on criminal cases. However, the court did not decide more civil cases in 
2001 — ^the court issued the same number of civil opinions in 2001 as it did in 
2000 (excluding per curium opinions) and actually issued more civil opinions in 
1999. The more likely cause is the court's ability to accept more criminal 
appeals with the potential for significant legal precedent, rather than the 
compulsory criminal appeals with little or no precedential value. Presumably, the 
more significant legal precedent brings less willingness to compromise by the 
justices because of the long-term impacts of the decision. The number of 
dissents in criminal opinions also increased dramatically in 2001 to 30. In 1999 
and 2000, the court had only 17 dissents in criminal cases. 

The following is a description of the highlights from each table: 

Table A. In 2001 , the supreme court issued 21 1 opinions that were authored by 
an individual justice. This is a negligible increase from last year's 192 opinions 
authored by an individual justice. Of the 21 1 issued in 2001, only 49 were civil 



many of these cases did not involve significant legal questions as evidenced by the high percentage 
of direct appeal judgments affirmed. In June 2001 , the court's mandatory jurisdiction over criminal 
appeals changed because of an amendment to Indiana's Constitution. Article 7, section 4 now 
provides a right of direct appeal to the court only for judgements imposing a penalty of death. 

3. Randall T. Shepard, Why Changing the Supreme Court's Mandatory Jurisdiction Is 
Critical to Lawyers and Clients, 33 IND. L. Rev. 1 1 1 , 1 1 04 (200 1 ). 

4. See City Chapel Evangelical Free, Inc. v. City of South Bend, 744 N.E.2d 443 (Ind. 
2001); Degussa Corp. v. Mullens, 744 N.E.2d 407 (Ind. 2001). 

5. Osborne v. State, 754N.E.2d 916 (Ind. 200 1 ) (Shepard, C.J., Boehm, J., Dickson, J., all 
concurring in result); Sears Roebuck and Co. v. Manuilov, 742 N.E.2d 453 (Ind. 2001) (Sullivan, 
J., concurring in result; Shepard, C.J. & Boehm, J., dissenting). 



2002] INDIANA SUPREME COURT 1119 



opinions — ^the same number of civil opinions issued in 2000. Justice Boehm 
authored the most opinions at 48. Those who hoped the change in the court's 
mandatory jurisdiction over criminal appeals would allow more civil cases to be 
heard by the court were disappointed in 2001 , but it is still too early in the court's 
new docket. A sudden increase in civil appeals granted transfer was not expected 
since the court still must clear its docket of the mandatory criminal appeals that 
came before it prior to June 2001. Next year should be a watershed year in 
determining the real impact of the docket change in the court's mandatory 
jurisdiction. 

The court as a whole issued 24 per curiam opinions — 23 civil and 1 criminal. 
Almost all 23 civil opinions were attorney discipline matters. In 2000, this 
article reported that the court had issued 71 per curiam opinions. That number 
has declined this year because the court is issuing more attorney discipline 
decisions as orders rather than per curiam opinions. When considering both per 
curiam decisions and orders involving the discipline of attorneys, the court's 
number of cases in this area has remained about the same. 

Continuing the trend of increases in dissents identified in last year's article, 
the court again increased its dissents to 56. For comparison purposes, the court 
issued 42 dissents in 2000 and 38 dissents in 1999. In an about face from 
previous years. Justice Sullivan had the least total dissents with 6. In the 
previous four years. Justice Sullivan led the court with the number of dissents. 
This year. Justice Dickson drafted the most dissents with a total of 22. Last year. 
Justice Sullivan had the most dissents with 13. 

Table B-1. For civil cases, Chief Justice Shepard and Justice Sullivan were the 
two justices most aligned at 85.4%. Chief Justice Shepard and Justice Boehm 
were next at 82.5%. Justices Dickson and Boehm were the least aligned at 
67.5%. 

Chief Justice Shepard was the most aligned with other justices, and Justice 
Dickson was the least aligned. 

Table B-2. For criminal cases. Chief Justice Shepard and Justice Sullivan are 
the most aligned pair of justices — in agreement 92.1% of the time. Justices 
Sullivan and Dickson were the least aligned at 78.4%o. As for criminal cases. 
Justice Shepard was the most aligned with his fellow justices. 

Table B-3. For all cases. Chief Justice Shepard and Justice Sullivan were the 
two justices most aligned at 90.5%. The two least aligned justices, the same as 
last year, were Justices Sullivan and Dickson at 76.1%. 

Overall, Chief Justice Shepard was the most aligned with his fellow justices, 
and Justice Dickson was the least aligned. 

Table C. Echoing the trend toward a lack of consensus among the court's 
justices, unanimity declined in 2001 . The court was unanimous in 69.1% of its 
decisions in 2001, as compared to 81.3% in 2000 and 72.8% in 1999. The 
number of dissents increased in 2001 to 18.5% from 12.4%) in 2000 and 1999. 



1120 INDIANA LAW REVIEW [Vol. 35:1 1 17 



Table D. Table D, more than any other table, demonstrates the increased 
divisions among the justices. The number of 3-2 split decisions doubled in 2001 
from 2000. Last year, the court issued 1 5 split decisions and it issued only nine 
the year before. This year, however, the court issued 27 split decisions. The 
authors have counted two plurality decisions as split decisions.^ Neither of these 
cases, strictly speaking, are 3-2 decisions, but they certainly fall into the spirit of 
3-2 decisions in demonstrating issues on which the court is deeply divided. The 
opinion in City Chapel, for example, spawned three separate dissenting opinions. 
Chief Justice Shepard was by far in the majority in the most number of split 
opinions. He was in the majority in 21 of the 27 split opinions. The next closest 
justice was in the majority in 14 such opinions. 

Table E-1. The court affirmed over 77% of the mandatory criminal appeals, 
which were also still the majority of its docket. Overall, the court affirmed cases 
55.8% of the time. This high percentage was driven by the large percentage of 
mandatory criminal appeals affirmed. In contrast, civil appeals were affirmed 
only 14.7% of the time and nonmandatory criminal appeals were affirmed only 
28% of the time. The large percentage of cases affirmed by the court is likely to 
decline because of the change in the court's jurisdiction over mandatory criminal 
appeals, effective in June 2001 , which will bring more discretionary criminal and 
civil issues on which the court has, historically, lacked consensus. 

Table E-2. Expectations were high that the change in the court's mandatory 
jurisdiction would lead to an increase in the number of civil petitions granted 
transfer. The court's jurisdiction changed in June 2001. Nonetheless, the 
number of civil petitions granted transfer by the court declined from 61 in 2000 
to only 34 in 2001. This change may also reflect the decline in petitions to 
transfer filed in 2001 . During 2000, 825 petitions to transfer were filed but this 
year only 740 were filed. A civil petition to transfer stood about a 12.4% chance 
of being granted, and a criminal petition stood about a 6.6% chance of being 
granted. No juvenile petitions were granted transfer in 2001 . 

Table F. The court continues its vigorous interest in the Indiana Constitution 
with 26 opinions involving such issues. A review of these cases demonstrates 
that the court is especially interested in the double jeopardy provision of the 
Indiana Constitution. The number of attorney discipline cases listed in this table 
(23) appears to have drastically declined from the number of such cases last year 
(60). This decline is misleading. The court has begun to decide more attorney 
discipline cases in orders rather than per curiam opinions. The authors have 
determined that only per curiam opinions will be reflected in Table F. When 
accounting for the number of attorney discipline cases decided by order (53), the 
number of attorney discipline cases remains about the same as last year. The 
court also decided 1 death penalty cases, affirming eight and reversing two such 
cases. 



6. See City Chapel Evangelical Free, Inc. , 744 N.E.2d at 443; Degussa Corp., 744 N.E.2d 
at 407. 



2002] 



INDIANA SUPREME COURT 



1121 



TABLE A 

Opinions* 





OPINIONS OF COURT'' 


CONCURRENCES^ 


DISSENTS'* 






Criminal 


Civil 


Total 


Criminal 


Civil 


Total 


Criminal 


Civil 


Total 


Shepard, C.J. 


32 


7 


39 


2 


1 


3 


2 


7 


9 


Dickson, J.*" 


17 


7 


24 


4 


2 


6 


13 


9 


22 


Sullivan, J." 


36 


11 


47 


5 


3 


8 


4 


2 


6 


Boehm, J.*^ 


32 


16 


48 


10 


4 


14 


7 


4 


11 


Rucker, J.*-' 


21 


8 


29 


5 


5 


10 


4 


4 


8 


Per Curiam 


1 


23 


24 














Total 


139 


72 


211 


26 


15 


41 


30 


26 


56 



" These are opinions and votes on opinions by each justice and in per curiam in the 2001 term. The 
Indiana Supreme Court is unique because it is the only supreme court to assign each case to a justice by a 
consensus method. Cases are distributed by a "consensus of the justices in the majority" on each case either 
by volunteering or nominating writers. The chief justice does not have any power to control the assignments 
other than as a member of the majority. See Melinda Gann Hall, Opinion Assignment Procedures and 
Conference Practices in State Supreme Courts, 73 JUDICATURE 209 (1990). The order of discussion and 
voting is started by the most junior member of the court and follows reverse seniority. See id. at 210. 

^ This is only a counting of fiiU opinions written by each justice. Plurality opinions that announce 
the judgment of the court are counted as opinions of the court. It includes opinions on civil, criminal, and 
original actions. Also, the following three miscellaneous cases are not included in the table: Stanrail Corp. v. 
Unemployment Ins. Rev. Bd., 749 N.E.2d 483 (Ind. 2001) (dissent from denial of transfer); In re Becker, 743 
N.E.2d 1115 (Ind. 2001) (dissent from order approving statement of circumstances and conditional agreement 
for discipline); In re Shorter-Pifer, 743 N.E.2d 115 (Ind. 2001) (dissent from order finding misconduct and 
imposing discipline). 

" This category includes both written concurrences, joining in written concurrence and votes to 
concur in result only. 

•^ This category includes both written dissents and votes to dissent without opinion. Opinions 
concurring in part and dissenting in part or opinions concurring in part only and differing on another issue are 
counted as dissents. 

' Justices declined to participate in the following non-disciplinary cases: Justice Boehm (State Bd. 
of Tax Comm'rs v. Town of St. John, 751 N.E.2d 657 (Ind. 2001)); Justice Rucker (Rheem Mfg. Co. v. Phelps 
Heating & Air Conditioning, Inc., 746N.E.2d941 (Ind. 2001); DegussaCorp. v. Mullens, 744N.E.2d407 (Ind. 
2001)); Justice Sullivan (Forney v. State, 742 N.E.2d 934 (Ind. 2001); State Employees Appeal Comm'n v. 
Bishop, 741 N.E.2d 1229 (Ind. 2001); Rogers v. R.J. Reynolds Tobacco Co., 745 N.E.2d 793 (Ind. 2001)). 



1122 INDIANA LAW REVIEW [Vol. 35:1117 

TABLE B-1 
Voting Alignments for Civil Cases*^ 
Not Including Judicial or Attorney Discipline Cases 







Shepard 


Dickson 


Sullivan 


Boehm 


Rucker 




O 




27 


33 


31 


28 


Shepard, 
C.J. 


s 

D 


... 


3 
30 


2 

35 


2 
33 


1 
29 


N 




42 


41 


40 


40 




P 




1\A% 


85.4% 


82.5% 


72.5% 







27 




28 


24 


28 


Dickson, 
J. 


s 

D 


3 
30 





28 


3 
27 


4 
32 


N 


42 




41 


40 


40 




P 


71.4% 




68.3% 


67 5% 


80.0% 




O 


33 


28 




29 


27 


Sullivan, 
J. 


s 

D 


2 
35 



28 




1 
30 


1 
28 


N 


41 


41 




39 


39 




P 


85.4% 


68.3% 




76.9% 


71.8% 







31 


24 


29 




26 


Boehm, 


S 

D 


2 
33 


3 
27 


1 
30 




3 
29 


J. 


N 


40 


40 


39 




. 38 




P 


82.5% 


67.5% 


76.9% 




76.3% 







28 


28 


27 


26 






S 


I 


4 


1 


3 




Rucker, 


D 


29 


32 


28 


29 


... 


J. 


N 


40 


40 


39 


38 






P 


n.m 


80,0% 


71,8% 


7().3% 





^ This Table records the number of times that one justice voted with another in ftill-opinion 
decisions, including per curiam, for only civil cases. For example, in the top set of numbers for Chief Justice 
Shepard, 27 is the number of times Chief Justice Shepard and Justice Dickson agreed in a full majority opinion 
in a civil case. Two justices are considered to have agreed whenever they joined the same opinion, as indicated 
by either the reporter or the explicit statement of a justice in the body of his or her own opinion. The Table does 
not treat two justices as having agreed if they did not join the same opinion, even if they agreed only in the 
result of the case or wrote separate opinions revealing little philosophical disagreement. 

"O" represents the number of decisions in which the two justices agreed in opinions of the court 

or opinions announcing the judgment of the court. 
"S" represents the number of decisions in which the two justices agreed in separate opinions, ' 

including agreements in both concurrences and dissents. | 

"D" represents the number of decisions in which the two justices agreed in either a majority, ^ 

dissenting, or concurring opinion. 
"N" represents the number of decisions in which both justices participated and thus the number 

of opportunities for agreement. 
"P" represents the percentage of decisions in which one justice agreed with another justice, 
calculated by dividing "D" by "N." 



2002] INDIANA SUPREME COURT 1 1 23 

TABLE B-2 

Voting Alignments FOR Criminal Cases 
Not Including Judicial or Attorney Discipline Cases* 







Shepard 


Dickson 


Sullivan 


Boehm 


Rucker 




O 




116 


125 


119 


124 


Shepard, 
C.J. 


S 
D 


,, 


1 
117 


3 
128 


1 

120 



124 


N 




140 


139 


140 


140 




P 




83.6% 


92.1% 


85.7% 


88.6% 







116 




109 


113 


HI 


Dickson, 
J. 


s 

D 


1 
117 


_-_ 



109 


5 
118 


1 

112 


N 


140 




139 


140 


140 




P 


83.6% 




78.4% 


84.3% 


80.0% 







125 


109 




112 


119 


Sullivan, 
J. 


S 
D 


3 
128 



109 




2 
114 


2 
121 


N 


139 


139 




139 


139 




P 


92.1% 


78.4% 




82.0% 


87.1% 







119 


113 


112 




114 


Boehm, 
J. 


S 
D 


1 
120 


5 
118 


2 
114 


. 


2 
116 


N 


140 


140 


140 




140 




P 


8-5 7% 


84 3% 


8ft 0% 




82.9% 







124 


111 


119 


114 






S 





1 


2 


2 




Rucker, 


D 


124 


112 


121 


116 


— 


J. 


N 


140 


140 


139 


140 






P 


88.6% 


80.0% 


87.1% 


82.9% 





^ This Table records the number of times that one justice voted with another in full-opinion 
decisions, including per curiam, for only criminal cases. For example, in the top set of numbers for Chief 
Justice Shepard, 1 16 is the number of times Chief Justice Shepard and Justice Dickson agreed in a full majority 
opinion in a criminal case. Two justices are considered to have agreed whenever they joined the same opinion, 
as indicated by either the reporter or the explicit statement of a justice in the body of his or her own opinion. 
The Table does not treat two justices as having agreed if they did not join the same opinion, even if they agreed 
only in the result of the case or wrote separate opinions revealing little philosophical disagreement. 
"O" represents the number of decisions in which the two justices agreed in opinions of the court 

or opinions announcing the judgment of the court. 
"S" represents the number of decisions in which the two justices agreed in separate opinions, 

including agreements in both concurrences and dissents. 
"D" represents the number of decisions in which the two justices agreed in either a majority, 

dissenting, or concurring opinion. 
"N" represents the number of decisions in which both justices participated and thus the number 

of opportunities for agreement. 
"P" represents the percentage of decisions in which one justice agreed with another justice, 
calculated by dividing "D" by "N." 



1124 INDIANA LAW REVIEW [Vol. 35:1117 

TABLE B-3 

Voting Alignments for All Cases 
Not Including Judicial or Attorney Discipline Cases'" 







Shepard 


Dickson 


Sullivan 


Boehm 


Rucker 




O 




143 


158 


150 


152 


Shepard, 


S 
D 




4 
147 


5 
163 


3 
153 


1 
153 


C.J. 


N 




182 


180 


180 


180 




P 




80.7% 


90.5% 


85.0 % 


85.0 % 




O 


143 




137 


137 


139 


Dickson, 

J. 


S 
D 


4 
147 





137 


8 
145 


5 
144 


N 


182 




180 


180 


180 




P 


80 7% 




76 1% 


80 5 % 


80 % 







158 


137 




141 


146 


Sullivan, 
J. 


s 

D 


5 
163 




137 




3 
144 


3 
149 


N 


179 


180 




178 


178 




P 


90 5% 


76 1 % 




80 9 % 


83 7% 




O 


150 


137 


141 




140 




S 


3 


8 


3 




5 


Boehm, 


D 


153 


145 


144 


— 


145 


J. 


N 


180 


180 


178 




178 




P 


85 0% 


80 5% 


80 9% 




81 5% 







152 


139 


146 


140 






S 


1 


5 


3 


5 




Rucker, 


D 


153 


144 


148 


145 


. — 


J. 


N 


180 


180 


178 


178 






P 


85.0% 


80.0% 


83.7 % 


81.5% 





^ This Table records the number of times that one justice voted with another in full-opinion 
decisions, including per curiam, for all cases. For example, in the top set of numbers for Chief Justice Shepard, 
143 is the total number of times Chief Justice Shepard and Justice Dickson agreed in all full majority opinions 
written by the court in 2001. Two justices are considered to have agreed whenever they joined the same 
opinion, as indicated by either the reporter or the explicit statement of a justice in the body of his or her own 
opinion. The Table does not treat two justices as having agreed if they did not join the same opinion, even if 
they agreed only in the result of the case or wrote separate opinions revealing little philosophical disagreement. 
"O" represents the number of decisions in which the two justices agreed in opinions of the court 

or opinions announcing the judgment of the court. 
"S" represents the number of decisions in which the two justices agreed in separate opinions, 

including agreements in both concurrences and dissents. 
"D" represents the number of decisions in which the two justices agreed in either a majority, 

dissenting, or concurring opinion. 
"N" represents the number of decisions in which both justices participated and thus the number 

of opportunities for agreement. 
"P" represents the percentage of decisions in which one justice agreed with another justice, 
calculated by dividing "D" by "N." 



2002] INDIANA SUPREME COURT 11 25 

TABLE C 

Unanimity 
Not Including Judicial or Attorney Discipline Cases' 

Unanimous Opinions 

Unanimous^ with Concurrence'' with Dissent Total 

Criminal Civil Total Criminal Civil Total Criminal Civil Total 

100 23 123(69.1%) 17 5 22(12.4%) 18 15 33(18.5%) 178 



' This Table tracks the number and percent of unanimous opinions among all opinions written. If, 
for example, only four justices participate and all concur, it is still considered unanimous. It also tracks the 
percent of overall opinions with concurrence and overall opinions with dissent. 

' A decision is considered unanimous only when all justices participating in the case voted to concur 
in the court's opinion as well as its judgment. When one or more justices concurred in the result but not in the 
opinion, the case is not considered unanimous. 

^ A decision is listed in this column if one or more justices concurred in the result but not in the 
opinion of the court or wrote a concurrence, and there were no dissents. 



1126 INDIANA LAW REVIEW [Vol. 35:1 117 

TABLE D 



3-2 Decisions' 



Justices Constituting the Majority Number of Opinions" 

1 . Shepard, C.J., Dickson, J., Boehm, J. 3 

2. Shepard, C.J. . Dickson, J, Sullivan, J. 4 

3. Shepard, C.J., Sullivan, J., Boehm, J. 5 

4. Shepard, C.J, Sullivan, J, Rucker, J. 8 

5. Dickson, J, Boehm, J, Rucker, J. 2 

6. Boehm, J., Sullivan, J., Rucker, J. 2 

7. Sullivan, J, Rucker, J. 1 

8. Dickson, J., Rucker, J. 2 

9. Shepard, C.J., Sullivan, J. 1 

Total" 28 



' This Table concerns only decisions rendered by full opinion. An opinion is counted as a 3-2 
decision if two justices voted to decide the case in a manner different from that of the majority of the court. 
*" This column lists the number of times each three-justice group constituted the majority in a 3-2 
decision. 

" The 2001 term's 3-2 decisions were: 

1 . Shepard, C. J., Dickson, J., Boehm, J.: Sanchez v. State, 749 N.E.2d 509 (Ind. 2001) (Boehm, J.); 
Query v. State, 745 N.E.2d 769 (Ind. 2001) (Boehm, J); Hughes v. City of Gary, 741 N.E.2d 1 168 (Ind. 2001) 
(Shepard, C.J). 

2. Shepard, C.J., Dickson, J., Sullivan, J.: /n re Capper, 757 N.E.2d 138 (Ind. 2001) (per curium); 
Vitek V. State, 750 N.E.2d 346 (Ind. 2001) (Sullivan, J.); Zimmerman v. State, 750 N.E.2d 337 (Ind. 2001) 
(Dickson, J.); Daniels v. State, 741 N.E.2d 1 177 (Ind. 2001) (Shepard, C.J.). 

3. Shepard, C.J., Sullivan, J., Boehm, J.: Mangold ex rel. Mangold v. Dep't of Natural Res., 756 
N.E.2d 970 (Ind. 2001) (Rucker, J); Hollowell v. State, 753 N.E.2d 612 (Ind. 2001) (Sullivan, J); Fleetwood 
Enters., Inc. v. Progressive N. Ins. Co., 749 N.E.2d 492 (Ind. 2001) (Boehm, J); Progressive Ins. Co. v, Gen. 
Motors Corp., 749 N.E.2d 484 (Ind. 2001) (Boehm, J); Durham ex rel. Estate of Wade v. U-Haul Int'l, 745 
N.E.2d 755 (Ind. 2001) (Boehm, J). 

4. Shepard, C.J., Sullivan, J., Rucker, J.: Francis v. State, 758 N.E.2d 528 (Ind. 2001) (Rucker, J); 
Randolph v. State, 755 N.E.2d 572 (Ind. 2001) (Rucker, J); Miller v. State, 753 N.E.2d 1284 (Ind. 2001) 
(Sullivan, J.); Wallace v. State, 753 N.E.2d 568 (Ind. 200 1 ) (Rucker, J); Wadsworth v. State, 750 N.E.2d 774 
(Ind. 2001) (Shepard, C.J); Holsinger v. State, 750 N.E.2d 354 (Ind. 2001) (Sullivan, J); Pennycuff v. State, 
745 N.E.2d 804 (Ind. 2001) (Shepard, C J); Noble County v. Rogers, 745 N.E.2d 194 (Ind. 2001) (Sullivan, 
J.). 

5. Dickson, J., Boehm, J., Rucker, J.: Jiosa v. State, 755 N.E.2d 605 (Ind. 2001) (Boehm, J.); Segura 
v. State, 749 N.E.2d 496 (Ind. 2001) (Boehm, J.). 

6. Boehm, J., Sullivan, J., Rucker, J.: Ashabraner v. Bowers, 753 N.E.2d 662 (Ind. 2001) (Sullivan, 
J.); In re Harshey, 740 N.E.2d 851 (Ind. 2001) (per curiam). 

7. Sullivan, J., Rucker, J.: Osborne v. State, 754 N.E.2d 916 (Ind. 2001) (Rucker, J.) (Shepard, C.J., 
Boehm, J., Dickson, J., concurring in result). 

8. Dickson, J., Rucker, J.; City Chapel Evangelical Free Inc. v. City of South Bend, 744 N.E.2d 443 
(Ind. 2001 ) (Dickson, J.) (Shepard, C.J., Sullivan, J., and Boehm, J., all dissenting with separate opinion); Sears 
Roebuck & Co. v. Manuilov, 742 N.E.2d 453 (Ind. 2001) (Dickson, J.) (Sullivan, J. concurring in result; 
Shepard, C.J. and Boehm, J., dissenting). 

9. Shepard, C.J., Sullivan, J.: Degussa Corp. v. Mullens, 744 N.E.2d 407 (Ind. 2001) (Sullivan, J.) 
(plurality decision: Boehm, J., Dickson, J., dissenting). 



2002] 



INDIANA SUPREME COURT 



1127 



TABLE E-1 

Disposition of Cases Reviewed by Transfer 
AND Direct Appeals" 



Reversed or Vacated '' Affirmed 



Total 



Civil Appeals Accepted for Transfer 
Direct Civil Appeals 
Criminal Appeals Accepted for Transfer 
Direct Criminal Appeals 



29 (85.3%) 


5 (14.7%) 


34 











18(72%) 


7 (28%) 


25 


22 (22.7%) 


75 (77.3%) 


97 



Total 



69 (44.2%) 



87 (55.8%) 



156" 



Direct criminal appeals are cases in which the trial court imposed a death sentence. See IND. 
Const, art. VII, § 4. Thus, direct criminal appeals are those directly from the trial court. A civil appeal may 
also be direct from the trial court. See Ind. Appellate Rule 56 and also pursuant to Rules of Procedure for 
Original Actions. All other Indiana Supreme Court opinions are accepted for transfer from the Indiana Court 
of Appeals. See Ind. Appellate Rule 57. 

^ Generally, the term "vacate" is used by the Indiana Supreme Court when it is reviewing a court of 
appeals opinion, and the term "reverse" is used when the court overrules a trial court decision. A point to 
consider in reviewing this Table is that the court technically "vacates" every court of appeals opinion that is 
accepted for transfer, but may only disagree with a small portion of the reasoning and still agree with the result. 
See Ind. Appellate Rule 58(A). As a practical matter, "reverse" or "vacate" simply represents any action by 
the court that does not affirm the trial court or court of appeals opinion. 

"^ This does not include 23 attorney and judicial discipline opinions or one opinion related to certified 
questions. These opinions did not reverse, vacate, or affirm any other court's decision. This also does not 
include 10 opinions which considered petitions for post conviction relief 



1128 INDIANA LAW REVIEW [Vol. 35:1 117 

TABLE £-2 

Disposition of Petitions to Transfer 
TO Supreme Court in 200r 

Denied or Dismissed Granted Total 

Petitions to Transfer 

Civir 

Criminal' 

Juvenile 

Total 677(91.5%) 63 (8.5%) 740 



240 (87.6%) 


34(12.4%) 


274 


410(93.4%) 


29 (6.6%) 


439 


27(100%) 


(0%) 


27 



' This Table analyzes the disposition of petitions to transfer by the court. See IND. Appellate RUle 
58(A). 

' This also includes petitions to transfer in tax cases and worker's compensation cases. 

' This also includes petitions to transfer in post-conviction relief cases. 



2002] INDIANA SUPREME COURT 1129 

TABLE F 

Subject Areas of Selected Dispositions 
WITH Full Opinions" 

Original Actions Number 

• Certified Questions T 

• Writs of Mandamus or Prohibition 

• Attorney Discipline 23'*' 

• Judicial Discipline T 

Criminal 

• Death Penalty IC 

• Fourth Amendment or Search and Seizure 9^ 
■ Writ of Habeas Corpus 

Emergency Appeals to the Supreme Court 

Trusts, Estates, or Probate 

Real Estate or Real Property 4"" 

Personal Property 

Landlord-Tenant 



Divorce or Child Support 


obb 


Children in Need of Services (CHINS) 





Paternity 






Product Liability or Strict Liability 1" 

Negligence or Personal Injury 6'''' 

Invasion of Privacy 1"* 

Medical Malpractice 

Indiana Tort Claims Act 2"^ 

Statute of Limitations or Statute of Repose 1^ 

Tax, Department of State Revenue, or State Board of Tax Commissioners 3"' 

Contracts 2" 

Corporate Law or the Indiana Business Corporation Law 2^ 

Uniform Commercial Code 2^ 

Banking Law 1" 

Employment Law J*™" 



Insurance Law 


^nn 


Environmental Law 


■noo 


Consumer Law 





Worker's Compensation 


2PP 


Arbitration 





Administrative Law 


3qq 


First Amendment, Open Door Law, or Public Records Law 





Full Faith and Credit 





Eleventh Amendment 





Civil Rights 


3" 


Indiana Constitution 


26 





" This Table is designed to provide a general idea of the specific subject areas upon which the court 
ruled or discussed, and how many times it did so in 200 1 . It is also a quick-reference guide to court rulings for 
practitioners in specific areas of the law. The numbers corresponding to the areas of law reflect the number of 



1130 INDIANA LAW REVIEW [Vol. 35:1117 



cases in which the court substantively discussed legal issues about these subject areas. Also, the following 53 
miscellaneous attorney discipline cases are not in the table: In re Relphorde, 760 N.E.2d 172 (Ind. 2001) (order 
approving statement of circumstances and conditional agreement); In re Smith, 760 N.E.2d 171 (Ind. 2001) 
(order accepting resignation); In re Lowry, 760 N.E.2d 170 (Ind. 2001) (order suspending respondent); In re 
Hoogland, 760 N.E.2d 169 (Ind. 2001) (order approving statement of circumstances and conditional 
agreement); In re Herthel, 760 N.E.2d 1 55 (Ind. 2001) (order fmding misconduct and imposing discipline); In 
re Tudor, 760 N.E.2d 154 (Ind. 2001) (order fmding misconduct and imposing discipline); In re Blackham, 
760 N.E.2d 153 (Ind. 2001) (order finding misconduct and imposing discipline); In re Griffiths, 760 N.E.2d 
1 53 (Ind. 200 1 ) (order finding misconduct and imposing discipline); In re Evans, 759 N.E.2d 1 064 (Ind. 200 1 ) 
(order approving statement of circumstances and conditional agreement); In re Butler, 759 N.E.2d 215 (Ind. 
2001) (order to show cause); In re Hardy, 759 N.E.2d 214 (Ind. 2001) (order to show cause); In re Graybill, 
759 N.E.2d 213 (Ind. 2001) (order to show cause); In re Forgey, 759 N.E.2d 212 (Ind. 2001) (order to show 
cause); In re Caravelli, 758 N.E.2d 930 (Ind. 2001) (order approving agreed resolution of objections to 
automatic reinstatement); In re Sheldon, 758 N.E.2d 929 (Ind. 2001) (order approving statement of 
circumstances and conditional agreement for discipline); In re John, 758 N.E.2d 929 (Ind. 2001 ) (order finding 
misconduct and imposing discipline); In re Layson, 758 N.E.2d 515 (Ind. 2001) (order suspending the 
respondent from the practice of law); In re Watson, 757 N.E.2d 1002 (Ind. 2001) (order finding misconduct 
and imposing discipline); In re Headlee, 756 N.E.2d 969 (Ind. 2001) (order finding misconduct and imposing 
sanction); In re Benjamin, 756 N.E.2d 967 (Ind. 2001) (order accepting resignation and concluding 
proceeding); In re Starkes, 756 N.E.2d 964 (Ind. 2001) (order approving statement of circumstances and 
conditional agreement for discipline); In re Bean, 756 N.E.2d 964 (Ind. 2001) (order approving statement of 
circumstances and conditional agreement for discipline); In re Layson, 755 N.E.2d 162 (Ind. 2001) (order to 
show cause); In re Alvarez, 755 N.E.2d 162 (Ind. 2001) (order approving statement of circumstances and 
conditional agreement for discipline); In re Meek, 755 N.E.2d 161 (Ind. 2001) (order approving statement of 
circumstances and conditional agreement for discipline); In re Johnson, 755 N.E.2d 160 (Ind. 2001) (order to 
show cause); In re Caravelli, 755 N.E.2d 160 (Ind. 2001) (order staying automatic reinstatement pending 
resolution of commission objections); In re Atanga, 754 N.E.2d 498 (Ind. 2001 ) (order revoking respondent's 
probation and imposing suspension); In re Singleton, 754 N.E.2d 498 (Ind. 2001) (order approving statement 
of circumstances and conditional agreement for discipline); In re Holajter, 754 N.E.2d 497 (Ind. 2001) (order 
approving consent to discipline and imposing suspension and order clarifying final order); In re Harlowe, 753 
N.E.2d 1284 (Ind 2001) (order suspending respondent due to disability); /« re Transki, 753 N.E.2d 1283 (Ind. 
2001) (order to show cause); In re Coons, 751 N.E.2d 678 (Ind. 2001) (order approving statement of 
circumstances and conditional agreement for discipline); In re Silverman, 750 N.E.2d 376 (Ind. 2001) (order 
approving statement of circumstances and conditional agreement for discipline); In re Caravelli, 750 N.E.2d 
376 (Ind. 2001 ) (order finding misconduct and imposing discipline); In re Wells, 750 N.E.2d 369 (Ind. 2001) 
(order finding misconduct and imposing discipline); In re Jones, 750 N.E.2d 368 (Ind. 2001) (order accepting 
resignation and concluding proceeding); In re Carl, 748 N.E.2d 856 (Ind. 2001) (order to show cause); In re 
Bowman, 748 N.E.2d 364 (Ind, 2001) (order approving statement of circumstances and conditional agreement 
for discipline); In re McQuillin, 747 N.E.2d 563 (Ind. 2001) (order accepting resignation and concluding 
proceeding); In re Johnson, 747 N.E.2d 563 (Ind. 2001) (order accepting resignation and concluding 
proceeding); In re Jones, 747 N.E.2d 562 (Ind. 2001) (order of suspension upon notice of guilty finding); In 
re Mysliwiec, 747 N.E.2d 561 (Ind. 2001) (order approving statement of circumstances and conditional 
agreement for discipline); In re Evans, 747 N.E.2d 561 (Ind. 2001) (order of suspension upon notice of guilty 
finding); In re Petrovic, 747 N.E.2d 560 (Ind. 2001) (order accepting resignation and concluding proceeding); 
In re Poole, 747 N.E.2d 56 (Ind. 2001) (order accepting resignation and concluding proceeding); In re Taylor, 
744 N.E.2d 43 1 (Ind. 2001 ) (order postponing effective date of suspension); In re Haynes, 744 N.E.2d 430 (Ind. 
200 1 ) (order approving statement of circumstances and conditional agreement for discipline); In re Peters, 742 
N.E.2d 503 (Ind. 2001) (order approving statement of circumstances and conditibnal agreement for discipline); 
In re Collins, 741 N.E.2d 1246 (Ind. 2001) (order approving statement of circumstances and conditional 



2002] INDIANA SUPREME COURT 1131 



agreement for discipline); In re Light, 741 N.E.2d 1245 (Ind. 2001) (order finding misconduct and imposing 
discipline); In re Cheslek, 741 N.E.2d 1244 (Ind. 2001) (order approving statement of circumstances and 
conditional agreement for discipline); In re Chovanec, 741 N.E.2d 1244 (Ind. 2001) (order of reinstatement). 
Livingston v. Fast Cash USA, Inc., 753 N.E.2d 572 (Ind. 2001). 

"' /«re Miller, 759N.E.2d209(Ind.2001);/«re Baker, 758N.E.2d56(Ind. 2001); //ireCapper, 757 
N.E.2d 138 (Ind. 2001); /n re Moore, 756 N.E.2d 506 (Ind. 2001); /« re Richards, 755N.E.2d 601 (Ind. 2001); 
In re Hear, 755 N.E.2d 579 (Ind. 2001); In re McClellin, 754 N.E.2d 500 (Ind. 2001); In re Rodriguez, 753 
N.E.2d 1289 (Ind. 2001); In re Caravelli, 750 N.E.2d 376 (Ind. 2001); In re Tsoutsouris, 748 N.E.2d 856 (Ind. 
200 1 ); In re Radford, 746 N.E.2d 977 (Ind. 200 1 ); In re Thayer, 745 N.E.2d 207 (Ind. 200 1 ); In re Galanis 744 
N.E.2d 423 (Ind. 2001);/n re Wagner, 744 N.E.2d418(Ind. 2001); //I re Spraker,744N.E.2d4I5 (Ind 2001); 
In re Haith, 742 N.E.2d 940 (Ind. 2001); In re Paras, 742 N.E.2d 924 (Ind. 2001); In re Luddington, 742 
N.E.2d 503 (Ind. 2001); In re Taylor, 741 N.E.2d 1293 (Ind. 2001); In re Shull, 741 N.E.2d 723 (Ind. 2001); 
In re Murgatroyd. 741 N.E.2d 719 (Ind. 2001); In re Davis, 740 N.E.2d 855 (Ind. 2001); In re Harshey, 740 
N.E.2d 851 (Ind. 2001). 

In re Spencer, 759 N.E.2d 1064 (Ind. 2001); In re Funkc, 757 N.E.2d 1013 (Ind. 2001). 
Castor V. State, 754 N.E.2d 506 (Ind. 2001 ) (affirming); Bcn-Yisrayl v. State, 753 N.E.2d 649 (Ind. 
2001 ) (aflTirming); Timberlake v. State, 753 N.E.2d 591 (Ind. 2001) (affirming); Wrinkles v. State, 749 N.E 2d 
1 179 (Ind. 2001) (affirming); Allen v. State, 749 N.E.2d 1 158 (Ind. 2001) (affirming); Ingle v. State, 746 
N.E.2d 927 (Ind. 2001) (reversing); Lambert v. State, 743 N.E.2d 719 (Ind. 2001) (affirming ); Stephenson 
V. State, 742 N.E.2d 463 (Ind. 2001) (affirming); Daniels v. State, 741 N.E.2d 1 177 (Ind. 2001) (affirming); 
Prowell V. State, 74 1 N.E.2d 704 (Ind. 200 1 ) (reversing). 

Edwards v. State, 759 N.E.2d 626 (Ind. 2001); Gray v. State, 758 N.E.2d 519 (Ind. 2001); West v. 
State, 758 N.E.2d 54 (Ind. 2001); Crawford v. State, 755 N.E.2d 565 (Ind. 2001); Woodford v. State, 752 
N.E.2d 1278 (Ind. 2001); Vitek v. State, 750 N.E.2d 346 (Ind. 2001); Lockett v. State, 747 N.E.2d 539 (Ind. 
2001); Mitchell v. State, 745 N.E.2d 775 (Ind. 2001); Smith v. State, 744 N.E.2d 437 (Ind. 2001). 

Equicor Dev., Inc. v. Westfield- Washington Township Plan Comm'n, 758 N.E.2d 34 (Ind. 2001); 
City of New Haven v. Reichhart, 748 N.E.2d 374 (Ind. 2001); Noble County v. Rogers, 745 N.E.2d 194 (Ind. 
200 1 ); City Chapel Evangelical Free, Inc. v. City of South Bend, ex rel. Dep't of Redev., 744 N.E.2d 443 (Ind. 
2001). 

»* Sholes V. Sholes, 760 N.E.2d 156 (Ind. 2001); Cannon v. Cannon, 758 N.E.2d 524 (Ind. 2001); 
Buckalew v. Buckalew, 754 N.E.2d 896 (Ind. 2001). 

''^ Degussa Corp. v. Mullens, 744 N.E.2d 407 (Ind. 2001 ). 

'•'• Moberly v. Day. 757 N.E.2d 1007 (Ind. 2001); Mangold ex rel. Mangold v. Ind. Dep't of Natural 
Res., 756 N.E.2d 970 (Ind. 2001 ); Owens Coming Fiberglass Corp. v. Cobb, 754 N.E.2d 905 (Ind. 200 1 ); Forte 
V. Connerwood Healthcare, Inc., 745 N.E.2d 796 (Ind. 2001); Elmer Buchta Trucking, Inc. v. Stanley, 744 
N.E.2d 939 (Ind. 2001); Sears Roebuck & Co. v. Manuilov, 742 N.E.2d 453 (Ind. 2001). 

« Felsher v. Univ. of Evansville, 755 N.E.2d 589 (Ind. 2001). 

^ Mangold exrel Mangold v. Ind. Dep*t of Natural Res., 756 N.E.2d 970 (Ind. 2001); Noble County 
v. Rogers, 745 N.E.2d 194 (Ind. 2001). 

«» Degussa Corp. v. Mullens, 744 N.E.2d 407 (Ind. 2001). 

•* State ex rel. Ind. Dep't of Revenue v. Deaton, 755 N.E.2d 568 (Ind. 2001); State Bd. of Tax 
Comm'rs v. Town of St. John, 751 N.E.2d 657 (Ind. 2001); State Bd. Of Tax Comm'rs v. Indianapolis Racquet 
Club, Inc., 743 N.E.2d 247 (Ind. 2001). 

Allstate Ins. Co. v. Dana Corp., 759N.E.2d 1049 (Ind. 2001); Brown v. Branch, 758 N.E 2d 48 (Ind. 
2001). 

'' Ind. Dep't of Envtl. Mgmt. v. RLG, Inc., 755 N.E.2d 556 (Ind. 2001 ); G&N Aircraft, Inc. v. Boehm, 
743 N.E.2d 227 (Ind. 2001). 

•* Livingston v. Fast Cash USA, Inc., 753 N.E.2d 572 (Ind. 2001); Rheem Mfr. Co. v. Phelps Heating 
& Air Conditioning, Inc., 746 N.E.2d 941 (Ind. 2001). 



1132 INDIANA LAW REVIEW [Vol. 35:1 117 



" Livingston v. Fast Cash USA, Inc., 753 N.E.2d 572 (Ind. 2001). 

"^ Fratus v. Marion Cmty. Sch. Brd. of Trs., 749 N.E.2d 40 (Ind. 2001). 

"" Allstate Ins. Co. V. Dana Corp., 759 N.E.2d 1049 (Ind. 2001); Gallant Ins. Co. v. Isaac, 751 N.E.2d 
672 (Ind. 2001). 

Allstate Ins. Co. v. Dana Corp., 759 N.E.2d 1049 (Ind. 2001); Ind. Dep't of Envtl. Mgmt. v. RLG, 
Inc., 755 N.E.2d 556 (Ind. 2001). 

^ DegussaCorp. v. Mullens, 744 N.E.2d407 (Ind. 2001); GKN Co. v. Magness, 744 N.E.2d 397 (Ind. 
2001). 

•« Equicor Dev., Inc. v. Westfield- Washington Township Plan Comm'n, 758 N E.2d 34 (Ind. 2001); 
Fratus v. Marion Cmty. Sch. Brd. of Trs., 749N.E.2d 40 (Ind. 2001); Turner v. City of Evansville, 740 N.E.2d 
860 (Ind. 2001). 

Forrest v. State, 757 N.E.2d 1003 (Ind. 2001); LeShore v. State, 755 N.E.2d 164 (Ind. 2001) 
Ashabraner v. Bowers, 753 N.E.2d 662 (Ind. 2001). 

«• Sholes V. Sholes, 760 N.E.2d 156 (Ind. 2001); Boatright v. State, 759 N.E.2d 1038 (Ind. 2001) 
Hopkins v. State, 759 N.E.2d 633 (Ind. 2001); Gates v. State, 759 N.E.2d 631 (Ind. 2001); Edwards v. State 
759 N.E.2d 626 (Ind. 2001); Gray v. State, 758 N.E.2d 519 (Ind. 2001); West v. State, 758 N.E.2d 54 (Ind 
2001); Crawford v. State, 755 N.E.2d 565 (Ind. 2001); Hubbell v. State, 754 N.E.2d 884 (Ind. 2001); Johnson 
V. State, 749 N.E.2d 1 103 (Ind. 2001); Sanchez v. State, 749 N.E.2d 509 (Ind. 2001); Marley v. State, 747 
N.E.2d 1 123 (Ind. 2001); Fosha v. State, 747 N.E.2d 549 (Ind. 2001); Lockett v. State, 747 N.E.2d 539 (Ind. 
2001); Kilpatrick v. State, 746 N.E.2d 52 (Ind. 2001); Mitchell v. State, 745 N.E.2d 775 (Ind. 2001); Noble 
County V. Rogers, 745 N.E.2d 194 (Ind. 2001); City Chapel Evangelical Free, Inc. v. City of South Bend ex 
rel. Dep't of Dev., 744 N.E.2d 443 (Ind. 2001); Smith v. State, 744 N.E.2d 437 (Ind. 2001 ); Games v. State, 
743 N.E.2d 1 132 (Ind. 2001); Russell v. State, 743 N.E.2d 269 (Ind. 2001); Redman v. State, 743 N.E.2d 263 
(Ind. 2001); Long v. State, 743 N.E.2d 253 (Ind. 2001); Roby v. State, 742 N.E.2d 505 (Ind. 2001); Ledo v. 
State, 741 N.E.2d 1235 (Ind. 2001); Sivels v. State, 741 N.E.2d 1 197 (Ind. 2001). 



A Year Of Transition in Appellate Practice 



Douglas E. Cressler* 



Introduction 



The year 2001 was a time of transition for the appellate lawyer in Indiana. 
An entirely new set of Rules of Appellate Procedure went into effect, governing 
all appeals initiated on or after January 1 , 2001 . Most of the published opinions 
during the reporting period, having already been initiated under the former rules, 
were governed by those now-superseded rules. However, by the end of 2001, 
many of the pending appeals had been initiated under the newer rules, and some 
interpretative case law was being published. 

By the end of 2001, the Indiana Supreme Court began to experience the 
benefits of a change in the rules governing its jurisdiction. For the first time in 
its history, the court had almost complete discretionary control over its appellate 
docket. The court also adopted several noteworthy amendments to the new 
appellate rules. Finally, the year ended with the implementation of two 
innovative Internet applications of particular interest and benefit to the appellate 
practitioner. 

This Article examines recent developments in the area of state appellate 
procedure during this important transitional year.' 

I. A Few Words About the Not-So-New Rules 

The Rules of Appellate Procedure that went into effect at the start of the year 
2001 have been written about elsewhere, and there is no need to reexamine their 
genesis or significance in detail.^ However, at least a rudimentary overview of 
how and why the new rules came into being is warranted. 

The rules of procedure governing the appellate process in this state were 
rewritten and replaced after a significant effort by committees made up of 
members of the Indiana State Bar Association's Appellate Practice Section, by 
the Indiana Supreme Court Rules Committee, and by the Indiana Supreme Court 
itself.^ The new rules became effective for all appeals initiated on or after 



* Administrator, Indiana Supreme Court; Adjunct Professor, Indiana University School 
of Law— Indianapolis. B.S., with highest distinction, 1984, Purdue University— Indianapolis; J.D., 
magna cum laude, 1989, Indiana University School of Law— Indianapolis. 

1 . This Article includes discussions of significant opinions handed down by the Indiana 
Court of Appeals before October 1, 2001, or by the Indiana Supreme Court before November 1, 
2001, plus information concerning other important developments that occurred in 2001 . 

2. See, e.g., Douglas E. Cressler & Paula F. Cardoza, A New Era Dawns in Appellate 
Procedure, 34 IND. L. REV. 741, 744-747 (2001); George T. Patton, Jr., Recent Developments in 
Indiana Appellate Procedure: New Appellate Rules, a Constitutional Amendment, and a Proposal, 
33IND.L.REV. 1275(2000). 

3. See generally George T. Patton, Jr., Appellate Rules Proposal Before Rules Committee, 
Res Gestae, Apr. 1999, at 10, 10-11. 



1134 INDIANA LAW REVIEW [Vol. 35:1 133 



January 1, 2001.^ The goals of the complete revision included making the 
appellate process easier to understand, more streamlined, and more uniform in 
practice.^ Although there was considerable carryover of language and general 
operation, there were many substantive changes. The rules governing appellate 
procedure were reorganized and renumbered. Changes were made to the 
nomenclature of appeals work, in the timing for many aspects of taking an 
appeal, in motions practice, and in the procedures for seeking transfer to the 
Indiana Supreme Court. The greatest changes brought about by the new rules, 
however, were in how the record on appeal is prepared and presented to the 
appellate court. 

II. Rule AMENDMENTS 

As expected, the Indiana Supreme Court determined that a number of minor 
amendments to the newly-promulgated Rules of Appellate Procedure were 
warranted after their first year in operation. The court's order, issued December 
21, 2001, included changes to forty-seven different sections of the appellate 
rules.^ Although many of the changes were cosmetic, a few of the amendments 
provided important clarification and improvement to the operation of the 
appellate rules. The rule amendments were made effective April 1, 2002.^ 

A. The New "Addendum to Brief 

One amendment of particular interest to appellate practitioners was the 
addition of new Appellate Rule 46(H). That new provision states: 

H. Addendum to Brief. Any party or any entity granted amicus curiae 
status may elect to file a separately-bound Addendum to Brief. An 
Addendum to Brief is not required and is not recommended in most 
cases. An Addendum to Brief is a highly selective compilation of 
materials filed with a party's brief at the option of the submitting party. 
Note that only one copy of the Appendix is filed (see Rule 23(C)(5)), 
but an original and eight copies of any Addendum to Brief must be filed, 
in accordance with Rule 23(C)(3). If an Addendum to Brief is 
submitted, it must be filed and served at the time of the filing and service 
of the brief it accompanies. An Addendum to Brief may include, for 
example, copies of key documents from the Clerk's Record or Appendix 
(such as contracts), or exhibits (such as photographs or maps), or copies 
of critically important pages of testimony from the Transcript, or full text 
copies of statutes, rules, regulations, etc. that would be helpful to the 



4. See Order Amending Indiana Rules of Appellate Procedure (Ind. Feb. 4, 2000) (No. 
94S00-0002-MS-77), available a/ http://www.in.gOv/judiciary/opinions/archive/l 1090001 .ad.html. 

5. See Patton, supra note 2, at 1 275-76. 

6. See Order Amending Indiana Rules of Appellate Procedure WL IN ORDER 01 -24 (Dec. 
21, 2001) (No. 94S00-0101-MS-67) [hereinafter Order]. 

7. Id. 



2002] APPELLATE PRACTICE 1135 



Court on Appeal but which, for whatever reason, cannot be conveniently 
or fully reproduced in the body of the brief. An Addendum to Brief may 
not exceed fifty (50) pages in length and should ordinarily be much 
shorter in length. The first document in the Addendum to Brief shall be 
a table of contents, and documents contained in the Addendum to Brief 
should be indexed or numbered in some manner that facilitates fmding 
the documents referred to therein, preferably with indexed tabs. The 
Addendum to Brief shall be bound in book form along the left margin, 
preferably in a manner that permits the volume to lie flat when opened. 
The Addendum to Brief shall have a cover that is the same color and 
similarly styled as the brief it accompanies (see Form App. 43-1 ), except 
that it shall be clearly identified as an Addendum to Brief. An 
Addendum to Brief may not contain argument.* 

The "addendum to brief is an appropriate new name for an old idea. The 
superseded rules permitted parties to accompany their briefs with a separately 
bound "appendix."^ The appendix could contain "significant parts of the record 
or other material deemed useful.'"^ Because a party would file an original and 
eight copies of the appendix along with the party's briefs," the old rule provided 
a useful vehicle for making certain that each judge or justice reviewing the 
appeal had ready access to key documents from the record. In a contract dispute, 
for example, the filing of an appendix containing a complete copy of the contract 
at issue would ensure that all the members of the reviewing court could examine 
the whole contract without having to look for it elsewhere in the single set of 
bound volumes of the record of proceedings. 

When the new rules went into effect, however, the term "appendix" was 
appropriated to designate something that is now more properly thought of as 
being part of the appellate record than as a supplement to a brief. '^ The appendix 
is generally a bound compilation of the documents filed in the trial court. '^ Only 
one copy of an appendix is filed,''* thus minimizing its value as an instrument for 
conveniently placing key documents in front of each reviewing judge or justice. 
Moreover, the appendix as currently defined generally would be too large and 
inclusive to serve the narrow, specific purpose of the old appendix rule. For 
example, in a criminal appeal, the appellant's appendix consists, inter alia, of all 
the documents that had been filed with the clerk of the trial court. '^ Even in civil 
appeals, the appendix contains any "pleadings and other documents" filed in the 



8. Id. (amending IND. Appellate Rule, 46 effective Apr. 1, 2002). 

9. App.R. 8.2(A)(4) (repealed Jan. 1,2001). 

10. Id 

11. See APP.R. 9(B)( 1 ) (repealed Jan. 1 , 200 1 ). 

12. 5eg App.R. 2(C). 

13. See id. 

14. APP.R. 23(C). 

15. 5eg APP.R. 50(B)(1). 



1136 INDIANA LAW REVIEW [Vol. 35:1 133 



trial court that are "necessary for resolution of the issues raised on appeal.*"^ 

It was clear, therefore, that the old appendix was something very different 
from the new appendix, and that there was nothing in the new rules to take its 
place. The occasionally useful function previously performed by the old 
appendix was lost in the new rules, as initially adopted. The adoption of new 
Appellate Rule 46(H) corrects that omission by creating an "addendum to brief." 
The new rule also gives greater definition to the function than was ever provided 
in the past. 

As was the practice under the old rule,'^ parties file an original and eight 
copies of each addendum to brief at the time of the filing of the brief itself.'* The 
rule expressly states that an addendum should be a "highly selective compilation" 
of not more than fifty pages and "ordinarily . . . much shorter in length."'^ The 
rule expressly states that an addendum "is not required and is not recommended 
in most cases."^^ In other words, addenda should be very thin in physical 
dimension, and only filed in appeals where the reviewing court would be aided 
by having multiple copies of key documents available. The rule articulates 
examples of the types of documents that may be included with an addendum and 
also details the required format.^' If record materials are included in an 
addendum, then citations to those materials in an appellate brief must include 
citation to both the record and the addendum. ^^ This amendment heralds the 
return, with a new name, of a useful tool of appellate advocacy. 

B, Appendices 

The Indiana Supreme Court also adopted some important changes affecting 
the form and filing of appendices. As noted above, the appendix serves the 
function of providing the appellate court with a record of the filings made in the 
trial court.^^ A seemingly minor, but potentially significant, clarifying 
amendment was made to the rule governing the contents of the appellant's 
appendix. In both civil and criminal appeals, the applicable rule had required 
that the appendix include "any record material relied on in the brief "^"^ Because 
parties also rely on portions of the transcript in their briefs, the rule as initially 
adopted could have been read to require that copies of any portion of the 
transcript relied on in a brief be included in the appendix. 

Those same rules, as amended, now state that the appendix must include "any 
record material relied on in the brief unless the material is already included in 



16. App.R. 50(A)(2)(f). 

17. 5ee APP.R. 9(B)(1) (repealed Jan. 1,2001). 

1 8. Order, supra note 6 (amending App.R. 23(C)(3)). 

19. Id. (amending App.R. 46). 

20. Id. 

2 1 . See id. 

22. Id. (amending App.R. 22(C)). 

23. See supra note 1 2 and accompanying text. 

24. App.R. 50(A)(2)(h), (B)(1)(e) (amended Apr. I, 2002). 



2002] APPELLATE PRACTICE 1137 



the Transcript. ^'^^ In other words, there is no need to include those sections of 
the transcript referenced in the brief in the appendix. So long as any record 
material relied on in the brief can be found in either the appendix or the 
transcript, then the rules have been satisfied. 

Another amendment affecting appendices was specifically directed to 
appellants in criminal cases. The rule governing required service of documents, 
as now amended, provides that appendices filed in criminal appeals need not be 
copied and served on the Attorney General.^^ This amendment helps reduce 
unnecessary copying. The Attorney General has ready access to the filed 
appendices through the appellate court clerk's office. If there was any doubt 
about that availability, the rules as amended now expressly state that parties may 
have access to transcripts and appendices during the period that they are working 
on their briefs, subject to internal rules the appellate court clerk might use to 
ensure accountability and fairness.^^ 

C Transcripts, Exhibits, and the Duties of the Court Reporter 

The amended appellate rules clarify that preparation of the separately-bound 
volumes of exhibits from trial are part of the transcript preparation process and, 
thus, the responsibility of the court reporter.^' Also, the court reporter is required 
to prepare an index of exhibits, to "be placed at the front of the first volume of 
exhibits."^^ In addition, the rules require the court reporter to serve the parties 
with copies of any motions requesting additional time to file the transcript.^^ 

One of the appellate rules requires the court reporter to annotate each page 
of a transcript with information "where a witness's direct, cross, or redirect 
examination begins."^' Previously, those annotations had to be placed as headers 
at the top of the page, but the amendment now alternatively allows the 
annotations to be placed as footers at the bottom of the page.^^ The requirement 
that the court reporter format the transcript to an electronic disk has been 
changed to requiring "an electronically formatted medium (such as disk, CD- 
ROM, or zip drive)."" 

D. Duties of the Trial Court Clerk 

A criminal appellant will typically have appointed local counsel who will 
need access to the transcript while working on the appellant's brief. 
Accordingly, the rules state that the transcript in criminal appeals is generally not 



25. Order, supra note 6 (amending App.R. 50(A)(2)(h), (BXlKe)). 

26. Id. (amending App.R. 24(A)). 

27. /flf. (amending App.R. 12(C)). 

28. M(amendingAPP.R.2(K), 11(A)). 

29. Id. (amending App.R. 29(A)). 

30. Id (amending APP.R. 1 1(C)). 

31. App.R. 28(A)(4). 

32. Order, supra note 6 (amending APP.R. 28(A)(4)), 

33. Id (amending App.R. 30(AK2)). 



1138 INDIANA LAW REVIEW [Vol. 35:1133 



transmitted by the trial court clerk to the appellate court clerk (in Indianapolis) 
until after the appellant's brief has been filed.^* 

A new amendment changes this rule in situations where the appellant is 
represented by the State Public Defender, rather than local counsel. Under the 
rule as amended, when a criminal appellant is represented by the State Public 
Defender, the transmission of the transcript by the trial court clerk to the 
appellate court clerk is to occur immediately on completion and certification of 
the transcript.^^ This amendment is one of administrative convenience because 
the offices of both the State Public Defender and the Attorney General are in 
Indianapolis. Thus, the transcript is sent immediately to the location where the 
interested attorneys are located. 

Moreover, an addition to the rules makes clear that any party may file a 
motion with the appellate court seeking an order directing "the trial court clerk 
to transmit the [t]ranscript at a different time than provided for in the rules."^^ 

The amendments also state that the copies of the chronological case summary 
accompanying the notice of completion of clerk's record "served on the parties 
need not be individually certified."^^ Further, only one original notice of 
completion of clerk's record and one original notice of completion of transcript 
need be filed with the appellate court clerk.^* 

In addition, the trial court clerk is now required to serve the parties with any 
motions seeking an extension of time to assemble the record.^' 

E. Rehearing Practice 

The new amendments corrected an apparently unintentional change in 
rehearing practice associated with the rewriting of the rules. The superseded 
rules permitted a party an automatic extension of time within which to respond 
to a brief or other document served via mail or carrier by a party. ^^ However, the 
automatic extension did not apply to petitions that were responsive to filings 
made by the appellate court itself.'*' For example, a party filing a petition for 
rehearing or transfer following the issuance of an opinion by the court of appeals 
had to file the petition within the thirty days allotted by rule, without the benefit 
of the automatic extension rule."*^ However, the party responding to the petition 
was allowed the benefit of the automatic extension if service was by mail or 
courier.'*^ 



34. See APP.R. 12(B) (amended Apr. 1, 2002). 

35. Order, supra note 6 (amending APP.R. 1 2(B)). 

36. Id. 

37. Id. (amending APP.R, 10(C)). 

38. Id (amending APP.R. 23(C)(6)). 

39. M (amending APP.R. 10(E)). 

40. APP.R. 12(D) (repealed Jan. 1, 2001). 

41. See APP.R. 1 1 (repealed Jan. 1 , 200 1 ). 

42. See id. 

43. See APP.R. 12(D) (repealed Jan. I, 2001). 



2002] APPELLATE PRACTICE 1139 



When the new rules went into effect January 1 , 200 1 , they operated in much 
the same way, with one exception. The new rules contained a provision stating 
that the automatic extension rule did not apply to the filing of a brief in response 
to a petition for rehearing/"* The new rules created an apparently unintended 
variance from traditional practice and a discrepancy between rehearing and 
transfer practice/^ The court amended the rule to comport with traditional 
practice and to make the transfer and rehearing rules uniform. The appellate rule 
governing the filing of a response to a petition for rehearing, as amended, now 
states in relevant part, "Rule 25(C), which provides a three-day extension for 
service by mail or third-party carrier, may extend the due date; however, no other 
extension of time shall be granted.'"*^ 

The amendments also clarify the form and content requirements for the 
petition for rehearing. Specifically, as amended, the rule expressly states that not 
all the content requirements of Appellate Rule 46(A) must be met, only some of 
them.^^ 

F. Petitions Seeking Review of a Decision of the Indiana Tax Court 

The appellate rules, as adopted effective January 1, 2001, contained no 
provision expressly stating the content requirements for a petition seeking review 
of a decision of the Indiana Tax Court. As amended, the rules now include a 
content requirement, modeled along the lines of a petition to transfer."** The 
amended rule also makes clear that a petition for review is available when the tax 
court is sitting as an appellate court, reviewing a decision of a trial court with 
probate jurisdiction."*^ 

G. Other Miscellaneous Changes of Note 

The rules now expressly codify what had been an unwritten rule since 1997, 
when the court first adopted word limit restrictions on brief size, as opposed to 
page restrictions.^^ Under the amended rules, a motion seeking leave to file an 
oversize brief or petition must express the total number oi words desired for the 
oversize brief, not the number of pages.^' 

The rules now clarify the standard practice on the timing for filing a request 
for oral argument. The motion is due within seven days after any reply brief 



44. See APP.R. 54(C) (amended Apr. 1, 2002). 

45. See APP.R. 57(D) (permitting an automatic extension of time to file a response to a 
petition to transfer served by mail or carrier). 

46. Order, supra note 6 (amending APP.R. 54(C)). 

47. See id. (amending App.R. 54(F)). 

48. See id. (amending App.R. 63(A)); see also APP.R. 57(G) (stating the form and content 
requirements for a petition to transfer). 

49. Id. (amending App.R. 63(A)). 

50. Compare App.R. 8.2(A)(4) (repealed Jan. I, 1997) (imposing page restrictions on brief 
length), w/Y/i App.R. 8.2(A)(4) (repealed Jan. 1, 1998) (word restrictions on brief length). 

5 1 . Order, supra note 6 (amending App.R. 44(B)). 



1.140 INDIANA LAW REVIEW [Vol. 35:1133 



would be due before the court in which the motion is to be filed." 

In addition to being served on ail parties, the notice of appeal must now be 
filed with the clerk of the appellate court.^^ 

III. Developments IN THE Caselaw 

The courts issued a few cases of general significance during the reported 
period, regardless of which set of rules under which parties are operating. One 
of the few opinions to develop new law from the new rules, Johnson v. State,^^ 
is the first decision discussed below. 

A. Failure to Provide an Appendix Not Automatic Grounds for Dismissal 

When an appeal is taken in a criminal proceeding under the new rules, 
documents that were filed with the trial court are to be assembled by the 
appellant into an "appendix" that is to be filed with the appellant's brief.^^ A 
criminal defendant, acting pro se, attempted to appeal a trial court order. He 
failed to submit an appendix with his brief, as required by the appellate rules. On 
motion from the State, the Indiana Court of Appeals dismissed the appeal for 
failing to comply with required appendix rule.^^ 

The Indiana Supreme Court granted transfer to clarify "a specific point of 
appellate procedure."^^ The court noted the compulsory nature of the appendix 
filing requirement, but stated that ordering compliance with the rule, rather than 
dismissing the appeal, is the "better practice for an appellate court to follow."^* 

The court found support for this view in the new rules, specifically Appellate 
Rule 49(B), which expressly states that "[a]ny party's failure to include any item 
in an Appendix shall not waive any issue or argument."^^ The court also noted 
that the rules permit the appellee to file its own appendix, "containing materials 
not found in the appellant's appendix," and permit either party to file a 
supplemental appendix.^^ 

Significantly, the court noted that Appellate Rule 49(B) represents a 
departure from prior case law under the old rules, wherein the appellate courts 
decided that issues were waived due to appellant's failure to provide an adequate 



52. ^ee/cf. (amending App.R. 52(B)). 

53. M (amending App.R. 9(A)(1)). 

54. 756 N.E.2d 965 (Ind. 2001 ) [hereinafter Johnson II]. 

55. ^-ee App.R. 49(A), 50(B). 

56. Johnson v. State, 756 N.E.2d 508 (Ind. Ct. App.), vacated by 756 N.E.2d 965 (Ind. 
2001). 

57. yo/zAwo« //, 756 N.E.2d at 966-67. 

58. Jd. The court did state, however, that if an appellant is given an opportunity to cure a 
problem with the appendix and inexcusably fails to do so, ''dismissal of the appeal . . . would be 
available as the needs of Justice might dictate." Id. at 967. 

59. Jd. (quoting APP.R. 49(B)). 

60. Jd (citing APP.R. 50(A), 50(B)(2), 50(D)). 



2002] APPELLATE PRACTICE 1141 



record for appellate review.^' The new rules "signal[] a preference for an 
ameliorative approach toward failures by the parties to provide a complete 
record."^^ The appeal was reinstated and remanded to the court of appeals for 
further proceedings consistent with the court's opinion.^^ 
I It is important to note that if the appellant's appendix fails in a significant 

manner to include parts of the record necessary for appellate review, thereby 
requiring the appellee to submit his own appendix, there is recent authority for 
the proposition that the appellant might be compelled to pay the cost of preparing 
the filing.^ 

B. Two Out-of'the-Ordinary Applications of the **Law of the Case " Doctrine 

Two cases decided during the reporting period are noteworthy for their new 
interpretations of the law of the case doctrine. In one decision, the court of 
appeals found an unusual exception to the doctrine;^^ in the other, the court found 
the doctrine inapplicable.^ "The doctrine of the law of the case is a discretionary 
tool by which appellate courts decline to revisit legal issues already determined 
on appeal in the same case and on substantially the same facts."^^ The U.S. 
Supreme Court has held that there are exceptions to the rule, but they are lim ited 
to "extraordinary circumstances such as where the initial decision was 'clearly 
erroneous and would work a manifest injustice.'"^' 

In Turner v. State,^^ the Indiana Court of Appeals recognized one of those 
extraordinary circumstances in which the law of the case doctrine would not bar 
relitigation of an issue previously decided by another panel of the court. Forrest 
Turner and co-defendant David McCarthy were tried together and both were 
convicted of murder and attempted murder.^° They separately appealed, and both 
claimed error in the failure of the trial court to give jury instructions on lesser- 
included offenses.^' 

In Turner's original appeal,^^ the court of appeals affirmed, finding "no 



61 . Id (citing Lee v. State, 694 N.E.2d 7 19, 721 n.6 (Ind. 1998)). 

62. Id 

63. Id 

64. See, e.g., Scott v. Crussen, 741 N.E.2d 743, 745 n.l (Ind. Ct. App.), trans, denied, 761 
N.E.2d4!3 (Ind. 2001). 

65. See Turner v. State, 75 1 N.E.2d 726 (Ind. Ct. App. 2001 ). 

66. See Humphreys v. Day, 735 N.E.2d 837, 841 (Ind. Ct. App. 2000), trans, denied, 753 
N.E.2d 16 (Ind. 2001). 

67. Cutter v. State, 725 N.E.2d 401, 405 (Ind. 2000) (citing Christiansen v. Colt Indus. 
Operating Corp., 486 U.S. 800,817-18(1998); State v. Lewis, 543 N.E.2d 1 1 16, 1 1 18(Ind. 1989)). 

68. See Christianson, 486 U.S. at 8 1 7 (quoting Arizona v. California, 460 U.S. 605, 61 8 n.8 
(1983)). 

69. 751 N.E.2d 726 (Ind. Ct. App. 2001). 

70. Seeid2Xl2%'19. 

71. Id 

72. Tumerv. State, 691 N.E.2d 516 (Ind. Ct. App. 1998) (unpublished table decision), poj/ 



1142 INDIANA LAW REVIEW [Vol. 35:1133 



serious evidentiary dispute concerning the element of intent" and thus no error 
in refusing to give the lesser-included offense instructions on reckless homicide 
and criminal recklessness.^^ McCarthy, on the other hand, successfully obtained 
relief raising the same issues. In his direct appeaf^a different panel of the court 
of appeals concluded that the trial court should have given a reckless homicide 
instruction as a lesser-included offense of murder and a criminal recklessness 
instruction as a lesser-included offense to attempted murder.^^ McCarthy was 
ultimately retried with the new instructions, and the second jury convicted him 
of reckless homicide and criminal recklessness rather than murder and attempted 
murder.^^ 

Turner, having been denied relief on appeal, also filed a petition for post- 
conviction relief, but his request for relief was denied.^^ On appeal of that denial, 
the court of appeals determined that the failure to give the instruction on the 
lesser-included offenses was error, and that the contrary decision of the original 
panel of that court was "clearly erroneous and would work manifest injustice."^* 
The denial of post-conviction relief was reversed, and the cause was presumably 
remanded for a new trial. The disparity of the outcomes between McCarthy and 
Turner was a factor considered by the court of appeals in determining that an 
inequity justifying extraordinary relief existed. ^^ 

In Humphreys v. Day^^ the court of appeals did not find an exception to the 
law of the doctrine. Instead, the court found the doctrine legally inapplicable 
under the circumstances presented.*' Although the appeal involved a somewhat 
complex interpretation of Medicaid regulations, the teachings of the case 
regarding the law of the case doctrine are straightforward. In an earlier appeal 
involving the same parties, the court of appeals had decided two questions of 
law.*^ One of the parties petitioned for transfer to the supreme court, and the 
petition was granted.*^ In its opinion, the supreme court adopted the holding of 



conviction relief granted^ 751 N.E.2d at 728-29. 

73. Turner, 75 1 N.E.2d at 728-29. 

74. McCarthy v. State, 703 N.E.2d 199 (Ind. Ct. App. 1998) (unpublished table decision). 

75. Turner, 75 1 N.E.2d at 729. The court of appeals also held that the error in refusing the 
criminal recklessness instruction had been waved because McCarthy's counsel had not Joined in 
the request for such an instruction during trial. However, McCarthy successfully obtained relief 
in a post-conviction proceeding, successfully asserting that his trial counsel had been 
constitutionally ineffective for failing to join in the request. Id. at 729 n.l. 

76. Mat 729. 

77. Id 

78. /(i. at 734. 

79. ^ee /t/. at 729, 734. 

80. 735 N.E.2d 837 (Ind. Ct. App. 2000), trans, denied, 753 N.E.2d 16 (Ind. 2001). 

81. Mat 841. 

82. See Sullivan v. Day, 661 N.E.2d 848 (Ind. Ct. App. 1996), vacated inpart by6S\ N.E.2d 
713 (Ind. 1997). 

83. 5ee//wmp;ire;/5, 735N.E.2dat840. 



2002] APPELLATE PRACTICE 1143 



the court of appeals on one issue (Issue X).** As to the second issue (Issue Y), 
which the court of appeals had addressed sua sponte, the high court determined 
the parties should have been given the opportunity to develop a record and obtain 
a ruling from the trial court.*^ The court therefore vacated that part of the 
opinion addressing Issue Y and remanded the case to the trial court for further 
proceedings.*^ 

On remand, the trial court entered a judgment on Issue Y, and the Humpheys 
V. Day appeal on that issue ensued.*^ One of the parties argued that the question 
had already been decided by the court of appeals in its earlier opinion and had 
therefore become the law of the case.** The court of appeals rejected this 
contention. The court noted in particular the application of an appellate rule 
providing generally that when the supreme court grants transfer, the opinion of 
the court of appeals is vacated except for those portions "expressly adopted" or 
"summarily affirmed."*^ The earlier holding of the court of appeals on Issue Y 
had been neither adopted nor summarily affirmed by the supreme court. Thus, 
the court of appeals concluded that on this issue, "the previous opinion is not the 
law of the case because it is a nullity."^ 

C. Revisiting Motions Already Addressed in the Same Appeal 

The parties to an appeal will occasionally file substantive motions before an 
appeal has been fully briefed.^' Such motions are ruled on by a rotating panel of 
court of appeals' judges referred to as the "motions panel." The motions panel 
will almost certainly be composed of a different set of judges from those 
assigned to vote on and author the final opinion. 

No rule prevents the party whose pre-briefing motion is denied from raising 
the issue again in that party's brief on appeal. However, the question arises 
whether the authoring panel is bound by the earlier decision of the motions panel. 
This issue might be thought of as a cousin to the law of the case doctrine.^^ Four 
opinions issued during the reporting period addressed this question. 



84. Sullivan v. Day, 681 N.E.2d 713, 716 (Ind. 1997). 

85. /^. at 716-17. 

86. Id.dXlM. 

87. 735 N.E.2d at 840-41. 

88. Mat 841. 

89. Id. The opinion references former App.R. 1 1(B)(3). That older rule was repealed on 
January 1, 2001 and was replaced by App.R. 58(A), which contains essentially the same language. 

90. Id. 

91. The most common example would probably be a motion to dismiss involuntarily an 
appeal due to alleged procedural or jurisdictional defects, filed pursuant to APP.R. 36(B). 

92. The law of the case doctrine is generally thought of as applying to issues arising in 
subsequent appeals as opposed to issues arising twice within the same appeal. See supra note 67 
and accompanying text; see also CNA Ins. Cos. v. Vellucci, 596 N.E.2d 926, 927 (Ind. Ct. App. 
1992). 



1144 INDIANA LAW REVIEW [Vol. 35:1 133 



In Walker v. McTague,^^ the court refused to address an issue that had been 
raised earlier by motion, stating, "The Motions Panel issued an order allowing 
the case to proceed on its merits .... Therefore, we need not reconsider the 
procedural issue here . . . ."'* The appellate courts took similar stances in 
Mahone v. State^^ Snider v. State,^ and In re Estate of Mow ?^ 

These opinions imply that the court of appeals either will not reconsider 
matters earlier decided by that court by order'* or that it should only do so "in the 
case of extraordinary circumstances."'^ However, there is ample precedent for 
courts overruling prior orders issued in the appeal.'^ As the court of appeals has 
previously stated, "[B]ecause we could change our decision pursuant to a petition 
for rehearing, it would make no sense to refuse to do so at an earlier stage before 
we have expended further resources.'"^* 

In short, recent opinions have demonstrated an appropriate reluctance on the 
part of the court of appeals to overrule orders already decided by its rotating 
motions panels. Nevertheless, these decisions do not hold that the authoring 
court is absolutely precluded from reconsidering issues previously decided on a 
motion. Indeed, such a holding would be contrary to the court's traditional 
practice. If a party fails to obtain requested relief from a pre-briefmg motion to 
dismiss (assuming the motion has colorable merit), the best practice is to raise 
that issue again in that party's brief on the merits. Similarly, the issue should be 
available for a petition to transfer. Professionally responsible advocacy would 
dictate that the prior unsuccessful motion also be brought to the appellate court's 
attention. 

Z). Lost Appeal of a Deemed Denied Motion to Correct Error 
Not Salvageable Through Alleged Cross-Error 

A motion to correct error is deemed denied if not ruled on within certain time 
limits. '^^ Thus, the clock for initiating an appeal begins to run once the motion 
to correct error is deemed denied. Any subsequent ruling on the motion after it 
has been denied by operation of rule is not necessarily void, but is considered 



93. 737 N.E.2d 404 (Ind. Ct. App. 2000), trans, denied, 753 N.E.2d 8 (Ind. 2001). 

94. /^. at406n.l. 

95. See 742 N.E.2d 982, 985 n.3 (Ind. Ct. App.), trans, denied, 753 N.E.2d 1 1 (Ind. 2001). 

96. See 753 N.E.2d 721, 724 n.2 (Ind. Ct. App.), trans, denied, 761 N.E.2d 421 (Ind. 2001). 

97. 735 N.E.2d 240, 243 n.2 (Ind. Ct. App. 2000). 

98. See supra notes 95-97 and accompanying text. 

99. /</. (citing /« re Train Collision at Gary, Ind., 654 N.E.2d 1137, 1140n.l (Ind. Ct. App. 
1995)). 

1 00. See, e.g., St. Amand-Zion v. Review Bd. of Ind. Dep't of Employment & Training Servs., 
635 N.E.2d 184, 185 n.2 (Ind. Ct. App. 1994); Phipps v. First United Sav. Bank, 601 N.E.2d 13, 
15n.l (Ind. Ct. App. 1992). 

101. CNA Ins. Cos. v. Vellucci, 596 N.E.2d 926, 927 (Ind. Ct. App. 1992). 

102. 5ee Ind. Trial Rule 53.3. 



2002] APPELLATE PRACTICE 1 1 45 



voidable. •'' 

In Carter v. Jones, ^^ the plaintiff filed a mandatory motion to correct error, 
seeking addittur to the damage award. '^^ By operation of Trial Rule 53.3(A), the 
motion was deemed denied thirty days after the final hearing held on the motion. 
About three weeks after the motion to correct error was deemed denied, the trial 
court entered an order purporting to grant the motion and ordering an eleven-fold 
increase in the jury's verdict on damages.'^ The plaintiff took no action to 
initiate an appeal of the deemed denial that had already occurred. 

The defendant, however, did initiate a timely appeal of the order granting the 
motion to correct error. The defendant argued on appeal that the motion to 
correct error had already been deemed denied and that the subsequent order 
granting relief should not be given effect. '^^ The plaintiff then attempted to 
appeal the deemed denial of her motion to correct error by raising the issue as 
cross-error in her brief of the appellee. The plaintiff relied procedurally on the 
language of Trial Rule 59(G). '^* Specifically, that rule says that "if a notice of 
appeal rather than a motion to correct error is filed by a party in the trial court, 
the opposing party may raise any grounds as cross-errors . . . ."'°^ 

The court of appeals rejected this method of attempting to revive an 
otherwise lost right to an appeal."*^ The court held that the plaintiff forfeited her 
ability to take an appeal when she failed to take the proper steps to initiate an 
appeal within thirty days of the date the motion to correct error was deemed 
denied."' Concluding it lacked jurisdiction to review the merits of the deemed 
denial of the motion to correct error, the court dismissed the appeal, noting the 
trial court's obligation simply to enter judgment on the jury's original verdict.''^ 

If the result in Carter seems somewhat at odds with the language of Trial 
Rule 59(G), it is nevertheless completely consistent with a 1996 supreme court 
opinion. In Cavinder Elevators, Inc. v. Hall,^^^ the high court specifically 
cautioned that when a motion to correct error is deemed denied, the moving party 
must take the steps necessary to perfect an appeal from the deemed denial or be 



103. Cavinder Elevators, Inc. v. Hall, 726 N.E.2d 285, 288 (Ind. 2000). 

1 04. 75 1 N.E.2d 344 (Ind. Ct. App.), clarified on reh 'g, 757 N.E.2d 224 (Ind. Ct. App. 2001 ). 

1 05. Id. at 345. A motion to correct error is a prerequisite to an appeal on a claim that the jury 
verdict is inadequate or excessive. Ind. Trial Rule 59(A)(2). 

106. Cor/er, 751 N.E.2d at 345. 

107. Id dA 346. 

108. Mat 346-47. 

109. Ind. Trial Rule 59(G). 

110. Car/er, 751 N.E.2d at 346-47. 

111. Id. Because the events relating to this appeal took place in the year 2000, the plaintiff 
would have initiated an appeal by filing a praecipe within thirty days. See Ind. Appellate Rule. 
2(A) (repealed Jan. 1, 2001). Under the current rules, an appeal is initiated with the filing of a 
notice of appeal. See App.R. 9(A). 

112. Career, 751 N.E.2d at 347 &n.3. 

113. 726 N.E.2d 285 (Ind. 2000). 



1 146 INDIANA LAW REVIEW [Vol. 35:1 133 



precluded from raising the issue as cross-error. 



114 



E. Appealing Summary Disposition in Favor of a Codefendant 

One of the key issues in U-Haul International, Inc. v. Nulls Machine & 
Manufacturing Shop^^^ was whether a defendant in a civil action has standing to 
appeal the dismissal of a codefendant from the action. 

Before the Comparative Fault Act"^ was enacted in 1983, this question was 
generally answered in the negative."^ In order to have standing to litigate in 
Indiana, a party generally must show a "demonstrable injury."''* Under pre- 
comparative fault law, there was "no right to contribution among joint 
tortfeasors."''^ Therefore, a defendant would generally not be able to show any 
prejudice or injury resulting from the dismissal of a codefendant from the case. 

In 1996, the court of appeals recognized that the adoption of comparative 
fault altered the analysis for determining the standing of a codefendant to take an 
appeal. '^° In the recent U-Haul International case, the court of appeals more 
thoroughly analyzed this question and its holdings are worth noting to the 
appellate practitioner. 

Various U-Haul corporations, referred to collectively as U-Haul, were a few 
of the forty-five defendants named in a wrongful death action.'^' Another group 
of defendants, referred to collectively as the Valve defendants, were granted 
summary judgment by the trial court. '^^ U-Haul appealed the entry of summary 
judgment in favor of the Valve defendants. The plaintiff estate did not 
participate in the appeal. 

The Valve defendants argued that U-Haul lacked standing to take an appeal, 
asserting that U-Haul could show no demonstrable injury from their dismissal 
from the suit. The court of appeals stated that it could find "no Indiana case that 
is directly on point,"'^^ but ultimately disagreed with the defendants, finding that 
U-Haul did indeed have standing to appeal.'^'* 



114. 7^/. at 289. 

115. 736 N.E.2d 271 (Ind. Ct. App. 2000), trans, denied, 753 N.E.2d 8 (Ind. 2001). 

116. Pub. L. No. 317-1983 (codified as amended at iND. Code §§ 34-6-2-45, -88, 34-51-2-1 
to -19 (1998)). 

117. See, e.g., Ind. State Highway Comm'n v. Clark, 371 N.E.2d 1323, 1325-26 (Ind. App. 
1978) (holding that Defendant State of Indiana had no standing on appeal to challenge judgment 
on the evidence entered in favor of co-defendants). 

118. Hammes V. Brumley, 659N.E.2d 1021, 1029-30(Ind. 1995). 

119. C/ar^, 371 N.E.2d at 1326. 

120. See Shand Mining, Inc. v. Clay County Bd. of Comm'rs, 671 N.E.2d 477, 479-80 (Ind. 
CtApp. 1996). 

121. U-Haul Int'l, Inc. v. Nulls Mach. & Mfg. Shop, 756 N.E.2d 271, 273 (Ind. Ct. App. 
2000), trans, denied, 753 N.E.2d 8 (Ind. 2001). 

122. /^. at 274. 

123. Id ai 275. 

124. Mat 280. 



2002] APPELLATE PRACTICE 1147 



The court recognized that under the comparative fault principles governing 
current negligence law, fault (and the accompanying liability for damages) is 
allocated among those who may be culpable to the plaintiff" Therefore, under 
comparative fault, the removal of a party against whom fault could be allocated 
creates the potential for prejudice to a codefendant by increasing that 
codefendant's potential share of fault and liability.'^^ 

The court of appeals further noted that preservation of error is a part of the 
applicable analysis. '^^ According to the Bloemker and Rausch opinions, the 
failure to object to a codefendant's dismissal from a suit generally will waive the 
right to later name that former codefendant as a non-party. '^^ The court of 
appeals found cases like Bloemker and Rausch instructive in that they 
''established the principle that a defendant may not sit idly as its interests are 
subjected to possible prejudice when other co-defendants seek dismissal from the 
case, and then, at a later stage in the proceedings, seek to protect that interest 
after dismissal has occurred."'^^ 

The court of appeals ultimately held that in cases involving application of the 
Comparative Fault Act, the dismissal of a defendant from a case subjects 
remaining codefendants to greater potential liability, thus creating "sufficient 
prejudice to confer standing upon a codefendant" who wants to appeal the 
dismissal. '^^ However, the codefendant "must do something at the trial court 
level to preserve" the right to a later challenge to the dismissal through the appeal 
process.'^' Having preserved the claim of error by objecting to the summary 
judgment motion, and because the case was governed by comparative fault 
principles, the court concluded that U-Haul could take the appeal. '^^ 

U-Haul makes an important procedural point: a defendant must properly 
object to any motion that would eliminate a codefendant from the pool of 
potentially liable parties, not only to preserve any available non-party defense, 
but also to preserve the right to appeal an adverse decision. 

F. Procedural Guidance on Certified Questions from Federal Courts 

Appellate Rule 64 sets out the procedures a federal court should follow in 
certifying a question of state law to the Indiana Supreme Court. In terms of party 
procedure, however, the rule states simply that if the question is accepted, "the 
Supreme Court may establish by order a briefmg schedule on the certified 



125. See id. at 275. 

126. /flr.at280. 

127. See id. at 278-80 (citing Bloemker v. Detroit Diesel Corp. 687 N.E.2d 358 (Ind. 1997); 
Rausch V. Reinhold, 716 N.E.2d 993 (Ind. Ct. App. 1999)). 

128. See id. 

129. Mat 279. 

130. /f/. at 280. 

131. Id. 

132. Id. However, the court of appeals ultimately affirmed the entry of summary judgment in 
favor of the Valve defendants. Id. at 285. 



1148 INDIANA LAW REVIEW [Vol. 35:1133 



question."'" 

An example of a typical order establishing a briefing schedule was published 
by the supreme court during the reporting period. '^^ In addition to establishing 
a briefing schedule, the order identified the certified question, consolidated the 
briefing to avoid duplicative arguments, set up procedures for placing key 
documents from the federal court record before the court, and established length 
restrictions on the briefing. '^^ 

This published order should be reviewed by any attorney involved in a 
certified question from a federal court. Of particular note is the simultaneous 
briefing approach used by the court. The two consolidated sides were given 
approximately six weeks from the date of the order, within which both sides were 
to file principal briefs not to exceed 8400 words. '^^ Both sides were then given 
approximately four more weeks within which they could file a brief in response 
to their opponent's principal brief. '^^ The court's order stated that extensions of 
time would be granted only under extraordinary circumstances.'^* 

G. Motion for Judgment on the Evidence Held Not a Prerequisite to Appeal 
on Sufficiency of the Evidence in a Civil Case 

The first four subparts of Trial Rule 50(A) identify junctures during a trial 
when a motion for judgment on the evidence may be made.'^^ "The purpose of 
[a Trial Rule 50] motion for judgment on the evidence is to test the [legal] 
sufficiency of the evidence" presented by a party with the burden of proof on a 
particular claim. ''^^ The fifth subpart of Trial Rule 50(A), however, is not written 
in parallel with the first four. In an apparent reference to when parties may raise 
the sufficiency issue, the fifth subpart states that a party "may raise the issue 
upon appeal for the first time in criminal appeals but not in civil cases."'"^' 

In Walkerv. Pilliony^^ Walker appealedaciviljudgment entered againsthim, 
asserting that it was contrary to the evidence. However, he had not moved for 
judgment on the evidence pursuant to Trial Rule 50(A). ''^^ The appellees, the 
Pillions, asserted on appeal that any claim of error had been waived by the failure 
of Walker to raise the issue in the trial court. The Pillions relied on the express 
language of Trial Rule 50(AX5), arguing that the sufficiency of the evidence can 



133. IND. Appellate Rule 64(B). 

134. Livingston v. Fast Cash USA, Inc., 737 N.E.2d 1155 (Ind. 2000), certified question 
answered by 753 N.E.2d 572 (Ind. 2001). 

135. SeeiddX\\55-5b. 

136. See id. 

137. See id 

138. /f/. at 1156. 

1 39. See iND. Trial Rule 50 (A)( 1 )-(4). 

140. First Bank of Whiting v. Schuyler, 692 N.E.2d 1370, 1372 (Ind. Ct. App. 1998). 

141. iNfD. Trial Rule 50(A)(5). 

142. 748N.E.2d422(lnd. CLApp. 2001). 

143. IddXMA. 



2002] APPELLATE PRACTICE 1149 



be raised for the first time on appeal in criminal cases but not in civil. '"^^ 

The court of appeals acknowledged that "[a] reading of subsection (5) in 
isolation suggests that the Pillions are correct."''*^ The court nevertheless went 
on to hold that the appellant was not required to move for judgment on the 
evidence in the civil trial before raising the sufficiency issue on appeal."*^ The 
court of appeals found that requiring a motion for judgment on the evidence 
would be inconsistent with Trial Rule 59(A), which states that a post-trial motion 
to correct error is only mandatory when a party seeks to address newly 
discovered evidence or claims of inadequacy or excessiveness of the verdict.*'*^ 
Apart from being counterintuitive to the express language of Trial Rule 
50(A), the holding of Walker runs somewhat contrary to the general principle that 
issues not raised in the trial court are not preserved for appellate review J"** 
Although Walker holds that no motion for judgment on the evidence is required 
to preserve the sufficiency of the evidence issue in a civil trial, the best practice 
does not change. Trial Rule 50(A) sets out specific junctures in a jury trial when 
motions for judgment on the evidence may be made. If the sufficiency of the 
evidence is legitimately in dispute, counsel should consider making Trial Rule 
50(A) motions at all the appropriate times allowed by the rule.'*^ In addition to 
assuring that no claim of waiver can be made on appeal, making the motions 
creates the possibility of being the appellee, rather than the appellant, in any 
ensuing appeal. 

H. Effect of Bankruptcy Stay Issued During Pendency of Appeal 

When an entity files a bankruptcy petition, the federal court will issue an 
order staying all state court proceedings involving the debtor. '^° In two opinions 
issued during the reporting period, the supreme court determined that such stays 
would generally not prevent it from handing down an opinion involving a 
bankrupt entity. In Forte v. Connorwood Healthcare, Inc.,^^^ one of the 
defendant-appellees declared bankruptcy while the appeal was pending and a stay 
of all state court proceedings was issued.'" The supreme court nevertheless 
handed down its opinion in the appeal, stating that the opinion was rendered 
"with respect to the non-bankrupt parties only ."'^^ In Owens Corning Fiberglass 



144. Id. 2X424-25. 

145. Id. at 425. 

146. Id. at 426. 

147. /^. at 425-26. 

148. See Clarkson v. Dep't of Ins., 425 N.E.2d 203, 206 (Ind. Ct. App. 1981). 

1 49. See, e.g., 3 William F. Harvey, Indiana Practice § 50. 1 , at 463 (3d 2002) (referring 
to the filing of a Trial Rule 50(A) motion at the conclusion of one party's submission of evidence 
and again at the conclusion of the submission of all the evidence as a "sound practice"). 

150. See 1 1 U.S.C. § 362(a)(1) (2000). 

151. 745 N.E.2d 796 (Ind. 2001). 

152. /J. at798n.l. 

153. Id. (citing Seiko Epson Corp. v. Nu-Kote Int'l, Inc., 190 F.3d 1360, 1364-65 (Fed. Cir. 



1150 INDIANA LAW REVIEW [Vol. 35:1133 



Corp. V. Cobb,^^^ a federal stay was issued during the pendency of the appeal as 
a result of the bankruptcy filing of the sole defendant-appellant.'^^ The supreme 
court was not constrained by the stay from issuing its opinion, stating simply that 
the decision was "subject to applicable rules of bankruptcy law."'^^ 

/. Appellate Standard of Review Established in Counsel 
Disqualifications Cases 

The defendant in Robertson v. Wittenmyer^^^ filed a motion seeking to 
disqualify the plaintiffs attorney due to an alleged conflict of interest. The trial 
court granted the motion and an appeal ensued. '^^ On a question of first 
impression in Indiana, the court of appeals held that it would apply an abuse of 
discretion standard of review in determining whether error occurred.'^^ 

J. Law Firm Name a Necessary Part of Brief Captioning 

In Stone v. Stakes,^^ the court of appeals admonished counsel about failing 
to include the name of their law firm in the captioning of the briefs filed.'^' The 
court noted that the failure to include the firm name gives the sometimes- 
misleading impression of being a solo practitioner,'^^ in contradiction of the spirit 
of the supreme court's opinion in Cincinnati Insurance Co. v. Wills.^^^ 

K. Miscellanies of Note During the Reporting Period 

1. The Least and the Most at Stake. — The Damon Corporation (successful ly) 
appealed a judgment entered against it in the total amount of $121.14 plus 
costs. '^ The Kroger Company (unsuccessfully) appealed a compensatory 
damage judgment entered against it in the amount of $55 million. '^^ 

2. Best Use of a Pop Culture Reference. — During a dispute about a vehicle 
blocking traffic, Jaron Johnson made vulgar comments to the driver of another 
vehicle. The offended driver started to get out of his car, possibly to explain why 



1999)). 

154. 754 N.E.2d 905 (Ind. 2001). 

155. Seeid.dX9\6. 

156. Id. 

1 57. 736 N.E.2d 804 (Ind. Ct. App. 2000). 

158. /c/. at 805. 

159. Id. at 805-06. The trial court judgment was ultimately affirmed. Id. at 809. 

160. 749 N.E.2d 1277 (Ind. Ct. App.), aJTdon reh g, 755 N.E.2d 220 (Ind. Ct. App. 2001), 
trans, denied, 2002 Ind. LEXIS 182 (Feb. 15, 2002). 

161. Seeid2X\l%2n.l. 

162. Id 

163. 717N.E.2d 151, 165 (Ind. 1999). 

164. Damon Corp. v. Estes, 750 N.E.2d 891 (Ind. Ct. App. 2001). 

165. Ritter V. Stanton, 745 N.E.2d 828 (Ind. Ct. App. 2001), trans, denied, 2002 Ind. LEXIS 
100 (Ind. Jan. 31, 2002), cert, denied, 70 U.S.L.W. 3642 (U.S. 2002). 



2002] APPELLATE PRACTICE 1151 



it was unlikely he was going to comply with Johnson's explicit suggestions. 
Johnson lifted his jacket to show the driver an automatic weapon he was carrying 
and coolly stated, "Don't even think it."'^ A majority of a panel of the court of 
appeals reversed Johnson's conviction for intimidation, holding that Johnson's 
vague remark did not communicate a threat within the meaning of the applicable 
statute. '^^ In his dissent, the Honorable James Kirsch wrote: "In the Dirty Harry 
movies, Clint Eastwood's famous 'Go on . . . make my day' line was equally 
vague, but neither the derelicts invited to make Harry's day in the movie, nor the 
millions of movie goers who viewed it, had any doubts as to whether Harry was 
communicating a threat."'^* The supreme court unanimously agreed with the 
dissent, granting transfer and affirming the trial court. '^^ The high court also 
credited Judge Kirsch's Dirty Harry analogy in its opinion. '^° 

3. Appellate Brief-Writing Shortcoming of the Year. — ^The most frequently 
occurring problem with appellate briefs during the reporting period was 
improprieties in the statement of facts section, particularly, appellants' failures 
to prepare a concise but complete statement of facts in narrative form that is not 
argumentative, stated in a manner consistent with the applicable standard of 
review.'^' No fewer than twelve published opinions made specific reference to 
this problem. '^^ Doubtless, many such problems occurred without comment from 
the court of appeals or occurred in cases in which the opinion was unpublished. 
These documented reminders to counsel in the reported decisions probably 
represent the tip of an iceberg. 



166. 125'H.E2^9%A,9%6{\T\(\.Ci. AppXvacated and trans, granted,! A\ N.E.2d 1254(Ind. 
2000), trial court ajfd by 743 N.E.2d 755 (Ind. 2001). 

167. /f^. at 987. 

168. /c/. at 988 (Kirsch, J., dissenting). 

169. yo/iwjo/i, 743 N.E.2d at 755. 

170. 743N.E.2dat756n.l. 

171. See Ind. Appellate Rule 46(A)(6); App.R. 8.3(A)(5) (repealed Jan. 1, 2001). 

172. See Boczar v. Meridian St. Found., 749 N.E.2d 87, 92 (Ind. Ct. App. 2001); Walker v. 
Pillion, 748 N.E.2d 422, 424 n.3 (Ind. Ct. App. 2001 ); Elliott v. Sterling Mgmt. Ltd., 744 N.E.2d 
560, 562 n.l (Ind. Ct. App. 2001); Burrell v. Lewis, 743 N.E.2d 1207, 1209 (Ind. Ct. App. 2001); 
Dunson v. Dunson, 744 N.E.2d 960, 962 n.2 (Ind. Ct. App), trans, granted and vacated by 761 
N.E.2d 415 (Ind. 2001); S.E. v. State, 744N.E.2d 536, 538 n.l (Ind. Ct. App. 2001); Buchanan v. 
State, 742 N.E.2d 1018, 1021 n.2 (Ind. Ct. App.), trans, granted, 753 N.E.2d 13 (Ind. 2001), affd 
inpart and vacated in part, 767 N.E.2d 967 (Ind. 2002); Kanach v. Rogers, 742 N.E.2d 987, 988 
n.l (Ind. Ct. App. 2001); Major v. OEC-Diasonics, Inc., 743 N.E.2d 276, 278 n.3 (Ind. Ct. App.), 
trans, denied, 753 N.E.2d 15 (Ind. 2001); Speed v. Old Fort Supply Co., 737 N.E.2d 1217, 1218 
n. ! (Ind. Ct. App. 2000); Rogers ex rel. Rogers v. Cosco, Inc., 737 N.E.2d 11 58, 1 1 61 n. 1 (Ind. Ct. 
App. 2000), trans, denied, 761 N.E.2d 419 (Ind. 2001); Walker v. McTague, 737 N.E.2d 404, 406 
n.2 (Ind. Ct. App. 2000), trans, denied, 753 N.E.2d 8 (Ind. 2001 ). 



1152 INDIANA LAW REVIEW [Vol. 35:1133 



IV. Other Noteworthy Developments 

A. Some Change, Some Constancy in Leadership 

Every five years, the Indiana Judicial Nominating Commission must appoint 
a new chief justice for the state. '^^ The seven members of the Commission 
unanimously voted in December of 2001 to retain the Honorable Randall T. 
Shepard in the job he has held since IQS?.'^"* Shepard has now begun his fourth 
term as chief justice. '^^ No other jurist has served as chief justice of Indiana for 
so long.'^^ Shepard initially joined the court as an associate justice in 1985.'^^ 

The former chief judge on the Indiana Court of Appeals decided that his 
nine-year tenure was long enough. Effective January 1, 2002, the Honorable 
John Sharpnack voluntarily relinquished the reins ofappellate court leadership.*^* 
The fifteen-member court of appeals elected the Honorable Sanford Brook to the 
position of chief judge of the court.'^^ Chief Justice Randall T. Shepard stated, 
"I've always thought Judge Brook was one of the best and brightest the Indiana 
judiciary has to offer."'*° Judge Brook hopes to follow in the well-respected 
footsteps of Judge Sharpnack, who will now be free to focus on opinion writing. 
With regard to his predecessor. Judge Brook stated: "We're in wonderful shape 
in terms of how we manage our caseloads and how we go about writing our 
opinions."'*' 

B. Phasing in of New Jurisdictional Rule 

On November 7, 2000, the voters of Indiana gave fmal approval to an 
amendmenttothelndianaConstitution, limiting the obligatory criminal appellate 
jurisdiction of the Indiana Supreme Court to only those cases in which a sentence 
of death has been imposed.'*^ Previously, the state constitution required the 
State's highest court to assume direct jurisdiction over any case in which the 
appellant received a sentence in excess of fifty years on any one count.'" The 
purpose of the amendment was to free up the supreme court's docket to accept 
a broader range of civil and criminal cases based upon the importance of the legal 
questions presented through its discretionary authority to transfer jurisdiction 



173. IND. Const, art. VII, § 3. 

1 74. Denise G. Callahan, Commission Confirms Chief Justice Shepard, iND. LAW., Dec. 19, 
2001, at 5; Shepard to Continue as Chief Justice, RES GESTAE, Dec. 2001, at 29, 29. 

1 75. Shepard to Continue as Chief Justice, supra note 1 74, at 29. 

176. Id 

177. Id. 

1 78. Denise G. Callahan, New Chief Judge Takes Over on CA, iND. LAW., Jan. 2, 2002, at 3. 

179. Id. 

180. Id. 

181. Id. 

1 82. See Certification of Ratification (Nov. 7, 2000) (on file with the Indiana Secretary of 
State) (amending iND. Const, art. VII, § 4). 

1 83. iND. Const, art. VII, § 4 (amended 2000). 



2002] 



APPELLATE PRACTICE 



1153 



from the court of appeals.'*^ 

Once the constitutional amendment became effective, the court immediately 
changed its jurisdictional rule to route all criminal cases in which a fixed term of 
years has been imposed to the court of appeals.'*^ However, the new 
jurisdictional rule only became effective as to cases initiated with the filing of a 
notice of appeal on or after January 1, 2001 .'** All the cases already pending in 
the appellate courts, those being briefed, and those still in the record preparation 
process remained in their existing appellate pipeline. Therefore, despite the rule 
change, cases involving sentences in excess of fifty years continued to be sent to 
the supreme court at the usual rate throughout most of the year 2001 . 

Table 1 documents the number of direct criminal appeals transmitted to the 
supreme court over an eighteen-month time period ending January 1, 2002.'*^ 
Transmission to the court does not occur until the appeal is fully briefed. The 
table illustrates the effect of the court's phased-in approach to the jurisdictional 
change. 

Table 1. 

Direct Appeals Transmitted to the Indiana Supreme Court for Opinion 



Two-Month 
Period 


Criminal Appeals 

Transmitted to 

the Supreme Court 

for Opinion 


July-Aug. 2000 


21 


Sept.-Oct. 2000 


21 


Nov.-Dec. 2000 


25 


Jan.-Feb.2001 


23 


Mar.-Apr. 2001 


19 


May-June 2001 


20 


July-Aug. 2001 


20 


Sept.-Oct. 2001 


6 


Nov.-Dec. 2001 


2 



As Table 1 demonstrates, the number of transmitted new cases over which 
the supreme court exercised mandatory jurisdiction dropped off significantly in 
September 2001. Depending on the number of new capital and life without 
parole cases, the number of direct appeals transmitted to the supreme court for 



184. See Randall T. Shepard, Equal Access to the Supreme Court Requires Amending the 
Indiana Constitution, RES GESTAE, Sept. 2000, at! 2, 13. 

1 85. See IND. APPELLATE Rule 4(A)( 1 )(a) (amended Nov. 9, 2000). 

1 86. Order Amending Indiana Rules of Appellate Procedure (Ind. Nov. 9, 2000) (No. 94S00- 
0002-MS-77), available at http://www.in.gOv/judiciary/opinions/archive/l 1090001.ad.html. 

1 87. The information used to compile this table is on file with the Division of Supreme Court 
Administration, 315 State House, 200 W. Washington Street, Indianapolis, IN 46204. 



1154 INDIANA LAW REVIEW [Vol. 35:1133 



opinion as a matter of primary jurisdiction should remain at a fairly stable low 
number. Of course, the court will be required to vote and write on all the cases 
already transmitted under the old jurisdictional rule. However, once those cases 
have worked their way through the system, the supreme court can, for the first 
time in its history, fully realize its role as the court of last resort in Indiana. 

C. Appellate Dockets Online 

Checking the status of a pending appeal has been significantly easier since 
October 2001 . During that month, the chronological case summaries (dockets) 
of appeals before the Indiana Supreme Court, Indiana Court of Appeals, and 
Indiana Tax Court became available over the Internet.'** In addition to currently 
active appeals, the website includes docket information dating back many years. 

The website permits the user to search for appellate dockets by the appellate 
cause number, the trial court cause number, litigant name, or attorney name. 
Once an individual case is identified, a listing of all the filings and orders entered 
in the appeal is available, along with party and counsel information. This 
information is of great value in determining the status of a pending appeal, 
especially whether a petition to transfer jurisdiction to the supreme court has 
been filed, is pending, or may have been granted in a particular case. 

D. Webcasts of Oral Arguments 

Since September of 2001, the supreme court has been broadcasting its oral 
arguments live over the Internet. In addition, alt the video and audio recordings 
of the oral arguments that have been previously "webcasted" are being archived 
and may be viewed at any time via the Internet.'*^ Only a few states produce 
their oral arguments for broadcast in this manner. 

Conclusion 

The early indications are that the new Rules of Appellate Procedure are 
working well following this year of transition. By the end of their first year in 
operation, only minor clarifying amendments to the rules were necessary. Court 
reporters and trial court clerks seem to be handling their new duties, and 
attorneys are learning to use the new rules. The Indiana Court of Appeals 
continues to issue its opinions within a short time period from when each appeal 
is fully briefed.'^ In the coming years, the Indiana Supreme Court will become 



1 88. As of this writing, access to the online appellate docket is achieved by logging on to the 
Indiana Judicial System webpage located at http://www.in.gov/judiciary and clicking on the words 
"Online Docket: Case Search." 

189. As of this writing, access to the live webcasts and archived arguments is achieved by 
logging on to the webpage located at http://www.in.gov/judiciary/education and clicking on the 
graphic labeled "Watch Oral Arguments." Certain software is needed to view the arguments. 

190. See COURT OF APPEALS OF Indiana, 2000 Ann. Rep. 1 (2001 ) (stating that the average 
age of appeals pending before the court, measured from the date the appeal was fully briefed, was 



2002] APPELLATE PRACTICE 1155 



more active in the civil arena. Information about the status of cases pending on 
appeal is now available at the click of a button, and an attorney can watch an 
appellate oral argument from the comfort of her office. In sum, the rules and the 
tools are in place to make Indiana an accommodating place to practice appellate 
law. 



1.5 months). 



Recent Developments in Civil Procedure 

JoEllenLind* 
Table of Contents 

Introduction 1 158 

I. Indiana Supreme Court Decisions 1 160 

A. Decisions Clarifying Important Policies 1 1 60 

1 . Attorney's Fees . . . . » 1 160 

2. The Indiana Tort Claims Act and Trial Rule 65(C) 1 1 63 

3. Compensation to Appointed Counsel in Civil Matters 1 166 

4. Batson Challenges 1 169 

5. Tolling the Statute of Limitations 1171 

6. Nonparty Defendant Notice and Product Identification for 

Purposes of Summary Judgment 1 1 74 

7. Availability of Wrongful Death Remedies 1 176 

B, Other Significant Indiana Supreme Court Decisions 1181 

1. Appeals 1181 

2. Attorney Solicitation 1 1 85 

3. Corporate Privacy Rights and Injunctions 1 1 85 

.4. Juries , 1 186 

5. Law of the Case 1 186 

6. Local Rules 1 187 

7. New Trial Versus Judgment on Evidence 1 1 88 

8. Proceedings to Vindicate Minority Shareholder Rights 1 1 89 

9. Public Lawsuits 1 189 

10. Relief from Judgment Under Rule 60(B) 1191 

11. Statute of Limitations , 1 192 

12. Summary Judgment 1 193 

II. Selected Decisions from the Indiana Court of Appeals 1 194 

A. Amendment of Pleadings 1 194 

B. Arbitration 1 196 

C Asbestos 1 196 

D. Attorneys' Fees 1200 

E. Bankruptcy Stay 1202 

F. Burden of Proof 1203 

G. Discovery 1204 

K Findings 1205 

/. Injunctions, Declarations, and Other Special Relief 1206 

J. Instructions 1208 

K. Judgment on the Evidence 1208 

L Jurisdiction 1209 

1. "Jurisdiction over the Case" 1209 

2. Personal Jurisdiction 1210 

3. Subject Matter Jurisdiction 1211 



Professor of Law, Valparaiso University School of Law. 



1158 INDIANA LAW REVIEW [Vol. 35:1 157 



M Limitation of Actions 1213 

N. Local Rules 1214 

O. Preclusion 1215 

P. Real Party in Interest 1216 

Q. Right to Counsel 1217 

R. Service/Notice 1218 

S. Settlement 1218 

T. Standard of Review 1219 

U. Standard of Review Where No Appellee Brief 1220 

V. Standing 1220 

W. Summary Judgment 1221 

X. Tort Claims Act 1224 

III. Indiana's New Jury Rules 1224 

IV. Other Indiana Rule Changes 1227 

V. Federal Practice 1230 

A. Procedural Legislation 1230 

1 . Resident Aliens and the Diversity Statute 1 230 

2. Multiparty, Multiforum Litigation 1230 

3. Class Actions 1230 

4. Television in the Courtroom 123 1 

5. Electronic Communications 123 1 

6. Government Lawyers 1 23 1 

7. Terrorism 123 1 

B. U.S. Supreme Court and Seventh Circuit Decisions 123 1 

C Rules Changes 1236 

1 . The Federal Rules of Civil Procedure ("FRCP") 1236 

2. Seventh Circuit and Local Rule Matters 1237 

Introduction 

In his January 2002 address to the legislature on the state of the judiciary, 
Chief Justice Shepard described the evolution of Indiana's court system as a 
process of "re-constructing courts so substantially that the change is a matter of 
kind and not of degree."' Courts now foster public policy not just by rendering 
decisions for discrete controversies, but by connecting vitally to the community 
through a series of innovative programs. It seems especially fitting in the wake 
of recent events that Indiana's judiciary should strive to promote the rule of law 
through a series of projects to modernize and humanize the delivery of legal 
services in the state. Many of these programs came to fruition in 2001 , and many 
others have made substantial progress. They will affect the nature of civil 
practice substantially now and for the future. 

For instance, after four years of work, the "Juries for the 21st Century 



1. Chief Justice Randall T. Shepard, Address to the Indiana Legislature, State of the 
Judiciary, The Changing Nature of Courts (Jan. 16, 2002) [hereinafter "Address"], available at 
http://www.in.gov/judiciary/supreme/02stjud.html. 



2002] CIVIL PROCEDURE 1159 



Project" has been completed, and the court has issued a coherent set of Indiana 
Jury Rules in response.^ The Family Court Project has proved so successful that 
it has been extended to five additional counties.^ The Indiana Pro Bono 
Commission distributed its first funds to local communities to begin the delivery 
of legal services/ In response to technological change and as part of a broader 
move to improve the statewide management of the courts, the Judicial 
Technology and Automation Committee ("JTAC"), headed by Justice Sullivan, 
is promoting the advantages of electronic communications and records forjudges 
and lawyers. These are just a few of the efforts shaping the nature of courts in 
the state. Aside from these programs, the Indiana Supreme Court has 
promulgated important rule changes affecting not just juries but also the trial 
rules,^ administrative rules,^ and even rules for digital transcripts on appeal.^ In 
addition, it has revised the process of appeal from the Indiana Tax Court.* 

The decisions rendered in 2001 by the Indiana Supreme Court itself are 
complex and cover a broad array of topics; throughout they show a keen 
sensitivity to the capacity of the judiciary to act as a "strong partner" with the 
executive and legislative branches.' One of the most important themes 
underlying the court's 2001 cases is the impact of civil litigation on 
governmental organizations and the need to mediate between the ability of 
citizens to curb improper official action with the freedom of public entities to 
function. 

The Indiana Court of Appeals has been operating under the new appellate 
rules for a year and has issued numerous decisions. Many of them cover 
technical issues in civil procedure — for instance, in 2001 a remarkable number 
of appellate cases dealt with amendment of pleadings'*^ — ^while others touch on 
some of the most controversial policy questions that a reviewing court could be 
asked to resolve.'' 

At the federal level, court decisions and proposed legislation threatened 
increased barriers to plaintiffs' ability to bring actions, particularly class actions. 



2. IN Order 01-19 (Dec. 2 1 , 200 1 ). See also Citizens Commission for the Future of Indiana 
Courts, Juries for the 2 1st Century: Reports of the Citizens Commission for the Future of Indiana 
Courts and the Judicial Administration Committee of the Indiana Judicial Conference, [hereinafter 
Reports], available at http://www.state.in.us/judiciary/citizen/; and Comparison of 
Recommendation, available at http://www.state.in.us/judiciary/citizen/comparison.html. 

3 . Press Release, Indiana Supreme Court, Division of State Court Administration, Supreme 
Court Family Court Project Expands (Nov. 16, 2001), available at http://www.in.gov/judiciary/ 
supreme/press/prl 1 1601.html. 

4. See Address, supra note 1 . 

5. See infra notes 644-67 and accompanying text. 

6. See infra notes 665-67 and accompanying text 

7. See i/i/ra notes 668-69 and accompanying text. 

8. See infra notes 663-64 and accompanying text. 

9. See Address, supra note 1 . 

10. See infra?m\\A. 

11. 5ee m/ra Part II.C (regarding the plethora of asbestos cases). 



1 160 INDIANA LAW REVIEW [Vol. 35: 1 157 



Federalism continued as a theme in Supreme Court opinions as well. However, 
on the rulemaking level, less significant changes were made than in 2000. 

I. Indiana Supreme Court Decisions 

A, Decisions Clarifying Important Policies 

1. Attorney's Fees. — ^The decision by the Indiana Supreme Court with the 
largest policy implications may well be State Board of Tax Commissioners v. 
Town of St. John}^ It rejects the "private attorney general" exception to the 
"American Rule" on fee shifting. Contrary to the legal regimes of other 
industrialized democracies — ^most notably England — ^the winner of a lawsuit in 
an American court is typically prohibited from recovering attorney's fees from 
the loser, unless there is a specific statute or contract provision authorizing fee 
shifting.'^ The rationale for this approach is that fee shifting would have a 
chilling effect on plaintiffs' willingness to bring claims that deserve to be 
litigated but might still be lost. If the cost of failure would bring with it the risk 
of a hefty "fine" in the form of having to pay the winner's fees, the strong 
commitment of the American legal regime to open access to the courts might be 
frustrated.'* Indiana follows the American Rule.'^ 

Despite the American Rule, courts have developed common law exceptions 
to promote competing goals, most notably preventing unjust enrichment and 
sanctioning bad faith conduct in litigation. For instance, when litigation results 
in the generation of a common store of money to be distributed to a class, the 
"common fund" exception allows the court to award the named plaintiff 
attorneys' fees from the fund. This prevents class members from being unjustly 
enriched by not having to pay their fair share of the costs of the litigation.'^ 
Similarly, when litigation results in a nonmonetary common benefit that aids an 
ascertainable group, courts have applied various techniques to shift fees to the 
group for the same reason.'^ Expenses for litigation frivolously initiated can be 
recovered in a separate suit for malicious prosecution, and fees are often awarded 



12. 751 N.E.2d 657 (Ind. 2001). 

13. 5ge Alyeska Pipeline Serv. Co. V. Wilderness Soc'y, 421 U.S. 240, 257 (1975); see a/jo 
John Yukio Gotanda, Awarding Costs and Attorneys' Fees in International Commercial 
Arbitrations, 21 MiCH. J. InT'l L. 1 (1999). 

1 4. See Gotanda, supra note 1 3, at 38. n. 1 72. 

15. See Gavin v. Miller, 54 N.E.2d 2^7, 280 (Ind. 1 944). 

16. See Douglas La ycxxk. Modern American Remedies : Cases and Materials 869-70 
(2ded. 1999). 

17. See, e.g.. Mills v. Elec. Auto-Lite Co., 396 U.S. 375 (1970) (fees assessed against 
corporation and thus the cost of litigation that benefitted shareholders of the corporation 
derivatively shifted to them); Cmty. Care Ctrs., Inc. v. Ind. Family & Soc. Servs. Admin., 716 
N.E.2d 519 (Ind. CL App. 1999). As the Indiana Supreme Court noted in Town of St. John, 
sometimes the common benefit theory overlaps or is confused with the private attorney general 
exception. See Town of St. John, 751 N.E.2d at 658 n.3. 



2002] CIVIL PROCEDURE 1161 



as a form of sanction against a party's misconduct in litigation as part of the 
courts' power to control the behavior of those who appear before them.'^ The 
most controversial and least recognized common law exception to the American 
Rule is the idea that fees can be shifted when a litigant creates a public good by 
acting as a private attorney general. 

One functions as a private attorney general when one initiates litigation that 
would normally be brought by the government to promote important public 
policies, but the government is either unable or unwilling to bear the enforcement 
burden involved.'^ The private attorney general exception became extremely 
significant in the late 1960s and early 1970s — especially at the federal 
level — ^when it was used to justify the award of fees in public impact litigation.^^ 
However, the doctrine posed a substantial risk to public entities, for they were 
often the targets of such lawsuits.^' In 1975, the U.S. Supreme Court prohibited 
fee shifting in federal courts on a private attorney general theory through the 
landmark case, Alyeska Pipeline Service Co. v. Wilderness Society?^ This 
decision resulted from a challenge to the Alaska oil pipeline on environmental 
grounds. Pursuant to federalism principles, the case had no binding effect on the 
states, allowing them to retain the freedom to entertain common law exceptions 
to the American Rule for state-based claims litigated in state courts.^^ Until the 
Indiana Supreme Court's decision in Town of St. John^^ it was not clear what the 
status of the private attorney general exception was in Indiana. 

The fee issue in Town of St. John arose from the protracted litigation that 



18. Indiana has codified fee awards based on the notion of "obdurate" litigation behavior. 
IND. CODE §34-52-1-1 (1998). 

19. See, e.g., Serrano v. Priest, 569 P.2d 1304 (Cal. 1977) (class action brought to reform 
California's method of public school financing justified fee shifting on private attorney general 
theory). 

20. See, e.g., Lee v. Southern Home Sites Corp.. 444 F.2d 143 (5th Cir. 1971) (fees shifted 
where private litigation successfully challenged racial discrimination in home sales). 

21. To the extent constitutional rights were the subject of litigation, the state action 
requirement insured the presence of a governmental entity as a defendant. Moreover, when suits 
involved statutes or regulations, the governmental agency charged with their enforcement might be 
joined as a party. See, e.g.. La Raza Unida v. Volpe, 57 F.R.D. 94 (N.D. Cal. 1972) (litigants 
procured injunction prohibiting the Secretary of Transportation and others from violating housing 
displacement and relocation legislation and were awarded attorneys' fees), ajf'd, 488 F.2d 559 (9th 
Cir. 1973). 

22. 421 U.S. 240 (1975). In response to the holding of Alyeska, Congress passed the Civil 
Rights Attorneys Fees Award Act of 1976, 42 U.S.C. § 1988. It allows for one-way fee shifting in 
civil rights cases. 

23. Several federal circuit courts treat the issue of attorneys' fees as procedural under the £r/e 
doctrine and so do not follow state practice on fees in diversity actions. This is apparently the 
position of the Seventh Circuit, as least where a Federal Rule of Civil Procedure conflicts with a 
state approach. See Minnesota Power & Light Co. v. Hockett 14, Fed. Appx. 703, 706 (7th Cir. 
2001) (unpublished opinion) (declining to apply Indiana Trial Rule 65(C) as a basis for fees). 

24. 751 N.E.2d 657 (Ind. 2001). 



1162 INDIANA LAW REVIEW [Vol. 35:1 157 



invalidated Indiana's method of property taxation.^^ The prevailing taxpayers 
requested an award of their attorneys' fees from the tax court and it granted the 
request. The State Tax Board sought review in the Indiana Supreme Court, 
which in an opinion by Chief Justice Shepard, rejected the private attorney 
general exception to the American Rule.^^ 

The court conceded that some Indiana appellate cases appeared to allow the 
private attorney general exception, but it characterized those opinions as 
involving mere dicta.^^ Thus, to allow the taxpayers' request would be to adopt 
the exception, not just retain it. Chief Justice Shepard canvassed those states that 
follow and reject the private attorney general exception. Those who allow it, do 
so to motivate private litigants to undertake complex litigation to vindicate 
important public policies, or, in the words of New Hampshire's supreme court, 
to insure funding for lawsuits designed to "guard the guardians."^* On the other 
hand, states rejecting the doctrine are concerned with "unbridled judicial 
authority to 'pick and choose' which plaintiffs and causes of action merit an 
award . . . and would not promote equal access to the courts . . . [because] it lacks 
sufficient guidelines . . . ."^' The exception would also impose a burden on 
judicial resources, forjudges would have to revisit the merits of each case to 
determine whether it sufficiently promoted the public good.^° 

In light of these competing concerns, Chief Justice Shepard characterized the 
private attorney general exception as a "double-edged sword," and concluded that 
there is "no proven need" in Indiana for it, given the numerous statutes that 
already allow for fee-shifting: 

It is apparent that the General Assembly knows how to create statutory 
exceptions to the American rule, and that it has been willing to do so 
when it deems appropriate. Taking into account the plethora of statutory 
provisions already on the books, we are not persuaded that the judiciary 
needs to adopt a sweeping common-law exception to the American rule 
for all public interest litigation.^' 

Moreover the test commonly used for applying the doctrine gives rise to a 
"slippery slope,"^^ for it injects subjective determinations as to what is socially 
important into judicial decisions, it expends judicial resources, and it raises the 
questions of how to determine what is a benefit and to whom the benefit should 



25. State Bd. of Tax Comm'rs v. Town of St John, 751 N.E.2d 657, 657, 658 (Ind. 2001). 

26. /^. at 664. 

27. /fif. at 659-60. 

28. Id. at 661 (quoting Claremont Sch. Dist. v. Governor, 761 A.2d 389, 394 (N.H. 1999)). 

29. Id. (quoting N.M. Right to Choose v. Johnson, 986 P.2d 450, 459 (N.M. 1999)). 

30. Id 

31. Id 2X662. 

32. The test looks at **( 1 ) the societal importance of the vindicated right; (2) the necessity for 
private enforcement and the accompanying burden; and (3) the number of people benefitting from 
the decision." Id. 



2002] CIVIL PROCEDURE 1163 



be given, among other problems." 

The court did not emphasize the oft-cited rationale for the private attorney 
general exception — ^that it is the only way to obtain enforcement of important 
rights and policies in the face of recalcitrant governmental entities that are 
unwilling, or unable, to act.^"* The court conceded that private litigation was 
necessary to force a change in the way the state assessed the value of property in 
the very case before it," however, it was also concerned that the private attorney 
general justification could make Indiana a magnet for litigators who might be 
more motivated by the prospect of fees than vindicating rights.^^ It is fair to infer 
that one of the court's underlying concerns was the negative impact on 
governmental functioning that a geometric increase in public interest lawsuits 
might bring. 

2. The Indiana Tort Claims Act and Trial Rule 65(C). — ^Another decision 
that echoes a concern for the impact of procedure on governmental functioning 
is Noble County v. Rogers}^ Rogers raised the issue of whether a governmental 
entity that has procured an invalid temporary restraining order or preliminary 
injunction is immune under the Indiana Tort Claims Act from paying the 
wronged party damages in compensation under Trial Rule 65(C). On its surface 
it looks quite different from the policies surrounding the private attorney general 
doctrine, but at a higher level of description, the questions are the same: to what 
extent and for what goals should civil litigation be allowed to affect — even 
burden — ^the activities of public entities? 

The remedies for an improperly issued injunction specified in Indiana Trial 
Rule 65(C) are quite unique. In most jurisdictions public entities need not 
procure a bond in order to seek injunctive relief In those jurisdictions,^* when 
a preliminary injunction has been obtained by a government agency in error, 
there is no remedy for the wronged defendant for there is no bond to satisfy any 
claim for compensation and the governmental entity is typically exempted from 



33. Id. at 662>64. In this discussioil the court also included an intriguing comparison of the 
nature and importance of Indiana constitutional and statutory rights. Id. at 661-62. To remove 
some of the court's concems about subjective evaluations of the public good that could be 
occasioned by the doctrine, the taxpayers had asked that the private attorney general concept be 
limited to constitutional rights. Id. at 662. But, according to Chief Justice Shepard, 

because statutory law is far more easily updated than constitutional law, in many areas 
it more accurately reflects current social priorities .... It does not belittle the rights 
embodied in the Indiana Constitution to say that we cannot presume that constitutional 
mention automatically equates to the degree of current social importance. 
Id 

34. 5ge Serrano V. Priest, 569 P.2d 1304, 1314(Cal. 1977). See gewera//y Matthew D.Zinn, 
Policing Environmental Regulatory Enforcement: Cooperation, Capture, and Citizen Suits, 21 
Stan. Envtl. L.J. 81 (2002). 

35. Town ofSt. John, 75\}^.E.2d at 663. 

36. Id at 662. 

37. 745 N.E.2d 194 (Ind. 2001). 

38. /flf. at 201 (Boehm J., dissenting). 



1 164 INDIANA LAW REVIEW [Vol. 35:1 157 



paying monies in the absence of a bond.^' However, Indiana Trial Rule 65(C) 
specifically provides: "No such security [bond] shall be required of a 
governmental organization, but such governmental organization shall be 
responsible for costs and damages as may be incurred or suffered by any party 
who is found to have been wrongfully enjoined or restrained. '"^^ But, in Rogers 
the county argued that this rule violates the immunity granted to it by the ITCA,'*' 
because the remedy given a defendant in the trial rule amounts to a tort. The 
court of appeals disagreed, characterizing the measure as procedural ."^^ 

By a 3-2 margin and in an opinion crafted by Justice Sullivan, the court 
mediated between the need to protect government employees from "harassment 
by litigation or threats of litigation over decisions made while in the scope of 
their employment,"*^ and the need to preserve the courts' power to sanction 
litigants for improper behavior.^ The court chose not to explicitly characterize 
the rule as either one of procedure or one of tort — a difficult task since it shows 
traits of both and employs the term "wrongful." Instead, Justice Sullivan limited 
the application of Rule 65(C) to injunctions procured by governmental entities 
acting in bad faith. Only in those cases would the ITCA fail to shield 
government entities from paying compensation. This was necessary in his view 
because, otherwise, the ITCA would be constitutionally infirm."** 

The majority noted that the legislature's power to immunize government has 
"few limits."*^ However, one of those limits stems from the courts' ability to 
sanction those appearing before them, a capacity essential to the courts' 
independent function in government.'*^ Moreover, a long line of Indiana cases 
makes it clear that the government and its lawyers are subject to sanctions for 
litigation misconduct.** An accommodation through statutory interpretation was 
warranted: 

The parties ask us to resolve this apparent conflict by applying either the 
Trial Rule or the ITCA to the exclusion of the other. This posture puts 
into tension the powers of coordinate branches of our state government 
by asking us to ignore the pronouncement of one such branch. However, 
we have long held that "if an act admits of two reasonable 
interpretations, one of which is constitutional and the other not, we 



39. Id at 202. 

40. IND. TRIAL Rule 65(c). 

41. iND. CODE §§ 34-13-3-1 to -25 (1998). 

42. Rogers, 745 N.E.2d at 196. 

43. Id at 197 (quoting Celebration Fireworks Inc. v. Smith, 727 N.E.2d 450, 452 (Ind. 
2000)). 

44. Id 

45. IdsLi\99. 

46. Mat 197. 

47. /^. at 197-98. 

48. /d at 198-99. 



2002] CIVIL PROCEDURE 1 1 65 



choose that path which permits upholding the act.'"*^ 

The key was the interpretation of the rule's reference to "wrongfully." The court 
explicitly construed the meaning of that term in Rule 65(C) to require 
compensation only when the government acts "with such bad faith and malice 
that their actions undermine the authority of the court issuing the restraining 
order or inj unction. "^° This holding created an appropriate "balance" between 
the legislative policy of the ITCA and the judiciary's role and inherent power to 
sanction litigants. Thus, only in "rare cases" when the acts of government are so 
egregious as to "threaten the proper functioning of the court" would immunity 
be stripped and compensation would lie under Trial Rule 65(C).^' 

In an intriguing dissent joined by Justice Dickson, Justice Boehm argued that 
the remedial provisions of 65(C) ought to be definitively characterized because 
when identified, they sound in contract, not tort. Thus, Rule 65(C) compensation 
is totally outside the ICTA." After canvassing the practice of other jurisdictions 
on injunction bonds and governmental liability, as well as the histories of the 
ICTA and Trial Rule 65(C), Justice Boehm concluded that compensating a party 
affected by an erroneously issued injunction is a quid pro quo voluntarily 
undertaken by the plaintiff to obtain provisional relief.^^ Noting that in the past, 
Indiana law required governmental entities to post a bond, he asserted that: 

The 1970 changes [to Trial Rule 65] merely replaced the bond 
requirement, which plainly directed a contractual obligation of the 
governmental entity with a simple requirement that the entity reimburse 
directly. Basic contract principles and the doctrine that statutes are to be 
construed in harmony . . . lead me to conclude that the action for 

"wrongful injunction" is not a tort If the legislature wants to change 

that rule of substantive law, it may do so, but the laws on the books do 
not provide the immunity Noble County claims.^* 

This was because Noble County voluntarily accepted the arrangement imposed 
by the rule^^ when it sought a restraining order against Rogers. Moreover, in 
Justice Boehm's view, removing governmental immunity solely for bad faith 
conduct still conflicts with the ITCA.^^ 

Regardless of which category best identifies the remedy of Rule 65(C), it is 
important to note that the majority 's holding is limited to governmental entities.^^ 
Where private parties are involved, compensation from a bond ought to be 



49. Id. at 196, 197 (quoting Price v. State, 622 N.E.2d 954, 956 (Ind. 1993)). 

50. /rf. atl97. 

51. Mat 199. 

52. Id. at 200, 201, 204 (Boehm, J. dissenting). 

53. Mat 202-04. 

54. Id 

55. Id 

56. Mat 205-07. 

57. Matl97n.4. 



1166 INDIANA LAW REVIEW [Vol. 35:1157 



available whenever it is later determined that a temporary restraining order or 
preliminary injunction should not have issued. 

3. Compensation to Appointed Counsel in Civil Matters. — Another opinion 
showing the tension statutory enactments can create over the power of courts as 
a separate and co-equal branch of government is Shales v. Sholes,^^ decided in 
December 2001 . It has far reaching significance for pro bono practice because 
it clarifies whether an indigent person must have counsel appointed in a civil 
matter and whether appointed counsel must be compensated. 

Sholes involved a divorce sought by the wife of an inmate serving a life 
sentence in state prison.^^ He filed two requests to be allowed to proceed as a 
pauper and he also requested a free record.^ The trial court made no findings on 
Sholes' indigency status and denied the request to furnish a record. A judgment 
was entered in which the wife received virtually all the marital property and all 
of Sholes' retirement funds. Sholes moved to have the judgment set aside and 
also requested appointment of counsel. The trial court did not set the judgment 
aside and denied the request for counsel without making findings. The court did, 
however, find that Sholes lacked sufficient funds to obtain an appellate transcript 
and ordered one at public expense.^' On review, the Indiana Court of Appeals 
reversed the trial court's decision not to set the judgment aside,^^ basing its 
holding on Indiana Code section 34-1 0- 1 , which governs appointment of counsel 
for indigents.^^ It concluded that because Sholes had presented sufficient 
evidence of his indigency, the judgment should have been set aside.^ 
Accordingly, all matters after the request for counsel were vacated. 

On transfer, the Indiana Supreme Court stated that: 

[I]n ruling on an application for appointment in a civil case, the trial 
court must determine whether the applicant is indigent, and whether the 
applicant, even if indigent, has means to prosecute or defend the case. 



58. 760N.E.2d 156 (Ind. 2001). 

59. /^. at 157. 

60. Id. at 157-58. 

61. Mat 158. 

62. Id. 

63. iND. Code §34-10-1-1 (1998) provides: 

Sec. 1 . An indigent person who does not have sufficient means to prosecute or defend 

an action may apply to the court in which the action is intended to be brought, or is 

pending, for leave to prosecute or defend as an indigent person. 

Sec. 2. If the court is satisfied that a person who makes an application described in 

section 1 of this chapter does not have sufficient means to prosecute or defend the 

action, the court shall: 

(1 ) admit the applicant to prosecute or defend as an indigent person; and (2) appoint an 

attorney to defend or prosecute the cause. 

All officers required to prosecute or defend the action shall do their duty in the case 

without taking any fee or reward from the indigent person. 

64. 5/zo/e5,760N.E.2datl58. 



2002] CIVIL PROCEDURE 1167 



If those criteria are met, and there is no funding source or volunteer 
counsel, the court must determine whether the mandate of expenditure 
of public funds is appropriate in the case." 

The court reached this result through a complex series of arguments. 

The first issue the court considered was whether appointment of counsel in 
a civil case is mandatory or discretionary under Indiana Code section 34-10-1 . 
It noted that in 1999, the court of appeals had determined in Holmes v. Jones^ 
that the plain language of the statute mandated appointment of counsel and did 
not leave the question to trial court discretion.^^ However, the process of 
appointment requires a multilevel inquiry. As Justice Boehm opined, 
appointment of counsel is not automatic upon indigency status but also requires 
that the indigent be without "sufficient means" to proceed.^* How could one who 
is indigent have sufficient means? That might occur when the matter is one 
typically undertaken by nonindigents on a pro se basis (e.g., small claims 
matters), funded through a contingent fee, one to which a fee shifting statute 
applies, or is one for which a nonpaid volunteer attorney is available.^^ However, 
if both requirements are met — indigency and insufficiency— an attorney must be 
appointed. The question then becomes whether the attorney must be 
compensated. It is here that controversy arises and an element of court discretion 
is re- introduced. 

According to the express terms of Indiana Code section 34-10-1-2 an 
appointed attorney is prohibited from collecting a "fee or reward from the 
indigent person."^° In Justice Boehm 's view, this language should not prohibit 
payment from other sources for several reasons. First, courts have inherent 
power to "incur and order paid all such expenses as are necessary for the holding 
of court and the administration of its duties,"^' which has been codified in Trial 
Rule 60.5.^^ Second, no other legislation prohibits compensation. Third, if the 



65. Id. 2X151. 

66. 719 N.E.2d 843 (Ind. Ct. App. 1999). 

67. Notwithstanding that the legislature attempted to modify this result, these attempts were 
not successful, so in the court's view, the statute had to be taken at face value, Sholes, 760 N.E.2d 
atl59n.2. 

68. Mat 161. 

69. Id 

70. iND. CODE §34-10-1-2 (1998). 

71 . Sholes, 760 N,E.2d at 164 (quoting Knox County Council v. State ex rel. McCoimick, 
29N.E.2d405,413(1940)). 

72. Trial Rule 60.5(A) states: 

Courts shall limit their requests for funds to those that are reasonably necessary for the 
operation of the court or court-related functions. Mandate will not lie for extravagant, 
arbitrary or unwarranted expenditures nor for personal expenditures (e.g., personal 
telephone bills, bar association memberships, disciplinary fees). 
Prior to issuing the order, the court shall meet with the mandated party to demonstrate 
the need for said funds. 



1 168 INDIANA LAW REVIEW [Vol. 35: 1 157 



statute were read to require uncompensated appointment, then it would be 
unconstitutional for impressing the services of lawyers in violation of article 1, 
section 21 of the Indiana Constitution.^^ 

While Justice Boehm recognized that attorneys have a duty to provide pro 
bono services — a point that was central to the dissent — he characterized it as an 
obligation of the whole profession that could not be imposed on a single attorney 
without violating the Indiana Constitution. In reaching this conclusion, the 
majority characterized the long and complex history of Indiana's commitment to 
making counsel available to litigants quite differently from Justice Dickson's 
characterization in dissent. The majority alleged that early cases construing 
article 1, section 21 of the 1851 Indiana Constitution stand for the proposition 
that attorneys, like all other persons, cannot have their labor "conscripted" by the 
states without compensation. Although the populist view of the profession (one 
which had allowed any voter to function as an attorney) was eventually replaced 
with a regulatory view that includes pro bono service as an ethical requirement,^"* 
that change did not impliedly except lawyers from the prohibition of unpaid 
services contained in article 1, section 21.^^ 

In making this analysis, Justice Boehm had to confront Board of 
Commissioners v. Pollard J^ which Justice Dickson read (along with other cases) 
to authorize mandatory unpaid representation.^^ Justice Boehm distinguished its 
facts, in that the Pollard attorney had already rendered the services in issue but 
had not been paid by the county. The Pollard court did not require the county 
to pay, distinguishing the payment obligation for criminal from civil cases. 
Nonetheless in dicta it stated, "An attorney at law cannot, in this state, be 
compelled by an order of a court to render professional services without 
compensation."^* Noting that the Pollard court did not have to answer the 
question of what to do when no volunteer is available. Justice Boehm 
distinguished the case by concluding: "Although Pollard refused to hold that the 
statute required payment in civil cases, it also refused to press attorneys into 
uncompensated service."^^ Since Pollard, the inherent power of Indiana courts 
to order payment of monies to assist in the administration of justice has been 
established. Given this history, the Sholes majority found that when Indiana 



Trial Rule 60.5(B), in relevant part, states: 

Whenever a court . . . desires to order either a municipality, a political subdivision of 
the state, or an officer of either to appropriate or to pay unappropriated funds for the 
operation of the court or court-related functions, such court shall issue and cause to be 
served upon such municipality, political subdivision or officer an order to show cause 
why such appropriation or payment should not be made. 

73. IND. Const, art. 1,§21. 

74. 5/io/ej,760N.E.2d at 163-64. 

75. Mat 164. 

76. 55 N.E. 87 (Ind. 1899). 

77. Sholesyieo N.E.2d at 167 (Dickson, J., dissenting). 

78. Id. at 162 (quoting Bd. of Comm'rs v. Pollard, 55 N.E. 87, 87 (Ind. 1899)). 

79. Id. 



2002] CIVIL PROCEDURE 1 1 69 



Code section 34-10-1 mandates a lawyer's appointment in a civil matter, the 
attorney must be compensated, unless she or he volunteers to serve without pay .^° 
This, however, does not end the analysis. 

As an additional tier of inquiry the court reasoned that when an appointed 
lawyer seeks payment under Trial Rule 60.5, payment is only justified when 
circumstances warrant the serious measure of a court ordering compensation 
from general public funds. This final level of inquiry re-introduces discretion in 
the trial court's process of determining whether counsel must be made available 
in a civil matter. This is permissible because appointment of counsel in a civil 
case is statutory, not constitutional, and so can be balanced against other 
concerns: 

In most civil cases ... we have only a statutory directive, and there is no 
constitutional requirement that counsel be appointed for indigent 

litigants As explained, before appointing counsel, the trial court is 

to consider the type of case presented to determine whether even an 
indigent applicant has "sufficient means" to proceed without appointed 
counsel. In addition, the trial court is obliged to consider whether any 
specific fiscal or other governmental interests would be severely and 
adversely affected by a Trial Rule 60.5 order requiring payment of any 
appointed counsel.*' 

The majority suggested several relevant factors for courts to consider, many of 
which involve the merits of the action at issue — ^whether, inter alia, the matter 
is "frivolous," whether it raises legal principles that are "insignificant," and 
whether it presents a "vendetta."*^ The court ordered a remand in Sholes for a 
determination of all these issues but underscored that: "If no uncompensated 
attorney is willing to serve and the trial court finds itself unable to order 
payment, then ... the statutory obligation to appoint counsel fails as an 
unconstitutional order to attorneys to work without compensation."*^ Justice 
Boehm argued that if the statute were interpreted to obviate courts' discretion at 
this level, it would be an unconstitutional intrusion on the judiciary's inherent 
powers to administer justice.*^ Thus, while the Sholes majority requires 
appointment of counsel in a proper civil case, an indigent's actual ability to 
obtain representation is by no means assured. 

4. Batson Challenges. — A decision that directly connects constitutional 
rights with procedural issues is Ashabraner v. Bowers,^^ a case that underscores 
the concern for diverse juries emanating from the Indiana Jury Rules themselves. 
The sequence of events in Ashabraner is important. The lawsuit was between 



80. 


Id at 166. 


81. 


Id at 165-66. 


82. 


Id at 166. 


83. 


Id 


84. 


Id 


85. 


753 N.E.2d 662 (Ind. 2001), 



1170 INDIANA LAW REVIEW [Vol. 35:1157 



two motorists whose cars collided.*^ During voir dire, the defendant's attorney 
exercised a peremptory challenge to the sole African-American potential juror. 
The plaintiff — ^who was not of the same race as the defendant — made a 
^'BatsorC'^^ challenge to the striking of the juror, arguing that the juror's answers 
showed her to be neutral and intelligent; the inference was that the only basis for 
striking the juror must have been her race.'* Defense counsel gave no real reason 
for the? challenge'^ but simply assured the court it was not race-based. The trial 
court overruled the plaintiffs objection stating, "peremptory challenges can be 
utilized for any reason."^ This statement indicated that the trial court had not 
followed the mandate of Batson v. Kentucky ^^ which establishes a two-tiered 
procedure for questioning. First, a prima facie case must be made by the 
objecting party that a challenge is race-based. If that is accomplished, the burden 
shifts to the peremptory challenger to give a race-neutral reason for the challenge. 
Batson was extended to civil cases in Edmonson v. Leesville Concrete Co.^^ 

On review the court of appeals clearly applied Batson, but concluded that the 
plaintiff had not made a prima facie case that the challenge was race-based, so 
the defendant did not have to give a race neutral reason. 

On transfer and by a 3-2 decision, the Indiana Supreme Court found the court 
of appeals' ruling erroneous. First, the court noted that McCants v. State^^ 
established that removing the sole juror of color from the venire is enough to 
establish prima facie racial discrimination — ^at least in a criminal matter. In the 
civil context, it is "evidence of discrimination that must weigh in the balance."^"^ 
This evidence, coupled with the juror's neutral answers on voir dire and her 
apparent competency, was sufficient to shift the burden to the defendant to give 
a race-neutral explanation. The majority was particularly concerned that: 

"[W]hen a Batson objection has been made, [the objecting party] is 
entitled to the benefit of the proposition that peremptory challenges 
allow those inclined to discriminate to do so." By fmding that a party 
has established a prima facie case where the only minority juror gave 
"neutral" answers to jury selection questions but was removed anyway, 
we recognize that there may be an unconstitutional discrimination where 



86. Id. at 664. 

87. This is the informal reference to the requirement of Batson v. Kentucky, 476 U.S. 79 
(1986), a criminal case, that when a pattern of peremptory challenges suggests racial bias, the 
challenger must provide a race-neutral explanation. 

88. Ashabraner, 753 N.E.2d at 665. 

89. Later, defense counsel explained that the strike was exercised in order to make room for 
another potential juror, a law student, whom the defense believed would be more understanding of 
the doctrine of res ipsa loquitur. Id. at 665 n.7. 

90. /rf. at666. 

91. 476 U.S. 79,96-98(1986). 

92. 500 U.S. 614 (1991). 

93. 686N.E.2d 1281, 1284 (Ind. 1997). 

94. /l5/ia6ra«er, 753 N.E.2d at 667. 



2002] CIVIL PROCEDURE 1171 



the venire contained a single or a small number of minority jurors. We 
believe it appropriate that trial courts make a Batson investigation into 
potential discrimination in such circumstances.^^ 

The Indiana Supreme Court concluded that the lower courts had not handled the 
first phase of Batson* s two-tiered procedure properly and remanded without 
reaching the second level of inquiry.^ Nonetheless, it warned that an explanation 
for a challenge stating "I did not strike the juror because of race. I struck [the 
juror] because of the way I saw the jury panel being made up," is not sufficient 
under Batson's mandate.^^ Ashabraner shows that the court will carefully 
scrutinize the compliance of Indiana's courts with the goal of removing racial 
discrimination in jury selection. 

5. Tolling the Statute of Limitations. — With its decisions from City of St. 
John through Ashabraner, the court shows its clear willingness to confront 
difficult policy and theoretical questions,^^ yet its most significant recent 
opinions may be ones that impact the nuts and bolts of everyday civil litigation. 
Leading this group is Ray-Hayes v. Heinamann,^^ which resolves a split in the 
court of appeals over the steps to be taken to commence an action for purposes 
of tolling the statute of limitations. Moreover, because the court has determined 
that something more than mere filing with the clerk's office is required — a 
deviation from federal practice — ^the new requirements may pose a trap for the 
unwary.'^ A complete understanding of the Indiana requirements for 
commencement are essential to the litigator. 

The ambiguity over what counts as the beginning of a case for purposes of 
tolling can be traced to the court's opinion in Boostrom v. Bach,^^^ a small claims 
matter in which the court held that payment of the filing fee, and not the mere 
tender of the complaint to the clerk, is necessary to "commence" an action. '°^ 



95. Id at 668 n. 1 (quoting Henry F. Greenberg, Criminal Procedure, 44 SYRACUSE L. Rev. 
189,226(1993)). 

96. Chief Justice Shepard and Justice Dickson dissented, asserting that the trial court's 
comments did not show definitively that it had not followed Batson. In addition, they concluded 
that the defendant had complied with the second aspect of Batson by volunteering a race neutral 
reason for striking the juror. At that stage, the dissenters argued that the explanation need not be 
"persuasive or even plausible," id. at 669 (Dickson, J., dissenting), but rather that Batson 
contemplates a third level of inquiry when the trial judge, taking into account that the objector has 
the ultimate burden of persuasion on racial motivation for the challenge, has met that challenge. 
Id at 669-70. 

97. Id at 666. 

98. See generally id. (clarifying Batson objections for racial discrimination to peremptory 
strikes of potential jurors); State Bd. of Tax Comm'rs v. Town of St. John, 751 N.E.2d 657 (Ind. 
200 1 ) (rejecting private attorney general doctrine as basis for award of attorneys' fees). 

99. 760 N.E.2d 172 (Ind. 2002). 

100. Id at 174. 

101. 622 N.E.2d 175 (Ind. 1993), cert, denied, 513 U.S. 928 (1994). 

102. Mat 176-77. 



1 1 72 INDIANA LAW REVIEW [Vol. 35:1157 



The rationale was that "the commencement of an action occurs when the plaintiff 
presents the clerk with the documents necessary for commencement of suit."'°^ 
In a footnote the court identified the necessary documents as the complaint, the 
summons and the filing fee.^^"* Because Boostrom was a small claims case and 
turned on nonpayment of the filing fee, court of appeals' decisions were in 
conflict over its applicability to summonses and its precedential value for larger 
controversies. 

In Fort Wayne International Airport v. Wilhum^^^^ the plaintiff timely 
tendered the complaint and fee to the clerk of the circuit court, but did not 
provide the summons until shortly after the running of the statutory period. The 
court of appeals concluded the action was time-barred and treated the footnote 
in Boostrom (identifying the summons as an essential document) as 
controlling.'^ However, the court of appeals decisions in Ray-Hayes, ^^^ and 
later, in Oxley v. Matillo,^^^ limited Boostrom to its particular facts and judged 
its references to the summons as dictum. They also justified doing so because 
current Trial Rule 3 provides literally that commencement of an action occurs by 
"filing a complaint with the court."'^ Thus it trumped the "dictum" in Boostrom 
so that the plaintiffs' tendering of their summonses after the limitations period 
did not bar their claims due to untimeliness. The Indiana Supreme Court granted 
transfer in Ray-Hayes and made it clear that Boostrom — broadly read — is 
controlling. 

In Ray-Hayes, the plaintiff timely filed an amended complaint to add Nissan 
Motor Company as a new defendant on a products liability claim, but she did not 
tender the summons to the clerk until more than four months after the two-year 
limitations period had run.''° On these facts, and by a 3-2 decision, the court 
found the action time-barred, citing Boostrom^^ It also stated: 

Requiring that the summons be tendered within the statute of limitations 
is also good policy, because it promotes prompt, formal notice to 
defendants that a lawsuit has been filed. This not only helps to prevent 
surprise to defendants, but it also helps to reduce stagnation that might 
otherwise occur if the claims could be filed only to remain pending on 



103. Id. at 111. 

104. Id ax Ml n.2. 

105. 723 N.E.2d 967 (Ind. Ct. App.), trans, denied, 735 N.E.2d 237 (Ind. 2000). 

106. /c/. at 968. 

1 07. 743 N.E.2d 777 (Ind. Ct. App.), trans, granted sub nom., Nissan N. Am. v. Ray-Hayes, 
2002 Ind. LEXIS 1 (Ind. 2001), superceded by Ray-Hayes v. Heinamann, 760 N.E.2d 172 (Ind. 
2002). 

108. 747 N.E.2d 1179 (Ind. Ct. App.), trans, granted, 2002 Ind. LEXIS 166 (Ind. 2001), 
superceded by 762 N.E.2d 1 243 (Ind. 2002). 

1 09. Id at 1 1 80; see also iND. TRIAL R. 3. 

110. /?ay-//fl7ej, 760N.E.2datl74. 

111. Id 



2002] CIVIL PROCEDURE 1173 



court dockets without notified defendants."^ 

In addition to these policy concerns, imminent changes in Trial Rule 3 were a 
consideration for the majority.''^ These took effect on April 1, 2002 and 
explicitly require tender of the complaint (or its equivalent), payment of the filing 
fee, if any, and "furnishing to the clerk of the court as many copies of the 
complaint and summons as are necessary" to effectuate service, where service is 
required.""^ Now, to begin an Indiana action within any applicable limitations 
period, one must tender the complaint, the filing fee and the summons to the 
clerk."' 

The issue of the steps needed to toll a statute of limitations is complicated by 
federal practice. The Federal Rules of Civil Procedure provide that an action is 
commenced on the filing of the complaint."^ Federal Rule of Civil Procedure 4 
details the requirements of proper service as a separate matter, but it does provide 
that if the summons and complaint are not served on the defendant within 120 
days from filing the case must be dismissed without prejudice or the court must 
order a specific time within which service must be accomplished."^ Federal 
cases establish that in federal matters, commencement occurs on the tendering 
of the complaint to the clerk,"* and the Seventh Circuit has held that the even the 
filing fee is not necessary."' These differences in approach to tolling between 
the federal system and Indiana can cause confusion. This is especially true when 
a state claim is filed in federal court under diversity jurisdiction, and the federal 
court is confronted with the question of how to apply the Erie doctrine'^° in light 
oi Ray-Hayes, The landmark case of Hanna v. Plummer^^^ established that where 
a Federal Rule of Civil Procedure directly governs in a diversity action, it 
prevails over contrary state practice so long as it is a validly promulgated rule 



112. Id. 

113. 5ee/>i/ra notes 639-41 and accompanying text. 

1 1 4. The new text of IND. Trial R. 3 provides: 

A civil action is commenced by filing with the court a complaint or such equivalent 
pleading or document as may be specified by statute, by payment of the prescribed filing 
fee or filing an order waiving the fee, and, where service of process is required, by 
furnishing to the clerk as many copies of the complaint and summons as are necessary. 

115. In a dissent, with which Justice Dickson concurred, Justice Rucker pointed out that given 
the ambiguity in the law existing at the time the claim in Ray-Hayes was filed, it was not clear that 
plaintiff should have had her action time-barred, under a proper construal of T.R. 41(E) (procedure 
on dismissals), and T.R. 1 2(B)(6) (dismissals for failure to state a claim for relief). Ray-Hayes^ 760 
N.E.2d at 175 (Rucker, J., dissenting). 

116. Fed. R. Civ. P. 3. 

117. Fed. R. Civ. P. 4. 

118. Henderson v. United States, 517 U.S. 654, 657 n.2 (1996). 

1 1 9. See Robinson v. Doe, 272 F.3d 92 1 , 922-923 (7th Cir. 200 1 ), reh 'g en banc denied by 
2002 U.S. App. LEXIS 585 (7th Cir. 2002); see also FED. R. Civ. P. 5(e). 

120. 5ee Erie R.R. V.Tompkins, 304 U.S. 64 (1938). 

121. 380 U.S. 460 (1965). 



1174 INDIANA LAW REVIEW [Vol. 35:1157 



under the Rules Enabling Act,'^^ that is, so long as it is arguably procedural. 
However, in Walker v. Armco Steel, Corp. '^^ the U.S. Supreme Court concluded 
that Federal Rule of Civil Procedure 3 does not speak directly to the issue of 
when a state action is commenced under the rule for purposes of tolling.'^'' It 
held a case time-barred when the plaintiff had filed his tort claim within the state 
limitations period but did not achieve actual service on the defendant until after 
the statutory period ran.'^^ These cases caution the litigator who practices both 
in Indiana and federal courts to pay attention to the possibility that the Indiana 
rule on tendering all essential documents, including the summons might not be 
applied in a diversity action. 

6. Nonparty Defendant Notice and Product Identification for Purposes of 
Summary Judgment. — Another opinion with practical impact on everyday 
litigation decisions is Owens Corning Fiberglass Corp. v. Cohb}^^ It explores 
the proper standard for summary judgment when product identification is the 
issue, and it details the considerations governing timely notice of the nonparty 
defense. 

In Owens Corning Fiberglass the plaintiff brought claims for products 
liability, negligence, strict liability and breach of warranty against thirty-three 
defendants in connection with his development of lung cancer from asbestos. '^^ 
Owens Corning was one of the named defendants. It filed an answer presenting 
a plethora of affirmative defenses, including the nonparty defense and also 
reserved the right to object to the dismissal of any settling defendant and to 
amend its answer to identify such settling defendant as a nonparty. '^^ 

A little more than a year later, plaintiff Cobb and Owens Corning filed cross- 
motions for summary judgment. The plaintiff sought partial summary judgment 
on Owens Coming's affirmative defenses and Owens Coming, in tum, sought 
summary judgment on the theory that plaintiff could not carry his burden to show 
that he had ever been exposed to Owen Coming's products. '^^ The trial court 
denied the Owens Coming motion for summary judgment without comment. 

A few days later, Owens Coming opposed plaintiffs motion by a two-part 
strategy: it moved for leave to amend its answer to specifically identify other 
asbestos-producing nonparties — some of which had settled with plaintiffs and 
some of which had not — ^and it filed a response to plaintiffs motion in which it 
cross-referenced to the new answer and designated evidence as to each nonparty. 



122. 28 U.S.C. §2072(1999). 

123. 446 U.S. 740,752-753(1980). 

124. /fl^. at 748-51. 

125. Id. 

126. 754 N.E.2d 905 (Ind. 2001). 

127. Mat 907. 

128. Following the Indiana Supreme Court's opinion last year in Mendenhall v. Skinner & 
Broadbent Co., 728 N.E.2d 140 (Ind. 2000), a settling defendant must be identified as a nonparty 
after dismissal so that credit for sums paid in settlement in the context of comparative negligence 
is subject to the jury process. 

1 29. Owens Corning Fiberglass, 754 N.E.2d at 908. 



2002] CIVIL PROCEDURE 1175 



Owens Corning argued that it thereby created a material issue as to whether it 
could meet its burden of proof that the nonparties had contributed to plaintiffs 
condition. Cobb countered that Owens Coming had not met its burden on 
product identification for the nonparties. Moreover he claimed the answer 
should not be allowed because timely notice of nonparties had not been given. 
The trial court granted plaintiffs motion for partial summary judgment and 
denied the motion to amend. '^° 

Although the defendant had the burden of proof on the nonparty defense,'^' 
the Indiana Supreme Court characterized the cross-motions for summary 
judgment as "mirror images'"^^ of each other. Both parties were attempting to 
exploit the paucity of evidence on product identification — Owens Corning 
alleged that plaintiff had not shown a triable issue as to whether its product 
caused his injuries; Cobb alleged that Owens Coming had not shown a triable 
issue as to whether any of the nonparties' products contributed to his condition. 
But in both instances, the court concluded that each had mustered enough 
evidence to avoid summary judgment'" and that it need not apply Jarboe v. 
Landmark Community Newspapers of Indiana, Inc. '^^ Nonetheless, the issue of 
the timely identification of the nonparties was still central. 

According to the court, the main purposes of notice are to allow the plaintiff 
an opportunity to join the nonparty as an additional named defendant prior to the 
running of the statute of limitations'" and, secondarily, to apprise the plaintiff 
of defense strategy. Thus, Indiana Code section 34-4-33- 10(c)'^^ requires 
designation of nonparties with "reasonable promptness." But, the reasonablity 
of notice depends on when the defendant becomes aware that there is a nonparty 



1 30. Id. The trial court did allow amendment to name one entity as a nonparty, Rutland Fire 
Clay. As the Indiana Supreme Court noted, this was inconsistent with the ruling in plaintiffs favor 
granting summary judgment on all affirmative defenses. See id. at 91 2 n. 1 1 . After trial, the jury 
awarded almost $700,000 in compensatory damages against Owens Corning and $15 million in 
punitive damages, which the trial court remitted in conformity with Indiana legislation capping 
punitive damages. Id. at 908. 

131. See Cornell Harbison Excavating, Inc. v. May, 546 N.E.2d 11 86, 1 1 87 (Ind. 1 989); Ind. 
Code §51-2-15 (1999). 

132. Owens Corning Fiberglass,15A^.E2(^d!i9U. 

133. Cobb's testimony that he had seen defendant's product, Kaylo, in sites where he had 
worked was sufficient to create a genuine issue regarding whether Owens Coming's product were 
a cause of his lung cancer. Similarly, Cobb's testimony that he purchased and used various 
asbestos-containing goods from nonparty defendant, Sid Harvey, should have precluded summary 
judgment on Owens Coming's motion at least with regard to it. Id. 

1 34. 644 N.E.2d 1 1 8, 1 23 (Ind. 1 994). By the opinion in Jarboe, Indiana rejects the approach 
to summary judgment established for the federal courts in Celotex Corp. v. Catnett, 477 U.S. 317 
(1986). 

135. See Owens Corning Fiberglass, 754 N.E.2d at 913-14. 

136. Ind. Code § 34-4-33-1 0(c) (1998) (repealed by P.L. 1-1988, Sec. 201) (current version 
at Ind. Code § 34-51-2-16 (1999)). 



1176 INDIANA LAW REVIEW [Vol. 35:1 157 



to be identified. In the case of a defendant who is dismissed, '^^ this awareness 
can come late in the proceedings. Moreover, when the plaintiff has knowledge 
of the existence and identity of a potential nonparty — ^which is certainly the case 
with a settling defendant— the plaintiff cannot logically be prejudiced by delay 
in identifying the nonparty. Thus the court stated: "No violence is done ... by 
permitting a defendant to assert a nonparty affirmative defense reasonably 
promptly after receiving notice that a named party defendant has been dismissed 
from the lawsuit."'^* Because Owens Coming did not move to amend its answer 
as to certain nonsettling and nonjoined entities for more than one year after it 
knew or should have known their identities, the timeliness of notice was not met 
as to them. However with regard to one defendant that had settled with the 
plaintiff, notice was reasonably prompt and the motion to amend was not too late. 
Thus, the trial court committed reversible error when it granted plaintiff summary 
judgment on Owens Coming's nonparty defense relating to that entity. 

7. Availability of Wrongful Death Remedies. — The topic of remedies blurs 
the distinction between procedure and substance. In 2001 , the Indiana Supreme 
Court decided a quartet of cases clarifying the remedies available under the 
wrongful death and child wrongful death statutes, primarily in regard to punitive 
damages. The most important of these is Durham v. U-Haul International P'^ It 
explicitly prohibits recovery of punitive damages for wrongful death and it 
overrules Burk v. Anderson,^^^ which had excluded loss of consortium damages 
from the scope of the statute. 

In Durham, a driver was killed in a head-on collision with a U-Haul truck. 
The driver's husband and ex-husband sued for wrongful death as co- 
representatives on behalf of her estate. Her husband also filed an independent 
common law claim for loss of consortium. All plaintiffs sought punitive 
damages. On reconsideration, the trial court granted partial summary judgment 
in favor of all defendants on punitive damages, but denied summary judgment as 
to the loss of consortium claim. The court of appeals affirmed in part and 
reversed in part. Most importantly, it held that sound policy reasons support 
recovery of punitive damages in a wrongful death action, and so reversed on that 
ground. The Indiana Supreme Court granted transfer and, in an opinion written 
by Justice Boehm, identified three issues raised by the case — whether punitive 
damages are recoverable under the wrongful death statute; whether excluding 
them from recovery would be unconstitutional; and whether loss of 
consortium — ^and punitive damages premised on it — survives as an independent 
claim outside the purview of the statute.'*' 

At common law, one who killed the victim of his or her tortious conduct 



137. This is especially true where the dismissal is pursuant to settlement, and the nonparty 
should be identified pursuant to Mendenhal v. Skinner & Broadbent Co., 728 N.E.2d 140 (Ind. 
2000). 

138. Owens Corning Fiberglass, 754 N.E.2d at 91 5. 

139. 745 N.E.2d 755 (Ind. 2001). 

140. 109 N.E.2d 407 (Ind. 1952). 

141. Z)Mr/iflm, 745 N.E.2d at 758. 



2002] CIVIL PROCEDURE 1 1 77 



outright could escape paying any compensation, because the victim's personal 
cause of action was extinguished by death. ''^^ Wrongful death statutes were 
enacted to remove this injustice and provide deterrence. They have been strictly 
construed to give only a narrow remedy to dependents of the deceased to 
compensate them for the pecuniary losses caused by the death. "*^ The Indiana 
General Assembly adopted the state's first wrongful death statute in 1 852 and has 
repeatedly amended it.*^^ In all its permutations, the statute has never explicitly 
mentioned the topic of punitive damages.'"*^ Relying on the doctrine of 
"legislative acquiescence," the court concluded that punitive damages are not 
available under the statute notwithstanding the statutory gap. 

The plaintiffs argued that since the ban on punitive damages under the statute 
was judicially created, it could be judicially removed. Justice Boehm disagreed, 
positing that the legislature's long failure to amend the statute in the face of case 
law disallowing punitive damages expressed its agreement with the judicial 
interpretation. He noted that the legislative response to Indiana cases construing 
the child wrongful death statute shows how swiftly the legislature can act when 
it disagrees with the courts' interpretation'^^ and he argued that the legislature's 
lack of action suggests it agreed with the conclusion of courts that punitive 
damages were not available.'*' In the majority's view, this, along with the 
doctrine of stare decisis, restricted its discretion to allow punitive damages as a 
element of recovery: 

[I]f a line of decisions of this Court has given a statute the same 
construction and the legislature has not sought to change the relevant 
parts of the legislation, the usual reasons supporting adherence to 



1 42. Id. ; see also DAN B. DOBBS, Law OF REMEDIES § 8.3( 1 ) (2d ed. 1 993). 

143. 5eeZ)Mr/iam, 745 N.E.2d at 758. 

144. /c/. at 758-59. 

145. Id. at 758. Justice Boehm noted that, in contrast, the wrongful death statute governing 
unmarried adults does expressly prohibit punitive damages. Id. at 758-59. He also noted that the 
child wrongful death statute provides a specific, enumerated list of recoverable items and does not 
mention punitive damages. Id. at 759. See also infra text accompanying notes 166-74, discussing 
Forte V. Connerwood Healthcarey 745 N.E.2d 796 (Ind. 2001), in which the court construed the 
child wrongful death statute to prohibit punitive damages. 

1 46. Durham, 745 N.E.2d at 761 . One the cases relied on was Andis v. Hawkins, 489 N.E.2d 
78 (Ind. Ct. App. 1986). It held that recovery for love and affection was not available under the 
statute. The legislature immediately responded with an amendment making it clear that such items 
are recoverable. Justice Boehm argued that though this was an appellate opinion, it should be 
treated as if the appellate court were one of last resort due to the difficulty of civil cases making 
their way to the Indiana Supreme Court as a result of the requirement that the court review so many 
criminal cases. Durham, 745 N.E.2d at 760-61 & 761 n.2. 

147. Id at 761. The court cited Huff v. White Motor Corp., 609 F.2d 286 (7th Cir. 1979); 
Herriman v. Conrail, Inc. , 887 F. Supp. 1 1 48 (N.D. Ind. 1 995); Kuba v. Ristow Trucking Co. , 508 
N.E.2d 1 (Ind. 1987); and Rogers v. R.J. Reynolds Tobacco Co., 557 N.E.2d 1045 (Ind. Ct. App. 
1990) as the cases establishing judicial construction of the statute to preclude punitive damages. 



1178 INDIANA LAW REVIEW [Vol. 35:1 157 



precedent are reinforced by the strong probability that the courts have 
correctly interpreted the will of the legislature.^'** 

In addition, the court noted that since the wrongful death statute derogates the 
common law it should be strictly construed. Finally, the majority disagreed with 
the court of appeals' claim that Indiana law showed a general trend in favor of 
punitive damages. '^^ 

Turn ing to the constitutional question, the court construed the issue under the 
Federal Constitution because the plaintiffs had not challenged the exclusion of 
punitive damages under the state constitution. The plaintiffs alleged that not 
allowing punitive damages violated the Equal Protection Clause. '^^ The court 
scrutinized the statute using the "rational basis" analysis. Finding that the goal 
of the wrongful death statute is to compensate statutory beneficiaries for the 
pecuniary loss caused by the victim's death, the court did not punish the 
defendants. The court reasoned that the statute passed muster because it 
rationally advanced that goal.'^' In addition, the court found that the statute 
reflects the "qualitative difference" between injuries to tort victims themselves 
and harms to their survivors caused by their deaths.'" 

This left the third question to be addressed: what was the status of the 
husband's loss of consortium claim?'^^ In resolving this question, the court gave 
the plaintiff half a loaf Justice Boehm began the analysis by noting that loss of 
consortium is derivative of a victim's personal injury claim. Moreover, allowing 
such a claim to survive independent of the statute would promote easy 
circumvention of the ban on punitive damages.'^"* Because these factors militated 
in favor of including consortium claims within the purview of the legislation, the 
court overruled Burkv. Anderson,^^^ which had indicated that the cause of action 
for loss of consortium did survive outside the statute. 

This conclusion did not mean that the period for which recovery was 



148. Durham, 745 N.E.2d at 759 (citing Heffner v. White, 47 N.E.2d 964, 965 (1943)). 

149. Id. at 762-63. Justices Rucker and Dickson dissented. They argued that the legislative 
history cuts both ways — ^the failure of the legislature to speak on the issue of punitive damages at 
the same time that it responded specifically regarding the unmarried persons and child wrongful 
death statutes could just as easily lead to the inference that availability of punitive damages under 
the wrongful death statute itself was, at a minimum, an open question. Id at 767-68 (Rucker, J. 
dissenting). Moreover, they asserted that the doctrine of legislative acquiescence was not appl icable 
because it required legislative inaction in the face of a clear line of cases by the state's highest 
court — a factor not present here in their view. Id. at 768. Their dissent is especially significant 
because Justice Boehm himself noted that the policy arguments in favor of punitive damages under 
the wrongful death statute were persuasive had the court been writing on a clean slate. 

150. /^. at 763-64. 

151. Id 

152. Mat 764. 

153. Id 

154. Mat 764-65. 

155. 109 N.E.2d 407 (Ind. 1952). 



2002] CIVIL PROCEDURE 1179 



available was similarly limited to the contours of the common law. Although 
most states treat consortium claims as covering only the period between the 
victim's injury and the date of death, the court concluded that simply because 
death extinguishes the common law claim for post-mortem consortium damages 
does not mean they are excluded under the wrongful death statute. '^^ It held that 
damages for consortium thereunder can cover losses to the date of the surviving 
spouses' s death in a proper case.^^^ The court also noted that the traditional items 
of damage for consortium are included in the wrongful death claim; however, 
consistent with the main holding that the wrongful death statute does not support 
punitive damages, they are not available for the consortium elements as well. 

Bemenderfer v. Williams^^^ is a companion case with Durham and is also 
authored by Justice Boehm. It further refined how loss of consortium should be 
handled under the wrongful death statute and specifically addressed the problem 
of the death of a beneficiary which occurs after filing but before verdict. In 
Bemenderfer^ the decedent's death was allegedly caused by a doctor's 
negligence. '^^ The victim's elderly husband suffered from Alzheimer's disease, 
and she had cared for him at home. A lawsuit was filed naming the husband and 
decedent's daughter as plaintiffs.'^ Soon after the wife's death, the husband had 
to be put in a nursing home and he died relatively quickly. The inference that the 
wife's absence hastened his death was strong.'^' His daughter was substituted as 
the party plaintiff in his place, but the doctor moved for summary judgment 
arguing that the husband's death precluded wrongful death recovery for the 
pecuniary loss to him and further, that his consortium claim only covered the 
three days between decedent's injury and her demise.'" The Indiana Supreme 
Court rejected both arguments. 

Citing to Durham, the court reiterated that consortium claims are subsumed 
by the wrongful death statute. '^^ In contrast to Durham, the court denied that any 
doctrine of legislative acquiescence applied to the issue of the effect of a 
beneficiary's death prior to verdict.'^ Consequently, the court was free to 
consider the policy questions directly. Recognizing that the death of the 
beneficiary can give a defendant a windfall, the court held that a beneficiary may 
recover damages from the decedent's death up to the beneficiary's death and that 
these damages are an asset of the beneficiary's estate.'^^ 

In Forte v. Connerwood Healthcare Inc. '^ the issue was whether punitive 



1 56. Durham, 745 N.E.2d at 765. 

157. Id. 

158. 745 N.E.2d 212 (Ind. 2001). 

159. Mat 214. 

160. Id 

161. Id at214.15. 

162. Id at 215. 

163. Id at 216. 

164. Id 

165. Id at 218-19. 

166. 745 N.E.2d 796 (Ind. 2001). 



1180 INDIANA LAW REVIEW [Vol. 35:1157 



damages could be recovered under the child wrongful death statute. There a 
disabled child died within days of being admitted to a nursing home.'^^ The 
child's mother filed an action for compensation under a complaint that was pled 
very generally. She also asked for punitive damages. Defendants moved for 
partial summary judgment, claiming that punitive damages are not recoverable 
under the Child Wrongful Death Act.'^* The plaintiff responded that punitive 
damages were allowable and that her complaint could be read to include an 
independent loss of consortium claim supporting punitive damages. ^^^ On 
interlocutory appeal, the court of appeals affirmed the trial court's conclusion 
that the mother had no statutory right to punitive damages, but treated the 
consortium argument as a claim for loss of the child's services that survived the 
wrongful death statute. '^° 

In an opinion by Justice Rucker, the court first reviewed the child wrongful 
death statute and noted that it contains a highly specific list of damages. This list 
does not include punitive damages.'^' Because the statute is in derogation of the 
common law and therefore should be strictly construed, the court concluded that 
the statute did not include claims for punitive damages. '^^ However, in contrast 
to the analysis in Durham, the court allowed loss of services as an independent 
tort, but argued that the tort does not support punitive damages either. '^^ Justice 
Rucker reached this conclusion on the premise that loss of services is derivative 
of the personal injury claims of the victim. In the absence of legislation and 
following the common law approach, the cause of action dies with the child. '^"^ 

Finally, in Elmer Buchta Trucking, Inc. v. Stanley^^^ the court had to 
determine whether the 1965 amendments to the wrongful death statute dispensed 
with the requirement that the decedent's expenses be deducted from the damages 
to beneficiaries for pecuniary loss.'^^ These amendments established three 
groups of beneficiaries and designated the personal representative of the estate 
as the proper party plaintiff.*^' The estate receives compensation for discrete 
pecuniary losses for funeral, medical, and hospital expenses and the beneficiaries 
receive the remainder of any recovery.'^* The statute does not expressly require 
a deduction for monies the decedent would have spent personally or for his or her 
own maintenance. Noting that the language dictating recovery for "lost earnings" 
could support interpretations both requiring and excluding the deduction, the 



167. 


Id. at 798. 


168. 


Id. 


169. 


Id 


170. 


/i/. at 798-99. 


171. 


Id at 800. 


172. 


Id 


173. 


Id at 802-03. 


174. 


Id at 803. 


175. 


744 N.E.2d 939 (Ind. 2001) 


176. 


/^. at 940-41. 


177. 


/(i. at 941. 


178. 


Id 



2002] CIVIL PROCEDURE 1181 



majority treated the statute as ambiguous. ^^^ Noting that cases construing the 
statute had characterized it as a remedy for pecuniary loss and being concerned 
with the over-compensation that would arise if a deduction was not made, the 
court stated: "'That juries should account for actual fmancial loss has been held 
the object of the statute from the Nineteenth Century through to the last two 
decades. We cannot find legislative desire to alter that formula in the relatively 
general amendments adopted thirty-six years back."'*° The defendant should 
have been able to introduce evidence as to the expenses the decedent would have 
incurred during his lifetime. 

B. Other Significant Indiana Supreme Court Decisions 

1. Appeals. — ^The court used the controversy in GKNCo. v. Magness,^^^ as 
an opportunity to clarify the standard of appellate review when scrutiny of a Rule 
1 2 motion to dismiss for lack of subject matter jurisdiction is the issue. There the 
question concerned whether the plaintiff cement truck driver was a dual 
employee for purposes of the worker's compensation statute.**^ The trial court 
made its ruling on the basis of a paper record, and dismissed the case without 
making fmdings as to disputed facts.'" 

In a unanimous opinion authored by Justice Rucker, the court established as 
a general principle that 

a review of the case authority shows that the standard of appellate review 
for Trial Rule 12(B)(1) motion to dismiss is indeed a function of what 
occurred in the trial court. That is, the standard of review is dependent 
upon: (i) whether the trial court resolved disputed facts; and (ii) if the 
trial court resolved disputed facts, whether it conducted an evidentiary 
hearing or ruled on a "paper record.'"*^ 

Where no disputed evidence is at issue, the matter is a pure question of law and 
therefore the standard of review is de novo.'*^ However, even if facts are 
disputed, where the trial court rules on a paper record and conducts no 
evidentiary hearing, the standard of review is also de novo because the appellate 
court is in the same position as the trial court to judge the evidence.'^^ Justice 
Rucker reiterated that the trial court's ruling will be sustained on any applicable 
legal theory and that, in the case of a paper record review, "we will reverse on the 
basis of an incorrect factual finding only if the appellant persuades us that the 



179. 


Id at 942. 


180. 


Id. ai943. 


181. 


744 N.E.2d 397 (Ind. 2001), 


182. 


/(/.at 400. 


183. 


Id 


184. 


IdsAAOl. 


185. 


Id 


186. 


Id 



1182 INDIANA LAW REVIEW [Vol. 35:1 157 



balance of the evidence is tipped against the trial court's findings.'"*^ The court 
went on to conclude that, applying the factors for dual employee status developed 
in Hale v. Kemp,^^^ the trial court had correctly dismissed the action, despite the 
absence of findings.'"' 

In addition to the question of appellate review, the court also addressed 
burdens of pleading and proof. Despite the strong public policy of subsuming 
employee injury claims under the Worker's Compensation Act, Justice Rucker 
stated that coverage under the statute is an affirmative defense that must be raised 
by the defendant and that the defendant has the burden of proof on the question 
unless "the employee's complaint demonstrates the existence of an employment 
relationship .... Thus we disapprove of the language in those cases declaring 
that once an employer raises the issue of the exclusivity of the Act, the burden 
automatically shifts to the employee.'"^ 

Tom-Wat, Inc. v. Fink,^^^ is an important case that sheds light on the court's 
standards for appellate review of personal jurisdiction challenges, the scope of 
appeal from interlocutory orders, and late affidavits on summary judgment, 
among other issues. 

The case involved a trade debt between Tom- Wat, Inc. ("Tom-Wat"), a 
Connecticut corporation, and George Fink ("Fink"), an Indiana sole proprietor. '^^ 
When Fink failed to pay for goods ordered, Tom- Wat sued him in a Connecticut 
state court and obtained a default judgment. '^^ In 1 994, Tom- Wat filed an action 
to enforce this judgment in an Indiana state court, and Fink both answered and 
moved to dismiss the action for lack of personal jurisdiction over him in 
Connecticut. ''"* Because he attached an affidavit to his motion to dismiss, the 
Indiana Supreme Court treated it as a motion for summary judgment based on 
invalidity of the Connecticut judgment. However, the affidavit gave no specific 
information as to the jurisdictional facts. '^^ In the trial court, Tom-Wat had 
timely filed opposition and designated particular facts as creating genuine issues 
for trial. A month later, Tom- Wat filed its own cross-motion for summary 
judgment, which it supported by designations of facts and an affidavit.''^ In the 
summer of 1995, Tom- Wat requested a hearing on its motion for summary 
judgment and reiterated that request in 1997. A hearing was set, but Fink 
requested a continuance, which was granted. The matter was finally heard in 
March 1998.'^' 



187. 


Id 


188. 


579N.E.2d63(Ind. 1991). 


189. 


G/CA^, 744N.E.2dat402. 


190. 


Id. at 404. 


191. 


741 N.E.2d 343 (Ind. 2001), 


192. 


Id at 345. 


193. 


Id 


194. 


Id 


195. 


Id 


196. 


Id 


197. 


Id 



2002] CIVIL PROCEDURE 1 1 83 



Two days before this hearing Fink filed a designation of material facts and 
two affidavits alleging, among other things, that he had never been to 
Connecticut and that he had contracted to buy the goods in a meeting in 
Louisiana. On the basis of this information, Fink's only connection with 
Connecticut was his purchase of goods from a Connecticut corporation while 
outside the state. Tom- Wat then moved to strike this material for lateness. No 
ruling on that motion was evident from the record and the transcript of the 
hearing on all motions was lost.'^* The trial judge denied both Fink's motion to 
dismiss and Tom- Wat's motion for summary judgment and then recused himself. 
Tom- Wat filed an interlocutory appeal from the order denying the motions for 
summary judgment, but alleged that the trial court had actually stricken Fink's 
new material.'^ 

The court tackled this procedural morass by first noting that on interlocutory 
appeal every issue entailed by the order appealed from must be reviewed. 
Although the cross-motions for summary judgment were mutually inconsistent, 
because the trial court denied both, the Indiana Supreme Court had to review the 
matters raised by each.^°° Citing to Anthem Insurance Co. v. Tenet Healthcare 
Corp.,^^^ which was decided just last year. Justice Boehm reiterated that 
"personal jurisdiction is a question of law and, as such, it either exists or does 
not."^°^ Where there is no question as to the jurisdictional facts, the appellate 
court will make a "final determination" of the issue, taking into account the 
normal standard on review of summary judgment, that is, one which is the same 
as that which applies at the trial level. This standard construes all facts and 
reasonable inferences therefrom in favor of the nonmoving party and requires 
that the moving party show that no genuine issue of material fact exists to be 
resolved.^°^ 

From the court's perspective, there was no dispute over the operative facts 
regarding Fink's connection with Connecticut — "In sum, the facts established by 
both parties present a familiar pattern: Buyer ... is never physically present in 
Seller's . . . state, but places an order . . . with Seller to be shipped from Seller's 
facility in Seller's state."^°^ To reach this characterization, the court had to 
consider the facts in Fink's late-filed affidavits. This is consistent with the 
court's opinion in Indiana University Medical Center v. Logan^^^ which 
authorized trial court discretion to consider late-filed affidavits. It then treated 
the procedural history of the case as if the trial court had denied the motion to 
strike and found that this was not an abuse of discretion.^^^ The later-presented 



198. 


Id. 


199. 


Id. at 345-46. 


200. 


Id at 346. 


201. 


730 N.E.2d 1227 (Ind. 2000). 


202. 


Tom-Wat, 741 N.E.2d at 346. 


203. 


Id 


204. 


Id at 347. 


205. 


728 N.E.2d 855 (Ind. 2000). 


206. 


Tom-Wat, 741 N.E.2d at 347. 



1 1 84 INDIANA LAW REVIEW [Vol. 35: 1 1 57 



material was supplemental to the earlier conclusory affidavit of Fink and did not 
really present facts different from those relied on by Tom-Wat.^°^ This left the 
merits of the personal jurisdiction question for determination. 

The court resolved this by asserting that under both federal and Indiana law, 
Fink had the burden of showing the invalidity of the Connecticut judgment due 
to lack of personal jurisdiction.^^* It pointed out that the Connecticut approach 
to personal jurisdiction parallels the analysis adopted by Indiana in 
Anthern^^^ — that is, in both states a defendant's activities must fit within the long 
arm statue of the jurisdiction and the long arm as applied must comport with due 
process.^'^ For Justice Boehm, whether the Connecticut judgment should be 
enforced rested ultimately on federal principles, which require that the 
defendant's activities show minimum contacts with the forum and that 
jurisdiction not be so unfair as to be unreasonable.^" While under federal cases, 
one contact might be enough to satisfy the minimum contacts prong of the 
analysis, it would be too unfair to require a one time, out-of-state purchaser with 
no other connections to Connecticut to go there to defend himself Based on the 
facts before it, the Indiana Supreme Court concluded that the Connecticut 
judgment could not be enforced.^'^ However, because it conceded that Tom-Wat 
might not have had an adequate opportunity to respond to Fink's late-filed 
affidavits, the court remanded the action to the trial court.^'^ Again, the Indiana 
Supreme Court has shown that it will give parties opposing summary judgment 
every opportunity to show genuine issues for trial. 

Finally, in Bemenderfer v. Williams^^^ previously discussed in connection 
with the wrongful death,^'^ the court reviewed the proper procedure for appeal 
from a nonfmal order. In Bemenderfer, the trial court denied the defendant- 
doctor's motion for partial summary judgment.^'^ Thereafter, rather than 
following the certification procedure for interlocutory appeals, a procedure which 
requires the court of appeals to accept jurisdiction before the appeal can proceed, 
the trial court signed an "Agreed Final Judgment and Agreement Preserving the 
Issue of the Appropriate Measure of Damages"^'^ to create a final judgment 
pursuant to Rule 54(8).^'* The court of appeals then reviewed the decision and 
affirmed. On transfer, the Indiana Supreme Court pointed out that, as a private 
agreement between the parties, the "Agreed Judgmenf was not an appealable 



207. Id. 

208. Mat 348. 

209. Anthem Ins. Co. v. Tenet Healthcare Corp., 730 N.E.2d 1227 (Ind. 2000). 

210. Tom-^af, 741 N.E.2d at 348. 

211. M at 348-50. 

212. Mat 350. 

213. Id. 

214. 745 N.E,2d 212 (Ind. 2001). 

215. See supra notes 158-65. 

216. Bemenderfer, 145 l^.E.2d2Lt2\9. 

217. M. at215n.2. 

218. Ind. Trial R. 54 (B). 



2002] CIVIL PROCEDURE 1 1 85 



final judgment.^ '^ Because both the trial court and the court of appeals treated 
the matter as appealable and remanding for certification would only delay 
resolution of the merits, the court exercised its discretion to grant review.^^° 
However, it is clear that the Indiana Supreme Court disapproved of this method 
of attempting to construct appellate jurisdiction. 

2. Attorney Solicitation. — In Re MurgatroycF^^ is an interesting per curiarh 
opinion that blends issues of personal jurisdiction and subject matter jurisdiction 
in the context of attorney discipline. It involved solicitation of potential Indiana 
clients by two out-of-state California lawyers. The lawyers sent targeted mail to 
families and victims of a 1992 Indiana airliner crash offering representation 
without following the Indiana professional conduct rules restricting such 
solicitation.^^^ In prior litigation, the respondents had challenged Indiana's 
personal jurisdiction over them directly and lost.^^^ In the case before the court, 
the specific issue was the Indiana Supreme Court's regulatory power to impose 
discipline over out-of-state lawyers pursuant to an agreed judgment. Chief 
Justice Shepard wrote: 

Notwithstanding the fact that the respondents hold no Indiana law 
licenses and therefore are not subject to this Court's usual disciplinary 
sanctions for licensed Indiana attorneys who engage in professional 
misconduct, any acts which the respondents take in Indiana that 
constitute the practice of law are subject to our exclusive jurisdiction to 
regulate professional legal activity in this state. By directing the 
solicitations to the prospective clients, the respondents communicated to 
those persons that they were available to act in a representative capacity 

for them in Indiana courts As such, they held themselves out to the 

public as lawyers in this state when neither was admitted to practice 
here. Those acts constituted professional legal activity in this state 
subject to our regulatory authority .^^^ 

The court concluded that while it may not directly subject the law license of 
another state to discipline, it can impose penalties on persons for professional 
misconduct that occurs /« Indiana.^^^ 

3. Corporate Privacy Rights and Injunctions. — Felsher v. University of 
Evansville,^^^ is a significant torts and injunction case. Most important, it 
establishes as a matter of first impression that a corporation does not have a 
common law right of privacy where there is an alleged misappropriation of its 
name and likeness. It also reiterates that injunctive relief must be narrowly 



219. Bemenderfer, 745 N.E.2d at 2 1 5 n.2. 

220. Id. 

221. 741 N.E.2d 719 (Ind. 2001). 

222. Id at 720. 

223. Id 

224. Id. at 720-21 (footnotes omitted). 

225. Id 2X122. 

226. 755 N.E.2d 589 (Ind. 2001). 



1 1 86 INDIANA LAW REVIEW [Vol. 35:1157 



tailored. 

The defendant, a former University of Evansville professor, created a website 
and e-mail accounts that purported to be those of the university and certain of its 
officials. He used these means to pursue a vendetta against the university and 
others. One of his activities was to nominate university personnel for positions 
with other institutions. The University of Evansville and several of the 
individuals he targeted sought an injunction against him for violation of their 
rights to privacy. Summary judgment was granted for all defendants and a 
permanent injunction issued. 

On transfer, the supreme court rejected the privacy theoiV insofar as the 
university was concerned, holding that a corporation has no privacy right to 
vindicate and should pursue business-related causes of action for 
misappropriation. This had procedural implications, for although the court 
concluded that other state claims unrelated to privacy would authorize injunctive 
relief for the university, for example, state unfair competition, the injunction 
could not be affirmed as to the university on those grounds because they had not 
been presented in the pleadings. The court also stressed that in reviewing grants 
of summary judgment it will carefully scrutinize prior proceedings to insure that 
the nonmoving party has not been deprived of its day in court. Moreover, in 
passing on the more substantive issues raised by the case, the court noted that the 
defendant professor could not raise an issue for the first time on appeal by reply 
brief. Finally, the court found that the injunctive order issued was overbroad 
insofar as it prohibited the defendant from nominating individuals for positions 
in his own name and narrowed it to exclude this prohibition. 

4. Juries. — Rogers v. R.J. Reynolds Tobacco^^^ combined issues of harmless 
error and a trial judge's ex parte communication with a jury. The case involved 
claims brought by the widow of a smoker and had been previously appealed after 
the grant of summary judgment for defendants. In connection with the trial on 
remand, one of the jurors asked the bailiff whether the jury could hold a press 
conference after the verdict. The trial judge was informed and responded to the 
jury via the bailiff simply, "yes."^^* On appeal, the Indiana Supreme Court found 
this to be harmless, although the process violated the requirement that when the 
jury has questions or requests of the court, the parties are to be notified so they 
may be present and have knowledge of the judge's response before it is 
communicated to the jury .^^' The court suggested that one important factor for 
determining whether a judge's ex parte communication to a jury is harmful is to 
scrutinize the reaction of the jury, and particularly whether it returns a verdict 
shortly thereafter.^^° 

5. Law of the Case. — In City of New Haven v. Reichhart,^^^ the court was 
faced with an issue of first impression: whether the First Amendment right to 



227. 745 N.E.2d 793 (Ind. 2001). 

228. Id. at 795. 

229. Id 

230. Id 

231. 748 N.E.2d 374 (Ind. 2001). 



2002] CIVIL PROCEDURE 1 1 87 



petition the government prohibits an official entity from bringing a malicious 
prosecution claim against a person who exercises a statutory right to challenge 
governmental action. ^^^ However, the court did not reach the constitutional 
question, determining that the dispute could be resolved on other grounds.^" In 
the case, the plaintiff-taxpayer was an employee of a business that would have 
been adversely affected by an annexation ordinance adopted by the city of New 
Haven. The employer funded a lawsuit brought to challenge the city's process 
as a violation of the Open Door Act and to challenge the ordinance itself. A 
temporary restraining order was granted to plaintiff on the Open Door grounds; | 

thereafter the city rescinded the ordinance.^^^ However, it filed a counterclaim I 

against plaintiff for abuse of process. The plaintiff sought summary judgment 
thereon, which was denied. The court of appeals reversed, finding that the ; 

plaintiffs suit was not improper and summary judgment should have been < 

granted. While the interlocutory appeal was pending, the city amended its I 

complaint on remand to present a claim for malicious prosecution. ^^^ Later, the i 

plaintiff argued that the court of appeals' ruling on abuse of process was the law I 

of the case and presented other challenges to support a motion to dismiss the I 

malicious prosecution claim. The motion was granted and then affirmed by the < 

court of appeals, which held that its previous ruling on abuse of process was not I 

the law of the case as to malicious prosecution, but that the First Amendment did ' 

bar such a cause of action.^'^ « 

The Indiana Supreme Court affirmed, but on other grounds. It agreed with ' 

the court of appeals on the law of the case issue, pointing out that the elements 
of both theories are distinct, so that the city was not precluded by the prior ruling 
on the element of probable cause.^" Rather than reaching the constitutional 
question, the court concluded that no probable cause to bring the action existed 
on the facts of the case.^^* 

6. Local Rules. — Buckalew v. Buckalew^^^ raised the issue of whether a trial 
court's failure to follow a local rule is jurisdictional, rendering its actions 
thereafter void. In a dissolution proceeding, the trial court allowed the filing of 
a financial disclosure form, although both parties were not represented by 
counsel as explicitly required by a Howard County local rule.^*° The wife filed 
for relief from the judgment, which was denied. On appeal, she argued that the 
trial court's action was void.^*' Writing for a unanimous court. Justice Dickson 



232. 


Id. at 378. 


233. 


Id. at 379. 


234. 


Id at 376-77. 


235. 


Id at 377. 


236. 


Id 


237. 


Id at 379. 


238. 


Id 


239. 


754 N.E.2d 896 (Ind. 2001). 


240. 


/^. at 897. 


241. 


Id 



1188 INDIANA LAW REVIEW [Vol. 35:1157 



disagreed. Notwithstanding Mere J/Y/i v. State ^^^ which suggested that some local 
rules involving the substantive rights of the parties are mandatory and cannot be 
waived, Justice Dickson declared that the wife's attempt to characterize the 
question as one of jurisdiction was incorrect.^*^ He pointed out that there are 
only two requisites for trial court jurisdiction — competency over the subject 
matter and personal jurisdiction over the defendant. When both are present, there 
is no jurisdictional defect, although there may be reversible error in the manner 
in which the court employs its jurisdiction. In general, the failure to follow a 
local rule leads to error which might provide the basis for appeal, but does not 
render a judgment void ab initio}^ 

7. New Trial Versus Judgment on Evidence. — In Neher v. Hobbs^^^ the 
Indiana Supreme Court gave guidance as to the fmdings and procedures needed 
for a new trial motion to be properly granted. The case involved a collision 
between a van and an automobile. The van driver brought a claim for damages 
for his injuries and his wife presented a claim for loss of consortium and services. 
Although the jury found the automobile driver was at fault, it awarded the van 
driver no damages for his injuries and found for the automobile driver on the 
wife's claims. The plaintiffs filed a motion to correct error, which was granted 
and the trial court ordered a new trial. The car driver appealed, arguing that the 
trial court had not made the proper findings and followed the proper procedure 
in advance of giving the remedy of a new trial, especially one premised on the 
idea that the jury's verdict was against the weight of the evidence. The van 
driver filed a cross-appeal. The court of appeals reversed. 

On transfer and in an opinion by Justice Dickson, the Indiana Supreme Court 
discussed the requirements of a new trial motion and distinguished between the 
findings necessary when the ground for granting such a motion is that it is against 
the weight of the evidence versus the ground that it is clearly erroneous. In the 
latter circumstance, the trial court does not have to set forth the evidence both 
supporting and opposing the verdict in findings. Disagreeing with the defendant, 
the court concluded that the basis for the new trial order was that the verdict was 
clearly erroneous and it concluded that the findings sustained the new trial relief. 
The defendant also argued that the court was required to show why it did not 
grant judgment on the evidence rather than ordering a new trial. The supreme 
court rejected this claim of error as well, noting that the explanation process 
under Indiana Trial Rule 59 is designed to assist the appellate court on review; 
in the case before it, the reasons for not using the judgment on the evidence 
procedure were clear from the trial court's findings-the verdict was clearly 
erroneous because no damages were awarded though the defendant was at fault. 
In that circumstance, the trial court could not assess damages itself and enter 
judgment. However, noting that when a motion for new trial is granted, the 
scope of retrial should be limited only to those issues affected by error, the court 



242. 679N.E.2d 1 309 (Ind. 1997). 

243. ^McJb/ew, 754 N.E.2d at 897-98. 

244. Id. at 898. 

245. 760N.E. 2d602(lnd. 2001). 



2002] CIVIL PROCEDURE 1 1 89 



limited the trial court's order so that only the issue of damages and the wife's 
right to recovery were subject to retrial and remanded for proceedings consistent 
with that limitation. 

8. Proceedings to Vindicate Minority Shareholder Rights. — Galligan v. 
Galligan^^^ presented procedural issues in the context of a lawsuit over alleged 
breaches of fiduciary duty owed to minority shareholders by a majority 
shareholder. The controversy arose from sales made of corporate assets to a third 
party. The trial court granted defendants partial summary judgment and denied 
plaintiffs partial summary judgment. The Indiana Supreme Court affirmed in 
part and reversed in part. In so doing, it stated that the failure to comply with 
statutory requirements of the corporations statutes does not automatically result 
in a breach of fiduciary duty as a matter of law; instead undisputed facts that the 
majority shareholder failed to act in the interests of the corporation were 
required. This precluded summary judgment for plaintiffs on that issue. The 
court also concluded that the minority shareholders' primary remedy came from 
their statutory rights to dissent to the transaction, but that they could pursue 
separate claims against the persons responsible for the violation of those rights 
due to the absence of required notice.^*^ Similarly, in G cfe N Aircraft, Inc. v. 
Boehm^^^ the court again canvassed the remedies available to minority 
shareholders, holding among other things that the minority shareholder did not 
need to bring a derivative action where breach of fiduciary duty was the claim 
and that the primary remedy was the forced sale of the minority shareholder's 
interest. The court also rejected a claim for attorneys' fees, except insofar as the 
defendant had presented a frivolous counterclaim. 

9. Public Lawsuits. — In litigation stemming from the controversy over the 
revitalization of Gary, the court clarified the bond requirement in the context of 
a "public lawsuit" as defined by Indiana Code section 34-13-5-2.^*^ Hughes v. 
City of Gary^^^ involved two members of the Gary Common Council who 
objected to the council's approval of a plan to use casino revenues as security for 
municipal bonds to finance the Genesis Center, a baseball stadium, waterfront 
redevelopment, and other matters. They filed a lawsuit to invalidate the action.^^' 

Under Indiana legislation governing "public lawsuits,"^" one who sues to 
challenge public works projects must meet certain procedural hurdles not 
imposed in normal litigation."^ The purpose of these is to protect governmental 
entities from delay in and increased expense of public improvements caused by 



246. 741 N.E.2d 1217 (Ind. 2001). 

247. Mat 1228. 

248. 743 N.E.2d 227 (Ind. 2001). 

249. IND. CODE §34.13-5-2(b) (1998). 

250. 741 N.E.2d 1168 (Ind. 2001). 

251. Mat 1170. 

252. Ind. CODE §34-13-5-2 (1998). 

253. They are to show in a preliminary hearing that one's action raises '^substantial questions 
to be tried/' and, if this showing cannot be made, to post a bond to avoid dismissal of the case. 
//Mg/ie5,741N.E.2datn70. 



1190 INDIANA LAW REVIEW [Vol. 35:1157 



nonmeritorious litigation.^''* The trial court certified the action as a public 
lawsuit and held an interlocutory hearing. At the hearing, the city presented 
evidence of the increased costs the projects might incur as a result of the 
lawsuit.^'' The statute also required the plaintiffs to make a showing that would 
justify the issuance of a temporary injunction, despite the risk to the city from 
delay. The trial court made various conclusions (which the Indiana Supreme 
Court treated as fmdings) and determined that the plaintiffs had not met their 
burden. It ordered that they post a $2.35 million bond to cover the minimum 
expenses the city might incur from the effects of the suit on the contemplated 
projects. Because plaintiffs did not then post the bond, the case was dismissed 
and they appealed.^'^ 

Under an unusual procedure, the Indiana Supreme Court granted emergency 
transfer from the court of appeals.^'^ In so doing, it held that the public lawsuit 
statute requires that ''plaintiffs must introduce sufficient evidence that there is a 
substantial issue to be tried in order to avoid the bond requirement."^^* It 
underscored that the legislation balances the right of citizens to challenge public 
improvements against unwarranted delay, frustration, and additional expense 
caused by "harassing litigation. "^'^ 

In a concurring opinion joined by Justice Sullivan, Justice Rucker pointed 
out that Indiana "case authority does not make clear what is meant by a 
'substantial question' in the context of a public lawsuit."^^ However, the statute 
incorporates the standards for a temporary injunction. In 1970, in the case of 
Johnson v. Tipton Community School Corp.^^^ the court had established a 
multipart test for the necessary showing: that the question to be tried is 
substantial, that the status quo be maintained pending fmal determination (absent 
clear imminent injury); that there is no remedy at law, and that a bond be 
posted.^" Justice Rucker asserted that when a plaintiff in a public lawsuit does 
not seek temporary injunctive relief, then only the first prong oi Johnson should 
apply .^" He asserted further that when preliminary injunctive relief w sought in 
a public lawsuit, as it was in Hughes, all Xhe Johnson factors should be part of the 



254. Indiana ex. rel. Habercom v. DcKalb Circuit Court, 241 N.E.2d 62, 65 (Ind. 1968). 

255. //Mg/ie^, 741 N.E.2d at 1169-70. 

256. /£/. atll70. 

257. Id. See also iND. APPELLATE RULE 56(A), which authorizes such transfer when the 
supreme court determines that "an appeal involves a substantial question of law of great public 
importance and that an emergency exists requiring speedy determination." 

258. Hughes, 741 N.E.2d at 1 171 . The court also reiterated that a trial court's findings are 
challenged under the "clearly erroneous" standard, which also applies to the procedural processes 
involved in filtering our nonmeritorious public lawsuits. Id. at 1 1 72. 

259. Id (quoting Johnson v. Tipton Cmty. Sch. Corp., 255 N.E.2d 92, 94 (Ind. 1970)). 

260. Id. at 1 175 (Rucker, J., concurring). 

261. 255N.E.2d92,94(Ind. 1970). 

262. Id 

263. Hughes, 741 N.E.2d at 1 175 (Rucker, J., concurring). 



2002] CIVIL PROCEDURE 1191 



plaintiffs showing, including maintenance of the status quo.^^'* Notwithstanding 
the justices' unanimous agreement on the result, at a minimum Hughes 
demonstrates the complexities and ambiguities surrounding the procedure for 
matters classified as "public lawsuits." 

1 0. Relief from Judgment Under Rule 60(B) . — In Clear Creek Conservancy 
District v, Kirkbride^^^ the court had to determine whether landowners who filed 
untimely requests for exceptions to an appraiser's report governing their 
conservancy district assessment could obtain relief under Trial Rule 60(B)( 1 )}^^ 
Justice Sullivan concluded that if the principles of Lehnen v. State^^^ (governing 
eminent domain) extend to conservancy district matters, Rule 60 relief would not 
be available.^^* While the court of appeals had distinguished Lehnen on the 
ground that the conservancy district legislation was not comprehensive, Justice 
Sullivan agreed with Judge Friedlander in the dissent below, that the rule of 
Lehnen requires that a statute's fixed procedure be followed: "[T]he 
Conservancy Act provides a definite procedure for interested landowners to 

follow when contesting an appraiser's report Allowing landowners to file 

untimely exceptions in the trial court is simply not authorized by the conservancy 
district statutory scheme."^^^ For the court, requiring landowners to follow the 
statute insures that a district's financial arrangements can proceed with final ity.^^^ 
Allowing the use of Rule 60 to get around the requirement would "undermine the 
statutory scheme for fixing in place the financing arrangements of conservancy 
districts, and by extension, other governmental units operating under similar 
statutory arrangements."^^' 

Allstate Insurance Co. v. WatsorP^ provides some welcome direction from 
the supreme court as to the standards for setting aside a default judgment under 
Indiana Trial Rule 60(B) in the context of settlement negotiations. In that case, 
the plaintiffs sought recovery from Allstate for uninsured motorists coverage and 
protracted settlement discussions ensued over several years. Originally, 
plaintiffs' lawyer represented that a default judgment would not be pursued while 
negotiations were pending. Later the lawyer made a settlement demand and 
represented that it would be held open for a time certain. Before the running of 
that time, the plaintiffs' lawyer took Allstate's default. The trial court denied 
Allstate's motion to set the default aside and the appellate court affirmed. In an 
opinion by Justice Dickson, the Indiana Supreme Court reversed and stressed 
again the disfavor in which default judgments are held. Although the court 
recognized that trial court rulings on Rule 60(C) motions are given deference. 



264. /^. at 1175-76. 

265. 743 N.E.2d 1 i 16 (Ind. 2001). 

266. /^. at 1118. 

267. 693 N.E.2d 580 (Ind. Ct. App.), trans, denied, 706 N.E.2d 169 (Ind. 1998). 

268. Kirkbride, 743 N.E.2d at 1 1 18. 

269. /flf. atll20. 

270. Id 

271. Id 

272. 747 N.E.2d 545 (Ind. 2001). 



1 192 INDIANA LAW REVIEW [Vol. 35: 11 57 



that deference must be seen in the context of a public policy in favor of trial on 
the merits and the unique facts of each case, which bear on the justness of setting 
the judgment aside. Moreover, the court noted that an attorney's conduct might 
be technically correct under the trial rules and still violate the rules of 
professional responsibility. This bore on the case before the court, as the 
plaintiffs attorney did not honor his own representation. The opinion strongly 
suggests that where the granting of a default judgment rewards what is arguably 
attorney misconduct, all things being equal, the default should be set aside. 

11. Statute of Limitations. — Revisiting issues similar to those involved in 
Van Dusen v. Stotts^^^ the Indiana Supreme Court construed the application of 
the "discovery" rule for the running of the statute of limitations in Degussa Corp. 
V. Mullens }^^ Degussa Corp. was an action based on negligence and products 
liability involving a worker who alleged lung injury from chemicals used in the 
making of animal feed. Defendants moved for summary judgment on the theory 
that plaintiffs claims were time-barred."^ The trial court denied the motion. On 
transfer. Justice Sullivan noted that the court has adopted a "discovery" rule to 
clarify the negligence and products liability limitation statute"^ where injuries 
are caused by exposure to foreign substances.^^^ Even on defendant's theory, the 
action was commenced only eight days after the running of the period. Although 
plaintiff visited her doctor complaining of respiratory problems more than two 
years before she filed suit, she was only told then that there was a reasonable 
possibility^ not a probability^ that her condition was caused by exposure to 
defendants' products. Plaintiff diligently pursued further testing to "transform 
speculation into a causal link."^^' Because that link had not been made in the 
eight days at issue in the case, the cause of action had not yet accrued and the 
trial court properly denied the motion to dismiss."^ The court's opinion suggests 
that although certainty is not necessary to trigger the running of the statute of 
limitations, the mere possibility that an injury is caused by a defendant's product 
is not sufficient either.^*® Whether mere possibility has ripened into something 



273. 712 N.E.2d 491 (Ind. 1999) (construing the issue of when a patient should be on inquiry 
notice regarding medical malpractice such that a cause of action accrues). 

274. 744 N.E.2d 407 (Ind. 2001). 

275. One defendant also moved to dismiss for lack of subject matter jurisdiction claiming 
exclusive worker's compensation jurisdiction. This motion was also denied by the trial court. 
Because the court was evenly divided on this question, the trial court's judgment was affirmed 
pursuant to Indiana Appellate Rule 59(B). In scrutinizing the questions raised regarding worker's 
compensation, Justice Dickson, writing for the dissenting members of the court, followed the 
analysis ofGNK Co. v. Magness, 744 N.E.2d 397 (Ind. 2001), and reiterated that where the trial 
court rules on a paper record, the standard of review is de novo. Degussa Corp. , 744 N.E.2d at 4 1 5 
(Dickson, J., dissenting). 

276. Ind. CODE §33-1-1.5-5 (1998). 

277. Dej^Mwa Corp., 744 N.E.2d at 410. 

278. /«/. at4Il. 

279. Id 

280. /J. at41M2. 



2002] CIVIL PROCEDURE 1 1 93 



more is a question of fact that will be determined on a case-by-case basis. In 
analyzing the case. Justice Sullivan explicitly stated that decisions under the 
Medical Malpractice Act are persuasive as to questions of when a plaintiff should 
have discovered a possible negligence or products liability cause of action.^^' 

12. Summary Judgment. — Mangold v. Indiana Department of Natural 
Resources^^^ is an important torts decision involving governmental immunity and 
duty that also has significance for summary judgment. There a twelve-year-old 
boy returned home after watching a school-sponsored Department of Natural 
Resources (DNR) demonstration of firearm safety. He took apart a shotgun shell, 
struck it with a hammer and chisel and was injured when it exploded. An action 
was filed on his behalf against the school and the DNR. The school presented 
the affirmative defense that it owed no duty for injuries sustained off of school 
grounds and the DNR defended on grounds of governmental immunity. 
Contributory negligence was also interposed as a defense by each defendant. 
Both the school and the DNR moved for summary judgment, which was granted 
by the trial court and affirmed on appeal. The Indiana Supreme Court allowed 
transfer and held that a school's duty is not dependent on the plaintiffs injuries 
occurring on school property. It also reaffirmed that governmental immunity 
under section nine of the Indiana Tort Claims act should be narrowly construed, 
following Hinshaw v. Board of Commissioners of Jay County^^^ so as to apply 
only where vicarious liability is premised on the acts of third parties other than 
government employees. Nonetheless, three of the members of the court. Chief 
Justice Shepard and Justices Sullivan and Boehm, found that summary judgment 
still should be affirmed due to the contributory negligence of the boy. 

Several significant principles for summary judgment arise from the case. 
First, citing to the standards for summary judgment established in early 200 1 by 
Tom-Wat, Inc. v. Fink^^^ the court reiterated that summary judgment is only 
proper where there is no genuine issue of material fact in dispute, after all facts 
and reasonable inferences therefi*om are construed in favor of the nonmoving 
party, and the movant is entitled to judgment as a matter of law. Second, 
although Justice Rucker noted that the existence of duty is normally a question 
of law for the court, not one of fact for the jury, he reiterated that breach of duty, 
"which requires a reasonable relationship between the duty imposed and the act 
alleged to have constituted breach is usually a matter left to the trier of fact."^^^ 
Finally, in Chief Justice Shepard's concurring opinion for the majority, he 
strongly suggested that because "even the slightest contributory negligence by the 
plaintiff bars recovery," it is much more likely for contributory negligence to 
succeed on summary judgment as an affirmative defense than the defense of 
comparative negligence. 



281. Mat 410-11. 

282. 756N.E.2d 970 (Ind. 2001). 

283. 61 1 N.E.2d 637 (Ind. 1993). 

284. 74 1 N.E.2d 343 (Ind. 200 1 ). See also supra text accompanying notes 191-213. 

285. Mangold, 756 N.E. 2d at 975 (citing Delta Tau Delta, Beta Alpha Chapter v. Johnson, 
712 N.E.2d 968, 974 (Ind. 1999)). 



1 194 INDIANA LAW REVIEW [Vol. 35:1157 



II. Selected Decisions from the Indiana Court of Appeals 

As expected, the decisions from the court of appeals affecting Indiana civil 
procedure were extremely varied. Along with the usual crop of opinions 
grappling with Rule 12 and summary judgment motions, there were a surprising 
number of cases dealing with amendment of pleadings and attorneys' fees. One 
of the most significant cluster of decisions involved the application of Indiana's 
Product Liability Act to asbestos-related injuries. What follows is a description 
of selected court of appeals opinions, organized by topic. 

A. Amendment of Pleadings 

SLR Plumbing & Sewer, Inc. v. Turk^^^ involved an action by a subcontractor 
on a mechanic's lien. The court of appeals held that the denial of plaintiff s oral 
motion to amend to add a claim for homeowners' personal responsibility was 
harmless.^'^ This is because in ruling on the homeowner's motion for summary 
judgment, the trial court already scrutinized the key issue in the amended 
opinion — whether the subcontractor's letter gave notice of personal 
responsibility as required by Indiana Code section 32-8-3-9.^''* The court also 
noted that the amendment of pleadings is within the broad discretion of the trial 
court and enjoys a deferential standard of review.^*^ 

In Osterloo v. Wallar,^^ sl car collided with a child on a sled. The case raised 
the same nonparty "Catch-22" that was resolved by the Indiana Supreme Court 
in Owens Coming Fiberglass Corp. v. Cobb?^^ The question was whether the 
defendant-motorist could amend his pleading to add as a nonparty the child's 
father, who had previously been a defendant but was dismissed from the 
action.^^^ The problem was whether the amended pleading met the timeliness 
rules under the Comparative Fault Act.^^^ Relying directly on Cobb, the court of 
appeals determined that the purpose of the nonparty requirement — ^to apprise the 
plaintiff of potential defendants — ^was met where the plaintiff was surely aware 
of the potential nonparty's existence; thus the amendment was "reasonably 
prompt" under the statute and should have been allowed.^^"* 

Davis V. Ford Motor Co.^^^ showed the overlap of Indiana Trial Rules 
12(B)(6) (dismissal for failure to state a claim) and 12(C) (motion for judgment 
on the pleadings). Rule 12(C) does not provide for amendment as an alternative 
to dismissal, but 12(B)(6) does. The issue was whether in a circumstance where 



286. 757 N.E.2d 193 (Ind. Ct. App. 2001). 

287. Mat 197-98. 

288. Id. 

289. Id 

290. 758 N.E.2d 59 (Ind. Ct. App. 2001). 

291. 754 N.E.2d 905 (Ind. 2001). 

292. 0^rer/oo,758N.E.2dat61. 

293. /(^. at 63-64. 

294. Mat 64-65. 

295. 747 N.E.2d 1 146 (Ind. Ct. App. 2001). 



2002] CIVIL PROCEDURE 1195 



a defendant strategically files a motion for judgment on the pleadings that could 
be characterized as a 1 2(B)(6) motion, the trial court should treat it as a 1 2(B)(6) 
request, thus affording plaintiff the opportunity to amend.^'^ Answering this 
question turned on the nature of the defect in the pleading. Quoting Federal 
Practice and Procedure, ^^^ the court of appeals suggested that a Rule 12(B) 
motion goes to a plaintiff's failure to satisfy a "procedural" condition for his 
claim, such as insufficient particularity in the pleading.^'* In contrast, a motion 
for judgment on the pleadings, which presumes an end to the pleadings, goes to 
the substantive merits.^^ Where the defect is procedural, a trial court commits 
reversible error when it puts form over substance and treats the matter under 
12(C), thereby preventing amendment.^°° One problem with this approach is the 
difficulty of distinguishing between procedural and substantive defects. Another 
is that following Rule 12(C) could end the pleading stage prematurely by 
precluding amendments that might correct defects that are not easily classified 
in terms of these categories. 

In Russell v. Bowman, Heintz, Boscia & Vician, Inc.^^^ an action brought 
under the federal Fair Debt Collection Practices Act,'°^ the debtor amended his 
complaint to add his wife as a party-plaintiff and to add the assignee of the debt. 
Bowman, as a new defendant.^®^ Bowman filed a motion to dismiss the amended 
complaint, arguing that the husband's settlement with the assignor was fatal and 
that the amendment came too late. The trial court granted dismissal for lack of 
subject matter jurisdiction due to the settlement.^^ The court of appeals reversed 
because no responsive pleading had been filed by the original settling defendant. 
Under the express terms of Indiana Trial Rule 15(A), the plaintiff has a right to 
amend without leave of court. Plaintiff could also add new claims and parties so 
long as the joinder rules were met.^°^ Finally, there was no subject matter defect 
because the action was still pending against the original defendant when the 
amendment was made.^°^ In contrast, the court concluded in Kuehl v. Hoyle ^°^ 
that the amendment of right rule in 1 5(A) does not trump the relation-back 
requirements of Rule 15(C) simply because no responsive pleading is filed.^^* 



296. Mating. 

297. 5 A Charles Alan Wright & Arthur r. Miller, Federal Practice and Procedure 
§ 1369 (2d ed. 1990). 

298. Davw,747N.E.2datn50. 

299. Id. 

300. /^. at 1149. 

301. 744 N.E.2d 467 (Ind. Ct. App.), trans, denied, 761 N.E.2d 420 (Ind. 2001). 

302. Fair Debt Collection Practices Act, Pub. L. 95-109, 91 Stat. 874 (codified as amended 
in scattered sections of 1 5 U.S.C, ch. 41). 

303. /?MMe//,744N.E.2dat469. 

304. Mat 469-70. 

305. Mat 471. 

306. Id 

307. 746 N.E.2d 104 (Ind. Ct. App. 2001). 

308. Mat 108. 



1 196 INDIANA LAW REVIEW [Vol. 35: 1 1 57 

Thus, the statute of limitations may still bar amendment.^°^ 

B. Arbitration 

Mislenkov v. Accurate Metal Detinning, Inc}^^ involved a claim of 
misappropriation of trade secrets by a former employee, Mislenkov, and that 
employee's second employer, Shoreland. Both defendants moved to dismiss, 
claiming an arbitration agreement between Mislenkov and Accurate Metal 
Detinning ("Accurate Metal") deprived the court of subject matter jurisdiction.^ ' ^ 
The court of appeals applied a two-tiered test for arbitration: whether there is an 
enforceable agreement to arbitrate between the parties and whether the dispute 
falls within the scope of that agreement.^ ^^ Because Shoreland was not in privity 
on agreement, the company could not enforce it, so the first prong of the test was 
not met as to Shoreland.^" Although there was an enforceable arbitration 
agreement between Mislenkov and Accurate Metal, it did not cover the whole 
employment relationship, but only matters occurring after a release had created 
a new contractual relationship. As to Mislenkov, the second tier of the analysis 
was not satisfied because the dispute related to pre-agreement actions.^'* 

C Asbestos 

Asbestos cases present difficult problems for issues relating to limitation of 
actions and product identification/causation. The diseases caused by asbestos 
take a very long time to develop. In the typical circumstance where a worker 
might be exposed, numerous companies could have produced the article creating 
the exposure. After many years, workers' memories fade and documentary 
evidence linking the asbestos of a particular defendant to a specific work 
environment is difficult to discover. Where asbestos is a component part of a 
product, a worker might never have been aware of the identity of the supplier of 
the asbestos in the first place. From a procedural perspective, these issues 
typically arise on summary judgment. Complicating matters, the ten-year repose 
period of the Indiana Products Liability Act^'^ ("PLA") runs from the date a 
product is delivered to the initial user or consumer, regardless of when the claim 



309. /</. at 108-09. 

310. 743 N.E.2d 286 (Ind.CtApp. 2001). 

311. Mat 288. 

312. Mat 289. 

313. Mat 290. 

314. Id. 

315. IND. Code § 34-20-3-1 (1998) provides in part that: 
[A] product liability action must be commenced: 

(1) within two (2) years after the cause of action accrues; or 

(2) within ten (10) years after the delivery of the product to the initial user or consumer. 
However, if the cause of action accrues at least eight (8) years but less than ten (10) 
years after that initial delivery, the action may be commenced at any time within two (2) 
years after the cause of action accrues. 



2002] CIVIL PROCEDURE 1197 



accrues as to a particular plaintiff. However, it does not apply to certain actions 
for asbestos exposure. Instead, where the requirements of Indiana Code section 
34-20-3-2 ("the asbestos exception") are met, a claim may be brought within two 
years from the date it accrues, regardless of when the product was put on the 
market.^ '^ The asbestos exception raises problems of statutory interpretation, 
and, depending on how they are resolved, exposes the PLA to constitutional 
infirmity under Martin v. Richey^^^ and related cases. 

Black V. ACandS, Inc?^^ may prove to be one of the most important 
decisions from the court of appeals in 2001 because it construes the asbestos 
exception broadly. It has already had an impact on the many asbestos-related 
actions brought in Indiana courts. Black arose from a suit brought by the widow 
and the estate of a blast furnace worker who worked in the Gary USX steel 
works. He died from asbestos- induced lung cancer.^^^ The action came up for 
review after the Indiana Supreme Court granted transfer in Owens Corning 
Fiberglass Corp. v. Cobb,^^^ but before it issued its opinion. In Cobb, the 
supreme court affirmed the trial court's determination that the plaintiffs had 
shown sufficient evidence linking defendant's product to decedent to avoid 
summary judgment. It disagreed with the court of appeals that the evidence 
presented no issue of material fact for trial.^^* 

The Blacktrial court had granted summary judgment for two different groups 
of defendant-companies on two different grounds. For the first group, it 
concluded that the PLA ten-year repose period applied, not the two-year asbestos 
exception, because the defendants in this group were not both miners a«(i sellers 
of asbestos.^^^ Regarding the second group, the court found insufficient evidence 
on product identification.^^^ 

As to the first ground, the court of appeals construed the language "persons 
who mined and sold" in the statutory exception to determine whether it was 
meant in the conjunctive — so that both mining aA7^ selling were required of the 
same defendant — or the disjunctive — so that either mining or selling would 
suffice.^^'* Despite a line of previous cases that suggested both attributes were 



3 1 6. Id. § 34-20-3-2. The statute provides, in pertinent part, that the exception is available as 
follows: 

(d) This . . . [exception] applies only to product liability actions against: 

(1 ) persons who mined and sold commercial asbestos; and 

(2) funds that have, as a result of bankruptcy proceedings or to avoid bankruptcy 
proceedings, been created for the payment of asbestos related disease claims or asbestos 
related property damage claims. 

317. 7 1 1 N.E.2d 1 273 (Ind. 1 999). 

318. 752N.E.2d 148 (Ind. Ct. App. 2001). 

319. Mat 150. 

320. 754 N.E.2d 905 (Ind. 2001). 

32 1 . See supra notes 1 26-38 and accompanying text. 

322. Black, 752 N.E.2d at 156. 

323. /^. at 157. 

324. /^. at 151-52. 



1 198 INDIANA LAW REVIEW [Vol. 35: 1 1 57 



required,^^^ the court of appeals determined that "the construction [of the statute] 
urged by defendants is inconsistent with other provisions of the products liability 
act and with our supreme court's precedent and would lead to an absurd 
result."^^^ The "absurd result" would be that a company that mined but did not 
sell asbestos, and a company that sold but did not mine asbestos, would both be 
able to take advantage of the ten-year limit, despite causing the same harm to 
plaintiffs as companies that both mined and sold it. Moreover, this interpretation 
would not promote the purpose of giving plaintiffs in asbestos cases an adequate 
time from discovery of their condition to sue. This policy was suggested by the 
Indiana Supreme Court in Covalt v. Carey Canada, Inc.^^^ a case that was 
decided prior to the asbestos exception statute. There the supreme court argued 
that the ten year limit ought not to apply "to cases involving protracted exposure 
to an inherently dangerous foreign substance which is visited into the body."^^* 
The court of appeals agreed with the distinction in Covalt between a regular 
product in the marketplace and asbestos, "a hazardous foreign substance which 
causes disease,""^ especially because the diseases it causes take a long time to 
develop. It reversed the trial court's grant of summary judgment based on the 
PLA."^ 

In resolving the issue of product identification, the court of appeals was 
persuaded by the Seventh Circuit's opinion in Peerman v. Georgia-Pacific 
Corp?^ ' Peerman suggests that a plaintiff must come forward with facts showing 
the victim's inhalation of a particular defendant's asbestos to avoid summary 
judgment on product identification.^^^ The court of appeals interpreted Peerman 
to mean that "concrete facts" would be required to show product identification, 
not speculative inferences.^^^ Although there was some evidence that the 
defendants' products might have been in the firebricks or used as insulation 
where decedent worked, the court of appeals discounted it as speculative and 
inferential.""* It concluded that the trial court had not erred in granting the 
defendants summary judgment therefore. However, given the Indiana Supreme 



325. See Novicki v. Rapid-American Corp., 707 N.E.2d 322, 324 (Ind. Ct. App. 1 999); Sears 
Roebuck & Co. v. Noppert, 705 N.E.2d 1065, 1068 (Ind. Ct. App. 1999); see also Spriggs v. 
Armstrong World Indus., No. IP91-651, 1999 U.S. Dist. LEXIS 19874 (S.D. Ind. 1999). 

326. B/acife,752N.E.2datl52. 

327. 543 N.E.2d 382 (Ind. 1989). 

328. Mat 385. 

329. Mat 386. 

330. BlacK 752 N.E.2d at 151, 154. 

331. 35 F.3d 284, 287 (7th Cir. 1994) (applying Indiana law). 

332. Id. at 286. Moreover, according to Peerman, no Indiana court had articulated a test for 
causation in asbestos cases. 

333. M. at 286-87. The reference to "concrete facts" comes from the court of appeals decision 
in Owens Coming Fiberglass Corp. v. Cobb, 7 1 4 N.E.2d 295, 303 (Ind. Ct. App. 1 999), which was 
vacated when the Indiana Supreme Court granted transfer. See Owens Coming Fiberglass Corp. 
V. Cobb, 754 N.E.2d 905 (Ind. 2001). 

334. 5/flc^, 752 N.E.2d at 155-57. 



2002] CIVIL PROCEDURE 1199 



Court's opinion in Cobb, this conclusion is in doubt.^^^ 

Jurich V. Garlock, Inc?^^ also raised the question of how to construe the PLA 
in the case of a worker whose claim was filed more than ten years after he could 
have been exposed to defendants' products but within the asbestos exception. 
This panel of the court of appeals found the analysis of the exception statute in 
^/acA: "reasonable" and followed it."^ However, it confronted anew interpretive 
problem — ^whether plaintiffs would have to show that defendants were miners or 
sellers of commercial asbestos, defined as asbestos in the raw processed form. 
If so, the exception would not apply to persons who sold products that contained 
asbestos as a component.^^* In that circumstance, the PLA could be 
unconstitutional as applied for violating the Indiana Constitution open courts 
provision."^ 

The court of appeals reasoned that the word "commercial" was intended to 
have effect in the statute and not be mere surplusage. Moreover, it was 
persuaded by a regulation of the Environmental Protection Agency that 
"commercial asbestos" must be defined in terms of its raw state.-^''^ Thus, the 
exception did not apply to defendants who only sold products incorporating 
asbestos. Therefore, the court had to reach the question of whether the PLA 
violates the Indiana Constitution open courts provisions in light of the Indiana 
Supreme Court's holdings in Martin v. Richey^^^ and its progeny.^"^^ The court 
concluded that it might in two circumstances: where a person is injured by an 
asbestos product within the PLA ten-year period but does not gain knowledge of 
the injury until afterward; and where a person is injured prior to the passage of 
the PLA and the date of the product's delivery is unknown.^*^ This latter 
situation was presented by the facts of the case and the court held the PLA 
unconstitutional as applied to plaintiffs. 

Allied Signal, Inc. v, Herring^^ combined the issues raised by both Black and 
Jurich. There the defendants argued the plaintiff would have to show they were 
both miners and sellers of asbestos to prevail.^"*^ A different panel of the court 
of appeals found the analysis in Black on that question compelling and adopted 
it.^"*^ As in Jurich, the defendants also argued that plaintiffs would have to show 
they dealt in commercial Sisbestos?^^ However, the court did not reach this issue, 



335. See supra notes 126-38 and accompanying text. 

336. 759 N.E.2d 1066 (Ind. Ct. App. 2001). 

337. Id at 1069-70. 

338. Mat 1070-71. 

339. Id. at 1071; Ind. Const. art.l2, § 1. 

340. Jurich, 759 N.E.2d at 1070. 

341. 71 1 N.E.2d 1273 (Ind. 1999). 

342. See, e.g., Mcintosh v. Melroe Co., 729 N.E.2d 972 (Ind. 2000). 

343. Jurich, 759 N.E.2d at 1071 . 

344. 757 N.E.2d 1030 (Ind. Ct. App. 2001). 

345. Id at 1032-33. 

346. Id at 1035-36. 

347. Id at 1036-37. 



1200 INDIANA LAW REVIEW [Vol. 35:1 157 



for it found that defendants had not raised it below and so waived it on appeal.^"** 
This waiver also obviated the need to discuss constitutional questions raised by 
thePLA. 

Fulk V. Allied Signal, Inc.^^^ is yet another asbestos case involving Allied 
Signal as a defendant. Judge Mattingly-May, who wrote the opinion in Black, 
used its analysis on the asbestos exception again in Fulk?^^ The opinion also 
followed the same reasoning on product identification and affirmed the trial 
court's grant of summary judgment for a number of defendants where there was 
some evidence of decedent's exposure to their products, but it was not strong.^^* 
Once again, after Cobb the product identification aspect of this case is in 
doubt.^" 

Parks V. A.P. Green Industries^^^ again presented issues of product 
identification and the statute of repose. In Parks a boilermaker with lung cancer 
and his wife sued a variety of asbestos producers for products liability and loss 
of consortium. ^^'^ The defendants moved for summary judgment on the grounds 
that the plaintiffs had failed to bring their actions in time and that they had failed 
to muster sufficient evidence to link the boilermaker's lung cancer with inhaling 
their asbestos.^^^ Among its rulings, the trial court denied summary judgment to 
defendant Chicago Firebricks on the issue of product identification, but granted 
all defendants summary judgment for the plaintiffs' failure to bring their claims 
within the ten-year repose period of the PLA.^^^ The court of appeals affirmed 
denial of summary judgment as to Chicago Firebricks on product identification, 
but reversed as to a number of defendants on the timeliness issue following the 
analysis in 5/ac^.^^' 

The cases from Black to Parks show an emerging consensus on whether a 
defendant must be both a miner and a seller of asbestos for the asbestos 
exception to the PLA to apply. However, the issue of whether "commercial 
asbestos" is limited to raw processed asbestos is an open question, as is the 
manner in which the court of appeals will interpret the showing necessary to 
avoid summary judgment on product identification after Cobb. 

D. Attorneys ' Fees 

Former Appellate Rule 15(G) allowed appellate courts to assess damages 
when a judgment was affirmed on appeal. This award was informally referred 



348. Mat 1037. 

349. 755 N.E.2d 1 198 (Ind. Ct. App. 2001). 

350. /c/. at 1202-03. 

351. Mat 1203-06. 

352. See supra notes 126-38 and accompanying text. 

353. 754 N.E.2d 1052 (Ind. Ct. App. 2001). 

354. Mat 1054-55. 

355. Id at 1055. 

356. Id 

357. Mat 1059. 



2002] CIVIL PROCEDURE 1201 



to as "appellate attorneys' fees.""* In Kuehl v. Hoyle^^^ the court of appeals 
strictly construed the application of the rule to avoid a chilling effect on the 
taking of appeals. Even though the plaintiff in Kuehl waited more than eight 
years to amend her complaint, there had been two previous appeals in the action, 
and it was possible she was litigating matters that had been settled, the appellate 
court declined to award attorney fees.'^ Sanctions for frivolous or bad faith 
appeals are now governed by Indiana Appellate Rule 66(E), which provides: 
"The Court may assess damages if an appeal, petition, or motion, or response, is 
frivolous or in bad faith. Damages shall be in the Court's discretion and may 
include attorneys' fees. The Court shall remand the case for execution."^^' 

In SLR Plumbing & Sewer, Inc. v. Turk^^^ described above, the court of 
appeals reviewed the process for determining whether a prevailing party should 
be awarded fees under Indiana Code section 34-52-1-1 covering "groundless" 
claims. Citing Emergency Physicians of Indianapolis v. Pettit^^^ the court 
described three steps for reviewing a fee award, two of which go to merit 
questions: a review of the trial court's fmdings of fact under the clearly 
erroneous standard, a review de novo of the trial court's legal conclusions, and 
a review of the trial court's decision to award attorney fees under an abuse of 
discretion standard.^^ Concluding that there were facts to support the 
subcontractor's claim, but that the legal significance he gave them was incorrect, 
the court of appeals did not consider the action "groundless" and reversed the 
award of fees. ^^^ 

Stephens v. Parkview Hospital, Inc?^ injects some confusion over the 
applicable standard of review on fees for it states: 

We note that the trial court's decision to grant or deny attorney fees will 
not be disturbed absent an abuse of discretion. When the trial court 
determines that attorney fees were not warranted under the statute 
permitting the award of attorney fees for bringing or pursuing a frivolous 
claim, we will review that conclusion de novo.'^^ 

In Davidson v. Boone County^^^ the trial court awarded the county almost 



358. See Greasel v. Troy, 690 N.E.2d 298, 304 (Ind. Ct. App. 1997). 

359. 746 N.E.2d 104 (Ind. Ct. App. 2001). 

360. Matin. 

361. Ind. Appellate Rule 66(E). 

362. 757 N.E.2d 193 (Ind. Ct. App. 2001). See suprq notes 286-89 and accompanying text. 

363. 71 4N.E.2d 1111,11 15 (Ind. Ct. App.), flafopte£/o«/rfl/w/er, 71 8N.E.2d 753 (Ind. 1999). 

364. SRL Plumbing & Sewer, Inc., 757 N.E.2d at 201. iND. CODE §§ 34-52-1-1 (1998) 
provides: "In any civil action, the court may award attorney's fees as part of the cost to the 
prevailing party, if the court finds that either party: (1 ) brought the action or defense on a claim or 
defense that is frivolous, unreasonable, or groundless . . . ." 

365. SRL Plumbing, 757 r^.E.ld at 20U02. 

366. 745 N.E.2d 262 (Ind. App. 2001). 

367. Id. at 267 (citations omitted). 

368. 745 N.E.2d 895 (Ind. Ct. App. 2001 ). 



1202 INDIANA LAW REVIEW [Vol. 35:1157 



$80,000 in attorneys fees without the county's requesting them.^^' Plaintiffs had 
filed a claim against Boone County alleging discrimination and other 
constitutional violations stemming from its construction of a building without a 
permit. The court of appeals affirmed the trial court and also cited to Emergency 
Physicians of Indianapolis?^^ It held that a trial court has the power under the 
statute to award fees sua sponte.^^' The facts were particularly egregious in the 
case before the court and it found that, among other things, the plaintiffs had 
brought their claims for purposes of harassment. 

In Grubnich v. Renner^^^ the court of appeals concluded that, given the 
changes in Indiana case law and ambiguity as to the extent of retroactivity of 
relevant decisions, the question concerning whether the Medical Malpractice Act 
limited a defendant's liability for post-judgment interest was so complex it 
prevented his defense from being groundless.^^^ The decision includes a useful 
summary of the standards for the award of interest and review of an award of 
attorneys' fees. With regard to the latter, it follows the multistep process 
outlined by Emergency Physicians of Indianapolis. 

Major V. OEC-Diasonics, Inc?^^ presented a different fee question. There 
a law firm sought to foreclose on an attorney's fee lien and based the claim on 
unjust enrichment, an equitable remedy. The defendant alleged that the lawyer's 
professional misconduct in entering into an oral contingent fee modification, and 
other acts, prevented quantum meruit recovery due to unclean hands. ^^^ He also 
argued that the lawyer must disgorge any fees as a result of ethical violations. 
The court of appeals disagreed and ruled these arguments were factors to be 
balanced, but were not complete barriers to recovery .^^^ Moreover, the risk to the 
firm of losing the case on which the firm had worked for more than a decade 
justified consideration of the oral contingent fee agreement. It supported the 
quantum meruit award, which included a $650,000 bonus in addition to fees 
calculated on the firm's hourly rates.^^^ 

E. Bankruptcy Stay 

In Zollman v. Gregory ^^^ plaintiffs filed a medical malpractice claim with the 
Indiana Department of Insurance after the doctor sought federal bankruptcy 
protection. Nonetheless, the federal bankruptcy court later allowed plaintiffs 



369. Mat 898. 

370. Id. at 849. See also Emergency Physicians of Indianapolis v. Pettit, 714 N.E.2d 1111, 
1115(Ind. Ct. App. 1999). 

371. Davidson, 745 N.E.2d at 900. See IND. CODE §§ 34-52-1-1 (1998). 

372. 746 N.E.2d 1 1 1 (Ind. Ct. App. 2001). 

373. /fi^. at 119-20. 

374. 743 N.E.2d 276 (Ind. Ct. App.), trans, denied. 753 N.E.2d 1 5 (Ind. 2001). 

375. /c?. at 281-82. 

376. /^. at 282-83. 

377. /of. at 360-61. 

378. 744 N.E.2d 497 (Ind. Ct. App.), trans, denied, 753 N.E.2d 17 (Ind. 2001). 



2002] CIVIL PROCEDURE 1203 



relief from the stay to pursue their action.^^^ The court of appeals treated this 
relief as a nunc pro tunc order, although it was not labeled as such. The 
bankruptcy court had specifically directed that the plaintiffs be able to proceed 
with their action and described that action as "pending" in state court.^^^ Thus, 
the plaintiffs' filing was not void and tolled the running of the statute of 
limitations on their claim.^*' 

F. Burden of Proof 

In B.E.I., Inc. v. Newcomer Lumber & Supply Co.,^^^ a lumber supplier sued 
a homeowner on a theory of account stated for building supplies delivered. The 
homeowner disputed certain charges and credits, despite the fact that the supplier 
had sent him invoices to which he never objected.^*^ The trial court entered 
judgment against him inferring that his nonresponse to the invoices showed his 
agreement that the amount claimed was correct.^*"* The court of appeals affirmed 
and approved the principle that "[a]n agreement that the balance is correct may 
be inferred from delivery of the statement and . . . failure to object . . . within a 
reasonable amount of time."^*^ This creates a prima facie presumption that the 
debtor must rebut. The trial court's findings of fact that the homeowner had a 
reasonable time to object and had not rebutted the presumption were not 
erroneous, given the deferential standard of review. 

Under worker's compensation law, the "odd lot" doctrine treats a worker as 
totally disabled, even though the worker is not completely unable to work, if the 
disability would prevent employment "in any well-known branch of the 
competitive labor marked absent superhuman efforts, sympathetic friends or 
employers, a business boom, or temporary good luck."^*^ When raised, it can 
affect burdens of production. In Schultz Timber v. Morrison,^^^ the employer 
used the odd-lot theory to argue that it had rebutted the employee's prima facie 
case of total disability before the Worker's Compensation Board.^*^ The court 
of appeals declined to recognize the principle stating that in Walker v. State, 
Muscatatuck State Development Center ^^^"^ our supreme court "did not expressly 
adopt the odd lot doctrine."^^ 



379. Mat 498. 

380. Mat 50 1-02. 

381. Id. 

382. 745 N.E.2d 233 (Ind.Ct.App. 2001). 

383. Mat 235-36. 

384. Mat 236. 

385. Id. at 237 (quoting Auffenberg v. Bd. of Tr. of Columbus Reg'l Hosp., 646 N.E.2d 328, 
331 (Ind.Ct.App. 1995)). 

386. See BLACK'S LAW DICTIONARY 559 (5th ed. 1983). 

387. 751 N.E.2d 834 (Ind.Ct.App. 2001). 

388. Mat 837-38. 

389. 694 N.E.2d 258 (Ind. 1998). 

390. Schultz Timber, 751 N.E.2d at 838. 



1204 INDIANA LAW REVIEW [Vol. 35:1 157 



United Farm Insurance Co. v. Riverside Autosales^^^ was a bailment action 
brought by the insurance company as subrogee of the insured over a fire that 
destroyed an automobile. The trial court granted the bailee, Riverside, judgment 
on the evidence as to breach of warranty, but allowed the case to go forward on 
negligence. Thereafter, the trial court made fmdings of fact and conclusions of 
law sua sponte and entered judgment for Riverside as to negligence.^^^ In a 
bailment where the arrangement benefits both parties, and property is delivered 
to the bailee in good condition but is returned damaged, the inference arises that 
the bailee has been negligent.^^^ The court of appeals concluded that Riverside 
rebutted the inference by showing evidence of due care as reflected in the 
fmdings. Thus, plaintiff had the ultimate burden of proof on negligence.^'* 
Finally, the trial court's sua sponte findings and conclusions resulted in the court 
of appeals treating the verdict as a general verdict and viewing the special 
findings as going only to the specific issues they covered.^'^ 

G. Discovery 

Davidson v. Perron^^^ involved a wrongful termination action by a former 
police officer brought on the theory that he had been fired in retaliation. Under 
the authority of Tyson v. State,^^^ the trial court struck the affidavit of one of the 
officer's witnesses though he was proceeding pro se.^^' The witness had not been 
listed for trial, the officer did not provide a witness list to defendant until after 
the discovery cutoff date, and the testimony was prejudicial.^^ The court of 
appeals also upheld the trial court's disallowance of discovery regarding alleged 
retaliatory firings of other officers stating that the officer's claim had to stand on 
its own.*"*^ 

Potts. V. Williams^^^ was a medical malpractice action brought by a minor 
child for injuries suffered during delivery ."^^^ The plaintiff obtained depositions 
and trial transcripts of testimony of the defendant's expert for cross-examination. 
The trial court denied the defendant's motion to compel discovery on the ground 
the materials were attorney work-product.''^^ The court of appeals agreed because 
the items were obtained in anticipation of litigation as required by Trial Rule 



391. 753 N.E.2d 681 (Ind. Ct. App. 2001). 

392. /t/. at 684. 

393. Id sti 6^5. 

394. Id. 

395. Id at 684. 

396. 756 N.E.2d 1007 (Ind. Ct. App. 2001). 

397. 619 N.E.2d 276 (Ind. Ct. App. 1993). 

398. Davidson, 756 N.E.2d at 1013. 

399. Id at 1014. 

400. Id a.t\0\5. 

401 . 746 N.E.2d 1000 (Ind. Ct. App. 2001). 

402. Mat 1003-04. 

403. Mat 1005-06. 



2002] CIVIL PROCEDURE 1205 



26(B)(3) and the defendant did not show substantial need overbalancing work 
product protection, because he had equal or better access to the previous 
testimony of his own expert.^ 

H. Findings 

The court of appeals continues to distinguish the significance of trial court 
findings of fact when reviewing summary judgment rulings and judgments 
resulting from bench trials or trials with advisory juries. Indiana Trial Rule 52^^^ 
requires the trial court to make findings whenever a bench trial takes place or 
judgment is rendered with the help of an advisory jury. Those findings can result 
from a request by the parties or sua sponte. There is a two-part process for 
reviewing the findings-first, the appellate court must determine if the findings 
are supported by the evidence, and second, whether the judgment is supported by 
the findings. The appellate court will affirm the judgment on any legal theory 
supported by the findings, not just those theories '"espoused in the trial court 
proceeding,'"**^ and will only reverse if the judgment is clearly erroneous.^^ The 
Indiana Supreme Court reiterated this approach this year '\nG& N Aircraft, Inc. 
V. Boehm.^^^ Moreover, findings issued sua sponte are entitled to the same 
standard of review.*^ 

In contrast, when a court makes findings in connection with a summary 
judgment motion, they are not entitled to the same deference given in the case of 
a bench trial or an advisory jury and they do not change the de novo standard of 
review on summary judgment. As the court explained it in Ferrell v. Dunescape 
Beach Club Condominiums Phase 7:*'® 

Here, the trial court entered specific findings of fact and conclusions 
thereon, which would normally trigger the two-tiered appellate standard 
of review contained in Indiana Trial Rule 52. However, specific findings 
and conclusions entered by the trial court when ruling on a motion for 
summary judgment merely afford the appellant an opportunity to address 
the merits of the trial court's rationale. They also aid our review by 
providing us with a statement of reasons for the trial court's actions, but 
they have no other effect. Rather than relying upon the trial court's 
findings and conclusions, we must base our decision upon the materials 
properly presented to the trial court under Indiana Trial Rule 56(C).^" 



404. Id. However, Marshall v. State, 759 N.E.2cl 665, 669-70 (Ind. Ct. App. 2001), 
distinguished the applicability of Potts in a criminal case where the defendant did not seek 
information of his own expert. 

405. Ind. Trial R. 52. 

406. Mitchell V. Mitchell, 695 N.E.2d 920, 924 (Ind. 1998). 

407. Shenvar v. Johnson, 741 N.E.2d 1275, 1279 (Ind. App. 2001). 

408. 743 N.E.2d 227, 234 (Ind. 2001). 

409. Klotz V. Klotz, 747 N.E.2d 1287, 1 190 (Ind. App. 2001). See also supra Part II.F. 

410. 751 N.E.2d 702, 709 (Ind. App. 2001). 

411. /cf. (citations omitted). 



1206 INDIANA LAW REVIEW [Vol. 35:1157 



/. Injunctions, Declarations, and Other Special Relief 

To obtain injunctive relief, the plaintiff typically has to show "irreparable 
harm," that is, that there is no adequate remedy at law to redress his or her injury. 
This usually means that compensatory damages will not make the plaintiff whole 
due to the uniqueness of the wrong involved.*'^ When an injunction is sought 
before disposition of a case on the merits, the plaintiff must show additional 
factors — ^that there is a likelihood of success on the merits, that the status quo 
will be maintained, that the balance of hardships is in favor of the plaintiff if an 
injunction is issued, and that the public interest is not harmed by issuance."*'^ The 
court of appeals decided a number of injunction cases in 2001 illuminating the 
type of injury that satisfies the irreparable harm requirement. 

Normally, irreparable harm is absent where plaintiffs loss is purely 
economic,'*''* but in Barlow v. Sipes*^^ the court issued a preliminary injunction 
against an insurance adjuster who had accused a body shop of fraud. The body 
shop owners sued for defamation and intentional interference with business 
relationships.'*'^ Because they could not quantify the economic losses threatened 
and because intangible reputational harm to the business was involved, the 
remedy at law was inadequate.*'^ The court of appeals affirmed, despite 
acknowledging that preliminary injunctive relief should be used sparingly.'*'^ 

In Cohoon v. Financial Plans & Strategies, Inc.^^^ irreparable harm for the 
preliminary injunction was supplied by the presence of an enforceable covenant 
not to compete and the difficulty of ascertaining the loss to the former 
employer's business goodwill from the employee's breach.*^^ 

Indiana strictly construes covenants not to compete against enforcement. So 
to obtain an injunction based on one, the covenant must be reasonable in terms 
of the employer's legitimate business interests and the geographic and 
chronological limits it imposes.'*^' If it is enforceable, then the uncertainty as to 
the exact monetary losses associated with loss of goodwill — ^a property 
right — can support a fmding of irreparable harm.'*^^ Moreover, the court of 
appeals gives deference to the trial court's findings on these issues.'*^^ Hence, the 
court of appeals affirmed the trial court's injunction against the certified financial 
planner's violation of a two-year long covenant not to compete. It also found that 



412. See DOBBS, supra note 1 42, § 25( 1 ). 

413. Id. 

414. Id. 

41 5. 744 N.E.2d 1 (Ind. Ct. App.), trans, denied, 753 N.E.2d 16 (Ind. 2001). 

416. Wat 2. 

417. /^. at 6-8. 

418. /^. at 9-10. 

419. 760 N.E.2d 190 (Ind. Ct. App. 2001). 

420. /flf. atl93. 

421. /f/. at 194. 

422. /i/. at 195. 

423. /flf. at 193-94. 



2002] CIVIL PROCEDURE 1207 



the covenant was specific enough in terms of customers that this cured any 
geographic overbreadth/^* 

In contrast, in Mercho-Roushdi'Shoemaker-Dillery-ThoracO' Vascular Corp. 
V. Blatchforct^^ the trial court denied the issuance of a preliminary injunction 
sought by a group of physicians to enforce a noncompetition agreement.'*^^ The 
court of appeals affirmed the denial because pure economic loss does not 
generally resuh in injunctive relief/^^ Giving deference to the trial court, the 
appellate court stated the trial court had not erred in determining that plaintiffs 
failed to carry their burden to show that monetary losses were difficult to 
calculate/^^ 

In Indiana Family & Social Services Administration v. Legacy Healthcare, 
Inc.^^^'^ which focused on a dispute over the termination of a Medicaid provider 
agreement, the court of appeals agreed with the trial court that the operator of a 
nursing home did not show irreparable harm to itself or its mentally disabled 
residents. This was because the nursing home only alleged pure economic harm, 
even though in the form of threatened business failure/^*^ Moreover, because a 
receiver had been appointed to run the nursing home, the court found no 
irreparable harm to the residents who were being cared for under the control of 
the receiver.'*^' The nursing home's reliance on pure economic harm to justify 
a stay was particularly ineffective because it had failed to exhaust administrative 
remedies/^^ 

In Reed Sign Service, Inc. v. Reid,^^^ an important decision for TRO 
procedure, the court held that where a billboard owner who was ordered to 
dismantle a sign had actual notice of the order, but was not served after a number 
of service attempts, did not deprive the court of personal jurisdiction. This was 
the result because actual notice, coupled with the attempts at service, showed that 
notice reasonably calculated to inform the defendant of the proceeding was 
undertaken. Moreover, the failure to order a bond did not void the TRO and 
prevent a contempt citation where the TRO had dissolved and the defendant had 
not complied with the order. 

In Ferrell v. Dunescape Beach Club Condominiums Phase I, Inc.^^^ the court 
discussed declaratory relief and also detailed the showing necessary for the 
issuance of a preliminary injunction. The case also provides a useful description 
of the differences between preliminary and injunctive relief It emphasizes that 



424. M at 195-96. 

425. 742 N.E.2d 519 (Ind.Ct.App. 2001). 

426. /(i. at 521. 

427. /^. at 526. 

428. /£/. at 523-24. 

429. 756 N.E.2d 567 (Ind. Ct. App. 2001), trans, denied, 2002 Ind. LEXIS 254. 

430. /d at 571. 

431. Id 

432. Mat 571-72. 

433. 755 N.E.2d 690 (Ind. App. 2001). 

434. 75 1 N.E.2d 702 (Ind. App. 2001 ). 



1208 INDIANA LAW REVIEW [Vol. 35:1 157 

difference as one of timing — a preliminary injunction issues during the pendency 
of an action while a permanent injunction is a remedy given after a final 
determination. Finally, in Malone v. Price,^^^ the court canvassed the proper 
procedures to follow to establish entitlement to the statutory remedy of mandate, 
to declaratory relief, and to a writ of mandamus. 

J. Instructions 

Several appellslte cases give good guidance on the standards for review of 
trial court instructions. Review of the appropriateness of an instruction is 
undertaken pursuant to an abuse of discretion standard. The appellate court 
determines abuse of discretion using a three-part test: whether the tendered 
instruction correctly states the law; whether there is evidence in the record to 
support giving the instruction; and whether the substance of the instruction is 
covered by other instructions that are given .^^^ Moreover, the harmless error 
doctrine is particularly applicable to the giving of an erroneous instruction, for 
one must show that it affected the outcome of the proceeding to gain reversal .^^^ 

K. Judgment on the Evidence 

S.E. Johnson Co. v. Jack,^^^ another auto case, involved a dispute over 
whether a subcontractor should be liable to a motorist for an accident at a road 
construction site where asphalt had been removed leaving the yellow line 
marking the roadway obscured.*'^ The subcontractor's theory was that its work 
was accepted by the general contractor. Under Hill v. Rieth-Riley Construction 
Co.y^^ '^acceptance'' eliminates the independent contractor's liability to third 
parties. But, such acceptance is subject to the fact-sensitive, multifactoral test 
of Blake V. Calumet Construction Corp.^*^ The contractor moved for judgment 
on the evidence at close of all the evidence, which was denied.^^ The court of 
appeals asserted that there was sufficient evidence for the case to go to the jury 
when it was not clear that the Indiana Department of Transportation had accepted 
the work at the end of each day.^^ The court strongly suggested that under 
Blake, it would be difficult to take a case from the jury. ^ 



435. 755 N.E.2d 213 (Ind.App. 2001). 

436. Faulk v. Northwest Radiologists, P.C., 751 N.E.2d 233, 241(lnd. App. 2001). See also 
Kostidis V. General Cinema Corp. of Indiana, 754 N.E.2d 563, 570 (Ind. App. 2001 ). 

437. Centennial Mortgage, Inc. v. Blumenfeld, 745 N.E.2d 268, 278 (Ind. App. 2001). 

438. 752N.E.2d72(Ind.Ct.App.200l). 

439. Id. at 15. 

440. 670 N.E.2d 940, 944 (Ind. Ct. App. 1996). 

441. 674 N.E.2d 167 (Ind. 1996). 

442. 5.£.yo/i«jo«, 752 N.E.2d at 75-76. 

443. /i/. at78. 

444. Mat 77-78. 



2002] CIVIL PROCEDURE 1209 



L Jurisdiction 

1. "Jurisdiction over the Case. " — Georgetown Board of Zoning Appeals v. 
Keele*^^ presented a dispute over a use variance granted by the Georgetown 
municipal zoning board for the construction of multifamily housing on 
agricultural land. Keele and other residents of the county sued to have the 
variance invalidated on the ground that the municipal board had no subject- 
matter jurisdiction to grant a variance, as the land was outside the city. The trial 
court agreed and the board and developer appealed/*^ On review, the court of 
appeals distinguished lack of subject matter jurisdiction which cannot be waived 
from jurisdiction over the case, which can be waived. The court defined subject 
matter jurisdiction as "the power of [a tribunal] to hear and determine a general 
class of cases to which the proceeding before it belongs'"^'*^ and derives from a 
constitutional or statutory grant of power. It cannot be forgone by a party. In 
contrast, "jurisdiction over the case" is the authority to hear a specific case 
within a category of cases over which a court has subject matter jurisdiction.'*'*^ 
The court of appeals concluded that the board did have subject matter jurisdiction 
over the variance.^*' 

First, the court noted that an Indiana statute allows municipalities to control 
zoning of land within a two mile fringe of city boundaries.'*^^ Second, it stated 
that the board had subject matter jurisdiction over zoning variances. Thus, 
following the reasoning of Board of Trustees v. City of Fort Wayne, *^^ the court 
concluded that even though the board did not fulfill the conditions of the statute, 
that failure went to jurisdiction over the case, not over the subject matter. 
Because Keele never raised his objections with the board originally, he and the 
other plaintiffs waived the defect.^^^ 

In matters involving the Uniform Child Custody Jurisdiction Act 
("UCCJA"),'*^^ a trial court must first decide if it has jurisdiction and then 
whether that jurisdiction should be exercised.^^* Christensen v. Christensen^^^ 
raised the issue of whether the jurisdictional inquiry of the UCCJA goes to 
subject matter, personal jurisdiction, or something in between, that is, 
"jurisdiction over the case." 

Under classic principles of personal jurisdiction, a defendant can consent to 



445. 743 N.E.2d 301 (Ind. Ct. App. 2001). 

446. Mat 302. 

447. Id. at 303 (quoting Santiago v. Kilmer, 605 N.E.2d 237, 239-40 (Ind. Ct. App. 1992)) 
(alteration in original). 

448. Id. 

449. /J. at 304. 

450. 5eea/5olND. Code 36-7-4-205 (1998). 

451. 375N.E.2d. 1112(1978). 

452. Georgetown Bd. of Zoning Appeals, 743 N.E.2d at 305. 

453. IND. CODE §31-17-3-3 (1998). 

454. See Ashburn v. Ashbum, 661 N.E.2d 39, 41 (Ind. Ct. App. 1996). 

455. 752 N.E.2d 179 (Ind. Ct. App. 2001). 



1210 INDIANA LAW REVIEW [Vol. 35:1157 



a court's jurisdiction over his or her person, thereby waiving any defects in the 
geographic power of the court/'^ One way for a defendant to consent is to seek 
affirmative relief from the court in question. In Christemen, the former wife 
filed a petition to enforce a foreign support decree in an Indiana court under the 
Uniform Reciprocal Enforcement of Support Act."*^^ Prior to the Indiana 
proceeding, she and her husband had shared legal custody, but she had been the 
primary custodial parent of the children, who lived with her in Virginia.'*^^ The 
court enforced the support order, but thereafter the husband sought to 
domesticate the foreign decree and pursued a change in custody .'^^^ The trial 
court domesticated the action on the assumption that both parties agreed and 
were proceeding pro se. Thereafter the wife sought to vacate the domestication 
and requested dismissal of the custody matters. The court denied this relief and 
eventually changed physical custody to the father.*^ 

The court of appeals affirmed the trial court's jurisdiction to do so. First, 
under the authority of Williams v. Williams,^^^ the court held that the 
jurisdictional requirement of the UCCJA did not, on the facts before it, go to 
subject matter. Instead, it raised the issue of jurisdiction over the case."^^^ Using 
the same framework applicable to consent to personal jurisdiction, it held that the 
wife waived objection to the court's authority because she expressly consented 
to the trial court's power when she originally sought affirmative relief from the 
court."*^^ The court of appeals also justified this result in policy terms, arguing 
that failing to give effect to the trial court's ruling would promote forum 
shopping by parents unhappy with custody determinations in one jurisdiction."*^ 

2. PersonalJurisdiction. — Bartle v. HCFP Funding, Inc.^^^ raised issues of 
preclusion and personal jurisdiction and also characterized choice of law 
provisions in the context of personal jurisdiction. The action was one to enforce 
a judgment obtained in a Maryland court proceeding against the Indiana 
guarantor of a sale of accounts receivable. The defendant defaulted in the action, 
so he never appeared and consented to the Maryland court's jurisdiction over 
him."*^^ The facts relating to personal jurisdiction were not actually litigated in 
the Maryland proceeding and so they did not give rise to issue preclusion on the 
jurisdictional questions. This meant that the guarantor could collaterally attack 
the validity of the Maryland judgment in the Indiana court.^^^ 



456. See Pennoyer v. Neff, 95 U.S. 714 (1877). 

457. Christensen, 752 N.E.2d at 181. 

458. Id. at 181-82. 

459. Id. 

460. Id 

461. 555 N.E.2d 142 (Ind. 1990). 

462. Christensen, 752 N.E.2d at 183. 

463. Id 

464. Mat 184. 

465. 756 N.E.2d 1034 (Ind. Ct. App. 2001). 

466. /^. at 1035. 

467. /c/. at 1036. 



2002] CIVIL PROCEDURE 1211 



The guarantor had no contact with Maryland other than his execution of the 
guaranty agreement. The plaintiff was not even a Maryland entity and there was 
no evidence the guarantor had any other connection with the jurisdiction."*^* On 
the facts of the case, the court of appeals concluded that the guarantor's actions 
did not come within the Maryland long-arm statute which required that he 
transact business in the state. The threshold requirement for personal jurisdiction 
was not satisfied.'*^' Moreover, the court held that a choice of law provision is 
not the equivalent of a forum selection clause. Thus, the choice of law provision 
alone could not establish the guarantor's consent to Maryland jurisdiction."*^^ 

3. Subject Matter Jurisdiction. — Lake County Sheriff's Corrections Merit 
Board v. Peron^^^ combined issues of mootness with failure to exhaust 
administrative remedies. In that case, a group of correctional officers sought a 
preliminary injunction to stay the merit board from holding disciplinary hearings 
before they could conduct discovery .^^^ The officers were accused of leaving 
work without permission and falsifying time sheets, among other things. Notice 
was given to them only three days before the hearing.*^^ The trial court granted 
the injunction on the ground that the officers would be irreparably harmed and 
stayed proceedings for forty- five days. On appeal by one of the officers, the 
court ruled that the injunction had expired after forty-five days and the merit 
board granted an additional continuance, rendering the appeal moot."*^"* The court 
of appeals disagreed and held that the public interest exception to the mootness 
doctrine applied.'*^^ It considered the issue raised — ^whether a stay of 
administrative proceedings is proper to allow discovery — ^to be one of great 
importance and likely to reoccur.*^^ The court also held that the trial court lacked 
subject matter jurisdiction because the officers aborted the administrative process 
and did not exhaust their administrative remedies. Thus, no special exception to 
the exhaustion requirement was made for discovery .^^^ 

In Boone County Area Planning Commission v. ShelburneJ^^^ the question 
was whether the trial court abused its discretion when it ordered the planning 
commission to certify that it had no recommendation to make to the board of 
commissioners after it had a matter pending for many months. Construing 
Indiana Code section 36-7-4-608(b/^^ and related statutes, the court of appeals 
held that a planning commission is statutorily required to initiate a public hearing 



468. 


Id 


469. 


Id 


470. 


Id at 1037-38. 


471. 


756 N.E.2d 1025 (Ind. Ct. App. 2001), 


472. 


Id at 1026-27. 


473. 


Id at 1027. 


474. 


Id 


475. 


Id 


476. 


Id 


477. 


/£/. at 1028-29. 


478. 


754 N.E.2d 576 (Ind. Ct. App. 2001). 



479. IND. Code § 36-7-4-608(b) (1998). 



1212 INDIANA LAW REVIEW [Vol. 35:1 157 



on a proposed zoning map amendment within sixty days/*° However, it is not 
required to complete all its information gathering within that time frame/^' But, 
not only did the planning commission repeatedly delay concluding any hearing, 
it also decided not to take any action on the matter before it. Because the 
planning commission abandoned its role in the zoning process, it was not a 
violation of subject matter jurisdiction or an abuse of discretion for the trial court 
to mandate that the commission certify to the board of commissioners that it had 
no recommendation.'**^ 

In Turner v. Richmond Power & Light Ca,"**^ the court of appeals reversed 
the trial court's conclusion that it had no subject matter jurisdiction over an 
action brought against the Richmond Power and Light Company by a city 
employee. The dismissal had been made on the basis of the exclusive 
jurisdiction of the worker's compensation system, but the court of appeals found 
that the trial court had mischaracterized the nature of the utility.**"* It concluded 
that, as a matter of law, it was not a city agency, but a hybrid entity, 
distinguishable enough from the city that the plaintiff was not its employee."**^ 
The court of appeals reiterated this analysis on Petition for Rehearing"**^ and cited 
the Indiana Supreme Court's opinion in GKNCo. v. Magness.^^^ GKNholds that 
when an appellate court reviews a trial court's disposition of a case made purely 
on a written record, the trial court's fmdings of fact are not entitled to deference 
but are treated as issues of law.*** 

Grubnich v. Renner,^^^ discussed supra, involved an action for dental 
malpractice and questioned whether the trial court retained jurisdiction to grant 
post-judgment interest three years after entry of a judgment that did not mention 
interest.*^ Noting that the post-judgment interest statute directs that interest 
accrues on the date of the verdict and that case law treats such interest as part of 
the money judgment, the appellate trial court found the court did have the power 
to assess interest when the plaintiffs sought to have their judgment enforced.*^' 

The Indiana Supreme Court has granted transfer and vacated the opinion of 
the court of appeals in Green v. Hendrickson Publishers, Inc., which had 
concluded that certain counterclaims for failure to timely pay royalties were not 



480. 5/ie/6MrAie, 754 N.E.2d at 581-82. 

481. Id 

482. Id. 

483. 756 N.E.2d 547 (Ind.Ct.App. 2001). 

484. /^. at 558. 

485. Id 

486. See Turner v. Richmond Power & Light Co., 763 N.E.2d 1005 (Ind. Ct. App. 2002) 
(Petition for Rehearing). 

487. 744 N.E.2d 397 (Ind. 2001). 

488. See Turner, 163 't^.Eld at 1005. 

489. 746 N.E.2d 1 1 1 (Ind. Ct. App. 2001); see also supra notes 372-73 and accompanying 
text. 

490. Grubnich, 746 N.E.2d at 1 13. 

491. /^. at 115. 



2002] CIVIL PROCEDURE 1213 



copyright claims within the exclusive jurisdiction of the federal courts."^^^ 

Sims V. Beamer^^^ involved a § 1983 action traceable to a judge's denial of 
a request for default after the judge had entered an order changing venue. The 
court of appeals stated that when judicial immunity is in question, a court's 
jurisdiction will be broadly construed. This fosters the policy "to preserve 
judicial independence in the decision-making process .... Judicial decision- 
making without absolute immunity would be driven by fear of litigation and 
personal monetary liability.'"*^^ 

M Limitation of Actions 

Allen V. Great American Reserve Insurance Ca*^^ involved relating back an 
amendment of pleadings so as to satisfy the statute of limitations. There 
subagents sold tax-deferred annuities for a general life insurance agent."*^^ They 
brought actions against the general agent and the insurance company on 
numerous theories involving misconduct regarding misrepresentations about 
front- loading provisions of the annuities."*'^ The trial court granted the 
defendants partial summary judgment and the subagents appealed."*^* The court 
of appeals concluded that the subagents' claims related back, but found that the 
agents did not reasonably rely on representations concerning the annuity 
provisions in question.*^ 

Indiana Code section 22-3-3-27 imposes a one-year limit on modifying a 
worker's compensation award for permanent partial impairment awards.^°° 
Halteman Swim Club v. Duguicf^^ raised the question of whether this limit also 
applies to claims for medical expenses incurred after the permanent partial 
impairment award under Indiana Code section 22-3-3-4(c).^°^ It showed again the 
courts' use of the doctrine of legislative acquiescence. 

Twenty years previously, in Gregg v. Sun Oil Co, ,^°^ the court of appeals had 
decided that claims for medical expenses can be brought if the claim "is filed 
within one year from the last day on which compensation was paid, whether 
under the original award or a previous modification."^^* Thereafter in Berry v. 



492. Green v. Hendrickson Publishers, Inc., 75 1 N.E.2d 81 5 (Ind. App. 2001), trans, granted, 
2002 WL 1397891 (Ind. Jun 27, 2002) (NO. 79S02-0206-CV-352). 

493. 757 N.E. 2d 1021 (Ind. App. 2001). 

494. Id. at 1024. 

495. 739 N.E.2d 1080 (Ind. Ct. App. 2000). 

496. /^. at 1081-82. 

497. Id at 1082. 

498. Id at 1083. 

499. /^. at 1085. 

500. iND. CODE §22-3-3-27 (1998). 

501. 757N.E.2d 1017 (Ind. Ct. App. 2001). 

502. Ind. Code § 22-3-3-27(c) ( 1 998). 

503. 388 N.E.2d 588 (Ind. App. 1979). 

504. Gregg, 388 N.E.2d at 590. 



1214 INDIANA LAW REVIEW [Vol. 35:1 157 



Anaconda Corp.^^^ the question was whether the one-year statute of limitations 
runs from the date of the last benefit payment or from the date of the last medical 
expense payment. The court concluded that the operative date was the last 
benefit payment date.^^ 

In Halterman Swim Club, the court of appeals characterized the distinction 
between medical expenses and the permanent partial disability award as "a 
distinction without a difference" under Gregg.^^^ Therefore plaintiff would have 
to provide a significant reason for failing to follow Gregg and related cases. 
Because the claimant presented no justification for deviating from the 
legislature's tacit agreement with the courts' interpretation, the Worker's 
Compensation Board erred when it denied the employer's motion to dismiss.^^* 

In Rogers v. MendeP^ and following Boggs v. Tri-State Radiology, Inc.,^^° 
the court of appeals concluded that the two-year, occurrence-based limitations 
of action under the medical malpractice statute was constitutional as applied 
where, in a lawsuit over alleged malpractice in connection with uterine cancer, 
the plaintiff discovered or should have discovered her possible claim within ten 
months of the running of the period. In contrast, in Shah v. Harris, ^^^ the plaintiff 
was allowed to have the limitations period run from the date of discovery and not 
the occurrence, where seven years previously her doctor had misdiagnosed her 
multiple sclerosis as a vitamin deficiency and she gained no information within 
the two-year period to put her on notice of a potential claim. 

In Lusk V. Swanson,^^^ the court of appeals concluded that the standard form 
letter sent to the plaintiff from the Indiana Department of Insurance concerning 
her medical malpractice claim and stated in hypothetical terms, for example, ""If 
Indiana Code 34-18-1-1, et seq. is applicable to this claim," did not toll the 
running of the statute of limitations on her action against a provider who was not 
covered by the Medical Malpractice Act. 

A^. Local Rules 

In Spudich v. Northern Indiana Public Service Co.,^^^ plaintiff Spudich was 
stringing lights on the trees at the East Chicago City Hall building. He was hurt 
by power from noninsulated lines owned by the Northern Indiana Public Service 
Commission ("NIPSCO") while standing in an aerial bucket.^** One issue that 
developed in the case was whether expert testimony would establish a duty on 



505. 534 N.E.2d 250 (Ind. Ct. App. 1989) 

506. /J. at 253. 

507. Halteman Swim Club v. Duguid, 757 N.E.2d 1017, 1020 (Ind. Ct. App. 2001). 

508. Id ai 1020. 

509. 758 N.E.2d 946 (Ind. Ct. App. 2001). 

510. 730 N.E.2d 692, 694 (Ind. 2000). 

511. 758 N.E.2d 953 (Ind. Ct. App. 2001). 

512. 753N.E.2d748(Ind.Ct.App.200I). 

513. 745 N.E.2d 281 (Ind. Ct. App. 2001). 

514. /^. at 284-85. 



^ 



2002] CIVIL PROCEDURE 1215 



NIPSCO's part to insulate wires within a certain distance from the tree where 
Spudich was working. During discovery, NIPSCO asked Spudich to designate 
experts he would call at trial.^'^ This information had not been provided when 
NIPSCO moved for summary judgment.^^^ Spudich then filed supplemental 
interrogatory answers in which he designated an expert witness, and then 
opposed NIPSCO's motion, arguing, among other things, that NIPSCO had a 
duty to insulate lines within a certain distance from trees. He used the affidavit 
of the expert to support his opposition.^'^ 

Lake County Local Rule 4 permits the moving party to file a reply to the 
nonmoving party's opposition. Conversely, Trial Rule 56 makes no mention of 
a reply. After deposing the expert, NIPSCO filed a reply in which it designated 
evidence in support of its motion that it had not previously used.^'* The trial 
court granted NIPSCO summary judgment and the plaintiff appealed. He argued 
that Local Rule 4 was in conflict with Rule 56. 

The court of appeals stated that, as a general proposition, Indiana Trial Rules 
trump contrary local rules, although Trial Rule 81 itself allows for local rules to 
be promulgated.^'^ The question is one of consistency. The test established by 
the Indiana Supreme Court is whether it is possible to apply both a trial rule and 
a local rule at the same time."*^ In the case of Rule 56, a reply is neither 
authorized nor prohibited. However, the court of appeals noted that the rule 
contemplates supplemental information being provided, so that "additional 
evidence after initial filings is contemplated . . . and the Local Rule [4] merely 
provides a mechanism for filing that evidence not inconsistent with the Trial 
Rule.""' Spudich also argued that even if Local Rule 4 were proper, the content 
of NIPSCO's reply still violated Rule 56(C),"^ which speaks of making 
evidentiary designations at the time the motion is filed. The court of appeals 
rejected this argument as well, again relying on that portion of Rule 56 which 
authorizes supplementation."^ 

O. Preclusion 

City of Anderson v. Davis^^* was a case that arose out of a police dog's attack 
of an officer."^ The plaintiff officer charged that the dog should not have been 
used because his propensity to attack was known. He also claimed excessive 



515. Id ai2S5. 

516. Id 

517. Id 

518. Id 

519. Mat 286. 

520. Id (citing State v. Bridenhager. 279 N.E.2d 794, 796 (Ind. 1972)). 

521. Mat 287. 

522. Id at 288. 

523. Mat 288-89. 

524. 743 N.E.2d 359 (Ind. CtApp. 2001). 

525. Mat 288-89. 



1216 INDIANA LAW REVIEW [Vol. 35:1 157 



force. ^^^ The officer had previously filed a civil rights claim in federal court that 
was dismissed on summary judgment.^^^ The court of appeals held that the 
officer's argument concerning knowledge of the dog's propensity was a 
negligence claim barred by governmental immunity. While the court conceded 
that the status of an excessive force claim in the context of immunity is not clear, 
it concluded that the plaintiff was collaterally estopped by the federal case on 
that theory."* Indiana recognizes the doctrine of collateral estoppel (issue 
preclusion) in an inter-system context between state and federal courts. Because 
the same issues were litigated in the federal action and the officer had a full and 
fair opportunity to develop them there, he was precluded from relitigating them 
in the Indiana court."^ The court also stated that appellate review of 
governmental claims of immunity is de novo and that no particular deference is 
given the trial court determination of the issue.^^° 

In re Adoption ofA.N.S.^^^ involved the concurrent jurisdiction of a court 
determining paternity and a court authorizing adoption. The biological father 
notified the mother of his intention to contest the adoption of a child bom out of 
wedlock, but did not begin a paternity proceeding until a few days after the time 
required by statute.^^^ The mother contested paternity by a summary judgment 
motion, which argued that the father's notification came too late, but her motion 
was denied. Later she initiated a separate adoption action in another court of the 
same county and argued that the father should not be allowed to intervene 
because he had not objected to the adoption within the statutory period. The 
adoption court eventually allowed intervention and the mother appealed.^^^ The 
appellate court did not reach the merits of the case, but instead determined that 
the prior proceeding precluded relitigation of the issue of paternity, foreclosing 
the adoption. The court recognized the concurrent jurisdiction of both courts, but 
treated preclusion as dispositive."'* 

P. Real Party in Interest 

IDEMv. Jennings Northwest Regulatory Utilities^^^ involved a dispute over 
the status of a water and sewage utility district. The Indiana Department of 
Environmental Management ("IDEM") originally established the utility such that 



526. Mat 361. 

527. Id. 

528. /flf. at366. 

529. Id. 

530. Mat 362. 

531. 741 N.E.2d 780 (Ind. Ct. App. 2001). 

532. Id. at 782. ^ee iND. CODE § 3 1-3 -1-6.4 (repealed and reenacted as iND. CODE §3 1-1 9-3 -4 
(1998)). The statute requires the putative father to establish paternity by action to contest an 
adoption within thirty days of notice. 

533. y^.A^.S.,741N.E.2dat784. 

534. Id at 787. 

535. 760 N.E.2d 184 (Ind. Ct. App. 2001). 



2002] CIVIL PROCEDURE 1217 



its board would be elected by customers and it would be independent of the 
county commissioners. Later, IDEM sought to change that structure by issuing 
an "Amended Order" to its previous final order of agency action.^^^ The utility 
filed a petition for judicial review of the Amended Order and IDEM defended on 
the bases that the utility lacked standing to sue and was not the real party in 
interest. The petition was dismissed, and the utility amended its petition, but 
only after the thirty-day period specified in the Administrative Orders and 
Procedures Act for judicial review. The trial court proceeded with the action and 
set aside the Amended Order. IDEM appealed on the ground of lack of subject 
matter jurisdiction. ^^^ 

The court of appeals agreed with IDEM that the later petition could not relate 
back to the earlier one, in order to bring the utility's action within the time period 
for seeking judicial review of agency action. It thus rejected the argument that 
the dismissal should have been treated as a simple 12(B)(6) failure to state a 
claim that could be remedied.^^* However, it disagreed that the original petition 
was subject to dismissal, for it found that the utility did have standing to sue and 
was the real party in interest. The utility had standing under Indiana Code 
section 4-21.5-5-3(a)(4) as an entity "aggrieved or adversely affected by the 
agency action."^^^ This was because the Amended Order removed the utility's 
independence, which was prejudicial. Moreover, there was standing because the 
utility should have received notice of the action as the entity created by the 
original order and would be affected by its amendment.^^^ For similar reasons, 
the utility was the real party in interest, for the right threatened — ^to be 
independent — ^was owned by the utility.^'*' 

Q, Right to Counsel 

In a decision that raised some of the issues the Indiana Supreme Court 
grappled with in Sholes v. Sholes,^^^ the court in Lattimore v. Amsler^^^ held that 
the pauper statute creates an independent right to court-appointed counsel. The 
case involved a father who filed a pro se proceeding to establish paternity, which 
was dismissed. The court believed the opinion in Holmes v. Jones^^ required the 
counsel, so that once the trial court found the father indigent and waived the 
filing fee, it had no discretion to deny him representation. How this opinion 
should be read in light of the Indiana Supreme Court's refinement of these issues 
in Sholes is an open question. 



536. /^. at 186. 

537. /^. at 186-87. 

538. /flf. at 187-88. 

539. Id. at 188; see also IND. CODE § 4-21 .5-5-3 (a)(4) (1998). 

540. Je«rtmg5, 760 N.E.2d at 188-89. 

541. Id. 

542. 760 N.E.2d 156 (Ind. 2001 ). See also supra notes 58-84 and accompanying text. 

543. 758 N.E. 2d 568 (Ind. Ct. App. 2001). 

544. 719 N.E.2d 843 (Ind. Ct. App. 1999). 



1218 INDIANA LAW REVIEW [Vol. 35:1157 



R. Service/Notice 

In a dispute over a permanent protective order issued against a father, the 
court of appeals construed proper service under Trial Rule 4. 1 (A)(3). In Hill v. 
Ramey,^^^ the father, Hill, was served with a temporary protective order and later 
with a permanent protective order by the sheriff leaving a copy of the papers with 
his parents at their home. However, Hill was living in Louisville, Kentucky, not 
with his parents, at the time of service.^"*^ He requested relief from the default 
judgment leading to the permanent protective order on the grounds of lack of 
notice. This was denied.^"*^ The court of appeals reversed and held that even if 
service was made at Hill's parents home on the theory that it was his last known 
address, this was not sufficient to satisfy the requirement that it be made at his 
"dwelling house or usual place of abode."^*' Thus, no personal jurisdiction had 
ever been established over Hill, rendering the court's action void. This was true 
even if he had received actual notice of the proceeding. Hill is a good example 
of the fact that the procedures for service are strictly construed. ^"^^ 

Boczar v. Reuherf^^ involved a lawsuit by an attorney to collect his fee. The 
court of appeals made a number of points concerning personal jurisdiction and 
service. In that action, the plaintiff attorney used abode service to acquire 
jurisdiction over the defendants but did not follow it up by mailing a copy of the 
summons to them as required by Indiana Trial Rule 4.1(B). Distinguishing the 
decision in Barrow v. Penningion,^^^ the court concluded that this failure did not 
deprive the court of personal jurisdiction over the defendants where they received 
actual notice and the "exigencies" of Barrow were not present.^^^ In Volunteers 
of America v. Premier Auto Acceptance Corp,,^^^ the appellate court opined that 
in a garnishment action, a summons addressed simply to the employer and not to 
a specific officer or person is inadequate for service where the employer did not 
have actual notice of the proceeding. 

S. Settlement 

Last year in Vernon v. Acton, the Indiana Supreme Court established that a 
settlement agreement need not be in writing to be enforceable.""* The court of 
appeals applied this principle in a novel context in In re Estate ofSkalka.^^^ The 
case involved a family dispute over real estate and an action to partition. During 



545. 744 N.E.2d 509 (Ind. Ct. App. 2001). 

546. /^. at 510. 

547. Mat 511. 

548. Id 

549. /^. at 512. 

550. 742 N.E.2d 1010 (Ind. Ct. App. 2001). 

55 1 . 700 N.E.2d 477 (Ind. Ct. App. 1998). 

552. Boczar Sit \0\5'\6. 

553. 755 N.E.2d 656 (Ind. Ct App. 2001). 

554. 732 N.E.2d 805, 809 (Ind. 2000). 

555. 751 N,E.2d 769 (Ind. Ct. App. 2001). 



2002] CIVIL PROCEDURE 1219 



the pretrial conference, the trial judge met with the parties without their attorneys 
present and reached a settlement.^^^ Thereafter, the plaintiffs' attorney reduced 
the settlement agreement to writing, but the parties never signed it. Later, the 
plaintiffs alleged that they had not entered into a settlement agreement. 
Nonetheless, the court enforced one and made supportive findings. Plaintiffs 
appealed, arguing among other things, that there was insufficient evidence they 
had agreed to settle, that the judge acted as a mediator in violation of the ADR 
rules, and that in meeting with them without their lawyers, the judge improperly 
pressured them to settle. 

The court of appeals rejected all arguments. First, and given the deference 
accorded to trial court findings, it concluded that there was sufficient evidence 
to support the judge's opinion that there was a settlement, particularly because 
plaintiffs' own lawyer drafted an agreement incorporating it. That fact removed 
any concern over undue pressure. If the plaintiffs did not really agree to a 
settlement, their lawyer would not have drafted the document."^ Finally, the 
court rejected the notion that the judge functioned as a formal mediator in 
violation of the ADR rules. Although in remarks the judge spoke of "no longer 
going to be the mediator"^^^ this statement, in context, showed that he was simply 
attempting to assist the parties to reach settlement. 

T. Standard of Review 

In Justiniano v. Williams^^^ the court of appeals applied the principle that 
review of a paper record requires no special deference on findings in the context 
of a worker's compensation proceeding. In Walker v. State, the Indiana Supreme 
Court held that where there is no evidentiary hearing below, the facts are not in 
dispute, and review is of a documentary record, the questions on appeal are akin 
to legal ones.^^° The court of appeals stated that in making such "legal analysis" 
under the Worker's Compensation Act, the doubts as to the Act's meaning should 
be construed in favor of coverage to foster the humane purpose of worker's 
compensation.^^' 

In Justiniano, 2i worker whose legs were injured in a single accident, argued 
that the board did not give him a large enough award because it used the wrong 
standard to judge his degree of impairment.^^^ The court of appeals disagreed, 
noting that the award made was supported by the statement of plaintiff s own 
doctor as to the percentage of his impairment in terms of the "whole body 
standard."^^^ The board's hearing judge was not required to accept a stipulation 



556. Id. 2X110. 

557. Id ai 112-13. 

558. Id at 112. 

559. 760 N.E.2d 225 (Ind. Ct. App. 2001). 

560. 694 N.E.2d 258, 266 (Ind. 1998). 

561 . Justiniano, 760 N.E.2d at 228. 

562. Id 2X221. 

563. Mat 228-29. 



1220 INDIANA LAW REVIEW [Vol. 35:1157 



that showed a larger injury, but could make independent inquiry into the matter 
by analyzing the claimant's medical records, which findings could then be 
adopted by the board.^^ 

Although it ultimately reversed the trial court's disposition, Homer v. 
Burman^^^ reiterates that on appellate review, extreme deference is generally 
accorded the actions of the Small Claims Divisions of Indiana courts of general 
jurisdiction: "Indiana Small Claims Rule 8(A) provides for informal hearings 
with relaxed rules of procedure in order that speedy justice can be dispensed. As 
a result, we are particularly deferential to the trial court's judgment."^^ 

U. Standard of Review Where No Appellee Brief 

What should the response of the courts of appeals be when an appeal is taken 
but the winner below, the appellee, files no brief in opposition? Unfortunately, 
this is a frequently recurring situation. The appellate decisions are in agreement 
that in that circumstance, a lesser showing is required of an appellant to obtain 
a reversal. All that need be demonstrated is that there is a "prima facie" showing 
of error below. As the court explained in Muncie Indiana Transit Authority v. 
Smith,'''' 

At the outset we note that Smith has failed to file an appellee's brief. 
When an appellee fails to submit a brief in accordance with our rules, we 
need not undertake the burden of developing an argument for the 
appellee. Rather, Indiana courts have long applied a less stringent 
standard of review with respect to showings of reversible error when an 
appellee fails to file a brief. Thus, we may reverse if the appellant is 
able to show prima facie error. In this context, "prima facie" is defined 
as "at first sight, on first appearance, or on the face of it." 

As these cases show, this will continue to be the approach even under the new 
Appellate Rules. 

V. Standing 

Cittadine v. Indiana Department of Transportation'^^ presented the questi on 
whether a local Elkhart citizen could use the public standing doctrine to force the 
Indiana Department of Transportation (INDOT) to prevent a railroad from 
placing rolling stock on an interchange on Elkhart city streets. In general, the 
public standing doctrine allows a member of the public with no specific interest 
or injury at stake to initiate litigation to enforce a public right. Because of 
inquiries from acquaintances, plaintiff Cittadine sought a writ of mandamus 



564. Id. at 229. 

565. 743 N.E.2dl 144 (Ind.Ct.App. 2001). 

566. /t/. at 1146. 

567. 743N.E.2d 1214, 1 2 16 (Ind.Ct.App. 2001) (citing Robinson v. Valladares, 738 N.E.2d 
278, 280 (Ind. Ct. App. 2000)) (all other citations omitted). 

568. 750 N.E.2d 893 (Ind. Ct. App. 2001). 



2002] CIVIL PROCEDURE 1221 



requiring INDOT to interpret Indiana Code section 8-6-7.6-1 (governing 
obstructions of motorist views at railway-highway intersections) to prevent the 
railroad practice. He specifically relied on the public standing doctrine to sue.^^^ 
But according to the court of appeals, the Indiana Supreme Court has 
sign ificantly narrowed the doctrine in Pence v. State ^^^^ and now requires extreme 
circumstances to justify a lawsuit based solely on taxpayer or citizen status. The 
rationale for this approach is to protect state separation of powers. The court 
noted that there were legitimate reasons for the manner in which INDOT acted, 
and it exercised its executive branch power consistently with its authority, so the 
suit would not be allowed.^^' 

In In re Guardianship ofK.T.^^^ the court of appeals reiterated that the 
fundamental principles of standing are whether the person seeking relief has a 
demonstrable injury in respect of the lawsuit and is the proper person to invoke 
the court's power for such relief. Under those guidelines, it concluded that the 
natural father and custodial parent of a child bom out of wedlock had standing 
to seek a modification of the court order allowing visitation by the child's 
maternal grandparents, who had been the previous guardians of the child. 

W. Summary Judgment 

In Board of Commissioners of the County of Harrison v. Lowe,^^^ the trial 
court granted the county partial summary judgment on the ground it was 
"legislatively" immune from suit arising from an auto accident under the Indiana 
Tort Claims Act.^^^ However, the county was not totally immune because posting 
warning signs regarding road conditions is not statutorily mandated. On appeal, 
the county argued that summary judgment in its favor was still appropriate, 
because the plaintiff had not designated the warning issue as a material fact when 
opposing the motion."^ The court of appeals disagreed, citing to Cavinder 
Elevators, Inc. v. Hall,^^^ a 2000 decision of the Indiana Supreme Court that 
made it clear the nonmoving party has no obligation to present opposition 
evidence to avoid summary judgment, if the moving party has not first met its 
burden of showing no genuine issue of material fact .^^^ The case also contains 
an exhaustive discussion of the history of immunity under the Act and ^he 
legislative exception.^^* 



569. Id at %95. 

570. 652 N.E.2d 486, 488 (Ind. 1995). 

571. OY/fli/me, 750N.E.2dat896. 

572. 743 N.E.2d 348 (Ind. Ct. App. 2001). 

573. 753 N.E.2d 708 (Ind. Ct. App. 2001). 

574. /^. at 710-11. 

575. /t/. at 720. 

576. 726 N.E.2d 285, 290 (Ind. 2000). 

577. Zowe, 753 N.E.2d at 720. 

578. Mat 716-19. 



1222 INDIANA LAW REVIEW [Vol. 35:1157 



In Steuben County Waste Watchers v. Family Development Ltd.^^^ the 
controversy was over whether a developer was required to obtain an 
improvement location permit before building a landfill. The county and 
environmental groups sued to require the permit. The developer moved for 
summary judgment, which the trial court granted.^*^ In opposition to the motion 
for summary judgment, plaintiffs attached affidavits that referred to the prior 
condition of the landfill and that also included statements from the county zoning 
administrator as to the steps by which the permit could be obtained.^*' On 
review, the Indiana Court of Appeals held that the trial court had properly struck 
these materials. The prior condition of the landfill was irrelevant to the building 
of a subsequent landfill, and the county zoning commissioner's comments 
represented a statement of legal conclusions, not facts.^'^ In reviewing the 
adequacy of the administrator's affidavit, the court of appeals noted that, 
normally, not even expert witnesses are competent to testify as to legal 
conclusions.^" Although it agreed with the trial court's striking of the affidavits, 
the court reversed, stressing that a reviewing court gives no special deference to 
a trial court's interpretation of a statute.^** 

In Chandler v. Dillon^*^ the trial court granted the plaintiff an extension of 
time to respond to a motion for summary judgment and then rescinded the 
extension, giving the plaintiff only one day to oppose the motion. Thereafter the 
trial court granted summary judgment.^*^ It gave numerous reasons for the 
rescission: that the extension was "inconsistent" with prior orders establishing 
a case management schedule; that the order had a stamped, not written, signature; 
and that the order was issued without a hearing.^*^ The court of appeals 
concluded that such a short time to respond after the grant of an extension 
deprived the plaintiff of due process.^'* It also rejected the trial court's reasons 
for the rescission.^*^ It noted that under State ex rel. Peacock v. Marion Superior 
Court, Civil Div., Room No. 5,^^ a stamped signature is given the same effect as 
a written one, absent specific evidence of irregularity.^^' Nothing in the 
applicable trial rules for enlarging time or granting summary judgment requires 
a hearing before an extension to respond to a summary judgment motion may be 
given. 



579. 753 N.E.2d 693 (Ind.Ct.App. 2001). 

580. Mat 696. 

581. Id. 

582. Mat 699. 

583. Mat 697-700. 

584. Id. 

585. 754 N.E.2d 1002 (Ind. Ct App. 2001). 

586. Mat 1004. 

587. Mat 1005-06. 

588. Mat 1006. 

589. Id (citing Harder v. Estate of Rafferty. 542 N.E.2d 232, 234 (Ind. Ct. App. 1989)). 

590. 490N.E.2d 1094, 1096 (Ind. 1986). 

591. C/ia«£^/er,754N.E.2datl005. 



2002] CIVIL PROCEDURE 1223 



Azhar v. Town of Fisher s^"*^ involved a citizen lawsuit for violation of the 
Open Door Act against the town, town council, and an ad hoc committee of the 
town council. The trial court granted defendants summary judgment.^^^ The 
court of appeals concluded that the plaintiff was not prejudiced when the 
defendants' motion to dismiss was converted to summary judgment motion 
without express notice.^^^ This was because he was given adequate time to 
respond. Moreover, the obvious use of evidence outside the pleadings should 
have put the plaintiff on notice that the motion was actually a summary judgment 
request.^^^ However, summary judgment was unwarranted because genuine 
issues of material fact existed regarding whether the defendants had cured their 
previous violation of open door requirements.^^ 

In Deuitch v. Fleming^^^ the trial court granted summary judgment, but the 
court of appeals reversed concluding that there were genuine issues of material 
fact as to breach of duty, causation, and elements of res ipsa loquitur. In so 
doing, the court described what it characterized as ambiguity in the standards for 
granting summary judgment.^'* The court was particularly critical of the Indiana 
Supreme Court's opinion in Jarboe v. Landmark Community Newspapers of 
Indiana, Inc.,^^ which prohibits a movant on summary judgment from meeting 
its prima facie burden by merely pointing out that a plaintiff has failed to produce 
evidence raising material issues of fact on essential elements of a claim. For the 
Deuitch court, this created the following reality: "Thus, applying the standard 
as articulated in Jarboe permits a plaintiff who has no evidence supporting his 
claim to proceed to trial, thereby wasting the parties' time and money as well as 
judicial resources. One would hope that this anomaly would be addressed by the 
supreme court."^°° Thus, it requested direction from the Indiana Supreme Court 
on these questions.^' 

A number of appellate cases reiterate that simply because cross-motions for 
summary judgment are filed, this does not change the standard of review and 
each motion should be scrutinized on its own under the applicable requirements 
for summary judgment.^°^ 



592. 744 N.E.2d 947 (Ind.Ct.App. 2001). 

593. /t/. at 950. 

594. /^. at 950-51. 

595. Id. 

596. /fl?. at953. 

597. 746 N.E.2d 993 (Ind.Ct.App. 2001). 

598. /£/. at 999-1000. 

599. 644 N.E.2d 118, 123 (Ind. 1994). 

600. Dg«//c/i, 746N.E.2datl000. 

601. /(i. at 1000. 

602. See, e.g., Conseco Fin. Servicing Corp. v. Old Nat' I Bank, 754 N.E.2d 997 (Ind. App. 
2001); Hoosier Ins. Co. v. Audiology Found, of Am., 745 N.E.2d 300, 306 (Ind. Ct. App. 2001). 



1224 INDIANA LAW REVIEW [Vol. 35:1 157 



X. Tort Claims Act 

In Indiana Department of Transportation v. Shelly & Sands, Inc. ,^^ an action 
in which a contractor sued the Department of Transportation on theories of 
constructive fraud and estoppel, the court of appeals held that such claims, when 
grounded in tortious conduct, are still subject to the notice requirements of the 
Tort Claims Act.*^ 

Porter v. Fort Wayne Community Schools^^ involved a collision between a 
car and a school bus. On the advice of the school district's insurance adjuster, 
the driver's lawyer sent a letter to the defendant that included detailed 
information about the accident, fairly inferred that a lawsuit was contemplated, 
but did not formally state an intent to sue.^ The trial court granted summary 
judgment for failure to provide notice under the ITCA. The court of appeals 
reversed, concluding that the letter substantially complied with the notice 
requirements.^^ In so holding, the court noted that compliance with the Act is 
a preliminary procedural issue that must be resolved prior to trial. ^' 

III. Indiana's New JURY Rules 

The "Juries for the 21st Century" project has culminated in the approval of 
new Indiana Jury Rules by the Indiana Supreme Court.^^ It was undertaken 
jointly by the Citizens Commission for the Future of Indiana Courts ("CCFC") 
and the Judicial Administration Committee of the Judicial Conference (both 
collectively referred to as the "Commission")^'^ to promote a number of goals. 
Among these were to make all rules affecting juries accessible in one place, to 
increase public understanding of the role of jurors in the trial process, to expand 
jury service, to diversify the jury pool, to increase respect for jurors, and to 
protect juror privacy and safety.^" The new rules take effect on January 1 , 2003 . 

The Indiana Jury Rules introduce new matters and preserve features of 
current practice.^'^ Many of the Commission's recommendations became rules, 
though not all. The Commission felt strongly that virtually no exemptions from 
jury service should be granted. Instead, a process of deferral should be utilized 
when undue hardship, extreme inconvenience, or public necessity would support 



603. 756N.E.2d 1063 (Ind.Ct.App. 2001). 

604. Mat 1077. 

605. 743 N.E.2cl 341 (Ind. Ct. App. 2001). 

606. /^. at 342-43. 

607. Mat345. 

608. Id at 344. 

609. Press Release, The Indiana Supreme Court Adopts Most Rules Proposed by Coalition of 
Citizens and Judges [hereinafter CCFC Press Release], copy on file with the Indiana Law Review. 
See also Reports^ supra note 2. 

610. See Reports, supra note 2, at \. 

611. See CCFC Press Release, supra note 609, at 1-2. 

612. /^. atl. 



2002] CIVIL PROCEDURE 1225 



a delay in a citizen's participation.^'^ The Indiana Jury Rules strictly limit 
exemptions from service to those specifically enumerated by statute. However, 
the Indiana Supreme Court felt that it did not have the power to eliminate the 
substantive right not to serve accorded to some citizens by the legislature.^"* As 
a compromise, where a specific exemption does not apply and burden is alleged 
to justify nonparticipation, rather than completely excusing a potential juror, 
service will be deferred.^'^ 

Innovative rules to educate the jury on its role and to increase its 
understanding of the processes and substantive issues unfolding during trial will 
affect trial practice.^'^ While these changes might improve functioning, they also 
allocate more responsibility to the trial judge and might alter the order of classic 
procedures such as the giving of final instructions. Juror understanding and 
efficiency could be being bought at the expense of the trial lawyer's ability to 
control the presentation of his or her case. For instance, upon welcoming the 
panel, the trial judge must now immediately introduce the jury to the case.^'^ The 
introduction must include a description of the nature of the matter and applicable 
standards and burdens of proof, among other things.^*^ At this early stage, and 
with the court's consent, the parties are allowed to present "mini" opening 
statements.^'^ Carrying forward this same theme, Indiana Jury Rule 20 provides 
that the court shall again guide the jury before opening statements by reading 
instructions on the issues for trial, burdens of proof, credibility of witnesses and 
how to weigh evidence.^^° The trial judge must also inform jurors that they 
themselves may seek to ask questions by giving the questions in writing to the 
judge.^^' Rule 23 authorizes the judge to issue to jurors a trial book which can 
include instructions, witness lists, and copies of all admitted exhibits.^^^ The 
Commission also recommended a new chronology for final instructions. It would 
have had the trial judge give the instructions prior to closing arguments to 
provide jurors with a framework for the arguments."^ The Indiana Supreme 
Court did not mandate this sequence, but instead left it to the discretion of the 
trial judge.^^* According to the Commission, the purpose of the repeated 
guidance of these rules is to increase jury understanding: "Repetition of complex 
legal issues, such as standards of proof, are [sic] expected to assist jurors to learn 



613. Compare Reports^ supra note 2, at 6, 34-37, 65-66, w/Y/? IND. JURY R. 6 (effective Jan. 
1,2003). 

614. See CCFC Press Release, supra note 609, at 1. 

615. iND. Jury R. 7 (effective Jan. 1, 2003). 

616. See Reports, supra noXt 2^ ?XA9'55. 

617. iND. Jury R. 14 (effective Jan. 1,2003). 

618. Id. 

619. Id. 

620. iND. Jury R. 20 (effective Jan. 1, 2003). 

621. Id 

622. iND. JURY R. 23 (effective Jan. 1 , 2003). 

623. See CCFC Press Release, supra note 609, at 2. 

624. iND. Jury R. 27 (effective Jan. 1 , 2003). 



1226 INDIANA LAW REVIEW [Vol. 35:1157 



unfamiliar concepts and apply them during deliberations."^^^ 

Another important topic and one allied to exemptions and excusals is the 
need to diversify the jury pool. Survey results obtained by the Commission^^^ 
and citizen comments at public hearings around the state showed that Indiana 
citizens are deeply concerned that jury panels become more demographically 
representative, not just in terms of race, but also in terms of vocation, life 
experience, and economic background."^ To achieve this, the Indiana Jury Rules 
direct that the jury pool be derived not just from voter registration lists, but also 
from lists of utility customers, property taxpayers, income tax form mailing lists, 
motor vehicle registrations and drivers' licenses, as well as city and telephone 
directories."* 

The Commission recognized that the practice of peremptory challenges 
undermines jury diversity, but could not agree on a solution to the problem."^ 
Instead, it recommended that the court require documentation of juror 
disqualification, exemptions and deferrals,^^° and that the process of jury 
selection be recorded, including sidebar conferences,^^' so that a study could be 
made. The court enacted these suggestions in Indiana Jury Rules 8 and 12.^^^ It 
is interesting to note that in Ashahraner v. Bowers ^^^^ ']ust decided in 2001, the 
court insisted on strict adherence to the BatsorP^ doctrine, which is designed to 
reduce peremptory challenges motivated by racial bias. 

On the issues of jury respect, privacy, and safety, a number of changes have 
been instituted. According to the Commission, respect for jurors is increased by 
Rule 4, which requires a minimum of two weeks notice of potential service; Rule 
9, which limits service to one day or one trial; Rule 7, which allows deferrals for 
service whose timing works a hardship on the citizen (e.g., farmers in the 
growing season; accountants at tax time); and Rule 3, which prevents bystanders 
from being conscripted for jury service.^^^ Issues of juror privacy and safety can 
coalesce. Rule 10 provides that personal information obtained about jurors be 
kept confidential, unless discussed in open court."^ To reduce hostility to the 
jury. Rule 30 now requires that the verdict be read aloud by the judge, rather than 
the foreperson .^^^ 



625. ^ee CCFC Press Release, 5wpra note 609, at 2. 

626. See Reports, supra note 2, at 26-3 1, 37-41 . 

627. 5ee CCFC Press Release, 5M/7ra note 609, at 2. 

628. IND. Jury R. 2 (effective Jan. 1 , 2003). 

629. See Reports, supra noXt 2, diX'il'AX. 

630. See CCFC Press Release, supra note 609, at 2. 

631. Id 

632. iND. JuryR. 8, 12 (effective Jan. 1, 2003). 

633. 753 N.E.2d 662 (Ind. 2001). ^ee^i/pra Part I.A.4. 

634. 476 U.S. 79 (1986). 

635. See Reports, supra note 2, at 30; CCFC Press Release, supra note 609, at 4. 

636. IND. Jury R. 10 (effective Jan. 1, 2003). 

637. iND. Jury R. 30 (effective Jan. 1 , 2003). 



2002] CIVIL PROCEDURE 1227 



IV. Other Indiana Rule Changes 

On April 1, 2002, a series of changes to the Indiana Trial Rules became 
effective. The most important of these involves Trial Rule 3 and parallels the 
Indiana Supreme Court's decision in Ray-Hayes, ^^^ which required tender of the 
summons to the clerk of the court to commence an action. Now the rule 
expressly provides that a civil action is not begun unless the complaint is filed 
along with "payment of the prescribed filing fee or filing an order waiving the 
filing fee, and, where service of process is required, by furnishing to the clerk as 
many copies of the complaint and summons as are necessary."^^^ This change 
makes it clear that a litigant can no longer toll the statutes of limitations while, 
at the same time, delaying tender of the summons to the clerk of the court. 
Where practitioners initiate an action at the last moment, failure to tender the 
summons until after the statute has run will be fatal. Trial Rule 4(B) has also 
been amended to conform to the changes in Rule 3 and remove any ambiguity as 
to the required chronology .^^ 

In response to changing technology. Rule 5(E), which defines "filing with the 
court," allows electronic filings not just by facsimile, but by all forms of 
electronic transmission. This is consistent with Indiana's recent adoption of the 
Uniform Electronic Transactions Act,^' which contains provisions designed to 
encourage electronic records for governmental entities.^^ Recognizing the heavy 
use of express delivery services by attorneys, new Rule 5(E)(4) allows filing with 
the clerk by use of "any third-party commercial carrier" so long as service is to 
take place within three calendar days.^^ Renumbered Rule 5(E)(5) makes third- 
party commercial carrier filing effective on deposit with the carrier. However, 
if any method of filing with the clerk other than personal delivery is employed, 
parties must retain proof of filing.*^ 

Like the changes to Rule 3, amendments to Trial Rule 1 5(C) will impact the 
ability of parties to meet the statute of limitations. Previously, when a new party 
was to be added by amending a pleading, that amendment would not relate back 
to the date of commencement unless, within the limitations period, the new party 
both received notice of the lawsuit so as not to be prejudiced, and was or should 
have been aware that he or she was mistakenly omitted from the action. ^'^^ Now 
these requirements must be met within 120 days of "commencement of the 
action."^^ 



638. 753 N.E.2d 662 (Ind. 2001). 

639. Ind. Trial R. 3 (amended 2001). 

640. Ind. Trial R. 4(B) (amended 2001). 

641. Ind. Code § 26-2-8 (1998 & Supp. 2001). 

642. Id. 

643. Ind. Trial R. 5(E)(4) (amended 2001). 

644. Ind. Trial R. 5(E)(5) (amended 2001). 
645 Ind. Trial R. 15(C) (amended 2001). 
646. Id. 



1228 INDIANA LAW REVIEW [Vol. 35:1 157 



Last year in Old Indiana Ltd. Liability Co. v. Montana, ^^ the court of appeals 
strictly construed the language of Rule 35 on mental and physical exams to 
require all examinations thereunder to be performed by a licensed physician.^"** 
This interpretation prevented important categories of professionals, such as 
psychologists, physical therapists, vocational specialists, and the like, from 
eligibility to conduct court-ordered examinations. Amended Rule 35 now 
specifies that a court may order an examination by any "suitably licensed or 
certified examiner."^' 

Trial Rule 53.1 imposes time limits on trial courts for ruling on motions.^^^ 
It has been amended to better accommodate the effects of alternative dispute 
resolution ("ADR") on the chronology of cases. Now, the time from the point 
when a matter is referred to ADR until the ADR report is submitted is excluded 
for purposes of computing the time when a judge must rule on a motion."' 

As the previous discussion of Sholes v. Sholes^^^ shows, Indiana Trial Rule 
60.5 is a unique provision that affords courts a procedure for mandating the 
expenditure of public funds for the operation of the court or court-related 
activities."^ The rule specifies that when a court seeks to mandate funds, an 
order to show cause why the appropriation should not be made shall issue and a 
bench trial should be undertaken, presided over by a special judge.""* Previously, 
the Indiana Supreme Court was to appoint such a judge from a panel of judges 
and former judges maintained by the court."^ Now, Rule 60.5 has been amended 
to dispense with the panel."^ Under the previous version of the rule, any 
determination that expenditure of funds should occur was automatically reviewed 
in the Indiana Supreme Court, unless the government entity waived review within 
two days after entry of the decree. The time for waiver is now extended to a full 
thirty days."^ 

Trial Rule 75 on venue has been amended to refer generally to "actions," not 
"causes" or "proceedings," and to impose the duty of paying the costs associating 
with transferring an action for improper venue within twenty days of the order 
of transfer."* If this payment is not timely made, the action must be dismissed 
(though without prejudice) and attorneys' fees and costs must be awarded. 
Subdivision (E) of the Rule has also been changed to cross-refer to new 
Appellate Rule 14(A)(8) on interlocutory appeals. 



647. 732 N.E.2d 179 (Ind. Ct. App. 2000). 

648. /rf. at 186-87. 

649. Ind. TRIAL R. 35 (amended 2001). 

650. Ind. Trial R. 53.1. 

651. Ind. Trial R. 53.1(B) (amended 2001). 

652. 760 N.E.2d 156 (Ind. 2001). 

653. See supra Part I.A.3. 

654. Ind. Trial R. 60.5. 

655. Id. 

656. Ind. Trial R. 60.5 (amended 2001). 

657. Id. 

658. Ind. Trial R. 75(1)(2) (amended 2001). 



2002] CIVIL PROCEDURE 1229 



Finally, Rule 79 governing the appointment of special judges in conjunction 
with provisions such as Rule 60.5 has been amended to allow a judge who has 
granted a change of venue to serve as a special judge in the same matter in its 
new location. This is conditioned on agreement of the parties and the sending 
and receiving judges of the respective counties.^^^ Subdivision (K) has also been 
changed to specifically include special judges appointed pursuant to Indiana 
Code section 34-13-5-4 on public lawsuits.^^^ Part (P) has been modified to 
provide a special fee for senior judges who serve as special judges and the last 
sentence of that section, mandating that their payment be determined by the fee 
schedule of the Director of the Division of State Court Administration, has been 
deleted.""' 

Effective January 1 , 2002 are revisions to Tax Court Rules 1 through 9, and 
1 6 through 20."" These changes are in response to the new Indiana Board of Tax 
Review, established in 2001 by Indiana Code section 6-1.5-2-1 and provide 
procedures for appeal in state tax matters, among other things.""^ In addition, a 
new form, entitled "Verified Petition for Judicial Review of a Final 
Determination of the Indiana Board of Tax Review" has been added. While state 
tax court procedure is beyond the scope of this Article, tax practitioners should 
take care to familiarize themselves with the rule amendments and their focus on 
the requirement of exhausting administrative remedies. This is found in the 
constant references to the "final determinations" of taxing authorities in the new 
rules. 

Changes to three Indiana Administrative Rules will become effective on 

various dates. Rule 5 governing senior judges has been amended to afford them 

state insurance benefits and entitlements, effective January 1, 2002.""^ 

Administrative Rule 8 immediately institutes a new type designation for the case 

numbering system affecting civil plenary matters — ^"PL" for all cases filed after 

January 1, 2002, not "CP."""^ In conformity with the concern for juror privacy 

and safety expressed in the reports of the Commission, Administrative Rule 9 has 

been amended so that, effective January I, 2003, personal information about 

i jurors and prospective jurors that is not disclosed in open court will be kept 

confidential from public dissemination.""" Finally, pursuant to Appellate Rule 

30, the Indiana Supreme Court has promulgated technical standards for digital 

& transcripts to be used on appeal.""^ Among these standards is the requirement 

s that all eligible documents be converted into the Adobe Portable Document 



659. IND. Trial R. 79(J)(1) (amended 2001). 

660. iND. Trial R.79(K) (amended 2001). 

66 1 . iND. Trial R. 79(P) (amended 200 1 ). 

662. See http://www.in.gov/judiciary/research/amend02/tax.pfd (last visited May 21, 2002). 

663. Id. 

664. iND. Admin. R. 5 (amended 2001). 

665. iND. Admin. R. 8. 

666. iND. Admin. R. 9(L) (amended 200 1 ; amendment effective 2003). 

667. http://www.in.gov/judiciary/research/amend02/digital.pfd. 



1230 INDIANA LAW REVIEW [Vol. 35:1 157 



Format by the court reporter for transmission to the court of appeals.^^* Civil 
practitioners should also review changes to the Rules for Small Claims Court,^^' 
the Rules of Judicial Conduct,*^^ and the Rules of Evidence.^^' 

V. Federal Practice 

The year 2001 proved a particularly discouraging one for the plaintiffs bar 
insofar as federal practice was concerned. The U.S. Supreme Court decided a 
number of cases that reduce the incentives for taking civil litigation or make 
access to court trials more difficult. Both Congress and the federal rulemakers 
seem intent on restricting state class actions by federalizing them using minimal 
diversity or erecting obstacles to class action status or attorney compensation. 
The changes to the Federal Rules of Civil Procedure ("FRCP") for this 
rulemaking cycle were less extensive than in 2000, although proposed rule 
changes in the pipeline are controversial. What follows is a brief review of some 
of the developments affecting civil practice in the federal courts. 

A. Procedural Legislation 

1. Resident Aliens and the Diversity Statute. — The Federal Court 
Improvements Act of 2001^^^ would repeal the provision of 28 U.S.C. § 1332 that 
deems a resident alien a citizen of the state of her/his permanent residence and 
replace it with a rule that prohibits federal jurisdiction for disputes involving 
such persons. 

2. Multiparty, Multiforum Litigation. — In March 2001, the U.S. House of 
Representatives passed the Multidistrict, Multiparty, Multiforum Trial 
Jurisdiction Act of 2001 .^^^ It permits federal jurisdiction on minimal diversity 
in mass tort cases where at least twenty-five persons have died or been injured 
and each plaintiff claims damages in excess of $150,000.^^^ However, it also 
mandates that federal courts abstain from exerting this jurisdiction where a 
substantial portion of plaintiffs and primary defendants are from the same state. 
Likewise, that state's law will govern the conflict. It also legislatively overrules 
Lexecon, Inc. v. Milberg Weiss BershadHynes & Lerach,^^^ which had allowed 
a judge who had received a case pursuant to 28 U.S.C. § 1407 (multidistrict 
litigation) to retain the case for trial .^^^ 

3. Class Actions. — Several bills are pending in Congress that affect class 
actions and parallel attempts from the FRCP rulemaking process ("FRCP") to 



668. Id. 

669. Available at http://www.in.gov/judiciary/research/rules.html. 

670. Id. 

671. Id 

672. H.R. 2522, 107th Cong. (2001). 

673. H.R. 860, 107th Cong. (2001). 

674. H.R. 860, 107th Cong., § 3 (2001). 

675. 523 U.S. 26(1998). 

676. H.R. 860, 107th Cong., § 2 (2001). 



2002] CIVIL PROCEDURE 1231 



rein in state class actions.^^^ S. 1 7 1 2^^* expands the provisions of H.R. 234 1 , the 
Class Action Fairness Act of 2001.^^^ The House bill, if passed, would provide 
federal subject matter jurisdiction over state-based class actions where there is 
minimal diversity among class members, there are at least 100 such members, 
and the amount in controversy exceeds $2 million. H.R. 2341 also regulates the 
adequacy of class notice and the attorneys' fees that are recoverable. In addition, 
it heightens pleading requirements for such classes and stays discovery until 
motions to dismiss can be heard. S. 1712 goes beyond this proposed legislation 
because it allows removal to federal court of matters not formally designated as 
class actions in two situations, any public interest lawsuit not filed by a state 
attorney general and claiming monetary relief and any claim for monetary relief 
tried jointly with 1 00 or more persons. 

4. Television in the Courtroom. — In the fall of 2001, the Senate Judiciary 
Committee approved the Sunshine in the Courtroom Act, S. 986. It gives federal 
judges the discretion to allow television broadcasting of proceedings, even 
though the Judicial Conference of the United States has been opposed to this 
move.^*° 

5. Electronic Commimications. — ^The E-Govemment Act of 2001, S.803, 
would require all federal courts to establish a website where detailed information 
about cases and other matters would be available.^*' 

6. Government Lawyers. — S. 1437, introduced by Senator Leahy and 
entitled the Professional Standards for Government Attorneys Act of 200 1 , 
would require federal rulemakers to regulate the conduct of government lawyers, 
especially insofar as their ability to contact represented persons is concerned. It 
would also authorize government lawyers to act in "sting" operations. ^^^ 

7. Terrorism. — S. 1 75 1 , the Terrorism Risk Insurance Act of 200 1 , would 
use the multidistrict litigation approach to put all matters stemming from a 
terrorist incident in one federal forum. It would also preclude punitive damages 
for actions under the act.^*^ A similar approach is taken in the Terrorism Risk 
Protection Act, H.R. 321 0.^*^ Finally, the Air Transportation Safety and System 
Stabilization Act of 200 1 ,^'^ introduced in response to the September 1 1 disaster, 
would limit the liability of airlines, but provide new causes of action to litigants. 

B. U.S. Supreme Court and Seventh Circuit Decisions 
In 2001 , the decision that will most affect civil practice is one that spans the 



677. 5ee /w/ra text accompanying notes 741-43. 

678. S. 1712, 107th Cong. (2001). 

679. H.R. 2341, 107th Cong. (2001). 

680. S. 986, 107th Cong. (2001). H.R. 2519 is the companion House bill. 

681. S. 803, 107th Cong. (2001). 

682. S. 1437, 107th Cong. (2001). 

683. S. 1751, 107th Cong. (2001). 

684. H.R. 3210, 107th Cong. (2001). 

685. H.R. 2926, 107th Cong. (2001). 



1232 INDIANA LAW REVIEW [Vol. 35:1157 



categories of substance and procedure. Cooper Industries, Inc. v. Leatherman 
Tool Group, Inc.^^^ introduces a stunning reconception of the nature of a jury's 
determination of punitive damages. In so doing it revolutionizes the standard of 
appellate review to be applied. Normally, the award of punitive damages is a 
matter within the purview of the states, because the ability to recover monies in 
a civil matter to punish a defendant's bad behavior is a creature of common law. 
This makes it difficult to "constitutional ize" a jury's assessment of punitive 
damages so as to reach the federal forum. Nonetheless, the U.S. Supreme Court 
has decided a number of significant punitive damages cases.^*^ One of the most 
controversial questions about those decisions is whether they involve substantive 
due process, or whether they are procedural due process decisions.^^* This is 
because the fundamental question inherent in all of them is this: When is the 
amount of punitive damages simply too large to be constitutional, regardless of 
any other factor? 

To add to the controversy, issues of punitive damages have historically been 
treated as questions of fact within the sound province of the jury to answer, 
curbed by the ability of courts to review an assessment for excessiveness under 
a deferential standard.^*^ In Cooper, the Supreme Court has struck at the heart 
of this classic allocation of functions between judge and jury, and trial and 
reviewing courts, by holding that punitive damage assessments are not matters 
of fact, but are moral evaluations.^^^ Thus, an appellate court is now authorized 
to use a de novo standard of review in scrutinizing them. Previously, when a trial 
judge left the jury's verdict intact, the reviewing court was required to use an 
abuse of discretion standard. Now, the court of appeals is free to make its own 
determination of the jury's results as if it were deciding a question of law. This 
view runs counter to a long history of allocating punitive damage issues to juries, 
in part from the founders' concern that government can oppress a defendant by 
fining in a civil context, almost as easily as by pursuing criminal prosecution. 
The jury was to be a bulwark against political retaliation worked by this device. 
Moreover, the Court's own opinions on the right to jury trial have treated as 
especially jury-worthy any remedy that involves a penalty or fine.^^' And, the 
classic factors a jury must consider for fixing punitive damages in most 
jurisdictions plainly involve issues of fact — for example, given the defendant's 
financial condition, what amount of damages is effective to deter? 

By expressing its analysis in terms of the standard of review, the Court has 
neatly finessed many of the difficult substantive issues raised by punitive 



686. 532 U.S. 424(2001). 

687. See, e.g., BMV of N. Am. Inc. v. Gore, 5 1 7 U.S. 559 (1995) (holding award of $4 million 
in punitive damages as unconstitutionally "excessive"). 

688. See, e.g., id. 

689. Cooper, 532 U.S. at 437. 

690. One of the great debates in philosophy is whether there are any objectively verifiable 
moral "facts" or whether when one makes an ethical judgment, one is merely expressing an opinion 
or an emotion. 

691. See, e.g., Tull v. United States, 481 U.S. 412 (1987). 



2002] CIVIL PROCEDURE 1233 



damages. However, as Justice Ginsberg suggested in Gasperini v. Center for 
Humanities, ^^^ making it easier for appellate courts to undo jury verdicts can 
function as an indirect cap on damages.^^^ There is also the practical issue of 
how to define and demarcate this new category of "moral" assessment. For all 
these reasons, Cooper is a troubling opinion. Its new conceptual framework 
could have a far-reaching impact not just on jury determinations of punitive 
damages, but also on any jury verdict that requires judgments about intangible 
items such as pain and suffering and emotional distress. 

Buckhannon Board and Care Home, Inc. v. West Virginia Department of 
Health and Human Resources^^^ is another decision that significantly affects 
plaintiffs. It rejects the "catalyst of reform"^^^ theory for shifting fees under two 
fee-shifting statutes, the Fair Housing Act and the Americans with Disabilities 
Act ("ADA").^^ One of the difficult questions raised by an award of fees is 
whether a litigant is a "prevailing party" for purposes of fee shifting. In many 
instances, especially when the defendant is goaded to change its behavior by 
litigation, but a full merits determination is not made, "prevailing party" status 
is not clear. Nine of the circuit courts had authorized an award of fees on the 
theory that, if the litigation provoked significant change, it was a catalyst of 
reform and should count as a win for the plaintiff. The Court ignored this 
consensus and interpreted the Fair Housing Act and the ADA to prohibit fee 
shifting for this reason. This case could have implications for any fee-shifting 
statute. 

Not only in Cooper and Buckhannon, but in a variety of other cases the U.S. 
Supreme Court has affected civil practice. Circuit City Stores, Inc. v. Adams ^^^ 
will also negatively treat plaintiffs, for it holds that the Federal Arbitration Act 
applies to all employment agreements, except those of transportation workers.^^^ 
This carries forward the Court's trend of vigorously applying the Act, but it 
discounts the policy argument that it is inappropriate to force arbitration when 
civil rights and other policy questions are raised in an employment context.^^ 
Continuing the same general theme, restricting plaintiff lawsuits, the Supreme 
Court concluded in a 5-4 decision that there is no private right of action to 
enforce regulations promulgated under Title VI of the Civil Rights Act dealing 
with the disparate impact of state action.^°^ This was the question in Alexander 



692. 518 U.S. 415(1996). 

693. /f/. at 425 (Ginsburg, J., dissenting). / 

694. 532 U.S. 598(2001). 

695. See Nadeau v. Helgemoe, 581 F.2d 275 (1st Cir. 1978) (holding fees appropriate when 
plaintiffs lawsuit is causally linked to defendant's change in behavior and there is some legal basis 
for plaintiffs claim). 

696. Buckhannon Bd. & Care Home, Inc., 532 U.S. 598 at 605. 

697. 532 U.S. 105(2001). This decision overrules Cra/? v. Campbell Soup Co,, 177F.3d 1083 
(9th Cir. 1999). 

698. See, e.g.. Craft, Ml ^MziXmA. 

699. See also Green Tree Fin. Corp. v. Randolph, 531 U.S. 79 (2001). 

700. 42 U.S.C. § 2000d-l (1999); 28 CFR § 42.104(b)(2) (1999). See also 49 CFR § 



1234 INDIANA LAW REVIEW [Vol. 35:1 157 



V. SandovalJ^^ which challenged the State of Alabama's requirement that one 
show proficiency in English in order to obtain a driver's license. 

In Becker v. Montgomery^^^ by a unanimous opinion, the Court held that a 
party's failure to sign a notice of appeal is not a fatal defect. This is because the 
substance of the notice made it clear who the parties involved in the appeal were, 
so that absence of a signature was a technical problem that did not go to the 
reviewing court's appellate jurisdiction. Thomas v. Chicago Park Districf^^ 
emanated from the Seventh Circuit Court of Appeals and raised significant First 
Amendment questions about parade permits. It held that because Chicago's 
requirements do not constitute a content-based regulation, access to prompt 
judicial review under the procedural requirement of Freedman v. Marylancf^^ 
governing prior restraints did not apply .^°^ 

Finally, important cases pending before the Court include Mathias v. 
Worldcom Technologies, IncJ^ and Verizon Maryland, Inc. v. Public Service 
Commission of Mary land. ''^^ These represent a circuit split over the appealability 
of state commissions' actions regarding interconnection agreements. Among 
other questions, they address whether prospective relief against such 
commissions for violation of the Telecommunications Act of 1996 are 
permissible under the £x/?(a[r/^ Young doctrine, ^^^ In Devlin v. Scardelletti,^^ the 
Court will determine whether a nonintervening class member has standing to 
appeal, even after the motion to intervene was properly denied. Dusenbery v. 
United States, ^^^ orally argued in late October and decided in January 2002, held 
that the proper standard for notifying a prisoner of a civil forfeiture proceeding 
is designated by the "reasonable under the circumstances test" of Mullane v. 
Central Hanover Bank & Trust Co.^" not the more stringent test of Mathews v. 
Eldridge^^^ for notice and opportunity to be heard where provisional remedies are 
sought.^'^ Another pending case just decided in 2002 is Raygor v. Regents of the 
University of Minnesota J^^ It holds that the Eleventh Amendment is violated by 
the thirty-day statute of limitations tolling provision of the federal supplemental 



21.5(b)(2) (2000). 

701. 532 U.S. 275 (2001). 

702. 532 U.S. 757(2001). 

703. 122 S.Ct. 755 (2001). 

704. 380 U.S. 51(1965). 

705. Thomas, 122 S. Ct. at 778-80. 

706. U.S. No. 00-878, reported below as Illinois Bell Telephone Co. v. Worldcom 
Technologies. Inc., 179 F.3d 566 (7th Cir. 1999), cert, granted, 532 U.S. 903 (2001). 

707. U.S. No. 00-1531. 

708. 209 U.S. 123(1908). 

709. U.S. No. 01-417. 

710. 534 U.S. 161(2002). 

711. 339 U.S. 306(1950). 

712. 424 U.S. 319(1976). 

713. DM5e«6erv> 534 U.S. at 669. 

714. 122 S.Ct. 999 (2002). 



2002] CIVIL PROCEDURE 1 23 5 



jurisdiction statute, § 28 U.S.C. 1367. This occurs where a state-based claim 
filed against a nonconsenting state in federal court is subsequently dismissed on 
Eleventh Amendment grounds and then refiling is sought in state court.^'^ 

The U.S. Court of Appeals for the Seventh Circuit has decided a number of 
cases important to civil practice matters. A cluster of them were concerned with 
arbitration agreements. For instance, in George Watts & Son v. Tiffany & Co.,^^^ 
the Seventh Circuit Court of Appeals held that the "manifest disregard of the 
law" principle is not available to justify court intervention into arbitration on the 
issue of attorneys' fees, because, although a Wisconsin statute authorized fees, 
it did not prevent parties from agreeing to bear their own legal expenses and there 
was no agreement to the contrary between them.^/^ In IDS Life Insurance Co. v. 
Royal Alliance Ass '«^'* the Seventh Circuit stated that an arbitration award need 
not be correct or reasonable to be binding, continuing thie theme of George Watts 
& Son. However, in Penn v. Ryan 's Family Steak Houses, Inc.,^^^ a case from 
Indiana, the court concluded that an arbitration agreement that allowed the 
employer to modify its terms without notice and included other one-sided 
provisions lacked contractual mutuality and was unenforceable. 

Other opinions from the Seventh Circuit of interest to civil practitioners are 
Downey v. State Farm Fire & Casualty Co?^^ (no federal subject matter 
jurisdiction in an action against a private insurer that issued federal flood 
insurance; consent judgment preserves the right to appeal where expressly 
reserved); Ester v. Principf^^ (when an agency decides the merits of a complaint 
without addressing the question of timeliness of exhaustion of remedies, it has 
waived the defense in subsequent lawsuits); Thompson v. Altheimer & Gray ^^^ 
(abuse of discretion in racial discrimination case not to dismiss juror for cause 
when juror could not assure court that, given her background, she could be 
impartial); Hetreed v. Allstate Insurance Co.^^^ (when appealing decision on 
merits litigant must file notice of appeal covering award of costs to appeal such 
award); Indiana Civil Liberties Union v. O 'Bannon^^^ (preliminary injunction 
against erection of stone monument with the Ten Commandments on statehouse 
grounds proper because likelihood of success on merits showing violation of 
Establishment Clause); Isaacs v. Sprint Corp.^^^ (no conditional grant of class 
certification); United Air Lines, Inc. v. International Ass 'n of Machinist & 



715. /^. at 1004-05. 

716. 248 F.3d 577 (7th Cir. 2001). 

717. IdatSSl. 

718. 266 F.3d 645 (7th Cir. 2001). 

719. 269 F.3d 753 (7th Cir. 2001). 

720. 276 F.3d 243 (7th Cir. 2001). 

721. 250 F.3d 1058 (7th Cir. 2001). 

722. 248 F.3d 621 (7th Cir. 2001). 

723. 135 F.3d 1 155 (7th Cir. 2001) (unpublished opinion). 

724. 259 F.3d 766 (7th Cir. 2001). 

725. 261 F.3d 679 (7th Cir. 2001). 



1236 INDIANA LAW REVIEW [Vol. 35:1 157 



Aerospace Workers^^^ (federal court had jurisdiction to issue injunction against 
labor union despite Norris-LaGuardia Act because union actively promoted work 
slowdown); Kalan v. City of Si Francis^^^ (where parties stipulate to specifically 
identified magistrate judge, different magistrate judge cannot preside without 
their consent); Lockwood International B, V. v. Volm Bag CoP^ (paying a 
plaintiff to replead a complaint does not eliminate the liability of the insurer to 
defend its insured); National Organization for Women, Inc. v. Scheidler^^^ 
(private party may obtain civil injunctive relief under the Racketeer Influenced 
and Corrupt Organizations Act ("RICO"), in disagreement with Ninth Circuit on 
same issue); Szabo v. Bridgeport Machines, IncP^ (when ruling on class 
certification, a court does not have to accept the allegations in plaintiffs 
complaint as true); In re Synthroid Marketing Litigation^^^ (gives detailed 
guidance on notice of appeal for would-be intervenors who oppose class 
settlement; requires trial court to estimate market rates to set fees; concludes 
incentive awards not available where party does not become class representative 
until after success is likely). 

C Rules Changes 

1. The Federal Rules of Civil Procedure CFRCP ") . — Proposed changes to 
the FRCP became effective December 1, 2001. Rule 5(b)(2)(D) allows for 
electronic service and service through court facilities.'" To conform with this 
change. Rule 6(e) extends the time for response to documents so served for three 
days.'" Rule 77(d) provides the clerk of the court with more alternatives for 
notifying parties of entry of an order or judgment, including facsimile and 
computer transmission. Rule 65 adds a new subdivision (f) to govern copyright 
impoundment.'^"* Finally, Rule 81(a)(1) clarifies that the FRCP apply in 
bankruptcy proceedings, mental health proceedings, and copyright 
proceedings.'^^ 

In September 2001 , the Judicial Conference Committee on Rules of Practice 
and Procedure approved changes previously proposed for comment. New Rule 
7.1 would be added to require disclosures that will assist judges in avoiding 
conflicts of interest. Among other things, it would require the disclosure of 
corporate parties' financial interests, including the disclosure of parent 



726. 243 F.3d 349 (7th Cir. 2001). 

727. 274 F.3d 1150 (7th Cir. 2001). 

728. 273 F.3d 741 (7th Cir. 2001). 

729. 267 F.3d 687 (7th Cir. 2001). 

730. 249 F.3d 672 (7th Cir. 2001). 

731. 264 F.3d 712 (7th Cir. 2001). 

732. Fed. R. Civ. Proc. 5(b)(2)(D), available at http://www.house.gov/judiciary/civil2001 . 
pfd. 

733. Fed. R. Civ. Proc. 6(e), available at http://www.house.gov/judiciary/civil2001.pfd. 

734. Fed. R. Civ. Proc. 65, available at http://www.house.gov/judiciary/civil2001.pfd. 

735. Fed. R. Civ. Proc. 8 1 (a)(1), available at http://www.house.gov/judiciary/civil200 1 .pfd. 



2002] CIVIL PROCEDURE 1237 



corporations and stock interests of at least ten percent held by public 
corporations.'^^ Rule 58 will be changed to clarify when the time runs for filing 
an appeal.'^' Section (b) thereof specifically designates the time of entry of 
judgment and includes a provision that keys off of the date when a separate 
document setting forth the court's action must be filed under proposed Rule 
58(a)(1). That subsection makes it clear that, except for orders for disposing of 
motions for judgment under Rule 50(b), to amend or make findings of fact under 
Rule 52(b), for attorneys' fees under Rule54(d)(2)(B), for new trial or to alter or 
amend the judgment under Rule 59, and for Rule 60 relief, a// judgments, even 
amended ones, must be entered on a separate document.'^^ The rule also makes 
it clear entry of judgment may not be delayed or the time for appeal enlarged due 
to motion to tax costs or for fees and conforms the procedure for ruling on 
motion for attorneys' fees to Appellate Rule 4. To be consistent with these 
changes. Rule 54 would also be amended to delete the requirement of service 
before the submission of a motion for attorneys' fees and to delete the 
requirement of a separate judgment therefor.'^^ Rule 81(a)(2) would also be 
amended to remove a conflict between the FRCP and the Rules Governing 2254 
Cases and Rules Governing 2255 Proceedings. Finally, certain amendments to 
Supplemental Rule C on Admiralty are proposed that would govern 
interrogatories in civil forfeiture proceedings and other matters. 

The advisory committee has also published for comment proposed changes 
to Rules 23, 51, 53, 54(dX2), and 71(a). The proposed changes to Rule 23 are 
significant. They are designed to address the general concerns for fairness of 
class procedure for unnamed class members raised by the U.S. Supreme Court's 
opinion in Anchem Products Inc. v. Windsor?^ In addition, like the proposed 
class action legislation pending in Congress, they include measures that will 
affect the ability of parties to bring class actions in state forums. Two 
particularly controversial topics are measures to enjoin overlapping class actions 
filed in multiple state courts and appointment and reimbursement of class 
counsel.'^' Among other changes are those requiring notice to class members at 
the certification stage, appeals by nonintervening class members, and the 
preclusive effects of class certification and settlement. 

2. Seventh Circuit and Local Rule Matters, — Effective December 1 , 200 1 , 
the Seventh Circuit amended a number of its Rules — ^22.2(a) (disclosure 
statements of prior proceedings and other matters), 26. 1 (disclosure statements 



736. Proposed Fed. R. Civ. Pro. 7.1(a)(lXA). 

737. See Memorandum from Paul V. Niemeyer, Chair, Advisory Committee on the Federal 
Rules of Civil Procedure, to Honorable Anthony J. Scircia, Standing Committee on Rules of 
Practice and Procedure, at 91 (May 2000) (on file with the Indiana Law Review). 

738. Id. 

739. Id 

740. 521 U.S. 59 (1997). See also BNA LEGAL WEEK, May 8, 2001, at. 2684. 

74 1 . See Civil Rules Committee Hears Testimony on Proposals to Amend Class Action Rule, 
BNA Law Week, Dec. 1 8, 200 1 , at 2366; Senators Offer New Class Action Legislation Similar to 
Bill Approved Earlier by Committee, BNA LAW WEEK, Dec. 1 8, 200 1 , at 2367. 



1238 INDIANA LAW REVIEW [Vol. 35:1 157 



of identity of nongovernmental attorneys), 31(e) (digital briefs), 32(a) (brief lie 
flat rule), and 34(h) (argument by law students)^*^ It also included in its Internal 
Operating Procedures a provision concerning the sealing of records. It requires 
a court order for records to be sealed, unless a stature provides to the contrary. ^"^^ 
Notice has also been given by the Administrative Office of the U.S. Courts that 
interest rates on judgments in the federal courts have been changed pursuant to 
statute, effective on all judgments entered on or after December 21, 2000.^*^ 

On January 2, 2002, a series of changes to the Local Rules for the U.S. 
District Court for the Northern District of Indiana became effective^*^ and a new 
fee schedule was introduced.^"*^ The U.S. District Court for the Southern District 
of Indiana has also effectuated changes to certain of its Local Rules, effective 
January 1, 2002.^"*^ In addition, all cases filed on or after November 16, 2001 
must submit a Case Management Plan, unless otherwise exempted, that complies 
with the Instructions for Preparing Case Management Plans promulgated by the 
Southern District pursuant to its Local Rule 1 6. 1 .^^* 



742. 5ee http://www.ca7.uscourts.gov/webnote.htm (last visited Mar. 15,2002). 

743. See http://www.ca7.uscourts.gov/Rules/rules.htm (last visited Mar. 15, 2002). 

744. Current rates are available at http://www.federaIreserve.gOv/releases/H 1 5/Current. 

745. See Local Rules 5.1(c), 1(0, Kg). 1(h), 8.2, 16.1(b), 16.3, 24.1(a), 1(b), 1(c), 47.3, 
72.1(d), 1(e), 1(0, 1(g), l(i), 10), 72,2(a), 79.1, 83.7(a), 7(c), 200.1 and Rule III of the Rules of 
Disciplinary Enforcement, available at http://www.innd.uscourts.gov/localrules.html. 

746. See http://www.innd.uscourts.gov/feeinfo.html. 

747. 5ee Local Rules 4.6, 16.1(b), 1(c), 24.1, 72.1, 72.3,76.1, 81.2, 83.5, ava/Va^/e a/ http:// 
www.insd.uscourts.gov/pub_main.htm. 

748. See http://www.insd.uscourts.gov/whats_new_main.htm. 



Indiana's Revised Article 9 and Other 
Developments in Commercial and Consumer Law 



Matthew T. Albaugh* 



Introduction 

July 1, 2001 witnessed the long awaited arrival of Revised Article 9 to most 
of the United States. A culmination of over a decade's work,' Revised Article 
9 will be in effect in all fifty states plus the District of Columbia as of January 
1, 2002.^ With these major changes to the law of secured transactions, the 
coming months will be a significant challenge to secured parties, practitioners, 
and the courts as the transition takes full effect. As Revised Article 9's 
provisions have been in force for only a short period, few of the unavoidable gaps 
and ambiguities have received judicial scrutiny. Indiana is not immune from the 
challenges posed by the adoption of Revised Article 9. Revised Article 9's 
changes not only represent a departure from numerous provisions in the old 
Article 9, but also present an additional hazard for many parties in Indiana 
because of several non-uniform amendments to the revised article. 

Space does not permit a full treatise on the ramifications of Revised Article 
9. Truly, others have already risen to the task.^ Instead, my objective in this 
Article is to provide a sufficient framework of the present filing procedures in 
Indiana and to highlight and explain those provisions in which the Indiana 
General Assembly has departed from the uniform article. Also, reference both 
to comparable state departures from the uniform act and to Revised Article 9's 
official comments will be provided where applicable. 



♦ Judicial Clerk to Chief Justice Randall T. Shepard, Indiana Supreme Court. A.S., 
summa cum laude, 1995, Vincennes University; B.A., 1997, Indiana University; J.D., summa cum 
laude, 2001, Indiana University School of Law— Indianapolis. The views expressed are solely 
those of the author. I would like to thank Professor James A. Nehf, Indiana University School of 
Law—Indianapolis, for his invaluable assistance and feedback on this article. 

1 . The Permanent Editorial Board of the Uniform Commercial Code (U.C.C.) established 
a committee in 1990 to study the need for revising Article 9. See Donald W. Garland, Revised 
Article 9: Understanding the Changes to Secured Transactions, 64 TEX. B.J. 974, 974 (2001). 
Revised Article 9 was promulgated by the National Conference of Commissioners on Uniform State 
Law (N.C.C.U.S.L.) in 1998. See Ingrid Michelsen Hillinger & Michael G. Hillinger, 2001: A 
Code Odyssey (New Dawn for the Article 9 Secured Creditor), 1 06 COM. L.J. 1 05, 1 05 (200 1 ). 

2. New York, New Jersey, and Massachusetts enacted Revised Article 9 j ust days before the 
July 1 , 2001 deadline. In addition, four states pushed forward the effective date of Revised Article 
9 to allow more time for their filing offices to adjust to the changes. Connecticut's law becomes 
effective on October 1 , 2001 . Alabama, Florida, and Mississippi represent the final three states to 
come on board with effective dates of January 1, 2002. See Press Release, National Conference of 
Commissioners on Uniform State Laws, States Uniformly Enact U.C.C. 9 Revisions (July 2, 2001 ), 
available at http://www.nccusl.org/nccusl/pressreleases/prl -07-01 .asp (last visited Dec. 5, 200 1 ). 

3. See. e.g., JAMES J. WHITE & ROBERT S. SUMMERS, UNIFORM COMMERCIAL CODE: 1999 

Article 9 Supplement (4th ed.Supp. 1999); The New Article 9: Uniform Commercial Code 
(Corrine Cooper ed., 2d ed. 2000). 



1240 INDIANA LAW REVIEW [Vol. 35:1239 



In the second part of this Article, I will discuss other major legislative 
developments and case law in the field of commercial law during the survey 
period/ Included in this discussion is an important, though questionably 
decided, opinion from the Indiana Supreme Court regarding payday loan 
creditors.^ 

I. Indiana's Revised Article 9 

In a nutshell, Revised Article 9 makes the law of secured transactions more 
certain for the experienced practitioner and more daunting for the novice. As 
White and Summers explain in their treatise, *1ength and complexity" are the 
byproduct of resolving the ambiguities of the old Article 9.' Some of the major 
developments, discussed in further depth below, include an expansion of Article 
9's scope, new priority rules, changes to choice-of-law rules, and changes to the 
enforcement provisions, to name but a few. 

A. The Scope of Article 9 

Article 9's basic scope provision, Indiana Code section 26-1-9.1-109,^ 
sweeps a huge array of transactions into the fold. As subsection (a)(1) states, 
generally *'a transaction, regardless of its form, that creates a security interest in 
personal property or fixtures by contract" is governed by Article 9.* The creation 
of a security interest makes Article 9 applicable, regardless of the transaction's 
form or the name parties assign to it.^ Reference to Indiana Code section 26- 1 - 1 * 
201(37) must be made for the definition of "security interest." 

Generally speaking, Revised Article 9 provides for sixteen categories of 
collateral that can be subject to a security interest. They are: 

Consumer Goods 

Farm Products 

Inventory 

Equipment 

Instruments 

Documents 

Accounts 

Deposit Accounts 



4. The survey period is from October 1, 2000 to September 31, 2001, although more 
recently decided cases will be included in this Article to make it as timely as possible. 

5. The Indiana Supreme Court was still suffering from the onslaught of direct criminal 
appeals during the survey period. As the recently amended jurisdiction of the Indiana Supreme 
Court ends mandatory review of criminal cases imposing sentences greater than fifty years, 
practitioners should look to the Indiana Supreme Court to take a more direct role in shaping 
consumer and commercial law. See Ind. Const, art. VII, § 4 (amended 2000). 

6. White & Summers, jwpra note 3, at 33. 

7. Formerly Ind. Code § 26- 1 -9- 1 02 ( 1 995). 

8. Ind. Code §26-l-9.1-109(a)(I)(Supp. 2001). 

9. 5ecU.C.C. §9-109 cmt. 2 (2000). 



2002] COMMERCIAL AND CONSUMER LAW 1241 



Health Care Insurance Receivables 

Chattel Paper 

Electronic Chattel Paper 

Letter of Credit Right 

Commercial Tort Claims 

General Intangibles 

Investment Property 

Proceeds '° 

The above list, with the exception of one category, is mutually exclusive (i.e., 
the type of collateral does not change if in the same person's hands). The one 
category of collateral that can present problems to secured creditors is farm 
products. For instance, a farmer that grows and harvests com possesses farm 
products. But after processing the corn, it converts into inventory. A secured 
party must be careful with regard to taking a security interest in a farmer's farm 
products. An imprecise or under-inclusive description of the collateral in the 
security interest may result in an invalid security interest.^' 

Indiana has made two non-uniform amendments to Article 9's scope 
provision. First, the uniform Article 9, subsection 9-1 09(d)(8) excludes several 
transactions, including: 

a transfer of an interest in or an assignment of a claim under a policy 
insurance, other than an assignment by or to a health-care provider of a 



10. See IND. Code §§ 26-l-9.1-102(a)(23) (Supp. 2001) (defining "consumer goods" as 
"goods that are used or bought for use primarily for personal, family, or household purposes"); 26- 
1 -9. 1 - 1 02(a)(34) (defining "farm products"); 26- 1 -9. 1 - 1 02(a)(48) (defining "inventory"); 26- 1-9.1- 
102(a)(33) (defining "equipment," a catch-all provision covering "goods other than inventory, farm 
products, or consumer goods"); 26- 1 -9. 1 - 1 02(a)(47) (defining "instrument"); 26- 1 -9. 1 - 1 02(a)(30) 
(defining "document" as a "document of title," which functions as a substitute for the actual goods 
(i.e., warehouse receipts, bills of lading)); 26-1 -9. 1-1 02(a)(2) (defining "account"); 26-1-9.1- 
102(a)(29) (defining "deposit account"); 26-1-9. 1-1 02(a)(46) (defining "health-care-insurance 
receivable" as an "interest in or claim under a policy of insurance that is a right to payment of a 
monetary obligation for health-care goods or services provided"); 26-l-9.l-l02(a)(l 1) (defining 
"chattel paper"); 26-l-9.1-102(a)(31) (defining "electronic chattel paper"); 26-1-9. l-102(a)(51) 
(defining "letter-of-credit right"); 26-l-9.1-102(a)(l3) (defining "commercial tort claim" and 
excluding "damages arising out of personal injury to or the death of an individual"); 26-1-9.1- 
102(a)(42) (defining "general intangible"); 26-1-9. l-102(a)(49) (defining "investment property" 
as a "security, whether certificated or uncertificated, security entitlement, securities account, 
commodity contract, or commodity account"); 26-1-9. 1-1 02(a)(64) (defining "proceeds"). 

1 1 . A problem Revised Article 9 does not address is the whether a document labeled "lease" 
is a lease outside of Article 9's provisions or a security agreement. While a "nervous lessor" is 
permitted to file a financing statement under U.C.C. § 9-505, filing is not required. The distinction 
between a lease and a security agreement can be very tricky, and a careless secured party could find 
himself out in the cold in the event of a priority dispute. See generally White & Summers, supra 
note 3, at 39-50 (describing in detail the problem of differentiating between leases and security 
agreements). 



1242 INDIANA LAW REVIEW [Vol. 35:1239 



health-care-insurance receivable and any subsequent assignment of the 
right to payment, but Sections 9-3 1 5 and 9-322 apply with respect to 
proceeds and priorities in proceeds.'^ 

In its place, Indiana has carved out an exception in subsection 9- 109(a)(7) to 
provide that "a transfer of an interest or a claim in a contractual right of a person 
to receive commissions or other compensation payable by an insurer" is an 
interest that falls within Revised Article 9.'-^ Indiana's subsection 9- 109(d)(8) is 
amended to reflect these changes.'"* 

The second non-uniform change is to section 9- 1 09's preemption provisions. 
Under the uniform 9- 1 09(c)(2) and (3), Article 9 does not apply to the extent that 

(2) another statute of this State expressly governs the creation, 
perfection, priority, or enforcement of a security interest created by this 
State or a governmental unit of this State; 

(3) a statute of another State, a foreign country, or a governmental unit 
of another State or a foreign country, other than a statute generally 
applicable to security interests, expressly governs creation, perfection, 
priority, or enforcement of a security interest created by the State, 
country, or governmental unit ... .'^ 

These provisions provided that Article 9 would apply to security interests created 
by state or foreign governmental units except to the extent another statute 
governed the issue. Subsection (c)(2) would defer to all forum state statutes 
while subsection (c)(3) would defer to foreign statutes only if they contained 
rules specifically applicable to the security interests of the governmental unit.'^ 
Indiana's revised Article 9 eliminates both of these provisions.'^ As such, 
subsection 9- 109(c) provides that only federal law preempts Article 9. 

B. Creation and Attachment of the Security Interest 

A secured party has two primary concerns. First, the secured party must 
ensure the enforceability of the security interest against the debtor — ^through 
creation of a security interest and attachment. Second, the secured party must 
ensure the priority of his interest against other third parties — ^through perfection. 
Generally, attachment and perfection are accomplished through the use of two 
forms: the security agreement, an agreement between the debtor and the secured 
party; and the financing statement, a filed form announcing the secured parties' 



12. U.C.C. §9-109(d)(8)(200I). 

13. IND. CODE § 26-l-9.I-109(a)(7) (Supp. 2001). 

14. No other state has made a comparable change to its Article 9 scope provision. See 
Penelope L. Christophorou et al., Under the Surface of Revised Article 9: Non- 
uniformity AND Filing Office Procedures 3- 1 8 (200 1 ). 

15. U.C.C. § 9-109(c)(2)-(3) (2001). 

16. See id. cmt. 9. 

1 7. Florida, Nevada, and West Virginia made comparable changes. See Christophorou ET 
al., supra note 14, at 6, 1 1, 17-18. 



2002] COMMERCIAL AND CONSUMER LAW 1 243 



security interest to the rest of the world. 

Security interests "attach" when they become enforceable against the debtor 
with respect to the collateral specified in the security agreement.'^ The 
requirements for attachment are set out in Indiana Code section 26- 1 -9. 1 -203(b)- 
(c) (Supp. 2001). Those provisions provide: 

(b) Except as otherwise provided in subsections (c) through (i), a 
security interest is enforceable against the debtor and third parties with 
respect to the collateral only if: 

(1) value has been given; 

(2) the debtor has rights in the collateral or the power to transfer 
rights in the collateral to a secured party; and 

(3) one (1) of the following conditions is met: 

(A) The debtor has authenticated a security agreement that provides 
a description of the collateral and, if the security interest covers timber 
to be cut, a description of the land concerned. 

(B) The collateral is not a certificated security and is in the 
possession of the secured party under IC 26-1-9.1-313 pursuant to the 
debtor's security agreement. 

(C) The collateral is a certificated security in registered form and the 
security certificate has been delivered to the secured party under IC 26- 
1-8.1-301 pursuant to the debtor's security agreement. 

(D) The collateral is deposit accounts, electronic chattel paper, 
investment property, or letter-of-credit rights, and the secured party has 
control under IC 26-1-9.1-104, IC 26-1-9.1-105, IC 26-1-9.1-106, or 
IC 26- 1 -9. 1 - 1 07 pursuant to the debtor's security agreement. 

As the official comments state, a valid security agreement requires the creditor 
give value, the debtor retains rights in the collateral, and an agreement plus 
"satisfaction of an evidentiary requirement."'^ The failure to properly attach 
results in an unsecured status for the creditor. 

Section 1-201(44) provides the definition of "value."^° Any consideration 
sufficient to support a simple contract and a preexisting debt satisfy the 
requirement of value, but attachment will not occur by gift. Because the security 
agreement involves a conveyance of a property interest, the debtor must also 
have some rights in the collateral. Section 9-204 provides that both after- 
acquired property clauses (a present loan for future collateral) and future advance 
clauses (present collateral for a future loan) are permissible.^' Nevertheless, no 
attachment occurs until either the debtor acquires an interest in the property or 
the secured party gives value. 



18. U.C.C. §9-203(a)(2001). 

19. Id. cmt. 2. 

20. IND. CODE §26-1-1 -20 1 (44) ( 1 998). 

21. Section 9-204(b) is an exception for after-acquired property clauses. In the case of 
consumer goods or commercial tort claims, the debtor must generally acquire rights in them within 
ten days after the secured party gives value. Id. § 26- 1-9.1 -204(b) (Supp. 2001). 



1244 INDIANA LAW REVIEW [Vol. 35:1239 



The final "evidentiary requirement" can be accomplished in a number of 
ways. The first and simplest would be the secured party's actual possession of 
the collateral.^^ A pawnshop would be a good example of this situation. As is 
discussed later, possession also works to perfect a secured party's security 
interest, so possession can work the two-fold purpose of enforcement of a 
security interest and perfection. Second, if the collateral is deposit accounts, 
electronic chattel paper, letter-of-credit right, or investment property, the security 
agreement may be evidenced by "control. "^^ The third and most common way 
to satisfy this evidentiary requirement is through a security agreement. 

A security agreement is "an agreement that creates or provides for the 
security interest."^'* It is both a contract and a deed conveying a property 
interest.^^ Third parties look to the security agreement to determine what 
collateral is covered, and therefore encumbered, and what collateral is available. 
The sufficiency requirements of the collateral's description in the security 
agreement, governed by section 9-108, is different than that in the financing 
statement, governed by section 9-504.^^ The description is sufficient if it 
"reasonably identifies what is described" or is "objectively determinable."^^ 
Listing the type of collateral (i.e., consumer goods, inventory, etc.) is sufficient, 
but super-generic descriptions such as "all the debtor's assets" are deficient.^* 

In addition to a sufficient description, a security agreement must also be 
"authenticated."^^ As defined by section 1-201(39), "signed" includes "any 
symbol executed or adopted by a party with present intention to authenticate a 
writing." As set out in section 9- 102(a)(7), to "authenticate" includes the 
definition of "signed," but is expanded to allow for electronic and other non- 
written forms of security agreements. 

Indiana made no material amendments to the uniform Revised Article 9. 
Following these procedures will establish a secured party's rights against the 
debtor. The additional step of perfection is required to establish lien priority 
against third parties. 

C Perfection 

Following the creation of a security interest and attachment, the secured 
party must then ensure perfection. Relevant only to third parties, perfection is 
the process by which secured parties, either through filing a finance statement, 
taking possession of the collateral, or taking "control" of the collateral, establish 



22. 5ee/£/.§ 26- 1-9.1 -203(b)(3)(B). 

23 . See id. § 26- 1 -9. 1 -203(b)(3)(D). 

24. U.C.C. §9-102(a)(73)(200l). 

25. See WHITE & SUMMERS, supta note 3, at 34. 

26. See id. at 74. The description requirements for security agreements are more stringent 
than those for financing statements. See id. at 75. 

27. See IND. CODE § 26- 1 -9. 1 - 1 08 (Supp. 200 1 ). 

28. See id. 

29. See id § 26-1-9.1 -203(b)(3)(A). 



2002] COMMERCIAL AND CONSUMER LAW 1245 



lien priority. In specific instances, perfection is automatic. The rules for 
perfection are generally found between U.C.C. sections 9-308 and 9-316. 

1, Automatic Perfection. — Indiana Code section 26- 1 -9. 1 -309 provides that 
certain security interests are perfected automatically upon attachment. The most 
important of which is a purchase money security interest (PMSI) in consumer 
goods. A PMSI is created when a secured party provides money to the debtor 
that is used to acquire an interest in the collateral, and consumer goods are 
defined as "goods that are used or bought for use primarily for personal, family 
or household purposes."^® Other important security interests that are 
automatically perfected include the sale of payment intangibles or promissory 
notes and assignments of accounts, health care insurance receivables, or payment 
intangibles.^' 

2. Perfection by Possession. — Subsection 9-3 1 3(a) provides that a secured 
party can perfect a security interest in negotiable instruments, goods, instruments, 
money, or tangible chattel paper through possession.^^ Perfection of a security 
interest in certified securities is accomplished by taking delivery of the certified 



30. /£/. §26-1-9.1-102(23). 

3 1 . See id. § 26- 1 -9. 1 -309. That section reads as follows: 
The following security interests are perfected when they attach: 

(1) A purchase-money security interest in consumer goods, except as otherwise 
provided in IC 26- 1-9. 1-3 11 (b) with respect to consumer goods that are subject to a 
statute or treaty described in IC 26- 1-9.1-311 (a). 

(2) An assignment of accounts or payment intangibles which does not by itself or in 
conjunction with other assignments to the same assignee transfer a significant part of 
the assignor's outstanding accounts or payment intangibles. 

(3) A sale of a payment intangible. 

(4) A sale of a promissory note. 

(5) A security interest created by the assignment of a health-care-insurance receivable 
to the provider of the health-care goods or services. 

(6) A security interest arising under IC 26- 1 -2-40 1 , IC 26- 1 -2-505, IC 26- 1 -2-7 1 1 (3), 
or IC 26-1-2.1-508(5), until the debtor obtains possession of the collateral. 

(7) A security interest of a collecting bank arising under IC 26- 1 -4-2 1 0. 

(8) A security interest of an issuer or nominated person arising under IC 26-1-5. 1-1 1 8. 

(9) A security interest arising in the delivery of a financial asset under IC 26-1-9.1- 
206(c). 

(10) A security interest in investment properly created by a broker or securities 
intermediary. 

(1 1) A security interest in a commodity contract or a commodity account created by a 
commodity intermediary. 

(12) An assignment for the benefit of all creditors of the transferor and subsequent 
transfers by the assignee thereunder. 

( 1 3) A security interest created by an assignment of a beneficial interest in a decedent's 
estate. 



Id. 



32. /t/. §26-1-9.1-313. 



1246 INDIANA LAW REVIEW [Vol. 35:1239 



securities." Logically, possession is ineffective for certain categories of 
collateral such as accounts and general intangibles because the law does not 
recognize their embodiment in a tangible thing. Subsection 9-313 is a complex 
provision, and because possession comports poorly with modern commercial 
transactions, the reader is left to parse out perfection by possession elsewhere. 

3. Perfection by Control. — Control is roughly the equivalent of possession 
described above. Under subsection 9-3 10(b)(8), a secured party is permitted to 
control deposit accounts, electronic chattel paper, investment property, and letter- 
of-credit rights for purposes of perfection. Generally speaking, control is the 
exclusive means for perfecting security interests in deposit account and letter-of- 
credit rights. Subsections 9-104 through 9-107 describe the procedures to 
acquiring "control" of these types of collateral. 

4. Perfection by Filing, — The last and by far the most common method for 
perfecting a security interest is by filing a financing statement. White and 
Summers estimate that over ninety percent of security interests are perfected by 
filing a financing statement.^"* Subsections 9-502, 9-516 and 9-520 are the key 
provisions covering financing statements. 

Subsection 9-502 sets out the three pieces of information that are essential 
to make the financing statement effective. They are (1) the name of the debtor, 
(2) the name of the secured party, and (3) a description of the collateral covered 
by the financing statement.^^ It is no longer essential that a financing statement 
include the debtor's signature or the addresses of the parties, as did former 
subsection 9-402(1). These three pieces of information are the absolute 
requirements of any financing statement; deficiency in any will result in an 
ineffective filing. 

Indiana made two non-uniform changes to section 9-502. First, 9-502(e) 
states that to the extent other provisions of the Indiana Code require the 
identification of the preparer of the financing statement, "the failure of the 
financing statement to identify the preparer does not affect the sufficiency of the 
financing statement."^^ Second, section 9-502(f) requires that the secured party 
provide the debtor with a copy of the financing statement within thirty days of 



33. See id. 

34. White & Summers, supra note 3, at 1 02. 

35. IND. Code § 26- 1-9.1 -502(a) (1998). Subsection 9.1-502(b) provides additional 
requirements to cover real property related collateral (e.g., fixtures). For this collateral, the 
financing statement must also: 

(1) indicate that it covers this type of collateral; 

(2) indicate that it is to be filed in the real property records; 

(3) provide a description of the real property to which the collateral is related that is 
sufficient to give constructive notice of a mortgage under the law of this state if the 
description were contained in a record of the mortgage of the real property; and 

(4) if the debtor does not have an interest or record in the real property, provide the 
name of a record owner. 

Id 

36. M§ 26- 1-9.1 -502(e). 



2002] COMMERCIAL AND CONSUMER LAW 1 247 



filing. But again, a secured party's failure to meet this requirement does not 
affect the sufficiency or effectiveness of the financing statement.^^ 

Subsection 9-503 provides what is required of a financing statement to give 
the name of the debtor.^* For registered organizations, the fmancing statement 
is sufficient "only if the financing statement provides the name of the debtor 
indicated on the public record of the debtor's jurisdiction of organization which 
shows the debtor to have been organized."^^ In most other cases, the fmancing 
statement is sufficient: "(A) if the debtor has a name, only if it provides the 
individual or organizational name of the debtors; and (B) if the debtor does not 
have a name, only if it provides the names of the partners, members, associates, 
or other persons comprising the debtor.'"*^ Because the filings are indexed 
according to the debtor's name, a precise recitation of the debtor's name is 
absolutely crucial to provide adequate notice to third parties. Subsection 9- 
503(c) provides that trade names are insufficient, although if a search using the 
filing office's standard search logic would turn up the debtor's name, it would 
be sufficient."" The test for determining whether an error in the debtor's name 
is fatal is whether the error makes the financing statement "seriously 
misleading.'"*^ Importantly, section 9-507 provides that a fmancing statement 
must only satisfy the requirements of 9-502 at the time of filing. Subsequent 
events that cause the financing statement to become seriously misleading 
generally do not affect the financing statement's effectiveness."*^ 

Subsection 9-504, establishing the requirements for a financing statement's 
description of the collateral, adopts the standard from section 9-108, covering 
security agreements, with one important caveat."*"* If the financing statement 
provides that it "covers all assets or all personal property" of the debtor, it is 
sufficient."*^ Otherwise, applying the standard set forth in section 9-108, a 
description of collateral is sufficient if it "reasonably identifies what is 



37. M§ 26-9.1-502(1). 

38. M§ 26-1-9.1-503. 

39. M§ 26- 1-9.1 -503(a)(1). 

40. /c/. §26-l-9.1-503(a)(4). 

41 . See id. § 26- 1-9.1 -506(c). This provision may save an otherwise insufficient financing 
statement. 

(c) If a search of the records of the filing office under the debtor's correct name, using 
the filing office's search logic, if any, would disclose a financing statement that fails to 
sufficiently provide the name of the debtor in accordance with IC 26- 1-9.1 -503(a), the 
name provided does not make the financing statement seriously misleading. 
Id. 

42. Id 

43. See id. § 26-1-9.1-507. Nevertheless, if the debtor changes his name after filing, a 
financing statement is effective to perfect a security interest in collateral acquired within four 
months after the name-change. An amendment to the financing statement must be filed to perfect 
collateral acquired after the four-month window. See id. § 267-1-9. 1 -507(c). 

44. See id §§ 26-1-9.1-108, 26-1-9.1-504. 

45. See id §26-1-9.1-504(2). 



1248 INDIANA LAW REVIEW [Vol. 35:1239 



described."'" 

Section 9-5 1 6(b) sets out additional information that the financing statement 
should include. The secured party, in addition to the requirements of section 9- 
502, is required to: 

(A) provide a mailing address for the debtor; 

(B) indicate whether the debtor is an individual or an organization; or 

(C) if the financing statement indicates that the debtor is an 
organization, provide: 

(i) a type of organization for the debtor; 
(ii) a jurisdiction of organization for the debtor; or 
(iii) an organizational identification number for the debtor or indicate 
that the debtor has none."*^ 

Nevertheless, if the filing office accepts a financing statement that fails to 
meet the requirements of section 9-5 1 6 but satisfies section 9-502, the financing 
statement will be valid. But the opposite is not true. Any deficiency in section 
9-502 requirements will render the financing statement ineffective. Moreover, 
if a filing statement satisfies the requirements of both 9-502 and 9-5 1 6(b) and the 
filing office refuses to accept it, an effective filing has occurred despite the 
rejection against everyone except "a purchaser of the collateral which gives value 
in reasonable reliance upon the absence of the record from the files.'"** 

Subsection 9-501 specifies the appropriate filing locations. Generally 
speaking, the appropriate location for filing a financing statement is with the 
office of the secretary of state unless the collateral is real estate related, in which 
case the secured party should do a local filing.'^ Indiana made one non-uniform 
change to this section. Section 9-501(c)-(k) generally provides that until July 1, 
2002, a secured party is allowed to make a local filing for farm products, farm 
equipment and accounts, or general intangibles arising from or relating to the sale 
of farm products.^^ 

The adoption of Revised Article 9 represents a major challenge for Indiana 
practitioners. In addition to several non-uniform changes peculiar to Indiana, 
Revised Article 9 makes several significant changes to the prior version. By the 
time of this Article's publication, the transition rules will have likely worked 
their course. While Revised Article 9 is now the most complete and thorough 
U.C.C. section, practitioners should look to the appellate courts over the coming 
months to begin to tackle Article 9's difficult provisions. 



46. See id. § 26-1-9. 1-I08(a). 

47. Id. §26- 1-9. 1-5 1 6(b). 

48. Id §26- 1-9. 1-5 16(d). 

49. Id §26-1-9.1-501. 

50. Id §26-l-9.1-501(c)-(k). 



2002] COMMERCIAL AND CONSUMER LAW 1 249 



IL Other Commercial and Consumer Law Developments 

A. Indiana Supreme Court 

The Indiana Supreme Court handed down a major decision against short- 
term, consumer loan businesses operating in Indiana. In Livingston v. Fast Cash 
USA, Inc.,^^ the United States District Courts for the Northern and Southern 
District of Indiana^^ certified the following question to the Indiana Supreme 
Court: "[I]s the minimum loan finance charge permitted by Indiana Code section 
24-4.5-3-508(7), when charged by a licensed supervised lender, limited by 
Indiana Code section 24-4.5-3-508(2) or Indiana Code section 35-45-7-2?"" The 
Court answered in the affirmative. Justice Rucker authored the majority 
decision, in which Justice Boehm concurred in a separate opinion. Chief Justice 
Shepard filed the "loan" dissenting opinion. 

While the facts of the case were not difficult, the interpretation of the badly 
worded statute was. The plaintiffs were consumers who had taken out short-term 
loans (anywhere from seven days to two weeks) ranging between fifty to $400 
fi-om businesses engaged in providing "payday loans."*"* The borrowers wrote 
post-dated checks for the principal and a fixed finance charge, ranging from 
fifteen to thirty-three dollars. Borrowers would incur another charge if they had 
insufficient funds when the loan came due." 

Plaintiffs brought suit against the lenders in federal court, alleging that 
although the lenders charged the minimum loan finance apparently permitted by 
Indiana Code section 24-4.5-3-508(7),*^ the finance charge exceeded the 
maximum annual percentage rated allowable under either Indiana Code section 
24-4.5-3-508(2)*^ or section 35-45-7-2.** In other words, the plaintiffs argued 



5 L 753 N.E.2d 572 (Ind. 200 1 ). 

52. Contrary to the court's opinion, the cases pending in the Southern and Northern District 
Courts were dismissed without prejudice. Livingston was dismissed without prejudice on March 
9, 2001 . The parties had forty-five days to re-open the case following the supreme court's decision 
on the certified question. The lead case of Livingston v. Fast Cash USA. Inc. was re-opened on 
September 13, 2001, and the case is again pending before Magistrate Judge Godich. Case 
information is available at http://www.insd.uscourts.gov/caseinfo.htm (last visited May 28, 2002). 

53. 753 N.E.2d at 574. 

54. See id. 

55. See id. For instance, if the borrower took out a two-week loan and could not cover her 
check when due, the lender would issue a new loan for another two weeks (essentially for the 
money previously loaned) with additional finance charges. See id. 

56. Regarding supervised loans not made pursuant to a revolving loan account, Indiana's 
Uniform Consumer Credit Code (U.C.C.C.) states that a "lender may contract for and receive a 
minimum loan finance charge of not more than thirty dollars." iND. CODE § 24-4.5-3-508(7) 
( 1 998). This statute is indexed for inflation, and at the time of suit, the figure had an adjusted value 
of thirty-three dollars. 

57. The statute states the following: 

(2) The loan finance charge, calculated according to the actuarial method, may not 



1250 INDIANA LAW REVIEW [Vol. 35:1239 



that charging a thirty-three dollar finance charge on a two-week loan far 
exceeded the allowable loan finance charge annual percentage rate (APR), thirty- 
six percent, for loans under three hundred dollars. 

Two seemingly conflicting provisions governing the finance charge lenders 
can assess are at the root of the argument, one limiting the APR and the other 
allowing a specific minimum finance charge. The applicable provision of 
subsection 3-508(2) states, "The loan finance charge, calculated according to the 
actuarial method, may not exceed the equivalent of the greater of . . . thirty six 
percent (36%) per year on that part of the unpaid balances of the principal which 

is three hundred dollars ($300) or less "^^ But in subsection 3-508(7), the 

statute goes on to provide: "With respect to a supervised loan not made pursuant 
to a revolving loan account, the lender may contract for and receive a minimum 
loan finance charge of not more than thirty dollars ($30)."^ 

In reconciling these two provisions, the court took three opposing views. 
The majority opinion reasoned that subsection 3-508(7) was based on the 
assumption that loans would last at least one year, thus short-term lenders are 
prevented from taking advantage of this subsection.^' Justice Boehm agreed that 
the statute was based upon an assumption, but instead reasoned that the 
provisions first assumes lawful loans (i.e., that lenders cannot contract for loan 
finance charges greater than those set by subsection 3-508(2) then seek refuge in 
subsection 3-508(7))." Chief Justice Shepard, in dissent, took the most 
straightforward view of the statute. He reasoned that the legislature intended that 



exceed the equivalent of the greater of either of the following: 

(a) the total of: 

(i) thirty-six percent (36%) per year on that part of the unpaid balances of the 

principal which is three hundred dollars ($300) or less; 

(ii) twenty-one percent (21%) per year on that part of the unpaid balances of 

the principal which is more than three hundred dollars ($300) but does not 

exceed one thousand dollars ($1,000); and 

(iii) fifteen percent ( 1 5%) per year on that part of the unpaid balances of the 

principal which is more than one thousand dollars ($1,000); or 

(b) twenty-one percent (21%) per year on the unpaid balances of the principal. 
M § 24-4.5-3-508(2). 

58. Indiana's loansharking statute states the following: 

A person who, in exchange for the loan of any property, knowingly or intentionally 
receives or contracts to receive from another person any consideration, at a rate greater 
than two (2) times the rate specified in [Indiana Code section] 24-4. 5-3 -508(2)(a)(i), 
commits loansharking, a Class D felony. However, loansharking is a Class C felony if 
force or the threat of force is used to collect or to attempt to collect any of the property 
loaned or any of the consideration for the loan. 
Id. § 35-45-7-2. 

59. /flf. § 24-4.5-3-508(2). 

60. Id § 24-4.5-3-508(7). 

61. Livingston v. Fast Cash USA, Inc., 753 N.E.2d 572, 576-77 (Ind. 2001). 

62. Id, at 578-79 (Boehm, J., concurring). 



2002] COMMERCIAL AND CONSUMER LAW 1 25 1 



"if the loan period is so short or the loan so small that [the loan finance] rate 
might produce just a few dollars, a minimum of $33 may be charged."^^ In one 
of the most quotable lines of the survey period. Chief Justice Shepard expressed 
the court's frustration in parsing through this badly crafted statute. He proposed: 
"It has been awhile since we last encountered a statute in such serious need of 
revision. Our federal cousins might take comfort in knowing that, like them, we 
found the task of parsing its various provisions very difficult (but had nowhere 
else to send out for help)."^ 

To understand the disagreement among the opinions, it is necessary to frame 
these two conflicting provisions in their historical context. Curiously, none of 
the three opinions discussed the road subsection 3-508(7) traveled before settling 
in its present position. From 1971 until today, the basic idea encompassed by 3- 
508(7) has taken on various forms and appeared in different provisions of the 
U.C.C.C. 

Indiana's U.C.C.C. was enacted in 1971 . As originally enacted, subsection 
3-508 contained only a provision governing maximum loan finance charge 
percentage rates.^^ Instead, the provision capping a specific finance charge dollar 
amount was found in the U.C.C.C. 's prepayment section.^^ In pertinent part, it 
stated: 

[T]he lender may collect or retain a minimum charge within the limits 
stated in this subsection if the loan finance charge earned at the time of 
prepayment is less than any minimum charge contracted for. The 
minimum charge may not exceed the amount of loan finance charge 
contracted for, or five dollars ($5) in a transaction which had a principal 
of seventy-five ($75) or less, or seven dollars and fifty cents ($7.50) in 
a transaction which had a principal of more than seventy-five dollars 
($75)."' 

From its beginning, this provision worked to guarantee a minimum finance 
charge to lenders, either the "loan finance charge contracted for" or in the event 
of prepayment, a set dollar amount. 

In 1982, subsection 3-508(7) was crafted by the Indiana General Assembly. 
In whole the section stated: 

Notwithstanding subsection (2) [subsection 3-508(2)], with respect to a 
supervised loan not made pursuant to a revolving loan account, the 
lender may contract for and receive a minimum loan finance charge of 
not more than five dollars ($5) when the original principal balance of the 



63. Id. at 580 (Shepard, C.J., dissenting). He went on to say, however, that the practice of 
charging a new fee each time a loan rolled over violated Indiana Code § 24-4.5-3.509, prohibiting 
sequential fee-charging practices. Id. at 581. 

64. Id 

65. Id §24-4.5-3.508(1971). 

66. /^. § 24-4.5-3-210 (1971) (amended 1972). 

67. Id §24-4.5-3-210(2). 



1252 INDIANA LAW REVIEW [Vol. 35:1239 



obligation does not exceed seventy-five dollars ($75), or not more than 
seven dollars fifty cents ($7.50) when the original principal balance of 
the obligation exceeds seventy- five dollars ($75).^'* 

As initially drafted, subsection 3-508(7) acted as an explicit exception to 3- 
508(2)'s percentage limit on loan finance charges. Subsection 3-210(2) 
regarding prepayment remained the same. As such, the two provisions worked 
together. For loans over seventy-five dollars, lenders could impose a minimum 
finance charge of $7.50, regardless of the duration of the loan. Accordingly, 
under subsection 3-210(2), lenders could collect up to this $7.50 figure in the 
event of prepayment. 

For ten years, these two provisions co-existed. In 1992, both were amended. 
Subsection 3-210(2) was completely reworked to its present form. It reads: 

Upon prepayment in full of a consumer loan, refinancing, or 
consolidation, other than one (1 ) under a revolving loan account, if the 
loan finance charge earned is less than any permitted minimum loan 
finance charge (IC 24-4.5-3-201(6) or IC 24-4.5-3-508(7)) contracted 
for, whether or not the consumer loan, refinancing, or consolidation is 
precomputed, the lender may collect or retain the minimum loan finance 
charge, as if earned, not exceeding the loan finance charge contracted 
for.^^ 

In the same year, subsection 3-508(7) was amended to the following: 
"Notwithstanding subsection (2), with respect to a supervised loan not made 
pursuant to a revolving loan account, the lender may contract for a minimum loan 
finance charge of not more than thirty dollars ($30)."^° The two provisions were 
changed significantly in 1992, but their basic effect remained the same. One 
stood as a clear exception to subsection 3-508(2)'s APR percentage limitation by 
establishing a specific dollar amount which lenders could collect, regardless of 
amount or duration. The other provided that, in the event of prepayment, lenders 
could collect the lesser of the amount contracted for or $30, but recognized the 
lenders' ability to charge up to this maximum dollar amount. 

The latest amendment to these two provisions occurred in 1 994. The General 
Assembly, most likely acting under the auspices of Legislative Services, made 
a few changes to the language of the entire subsection 3-508, all of which appear 
to be minor word and nonsubstantive changes. One of these changes was to 
subsection 3-508(7). The words "notwithstanding subsection (2)" were 
deleted.^' The whole of the other changes made to subsection 3-508 were very 



68. 1982 Ind. Acts 149, sec. 4. 

69. 1992 Ind. Acts 14, sec. 30 (codified as amended at Ind. CODE § 24-4.5-3-210(2) (1998)), 

70. Mat 4. 

71. Ind. Code Ann. § 24-4.5-3-508 (West 1998). The historical and statutory notes in 
West's Annotated Code state that the 1994 changes "amended the section by deleting 
notwithstanding IC 24-4.5-1-106(1), from Subsec. (6); deleting notwithstanding subsection (2), 
from Subsec. (7), and making other nonsubstantive changes." Id. 



2002] COMMERCIAL AND CONSUMER LAW 1253 



minor, deleting gender specific pronouns and unnecessary cross-references. It 
seems highly unlikely that the changes made to 3-508(7) were ever intended to 
change the substantive meaning of the provision. 

So what was the purpose and effect of this amendment? First, it is most 
probable that Legislative Services thought that the ''notwithstanding subsection 
(2)" language was superfluous, and did not fully recognize the effect this 
amendment would have. However, one does not delete an exception simply by 
deleting its reference point. For instance, if "rule one" says "the sky is blue" and 
"rule two" says "notwithstanding rule one, the sky is pink on Sunday," the force 
and effect of "rule two" is not lessened by deleting reference to "rule one." 

Both before and after the 1994 amendment, subsection 3-508(7) acts as an 
exception to 3-508(2). For nearly twenty years, the two provisions have acted 
harmoniously to set a specific, minimum dollar amount for loan fmance charges, 
which is then cross-referenced in the prepayment provision. Deleting the 
language "notwithstanding subsection (2)" from 3-508(7) along with other minor 
and nonsubstantive language changes should not have meant an end to the 
general exception to 3-508(2). Remarkably, the majority of the court thought it 
should. 

The majority turned the seemingly clear meaning of the two provisions on 
its head and said that these two provisions anticipated only one-year or longer 
loans, which in essence limits 3-508(7) to 3-210(2)'s construction and function, 
rather than the other way around. The major fallacy in the majority's opinion 
is a comparison of the 1971 U.C.C.C. with its present form without sufficient 
analysis of the effects the various amendments worked during the interceding 
thirty years. From its inception, 3-508(7) has been an exception to 3-507(2), 
unaffected by the language of 3-2 1 0(2). Justice Rucker, writing for the majority, 
offered: 

Subsection 3-508 has been amended three times since 1971 . However, 
each amendment has referred to the prepayment section 3-210. At 
present, subsection 3-508 as well as subsection 3-210 works 
substantially the same as it has always worked: a lender is allowed to 
charge up to the amount specified in subsection 3-508(7), limited by the 
total fmance charge that was originally provided for in the contract. 
Hence, a two-week $200 loan still generates $2.77 in maximum 
interest.^^ 

In this, I would respectfully argue that the majority is wrong. Subsection 3- 
210(2) states that if the loan finance charge actually earned is less than the 
minimum loan finance charge (set by 3-508(7)), the lender can collect or retain 
a minimum loan finance charge in the event of prepayment, not to exceed the 
finance charge contracted for ?^ In the example Justice Rucker provides, he 
incorrectly limits the amount collectable by the permissible APR requirements 
of subsection 3-508(2) rather than the finance charge actually contracted fi)r. 



72. Livingston v. Fast Cash USA, Inc., 753 N.E.2d 572, 576 (Ind. 2001 ) (footnote omitted). 

73. lND.CODE§ 24-4-5-3-210(2) (1998). 



1254 INDIANA LAW REVIEW [Vol. 35:1239 



Thus, if the original agreement called for a set $33 finance charge, following 3- 
10(2)'s wording, a lender could collect $33 from the borrower in the event of 
prepayment. 

While Justice Boehm in a separate concurring opinion justifies the majority's 
decision on separate grounds, he too is dogged by a failure to fully to grasp the 
actual wording and historical context of subsections 3-210(2), 3-508(2), and 3- 
508(7). As Justice Boehm framed the issue: "As I see it, the issue is whether the 
$33 minimum loan finance charge provided by subsection 508(7) is collectible 
if it exceeds the loan finance charge allowed under subsection 508(2) for the loan 
as written for its full term."^"* Although Justice Boehm recognizes that subsection 
3-508(7) "sets the amount of the minimum charge," he believes that it does not 
constitute an independent exception to 3-508(2)'s limits.^^ He argues that 3- 
508(2) alone caps the permissible finance charge. Like the majority. Justice 
Boehm fails to reconcile the historical framework of these subsections. As 
section 3-508(7) was originally enacted and continues to function, it acts as a 
specific exception to the APR limitations of section 3-508(2) and establishes a 
minimum dollar amount that can be assessed as a finance charge. 

Without doubt, both the majority and concurring opinions set forth plausible 
policy arguments why such short-term lenders should be prohibited from 
collecting these exorbitant finance charges. In truth, I too find much that is 
abhorrent about this industry. But whatever one's view is of this 
industry — ^whether it is a predatory lending institution, whether it targets the poor 
and uneducated — ^to find it violates a section of Indiana Code requires a violation 
of the language of the statute. In this case there is no such violation. 

At the heart of both the majority's and Justice Boehm's argument is the basic 
premise that the General Assembly never contemplated such a system of small 
amount, short-term loans. Fair enough. But what should the court do when faced 
with this question of statutory construction? As it has said many times, "The 
primary rule in statutory construction is to ascertain and give effect to the intent 
of the legislature. 'The best evidence of legislative intent is the language of the 
statute itself, and all words must be given their plain and ordinary meaning unless 
otherwise indicated by statute. '"^^ 

The opinion that most held true to these cardinal rules of statutory 
construction was Chief Justice Shepard's dissenting opinion. He wrote: 

I read subsection 508(7) to mean what it says, in straightforward terms 
.... [S]ubsection 508(7) [i]s an exception to subsection 508(2), and it 
makes $33 a true "minimum loan finance charge" using the common 

meaning of the words Although subsection 3-508(7) does perform 

this additional function [i,e., providing loan prepayment limitations], I 



74. Livingston^ 753 N.E.2d at 578 (Boehm, J., concurring), 

75. Id. 

76. Chambliss v. State, 746 N.E.2d 73, 77 (Ind. 2001 ) (citing Bartlett v. State, 71 1 N.E.2d 
497, 501 (Ind. 1999)). 



=»ME 



2002] COMMERCIAL AND CONSUMER LAW 1255 



still find its primary purpose in its plain language/^ 

Unfortunately, his more straightforward, and what I consider correct, view could 
find no support among his colleagues, and three members of the court settled 
upon a much more strained, tenuous interpretation of the statute. 

What are the effects of the supreme court's decision? A class action lawsuit 
is currently proceeding in federal district court, and according to J. Phillip 
Goddard, deputy director and chief counsel for the Indiana Department of 
Financial Institutions, borrowers who were charged more than thirty-six percent 
APR on these short-term loans should be entitled to restitution.^^ From the 
businesses' standpoint, while there were early reports of some payday loan 
companies going out of business, several have affiliated themselves with national 
banks organized in other states with higher or no interest rate limitations, thereby 
allowing them to bypass Indiana law.^^ 

In another case, the Indiana Supreme Court addressed a difficult issue 
concerning express warranties under Indiana's version of the U.C.C. In Rheem 
Manufacturing Co. v. Phelps Heating & Air Conditioning, Inc. ,*** Phelps Heating 
& Air Conditioning ("Phelps") was a central Indiana contractor that installed 
Rheem furnaces in several new homes. Several of the furnaces malfunctioned, 
requiring Phelps to incur considerable expense repairing them, an estimated 
$40,000 to $65,000. Phelps sued, alleging breach of implied and express 
warranties. Rheem expressly warranted its furnaces against "failure under 
normal use and service," but limited the warranty to replacement parts, 
specifically disclaiming consequential damages, incidental damages, and costs 
of servicing the furnaces.*' 

At trial, Rheem sought summary Judgment on the warranty claims alleging 
that damages were precluded because of the limitations under the express 
warranty and because of lack of privity under the implied warranties. The trial 
court denied this motion. On interlocutory appeal, the court of appeals affirmed 
the denial of summary judgment.*^ The supreme court accepted transfer and 
reversed as to the express warranty issue." 

Rheem first argued that summary judgment should have been granted as to 
the claim for lost profits because the warranty excluded consequential damages. 
Both parties agreed that the warranty's remedy, repair and replacement, failed of 
its essential purpose, but disagreed as to the construction of Indiana Code 
sections 26-1-2-719(2) and (3). Section 2-719(2) provides "[w]here 
circumstances cause an exclusive or limited remedy to fail of its essential 



77. Livingston, 753 N.E.2d at 580 (Shepard, C.J., dissenting). 

78. See Denise G. Callahan, Payday Decision Not Final, IND. LAWYER, Aug. 29, 200 1 , at 1 . 

79. Id at 22. 

80. 746N.E.2d 941 (Ind. 2001). 

81. Mat 944. 

82. Rheem Mfg. Co. v. Phelps Heating & Air Conditioning, Inc., 714 N.E.2d 1218 (Ind. Ct. 
App. 1 999), vacated by 746 N.E.2d 94 1 (Ind. 200 1 ). 

83. Rheem Mfg. Co., 7A6n.E.2dsiX956. 



1256 INDIANA LAW REVIEW [Vol. 35:1239 



purpose, remedy may be had as provided in IC 26-1."*^ Section 2-719(3) 
provides that ''[c]onsequentiai damages may be limited or excluded unless the 
limitation or exclusion is unconscionable. Limitation of consequential damages 
for injury to the person in the case of consumer goods is prima facie 
unconscionable, but limitation of damages where the loss is commercial is not."^^ 

Arguing a literal reading of section 2-719(2), Phelps contended that when a 
remedy fails of its essential purpose, any remedy provided by 26-1 may be had, 
including consequential damages. This is known as the "dependent" view that 
overrides a contract's consequential damage exclusion.*^ On the contrary, 
Rheem argued that the two subsections operated '"independently" and that the 
consequential damage exclusion survived the failure of the warranty's essential 
purpose. This is known as the "independent" view of subsections 2-719(2) and 
2-719(3).*' 

The supreme court found the independent view more soundly reasoned and 
held that subsection 2-719(2) "does not categorically invalidate an exclusion of 
consequential damages when a limited remedy fails of its essential purpose."** 
The court gave four reasons for this conclusion. First, the court found the two 
subsections contemplated different legal standards.*^ Second, the independent 
view upheld the statutory construction maxim of giving full effect to every 
term.^ Third, the independent view furthered the underlying legislative purposes 
of the U.C.C' And finally, the court felt the independent view supported the 
policy of favoring the parties' freedom of contract.'^ 

The supreme court next moved on to a discussion of Phelps' claim for labor 
expenses incurred while fixing the defective furnaces. Phelps claimed that it lost 
nearly $100,000 as a result of servicing the furnaces. Notwithstanding the 
contract's express warranty excluding the recovery of labor expenses, Phelps 
argued that the warranty failed of its essential purpose and was therefore entitled 
to collect all damages.^^ 

In determining whether the warranty failed of its essential purpose, the court 
first had to determine what the essential purpose was. The applicable warranty 



84. IND. Code §26-1-2-719(2) (1998). 

85. /^. §26-1-2-719(3). 

86. Rheem, 746N.E.2d at 947 (citing Middletown Concrete Prod. v. Black Clawson Co., 802 
F. Supp. 1135, 1151 (D. Del. 1992)). 

87. Id (citing Waters v. Massey-Ferguson, Inc., 775 F.2d 587, 592-93 (4th Cir. 1985)). 

88. Id (citing Schurtz v. BMW of N. Am., Inc., 814 P.2d 1 108, 1 1 12 (Utah 1991)). 

89. Id. at 948 ("A limited remedy will be struck when it fails of its essential purpose; an 
exclusion of consequential damages fails when it is unconscionable.''). 

90. /i/. at 948-49. 

91. Id. at 949. The purposes are: "(a) to simplify, clarify, and modernize the law governing 
commercial transactions; (b) to permit the continued expansion of commercial practices through 
custom, usage, and agreement of the parties; (c) to make uniform the law among the various 
jurisdictions." Ind. Code § 26-1-1-102 (1998). 

92. /?/iee/w,746N.E.2dat950. 

93. /(^. at 953. 



2002] COMMERCIAL AND CONSUMER LAW 1257 



provision provided that "[u]nder this Warranty, R[heem] will furnish a 
replacement part that will be warranted for only the unexpired portion of the 
original warranty."^"* Further, the warranty provided that "[t]his Warranty does 
not cover any labor expenses for service, nor for removing or reinstalling parts. 
All such expenses are your responsibility unless a service labor agreement exists 
between you and your contractor."^^ Additionally, officers of both Rheem and 
Phelps testified regarding the customary practice of furnace manufacturers and 
dealers. Both testified that it was custom for manufacturers to provide a one-year 
warranty on parts while the dealer typically provided a one-year warranty on 
labor."" 

Looking at the record, the court determined that the purpose of the limited 
warranty was "to maintain a reasonable division of responsibilities between the 
manufacturer and the contractor when consumers experienced problems.""^ The 
court then moved on to determine if the remedy failed of this purpose. It found 
the warranty served its purpose (i.e., Rheem supplied the parts for the 
malfunctioning furnaces and Phelps supplied the manpower to fix them). The 
court concluded that Phelps accepted this allocation of responsibility by dealing 
in Rheem furnaces."* 

While the court stated that "a limited remedy fails when its application 
operates to deprive either party of the substantial value of the bargain,""" the 
court believed failure occurs only in "unusual circumstances" and in "relatively 
few situations." '°^ The court described a failure of a warranty's essential purpose 
as occurring "when an unexpected circumstance arises and neither party accepted 
the risk that such circumstance would occur."'^' This seems like an appropriate 
rule in commercial sales where the loss is almost entirely economic, but it could 
work harsh results in a consumer sales context. It appears the court left open the 
possibility of a different result in the area of consumer sales. '^^ 

The court went on to find that Phelps was not entitled to collect direct 
warranty damages because of its position as an intermediate seller. '^^ Rather, 
Phelps' claim sounded in indemnity and subrogation for the damages suffered by 
its customers. The supreme court remanded the case for determination of 
whether Phelps could recover on an indemnity theory. '°'* 



94. Mat 944. 

95. Id. 

96. Id. at 953. 

97. Mat 954. 

98. Mat 955. 

99. Id (quoting IND. CODE § 26-1-2-719 cmt. 1 (1998)). 

100. M at 954 (citations omitted). 

101. Mat 955. 

1 02. See id (quoting V.M. Corp. v. Bernard Dist. Co., 447 F.2d 864, 865 (7th Cir. 1971 )) ("2- 
719 was intended to encourage and facilitate consensual allocations of risk associated with the sale 
of goods. This is particularly true where commercial, rather than consumer sales are involved."). 

103. Mat 956. 

104. See id. 



1258 INDIANA LAW REVIEW [Vol. 35:1239 



B. Court of Appeals' Decisions 

The Indiana Court of Appeals was active on a number of fronts in the areas 
of commercial and consumer law. In Walker v. McTague^^^^ the secured party, 
Walker, who had sold business properties to the McTagues, reassumed 
management and control of the businesses after the McTagues filed for 
bankruptcy. The McTagues owed Walker over $250,000. To satisfy the 
outstanding loan, Walker offered the business properties for sale via a sealed bid 
auction by placing notices in Lafayette and Indianapolis newspapers. This was 
the only notice of sale the McTagues received. The sole bid on the property was 
$50,000, placed by a company controlled by Walker. '°^ Walker then sought a 
deficiency judgment against the McTagues for the balance. After a bench trial, 
the trial court entered judgment for Walker in an amount of only $7,400, 
representing two months unpaid rent still owed by the McTagues, and Walker 
appealed. 

The court of appeals determined that advertisement through newspapers is 
not sufficient to satisfy the notice requirement to defaulting debtors. '^^ It then 
applied a two-prong test for determining whether a sale is commercially 
reasonable following a deficient notice. The effect of Walker's failure to give 
the McTagues notice was "to require [Walker] to prove that the reasonable value 
of the collateral at the time of the sale was less than the amount of the debt and 
that the sale was performed in a commercially reasonable manner."'"* As to the 
first prong, the creditor must present "credible, independent evidence that the 
sale price of the collateral was equal to the fair value of the collateral, but was 
less than the indebtedness."'^ For the second prong, the court laid out multiple 
factors for determining if a sale was commercially reasonable. These factors 
include: (1) the price received by the secured party, (2) whether the collateral 
was sold retail or wholesale, (3) the total number of bids solicited and received, 
and (4) whether the time and place of sale were reasonably calculated to result 
in a reasonable number of bidders. "° 

While Walker presented evidence that the value of the business properties 
was $250,000, because the sale resulted in only one bid, originated from Walker 
and was $200,000 below the market value of the properties, the court of appeals 
held that the trial court did not err in concluding "that the sale was not conducted 
in a commercially reasonable manner."'" 

InE & L Rental Equipment, Inc. v. Wade Construction, Inc.,^^^ the court of 
appeals was presented with a barter agreement in which E & L Rental Equipment 



1 05. 737 N.E.2d 404 (Ind. Ct. App. 2000). 

106. Mat 406-07. 

107. Mat 409. 

1 08. Id. at 409- 1 (citation omitted). 

109. Mat 410. 

110. Id. 

111. Mat 41 1. 

1 1 2. 752 N.E.2d 655 (Ind. Ct. App. 200 1 ). 



iM 



2002] COMMERCIAL AND CONSUMER LAW 1259 



(E & L) argued that the value of Wade Construction's performance was deficient 
and demanded additional payment. Pursuant to an agreement whereby E & L 
promised to provide Wade Construction with the use of construction equipment 
and various goods including sand, limestone and gravel in exchange for Wade 
Construction's promise to provide E & L with recycling services, E & L provided 
Wade Construction with $83,646 worth of goods and rental equipment between 
1994 and 1997. In exchange, Wade Construction provided E & L with $18,000 
worth of recycling services. '^^ 

E & L argued first that the agreement was a lease and not a barter. Looking 
to the evidence, the court of appeals found several factors indicative of a barter 
agreement. First, E & L did not invoice Wade Construction for use of its rental 
equipment until twenty-six months after performance under the contract began. 
The court also found that the U.C.C.'s definition of "lease," "a transfer of the 
right to possession and use of goods for a term in return for consideration," 
helpful. ""* Not only did E & L not specify a specific period for the transfer of 
right to possession, but E & L would also occasionally retrieve its equipment 
from Wade Construction for its own use."* 

In the alternative, E & L argued that the part of the agreement dealing with 
goods — ^that is, the sand, limestone and gravel— was covered by Article 2 of the 
U.C.C. The court of appeals concluded that Article 2 was applicable, but found 
the trial court's conclusion was no different."^ Both parties had fully performed 
their obligation, and it was only because the value of Wade Construction's 
performance was significantly less that E & L's that E & L was complaining. In 
essence, E & L entered into a bad agreement and sought to be bailed out by the 
courts, an invitation the appellate court declined."' 

In Pioneer Hi-Bred International, Inc. v. Key bank National Ass'n,^^^ the 
court of appeals was faced with a federal statute preempting Article 9's 
regulations of secured transactions in agricultural products. In the case, farmers 
in Shipshewana executed several promissory notes in exchange for which they 
granted Keybank a security interest in their real and personal property, including 
the products of their land. Subsequently, the farmers obtained an additional loan 
from Pioneer, and Pioneer took a security interest in the proceeds from the sale 
of the farmers' crops. Pioneer did not file a financing statement."^ When the 
farmers renewed their loans with Keybank, Keybank sent notice of their secured 
status to all parties, including Pioneer. After the farmers harvested and processed 
their crops, the proceeds of the sale were given to Pioneer. Later the next year, 
the farmers defaulted, and Keybank filed suit to collect on the proceeds of the 



113. Mat 657. 

1 14. Id. at 659 (emphasis in original) (citing IND. CODE § 26-1-2.1-103 (1998)). 

115. Id. 

116. Mat 660. 

117. Mat 660-61. 

1 18. 742 N.E.2d 967 (Ind. Ct. App. 2001). 

119. Mat 968-69. 



1260 INDIANA LAW REVIEW [Vol. 35:1239 



previous year's crops. '^° 

The court of appeals found that Indiana's Article 9 was preempted by federal 
regulations. The regulation provides that a buyer of farm products takes subject 
to a security interest if the buyer receives notice of another party's security 
interest within one year before the sale.'^' In this case, Pioneer received notice 
of Keybank's security interest on August 16, 1997, and Pioneer purchased the 
farmer's farm products on December 18, 1997.'^^ The court held that Pioneer 
took subject to the security interest and was accountable to Keybank for the 
amount it paid to the farmers. '^^ 

In Time Warner Entertainment Co. v. Whiteman,^^* customers filed a class 
action against Time Warner alleging that the late fees it assessed were 
"excessive, unreasonable, and a penalty.'"" Time Warner charged $4.65 to its 
customers who failed to pay by a certain date. The class action plaintiffs sought 
money damages and injunctive relief, and Time Warner argued that the voluntary 
payment doctrine barred relief for money damages. The trial court denied Time 
Warner's motion for summary judgment, and an appeal ensued to the court of 
appeals. 

The court of appeals found that summary judgment was appropriate based 
upon the voluntary payment doctrine, which provides that '"a voluntary payment 
made under a mistake or in ignorance of law, but with a full knowledge of all the 
facts, and not induced by any fraud or improper conduct on the part of the payee, 
cannot be recovered back.'"'^^ The court determined that the two key factors 
under the voluntary payment doctrine are the payor's knowledge and fraud or 
imposition by the payor. '^^ 

As to the first factor, the court held that the "onus is upon the party making 
the payment to inquire about the reasonableness of the charge before making the 



120. /(/.at 970. 

121. The regulation reads as follows: 

(d) Except as provided in subsection (e) and notwithstanding any other provision 
of Federal, State, or local law, a buyer who in the ordinary course of business 
buys a farm product from a seller engaged in farming operations shall take 
free of a security interest created by the seller, even though the security 
interest is perfected; and the buyer knows of the existence of such interest, 

(e) A buyer of farm products takes subject to a security interest created by the 
seller if— 

( 1 )(A) within 1 year before the sale of the farm products, the buyer has received from 
the secured party or the seller written notice of the security interest .... 
Id. at 971 (quoting 7 U.S.C. § 1631 (1985)). 

122. /</. at 969, 972. 

123. Id ai 972. 

124. 741 N.E.2d 1265 (Ind. Ct. App. 2001). 

125. /c/. at 1267. 

126. Id at 1270 (quoting City of Evansville v. Walker, 318 N.E.2d 388, 389 (1974) (citation 
omitted)). 

127. /(/. at 1270-71. 



'■^ 



2002] COMMERCIAL AND CONSUMER LAW 1261 



payment, or perhaps before signing the contract that specifies the late charge."'^* 
As to the second factor, the court determined that "'in order to render payment 
compulsory, there must have been some necessity and such pressure must be 
brought to bear upon the person paying as to interfere with free enjoyment of his 
rights of person or property. ""^^ The court of appeals held that potential loss of 
cable service or the threat of litigation does not rise to the level of compulsion 
necessary to satisfy the second factor of the voluntary payment doctrine. '^*^ 
Accordingly, the court found that summary judgment was appropriate as to the 
money damages claim. '^' Because a dispute existed on whether Time Warner's 
late fee was disproportionate to its actual loss, the court determined that a 
genuine issue of material fact was in dispute and summary judgment was 
inappropriate.'^^ The Indiana Supreme Court heard oral argument on the case, 
but denied transfer. 

Conclusion 

It was an eventful survey period in the areas of consumer and commercial 
law. The new and highly technical Revised Article 9 finally arrived. Moreover, 
the supreme court and court of appeals issued a number of noteworthy decisions. 
As of May 2002, it appears that the supreme court has issued the last of the direct 
criminal appeals that have hampered its ability to address many areas of civil 
law, including commercial and consumer law. With this newfound docket 
freedom, Indiana practitioners should look to the supreme court for greater 
guidance and development in these areas. 



128. Mat 1272. 

129. Id. (quoting Smith v. Prime Cable of Chicago, 658 N.E.2d 1325 (111. App. Ct. 1995)). 

130. Id. 

131. Id 

132. /(i. at 1275. 



State and Federal Constitutional 
Law Developments 



Rosalie Berger Levinson* 



Introduction 

This Article explores state and federal constitutional law developments over 
the past year. Parts I-III examine both U.S. Supreme Court cases and significant 
Indiana state and low^er federal court cases addressing federal constitutional 
issues. Part IV will focus on state civil constitutional law cases. 

I. First Amendment Speech Cases 

During the 2000 term the U.S. Supreme Court decided several cases raising 
First Amendment issues. In addition, both the district courts in Indiana and the 
Seventh Circuit Court of Appeals were called upon to assess First Amendment 
challenges to Indiana statutes. A recurring theme is the extent to which 
government may regulate speech in order to protect children. 

A. Regulating Commercial Speech to Protect Minors 

In Lorillard Tobacco Co. v. Reilly,^ the tobacco industry successfully 
challenged various Massachusetts regulations governing the advertising of 
tobacco products. State regulations, promulgated by the Attorney General, 
prohibited the outdoor advertising of smokeless tobacco or cigars within 1000 
feet of a school or playground.^ Further, they proscribed indoor, point-of-sale 
advertising of cigars and smokeless tobacco "placed lower than five feet from the 
floor of any retail establishment which is located within a thousand foot radius" 
of any school or playground.^ Despite the state's obviously strong interest in 
protecting its children from the ills of tobacco use, the Court reasoned that the 
regulations went too far. 

After striking the cigarette advertising regulations on pre-emption grounds,"* 
Justice O'Connor applied a four-prong analysis established in Central Hudson 
Gas & Electric Corp. v. Public Service Commission^ to test the smokeless 
tobacco regulations. Under the first prong, the court determines whether the 
expression is protected at all, since the state may ban commercial speech if it is 



* Associate Dean and Professor of Law, Valparaiso University School of Law. B.A., 
1969, Indiana University; J.D., 1973, Valparaiso University School of Law. 

1. 533 U.S. 525(2001). 

2. Id at 545. 

3. Id at 566 (quoting Mass. Regs. Code tit. 940, §§ 21.04(5)(b), 22.06(5)(b) (2000)). 

4. Id. at 553-57. The Court relied on the Federal Cigarette Labeling and Advertising Act, 
which prescribes mandatory health warnings for cigarette packaging and advertising. The Court 
rejected the Attorney General's argument that pre-emption should not apply because the regulations 
targeted youth exposure to tobacco, rather than the health-related content of advertising. The Court 
found the two concerns "intertwined." Id. at 526-27. 

5. 447 U.S. 557(1980). 



1264 INDIANA LAW REVIEW [Vol. 35:1263 



false, deceptive, or misleading, or if it concerns unlawful activity.^ The second 
prong asks whether the asserted governmental interest is substantial.^ The third 
and fourth prongs require the court to determine whether the regulation directly 
advances the asserted governmental interest and whether the regulation is more 
extensive than necessary to serve that interest.* The first two prongs were 
conceded by the parties and the Court found "ample documentation" of a 
problem with underage use of smokeless tobacco and cigars, which could be 
ameliorated by preventing campaigns targeted at juveniles.' The Court 
concluded, however, that the ban on outdoor advertising failed the fourth prong 
because it was more extensive than necessary to advance the state's interest in 
preventing underage tobacco use.'° The Court expressed concern that the 
regulations made no distinctions based on the size of the sign, nor did the 
regulations differentiate between rural, suburban, or urban locales, which 
"demonstrates a lack of tailoring."" The Court noted that in some areas the 
regulations "would constitute nearly a complete ban on the communication of 
truthful information about smokeless tobacco and cigars to adult consumers."'^ 
The Court reiterated the firmly established principle that the government's 
interest in protecting children from harmful materials "does not justify an 
unnecessarily broad suppression of speech addressed to adults."'^ 

As to the prohibition on indoor point-of-sale advertising, the Court concluded 
that this regulation failed both the third and fourth prongs of the Central Hudson 
analysis because it neither advanced the goal of preventing minors from using 
tobacco products, nor curbed the demand for such activity.'"* The five-foot rule 
would not curb demand for the product since children can obviously look up and 
see the ads, and there was not a "reasonable fif between the restriction and the 
goal of targeting advertising that entices children.'^ Further, the Court rejected 
a "de minimis" exception for even limited restrictions on advertising, where the 
restrictions lack sufficient tailoring.'^ 

The concurring opinions of Justices Kennedy, Scalia, and Thomas expressed 
concern with the Central Hudson test. Justice Kennedy, joined by Justice Scalia, 
opined that "the test gives insufficient protection to truthful, nonmisleading 



6. Id Sit 566. 

7. Id 

8. Id 

9. Z,on7/arfl^,533U.S. at563. 

10. Id at 566. 

11. Mat 564. 

12. Id 

13. Id at 565 (quoting Reno v. ACLU, 521 U.S. 844, 875 (1997)). 

14. Id. at 566. The Court, however, did sustain regulations requiring "tobacco retailers to 
place tobacco products behind counters and require customers to have contact with a sales-person 
before they are able to handle a tobacco product." Id at 568. 

15. Id at 567. 

16. Id 



2002] CONSTITUTIONAL LAW 1265 



commercial speech."'^ Justice Thomas flatly stated that he would subject all 
advertising regulations that restrict truthful speech to strict scrutiny analysis.'* 
As to the state's interest in protecting minors. Justice Thomas emphasized that 
the state did not focus its ban on "youthful imagery.'"^ More basically, he 
emphasized that the state cannot pursue its interest in regulating speech directed 
at children "at the expense of the free speech rights of adults."^^ 

Justice Stevens, joined by Justice Ginsberg and Justice Breyer, would have 
remanded the case for a trial to better assess whether the measures were properly 
tailored to serve the government's compelling interest in "ensuring that minors 
do not become addicted to a dangerous drug before they are able to make a 
mature and informed decision as to the health risks associated with that 
substance."^' Because there was some doubt in the record as to the impact the 
advertising ban would have, particularly in the state's largest cities, the breadth 
of the ban was potentially problematic. However, the dissenters would have 
upheld the point-of-sale advertising restrictions as not significantly implicating 
First Amendment concerns." 

Lorillard is significant for several reasons. The decision triggered nine 
separate opinions, including four rather convoluted concurring opinions. 
Nonetheless, Central Hudson remains intact, despite the urging of some members 
ofthe Court that truthful, nonmisleading commercial speech should enjoy the full 
First Amendment protection afforded non-commercial speech. On the other 
hand, the decision indicates that the Central Hudson test is not toothless and that 
the government will not be permitted to impose broad advertising bans to 
discourage the use of legal but disfavored products, even where a child welfare 
argument is invoked.^^ Either government must enact generally applicable 



1 7. Id. at 570 (Kennedy, J., concurring). But see Commodity Trend Serv., Inc. v. Commodity 
Futures Trading Comm'n, 233 F.3d 981, 994 (7th Cir. 2000) ("The government can directly 
regulate deceptive advertising without any further justification."). 

18. Lorillard, 533 U.S. at 570 (Thomas, J., concurring). 

19. Mat 574. 

20. Mat 575-76. 

21 . Id. at 587 (Stevens, J., concurring in part and dissenting in part). 

22. Mat 590. 

23. The Supreme Court's strict analysis of advertising bans is also reflected in Thompson v. 
Western States Medical Center, 122 S. Ct. 1497 (2002). The Court ruled 5-4 that the government 
could not prohibit the advertising of compounded drugs even when the government, in return, 
exempted such drugs from FDA standard drug approval requirements. The Court conceded that 
the prohibition on wide advertising of compounded drugs where such drugs did not first undergo 
safety testing might advance the government's interest in discouraging broad use of such drugs. 
However, the new law failed to meet Central Hudson's requirement that the means be no more 
restrictive than necessary: 'if the Government could achieve its interests in a manner that does not 
restrict speech, or that restricts less speech, the Government must do so." Id. at 1 506. Again the 
Court reiterated the principle that government cannot halt the dissemination of truthful commercial 
information simply to keep members ofthe public from making bad decisions with this information. 
Id at 1507. 



1266 INDIANA LAW REVIEW [Vol. 35:1263 



zoning ordinances that apply to all products, or it must take special care that its 
restrictions are limited to advertising with special appeal to minors in especially 
problematic geographical locations, in order to meet the narrow tailoring 
requirement. 

B. Regulating to Protect Minors from Violence 

It is well established that obscene materials are unprotected by the First 
Amendment. Further, even material that does not meet the adult standard of 
obscenity may be proscribed for minors based on the potential harm such 
material might cause to the psychological or ethical development of children.^* 
On the other hand, the Supreme Court has never addressed the constitutionality 
of laws aimed at shielding minors from depictions of graphic violence, despite 
a growing body of evidence that such material is also harmful to minors. In 
American Amusement Machine Ass 'n v. Kendrick^^ the Seventh Circuit was 
called upon to address this issue in the context of an Indianapolis ordinance 
aimed at limiting children's access to video games that depict violence. 

Under an Indianapolis ordinance, establishments which feature five or more 
coin-operated arcade games containing graphic violence or strong sexual content 
were required to both segregate such games to ensure access only by adults and 
to obtain parental consent prior to allowing a minor to play such games.^^ The 
ordinance specifically targeted amusement machines that predominantly appeal 
"to minors' morbid interest in violence or minors' prurient interest in sex, [that 
are] patently offensive to prevailing standards in the adult community as a whole 
with respect to what is suitable material for persons under the age of eighteen 
(18) years," and that lack "'serious literary, artistic, political or scientific value 
as a whole for persons under' that age."^^ The portion of the ordinance aimed at 
sexually explicit material closely tracks a similar statute that was sustained by the 
Supreme Court in 1 968.^^ The plaintiffs, manufacturers of video games and their 
trade association, challenged only the "graphic violence" aspect of the ordinance, 
which targeted "an amusement machine's visual depiction or representation of 
realistic serious injury to a human or human-like being where such serious injury 
includes amputation, decapitation, dismemberment, bloodshed, mutilation, 
maiming or disfiguration [disfigurement]."^^ Violations triggered potential 



24. See Ginsberg v. New York, 390 U.S. 629, 639-43 (1968). 

25. 244 F.3d 572 (7th Cir. 200 1 ), cert, denied, \ 22 S. Ct. 462 (200 1 ). 

26. See id. at 573. 

27. Id. (quoting INDIANAPOLIS, IN, CiTY-CouNTY General Ordinance No. 72, § 831.1 
(2000)). 

28. In Ginsberg, the Court upheld a statute that forbade any representation of nudity that 
"predominantly appeal [ed] to the prurient, shameful or morbid interest of minors," that was 
"patently offensive to prevailing standards in the adult community as a whole with respect to what 
is suitable material for minors" and that was "utterly without redeeming social importance for 
minors." Ginsberg, 390 U.S. at 633. 

29. Am. Amusement Mach. Ass'n, 244 F.3d at 573 (alteration in original) (quoting 



2002] CONSTITUTIONAL LAW 1267 



suspension or revocation of the right to operate the machines as well as monetary 
penalties.^^ 

The district court upheld the Indianapolis ordinance.^' It applied a rational 
basis analysis and concluded that empirical studies by psychologists, which 
found that playing violent video games tends to make young persons more 
aggressive in their attitudes and behaviors, sufficiently justified the enactment.^^ 
Further, the district court believed that the fact that the ordinance tracked the 
conventional standard for obscenity eliminated any due process vagueness 
concerns." 

The Seventh Circuit rejected both the district court's analysis and its 
conclusion. It reasoned that the ordinance had to be subjected to strict scrutiny 
and, because it found that Indianapolis could not meet this heightened standard, 
it ordered entry of a preliminary injunction prohibiting enforcement of the law.^"* 

A core question in the case was whether the city appropriately relied on the 
analogy to obscene material. Arguably, depictions of violence may be even more 
harmful to minors than sexually explicit material and, thus, if the former may be 
regulated, why not the latter? Judge Posner rejected the city's attempt "to 
squeeze the provision on violence into a familiar legal pigeonhole, that of 
obscenity. "^^ He reasoned that the U.S. Supreme Court has sustained regulation 
of obscenity not on grounds that it is harmful, but on grounds that it is 
offensive.^^ Government need not prove that obscene material is likely to affect 
anyone's conduct before the material can be proscribed, because it is sheer 
offensiveness that justifies the restriction.^^ On the other hand, because the city 
argued a link to harmful consequences as the basis for restricting violent speech, 
it was required to present some proof of a causal connection to some harm.^* 
While conceding that "protecting people from violence is at least as hallowed a 
role for government as protecting people from graphic sexual imagery," the court 
found that the city had failed to create a record demonstrating that violent video 
games led youthful players to breach the peace.^^ 

Judge Posner found the psychological studies relied on by the city 
unpersuasive because they failed to show that violent video games are any more 
harmful to the public safety than violent movies or other violent entertainment 
readily accessible to minors.'*^ He reasoned that video games are no different 



Indianapolis, FN, City-County General Ordinance, No. 72, § 831.1 (2000)). 

30. Id. 

31. See Am. Amusement Mach. Ass'n v. Cottey, 1 1 5 F. Supp. 2d 943 (S.D. Ind. 2000). 

32. Mat 964-66. 

33. Mat 978-81. 

34. Am. Amusement Mach. Ass '«, 244 F.3d at 580. 

35. Mat 574. 

36. M 

37. Mat 575. 

38. Mat 576. 

39. Mat 575. 

40. M at 578-79. 



1268 INDIANA LAW REVIEW [Vol. 35:1263 



from literature; many games have story lines and even ideologies, just as books 
and movies do.*' The facts that violent video games constitute a "tiny fraction" 
of the media violence to which American children are exposed and the characters 
in the video games are "cartoon characters" who could not be mistaken for real 
people further persuaded Judge Posner that the ordinance's curtailment of free 
expression could not be offset by any justification "'compelling' or otherwise.'"*^ 
Although access to such games was permitted when minors were accompanied 
by their parents, the court concluded that the parental accompaniment 
requirement would deter children from playinggamesand that most parents were 
simply too busy to accompany their children, even if they thought their children 
could be exposed to violent video games without suffering any harm."*^ 

The Indianapolis ordinance was addressed in the context of a preliminary 
injunction, and, thus, the court did not discuss whether a more narrowly drawn 
ordinance might survive a constitutional challenge. Judge Posner, however, 
implied that a sufficiently narrow statute must restrict itself to games that use 
actors in simulated real death and mutilation convincingly or to games that lack 
any story line and instead consist merely of "animated shooting galleries.'"** It 
can be questioned, however, whether strict scrutiny must be the analysis applied 
when government seeks to protect children. Certainly, as Judge Posner 
conceded, the Supreme Court has allowed greater government regulation where 
speech is targeted at children.*^ Further, the Court has applied a somewhat more 
deferential approach where the speech has little communicative value and 
appears to lie at the periphery of the First Amendment. For example, the Court 
has allowed much greater regulation of sexually explicit material, even where 
such material does not meet the strict legal definition of obscenity.*^ Arguably, 



41. /J. at 578. 

42. Jd at 579. 

43. Id at 578. 

44. Id at 579. 

45. For discussion of Ginsberg, SQQ supra nolQlS. 

46. In City of Erie v. Pap 's A. M. , 529 U.S. 277 (2000), a plurality held that a city's concern 
for the highly detrimental effects of lewd, immoral activities justified a ban on nudity as applied to 
nude dancing. The plurality specifically rejected the suggestion that the city had to develop a more 
specific evidentiary record of harm in order to justify its statute. Id. at 299-300. Similarly, in 
Renton v. Playtime Theaters, Inc., 475 U.S. 41 (1986), the Court upheld restrictive zoning of adult 
establishments, based on the alleged secondary effects associated with such businesses, without 
mandating that the city conduct its own new studies proving adverse secondary effects. The Court 
found that it sufficed that the studies relied on were "reasonably believed to be relevant to the 
problem'' addressed, /af. at 51-52. 

Further, in City of Los Angeles v. Alameda Books, Inc., 122 S. Ct. 1728 (2002), the Court in 
a 5-4 ruling held that a city could reasonably rely on studies correlating crime patterns with the 
concentration of adult businesses in single-use establishments to support an ordinance prohibiting 
more than one adult entertainment business in the same building. The Ninth Circuit held that the 
lack of more specific empirical data regarding multiple-use adult establishments was fatal to the 
zoning ordinance. 222 F.3d 719 (9th Cir. 2000). Relying on Renton, Justice O'Connor criticized 



2002] CONSTITUTIONAL LAW 1269 



violent video games can be said to fail within this less protected category. 

Judge Posner asserted that the ordinance could not meet even a lesser 
standard because ''[cjommon sense says that the City's claim of harm to its 
citizens from these games is ... at best wildly speculative.'"*^ He did so, 
however, only after flatly rejecting the psychological studies, because the games 
used in the studies were purportedly not similar enough to those marketed in 
game arcades in Indianapolis, and because the studies found only that the games 
triggered aggressive feelings, but not necessarily violent conduct.** Judge 
Posner's concept of "common sense" may not necessarily comport with that of 
other reasonable minds. He claims that children cannot "become well- 
functioning, independent-minded adults and responsible citizens if they are raised 
in an intellectual bubble[,]"*^ but common sense does not dictate that the 
development of minors will be impeded or that minors will be left "unequipped 
to cope with the world as we know it,"^° simply because they are denied access 
to violent video games unless accompanied by an adult. Although concerns for 
the First Amendment perhaps warrant a closer analysis than the reasonable basis 
test imposed by the district court, it is difficult to understand the notion that 



the court below for setting too high a bar on municipalities that were simply addressing the 
secondary effects of protected speech. Id. at 1736. Renton required only that the city's evidence 
*'fairly support the municipality 's rationale for its ordinance." Id. Justice O'Connor cautioned that 
cities could not rely on "shoddy data or reasoning" to enact zoning ordinances, but concluded that 
plaintiffs must cast doubt on the city's rationale by either demonstrating that its evidence does not 
support its rationale or by furnishing evidence that disputes the city's factual findings. At least at 
the summary judgment stage, plaintiffs had not produced such evidence and the city, therefore, met 
Renton's evidentiary requirement. Id. In a concurring opinion. Justice Kennedy emphasized that 
in the zoning context, cities have significant power to target the secondary effects of speech, and 
provided the purpose of the ordinance is ''to limit the negative externalities of land use," the usual 
presumption that content'based restrictions on speech are unconstitutional does not apply. Id. at 
1741; see also Blue Canary Corp. v. City of Milwaukee, 270 F.3d 1 156 (7th Cir. 2001). The 
Seventh Circuit held the city's denial of a permit for nude dancing at a burlesque theatre in a 
residential district did not violate the First Amendment because it only barred the operation in 
proximity to a residential neighborhood, leaving abundant convenient locations within the city. 
Further, the court rejected the argument that the zoning commissioner was given too much 
discretion in administering the zoning law, reasoning that '"some degree of discretion is an 
unavoidable feature of law enforcement." Id, at 1 158. In an earlier ruling upholding the city's 
refusal to renew the plaintiffs liquor license, the court reasoned that ''[t]he impairment of First 
Amendment values is slight to the point of being risible, since the expressive activity involved in 
the kind of striptease entertainment provided in a bar has at best a modest social value." Blue 
Canary Corp. V. City of Milwaukee, 251 F.3d 1121, 11 24 (7th Cir. 2001). Although the subsequent 
request did not involve the sale of alcohol, the court still found the same minimal impairment of 
free speech. See Blue Canary Corp., 270 F.3d at 1 1 57. 

47. Am. Amusement Mach. Ass'n, 244 F.3d at 579. 

48. Id at 578-79. 

49. Id. it 577, 

50. Id 



1270 INDIANA LAW REVIEW [Vol, 35:1263 



government has a sufficiently important interest in restricting the exposure of 
juveniles to sexually explicit material, but cannot restrict their access to video 
games that depict graphic violence. Concerns of vagueness are always an issue 
in the First Amendment context but, as the district court appropriately noted, the 
Indianapolis ordinance tracks the definition for regulating sexually explicit 
material aimed at minors that has been sustained by the Supreme Court. Further, 
the definition of proscribed material is quite detailed. 

Judge Posner concluded that the ordinance was overly broad because it was 
not restricted to games using more realistic actors and more realistic depictions 
of death and mutilation, or games lacking any story lines.^' Further, he 
contended that the ordinance was under-inclusive because it was aimed only at 
video games and not at violent movies and television." Concerns of over and 
under-inclusiveness are a well established aspect of strict scrutiny analysis; 
however, the Supreme Court has been less apt to apply this stringent analysis 
vv^hen the speech is targeted only at minors and has limited First Amendment 
value, and the state is exercising its power to protect minors.^^ Further, his 
analogy to violent movies and television is inapt. Unlike television, it is feasible 
for a city to restrict access to violent video games without affecting adult 
access,^"^ and movies already have a rating system that denies minors access to 
unsuitable films. The fact that parental rights are protected by allowing access 
when children are accompanied by their parents, similar to the motion picture 
industry, further supports the validity of the ordinance. Indianapolis appealed the 
ruling, but its certiorari petition was denied.^^ The issue, however, is unlikely to 
go away, as many state legislatures and municipalities have either enacted or are 
in the process of enacting similar legislation.^^ 



51. /(/. at 579-80. 

52. /^. at 578-79. 

53. See, e.g., Bellotti v. Baird, 443 U.S. 622, 633-34 (1979) (four-Justice plurality 
recognizing that the rights of minors cannot be equated with those of adults due to their peculiar 
vulnerability, their inability to make critical decisions in an informed, mature manner, and the 
importance of the parental role in child rearing). 

54. Unlike the cigarette advertising ban previously discussed, this ordinance need not 
adversely affect the rights of adults. See discussion supra Part I.A. 

55. See Kendrick v. Am. Amusement Mach. Ass'n, 122 S. Ct. 462 (2001). 

56. The Connecticut legislature passed similar legislation in May 2001, that was vetoed by 
the governor. See S.B. 1 19, 2001 Gen. Assem., Reg. Sess. (Conn. 2001). A bill targeting business 
owners who allow children to operate video games with "point and shoof' simulated firearms is 
pending in the New York Assembly. See A.9019, 224th Leg., Reg. Sess. (N.Y. 2001). Tennessee 
has recently amended its statute governing the sale, loan, or exhibition to minors of material that 
depicts sexual conduct to include "excess violence." Tenn. Code Ann. §§ 39-1 7-911, 39-17-914 
(2000). Similar legislation is pending in Oklahoma, Minnesota, Chicago and Honolulu. Indiana 
is considering enacting a similar provision. See H.R. 1649, 112 Leg., First Session (Ind. 2001) 
(referred to Senate on March 6, 200 1 ). Finally, St. Louis County, Missouri, is currently defending 
an ordinance which requires parental permission for children to buy violent or sexually explicit 
video games. See Interactive Digital v. St. Louis Co., No. OO-CV-2030, 2000 WL 826822 (E.D. 



2002] CONSTITUTIONAL LAW 1271 



The First Amendment has also posed an obstacle to Indiana lawmakers 
seeking to protect children from violence through curfew laws. In July 2000, a 
federal district court ruled that Indiana's first attempt to enact such a statute was 
unconstitutional because it interfered with the First Amendment rights of 
minors.^^ Although the statute created certain exceptions for work, school events 
and religious activities, the court found that it did not allow for other important, 
protected activities that take place after hours.^* The court reasoned that 
"without a general First Amendment activities exception, a curfew law is 
overbroad."^^ 

In response, the Indiana Legislature redrafted the law in May 2001 and 
broadened the exceptions in order to avoid intrusion on the First Amendment 
rights of minors. The new statute allows all First Amendment activity (free 
speech, the right of assembly, and freedom of religion) to be asserted as a defense 
to an arrest under the curfew statute.^*^ The Indiana Civil Liberties Union has 
challenged the new law as an even greater intrusion on First Amendment rights, 
because it requires minors to come forward and assert a defense.^' It contends 
that the possibility of arrest will deter youths from exercising their federally 
protected rights during curfew hours.^^ A district court last fall refused to enjoin 
enforcement of the statute.^^ Judge Tinder reasoned that the ICLU failed to show 
"a realistic threat" that minors would be arrested on curfew violations when they 
were exercising their First Amendment rights.^ Judge Tinder agreed that an 
exception for First Amendment activity was constitutionally mandated.^^ The 
judge, however, was not troubled by the fact that the exemption in the ordinance 
appeared as an affirmative defense, rather than as an exception, since state and 
federal law requires an arresting officer to consider the totality of circumstances, 
including the First Amendment activity defense.^ Further, he ruled that, even if 
the law burdened some First Amendment conduct, the ordinance was narrowly 



Mo. 2002). 

57. See Hodgkins v. Goldsmith, No. IP99-1 528.C-T/G, 2000 WL 892964 (S.D. Ind. July 3, 
2000). 

58. See id. 2X*9'\0. 

59. Id. at ♦IS. Subsequently, in Hodgkins v. Peterson, No. 1P00-1410-C-T/G, 2000 WL 
33 128726 (S.D. Ind. 2000), the court rejected a challenge based on the substantive due process 
rights of parents to raise and control their children without undue government interference. 
Although the court applied intermediate scrutiny, it concluded that, at the preliminary injunction 
stage, the parents had not made a clear showing that the ordinance was invalid in light of the city's 
substantial interests in protecting its youth from victimization and protecting the city from crimes 
committed by youth during curfew hours. See id. at ♦ 1 3- 1 5. 

60. 5ee IND. Code §31-37-3-3.5 (2001). 

61. Hodgkins ex rel. Hodgkins v. Peterson, 175 F. Supp. 2d 11 32 (S.D. Ind. 2001). 

62. /flf. atll45. 

63. /flf. atll67. 

64. Mat 1149. 

65. Mat 1140-44. 

66. Mat 1147. 



1272 INDIANA LAW REVIEW [Vol. 35:1263 



tailored to serve the government's interest "in providing for the safety and well- 
being of its children and combating juvenile crime."^^ 

In addition, the district court rejected the argument that the law interfered 
with the parents' right to guide the upbringing of their children, reasoning that 
"a parent's right to allow his or her minor children to be in public with parental 
permission during curfew hours" should not be viewed as a fundamental privacy 
right.^* The court applied the "intermediate scrutiny" standard of review, 
because of the significance of the parental rights at stake, but concluded that the 
curfew law was substantially related to the city's interests in "protecting its youth 
from victimization and protecting others from crimes committed by youth during 
curfew hours."^' Indeed, the court concluded that the curfew law would also 
satisfy strict scrutiny 7^ The judge's decision has been appealed to the Seventh 
Circuit. 

Several cities have enacted similar legislation, and the litigation demonstrates 
that the lower courts are divided as to both the standard of review that should 
apply to such laws and as to the core question of whether the state's interest in 
protecting juveniles from crime on the streets outweighs any potential First 
Amendment harm.^' In general, however, curfew laws that do not broadly 
exempt First Amendment activity have been disallowed, whereas ordinances that 
insulate First Amendment activity have been sustained 7^ 



67. /J. at 1150. 

68. Id. Hi 1161. 

69. /</. at 1164. 

70. See id at 1166. 

71. S'ee, e.g., Hutchinsv.Dist. of Columbia, !88F.3d531,534(D.C.Cir. 1999) (finding that 
a curfew statute with an explicit First Amendment exception does not implicate any fundamental 
rights of minors or their parents, but ordinance could be sustained even under strict scrutiny 
analysis); Schleifer v. City of Charlottesville, 159 F.3d 843, 847-49 (4th Cir. 1998) (holding that, 
because minors' rights are not co-extensive with those of adults, the appropriate standard to use is 
intermediate scrutiny, and that the city was justified in believing the curfew ordinance advanced the 
state's interest); Qutb v. Strauss, 11 F.3d 488, 492-96 (5th Cir. 1993) (holding that, because 
freedom of movement is a fundamental right under the Equal Protection Clause, strict scrutiny 
applies, but the ordinance was narrowly tailored to meet the state's compelling interest in protecting 
juveniles from crime on the streets, especially in light of the exemptions for First Amendment 
activities and traveling); cf. Nunez v. City of San Diego, 1 14 F.3d 935, 949 (9th Cir. 1997) 
(applying strict scrutiny because fundamental rights are implicated, and finding that the city could 
not show its curfew law to be narrowly tailored, because it included few exceptions for otherwise 
legitimate First Amendment activity). 

72. Note that the curfew laws upheld in Hutchins, Schleifer, and Qutb, supra note 71, all 
contained this exemption, contrary to the law struck in Nunez. The laws in Hutchins and Qutb also 
used the term "defense," but, unlike the Indianapolis ordinance, required the arresting officer to 
specifically determine that no defense existed before making an arrest. See Hutchins, 188 F.3d at 
535; g«/M 1 F.3d at 490-91. 



2002] CONSTITUTIONAL LAW 1273 



C. Regulating Access to Public Forums 

The Supreme Court this term revisited the question of how to resolve the 
conflict that occurs when religious groups seek access to government-owned 
property. In Capitol Square Review and Advisory Board v. Pinnette^ the Court 
in 1995 ruled that prohibiting the Ku Klux Klan from erecting a large Latin cross 
in the park across from the Ohio State House violated the Klan's free speech 
rights and that allowing the religious display on public property would not violate 
the Establishment Clause. The Court emphasized that government cannot 
discriminate based on the content of the speech or the identity of the speaker in 
a public forum that is open to everyone.^'* Even where government has not 
indiscriminately opened its property for public use, and thus needs not allow 
persons to engage in every type of speech, the Court has ruled that any regulation 
in a so-called "limited public forum" must be reasonable and viewpoint neutral.^^ 
In two recent cases the Supreme Court has ruled that discrimination against 
religious groups seeking the use of a limited public forum is impermissible 
viewpoint discrimination. In Lamb 's Chapel v. Center Moriches Union Free 
School District^^ the Court held that a school district violated the First 
Amendment by precluding a group from presenting films at the school after 
school hours based solely on the religious perspective of the films. Similarly, in 
Rosenberger v. Rector & Visitors of University of Virginia^'' the Court held that 
the university violated the First Amendment by refusing to fund a student 
publication solely because it addressed issues from a religious perspective. 

Despite these earlier rulings, the Milford Central School District denied the 
request of the Good News Club, a private Christian organization for children 
ages six to twelve, to hold weekly after-school meetings in the school cafeteria. 
Because there are some 4600 local clubs and approximately 500 of these meet on 
public school property, the Court's ruling in Good News Club v. Milford Central 
Schoor^ is significant. The Good News Clubs are sponsored by a national 
organization called Child Evangelism Fellowship, which states that its mission 
is to evangelize boys and girls with the gospel of the Lord Jesus Christ. The 
Milford Central School District adopted a community use policy allowing 
residents to use the school for "social, civic, and recreational meetings and 
entertainment events, and other uses pertaining to the welfare of the community," 



73. 515 U.S. 753(1995). 

74. IdaXieX. 

75. See, e.g.. Lamb's Chapel v. Center Moriches Union Free Sch. Dist., 508 U.S. 384, 392-93 
(1993); Cornelius V.N AACP Legal Def. and Educ. Fund, Inc., 473 U.S. 788, 806(1985). Note that 
the requirements of reasonableness and viewpoint neutrality apply even to the regulation of speech 
in non-public forums, i.e., government property that has not been opened for First Amendment 
activity. 

76. 508 U.S. 384 (1993). 

77. 515 U.S. 819 (1995). 

78. 533 U.S. 98 (2001). 



1274 INDIANA LAW REVIEW [Vol. 35:1263 



but it prohibited uses that involved religious worship.^' The school determined 
that the activities of the Good News Club were the equivalent of religious 
instruction and worship.*'^ The district court and the Second Circuit had both 
ruled that the school could deny the club access without engaging in 
unconstitutional viewpoint discrimination because the school had never allowed 
other groups to provide religious instruction and because the meetings here were 
"quintessential ly religious," and thus fell outside the bounds of pure moral and 
character development from a religious perspective.^' 

The Supreme Court, in a 6-3 opinion, rejected the analysis of the lower 
courts. First, the Court assumed that the school was a limited public forum and 
thus was not required to "allow persons to engage in every type of speech."*^ 
The school could reserve use of its property for certain groups or certain topics 
provided, however, that it did not discriminate on the basis of viewpoint and that 
the restrictions were reasonable in light of the purpose of the forum. ^^ The Court 
then concluded that the exclusion of the Good News Club was impermissible 
viewpoint discrimination.^"* Affirming its earlier holdings, the Court stated that 
"speech discussing otherwise permissible subjects cannot be excluded from a 
limited public forum on the ground that the subject is discussed from a religious 
viewpoint."*^ Justice Thomas reasoned that, like other permitted users such as 
the Boy Scouts and the 4-H Club, the Good News Club was engaged in teaching 
morals and character, but was excluded simply because its viewpoint was 
religious: "we can see no logical difference in kind between the invocation of 
Christianity by the Club and the invocation of teamwork, loyalty, or patriotism 
by other associations to provide a foundation for their lessons."*^ The Court 
expressly disagreed with the idea that something that is "quintessentially 
religious" cannot also be characterized as the teaching of morals and character 
development from a particular viewpoint.*^ 

Assuming the existence of viewpoint discrimination, Milford nonetheless 
argued that its interest in not violating the Establishment Clause outweighed the 
club's interest in gaining equal access to the school's facility.** The Supreme 
Court in recent years has failed to agree on how to analyze Establishment Clause 



79. /c/. at 102. 

80. Id. 

81. Id. zi99. 

82. Mat 106. 

83. Id 

84. Mat 107. 

85. Mat 112. 

86. Matin. 

87. Id See also DeBoer v. Village of Oak Park, 267 F.3d 558, 568 (7th Cir. 2001 ) (holding 
that the village engaged in impermissible viewpoint discrimination by refusing to allow use of the 
village hall for residents participating in a National Day of Prayer; the village's belief that prayer 
and singing hymns could not be viewed as a civic activity violated the speech rights of those who 
use these forms of expression to convey their viewpoint on matters relating to government). 

88. GootyyVew5C/M6, 533U.S. atll3. 



2002] CONSTITUTIONAL LAW 1275 



claims. While some Justices contend that the clause is violated only where the 
government exercises coercive pressure or discriminates among religious 
organizations,^^ others, led by Justice O'Connor, assert that the appropriate 
inquiry is w^hether the government has endorsed or demonstrated affirmative 
approval of religion.^ In rejecting the school's Establishment Clause defense, 
Justice Thomas invoked both of these "tests," while also emphasizing a neutrality 
or equal access principle that he would have the Court adopt.^' 

Justice Thomas focused on the facts that "the Club's meetings were held 
after school hours, not sponsored by the school, and open to any student who 
obtained parental consent."^^ He then reasoned that allowing the club to use the 
facilities would ensure, rather than threaten, neutrality toward religion.^^ As to 
the coercion argument. Justice Thomas observed that, because the children could 
not attend without their parents' permission, there could not be coercion to 
engage in the club's religious activities.^'* Finally, as to the endorsement test, 
Justice Thomas reasoned that, even if elementary school children are more 
impressionable than adults, the danger of children misperceiving the endorsement 
of religion was no greater than the danger of their perceiving a hostility toward 
religious viewpoints were the club excluded from the school.^^ 

Justice Scalia would paint with a broader brush; he asserted that there is no 
Establishment Clause issue where the speech is purely private and occurs in a 
public forum open to all on equal terms.^^ In sharp contrast. Justice Stevens, in 
dissent, argued that government is permitted to distinguish between religious 
speech that is simply about a particular topic from a religious point of view and 
religious speech that amounts to worship or proselytizing.^^ Justice Stevens 
concluded that a school district should be permitted to allow the first type of 
religious speech while disallowing the second.^* Similarly, Justice Souter, joined 
by Justice Ginsberg, stated that it was clear that the Good News Club intended 
to use public school premises "for an evangelical service of worship calling 
children to commit themselves in an act of Christian conversion."^ Justice 
Souter's dissent also emphasized that only four outside groups met at the school 
and that the Good News Club was the only one whose instruction followed 
immediately on conclusion of the school day, thus raising a concern of 
endorsement.'^ 



89. Lee v. Weisman, 505 U.S. 577 (1992) (opinion written by Justice Kennedy). 

90. Wallace v. JafFree, 472 U.S. 38, 75-76 (1985) (O'Connor, J., concurring). 

91. Goo^A^ew^C/M6,533U.S. atll4. 

92. Matin. 

93. Mat 113-14. 

94. Mat 115. 

95. Mat 117-18. 

96. Id. at 120-21 (Scalia, J., concurring). 

97. M at 130 (Stevens, J., dissenting). 

98. Id. at 130-31 (Stevens, J., dissenting). 

99. Id. at 138 (Souter, J., dissenting). 
100. Id. at 144 (Souter, J., dissenting). 



1276 INDIANA LAW REVIEW [Vol. 35:1263 



Good News Club is significant for several reasons. First, it establishes that 
government aid to even "pervasively sectarian" or religious practices will not 
inevitably be impermissible; rather, neutrality and equal access appear to be the 
watchw^ords of this Court. Second, the majority noted that it "would not find an 
Establishment Clause violation simply because only groups presenting a religious 
viewpoint have opted to take advantage of the [benefit] at a particular time."^°' 
Both of these determinations may be critical in assessing the validity of school 
vouchers, an issue currently pending before the Supreme Court. '^^ Third, the 
decision extends the equal access principle to include use of facilities where 
young children are involved, despite the argument that they may erroneously 
assume that everything that occurs in a school is done under the auspices of 
school authority. 

Justice Thomas emphasized that the club reached students only after school 
hours, with parental permission, and in the context of sharing facilities with other 
groups, such as 4-H Clubs and the Scouts. '^^ Further, Justice Thomas found no 
evidence in the record that children misperceived the club's activities as school 
sponsored and stated that such a belief was unlikely because meetings were held 
not in classrooms but in a special education room, public school teachers did not 
participate as instructors, and children in the club were not of the same age as in 
the normal classroom setting. '^'^ Although these factors leave open the possibility 
that "endorsemenf could pose a problem in a different context and that more 
than "neutrality" may be required on the part of government, it is significant to 
note that five Justices were willing to assess this question in the context of a 
summary judgment motion. Justice Breyer parted company with the majority, 
opining that the majority assumed facts not in evidence and that the endorsement 
question should have been remanded for a fuller factual development. '°^ 

This same clash between First Amendment values and the Establishment 
Clause arose in a somewhat unique context at Indiana University-Purdue 
University Ft. Wayne, when the University gave its permission for use of its 
studio theater for a student-directed play, titled Corpus Christi. In Linnemeier 
V. Indiana University-Purdue University Ft. Wayne ^^^ the plaintiffs sought to 
enjoin the production, contending that the play constituted an "undisguised attack 
on Christianity and the founder of Christianity, Jesus Christ," and that allowing 
this production violated the Establishment Clause. '°^ In response, the university 
argued that the studio theater was a limited public forum and that denying access 



101. Mat 119. 

102. See Simmons-Harris v. Zelman, 234 F.3d 945 (6th Cir. 2000), cert, granted, 122 S. Ct. 
23 (2001). 

103. Gooc/A^ew^C/M^ 533 U.S. at 136. 

104. /^. at 118. 

105. Id. at 128-29 (Breyer, J., concurring in part). 

106. 155 F. Supp. 2d 1034 (N.D. Ind. 2001), motion for stay denied, 260 F.3d 757 (7th Cir. 
2001). 

107. /rf. at 1035-36. 



2002] CONSTITUTIONAL LAW 1277 



would be viewpoint discrimination in violation of the First Amendment. '°* 

In denying the plaintiffs' motion for a preliminary injunction, Judge Lee 
agreed with the university that exclusion of this play would constitute 
impermissible viewpoint discrimination.'^' Further, he rejected the plaintiffs' 
argument that performance of the play would send a message of government 
endorsement. "° Judge Lee cautioned that courts must distinguish between the 
government's permitting speech and endorsing speech.'" The endorsement 
argument was weakened by a disclaimer in the playbill, which read "[t]his play 
was selected for its artistic and academic value. The selection and performance 
of the play do not constitute an endorsement by Indiana University Purdue 
University Fort Wayne or Purdue University of the viewpoints conveyed by the 
play.""^ The court distinguished recent cases involving display of the Ten 
Commandments, where an Establishment Clause violation was found, by 
emphasizing that this was a university setting, "a place citizens traditionally 
identify with creative inquiry, provocative discourse, and intellectual growth.""^ 



II. First Amendment Religion Cases 

A. Government Display of Religious Symbols 

As discussed in the previous section, the key Supreme Court decision last 
term addressing the Establishment Clause arose in the context of a school 
district's denying access to its facilities based on a concern that allowing 
religious worship to occur on school premises would violate the Establishment 
Clause. In Good News Club the Supreme Court rejected the notion that allowing 
access to religious groups, in the context of a limited public forum open to a 
variety of groups and subject matters, would send a message of government 
endorsement of religion."^ Where, however, it is government itself that is 
sponsoring the religious observance or display, arguably a more difficult 
Establishment Clause question is raised. Two recent Indiana cases address this 
question in the context of the government's display of the Ten Commandments. 

The Seventh Circuit, in Books v. City ofElkhart,^^^ ruled that displaying the 
Ten Commandments near the entrance of the city hall in Elkhart violated the 
Establishment Clause because it had both the purpose and the effect of 
impermissibly endorsing religion. In finding a religious purpose, the court relied 
on the dedication ceremony in 1958, wherein religious leaders urged the people 



108. Mat 1037 n.5. 

109. /flf. atl041. 
no. Mat 1041-42. 
HI. Mat 1042-43. 

112. Mat 1043. 

1 1 3. M. at 1042. The Ten Commandments cases are discussed infra. Part II. A. 

1 14. Supra notes 78-105 and accompanying text. 

115. 235 F.3d 292 (7th Cir. 2000), cert, denied, 532 U.S. 1058 (2001). 



1278 INDIANA LAW REVIEW [Vol. 35:1263 



of Elkhart to embrace the religious code of conduct taught in the Ten 
Commandments."^ As to the effect prong of the analysis, Judge Ripple 
expressed his view that displaying religious symbols at the seat of government 
must be subjected to particularly careful scrutiny, especially where the symbol 
represents a permanent fixture, rather than a mere seasonal display.''^ 

The appellate court's decision was appealed to the U.S. Supreme Court, but 
the certiorari petition was denied.'** The denial, however, triggered comments 
by three Supreme Court Justices who vehemently criticized the Seventh Circuit's 
analysis of the Ten Commandments issue. Chief Justice Rehnquist, joined by 
Justices Scalia and Thomas, argued that the Court should have taken the case "to 
decide whether a monument which has stood for more than 40 years, and has at 
least as much civic significance as it does religious, must be physically removed 
from its place in front of the city's Municipal Building."''^ In response. Justice 
Stevens wrote that the graphic emphasis of the words "THE TEN 
COMMANDMENTS— I AM the LORD thy God," which appear at the top of the 
monument and "in significantly larger font than the remainder," is "rather hard 
to square with the proposition that the monument expresses no particular 
religious preference."'^^ 

At the same time that Books was making its way through the courts, the 
Indiana General Assembly adopted a statute, which authorized the display of the 
Ten Commandments on real property owned by the state or a political 
subdivision as part of an exhibit displaying "other documents of historical 
significance that have formed and influenced the United States legal or 
governmental system."'^' The law took effect on July 1 , 2000, and the Governor 
of Indiana immediately announced his intent to erect a seven-foot limestone 
monument of the Ten Commandments, which was to be donated to the state, on 
the state house lawn. In compliance with the state statute, the monument was 
designed as a four-sided structure, displaying the Ten Commandments, the 
Federal Bill of Rights, and the Preamble of the 1851 Indiana Constitution. 
Although the state argued that the display was intended to serve only as a 
reminder of the nation's core values and ideals, the district court enjoined the 
Governor from moving forward with his plans, finding that the state was unable 
to cite any historical link between most of the Ten Commandments and "ideals 



116. Seeid.?LiZ03. 

117. /^. at 305-06. 

118. City ofElkhartv. Books, 532 U.S. 1058(2001). Note that the Seventh Circuit remanded 
with instructions that the district court should fashion a remedy that would not intrude on the 
authority of local government, while at the same time correcting the condition that offended the 
Constitution. See Books, 235 F.3d at 308-09. The Seventh Circuit also stayed the district court's 
mandate while the issue was appealed to the U.S. Supreme Court. Books v. City of Elkhart, 239 
F.3d 826, 829 (7th Cir. 2001). 

1 19. Books, 532 U.S. at 1063 (Rehnquist, C.J., dissenting). 

1 20. Id. at 1 059. Because only three Justices voted in favor of granting certiorari and the vote 
of a fourth is required, the Court skirted the issue for now. 

121. 5eelND. Code §4-20.5-21-2 (2000). 



2002] CONSTITUTIONAL LAW 1279 



animating American government." '^^ Last summer the Seventh Circuit affirmed 
this ruling. '^^ 

In Indiana Civil Liberties Union, Inc. v. O'Bannon,^^^ the Seventh Circuit 
agreed that the state's articulated purpose could not be viewed as secular, even 
if some of our secular laws parallel the Ten Commandments.'^^ Further, the fact 
that secular text would be displayed together with the Ten Commandments did 
not lead the court to find a secular purpose, because the Ten Commandments is 
an "inherently religious text."'^^ This case could not be distinguished from 
Books, where the city alleged that providing a "Code of Conduct" constituted a 
secular purpose. The court reasoned that the Ten Commandments indisputably 
addresses subjects that were beyond the scope of any government and involve 
instead the relationship of the individual and God.'^^ Further, since the display 
of the Ten Commandments would actually stand apart from the other secular 
texts, the design belied any suggestion that the texts were all presented simply to 
"remind viewers of the core values and legal ideals of our nation."'^* 

Focusing on the endorsement test, the court found that in light of the 
permanence of the exhibit as well as its content, design, and context, a reasonable 
person would believe that the display amounted to an endorsement of religion.'^' 
Factors supporting this conclusion were that the state house grounds are the seat 
of Indiana government, the limestone display would stand seven feet tall, six feet, 
seven inches wide, and four feet, seven inches deep, and the limestone blocks are 
tablet-shaped. These factors suggested the religious nature of the monument to 
observers even from a distance, and the lettering of the Ten Commandments 
would be larger than that of the Bill of Rights inscribed on the other side.'^° 
Since the secular text would appear on different sides of the monument, 
observers would be inhibited from visually connecting the texts, and nothing else 
in the context of the monument or the surrounding grounds mitigated the 
religious message conveyed.'^' Further, an observer who viewed the entire 
monument might reasonably believe that it impermissibly links religion and law 
since the Bill of Rights and the 1 85 1 preamble are located so close to the sacred 
text, thus sending a message of endorsement. '^^ 

The ruling in O'Bannon was not surprising in light oi Books. On the other 
hand, the U.S. Supreme Court has taken a contextual, highly fact-specific 



1 22. Ind. Civil Liberties Union, Inc. v. O'Bannon, HOP. Supp. 2d 842, 85 1 (S.D. Ind. 2000), 
affd, 259 F.3d 766 (7th Cir. 2001 ), cert, denied by 1 22 S. Ct. 1 1 73 (2002). 

123. Ind. Civil Liberties Union, Inc. v. O'Bannon, 259 F.3d 766 (7th Cir. 2001). 

124. Id 

125. Id mm. 

126. Id. 

127. Id 

128. Id at 17 \ '72. 

129. /^. at 772-73. 

130. Id 

131. Id at 773. 

132. Id 



1280 INDIANA LAW REVIEW [Vol. 35:1263 



approach in assessing Establishment Clause cases and in determining whether a 
reasonable person would see a particular government display of religion as an 
endorsement. Since the central theme in Books was that the Ten Commandments 
is a religious document, it was apparent that the State of Indiana in O'Bannon 
carried a heavy burden in demonstrating that the religiosity had been overcome. 
In essence, the location of the monument at the seat of all branches of state 
government made this display more problematic than that in Books. Nonetheless, 
Judge Coffey argued in dissent that the monument would serve "as a well- 
deserved recognition of our country's legal, historical, and religious roots."'" 
Judge Coffey emphasized that any endorsement was muted by the fact that the 
monument appeared on the state house lawn with at least twelve other secular 
monuments recognizing historic figures, such as Christopher Columbus, George 
Washington, former Indiana governors, and significant historic events, including 
the Civil War.''' 

Although only three justices appear ready to address this issue, it is unlikely 
to go away. The Elkhart display was one of hundreds donated by the Fraternal 
Order of the Eagles (FOE) in the 1950s."^ The planned display in O'Bannon 
was intended to replace a similar FOE display that was on the state house 
grounds in Indianapolis until its destruction by vandals in 1991, and a similar 
display triggered litigation in Lawrence County.''^ 

B. Government Entanglement with Religion 

In addition to the cases involving display of the Ten Commandments, Indiana 
courts tackled Establishment Clause issues in two other contexts. In Moore v. 
Metropolitan School District of Perry Township, '" a district court judge enjoined 
Perry Township from continuing its religious education program, which allowed 
students in grades four and five to leave school for approximately thirty minutes 
per week to attend religious instruction. Students who chose not to attend 
remained at school with a teacher, and they were not permitted to do school work, 
purportedly because parents who sent their children for religious instruction 
expressed concern that their children might fall behind in their studies.'^* The 



133. Id at 781 (Coffey, J., dissenting). 

134. /</. at 778-79. 

135. See Ind. Civil Liberties Union v. O'Bannon, 1 10 F. Supp. 2d 842, 844 (S.D. Ind. 2000). 

136. Kimberly v. Lawrence County, 119 F. Supp. 2d 856, 873 (S.D. Ind. 2000). See also 
ACLU of Ky. v. McCreary County, 145 F. Supp. 2d 845 (E.D. Ky. 2001) (ordering immediate 
removal of Ten Commandments from display entitled "The Foundations of American Law and 
Government Display," which included Magna Carta, Declaration of Independence, the Bill of 
Rights to the U.S. Constitution, Star Spangled Banner, Mayflower Compact of 1620, National 
Motto and Preemible to Kentucky Constitution; reasoning that use of Ten Commandments was 
permissible only in displays that demonstrate respect for law givers, and this display did not 
qualify). 

137. 2000 WL 243292 (S.D. Ind. 2001). 

138. /f/. at*5. 



2002] CONSTITUTIONAL LAW 1281 



court held that this restriction was motivated by a desire to encourage 
participation in the religious program, and thus violated the first prong of the 
Lemon test,'^^ which mandates that any government program have a secular 
purpose J"*® In addition, the court determined that a reasonable person would 
perceive the township's insistence on the silent reading program as an 
endorsement of religion, in violation of the second prong of the Lemon test."'* 
At least at the preliminary injunction stage, the evidence suggested some 
likelihood of success on the merits.''*^ 

The court also ruled that the township's practice of allowing the religious 
program to take place in trailers on school property and then paying the electric 
bills for at least some of the trailers violated both the Establishment Clause as 
well as Indiana law, which specifically prohibits the expenditure of public funds 
for religious instruction.*^^ Although the township agreed to move the trailers off 
school property by March 1, 2001, the court enjoined the practice for the 
remaining one month period."*"* 

In the second case, Brazauskas v. Ft. Wayne-South Bend Diocese, Inc.,^^^ the 
Indiana Court of Appeals ruled that the First Amendment barred a former diocese 
employee from bringing suit against the diocese and parish priest for various 
claims, including blacklisting and tortious interference with a business 
relationship. The court relied upon well-established law that prohibits the 
judiciary from resolving doctrinal disputes or determining whether a religious 
organization acted in accordance with its canons and bylaws. '"^^ The court 
recognized that it may apply neutral principles of law to churches without 
violating the First Amendment, but in this case it would be required to actually 
interpret Catholic precepts and procedures to determine whether the tortious 
behavior was undertaken in compliance with religious teaching.'"*^ The 
defendants argued that religious doctrine commands that church officials remain 
"in close communion"'^* with one another, and that the conduct of church 
officials in urging Notre Dame not to hire the plaintiff had "an ostensibly 
ecclesiastical basis," which is not subject to judicial review.*"*^ The court 
reasoned that since the defendants presented ostensibly ecclesiastical 
justifications for their actions, it lacked subject matter jurisdiction over the 
claims. '^° The Indiana Supreme Court has granted transfer and vacated the 



139. 


Lemon v. Kurtzman, 403 U.S. 602 (1971). 


140. 


Moore, 2000 WL 243282 at ♦S. 


141. 


Id. 


142. 


Id. 


143. 


Id at M. 


144. 


Id 


145. 


755 N.E.2d 201, 208 (Ind. Ct. App. 2001). 


146. 


Mat 205. 


147. 


Id 


148. 


Id alios. 


149. 


Id 


150. 


Id 



1282 INDIANA LAW REVIEW [Vol. 35:1263 



decisionJ^' 



C The Free Exercise of Religion 



The previous discussion suggests that the Supreme Court has moved toward 
a more "accommodation ist" approach regarding claims brought under the 
Establishment Clause. A majority of the Justices would allow greater interaction 
between church and state, allowing, for example, religious groups access to 
government forums. ^^^ On the other hand, the Court has exhibited a much more 
restrictive approach when the group seeking accommodation is a minority faith 
bringing claims under the Free Exercise Clause. Purportedly, this dichotomy is 
reconciled by the theory of neutrality. Where government allows religious 
groups to use its facility in conjunction with other speakers, it has simply adopted 
a neutral stance towards religion. In Employment Division, Department of 
Human Resources v. Smith,^^^ the Supreme Court, in 1990, held that when 
government enforced neutral laws of general applicability, it was adhering to the 
same position of neutrality — even where such laws significantly infringed upon 
the free exercise rights of minority faiths. In Smith, the Supreme Court ruled that 
facially neutral laws are constitutional provided government has a rational basis. 
Government need not meet the strict scrutiny standard applied to laws that 
intentionally burden fundamental rights or even the intermediate scrutiny test 
applied in the free speech context with regard to government statutes not 
intended to burden freedom of expression, but which have this effect.'^* 



151. 2002 Ind. LEXIS 350 (Ind. May 3, 2002). 

1 52. See supra notes 78-95 and accompanying text. The government aid issue will be revisited 
by the Supreme Court this Term. Simmons-Harris v. Zelman, 234 F.3d 945 (6th Cir. 2000), cert, 
granted 122 S. Ct. 23 (2001). The Sixth Circuit struck down Ohio's school voucher program 
primarily because the program provided no means of guaranteeing that the state aid, derived from 
public funds, would be used for exclusively secular purposes. In addition, no public schools chose 
to participate in the program, and the overwhelming majority of private school participants were 
sectarian. 

153. 494 U.S. 872(1990). 

1 54. See, e.g. , Hill v. Colo., 530 U. S. 703, 7 1 9 (2000) (holding that where a statute is a content 
neutral restriction on speech the government must show a substantial interest and narrowly tailored 
means, rather than the compelling interest and no less speech restrictive alternatives standard 
imposed where government is regulating in order to suppress a particular message or a particular 
speaker). But see Cosby v. State, 738 N.E.2d 709 (Ind. Ct. App. 2000) (rejecting a free exercise 
claim where the accused was charged with driving without a license on his way to church); United 
States V. Indianapolis Baptist Temple, 224 F.3d 627 (7th Cir. 2000), cert, denied, 531 U.S. 1112 
(200 1 ) (rejecting a religious-based claim brought by the Indianapolis Baptist Temple that it should 
not have to file federal employment tax returns or pay federal employment taxes). The court in 
Cosby determined that this was a neutral law of general applicability, enacted for reasons of public 
safety rather than for the purpose of restraining persons from traveling to their place of worship, and 
thus the rational basis standard applied and was met. Cosby, 738 N.E.2d at 71 1-12. Relying on 
Smith, the court in Indianapolis Baptist Temple concluded that tax laws are neutral laws of general 



2002] CONSTITUTIONAL LAW 1283 



In adopting the rational basis analysis in Smithy Justice Scalia distinguished 
earlier free exercise cases that utilized a strict scrutiny approach by contending 
that in those cases other "constitutional protections" were asserted in 
conjunction with the free exercise claim. '^^ For example, cases brought by 
Jehovah's Witnesses challenging licensing systems or taxes on the dissemination 
of religious ideas also raised free speech questions. '^^ Similarly, a case 
invalidating compulsory school-attendance laws as applied to Amish parents who 
refused on religious grounds to send their children to school also raised the right 
of parents to direct the upbringing of their children. '^^ This so-called hybrid 
claim exception to Smith was addressed by the Indiana Supreme Court in the case 
of City Chapel Evangelical Free, Inc. v. City of South Bend P^ 

City Chapel filed suit against South Bend after it instituted condemnation 
proceedings to acquire the church's property for redevelopment. The City of 
South Bend argued that the condemnation proceedings represented a "permissible 
use of religious-neutral laws of general applicability,"'^^ and thus under Smith it 
was not required to demonstrate a compelling government interest. City Chapel 
contended that its claim was based on the Free Exercise Clause in conjunction 
with the right to freedom of association, and thus it fell within the hybrid 
exception to Smith}^ South Bend's taking of its church building was therefore 
governed by the compelling interest test.'^' Although several courts have 
recognized this hybrid exception, '^^ others have rejected it outright pending 
further clarification by the Supreme Court, '^^ or have rejected it where the 
companion claim did not involve a fundamental right. '^ South Bend relied on 
a Third Circuit decision that held that freedom of association to worship was 



application that did not run afoul of the Free Exercise Clause even if they burden religious 
practices. Last fall, Judge Barker issued an order for the church to surrender its property to satisfy 
this judgment, and the Seventh Circuit refused to intervene. United States v. Indianapolis Baptist 
Temple, 2000 WL 1449856 (S.D. Ind. 2000). 

155. 5m///z, 494U.S. at881. 

156. /^. (citing Murdock V.Pennsylvania, 3 19 U.S. 105(1943)). 

157. See id. 

1 58. 744 N.E.2d 443, 45 1 (Ind. 2001 ). 

159. Id. 

160. Id 

161. Id. 

162. See, e.g., Swanson v. Guthrie Indep. Sch. Dist. No. I-L, 135 F.3d 694 (10th Cir. 1998) 
(recognizing hybrid claim where free exercise and parental rights were asserted, but concluding that 
claim failed because parental right to direct school criteria did not present a colorable claim); 
Brown v. Hot, Sexy & Safer Prod., Inc., 68 F.3d 525 (1st Cir. 1995) (recognizing hybrid claim 
where free exercise rights were asserted in conjunction with the parental right to direct upbringing 
of children). 

1 63. See, e.g. , Kissinger v. Bd. of Trs., 5 F.3d 1 77, 1 80 (6th Cir. 1 993) (declining to recognize 
hybrid claim exception until clarified by Supreme Court). 

164. See, e.g.. Miller v. Reed, 176 F.3d 1202 (9th Cir. 1999) (recognizing hybrid claim, but 
holding that companion claim must be a violation of a fundamental right). 



1284 INDIANA LAW REVIEW [Vol. 35:1263 



merely a derivative right of the free exercise of religion and not a separate right 
that can be used to trigger the hybrid exception.'" Chief Justice Shepard and 
Justice Boehm agreed with the Third Circuit approach, while Justice Rucker and 
Justice Dickson agreed with City Chapel that it qualified for the hybrid claim 
exception. Justice Sullivan broke the tie by siding with the City of South Bend, 
but not on grounds of the hybrid exception, which he did not address. 

Justice Dickson carefully traced the language in Smith, which specifically 
envisioned a hybrid case where freedom of association grounds would reinforce 
the Free Exercise Clause claim. More specifically. Smith referred to an earlier 
case that cited freedom to worship as an example of the right of expressive 
association.'^^ Justice Dickson, joined by Justice Rucker, concluded that there 
was no basis in Smith for disqualifying hybrid exception claims where freedom 
of expressive association was linked to religious expression. '^^ 

Chief Justice Shepard, joined by Justice Boehm, agreed instead with the 
Third Circuit that "assembling for purposes of worship is a derivative of free 
exercise of religion," and thus City Chapel was not entitled to a higher level of 
First Amendment protection. '^^ 

Justice Sullivan failed to break the 2-2 split on the issue. He reasoned that 
City Chapel only asked that a hearing be conducted wherein it could raise its 
First Amendment claims, but then it failed to provide a basis for a hearing under 
any body of law, federal or state.'^^ Justice Sullivan argued that there was no 
reason to address free exercise rights if City Chapel was not entitled to a 
hearing. '^^ Further, any arguments City Chapel would make at this hearing had 
already been raised during oral argument on the original motion for an 
evidentiary hearing.'^' Justice Sullivan could see no point in granting an 
additional hearing.'^^ Unfortunately, Justice Sullivan's opinion leaves litigants 
in the dark as to whether hybrid claims will be recognized by Indiana courts. At 
minimum, the debate among the justices demonstrates the need to characterize 
a free association claim as a separate, additional right, rather than linking it to 
worship or religious expression. 

III. The DUE Process Clause 

Although the text of the Due Process Clause appears to ensure only 
procedural fairness, the U.S. Supreme Court has long recognized that it also 
contains a substantive component that bars arbitrary, wrongful conduct. Further, 



165. City Chapel Evangelical Free, Inc. v. City of South Bend, 744 N.E.2d 443, 453 (Ind. 
2001) (citing Salvation Army v. Dep't of Cmty. Affairs, 919 F.2d 183 (3d Cir. 1990)). 

166. /f^. at 452. 

167. /^. at 454. 

168. Id. at 455 (Shepard, C.J., concurring in part and dissenting in part). 

169. Id. (Sullivan, J., dissenting). 

170. Id 

171. Id 

172. Mat 456. 



2002] CONSTITUTIONAL LAW 1285 



where the government interferes with a fundamental right, the Court has 
demanded that the government meet a heightened scrutiny standard. Both of 
these aspects of substantive due process were raised by Indiana litigants this last 
term. 

A. Regulation of Abortion and Pregnancy 

In Roe V. Wade,^^^ the Supreme Court characterized the woman's right to 
terminate a pregnancy as a fundamental right protected by the Due Process 
Clause from any legislation that fails to meet strict scrutiny analysis. In a 1992 
decision, however, the Court ruled that a state may regulate the abortion decision 
so long as the regulation did not impose an undue burden, which the Court 
defined as regulation having the purpose or effect of placing a substantial 
obstacle in a woman's attempt to obtain an abortion.'^* Subsequently, in 
Stenberg v. Carhart, ''^ the Supreme Court, in a controversial 5-4 decision, found 
that a Nebraska statute barring so-called partial-birth abortions imposed an undue 
burden because it lacked any exception for the preservation of a mother's health, 
and its definition of the proscribed procedure was so broad that it included the 
most frequently used second-trimester abortion method. '^^ 

Applying this analysis, the district court, in A Woman 's Choice-East Side 
Women's Clinic v. Newman,^^^ ruled that a provision in Indiana's abortion law 
that required medical personnel to provide state-mandated information about 
abortion and its alternatives "in the presence" of the pregnant woman at least 
eighteen hours before an abortion, imposed an undue burden on a woman's 
constitutional right to choose to end a pregnancy, and thus it violated the Due 
Process Clause.'^* 

The court reasoned that Indiana's "in the presence" stipulation effectively 
required two trips to an abortion clinic, thus placing a substantial obstacle in the 
path of a woman seeking abortion of a non-viable fetus.'^^ The Seventh Circuit 
earlier upheld a Wisconsin statute that forced abortion patients to make two trips 
to a clinic,'^^ and a similar Pennsylvania statute was upheld by the U.S. Supreme 
Court in 1992.'" Nonetheless, the district court noted that both the Seventh 
Circuit and the Supreme Court decisions left open the possibility that additional 



173. 410 U.S. 113, 164-65(1973). 

174. PlannedParenthoodofS.E. Pa. V.Casey, 505 U.S. 833,878(1992). 

175. 530 U.S. 914 (2000). 

176. Id at 930. See also Hope Clinic v. Ryan, 249 F.3d 603 (7th Cir. 2001) (holding that 
partial-birth abortion statutes in Illinois and Wisconsin were unconstitutional in light of the 
Stenberg opinion). 

177. 132F.Supp. 2d 1150 (S.D.lnd. 2001). 

178. /^. at 1181. 

179. Id at 1151. This requirement mandated that medical personnel provide advanced 
information eighteen hours before an abortion in the presence of the pregnant woman. Id. 

1 80. See Karlin v. Foust, 1 88 F.3d 446 (7th Cir. 1999). 

181. Planned Parenthood of S.E. Pa. v. Casey, 505 U.S. 833 (1992). 



1286 INDIANA LAW REVIEW [Vol. 35:1263 



empirical evidence establishing an undue burden could alter this result. Relying 
on Casey, the court stated that the critical inquiry was whether the abortion 
regulation would "operate to place a 'substantial obstacle' in the path of a large 
fraction' of the women for whom the law operates as a restriction.'"*^ The court 
then critically examined the new empirical data — 2l study that demonstrated that 
abortion rates in Mississippi declined between ten and thirteen percent after the 
two-trip law took effect, and data that the two-trip law caused a thirty-seven 
percent increase in the number of Mississippi residents who went to other states 
to obtain abortions. Statistics from Utah, which adopted a similar restriction, 
showed a 9.3% decline in the abortion rate and a thirty-three percent decrease in 
non-residents coming to the state to obtain abortions. Based in part on this data, 
which was part of a study published in the Journal of the American Medical 
Association, the court concluded that Indiana's requirement was likely to prevent 
abortions for approximately ten to thirteen percent of Indiana women who would 
otherwise chose to terminate a pregnancy.'*^ 

The U.S. Supreme Court has distinguished abortion regulation likely to have 
a "persuasive effect" on the abortion decision, which is permissible, from 
regulation likely to impose an undue burden.'** The district court nonetheless 
concluded that there was no evidence that requiring this state-mandated 
information in advance actually persuaded women to choose childbirth over 
abortion. ^*^ Further, the court was skeptical of the state's proffered purpose for 
the provision, namely to guard against telephonic impersonation of healthcare 
professionals.^*^ The case is currently on appeal to the Seventh Circuit. It is 
noteworthy that the court reached its conclusion only after a lengthy hearing 
where the state presented experts who challenged the credibility of the plaintiffs' 
statistician. Arguably, the appellate court should defer to the trial court's 
weighing of the credibility of the experts in the case and affirm its ruling. 

In a case of first impression, the Indiana Court of Appeals considered the 
right to procreate in the context of a trial court ordering a woman not to become 
pregnant as a condition of probation. In Trammell v. State,^^^ the defendant was 
charged with neglecting her infant son, who died of emaciation and malnutrition. 
She was found guilty but mentally ill due to her mental retardation, and she was 
sentenced to eighteen years in prison, eight of which would be served on 



182. A Woman 's Choice — East Side Women 's Clinic, 132 F. Supp. at 1 1 59. 

1 83. Id. Although the statistician who appeared before the district court judge was the same 
person whose statistical flaws were highlighted in the earlier Seventh Circuit ruling, the data was 
revised and the new study was published in ih^ Journal of the American Medical Association. See 
id. at 1 160-75. The new data convinced Judge Hamilton that women were indeed deterred by the 
Indiana law. Id. ail \15. 

1 84. Planned Parenthood, 505 U.S. 833 at 886 ("[U]nder the undue burden standard a State 
is permitted to enact persuasive measures which favor childbirth over abortion, even if those 
measures do not further a health interest."). 

1 85. A Woman 's Choice — East Side Women 's Clinic, 1 32 F. Supp. at 1 175. 

186. Mat 1179. 

187. 75IN.E.2d283,285-86(Ind. Ct.App. 2001). 



2002] CONSTITUTIONAL LAW 1287 



probation. She challenged the no pregnancy condition as an unconstitutional 
deprivation of her right to privacy.'^* 

The court acknowledged that the right to beget or bear a child has been 
recognized as "at the very heart of this cluster of constitutionally protected 
choices."'*' On the other hand, those convicted of a crime do not have the same 
rights as others. Probation conditions that impinge on constitutionally protected 
rights are permitted provided they are reasonably related to the treatment of the 
accused and the protection of the public.'^ The court must balance "(1) the 
purpose to be served by probation; (2) the extent to which constitutional rights 
enjoyed by law abiding citizens should be afforded to probationers; and (3) the 
legitimate needs of law enforcement."'^' 

Here the court found that the no pregnancy condition did not serve any 
rehabilitative purpose since it would not improve Trammell's parenting skills.''^ 
Further, the state's interest in preventing injury to unborn children would be 
better served "by alternative restrictions less subversive of appellant's 
fundamental right to procreate," namely requiring Trammel to enroll in a prenatal 
or neonatal treatment program if she becomes pregnant.''^ It is clear that in 
balancing the competing interests, the court gave significant weight to the 
privacy right at stake. Although finding that the condition served no discernible 
rehabilitative purpose, the court proceeded to hold that the condition excessively 
impinged on the privacy right of procreation because the state's goal could be 
accomplished by less restrictive means — an analysis reserved for government 
regulation that interferes with fundamental rights.'''^ 

B. Substantive Due Process as a Limitation on Punitive Damages Awards 

In the absence of a fundamental right, the Supreme Court has shown a great 
reluctance to sanction government conduct under the rather nebulous, open- 
ended notion of substantive due process. The one notable exception to this 
involves damages awarded by juries. In BMIV of North America, Inc. v. Gore,^^^ 
the Supreme Court held that a two million dollar punitive damages award was 
grossly excessive and violated substantive due process limits. The Court outlined 



188. Mat 288. 

189. /^. at 290. 

190. Id. at 288 (citing Carswell v. State, 721 N.E.2d 1255, 1258 (Ind. Ct. App. 1999)). 

191. Id. 

192. Mat 289. 

193. Id. 

194. Id Compare Doe v. City of Lafayette, 160 F. Supp. 2d 996, 1001-03 (N.D. Ind. 2001), 
where the court upheld the city's action in permanently banning a convicted sex offender from all 
city parks. The court determined that the defendant did not have a fundamental liberty interest in 
wandering through the city parks, and it refused to acknowledge intrastate travel as a fundamental 
right. Applying rational basis analysis, the court ruled that the ban was rationally related to the 
city's interest in protecting the welfare of its children from sexual predators. 

195. 517 U.S. 559,574-75(1996). 



1288 INDIANA LAW REVIEW [Vol. 35:1263 



three criteria that should be examined in determining whether a punitive damage 
award should be deemed unconstitutionally excessive: "the reprehensibility of the 
conduct, in particular, whether only economic harm is involved; the relation 
between compensatory and punitive damages; and the relation of the damages to 
other civil remedies authorized or imposed in comparable cases. '^ 

Applying this standard, the Indiana Court of Appeals rejected the 
constitutional challenge to a $1 .64 million punitive damage award in Executive 
Builders, Inc. v. Trisler.^^^ The court began its analysis by declaring that when 
a judgment was the product of fair procedures — impartial jurors were selected, 
they heard all the evidence presented by both sides, the trial court properly 
instructed them, and it upheld the punitive award after considering its 
constitutionality — ^there was a strong presumption that the award was 
constitutional.'^* The court then applied the three guideposts set forth in BMW, 
and concluded that the punitive damages award did not violate substantive due 

199 

process. 

IV. State Constitutional Law Developments 

Under the tutelage of Chief Justice Randall T. Shepard, the Indiana Supreme 
Court has re-examined the Indiana Constitution as a potential source for the 
protection of civil liberties.^^ Although the Indiana Supreme Court has made it 
clear that it is not anxious to usurp the legislative role of the General Assembly 
and has repeatedly cautioned that state statutes will be presumed constitutional, 
it has also noted that state constitutional provisions will be interpreted 
independently of their federal constitutional counterpart. The court will examine 
the text and the history regarding the state constitutional provision as well as 
early decisions interpreting the state constitution under this analysis.^^' These 
core principles are reflected in the state constitutional cases decided this term. 



196. /^. at 575, 580-81, 583-84. 

197. 741 N.E.2d 351, 359-61 (Ind. Ct. App. 2000). 

198. /^. at 360. 

199. Id. at 360-61. See also Cooper Indus, v. Leatherman Tool Group, Inc., 532 U.S. 424 
(2001) (holding that in determining whether a punitive damage award is unconstitutionally 
excessive, appellate courts should apply a de novo standard of review because a jury's award does 
not constitute a fmding of fact that is entitled to deference on appeal); In re Exxon Valdez, 270 F.3d 
1215 (9th Cir. 2001) (the punitive damages award of $5 billion in this maritime tort suit was 
disproportionate to the compensatory damages award of $287 million or to the potential criminal 
fine of $1 billion, and thus was excessive in violation of the Due Process Clause). 

200. See Randall T. Shepard, Second Wind for the Indiana Bill of Rights, 11 iND. L. REV. 575 
(1989). 

201. See, eg., Collins v. Day,644N.E.2d72,80(Ind. 1 994) (privileges and immunities clause 
of the Indiana Constitution imposes duties independent of those required by the Fourteenth 
Amendment to the U.S. Constitution). 



2002] CONSTITUTIONAL LAW 1289 

A. Religion Clauses 

Unlike the Federal Constitution, which includes only the Establishment and 
Free Exercise Clauses, the Indiana Constitution guarantees religious liberty 
through seven distinct and separate provisions. Article I, section 2 insures that 
"[a]ll people shall be secured in the natural right to worship ALMIGHTY GOD, 
according to the dictates of their own consciences."^^^ Article I, section 3 bars 
any law that might "control the free exercise" of religion, and also prohibits 
enactments that "interfere with rights of conscience" or the "enjoyment of 
religious opinions."^^^ Article I, section 4 reads that, "No preference shall be 
given, by law, to any creed, religious society, or mode of worship; and no person 
shall be compelled to attend, erect, or support any place of worship, or to 
maintain any ministry, against his consent."^^ In City Chapel Evangelical Free, 
Inc. V. South Bend^^^ City Chapel invoked ail three of these provisions as a 
defense to a condemnation proceeding brought by the City of South Bend to take 
its building for redevelopment. 

Although the Indiana Supreme Court rejected City Chapel's federal free 
exercise claim,^°^ it ruled, 3-2, that the framers of the 1851 Indiana State 
Constitution did not simply paraphrase the language in the Bill of Rights and that 
City Chapel indeed stated a separate, viable state constitutional law claim. The 
majority relied heavily on an earlier Indiana Supreme Court decision, which 
involved the free speech provisions of the Indiana Constitution. In Price v. 
State^^^ the court held that political speech was a core value embodied in the 
Indiana Constitution and, as such, the state could not punish political speech even 
when offensive words were uttered in the context of resisting arrest. The court 
in Price reasoned that government may not impose a material burden upon a 
constitutionally protected core value.^°* 

In this case, City Chapel contended that religious liberty was a core value, 
and it asserted that the taking of its property would materially burden this value 
because it threatened to "destroy the church."^*^ It urged that South Bend be 
enjoined from taking the Chapel's building without a hearing where South Bend 
would be required to prove that the need to exercise the police power of eminent 
domain outweighed the restrictions imposed on Chapel's fundamental rights.^'° 
Relying on Price, the court determined that the key question was whether the 
condemnation proceedings would amount to a material burden upon a core 



202. IND. Const, art. 1, § 2. 

203. iND. Const, art. I, §3. 

204. IND.CONST. art. l,§4. 

205. 744N.E.2d443(In(i. 2001). 

206. See supra TiOiQs\5%'69. 

207. 622 N.E.2d 954, 962-63 (Ind. 1993). 

208. Id. at 960. See also City Chapel Evangelical Free, Inc. v. South Bend, 744 N.E.2d 443, 
446-47 (Ind. 2001) (discussing the material burden analysis). 

209. a<v CAa;?^/, 744 N.E.2d at 445. 

210. Id. 



1290 INDIANA LAW REVIEW [Vol. 35:1263 



value.^" The court explained that this analysis "looks only to the magnitude of 
the impairment and does not take into account the social utility of the state action 
at issue."^'^ Using the historical approach affirmed in previous cases. Justice 
Dickson rejected the city's argument that the state constitution was intended to 
guarantee only the "personal devotional aspect of religion."^'^ Instead, the court 
concluded that "[s]ections 2 and 3 advance core values that restrain government 
interference with the practice of religious worship, both in private and in 
community with other persons."^''' In short, because the City of South Bend 
sought to take property that might have materially burdened City Chapel's rights 
embodied in the core values of sections 2, 3, and 4 of article I, City Chapel was 
entitled to an opportunity to present its claim. 

On the other hand, Justice Dickson emphasized that the condemnation 
procedure would be presumed constitutional, that City Chapel must clearly 
overcome that presumption, and that all doubts would be resolved against it.^'^ 
The church would have to show that taking its building would burden its 
members' right to worship according to the dictates of conscience or their right 
to exercise religious opinions or to be free from a government preference for a 
particular religious society. Further, the effect of the taking must constitute a 
material burden, not merely a permissible qualification.^'^ Chief Justice Shepard 
and Justice Rucker concurred with this analysis of the state constitutional claim, 
thus creating a three-judge majority in favor of City Chapel. 

Justice Boehm, in dissent, agreed that the religion clauses in the Indiana 
Constitution prevent the state from imposing material burdens on the exercise of 
religious practice and that this protection included the public and group activities 
associated with religious practices.^'^ However, Justice Boehm reasoned that 
City Chapel failed to present any evidence that South Bend's exercise of its right 
of eminent domain materially burdened any religious activity. There was no 
claim that the downtown site had "an independent religious significance."^'* 
Rather, City Chapel argued only the difficulty of finding another home at an 
affordable price. This suggests that under takings law, South Bend might be 
required to pay a higher price as just compensation, but this was not a basis for 
prohibiting the city from acting: "Given the Chapel's representation that this is 
a dispute over money, not religious principle, even if the Chapel proves all it 
claims, the solution is in dollars, not injunctive relief."^'^ Justice Boehm 
concluded that since City Chapel presented no evidence that would bar the 
taking, but only evidence that might relate to establishing just compensation, it 



211. Id. at 446. 

212. /c/. at 447. 

213. Id. at 448. 

214. Id 31450. 

215. Id at 450-51. 

216. Id 

217. Id. at 456 (Boehm, J., dissenting). 

218. Id at 457. 

219. Id at 458. 



2002] CONSTITUTIONAL LAW 1291 



failed to show the necessity for a hearing.^^^ 

Justice Sullivan agreed with Justice Boehm's conclusion that City Chapel 
was not entitled to a hearing; however, he did not feel there was a need to address 
the state religion clauses at all. He reasoned thai City Chapel's entitlement to a 
hearing was an entirely separate issue from whether City Chapel's religious 
rights were violated by South Bend's exercise of its eminent domain powers.^^' 
City Chapel "failed to assert adequately a right to a hearing under any body of 
law,"^^^ but instead tried to skip to the merits of the issues it would raise at a 
hearing. Justice Sullivan's final justification for refusing the state constitutional 
issues was that City Chapel failed to show the utility of an evidentiary hearing, 
since its brief cited only to evidence already in the record, and thus Justice 
Sullivan was not willing to decide the state constitutional issues.^^^ 

City Chapel is significant in establishing a separate role for the state religion 
clauses, especially in the wake of the watered-down version of the Federal Free 
Exercise Clause in Employment Division, Department of Human Resources v. 
Smith?^^ Many litigants in other states have turned to state constitutional 
provisions to secure religious liberty.^^^ It remains to be seen, however, whether 
protection under Indiana's religion clauses will be significant, given Justice 
Dickson's caveat regarding the difficulty of meeting the material burden 
standard. Justice Boehm's dissenting opinion persuasively argues that City 
Chapel will not meet this standard on remand unless it comes up with new 
evidence as to how moving the church to a new location will materially burden 
its right to worship. Nonetheless, the case establishes the principle that neutral 
government action that has a significant negative impact on religious liberty 
might be prohibited by the Indiana Constitution, even if such conduct is 
permitted under the Federal Free Exercise Clause. 

B. Due Course of Law and Equal Privileges Clauses 

Article I, section 1 2 of the Indiana Constitution guarantees that a remedy "by 

due course of law" is available to a person "for injury done to him and his 

person, property or reputation. "^^^ In most cases, Indiana courts have reasoned 

that the analysis under section 12 parallels that under the Federal Due Process 
Clause.227 



220. Id. 

221. M at 455 (Sullivan, J., dissenting). 

222. Id. 

ll-i. /^. at 456. 

224. 494 U.S. 872(1990). 

225. See, e.g., Jeffery D. Williams, Humphry v. Lane.* The Ohio Constitution 's David Slays 
the Goliath o/Employment Division v. Smith, Department of Human Resources of Oregon, 34 
Akron L. Rev. 9 1 9 (200 1 ). 

226. IND. Const, art. 1, § 12. 

227. ^ee. e.g., G.B. V.Dearborn County Div. of Family and Children, 754 N.E.2d 1027, 1031 
(Ind. Ct. App. 2001) ("Federal and state substantive due process analysis is identical"; although the 



1292 INDIANA LAW REVIEW [Vol. 35:1263 



Article I, section 23 of the state constitution provides that "[t]he General 
Assembly shall not grant to any citizen, or class of citizens, privileges or 
immunities, which, upon the same terms, shall not equally belong to all 
citizens. "^^^ The Indiana Supreme Court, in a 1994 decision, held that this 
provision should not be interpreted in the same manner as the Federal Equal 
Protection Clause.^^^ After thoroughly investigating the text and the history of 
this provision, the court set forth a two-prong test, which first requires that any 
disparate treatment by government be reasonably related to inherent 
characteristics that distinguish the unequally treated classes. Further, the 
preferential treatment must be uniformly applicable and equally available to all 
persons similarly situated.^^^ Most attempts to invalidate state legislative 
enactments under this provision have been unsuccessful because the Indiana 
Supreme Court requires that substantial deference be given to the legislative 
judgment. Only where the legislature draws lines in an arbitrary and manifestly 
unreasonable manner will the judiciary invalidate its laws.^^' 

Despite this deferential approach, the Indiana Supreme Court, in Martin v. 
Richey,^^^ held that Indiana's two-year occurrence-based medical malpractice 
statute of limitations^" was unconstitutional as applied to a plaintiff who suffered 
from a medical condition with a long latency period that prevented her from 
discovering the alleged malpractice within the two-year period. The court left 
the statute intact on its face, but held that its application to Martin's situation 
violated both article I, section 23 and article 1, section 12. 

Since the 1999 decision, however, the court has shown reluctance to expand 



right to family integrity is fundamental, Indiana statute, which prescribes exceptions to the 
requirement that government make reasonable effort to reunify and preserve family, satisfies 
substantive due process requirements because the exceptions are narrowly tailored to protect the 
welfare of children from parents who neglect, abuse, or abandon their children); M.G.S. v. Beke, 
756 N.E.2d 990 (Ind. Ct. App. 2001) (the same analysis applies to both federal and state due 
process claims and, in a case of first impression, court holds that father's due process rights were 
not violated by the implied consent provision in Indiana's adoption law that requires father to file 
a paternity action within thirty days of notice if he wishes to protect his peirental rights); Lake of 
the Woods v. Ralston, 748 N.E.2d 396 (Ind. Ct. App. 2001) (court uses federal procedural due 
process balancing standard and finds no violation of state or federal constitutional due process). 

228. Ind. Const, art. I, § 23. 

229. Collins v. Day, 644 N.E.2d 72, 73 (Ind. 1994). 

230. See id. Sii 7^-19. 

231. Jd. atSO. 5eea/.soLutzv.Fortune,758N.E.2d77,84(Ind.Ct. App.2001)(adopteewho 
sought to be declared remainder beneficiary of testamentary trust could not state viable claim under 
Indiana Privileges and Immunities Clause because such a claim requires state action, and here 
plaintiffs exclusion occurred as the result of testate succession, not a legislatively created rule of 
law or state action). 

232. 71 1 N.E.2d 1273, 1279 (ind. 1999). 

233. See iND. CODE § 34-18-7- 1 (b) ( 1 998) (statute of limitations begins to run at the time the 
alleged malpractice occurred, rather than when victim discovers the alleged harm). 



2002] CONSTITUTIONAL LAW 1293 



Martin. In Boggs v. Tri-State Radiology, Inc. ^^^ the court held that a person who 
discovers the malpractice within the two-year period, but files outside the 
limitations period, loses her claim even if the filing occurs within two years of 
discovery. The court reasoned that as long as the plaintiff has a meaningful 
opportunity to bring her claim, there is no violation of the due course of law 
provision.^^^ 

Relying on Boggs, the Indiana Court of Appeals, in Hopster v. Burgeson,^^^ 
rejected the argument that the statute of limitations is unconstitutional as applied 
to persons who suffer a delayed injury. The plaintiff contended that it was not 
until an autopsy was performed that he realized that the defendants had 
misdiagnosed his wife's condition. He filed his lawsuit two years after her death, 
and the trial court agreed that since he could not have discovered the alleged 
malpractice until his wife's death, the action should proceed. On appeal, the 
defendants argued that the case was not controlled by the Martin exception 
because the physicians treated the plaintiffs wife within two years of her death, 
and nothing prevented him from filing suit within the two-year statutory 
period.^^^ Indeed, the court in Boggs held that, "[a]s long as the claim can 
reasonably be asserted before the statute expires, the only burden imposed upon 
the later discovering plaintiffs is that they have less time to make up their minds 
to sue."^^* Boggs acknowledged that there may be situations where discovering 
and presenting the claim within the time demanded by the statute might not be 
reasonably possible, but it concluded that the plaintiffs eleven-month window 
to file did not present this situation. 

The husband in Hopster asked the court to reevaluate Boggs, opining that 
it creates a system whereby determinations must be made on a case-by-case basis 
as to whether plaintiff had a reasonable amount of time remaining to file suit 
prior to the expiration of the statute.^^^ The appellate court agreed that the 
current state of the law creates three different classes of medical malpractice 
plaintiffs. Those who discover the alleged malpractice on the date it occurs have 
two years to file suit; those who discover the alleged malpractice after the 
expiration of the statute of limitations and have no opportunity to file suit prior 
to the expiration will have a reasonable time to file; and those who, like this 
plaintiff, discover the alleged malpractice after it occurs but prior to the 
expiration of the two-year statute of limitations are bound by the two-year rule.^"^^ 
It means that those who suffer immediate injury due to malpractice will have a 
full two years to file suit, while those who suffer delayed injury will have less 
than two years.^"*' Nonetheless, the court felt constrained by the Indiana Supreme 



234. 730 N.E2d 692, 696-97 (Ind. 2000). 

235. /f/. at 698. 

236. 750N.E.2d841,849(Ind.Ct. App. 2001). 

237. /c/. at 848. 

238. Id. at 849 (citing Boggs, 730 N.E.2d at 697). 

239. Mat 850. 

240. Id 

24 L As to the family practitioner, for example, the husband would have had to sue within five 



1294 INDIANA LAW REVIEW [Vol. 35:1263 



Court's decision in Boggs?^^ Ironically, in this case, the law allowed the plaintiff 
to maintain his claim against the physician who treated his wife almost six years 
prior to filing the lawsuit since he could not with due diligence have filed within 
the two-year period, but it prohibited him from pursuing his claims against the 
physicians who treated his wife more recently, because the claims arose within 
two years of the limitations period. ^"^^ 

Other Indiana litigants fared no better under the state constitution. In Indiana 
Patient 's Compensation Fund v. Wolfe^^^ the court rejected a claim brought by 
parents who challenged their inability to bring suit to recover excess damages 
from the Indiana Patient's Compensation Fund. The statute^'*^ limits recovery to 
patients and was interpreted to exclude a parent with a derivative claim. The 
court ruled that this did not violate article 1 , section 1 2, because the limitation on 
recovery under Indiana's Medical Malpractice Act was a rational means of 
achieving the legislature's goal of protecting the healthcare industry and insuring 
the availability of services for all citizens.^"*^ Further, the interpretation did not 
violate article I, section 23, because each patient under the Act was entitled to 
seek damages up to the statutory cap, and any subclassification created by the 
definition of patient furthered the legislature's goal of maintaining medical 
treatment and lowering medical costs in Indiana.^"*^ 

Innovative attempts to use article I, section 23 by criminal defendants have 
been similarly unsuccessful. In Ben-Yisrayl v, State,^^^ the court upheld the 
Indiana statute that excludes prospective jurors who have a conscientious 
opposition to the death penalty. Since differential treatment need only be 
reasonably related to inherent characteristics that distinguish the unequally 
treated class, the court had little difficulty affirming the reasonableness of 
excluding from a jury those "who so inherently opposed to the death penalty that 
they could not recommend a death sentence regardless of the facts or the law."^"*^ 
Further, the court reasoned that the law treats all jurors who express this 
conviction the same. 

Similarly, in Cowart v. State,^^^ the court ruled that Indiana's child 
molestation statute did not violate section 23, even though it provided for harsher 



months of his wife's death to preserve his claim. See id at 845. The other health professionals 
cared for the wife within three months of her death, thus giving Mr. Hopstera much longer window 
within which to file his suit. 

242. Mat 850. 

243. Mat 851. 

244. 735 N.E.2d 1 187 (Ind. Ct. App.), trans, denied, 741 N.E.2d 1261 (2000). 

245. iND. CODE § 34.18-14-3(a) (1998). 

246. 735N.E.2datll93. 

247. Id at 1 193-94. See also Land v. Yamaha Motor Corp., U.S.A., 272 F.3d 514, 518 (7th 
Cir. 2001) (Indiana has expressly held that its Statute of Repose contained in its Products Liability 
Act does not violate article 1, section 12 or section 23 of the state constitution). 

248. 753 N.E.2d 649 (Ind. 2001). 

249. Mat 656. 

250. 756N.E.2d581,586(lnd.Ct. App. 2001). 



2002] CONSTITUTIONAL LAW 1295 



punishment for defendants who were twenty-one years of age or older, than to 
offenders between eighteen and twenty years old. Applying Collins v. Day,^^^ the 
court reasoned that the increased punishment for child molesters who are at least 
twenty-one years old is reasonably related to the inherent characteristics which 
distinguish the two age groups at issue, namely the different intellectual and 
emotional maturity and the fact that the greater age difference between the 
perpetrator and the victim might arguably intensify the fear of the victim and 
therefore justify a more severe punishment.^^^ Further, because the statute 
applies equally to all persons who are at least twenty-one years old, there is no 
disparate treatment among those who fall within the classification. 

Finally, in Teer v. State, ^^^ the court rejected an equal privileges challenge 
to the state's violent felon statute that distinguishes serious violent felons from 
the general class of felons by listing serious violent felonies rather than 
articulating a general definition. Again the court emphasized that a classification 
need have only a reasonable basis, and the fact that the statute omitted a few 
arguably violent crimes does not render the statute unconstitutional.^^'* All of 
these cases suggest that attorneys seeking to invoke section 1 2 or section 23 have 
an uphill battle to fight in light of the significant deference the court gives to 
legislative enactments. 



251. 644N.E.2d72(Ind. 1994). 

252. Cowart, 756 N.E.2d at 584-86. 

253. 738 N.E.2d 283 (Ind. Ct. App. 2001 ). 

254. Mat 288-89. 



Recent Developments in the Indiana Law of 
Contracts and Sales of Goods 



Harold Greenberg* 



Introduction 

Article 2 of the Uniform Commercial Code' has supplemented or, in some 
instances, has replaced the common law of contracts with respect to the sale of 
goods. Therefore, it is appropriate for this Article to discuss important cases 
arising under Article 2 as wel I as those arising under the common law during this 
survey period. 

I. The Independence of U.C.C. § 2-719(3) from U.C.C. § 2-719(2) 

An issue not previously raised in Indiana, which has caused a split among the 
courts of other states, is whether an exclusion of consequential damages for 
breach of warranty, as permitted in section 2-719(3), is independent of section 
2-719(2), which authorizes all Code remedies if a limited remedy fails of its 
essential purpose.^ If dependent, the failure of essential purpose of a limited 



♦ Professor of Law, Indiana University School of Law— Indianapolis; A.B. summa cum 
laude, 1959, Temple University; J.D. magna cum laude, 1962, University of Pennsylvania. The 
author expresses thanks to Jeffrey W. Ferrand, J.D., 2003 (anticipated), Indiana University School 
of Law— Indianapolis for his assistance in preparing this article. 

1. IND. Code § 26-1-2 (1998). This Article will use the generic section numbers to refer to 
Indiana's Uniform Commercial Code. For example, this article will cite to 2-719 instead of iND. 
Code § 26-1-2-719 (1998) unless the version of the Code enacted in Indiana differs from the 
current official draft. 

2. U.C.C. §2-719 (1999) provides: 

(1) Subject to the provisions of subsections (2) and (3) of IC 26-1-2-718 on liquidation 
and limitation of damages: 

(a) The agreement may provide for remedies in addition to or in substitution 
for those provided in IC 26- 1 -2 and may limit or alter the measure of damages 
recoverable under IC 26-1-2, as by limiting the buyer's remedies to return of 
the goods and repayment of the price or to repair and replacement of 
nonconforming goods or parts; and 

(b) Resort to a remedy as provided is optional unless the remedy is expressly 
agreed to be exclusive, in which case it is the sole remedy. 

(2) Where circumstances cause an exclusive or limited remedy to fail of its essential 
purpose, remedy may be had as provided in IC 26-1. 

(3) Consequential damages may be limited or excluded unless the limitation or 
exclusion is unconscionable. Limitation of consequential damages for injury to the 
person in the case of consumer goods is prima facie unconscionable, but limitation of 
damages where the loss is commercial is not. 

Compare Chatlos Sys., Inc. v. Nat'l Cash Register Corp., 635 F.2d 1081 (3d Cir. 1980); and Am. 
Elec, Power Co. v. Westinghouse Elec. Corp., 418 F. Supp. 435 (S.D.N.Y. 1976) ("independent" 
cases), with R. W. Murray Co. v. Shatterproof Glass Corp., 758 F.2d 266 (8th Cir. 1 985) and Adams 



1298 INDIANA LAW REVIEW [Vol. 35:1297 



remedy under section 2-719(2) automatically entitles the plaintiff to all Code 
remedies, including the recovery of consequential damages. If independent, the 
failure of essential purpose does not automatically invalidate an exclusion of 
consequential damages. 

In Rheem Manufacturing Co. v. Phelps Heating & Air Conditioning, Inc.^ 
the Indiana Supreme Court ruled that the exclusion of consequential damages 
subsection, 2-7 1 9(3), should be construed and applied independently of the prior 
subsections of section 2-7 1 9. Based on this construction, the court reversed the 
denial of defendant Rheem's motion for summary judgment on the issues of 
limitation of remedies and exclusion of damages."* 

Since the case was based on an interlocutory appeal from the denial of a 
motion for summary judgment, there should have been no facts in dispute, and 
all facts should have been viewed in the light most favorable to the nonmoving 
party,^ plaintiff Phelps. However, as discussed below, the case may not have 
been the best vehicle for the supreme court's decision. The facts were somewhat 
unusual and the case left many unresolved questions. Indeed, the court may have 
resolved the main issue prematurely. 

Rheem manufactures furnaces for use in homes and offices and, at the 
relevant times, sold them through a distributor. Federated Supply Corporation 
("Federated").^ Phelps, a heating and air conditioning contractor, purchased 
Rheem furnaces from Federated for resale to home builders or to private home 
owners and for installation by Phelps.^ For approximately four years, 
substantially all of Rheem's high efficiency furnaces were defective, failed to 
function properly, and required many service calls and repairs by Phelps at 
substantial cost to it.* Rheem was unable to correct the initial problems with its 
furnaces for at least three and one half years but did supply replacement parts.^ 
In addition, allegedly as a result of the poor performance record of the Rheem 
furnaces, Phelps also lost contracts for the sale and installation of furnaces in 
new housing developments."^ In an action against Rheem and Federated, Phelps 



V. J.I. Case Co., 261 N.E.2d 1 (III. App. Ct. 1970) ("dependent" cases). 

3. 746N.E.2d941 (Ind. 2001) [hereinaner/?Aee/«//]. This case is also the subject of brief 
commentary elsewhere in this survey issue. See Matthew T. Albaugh, Indiana 's Revised Article 
9 and Other Developments in Commercial and Consumer Law, 35 IND. L. REV. 1239, 1255-57 
(2002). 

4. /?/ieem //, 746 N.E.2d at 955. 

5. Mat 946. 

6. /t/. at 944. 

7. Rheem Mfg. Co. v. Phelps Heating & Air Conditioning, Inc., 714 N.E.2d 1218, 1219 
(Ind. Ct. App. 1999) [hereinafter Rheem /]. The Indiana Supreme Court referred readers to the 
court of appeals' decision for a more complete discussion of the facts. Rheem II, 746 N.E.2d at 
944. 

8. Rheem II, 746 N.E.2d at 944-45. Phelps incurred expenses of approximately $100,000 
in servicing defective Rheem high efficiency furnaces. Id. at 953. 

9. y?/ieem/, 714N.E.2datl220. 

10. Rheem II, 746 N.E.2d at 945; R. 22, 225. 



2002] CONTRACTS AND SALES OF GOODS 1 299 



sought to recover two basic types of damages: the expenses incurred in repairing 
the defective furnaces purchased by its customers and the profits it lost because 
of canceled sale and installation contracts. The former may be characterized as 
direct damages flowing naturally from the defects in the furnaces' ' and the latter 
as consequential damages.'^ 

Every box in which a Rheem furnace was shipped contained a pre-printed 
warranty captioned "Limited Warranty — Parts." This document expressly 
warranted the component parts of the furnace against failure for a particular term, 
limited the duration of the implied warranties of merchantability and fitness for 
particular purpose, limited the buyer's remedy for breach of warranty to the 
furnishing by Rheem of replacement parts, and excluded both the cost of labor 
to install the replacement parts and the recovery of incidental and consequential 
damages.'^ 



1 1 . See U.C.C. § 2-714(2) (1999). "The measure of damages for breach of warranty is the 
difference at the time and place of acceptance between the value of the goods accepted emd the 
value they would have had if they had been as warranted, unless special circumstances show 
proximate damages of a different amount." Id. 

12. See id. § 2-7 1 5(2)(a). "Consequential damages resulting from the seller's breach include 
(a) any loss resulting from general or peulicular requirements and needs of which the seller at the 
time of contracting had reason to know and which could not reasonably be prevented by cover or 
otherwise . . . ." Id. 

In a footnote, the court stated: "While Phelps seeks both consequential and incidental 
damages, the same analysis applies to each and we will discuss only consequential damages." 
Rheem II, 746 N.E.2d at 946 n.2. This statement ignores both the differentiation between incidental 
damages and consequential damages in U.C.C. section 2-715 and the language of U.C.C. section 
2-719(3) that refers only to consequential damages. That there is a difference between the two is 
illustrated by Commonwealth Edison Co. v. Allied Chem. Nuclear Prods., Inc., 684 F. Supp. 1429 
(N.D. 111. 1988), in which the contract expressly excluded consequential damages, but one party 
recovered storage charges (incidental damages) of almost $300 million. 

13. Rheem II, 746 N.E.2d at 944. The pertinent provisions of the typical Rheem warranty 
were as follows. 

GENERA!.: Manufacturer, RHEEM AIR CONDITIONING DIVISION, warrants ANY 
PART of this furnace against failure under normal use and service within the applicable 
periods specified below, in accordance with the terms of this Warranty. Under this 
Warranty, RHEEM will furnish a replacement part that will be warranted for only the 
unexpired portion of the original warranty .... 

HEAT EXCHANGER: RHEEM warrants the heat exchanger for a period of TEN (10) 
YEARS commencing from the date of original installation and operation .... In the 
event of heat exchanger failure during the warranty period, RHEEM will furnish a 
replacement heat exchanger. If not available for any reason, RHEEM shall have the 
right to instead allow a credit in the amount of the then current suggested retail selling 
price of the heat exchanger (or an equivalent heat exchanger) towards the purchase price 
of any other RHEEM gas or oil furnace. 

ANY OTHER PART: If any other part fails within ONE (1) YEAR after original 
installation and operation, RHEEM will furnish a replacement part .... 



1300 INDIANA LAW REVIEW [Vol. 35:1297 



Notwithstanding the exclusion of labor costs, during the problematic four- 
year period, Rheem issued numerous repair bulletins and allowed monetary 
credits to contractors making the necessary repairs. ''^ After meetings with Rheem 



SHIPPING COSTS: You will be responsible for the cost of shipping warranty 
replacement parts from our factory to our RHEEM distributor and from the distributor 
to the location of your product .... 

SERVICE LABOR RESPONSIBILITY: This warranty does not cover any labor 
expenses for service, nor for removing or reinstalling parts. All such expenses are your 
responsibility unless a service labor agreement exists between you and your contractor. 
HOW TO OBTAIN WARRANTY PERFORMANCE: Normally, the installing 
contractor from whom the unit was purchased will be able to take the necessary 
corrective action by obtaining through his RHEEM air conditioning distributor any 
replacement parts. If the contractor is not available, simply contact any other local 
contractor handling RHEEM air conditioning products .... 

MISCELLANEOUS: . . . ANY IMPLIED WARRANTIES, INCLUDING 
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, SHALL 
NOT EXTEND BEYOND THE APPLICABLE WARRANTY PERIODS SPECIFIED 
ABOVE. RHEEM'S SOLE LIABILITY WITH RESPECT TO DEFECTIVE PARTS 
SHALL BE AS SET FORTH IN THIS WARRANTY, AND ANY CLAIMS FOR 
INCIDENTAL OR CONSEQUENTIAL DAMAGES ARE EXPRESSLY EXCLUDED. 

RHEEM suggests that you immediately complete the information on the reverse side 
and retain this Warranty Certificate in the event warranty service is needed. Reasonable 
proof of the effective date of the warranty must be presented, otherwise the effective 
date will be based upon the date of manufacture plus 30 days .... 

Id. at R. 105 (emphasis in original). Rheem's "90 Plus" furnaces had a lifetime warranty which 

contained the following language: 

HEAT EXCHANGERS: RHEEM warrants the primary heat exchanger and the 
secondary heat exchanger (condensing coil) to the Original Owner for his or her 
lifetime , subject to proof of purchase, provided the furnace is installed and used in the 
Original Owner's principal residence. For any subsequent owner (or the original owner 
where the above lifetime warranty conditions are not or cease being met), . . . RHEEM 
will warrant the primary heat exchanger and the secondary heat exchanger (condensing 
coil) for a period of TWENTY (20) YEARS commencing from the date of original 
installation and operation .... In the event of heat exchanger failure during the 
warranty period, RHEEM will furnish a replacement heat exchanger. If not available 
for any reason, RHEEM shall have the right to instead allow a credit in the amount of 
the then current suggested retail selling price of the heat exchanger (or an equivalent 
heat exchanger) toward the purchase price of any other RHEEM gas furnace. 
INTEGRATED IGNITION CONTROL: RHEEM warrants the integrated ignition 
control for a period of FIVE (5) YEARS commencing from the date of original 
installation and operation. In the event of an integrated control failure during the 
warranty period, RHEEM will furnish a replacement integrated ignition control. 

MatR. 117. 

14. See, e.g., id. at R. 353. Bulletin #SR-I34 for Rheem Air Conditioning Division to AH 



2002] CONTRACTS AND SALES OF GOODS 1301 



representatives failed to yield results satisfactory to Phelps, Phelps brought suit 
against both Rheem and Federated for breaches of express warranty and of the 
implied warranties of merchantability and fitness for particular purpose.*^ 
Following some discoveiy, Rheem moved for summary judgment on the theories 
"that the damages sought by Phelps were excluded by the service labor exclusion, 
consequential damages exclusion, and incidental damage exclusion of Rheem 's 
written limited warranties."'^ Rheem also asserted that a lack of privity with 
Phelps entitled it to summary judgment on the implied warranty claims.'^ 

The trial court denied Rheem 's motion with regard to all the warranty 
claims.'* Subsequently, the trial court granted Rheem's motion to certify its 
ruling for interlocutory appeal.'^ As stated in the court of appeals' opinion, the 
pertinent questions certified were: 

Whether the failure of essential purpose of a limited warranty remedy 
under [Indiana Code section 26- 1-] 2-719(2) is independent from 
[Indiana Code section 26- 1-] 2-719(3) which reads consequential 
damages may be limited or excluded unless the limitation or exclusion 
is unconscionable and whether, because the tests for the two subsections 
are different, a limited remedy of repair or replacement survives under 
subsection (2) unless it fails of its essential purpose, but a limitation of 
consequential damages survives under subsection (3) unless it is 
unconscionable. 

Whether an intermediate reseller of goods can avail itself of the doctrine 
of failure of essential purpose under 2-719(2) where the intermediate 
reseller has sold and therefore no longer owns the goods, and where the 
intermediate reseller has created additional express warranties with 
remedies of greater scope than that of the defendant manufacturer.^^ 

The court of appeals ruled that, in accord with the "majority" view, sections 



Air Conditioning Distributors (July 15, 1992); Letter from Micheal D. Kaasa, Rheem Vice 
President, Sales, to Michael D. Phelps, President, Phelps Heating & Air Conditioning, Inc. (July 
12, 1994) (R. 390). In his letter, Mr. Kaasa stated: "We must acknowledge that the Update 
Program of the past two years placed an unwanted burden on the entire Rheem distribution 
network. At the onset, we made every effort to arrive at labor allowance levels that would minimize 
the costs to the dealer." Id. 

1 5. Rheem J, 714 N.E.2d 1 2 1 8, 1 22 1 (Ind. Ct. App. 1 999). Phelps also sued the defendants 
for negligence. Id The trial court's ruling on the negligence issue is not part of this appeal. 

16. Id 

17. Id 

18. Mat 1221-22. 

19. IddXMll. 

20. Id. The grant of summary judgment in favor of Federated against Phelps and its 
principals on Federated's counterclaim for failure to pay an account due of approximately $106,000 
was not part of the appeal and thus not a part of the supreme court's decision. Federated also filed 
a cross-claim against Rheem. Id. at R. 28-32. 



1302 INDIANA LAW REVIEW [Vol. 35:1297 



2-719(2) and 2-719(3) should be read independently, with the former being 
governed by a standard of failure of essential purpose of the limited remedy and 
the latter by a standard of unconscionability.^' The court did not rule on the 
unconscionability of the exclusion but remanded for a determination of fact: 
"whether the cumulative effect of Rheem's actions was commercially 
reasonable. ''^^^ 

With respect to Rheem's assertion that the absence of privity with Phelps 
precluded recovery for breach of implied warranties, the court of appeals stated 
that perfect vertical privity is not required, particularly when the distributor with 
whom the buyer is in privity acts as the agent of the manufacturer, as Phelps had 
alleged.^^ Whether Federated was Rheem's agent was a question of fact to be 
determined at trial. ^"^ 

The supreme court, in a 3-1 decision,^^ granted transfer, declared that 
sections 2-719(2) and 2-719(3) should be read independently, summarily 
affirmed the court of appeals as to the implied warranty claims, held that the 
language of the express warranty precluded Phelps from recovering its labor 
expenses or incidental and consequential damages, and observed that Phelps may 
still have a valid claim for breach of implied warranty or indemnity .^^ 

Reasonable judicial minds may differ on whether sections 2-719(2) and 2- 
719(3) were intended by the Code drafters to be construed dependently or 
independently. The current trend favors independence, and the court in Rheem 
followed that trend. However, independence still requires a consideration of all 
of the surrounding circumstances, including the failure of the essential purpose 
of the limited remedies. The court should have simply declared its construction 
of the relationship between sections 2-719(2) and (3), as requested by the trial 
court, and should have remanded for further proceedings. 

II. The Independence Issue 

As both courts observed, there has been a split among the decisions in other 
states on the question of whether sections 2-719(2) and 2-719(3) should be read 
dependently or independently.^^ The supreme court stated that "[i]n light of the 
depth of disagreement among the courts that have faced this issue, it is evident 



21. /?/ieem/,714N.E.2datl227. 

22. Id. at 1228 (emphasis in original). 

23. /f/. at 1228-31. 

24. Id. at 1 23 1 . This author has previously urged that Indiana should abolish the requirement 
of vertical privity in implied warranty cases. See Harold Greenberg, Vertical Privity and Damages 
for Breach of Implied Warranty under the U.C.C.: It 's Time for Indiana to Abandon the Citadel, 
21 IND.L. REV. 23(1988). 

25. Justice Dickson dissented and filed a short opinion. Rheem II, 746 N.E.2d 941, 956-57 
(Ind. 2001 ) (Dickson, J., dissenting). Justice Rucker did not participate because he was a member 
of the court of appeals that previously decided Rheem /. Id. at 956. 

26. Rheem II, 746 N.E.2d at 944, 948, 956. 

27. Id. at 947; Rheem /, 71 4 N.E.2d at 1 223; see, e.g., cases cited supra note 2. 



2002] CONTRACTS AND SALES OF GOODS 1 303 



that the UCC is ambiguous on this point."^* The court also noted that the 
"modern trend" appears to be that the two sections should be read independently 
of each other.^^ 

After a discussion of the rules of statutory construction and the justifications 
for both views, the supreme court ruled, as had the court of appeals, that Indiana 
should follow the majority position and adopt the independent view.^^ The court 
stated: 

[T]he legislature's intent to follow the independent view is also 
supported by the UCC's general policy favoring the parties' freedom of 
contract .... [T]he independent view refuses to override categorically 
an exclusion of consequential damages and will give effect to the terms 
of the contract. Indeed, consistent with the principle of freedom of 
contract, the independent view al lows the parties to agree to a dependent 
arrangement.^' 

The court expressly rejected the "commercial reasonableness" test of the court 
of appeals and, without discussion of whether Rheem's exclusion of 
consequential damages was unconscionable or whether Phelps had ever agreed 
to the exclusion other than by purchasing the furnaces for resale, reversed the 
trial court's denial of Rheem's motion for summary judgment on Phelps's claim 
for incidental and consequential damages.^^ The court declared that Phelps could 
not "escape the conclusion that these goods were relatively sophisticated and 
flowed between businesses [sic] entities."" In support, the court cited S.M. 
Wilson & Co. V. Smith International, Inc.^^ a case involving the negotiation of 
specifications for the design, construction, and delivery of a $550,000 tunnel 
boring machine, the installation of which was to be supervised by an expert 
provided by the seller.^^ The court also relied on and quoted one of the leading 
cases supporting the independent view, Chatlos Systems, Inc. v. National Cash 
Register Corp}^ In Chatlos Systems, the limitation of remedy and exclusion of 
consequential damages terms were in a contract that was negotiated over a period 
of months for a complex computer system expressly designed for Chatlos and to 
be installed and tested over an extended period of time.^^ The Rheem II court 
stated: 



28. /?/igew //, 746 N.E.2d at 948. 

29. Id. at 950; see JAMES J. White & Robert S. Summers, Uniform Commercial Code § 
12-10(c)(4thed. 1995). 

30. /?Aeem//, 746 N.E.2d at 948-50. 

31. Id. at 950 (emphasis in original). 

32. /flf. at952. 

33. Mat 951. 

34. 587 F.2d 1363 (9th Cir. 1978). 

35. /t^. at 1365-67. 

36. 635 F.2d 1081 (3d Cir. 1980). 

37. 5eeiV/. at 1083-84. 



1304 INDIANA LAW REVIEW [Vol. 35:1297 



The limited remedy of repair and consequential damages exclusions are 
two discrete ways of attempting to lim it recovery for breach of warranty . 
The Code, moreover, tests each by a different standard .... We 
therefore see no reason to hold, as a general proposition, that the failure 
of the limited remedy provided in the contract, without more, invalidates 
a wholly distinct term in the agreement excluding consequential 
damages. The two are not mutually exclusive.^* 

The court also relied upon Professors White and Summers.^^ They stated that 
the leading case supporting the independent view, and with which they agree, is 
American Electric Power Co. v. Westinghouse Electric Corp.^^ That case 
involved "a commercial agreement painstakingly negotiated between industrial 
giants" for a "highly complex, sophisticated, and in some ways experimental 
piece of equipment .... It is for this very reason that the . . . contract 
incorporates within it the limitation on the Seller's liability.'"*' The contract itself 
was negotiated over a period of two years.*^ The contrast between the goods 
involved in these three cases and the prepackaged Rheem furnaces with their 
enclosed preprinted warranties is striking. 

Furthermore, in S.M. Wilson, the court said the "holding [was] based upon 
the facts of this case as revealed by the pleadings and record and [was] not 
intended to establish that a consequential damage bar always survives a failure 
of the limited repair remedy to serve its essential purpose. Each case must stand 
on its own facts."*^ In Chatlos, the court stated: 

The repair remedy's failure of essential purpose, while a discrete 
question, is not completely irrelevant to the issue of the conscionability 
of enforcing the consequential damages exclusion. The latter term is 
"merely an allocation of unknown or undeterminable risks." U.C.C. § 
2-719, Official Comment 3 . . . . Recognizing this, the question here 
narrows to the unconscionability of the buyer retaining the risk of 
consequential damages upon the failure of the essential purpose of the 
exclusive repair remedy.'*'* 

In these leading "independent" cases, the provisions of sections 2-719(2) and 2- 
719(3) were not totally independent of each other but the latter section was 
construed and applied in the context of the former, notwithstanding the differing 
standards by which each section is judged. 



38. Rheem II, 746 N.E.2d 941, 948 n.6 (Ind. 2001) (quoting Chatlos, 635 F.2d at 1086). 

39. Mat 951. 

40. 418 F. Supp. 435 (S.D.N.Y. 1976). See White & SUMMERS, supra note 29, § 12-10(c). 
White and Summers suggest that the American Electric analysis should also apply in consumer 
cases. Id. This is briefly discussed in the text accompanying infra notes 45-46. 

41 . Am. Elec. Power Co., 418 F. Supp. at 458. 

42. /^. at 439. 

43. 587 F.2d 1363, 1375-76 (9th Cir. 1978). 

44. 635 F.2d 1081, 1086-87 (3d Cir. 1980) (internal citation omitted). 



2002] CONTRACTS AND SALES OF GOODS 1 305 



The court also relied on Schurtz v. BMW of North America, Inc.^^ which 
reconciled the split between the "independent" and "dependent" cases on a 
contextual basis. 

In cases where the buyer is a consumer, there is a disparity in bargaining 
power, and the contractual limitations on remedies, including incidental 
and consequential damages, are contained in a preprinted document 
rather than one that has been negotiated between the parties, the courts 
have held uniformly that if the limited warranty fails of its essential 
purpose, the consumer should be permitted to seek incidental and 
consequential damages. The courts usually reach this result by reading 

the two subparts [of 2-71 9] dependently On the other hand, in cases 

where the parties are operating in a commercial setting, there is no 
disparity in bargaining power, and the contract and its limitations on 
remedies are negotiated, most courts have concluded that if a limited 
warranty fails of its essential purpose, any contractual limitation on 
incidental and consequential damages is not automatically void. The 
subparts are read independently and the surviving limitation . . . remains 
valid absent a showing of unconscionability."*^ 

The difficulty that Rheem II presents is that it falls somewhere between the 
two examples just posited. The transaction was commercial, but the warranty 
and its limitations and exclusions were found in a preprinted form inside the box 
that likely would not be opened until delivery at the ultimate buyer's residence 
or office. Nevertheless, the court assumed throughout its opinion that Rheem and 
Phelps were of equal bargaining power and had negotiated the terms of the 
warranty. 

Unfortunately, Rheem II is made even more difficult by the court's 
observation, based on a reference to Phelps's brief, that "Phelps does not argue 
that the clause at issue was unconscionable.'"*^ The Code, however, states that 
unconscionability becomes an issue and evidence on it is required "[w]hen it is 
claimed or appears to the court that the contract any clause thereof may be 
unconscionable.'"** Phelps's failure to use the term "unconscionable" is 



45. 814 P.2d 1 108 (Utah 1991), cited in Rheem I/, 746 N.E.2d 941, 947 (Ind. 2001). 

46. Schurtz, 8 1 4 P.2d at 1 1 1 3- 1 4. 

47. Rheem II, 746 N.E.2d at 947 n.5 (stating, see, e.g.. Appellee's Br. at 25-28). 

48. U.C.C. § 2-302 ( 1 999) states: 

(1) If the court as a matter of law finds the contract or any clause of the contract to 
have been unconscionable at the time it was made the court may refuse to enforce the 
contract, or it may enforce the remainder of the contract without the unconscionable 
clause, or it may so limit the application of any unconscionable clause as to avoid any 
unconscionable result. 

(2) When it is claimed or appears to the court that the contract or any clause thereof 
may be unconscionable the parties shall be afforded a reasonable opportunity to present 
evidence as to its commercial setting, purpose and effect to aid the court in making the 
determination. 



1306 INDIANA LAW REVIEW [Vol. 35:1297 



regrettable. The tone of Phelps's various briefs, however, emphasized the 
unfairness of the exclusion, particularly in the light of Rheem's inability to 
produce a defect free furnace for almost four years and the apparent assumption 
by both parties throughout this phase of the litigation that the limited remedy 
failed its essential purpose. Although neither the trial court nor the court of 
appeals used the term "unconscionable," it is evident that both courts were 
concerned with the inherent unfairness of the exclusion on the facts as they had 
been developed as of the time of the motion for summary judgment. 

In addition, throughout its opinion, the supreme court emphasized the 
freedom of the parties to negotiate, to set contract terms, and to allocate risks. 
The facts of the case do not reflect that Rheem and Phelps engaged in any 
negotiation and discussion of allocation of risk, particularly allocation of the risk 
that Rheem would be unable to manufacture furnaces that worked properly. 

The consequence of Rheem II appears to be that in Indiana, whenever the 
transaction is between business entities of whatever size, the exclusion of 
consequential damages will be effective regardless of the failure of the essential 
purpose of the limited remedy and without the further factual analysis that the 
leading cases appear to require. Even following the line of cases established by 
Chatlos and American Electric Power, the question in Rheem II which the 
supreme court should have permitted to be resolved after the taking of evidence, 
was whether, in light of the failure of the limited remedy as assumed by the 
parties, it was unconscionable for Phelps to be financially responsible for 
Rheem 's extended failure to manufacture defect- free furnaces. 

In the words of the supreme court in a prior decision, "[a] substantively 
unconscionable contract is one that no sensible man would make and such as no 
honest and fair man would accept.'"*^ Perhaps this is what the court of appeals 
had in mind when it remanded for a finding of whether the exclusion was 
"commercially reasonable": In the light of Rheem's inability to produce defect- 
free furnaces, would a sensible contractor undertake the repair costs on all the 
furnaces for four years and would a fair manufacturer accept that undertaking? 

Although the issue of unconscionability under section 2-302 is for the court 
to determine, the parties "shall be afforded a reasonable opportunity to present 
evidence."^^ Section 2-302 deals expressly with what happens "[i]f the court as 
a matter of law finds the contract or any clause of the contract to have been 
unconscionable at the time it was made."^' Section 2-7 19(3) "makes it clear that 
[the limitations of remedies or exclusions of damages] may not operate in an 
unconscionable manner."^^ The plain implication is that the existence of 
unconscionability that would negate an exclusion of consequential damages 
under section 2-719(3) is to be determined after the failure of the essential 
purpose of the limited remedy under section 2-719(2) and in light of that failure. 

Having interpreted the statute at the request of the trial court rather early in 



49. Martin Rispens & Son v. Hall Farms, Inc., 621 N.E.2d 1078, 1087 (Ind. 1993). 

50. U.C.C.§ 2-302(2) (1999). 

51. Id. §2-302(1). 

52. Id. §2-719cmt. 3. 



2002] CONTRACTS AND SALES OF GOODS 1 307 



the life of the litigation, the supreme court should have remanded for further 
proceedings that would have permitted Phelps to introduce evidence to 
demonstrate that the exclusion was unconscionable or perhaps did not apply to 
Phelps at all, as discussed in the next section. 1 hus, even under the independent 
view of section 2-71 9(3), the trial court's denial of Rheem's motion for summary 
judgment appears to have been correct. 

III. Was Phelps Bolind by the Limitation of Damages and the 
Exclusion of Consequential Damages? 

A significant issue in Rheem II on which the court declined to express an 
opinion was whether Phelps was bound at all by the limitations and exclusions 
found in the warranty documents.^' The language of those documents indicates 
that they were directed to the buyers, not to an intermediary, such as a distributor 
or contractor. 

The court's reluctance to resolve whether the limitations and exclusions 
applied to Phelps is understandable. Phelps never raised the issue directly but 
seemed to argue around it. Phelps had based a major part of its claim on breach 
of express warranty. However, Phelps did argue that the transactions were not 
sophisticated and "that the warranties were simply found inside of the furnace 
box and were not the product of detailed negotiations."^'* The court responded 
that "Phelps's argument here may prove too much, i.e., that only the ultimate 
consumer, and not Phelps at ail, was to benefit from the warranty ,"^^ but that both 
parties "appear to assume" that Phelps was a beneficiary of the warranty .^^ 
Moreover, in discussing whether the essential purpose of the limitation to the 
furnishing of replacement parts and the exclusion of labor costs failed, the court 
stated very clearly: "The limitation is addressed to the end-user, warning them 
that they must look to the contractor for repairs: 'All such expenses are your 
responsibility unless a service labor agreement exists between you and your 
contractor. '"^^ Thus, the supreme court was aware that the issue, though not 
clearly delineated, was present in the case. 

A reading of each of the warranties as a whole reveals that the entire 
warranty and its limitations and exclusions were directed toward the end-user- 
home-owner, not to any intermediate contractor. The length of the warranty 
period was to begin on the date of original installation and operation, not on the 
date of purchase by a contractor, and was to last for a period of years thereafter. 
The lifetime warranty on the "90 plus" series of furnaces ran "to the Original 
Owner for his or her lifetime . . . provided the furnace is installed and used in the 
Original Owner's principal residence."^^ And in the event Rheem could not 



53. Rheem II, 746N.E.2d 941, 947 n.4 (Ind. 2001). 

54. Mat 951. 

55. Id. 

56. Id. 

57. Id. at 953. See supra note 13 for the language of the warranty. 

58. Rheem II, 746 N.E.2d at R. 1 1 7; see supra note 13. 



1308 INDIANA LAW REVIEW [Vol. 35:1297 



furnish a replacement of a defective heat exchanger, it would "allow a credit in 
the amount of the then current suggested retail selling price of the heat exchanger 
. . . toward the purchase price of any other RHEEM . . . furnace."^^ It would have 
made no sense for Rheem to give credit for the retail price to a contractor such 
as Phelps. The logical allowance would be the wholesale price unless Rheem 
intended to give the contractor an allowance for loss of profit, a consequential 
damage for which Rheem had excluded liability. The court of appeals, 
commenting on Rheem 's brief, stated that Rheem characterized the labor cost 
exclusion as being between itself and the home owner.^^ 

Nor can it be claimed that Phelps was an intended beneficiary of the Rheem 
warranty. In most "pass-through" warranties,^' the manufacturer states that the 
product is warranted for a specific time, that repairs of defects will be made at 
no cost to the buyer, and that the buyer should take the product to or call an 
authorized service facility for repairs.^^ In such situations, there is either an 
agreement between the manufacturer and the service facility for reimbursement 
to the latter of its costs of repair or the service facility can be considered an 
intended third-party beneficiary of the warranty agreement. The Rheem warranty 
made clear that Rheem did not intend to pay any costs of repair or to incur any 
obligation beyond furnishing the replacement parts to the ultimate buyer for 
installation at her own costs by her contractor.^^ 

As noted earlier, the court emphasized agreements between two sophisticated 
business entities and an apportioning of the risk. In view of the language of 
Rheem ' s express warranties, one wonders whether there was ever any negotiation 
or discussion of risk apportionment. In its discussion of the limitation of remedy, 
the court did note a possible usage of trade^ in the gas furnace industry," but the 
issue of the details of that usage and its applicability to the case at hand is one 
usually left to the fact finder, not an issue decided by an appellate court. 



59. Id. 

60. Rheem I,7\4 N.E.2d 1218, 1220 (Ind. Ct. App. 1999). 

61 . A "pass-through" warranty is "an express warranty packaged with the goods." Gary L. 
Monserud, Blending the Law of Sales with the Common Law of Third Party Beneficiaries^ 39 DUQ. 
L. Rev. Ill, 142 (2000); see Harry M. Flechtner, Enforcing Manufacturers' Warranties, "Pass 
Through" Warranties, and the Like: Can the Buyer Get a Refund?, 50 RUTGERS L. REV. 397 
(1998). 

62. See Flechtner, supra note 6 1 , at 398. The most frequent and difficult question that arises 
in connection with pass-through warranty litigation is whether the ultimate purchaser can revoke 
her acceptance and obtain a refund from the manufacturer whose warranty was passed through but 
with whom she in not in privity. See id. 

63. Rheem I, 714 N.E.2d at 1220. 

64. "A usage of trade is any practice or method of dealing having such regularity of 
observance ... as to justify an expectation that it will be observed with respect to the transaction 
in question. The existence and scope of such a usage are to be proved as facts . . . ." U.C.C. § 1- 
205(2) (1999). 

65. ^/leem //, 746 N.E.2d 941, 953-54 (Ind. 2001). 



2002] CONTRACTS AND SALES OF GOODS 1309 



IV. The Failure of Essential Purpose 

A further problem arises from several observations by the court early in part 
one of its opinion regarding the issue of the independence of section 2-719(3). 
The court stated that both Rheem and Phelps "appear[ed] to accept that the 
remedy provided by Rheem failed of its essential purpose"^^ under section 2- 
719(2);^^ that the trial court did not certify "the question of whether the [limited] 
remedy actually failed of its essential purpose and Rheem concedes that this issue 
'is not in debate'";^^ and that both parties assumed "that the warranty and its 
remedy limitations are applicable,"^^ — all issues on which the court declined to 
express an opinion.^^ Nevertheless, in part two of its opinion, the court 
specifically ruled that the remedy limitation — covering replacement parts but 
excluding the cost of installation of those parts did not fail of its essential 
purpose and, therefore, Phelps was not entitled to its repair costs.'' 

Having found that the exclusion of consequential damages precluded Phelps 
from recovering its lost profits from canceled contracts,'^ the court turned to the 
question of whether Phelps was entitled to any other damages. Since section 2- 
719(3) relates only to exclusion of consequential damages, whether Phelps was 
entitled to any other damages depended on whether the limitation of remedies 
solely to Rheem's furnishing of replacements of defective parts failed of its 
essential purpose pursuant to section 2-719(2).'^ The drafters defined such a 
failure as occurring "where an apparently fair and reasonable clause because of 
circumstances fails in its purpose or operates to deprive either party of the 

substantial value of the bargain "''' Notwithstanding the court's observations 

that the trial court had not certified the question of whether the remedy actually 
failed of its essential purpose, that Rlieem conceded that the issue was not in 
debate,'^ and that a jury may determine "[w]hether a limited remedy failed of its 
essential purpose,"'^ the court proceeded to decide that the limited remedy and 
labor cost exclusion did not fail of its essential purpose.'^ 

The court followed the analysis used in Martin Rispens & Son v. Hall Farms, 
/wc.,'* stating 

that the method used to decide whether a particular limitation fails of its 



66. 


Id. at 946. 


67. 


id. 


68. 


Id at 947 n.4. 


69. 


Id 


70. 


Id 


71. 


See id at 954-55. 


72. 


See id at 952. 


73. 


/^. at 947. 


74. 


U.C.C.§ 2-719 cmt 1(1999). 


75. 


Rheem II, 746 N.E.2d at 947 n.4 


76. 


Id at 948. 


77 


Id at 954-55. 


78. 


621 N.E.2d 1078 (Ind. 1993). 



1310 INDIANA LAW REVIEW [Vol. 35:1297 



essential purpose is to identify the purpose underlying the provision and 
determine whether application of the remedy in the particular 
circumstances will further that purpose. If not, and only then, is there a 
failure of essential purpose.^^ 

However, the Rheem court's application of Professor Eddy's analysis is 
incomplete. At the conclusion of his article, Professor Eddy suggests a three-step 
analysis: 

The first, the most important, and the most ignored step is to examine 
carefully the context of a particular transaction and to seek from an 
understanding of the transaction some further understanding of what 
purpose a given type of limited remedy might serve in it. The second 
step is to determine whether application of the limited remedy to the 
particular situation before the court furthers that essential purpose. If the 
remedy's purpose may no longer be furthered by its application, it 
remains for the court thoughtfully to fashion, from the Code's generally 
available remedies, relief that will most closely reproduce the contours 
of the parties' original bargain. Finally, even if the remedy's essential 
purpose calls for application, a third step is required: scrutiny of the 
remedy clause under the Code's unconscionability provision.*° 

These issues are fact sensitive and should be determined by a trial court, not 
on appeal. Moreover, "[1] imitations of remedy are not favored in Indiana and are 
strictly construed against the seller on the basis of public policy."*' 

Martin Rispens involved a single sale of diseased watermelon seeds. The 
court limited the buyer's remedy to return of the purchase price and excluded any 
incidental or consequential damages.*^ The court rejected the buyer's argument 
that the presence of the disease "was a novel circumstance not contemplated by 
the parties"*^ and stated that the parties could have allocated the risk of disease 
as part of their bargain.*"* Later, however, the Martin Rispens court stated: 

Left unanswered, however, is whether the parties in fact agreed to 
redistribute the risk of a latent defect in the seed. The question is 
whether there was mutual assent to the limitation of liability contained 
on the . . . can [of seeds] and the . . . purchase order. Contract formation 
requires mutual assent on all essential contract terms .... Assent to a 
limitation of liability may be assumed where a knowledgeable party 
enters into the contract, aware of the limitation and its legal effect 



79. Rheem II, 746 N.E.2d at 954 (quoting Martin Rispens, 621 N.E.2d at 1085-86 (citing 
Jonathan A. Eddy, On the "Essential" Purposes of Limited Remedies: The Metaphysics ofUCC 
Section 2-719(2), 65 Cal. L. Rev. 28, 36-40 (1977))). 

80. Eddy, supra note 79. 

8 1 . Martin Rispens, 62 1 N.E.2d at 1 085. 

82. Id at 1086. 

83. Id 

84. Id 



2002] CONTRACTS AND SALES OF GOODS 1311 



without indicating non-acquiescence to those terms. However, the 
intention of the parties to include a particular term in a contract is 
usually a factual question determined from all of the circumstances.*^ 

Accordingly, the court remanded for further proceedings on Rispens' warranty 
claims.*^ 

Whether Phelps ever agreed to the warranty and its limitations has already 
been discussed.*^ Even if Phelps had agreed, the court all but ignored the 
contention that neither party ever contemplated that Rheem would be unable to 
produce defect- free furnaces for four years.** The court noted that Phelps either 
gave its own warranties to its customers or sold them extended warranties.*^ The 
court concluded that this practice assured Rheem that "it would not be obligated 
to make repairs,"^ and that "[i]t was reasonable for Rheem to expect Phelps to 
use . . . [its own manpower and facilities] to go into local homes and offices to 
fix the furnaces,"^' thus apparently allocating the risk of labor expenses.^^ 
However, the court's conclusion does not follow from its statement. 
Manufacturers frequently do not make repairs themselves but rely on others, 
whether independent contractors or franchisees, to make repairs to defective 
goods on their behalf 

The interesting feature of Rheem's warranty is that Rheem's only promise 
was to furnish replacement parts, and nothing more. It is as if Rheem was saying 
to the buyer, "Here are the parts; you fix it." However, as noted by Professor 
Eddy, "the typical limited repair warranty embodies an exclusive remedy of 
repair or replacement and an exclusion of consequential damages."^^ Section 2- 
719(l)(a) approves of "limiting the buyer's remedies to return of the goods and 
repayment of the price or to repair and replacement of non-conforming goods or 
parts."^"* The official comments note that "it is of the very essence of a sales 
contract that at least minimum adequate remedies be available"^^ and that there 



85. /£/. at 1087 (citations omitted). 

86. Id. at 1091. 

87. See supra Part II. 

88. An interesting question is why Phelps continued to purchase Rheem furnaces during the 
entire four-year period. After a year, Phelps was certainly aware of Rheem's position as to 
remedies. Perhaps Phelps continued the purchases because of continued assurances from Rheem 
that the problems had been solved, thereby creating additional warranties. This is a factual issue 
for resolution at trial. Another question is whether, by reimbursing the costs of contractors 
installing and then repairing the defective furnaces, Rheem had actually waived the limitation of 
remedy. 5ee discussion accompanying /«/ra notes 99-101. 

89. /?/ieem //, 746 N.E.2d 941, 954 (Ind. 2001). 

90. Id. 

91. Id at 955. 

92. /^. at 954. 

93 . Eddy, supra note 79, at 6 1 . 

94. U.C.C.§ 2-7 19(a) (1999). 

95. Id § 2-719 cmt. 1. 



1312 INDIANA LAW REVIEW [Vol. 35:1297 



must be "at least a fair quantum of remedy for breach."'^ Again, in the Phelps 
context, these appear to be issues of fact for a fact finder. 

The Rheem court looked at the purpose of the limited remedy, decided that 
its purpose was to insulate Rheem from the costs of repairs, and concluded that 
the limitation served its essential purpose.^^ If the essential purpose of a limited 
remedy were only to insulate the warrantor from exposure to damages, no limited 
remedy would ever fail of its essential purpose. However, the limited remedy 
must also leave the buyer with a minimum adequate remedy, one that will give 
the buyer what was bargained for, namely, goods that are defect free and perform 
as they are supposed to perform.^* 

A further question not addressed by the court, and perhaps not ripe for 
discussion because of the procedural posture of the case, is whether Rheem 
waived the limitation of remedy when it engaged in its "furnace update 
program," which included the cost to contractors of making repairs to the 
defective furnaces. This conduct could have been a course of dealing that would 
have furnished a basis for interpreting the contracts pursuant to which Phelps 
purchased the fumaces^^ or to a course of performance that would have amounted 
to a waiver or modification of the labor exclusion.'^ "[WJhether there has been 
a waiver of a contract provision is ordinarily a question of fact."'°' However, by 
reversing the denial of summary judgment, the court foreclosed any discussion 
of this issue. 

V. The Right to Direct Damages or Indemnity 

A further interesting point is that the court's statement that even if the limited 
remedy did fail of its essential purpose, Phelps would not be entitled to the costs 
incurred in repairing the defective furnaces. '°^ The court observed that the cost 
of repair is the common measure of damages for breach of warranty'^^ but 
concluded, without any citation of authority in support, that because Phelps was 
no longer in possession of the goods, this measure of damages would be 
inapplicable.'^'* Instead, the court concluded that Phelps may have a cause of 



96. Id. 

97. Rheem 11, 746N.E.2d 941, 954-55 (Ind. 2001). 

98. 5ee U.C.C. § 2-719 cmt. 1 (1999). 

99. Id. § 1-205. 

100. See id. §§ 2-208, 2-209. "Subject to the provisions of the next section on modification 
and waiver, such course of performance shall be relevant to show a waiver or modification of any 
term inconsistent with such course of performance." Id. § 2-208(3). 

101. Harrison v. Thomas, 761 N.E.2d 816, 820 (Ind. 2002). 

102. Rheem II, 746 N.E.2d 941, 955 (Ind. 2001). 

1 03. Id. "The measure of damages for breach of warranty is the difference at the time and 
place of acceptance between the value of the goods accepted and the value they would have had if 
they had been as warranted, unless special circumstances show proximate warrant damages of a 
different amount." U.C.C. § 2-714(2) (1999). 

104. Rheem II, 7461^.E.2dat956. 



2002] CONTRACTS AND SALES OF GOODS 1313 



action against Rheem sounding in indemnity or subrogation.'^^ 

"'A right of indemnity exists where a party is compelled to pay damages that 
rightfully should have been paid by another party.'"'^ In determining whether 
Phelps has any claim for indemnity, the trial court would have to determine 
whether the home owners who purchased Rheem furnaces for installation by 
Phelps had any claims for damages against Rheem which were satisfied by 
Phelps. In order for the ultimate buyers to have any such claims, the trial court 
will have to find that the limitations and exclusions that the supreme court held 
to be effective against Phelps were not effective against the ultimate buyers. This 
would require a ruling that with respect to the ultimate buyers, the limited 
remedy and labor cost exclusion failed their essential purpose; otherwise, there 
would be no damages that rightfully should have been paid by Rheem. Since the 
indemnification issue was not before the court, there is no hint in the opinion 
whether these limitations and exclusions could be valid against one party, as the 
court found with respect to Phelps, and invalid against the ultimate consumer- 
buyer. '"' 

The court also stated that Phelps may have a claim for breach of implied 
warranty.'^* It is unclear whether the court meant that Phelps may have such a 
claim against Rheem or against Federated, the distributor from which Phelps 
purchased the furnaces. If the court meant that Phelps may still have such a 
claim against Rheem, the fact there may have been implied warranties that 
Rheem breached will be of little comfort to Phelps in view of the court's 
construction and application of the limitation of remedies and exclusions of 
damages. The limitations and exclusions found in the printed Rheem warranties 
were expressly intended to apply equally to those express warranties and to the 
implied warranties of merchantability and of fitness for particular purpose. '^^ 
Section 2-7 1 9 is intended to permit sellers to limit their liability for damages that 
flow from warranties that they have made, whether express or implied. "° 

VI. Covenants Not TO Compete 

During the survey period, the Indiana Court of Appeals decided two cases 
that dealt with covenants not to compete. The first, Kladis v. Nick's Patio, 
Inc.^^^^ arose out of an agreement for the sale of a business. The second, Burkv. 
Heritage Food Service Equipment, Inc. , ' '^ arose out of contracts of employment. 
Although neither case breaks new ground in the law of Indiana, they are of 



105. Id. 

106. Jd. (referring to Black v. Don Schmid Motor, Inc., 657 P.2d 517, 529 (Kan. 1983), 
quoting 41 Am. Jur. 2d Indemnity § 20 (1995)). 

1 07. See supra notes 45-46 and accompanying text. 

108. /?/igem //, 746 N.E.2d at 944. 

109. ^ee 5M/7rfli Part III. 

1 10. See White & Summers, supra note 29, § 12-9. 

111. 735 N.E.2d 1216 (Ind.Ct.App. 2000). 

1 12. 737 N.E.2d 803 (Ind. Ct. App. 2000). 



1314 INDIANA LAW REVIEW [Vol. 35:1297 



interest because of the clarity with which they explain the applicable law. 

A. The Scope of Noncompetition Agreements in Contracts for 

the Sale of a Business 

In Kladis, Kladis, a restauranteur, sold his restaurant business to Samoilis 
and Radokis. In order to preserve the goodwill built up by Kladis over the years, 
the agreement of sale provided that Kladis would not engage as an employee, 
agent, or owner of any competing restaurant business located within a radius of 
five miles of his former restaurant. '^^ Subsequently, Samoilis bought out 
Radokis' interest, but Radokis did not sign a noncompetition agreement. 
Thereafter, Radokis opened a competing restaurant within the five mile radius 
and hired Kladis to do roofing work and landscaping."* 

Samoilis filed an action against both Kladis and Radokis seeking preliminary 
and permanent injunctions, damages, and a declaratory judgment with respect to 
Kladis' noncompetition agreement."^ The trial court found that Kladis had 
assisted Radokis in opening the competing restaurant by performing landscaping 
services and roofing work, directing a laborer with respect to work being done 
inside the building, and meeting with Radokis on the premises, thereby 
threatening harm to Samoilis in violation of the noncompetition agreement."^ 
The trial court entered a preliminary injunction against both Kladis and Radokis, 
from which Kladis and Radokis filed an interlocutory appeal."^ 

The court of appeals reversed and remanded for trial."* At the outset of its 
discussion of the merits, the court reiterated the essential difference between 
covenants not to compete in employment agreements and agreements for the sale 
of a business. Although both restrain trade to some degree, the former "are not 
favored in the law . . . [and] are strictly construed against the employer,""^ in 
part because of unequal bargaining power between employer and employee.'^^ 
Noncompetition provisions in the latter agreements, however, are not as "ill- 
favored"'^^ because of more equal bargaining power between the parties and the 



113. Kladis, 735 N.E.2d at 1218. 

114. Id. 

\ 1 5. Id. The named plaintiff was the corporation owned by Samoilis; however, for purposes 
of simplicity, the plaintiff is referred to as Samoilis. 

116. /^. at 1218-19. 

117. Mat 1219. 

1 18. Id. at 1221. It should be noted that Samoilis failed to file a brief for the appellee. 
Although the court of appeals was not required to develop appellee's argument, and could have 
reversed if it had found that the appellants made di prima facie showing of trial court error, it used 
its discretion to consider the merits of the case. Id. at 1219. 

119. M at 1220 (citations omitted). 

1 20. See id. For further discussion of employment of non-compete agreements, see infra Part 
VLB. 

121. Kladis, 735 N.E.2d at 1 220 (quoting Fogle v. Shah, 539 N.E.2d 500, 502 (Ind. Ct. App. 
1989)). 



2002] CONTRACTS AND SALES OF GOODS 1315 



business buyer's legitimate desire to preserve the goodwill of the business for 
which he paid by preventing the seller from competing for the same (and the 
latter' s former) customers. '^^ 

Kladis agreed that Samoilis had a protectible interest in the goodwill of the 
restaurant/^^ However, the factual issue was, in the court's words, whether 
Kladis had "reentered the market to compete for the same customers."'^"^ The 
court concluded that the activities in which the trial court found Kladis had 
engaged, without more, did not demonstrate that Kladis had reentered the 
restaurant business to compete for his former customers and, therefore, did not 
come within the prohibition of the noncompetition agreement. '^^ 

With respect to Radokis, the court stated that under Indiana law, "one not a 
party to a noncompetition agreement may be enjoined from assisting a party to 
such an agreement from breaching" that agreement. '^^ Since Samoilis had failed 
to demonstrate that Kladis had breached the agreement, the preliminary 
injunction against both Kladis and Radokis could not stand. ^^^ 

B. The "Blue-Pencil" and Noncompetition Agreements 
in Employment Contracts 

In Burk v. Heritage Food Service Equipment, Inc. , ^^* a former employer (Tri- 
State) brought an action to enjoin and to recover damages from two former 
employees (Burk and Rody) and their new employer (Bowman Aviation), for 
their alleged violation of noncompetition and confidentiality agreements 
contained in the employees' contracts of employment with Tri-State.'^^ At the 
very outset of its opinion, the court described its task as being "to revisit the 
complexities of restrictive covenants in employment agreements." '^° 

As conditions of their respective employments at Tri-State, both Burk and 
Rody signed identical noncompetition and confidentiality agreements.'^' In the 
noncompetition agreements, the employees agreed, in essence, that for a period 



122. Id. 

123. Id. 

124. Id 

125. Mat 1221. 

126. Id 
Ml. Id 

\ 28. 737 N.E.2d 803 (Ind. Ct. App. 2000). The plaintiff-former employer did business as Tri- 
State Business Services and is referred to throughout the court's opinion as "Tri-State." In order 
to avoid confusion for readers of the opinion, this discussion will also refer to plaintiff as "Tri- 
State." 

129. Id. at 810. Tri-State also sought damages for tortious interference with a contractual 
relationship, and defendants-former employees counterclaimed for violation of the Indiana 
Blacklisting Statute, iND. CODE § 22-5-3-2 (1998). Id. at 816-19. Neither of these issues is 
discussed here. 

130. Bwrife, 737 N.E.2d at 807-08. 

131. /c^. at 808-09. 



1316 INDIANA LAW REVIEW [Vol. 35:1297 



of two years following the termination of employment for whatever reason, he 
or she would not work for any competitor of Tri-State, would not solicit or 
acquire any current or past customers of Tri-State, and would not disclose, copy, 
or use any of Tri-State's marketing plans, ideas, product research or other trade 
secrets. '^^ In the confidentiality agreement, the employee agreed that all 
information, training procedures and customer information was of a proprietary 
nature and that he or she would keep all such information confidential.'" 

Tri-State was in the electronic data storage business. Burk had worked for 
Tri-State as a clerical employee. Her duties included feeding documents into a 
computer scanner, but "she did not have access to or knowledge of Tri-State's 
customer pricing information."'^* She left Tri-State and became the office 
manager of its competitor. Bowman, where her duties varied considerably from 
those at Tri-State. '^^ The trial court did not enter an injunction against Burk; her 
appeal was based on issues not pertinent to the present discussion. '^^ 

Rody, as a salesman for Tri-State, had "significant contact with Tri-State's 
past, current, and prospective customers," had access to customer lists, and was 
trained in Tri-State's marketing procedures. '^^ Following his termination, he was 
hired by Bowman as its national sales manager and was ultimately charged with 
developing and selling Bowman's new electronic record storage services that 



1 32. Id. The pertinent parts of the employment agreement were as follows: 

2. Covenants Against Unfair Competition and Disclosure of Confidential Information, 
a) Employee agrees that during the term of employment, and for a period of two (2) 
years following the termination of Employment for whatever reason by any party 
thereto. Employee will not, directly or indirectly, do any of the following: 
i) Own, manage, control or participate in the ownership, management or control of, 
or be employed or engaged by or otherwise affiliated or associated as a consultant, 
independent contractor or otherwise with any corporation, partnership, 
proprietorship, firm, association or other business entity which competes with, or 
otherwise engages in any business of the Corporation . . . ; 
ii) Induce, solicit or acquire any current or past customers of the Corporation in the 
territory where the Corporation has or is currently conducting business as of the date 
of the execution of this Agreement for the purpose of engaging or soliciting sales, 
selling or competing with the Corporation in its business; . . . 
v) Disclose, divulge, discuss, copy or otherwise use or suffer to be used in any 
manner in competition with, or contrary to the interests of the Corporation, the 
marketing plans or strategies, inventions, ideas, discoveries, product research or 
engineering data, if any, or other trade secrets, pertaining to the business of the 
Corporation .... 



Id. 




133. 


Id at 809. 


134. 


Id 


135. 


Id 


136. 


See supra noit 129. 


137. 


BMr/:,737N.E.2dat809, 



2002] CONTRACTS AND SALES OF GOODS 1317 



competed with Tri-State's business. One of Bowman's new customers had been 
a prospective customer of Tri-State during Rody's prior employment and had 
become a customer of Tri-State after Rody had left.'^" The trial court enjoined 
Rody and Bowman from providing data storage services to entities that had been 
customers during Rody's employment at Tri-State. '^^ 

In reviewing the decision of the trial court, the court of appeals set forth what 
may be described as an outline of the law of enforceability of employees' 
covenants not to compete. Such covenants are in restraint of trade, are not 
favored in the law, are to be construed most strictly against the employer, and are 
to be enforced only if reasonable."*^ A finding with respect to reasonableness is 
to be based on whether the employer has a legitimate, protectible interest, 
whether the scope of protection is reasonable as to time, geography, and type of 
activity prohibited, and whether "'the former employee has gained a unique 

competitive advantage or ability to harm the employer '""*' Using a process 

called "blue-penciling," "if a covenant is clearly divisible into parts, and some 
parts are reasonable while others are unreasonable, a court may enforce the 
reasonable, severable parts''"*^ by striking the severable, unreasonable parts.'^^ 
However, the court may not redraw unreasonable provisions to make them 
reasonable under the guise of interpretation or "blue-penciling," "'since this 
would subject the parties to an agreement they have not made.'"''*^ 

Applying the foregoing analysis, the court of appeals found that the 
noncompetition clause in paragraph 2(a)(i) of the employment agreement was 
overbroad and unenforceable because it prohibited Rody from working for any 
competitor of Tri-State in any capacity whatever. In an effort to interpret the 
clause so as to furnish reasonable protection to the former employer, the trial 
court had impermissibly rewritten the clause by adding a term and narrowing its 
scope to a restriction of employment in any '"competitive capacity.'"'*^ 

Turning its attention to the trade-secrets clause in paragraph 2(a)(v) of the 
employment agreement, the court noted the four general characteristics of a 
protectible trade secret: "1) information; 2) deriving independent economic 
value; 3) not generally known, or readily ascertainable by proper means by others 
who can obtain economic value from its disclosure or use; and 4) the subject of 
efforts, reasonable under the circumstances to maintain its secrecy."'** Although 
the trial court had found that the identities of Tri-State's customers were easily 
ascertainable from the telephone directory, publicly known, and, therefore, not 
trade secrets, that court also found that Rody had breached the trade secrets 



138. Mat 810. 

139. Id 

140. Mat 811. 

141. Id. (quoting Silsz v. Munzenreider Corp., 41 1 N.E.2d 700, 705 (Ind. Ct App. 1980)). 

142. Id. 

143. Id 

144. Id (quoting Smart Corp. v. Grider, 650 N.E.2d 80, 83 (Ind. Ct. App. 1995)). 

145. Mat 812. 

146. Mat 813. 



1318 INDIANA LAW REVIEW [Vol. 35:1297 



clause by using the marketing information and sales strategy he had learned while 
employed at Tri-State.'"*^ Notwithstanding the apparent conflict between these 
two findings, the court of appeals ruled that one of them was sufficient to support 
the trial court's injunction against Rody from using any of Tri-State's marketing 
information or sales strategy.*'** 

Finally, with respect to the nonsolicitation clause in paragraph 2(a)(ii) of the 
employment agreement, the court of appeals ruled that the trial court had 
properly "blue-penciled" the clause.'"*^ As originally written, the clause would 
have prohibited Rody from soliciting and selling to Tri-State's former or present 
customers any goods or services even if unrelated to Tri-State's business. The 
use of the "blue pencil" to delete the phrases "or past" "engaging or soliciting 
sales," or "selling" which the court of appeals deemed severable, meant that the 
overbreadth of the clause was eliminated and that Rody and Bowman would be 
prohibited for fourteen months from competing for the business of entities who 
had been customers of Tri-State during Rody's employment with Tri-State.'^® 

Courts and scholars have hotly debated the use of the "blue pencil" in 
employment contract cases. '^' The dispute usually revolves around the issue of 
whether employers will draft overbroad restrictions to act in terrorem in order 
to discourage litigation by former employees without true regard for the 
protectible interest of the employer. '^^ Some states have refused to follow the 
"blue pencil" rule even in cases of clear severability or the presence of 
severability clauses. '^^ However, it has also been acknowledged that it is 
difficult for employers to draft individually appropriate noncompetition 
agreements for each employee based on his or her duties at the time of 
employment, or as those duties change thereafter.'^"* It has been suggested, 
therefore, that if the interest of the employer merits protection and the employer 
appears to have acted fairly, the covenant should be "tailored" to give reasonable 
protection to the employer with minimum inconvenience to the employee. *^^ 
However, this approach will likely act even more in terrorem than the "blue 
pencil" approach because employers will draft the broadest restrictions with the 
knowledge that the court will modify the contract if necessary. '^^ 

Without engaging in a lengthy analysis of the law of noncompetition 



147. M. at813-14. 

148. /(/.at 814. 

149. /^. at 814-15. 

150. /^. at 815-16. 

151. Harlan M. Blake, Employee Agreements Not to Compete, 73 HaRV. L. Rev. 625, 68 1 -82 
(1960). 

152. Id. 

153. See, e.g., Gary P. Kohn, Comment: A Fresh Look: Lowering the Mortality Rate of 
Covenants Not to Compete Ancillary to Employment Contracts and to Sale of Business Contracts 
in Georgia, 31 EMORY L.J. 635, 693 (1982). 

1 54. See Blake, supra note 1 5 1 , at 683. 

155. See id.; see also Kohn, supra noiQ 153,694-9^. 

1 56. See E. ALLEN Farnsworth, CONTRACTS § 5.8, at 357 (3d ed. 1 999). 



2002] CONTRACTS AND SALES OF GOODS 1319 



provisions in employment agreements, '^^ it appears that Indiana has followed a 
reasonable approach. The heavy burden remains on the employer to demonstrate 
that it has a protectible interest and that the former employee has threatened to 
violate that interest. If the employer has overreached by requiring an agreement 
more broadly drafted than necessary to protect its interest, the court should not 
rewrite that agreement. "Blue penciling" should be limited to clearly severable 
provisions, and the burden will also be on the employer to demonstrate that 
severability will not do violence to both its interest and the understanding of the 
parties. 



1 57. For a more complete discussion of covenants not to compete in Indiana, see John W. 
Bowers et al., Covenants Not to Compete: Their Use and Enforcement in Indiana, 3 1 Val. U. L. 
Rev. 65(1996). 



Corporate Law: A Year in the Life 
OF Indiana Corporate Law 



Leah M. Chan* 



Introduction 

The area of corporate law is a broad area, as it can expansively be defined as 
the law that affects incorporated businesses. Within this definition, other areas 
of law such as contract, agency and tort law are included because corporations 
are affected by these laws in one form or other. However, this Article will 
address only a narrow slice of corporate law, including issues of shareholder 
lawsuits, the well-established corporate doctrine of piercing the corporate veil, 
sections of the Indiana Business Corporation Law and sections of the Indiana 
Securities Act. 

I. Shareholder ACTIONS 

One of the more dynamic issues in corporate law is the area of shareholder 
actions. In 1995 and again in 1998, Congress passed legislation intending to 
reform the area of securities litigation, with the goal of protecting defendant- 
corporations from their overly litigious shareholders (and their equally overly- 
eager lawyers).' These reforms, although they apply to both public and closed 
corporations, were aimed at curbing frivolous lawsuits brought against public 
corporations.^ The focus in Indiana for the past few years, however, has been on 
closed corporations and defining the ways in which the shareholders of such 
corporations may bring suit. 

In general, a shareholder is required to file a derivative action when actions 
taken by the corporation itself, or taken by the officers or directors on behalf of 
the corporation, resulted in harm to the corporation. The reasoning behind the 
derivative action is that the cause of action the shareholder is alleging is one that 
belongs to the corporation, not to the shareholder individually.^ This separation 
of rights can become confusing, especially if the rights seemingly arise from 
violations of both shareholders' rights and corporation rights. 

There are special procedural steps a shareholder must take to perfect the 
derivative action.* One of these steps requires the shareholder to make a demand 
on the board of directors to bring suit. The shareholder must allege that she has 



♦ Judicial Clerk to the Honorable Frank Sullivan, Jr., Indiana Supreme Court. B.A., 1998, 
The George Washington University; J.D., 2001, New York University School of Law. The 
opinions expressed are those of the author. The author wishes to thank Alison Chestovich for her 
help with the preparation of this Article. 

1. See 15 U.S.C. § 78u-4 (2001); see also Dominic Bencivenga, Appeal Reveals Reform 
Act's Tortured History, N.Y.L.J., June 11, 1998, at 5; Elizabeth Strong, How the Courts & 
Congress Are Changing Securities Litigation, N.Y.L.J., Mar. 4, 1999, at 1. 

2. Bencivenga, supra note 1, at 5. 

3. G&NAircraft, Inc. v.Boehm, 743 N.E.2d 227, 234 (Ind. 2001). 

4. S'eelND.R. Trial P. 23.1. 



1322 INDIANA LAW REVIEW [Vol. 35:1321 



made this demand in her complaint.^ In addition, should the corporation establish 
a committee of disinterested directors or persons to investigate the corporation's 
rights and remedies,^ the court may suspend proceedings on the underlying 
derivative action until the investigation is completed.^ If the committee finds that 
there have been no violations, or finds that the lawsuit is not in the best interest 
of the corporation, the court "shall" presume these findings conclusive as to the 
suing shareholders.^ Unless the shareholder can prove that the committee 
members were either not disinterested or the investigation was not conducted in 
good faith, the shareholder will find herself without recourse.^ 

Compliance with these procedures is appropriate when the corporation is a 
public company, with its shares traded on a national market. After all, if the 
shareholder is dissatisfied at any point in the process, the shareholder can simply 
sell her shares on the market. However, withdrawal is not so easy for an unhappy 
shareholder in a closed corporation. The Indiana Supreme Court gave 
recognition to this aspect of closed corporations in its 1995 decision, Barth v. 
Barth}'' 

The court in Barth held that there are certain situations when a shareholder 
of a closed corporation should be allowed to bring a direct action, instead of a 
derivative one.'' In deciding to do this, the court followed a nationwide trend 
and a path also suggested by the American Law Institute.'^ Barth stated that in 
a closed corporation, shareholders are "more realistically viewed as partners, and 
the formalities of corporate litigation may be bypassed."'^ There are three 
situations in which a direct action can proceed, instead of a derivative one. A 
direct action will be allowed when ( 1 ) such an action will not unfairly expose the 
corporation or other defendants to several lawsuits; (2) the direct action will not 
"materially prejudice the interests" of the corporation's creditors; or (3) the 
action will not interfere with a "fair distribution" of any recovery "among all 
interested persons.'"'* It appears from the case law applying the rule of Barth that 
a finding of any one of these situations can preclude a direct action.'^ In this 
survey period, there have been three cases that have dealt with this issue and 



5. Id.\ see also IND. CODE § 23-1-32-2 (1998). 

6. iND. CODE §23-1-32-4 (1998). 

7. Id. § l-iA-^l-l. 

8. Id. § 23-l-32-4(c). 

9. Id. The official comments cite the businessjudgment rule as the underlying rationale for 
presuming the disinterested committee's findings as conclusive, analogizing the decision to pursue 
legal claims to "other questions of corporate policy and management." Id. at official cmt. 

10. 659 N.E.2d 559 (Ind. 1995). 

11. /t/. at 561. 

12. Id at 562; see also G & N Aircraft, Inc. v. Boehm, 743 N.E.2d 227, 236 (Ind. 2001). 

13. 5flr//2,659N.E.2dat561. 

14. Mat 562. 

15. See, e.g., Riggin v. Rea Riggin & Sons, Inc., 738 N.E.2d 292, 308 (Ind. Ct. App. 2000) 
(applying the multiplicity of lawsuits situation). 



2002] CORPORATE LAW 1323 



Barth}^ 

A. A Reaffirmation o/Barth and Available Remedies: 
G & N Aircraft, Inc. v. Boehm 

In the early 1990s, G & N Aircraft was a closely held Indiana corporation 
with five shareholders.'^ Paul Goldsmith, the founder, and his son, owned about 
thirty-two percent; Eric Boehm owned thirty-four percent and Richard Gilliland 
and James McCoy each owned 16 2/3%.'^ The five shareholders served as the 
board of directors for G & N, and Goldsmith, Boehm and Gilliland served as 
officers, with Goldsmith and Boehm as employees of G & N.'^ Goldsmith was 
also the sole-owner of other corporations that dealt with G & N, in addition to 
being G&N'slandlord.'° 

In the mid 1990s, Goldsmith's other corporations, and himself personally, 
were in fmancial difficulty.^' Goldsmith attempted to consolidate his 
corporations with G & N as a way to lighten his financial burden.^^ Goldsmith 
had G & N appraised, and its value was approximated at $961 , 000.^^ His initial 
attempt to consolidate failed because a bank rejected his application for a loan 
to buy out the other shareholders.^"* A year later. Goldsmith again initiated a 
consolidation effort.^^ In 1 995, Goldsmith took coercive steps to force Gilliland, 
McCoy and Boehm to sell their shares to Goldsmith.^^ One of these tactics 
included an eviction threat from Goldsmith, as landlord of G & N, to evict them 
from this hangar.^^ This persuaded Gilliland and McCoy to sell their shares to 
Goldsmith, but they remained on the board.^* 

Goldsmith had become the majority shareholder of G & N, but he could not 
get Boehm to sell his shares. Goldsmith then tried other methods to force Boehm 
to sell his shares by threatening Boehm with the fact that when G & N 
consolidated with Goldsmith's other companies, G & N would suffer a financial 
loss.^^ Goldsmith also cut off cash distributions from G & N and ultimately fired 



1 6. G <fe N Aircraft. Inc., 743 N.E.2d at 227; Hubbard v. Tomlinson, 747 N.E.2d 69 (Ind. Ct. 
App. 2001); /?<ggm, 738 N.E.2d at 292. 

17. G&N Aircraft. Inc., lAZ'H.E2^2Am. 

18. Id 

19. Id. 

20. Id at 232. 

21. See zfl?. at 232-33. 

22. Id 

23. Id 2X222. 

24. Mat 232-33. 

25. Mat 233. 

26. Id 

27. Id 

28. Mat 232-33. 

29. Id 



1324 INDIANA LAW REVIEW [Vol. 35:1321 



Boehm and changed Boehm's office locks.^^ 

Boehm filed an action against Goldsmith and G & N for both direct and 
shareholder derivative claims.^' The trial court found for Boehm in a four-day 
bench trial and awarded Boehm a variety of remedies, including a forced sale of 
Boehm's shares to Goldsmith, interest on back dividends, punitive damages, and 
attorney's fees.^^ In a unanimous decision, the supreme court affirmed in part 
and reversed in part.^^ 

As an initial matter, the court clarified the rights held by the corporation and 
those held by an individual shareholder in the contexts of direct and derivative 
actions. The court, adopting a New York-type definition, found that the rights 
held by each dictate the type of action to bring.^"* A direct action should be based 
on the rights the shareholder finds in the corporation's articles of incorporation, 
bylaws or in state corporate law.^^ In contrast, a derivative action should be 
brought by the shareholder on behalf of the corporation for a right that the 
corporation has failed to act upon.^^ The court then reaffirmed Barthy restating 
the three situations where a direct action was not appropriate in a closed 
corporation.^^ 

The court divided Boehm's claims into three categories,^* the division of 
which center around Goldsmith in his different capacities at G <& N and the 
alleged breach in his fiduciary duties to G & N and/or Boehm. The first of the 
three are Boehm's claims that Goldsmith as an officer and director breached his 
fiduciary duties to G & N.^^ These claims are derivative because G & N itself 
could have brought action against Goldsmith."*^ Goldsmith argued that the trial 
court erred by allowing Boehm to proceed on a direct action that was based on 
derivative claims."*' However, because G & N was a closed corporation 
controlled by Goldsmith, such a lawsuit would be unrealistic.^^ But Goldsmith 
argued that each of the situations outlined in Barth apply so that Boehm's direct 
action should be dismissed."*^ The court analyzed each of these, finding that none 
of the situations were present and the Barth exception applied to Boehm's 



30. 


Id. at 233. 


31. 


Id 


32. 


Id at 234. 


33. 


Id at 246. 


34. 


Id at 235 (citing Schreiber v. Butte Copper & Zinc Co., 98 F. Supp. 106, 1 12 (S.D.N. Y. 


1951)). 




35. 


Id 


36. 


Id 


37. 


Id at 236. 


38. 


Id 


39. 


Id 


40. 


Id at 237. 


41. 


Id 


42. 


Id 


43. 


Id 



2002] CORPORATE LAW 1325 



lawsuit."^ The second and third categories of Boehm's claims alleged that 
Goldsmith breached his fiduciary duty to Boehm as an officer and director and 
also as a majority shareholder/^ 

The court found no merit in Boehm's allegation that Goldsmith breached his 
duties to G & N as an officer and director/^ Although his transactions taken with 
respect to G & N were self-interested transactions, these actions were not 
concealed and there was no evidence to suggest that these actions harmed G & 
N."*^ This finding comports with Indiana's highly deferential business judgment 
rule/' 

The second and third categories alleged breaches of fiduciary duty by 
Goldsmith, in his capacities of officer, director, and majority shareholder, to 
Boehm as a minority shareholder/^ The court recognized that Goldsmith's 
actions were taken wearing his different hats — as landlord, majority shareholder, 
and officer and director/^ But the court clumped together Goldsmith's roles and 
addressed his actions in two parts — ^the first, before Goldsmith became a 
controlling shareholder and the second, actions taken as a majority shareholder/^ 

Prior to gaining control of G & N, Goldsmith made an offer for Boehm's 
shares, and Boehm alleged that this price was significantly less than the 
appraised value of Boehm's shares and less than what Boehm originally paid to 
purchase the shares/^ In and of itself, the court found that there is no duty to 
purchase shares at a fair price/^ If, on the other hand, there were nondisclosure, 
fraud or oppression, then Boehm would have a claim based on the low price 
Goldsmith offered for Boehm's shares/'* Even though Goldsmith did not actually 
succeed in forcing Boehm out of G & N, Goldsmith did succeed in gaining 
control of the corporation, and the actions taken to force Gilliland and McCoy 
to sell their shares were wrongs to Boehm /^ 

The court agreed with the trial court that the eviction notice after Goldsmith 
resigned as president of G & N was a sham/^ This eviction threat and 
Goldsmith's entire plan to gain total ownership of G & N was an abuse of 
Goldsmith's office/^ The actions taken by Goldsmith as an officer and director 



44. Mat 237-38. 

45. Mat 236. 

46. See id. at 238-40. 

47. Mat 239. 

48. Id. at 240. As discussed in Part IV, infra, directors can be held liable in very limited 
situations. 

49. G*A^.4/rcrq/?. /«c.,743N.E.2dat236. 

50. Id^XlAX. 

51. Mat 241-44. 

52. IddHilAX. 

53. M 

54. M 

55. Mat 242. 

56. M 

57. M 



1326 INDIANA LAW REVIEW [Vol. 35:1321 



were not for any "proper business purpose" designed to benefit the corporation, 
but rather to force Boehm out so that Goldsmith could finalize his consolidation 
plans.^* As a result, Boehm had a valid claim with respect to these actions. 
Goldsmith's actions taken after he became a majority shareholder were to render 
Boehm's shares worthless.^' Therefore, Goldsmith had breached his fiduciary 
duty by subordinating the corporation's interests to his own.^ 

Finally, the court discussed the remedies available to Boehm. As the 
"shareholder derivative action is a creature of equity"^' in Indiana, the court saw 
no reason why trial courts cannot be flexible when fashioning remedies for close 
corporation wrong-doings.^^ Therefore, the court upheld the forced sale of 
Boehm's shares to Goldsmith that the trial court ordered.^^ But the court 
cautioned future application of this remedy, as "[t]his remedy should be 
exercised only after careful thought. It amounts to a forced withdrawal of capital 
from the enterprise if the enterprise itself is the only realistic source of funding 
the buyout."^'* 

Judicially ordered dissolution is a drastic remedy, and one commentator 
describes this holding as "sweeping change to established law regarding 
shareholder disputes."^^ Prior to G d^ N Aircraft, Inc., the proper remedy was 
damages, and in cases of mergers and take-overs, the only remedy was under the 
dissenters' rights statute.^^ This same commentator predicts that this decision 
might have a "drastic impact" on future dealings between shareholders in a 
closed corporation.^' 

The court also upheld the punitive damages awarded because of Goldsmith's 
deliberate actions which were also found to be malicious and oppressive.^* In 
addition, Boehm was awarded attorney's fees but only as to the frivolous 
counterclaim asserted by Goldsmith.^^ However, Boehm was not entitled to 
attorney's fees for the derivative claims because the court upheld Boehm's 



58. Id. 

59. Id at 242-43. 

60. Id 

61. Mat 243-44. 

62. Id ax 244. 

63. Mat 243. 

64. Mat 244. 

65. Leanne Garbers, One Bad Apple: How One Evil Actor Can Rewrite Corporate Law, IND. 
Law., Aug. 29, 2001, at 25. 

66. Id 

67. Id. This prognosis seems a bit pessimistic. Situations analogous to the facts of this case 
are few and far between. It is rare to see a corporate officer, director and shareholder act in such 
a coercive manner and with a disregard for corporate formality liice Goldsmith did in this case. For 
other situations where there is no malicious intent, the business judgment rule will generally apply 
to deny a remedy to unhappy shareholders. 

68. G&N Aircraft, Inc., 743 N.E.2d at 245. 

69. Id 



2002] CORPORATE LAW 1327 



actions as direct claims, not derivative ones.^° 

B. When Barth Does Not Apply: Hubbard v. Tomlinson^' 

This is a straight-forward case involving the appl ication of Barth and G&N 
Aircraft, Inc. Eli Tomlinson was a shareholder of Multimedia, a closely-held 
bankrupt corporation, consisting of five shareholders.^^ Tomlinson filed suit 
against Joseph Hubbard, another shareholder, and S & A, an accounting firm that 
had provided the corporation services.'^ Tomlinson alleged that Hubbard had 
breached fiduciary duties, and had conspired with S & A to "'loot' the 
corporation."^'* The trial court denied S & A's motion for summary judgment, 
and the court of appeals accepted jurisdiction of S & A's interlocutory appeal of 
this denial. 

The court of appeals reversed, holding that Tomlinson had to bring his claims 
as a derivative action, as he was alleging harms to the corporation from an 
outside party, namely S & A.^^ Furthermore, the court conducted a Barth 
analysis and found that all three situations existed in Tomlinson' s case — ( 1 ) there 
were three other shareholders who could conceivably bring suit against 
Multimedia, subjecting it to several lawsuits; (2) Multimedia had more than fifty 
creditors, and their interests would be harmed by a direct action since Multimedia 
was insolvent; and (3) Tomlinson requested that the recovery be directly awarded 
to him, and not the corporation or shareholders.^^ 

C. When Does a Class Action Plaintiff in a Derivative Suit Fairly 

and Adequately Represent Similarly Situated Shareholders? : 

Riggin V. Rea Riggin & Sons, Inc.^^ 

Riggin addressed several issues, many procedural, in the context of a 
shareholder derivative and direct action. Although a procedural matter, one of 
the important parts of this case was the discussion of when a shareholder, 
bringing a derivative action on behalf of the corporation and all other similarly 
situated shareholders, can be deemed to fairly and adequately represent the 
class.^* This was a matter of first impression for the Indiana Court of Appeals 
and is fairly relevant to corporate litigation.^^ 



70. The court briefly discusses Boehm's vicarious liability claims against G & N for 
Goldsmith's actions. The court did not hold G&N liable under this theory, finding that the logic 
behind it became circular. Id. at 245-46. 

71. 747 N.E.2d 69 (Ind. Ct. App. 200 1 ). 

72. /^. at70. 

73. Id 

74. Id 

75. Id at 72. 

76. Id 

77. 738 N.E.2d 292 (Ind. Ct. App. 2000). 

78. See id at 302-04. 

79. The other procedural issues raised in the case, such as contempt, paying witness fees, and 



1328 INDIANA LAW REVIEW [Vol. 35:1321 



Rea Riggin & Sons, Inc. was formed in 1927 by Rea and Nellie Riggin.*® 
Since that time, the board of directors has always consisted of Riggin family 
members.^' In 1997, there were twenty-nine shareholders, including Richard 
Riggin.*^ Richard, unhappy with the actions of the board and other shareholders, 
filed both a derivative action and a direct action against Rea Riggin & Sons, Inc. 
and the board members individually.*^ After Richard suffered a series of mishaps 
involving attorneys wishing to withdraw from representation, the trial court 
finally granted summary judgment in favor of the corporation. Richard was also 
found in contempt of court for not paying deposition fees of the corporation's 
accountant and was in the custody of the Delaware County Sheriff until he paid 
the fee.*'^ On appeal, Richard contended that the grant of summary judgment in 
favor of the corporation was improper.*' 

As a preliminary matter, the court of appeals considered the burden of proof 
required of Trial Rule 23.1, which governs derivative shareholder actions, as 
opposed to Trial Rule 23, which governs class actions.*^ Relying on an 
interpretation of the Federal Rules of Civil Procedure by the Fifth Circuit,*^ the 
court of appeals held that in a derivative shareholder action, the burden of proof 
was on the defendants to show that the plaintiff-shareholder did not fairly and 
adequately address the interests of similarly situated shareholders.** 

Next, the court divided its inquiry of this issue into two parts — ^first, the court 
defined what constituted similarly situated shareholders, and second, the court 
set out factors to consider whether the plaintiff fairly and adequately represented 
the class. As to the first prong of the inquiry, the court rejected both the 
corporation's suggested meaning (all the shareholders of the corporation should 
be similarly situated in order to have a proper class) as well as Richard's 
proposed meaning (those shareholders who support the lawsuit).*^ The court 
instead adopted several factors used by federal courts in similar situations.^ 

The court instructed trial court judges, when defining the class of similarly 
situated plaintiffs, to exclude two types of shareholders: those named as 



motions for continuance will not be discussed in this Article. 



80. 


Riggin, 738 N.E.2d at 299 


81. 


Id. 


82. 


Id. 


83. 


Id 


84. 


Id 


85. 


Id 



86. /^. at 299-301. 

87. The court of appeals, explaining its reason for relying heavily on the interpretation of the 
Federal Rules of Civil Procedure, stated that "[djue to the similarity between T.R. 23.1 and the 
corresponding Federal Rule, we will utilize federal law in interpreting T.R. 23.1." Id. at 300. 

88. Mat 301. 

89. Id at 302. 

90. Id. at 303. In his analysis, Judge Sullivan relies heavily on a 1 995 article, Mary Elizabeth 
Matthews, Derivative Suits and the Similarly Situated Shareholder Requirement, 8 DePaul BUS. 
L.J. 1 (1995). 



2002] CORPORATE LAW 1329 



defendants in the suit, and those in financial or personal conflict with the 
corporation.^' In considering the opposition to the plaintiff-shareholder, the trial 
court judge should merely look at that as a factor in determining the adequacy of 
the representation, not in defining the class itself'^ The shareholders not 
excluded were then considered the class of similarly situated shareholders. 

After defming the class, the court instructed trial court judges to then look 
at the adequacy of the plaintiff-shareholder representation.^^ As set forth by Trial 
Rule 23.1, the plaintiff-shareholder must "fairly and adequately represent the 
interests of the shareholders or members similarly situated in enforcing the right 
of the corporation or association."^"* The court elected to adopt the eight factor 
test set forth by the Ninth Circuit in Larson v. Dumke!^^ However, the court 
cautioned that, as with any multi-factor test, the trial court judge should not focus 
in on one factor to the exclusion of others.^^ The overall goal of the inquiry was 
to determine adequacy of the representation so that the plaintiff-shareholder's 
suit may proceed.^^ 

The eight factors that the trial court judge should consider were: ( 1 ) whether 
the plaintiff is the true party in interest; (2) whether the plaintiff is familiar with 
the lawsuit or exhibits unwillingness to become familiar; (3) the degree of 
control the plaintiffs attorney exercises over the lawsuit; (4) the degree of 
support the plaintiff receives from the other shareholders; (5) whether the 
plaintiff is personally committed to the lawsuit; (6) the remedy sought by the 
plaintiff; (7) the "relative magnitude of the plaintiffs personal interest in the suit 
as compared to his interest in the derivative action;" and (8) whether there is any 
vindictiveness on the part of the plaintiff toward defendants. As with any multi- 
factor test, several factors overlap.^* 

The court applied this test, in light of the evidence presented by both parties 
in the summary judgment motion. The court eventually concluded that summary 
judgment was inappropriate because the corporation did not meet its burden of 
proof in showing that there were no material issues in dispute.^^ The court found 
that there was an unresolved question of whether Richard was a fair and adequate 
representative of the putative class of Rea Riggin & Sons' shareholders. ^°° 
Although the corporation had presented evidence that there were some 
shareholders in the court-defined class who opposed Richard's claims, the court 



91. /?/ggm, 738 N.E.2d at 304. 

92. Id. 

93. Id. 

94. Ind.T.RuleP. 23.1. 

95. Riggin, 738 N.E.2d at 304 (referencing Larson v. Dumke, 900 F.2d 1 363, 1 367 (9th Cir. 
1990)). 

96. /^. at 305. 

97. Id 

98. Id. For example, factors ( 1 ) and (3) go to the same point — is this the plaintiffs action 
or another person's action? Factors (2) and (5) are essentially the same questions. 

99. /^. at 312. 
100. /t/. at 307. 



1330 INDIANA LAW REVIEW [Vol. 35:1321 



found that this was not sufficient evidence to satisfy whether Richard should 
proceed as the class representative. '°' 

As to Richard's direct claims, the court applied the Earth factors after 
concluding that Rea Riggin & Sons was a closed corporation. •^^ The court held 
that to allow Richard to proceed with his direct claims would unfairly expose the 
corporation to more than several lawsuits.'^^ There were seven named 
defendants, all of whom were shareholders. '^'^ Aside from Richard, that left 
twenty-one shareholders as potential plaintiffs in suits against the corporation. 
Therefore, the court held that the trial court's grant of summary judgment on this 
issue was appropriate.'^^ 

II. Dissenters' Rights and Control Share Acquisition Statutes 

The Indiana Business Corporation Law ("I BCL") includes several provisions 
that limit the liability of directors for their transactions taken on behalf of the 
corporation.'*^ These same provisions limit the ability of a shareholder in a 
publicly traded corporation to object to certain actions taken by their corporation. 
Two such provisions of the IBCL that have generally been the subject of 
litigation are the Dissenters' Rights Statute ("DRS"), Indiana Code sections 23- 1 - 
44- 1 to -20, and the Control Share Acquisitions statute ("CSAS"), Indiana Code 
sections 23-1-42-1 to -11. 

The DRS, and in particular, Indiana Code section 23-1-44-8, is the sole 
remedy for shareholders in a closed corporation who are unhappy with the 
corporation's merger, share exchange, a substantial sale of all the corporation's 
assets, or a control share acquisition under section 23- 1 -42 (as discussed below). 
The remedy available to the unhappy shareholder is the right to demand the 
corporation buy back her shares and to demand an appraisal proceeding if the 
shareholder does not agree with the valuation of her shares made by the 
corporation.'®^ 

Subsection (c) of section 23-1-44-8, the heart of the DRS, makes patently 
clear that the remedy provided for in the statute is an exclusive one. The 
shareholder cannot protest the merger or other action in a separate proceeding, 
and should the shareholder bring such a separate suit, the suit will be barred by 
operation of the DRS.'°* In addition, any allegations of wrong-doing during the 



101. 


Id. 


102. 


Id. at 308 


103. 


Id 


104. 


Id 


105. 


Id 



106. The IBCL, passed by the legislature in 1986, was a wholesale revision of the former 
General Corporation Act. The official comments, recognized as authoritative, reflect an overall 
desire to limit director liability. See Fleming v. Int'l Pizza Supply Corp., 676 N.E.2d 1051, 1054 
(Ind. 1997). 

1 07. Ind. Code §23-1 -44- 19(1 998). 

108. See Young v. Gen. Acceptance Corp., 738 N.E.2d 1079 (Ind. Ct. App. 2000). 



2002] CORPORATE LAW 1331 



execution of the corporation's plan, such as breach of fiduciary duty, must be 
brought up in the appraisal proceeding. '^^ If the shareholder does not bring up 
these issues in the appraisal proceeding, there will be no other venue for them. ^'° 

Moreover, shareholders in a publicly traded corporation are not entitled to 
this remedy. As the official comments state, "the policy reason for this exception 
is that the market itself establishes both a fair price for the shares and a means by 
which a 'dissenting' shareholder can sell his shares for that price."'" An 
interesting consequence of this preclusion is that since allegations of wrong- 
doing during the merger must be brought up in the appraisal proceeding, these 
shareholders might not get their day in court at all on these claims."^ 

The CSAS's purpose is to provide shareholders of a corporation with more 
than 100 shareholders (and other "substantial ties" to Indiana) a right to vote on 
an acquisition of stock that would give an entity a controlling portion of the 
corporation."^ Control shares are defined in Indiana Code section 23-1-42-1 as 
shares that would give the acquirer certain voting power in the election of the 
board of directors in three percentage ranges.""* The idea behind this right to 
vote is premised on the traditional right of shareholders to vote on fundamental 
corporate changes. ' '^ 

However, this statute applies only to just that — a fundamental change. The 
statute does not apply to shifts in ownership blocks, rather it applies to shifts 
from a multi-shareholder control of a corporation to a single-shareholder 
domination."^ The disinterested shareholders (those not involved in the 
controlling share acquisition) are permitted to vote on whether the new 
controlling shareholder will be given those voting rights, that but for the statute, 
the new controlling shareholder would have. This statute was upheld by the 
United States Supreme Court in CTSCorp. v. Dynamics Corp. ofAmericaV^ 



A. Failing to Follow DRS Procedures: Galligan v. Galligan 



118 



In late 1996, Irish Park, a family-owned Indiana construction business, was 
having financial difficulties."^ To solve these financial troubles, the majority 
shareholder, Thomas Galligan, who had previously been a director and president 



1 09. See id ; Fleming, 676 N.E.2d at 1 058; Settles v. Leslie, 70 1 N.E.2d 849, 853-54 (Ind. Ct 
App. 1998). 

no. F/emmg,676N.E.2datl058. 

111. iND. Code §23-M4-8(c) official cmt. (1998). 

1 12. See Am. Union Ins. v. Meridian Ins. Group, 137 F. Supp. 2d 1096, 1 102-03 (S.D. Ind. 
2001). 

113. iND. CODE §23-1-42, official cmt. (1998). 

114. M §23-1-42-1. 

115. Id. 

1 16. See id; see also Galligan v. Galligan, 741 N.E.2d 1217 (Ind. 2001). 

117. 481 U.S. 69, 94 (1987). 

118. 741 N.E.2d 1217 (Ind. 2001). 

119. Id at 1220. 



1332 INDIANA LAW REVIEW [Vol. 35:1321 



of Irish Park, decided to sell all of Irish Park's assets to Golden Shamrock, a 
corporation owned by Larry Rice.'^° Although the court was not entirely sure of 
Rice's role in Irish Park at the time of the lawsuit, it appeared that Rice had been 
a long-time employee and member of Irish Park board of directors and possibly 
the president at the time of the sale. In conducting its sale to Golden Shamrock, 
Irish Park did not comply with any of Indiana's statutory requirements for a 
corporation's sale of substantially of all its assets.'^' 

Four of Galligan's children were minority shareholders in Irish Park, and 
three objected to the sale based on a variety of claims, including fraud and breach 
of fiduciary duty.'^^ In response, Galligan sent a notice to all the shareholders 
indicating that a meeting would be held on March 11,1 998, at which time a new 
board was to be elected and the sale discussed. '^^ On March 1 1 , Galligan was the 
only shareholder present at this meeting, although the three dissenting minority 
shareholders had served a "Shareholders' Notice Asserting Dissenters' Right" on 
all the potential members of the board of directors, including Galligan. '^^ At this 
meeting, Galligan elected himself the sole director of Irish Park, acting as the 
majority shareholder. Galligan subsequently elected himself as president and 
secretary of Irish Park, acting as a director. '^^ Finally, as the majority 
shareholder, Galligan voted to ratify the sale of Irish Park to Golden Shamrock.'^^ 

The court found that although Irish Park's initial actions with respect to the 

sale of its assets were defective, the ratification of the sale by Galligan as 

majority shareholder in the March 1 1 meeting was sufficient to render the sale 

proper. '^^ However, the court went on to find that Irish Park had subsequently 

failed to follow any of the procedures with respect to its dissenting 

shareholders.'^* More specifically, Irish Park had failed to send out a notice 

detailing the steps that the dissenting shareholders needed to take in order to 

receive payment for their shares, as befitted their only remedy under Indiana's 
DRS.*29 

This situation was a novel one for the court to consider. The DRS outlines 
specifically the remedy when dissenters fail to follow procedures: they forfeit 
their right to receive payment for their shares. However, the statute is silent on 
remedies when a corporation fails to follow the procedures. '^° The court found 
that it would be inequitable to keep the dissenters from being paid for their shares 
as "[tjhey cannot be held to have forfeited their rights by reason of the 



120. Id. 

121. Id. 

122. Id 

123. Id 

124. Id 

125. Id 

126. Id 

127. Mat 1222. 

128. /^. at 1224. 

129. Id 

1 30. Id at 1 225; IND. Code §23-1 -44- 1 3(c) ( 1 998). 



2002] CORPORATE LAW 1333 



corporation's ineptitude."'^' 

However, the court was concerned that a consequence of holding that the 
remedy for the corporation's failure to follow DRS was to allow dissenters to 
bring an action to compel the corporation to follow DRS procedures. First, this 
remedy could create a disincentive for the corporation to follow DRS procedures 
initially. And, as bringing an action to compel the corporation to act incurs legal 
expenses and fees, the remedy might even be a possible barrier for dissenters to 
ever receive payment. In order to stop such a fallout from this decision, the court 
held that should a corporation breach the statutory duty to follow procedures 
under DRS, like Irish Park did in this case, another cause of action arises from 
that failure because it is "an independent wrong that is not itself subject to the 
dissenters' rights provisions."'^^ 

This cause of action, the court was quick to point out, was not a "new" cause 
of action, but "[r]ather, we simply apply the commonly accepted principle that 
the directors may be liable for disregarding a statutory mandate to these unusual 
facts, where the directors failed to take the steps necessary to enjoy the safe 
harbor provided by the dissenters' rights statute."'" In further explanation of its 
holding, the court stated that the dissenting shareholders in this case could bring 
an action to force Irish Park to comply with the DRS.'^'* As to other remedies the 
plaintiffs could recover against Irish Park, the court found that if the plaintiffs 
could show that Irish Park's failure to comply with the DRS caused attorney's 
fees and other expenses, these could be recovered, including interest. '^^ And in 
the appraisal proceeding, the shareholders could bring up the alleged wrong- 
doings of Irish Park, but those claims were bound to only the appraisal 
proceeding, as per Fleming}^^ "Finally, if damages can be shown to have been 
caused by a breach of a statutory duty with respect to the dissenters' rights 
proceedings, the plaintiffs may bring a separate claim against the persons 
responsible."'^^ 

This final suggestion provoked a concurrence by Justice Sullivan who wrote 
merely to state that majority's recognition of a private cause of action for a 
breach of statutory duty was not necessary.'^* Instead, Justice Sullivan pointed 
to common law agency and contract principles cited by the official comments to 
Indiana Code section 23- 1 -36-2, wh ich shou Id be sufficient to remedy any breach 
of a statutory duty in situations such as these.'^^ 



131. 


Gfl///ga«,741N.E.2datl225. 


132. 


Id. at 1226-27. 


133. 


Id. at 1226. 


134. 


Id at 1227. 


135. 


Id 


136. 


Id 


137. 


Id 


138. 


Id. at 1228 (Sullivan, J., concurring) 


139. 


Id 



1334 INDIANA LAW REVIEW [Vol. 35:1321 



B. CSAS and DRS Applicability: Young v. General Acceptance Corp.^"*^ 

The plaintiffs in Young brought their action under the CSAS and the DRS. '"*' 
General Acceptance Corp. ("GAC") was a publicly traded corporation, with 
thirty percent of its outstanding stock publicly held.'*^ The rest of the stock was 
held by the two founding members, Malvin and Russell Algood, and six other 
Algood family members.''*^ In April 1997, GAC and the Algoods entered into a 
Stockholders' Agreement and Securities Purchase Agreement with Conseco and 
Capital American Life Insurance Company.''*'* The primary purpose of the two 
agreements was to provide a financing arrangement, and as long as there were 
debentures outstanding, Conseco would be guaranteed two positions on the GAC 
board of directors. '^^ 

Thisplan was carried out in July 1997. In September 1997 and March 1998, 
GAC entered into additional financing agreements with Conseco. '^^ Sometime 
after March 1998, Conseco presented a merger proposal to GAC's board, 
proposing a merger between GAC and a wholly-owned subsidiary of Conseco, 
CIHC.'*^ Shareholders, other than Conseco, would be bought out for thirty cents 
per share.*'** The common shareholders filed for a preliminary injunction, which 
was denied, and also filed actions under the CSAS and DRS."*^ The merger was 
consummated and plaintiffs continued with this suit.'^° 

The trial court granted defendant's summary judgment motion on plaintiffs' 
claims based on breach of fiduciary duty, finding them barred by the DRS.'^' 
The trial court also granted defendant's motion to dismiss plaintiffs' claims based 
on the CSAS.'" The court of appeals affirmed the trial court on all grounds. '^^ 

The first issue dealt with was the CSAS claim. After reviewing the purposes 
behind the statute, the court of appeals discussed its applicability. Through a 
reading of the official comments, and CTSCorp.^ the court of Ippeals held that 
the CSAS was meant to apply in hostile takeover situations.'^'* The court found 
that the transactions between GAC and Conseco were not hostile. '^^ 



140. 738N.E.2d 1 079 (Ind.Ct.App. 2000). 

141. /flf. atl082. 

142. Mat 1083. 

143. Id. 

144. Id. 

145. Id. at 1083-84. CALI was a wholly-owned subsidiary of Conseco. Id. 

146. Id 

147. Mat 1084. 

148. Id. The stock had been trading at $3.25 per share on April 10, 1997. Id. at 1083. 

149. Id at 1084. 

150. Id 

151. Mat 1085. 

152. Id 

153. Mat 1083. 

154. Mat 1087. 

155. Mat 1088. 



2002] CORPORATE LAW 1335 



Alternatively, the court found that even assuming hostility, there was no 
fundamental change in GAC's shareholder make-upJ^^ The common 
shareholders had always been a minority in the corporation, whether the majority 
shareholders were the Algoods or Conseco.'^' In addition, the court reasoned 
that the acquisition of shares by Conseco did not harm the common shareholders, 
because the common shareholders were always at a disadvantage in the decision 
making process of GAC, as the Algoods had been majority shareholders until the 
1997 and 1998 transactions.'^* 

Interestingly, the court of appeals did not look to the language of the statute 
to support its holding that the CSAS did not apply. The CSAS provides several 
exceptions to the applicability of the statute in section 23-1-42-2. Arguably, 
several of the exceptions could apply to the Conseco-GAC securities purchase 
agreement, depending on a reading of the agreement and the statute. '^^ 

The second issue the court of appeals reviewed was the trial court's grant of 
summary judgment in favor of defendant on plaintiffs' breach of fiduciary duty 
claims. The trial court found that all ten of plaintiff s contentions were barred 
by the DRS.'^° Summary judgment was also granted on the basis that plaintiffs' 
claims were derivative and their direct actions against GAC could not proceed.'^' 

Plaintiffs alleged that the DRS should not apply to them for three reasons: 
the violation of the CSAS voided the merger; the merger was void because of 
fraudulent statements in the proxy statement; and application of the DRS violated 
public policy considerations.'^^ The court of appeals upheld the application of 
the DRS to bar plaintiffs' breach of fiduciary duty claims, notwithstanding 
plaintiffs' three reasons to the contrary.'" Since the CSAS was addressed in part 
one of the opinion and was found to have not been violated, the court did not 
further discuss it in part two.'^ As to fraudulent statements in the proxy 
statement, the court held that even assuming the statements were fraudulent (as 
the court could fmd no support for plaintiffs' contentions that the statements 
were, in fact, fraudulent or misleading), fraud did not necessarily void a merger, 
but provided an additional matter to litigate within the DRS proceedings.'^^ 

Lastly, the court discussed plaintiffs' public policy argument as a basis for 
the decision not to apply the DRS in plaintiffs' situation.'^ Plaintiffs argued that 
the actions of GAC and Conseco were so "heinous" that by applying the DRS, 



156. Id. 

157. Id. 

158. Id 

1 59. The securities purchase agreement was apparently not made part of the record. Id. at 
1083. 

160. Mat 1089-93. 

161. /rf. at 1089. 

162. /(/.at 1090. 

163. Mat 1091-93. 

164. Mat 1091. 

165. Mat 1091-92. 

166. Mat 1092-93. 



1336 INDIANA LAW REVIEW [Vol. 35:1321 



the court would be sanctioning such heinous behavior. '^^ In dismissing this 
argument, the court provided a lengthy discussion of the public policy behind the 
statute, the discussion of which did not really reach plaintiffs' contention.'^* 

The court correctly acknowledged that the corporation, as the party that must 
initiate an appraisal proceeding under the statute, was also the party most 
interested in not paying dissenters anything for their shares. '^^ Although this 
works as a disincentive to hold up the corporation's responsibilities under the 
statute, the court pointed out that the penalty for not complying with the appraisal 
proceedings was for the corporation to pay the amount the dissenters demand. *^° 

This was all very interesting, but the court seemed to have missed the point 
of plaintiffs' argument, which was that the statute should not apply at all, and 
their claims of breach of fiduciary duty by GAC should not be barred. The 
appraisal portion of the DRS that the court spent time talking about did not 
answer plaintiffs' argument because the plaintiffs were shareholders in a publicly 
traded corporation.'^' The right of appraisal is available only for shareholders in 
a closed corporation, because the ability to withdraw from a close corporation is 
more difficult to do than in a public company. '^^ 

In addition, the Indiana General Assembly amended the statute to extend 
coverage of the sole remedy of dissenting and demanding payment to 
shareholders of a publicly traded corporation. The official comments to section 
23-l-44-8(c) state that the publicly traded company's shareholders were added 
because the public market was an available outlet for their shares. Therefore, 
plaintiffs had no right to a direct action at all, only a derivative one, a conclusion 
that the court fmally reached and properly affirmed the trial court's dismissal of 
plaintiffs' claims. '^^ 

III. Piercing THE Corporate Veil 

One of the basic premises of business law is that by forming a corporation, 
it has limited liability for actions taken in furtherance of the corporation's 
business. The concept of limited liability in the corporate entity has been a part 
of the United States for over a century.'^"* Even if there is only one shareholder, 
that one person will generally be immune from liability that the corporation may 
incur during its normal course of business. In Indiana, this rule is codified in the 



167. /^. at 1092. 

168. Mat 1092-93. 

169. See id ai\092. 

170. /flf.;^eelND. Code §23-l-44-19(a) (1998). 

171. Unless there is another, undisclosed reason that dissenters' rights would be available to 
plaintiffs. 

172. IND. CODE § 23-l-44-8(b) (1998); Am. Union Ins. v. Meridian Ins. Group, 137 F. Supp. 
2d 1096, 1101 (S.D.Ind. 2001). 

173. Young, 738 N.E.2d at 1093. 

174. William J. Rands, Domination of a Subsidiary by a Parent, 32 iND. L. REV. 421, 423 
(1999). 



nk 



2002] CORPORATE LAW 1337 



IBCL.*^^ This rule also holds true when a corporation is a wholly-owned 
subsidiary of another corporation. 

The IBCL, unlike the Revised Model Business Code upon which it was 
based, limits liability of a corporation's directors to situations where directors 
have willfully or recklessly breached their duties to their corporation.'^^ And, 
officers and employees are subject to common law agency and contract doctrines 
and do not have a separate standard of conduct to which to conform. '^^ 

However, there are situations where the corporate entity is used wrongfully 
as a shield by parent corporations or shareholders against prosecutions from third 
parties or even its own shareholders. In these situations, courts will pierce the 
corporate veil and hold the individual shareholder or corporation liable for 
actions taken by them in furtherance of the corporation's business.'^* Indiana 
courts, unlike other jurisdictions that generally apply a two or three factor "alter 
ego test,"'^^ apply an eight factor test'^^ which was articulated by the Indiana 
Supreme Court in Aronson v. Price. ^^^ These factors focus on whether "the 
corporate form was so ignored, controlled or manipulated that it was merely the 
instrumentality of another and that the misuse of the corporate form would 
constitute a fraud or promote injustice."'*^ 

Since September 2000, one supreme court case and two court of appeals 
cases dealt with piercing the corporate veil ("PCV"). Although the supreme 
court case, Commissioner v. RLG, Inc.^^^^ is not really a PCV case because it 
handles individual liability under environmental statutory law, it is still relevant 
to corporate law. The two court of appeals cases. Smith v. McLeod Distributing, 



175. IND. Code § 23- l-26-2(d) (1998). 

176. Id. §23-1-36-2. 

177. Id at official cmt. 

1 78. For a more in-depth analysis of this issue, see Rands, supra note 1 74. 

1 79. See Cynthia Nance, Ajjiliated Corporation Liability Under the WARN Act, 52 RUTGERS 
L. Rev. 495, 507 (2000). 

1 80. The eight factors are: 

(1) undercapitalization; (2) absence of corporate records; (3) fraudulent representation 

by corporation shareholders or directors; (4) use of the corporation to promote fraud, 

injustice or illegal activities; (5) payment by the corporation of individual obligations; 

(6) commingling of assets and affairs; (7) failure to observe required corporate 

formalities; or (8) other shareholder acts or conduct ignoring, controlling, or 

manipulating the corporate form. 

Aronson v. Price, 644 N.E.2d 864, 867 (Ind. 1994). These eight factors are a combination of the 

two-factor and three-factor tests used in other jurisdictions. See Nance, supra note 179, at 507 

(noting that the two-factor test focusing on "unity of ownership and interest*' and fraud or inequity 

would be a fallout of holding the corporations as separate entities; the three-factor test consists of 

(1) exercise of excessive control; (2) inequitable or wrongful conduct; and (3) causation). 

181. 644 N.E.2d 864, 867 (Ind. 1994). 

182. Id 

183. 755 N.E.2d 556 (Ind. 2001). 



1338 INDIANA LAW REVIEW [Vol. 35:1321 



Inc., and Apollo Plaza Ltd v. Antietam Corp., are more run-of-the-mill PCV 
cases. 

A. Responsible Corporate Officer Doctrine v. Veil-Piercing: 
Commissioner v. RLG, Inc. 

RLG, Inc. was a corporation in the business of operating a landfill in 
Wabash, Indiana.'*^ Lawrence Roseman was RLG's sole shareholder, director, 
president, secretary, and treasurer.'*^ In 1993, the Indiana Department of 
Environmental Management ("IDEM") brought suit against both RLG and 
Roseman for violations at the landfill.'** RLG negotiated agreements whereby 
RLG would remedy the wrong done at the landfill, and in return IDEM would 
drop the lawsuit.'*^ Remedial steps were not taken and in 1 994, IDEM reinitiated 
its proceedings. RLG failed to answer the complaint so the court entered a 
default judgment against RLG for three million dollars.'^ RLG was insolvent 
at this point. '^' In 1999, Roseman was found to not be personally liable for 
RLG's debt to IDEM by the trial court, and the court of appeals affirmed this 
judgment. '^^ 

The supreme court granted transfer, '^^ and Justice Boehm wrote for the 
unanimous court, holding that Roseman was indeed personally liable for RLG's 
default judgment award under the doctrine of responsible corporate officer.*^"* 
This doctrine, which is substantively different from the piercing the corporate 
veil doctrine, has the same effect as veil-piercing in that an individual 
shareholder is held liable for the actions of the corporation.'^^ 

The responsible corporate officer doctrine arose out of a 1 943 U.S. Supreme 
Court case and the Court's interpretation of a section of the Federal Food, Drug 
and Cosmetic Act.'^^ The doctrine was upheld and expanded upon by another 
U.S. Supreme Court case in 1975.'^^ The thrust of the responsible corporate 
officer doctrine was to hold a corporate officer liable, if that officer directed the 
actions of the corporation, and those actions constituted a public welfare 



184. 744 N.E.2d 459 (Ind.Ct.App. 2000). 

185. 751 N.E.2d 336 (Ind. Ct. App. 2001). 

186. /?IG, 755 N.E.2d at 558. 

187. /^. at 561. 

188. Mat 558. 

189. Id. 

190. Id. 

191. Id 

192. Mat 558-59. 

193. Commissioner v. RLG, Inc., 753 N.E.2d 5 (Ind. 2001). 

194. /2Z,G, 755 N.E.2d at 561-62. 

195. Mat 558. 

196. Id. (citing United States v. Dotterweich, 320 U.S. 277 (1943)). 

197. Id (citing United States v. Park, 421 U.S. 658 (1975)). 



2002] CORPORATE LAW 1 339 



offense.*^* The RLG court adopted this doctrine, as well as the three factors 
forming the standard to find a corporate officer responsible for the corporation's 
actions. *^^ The court found Roseman liable, in both his capacities as corporate 
officer and in an individual capacity under the Indiana environmental 
management laws, finding that Roseman acted in a direct capacity to violate the 
landfill laws.'"^ 

RLG mainly deals with a type of corporate liability where public welfare 
offenses are at issue, whereas PCV cases are not "dependent on the nature of the 
liability."^°' Therefore, this case will probably not have major consequences for 
corporations who are not in lines of business similar to RLG. The court draws 
a distinction between public welfare offense cases where a corporate officer 
would be held individually responsible and PCV cases, noting that the 
responsible corporate officer doctrine was more expansive in holding the 
corporate officer liable.^"^ If this were not the case, it would be rare that an 
officer could be held liable for public welfare offenses, where, as here, there was 
no wrongful use of the corporate entity .^°^ 

B. Two Corporations in One: Smith v. McLeod Distributing, Inc.^^* 

McLeod Distributing was a corporation in the business of wholesale 
distribution of carpets and other floor coverings.^^^ Michael Smith was the 
president of Colonial Industrial and Colonial Mat Corporations.^^ Colonial 
Industrial was incorporated in 1981, and Colonial Mat was incorporated in 
l^gy 207 Colonial Mat and McLeod began doing business a few months after 
Colonial Mat was incorporated. In order to obtain a line of credit for Colonial 
Mat with McLeod, Smith signed a personal guarantee that he would be liable for 
any debts Colonial Mat would incur.^°* 

In 1989, Smith sent McLeod a letter indicating that it would be doing its 
carpeting business under a different name. Colonial Carpets.^^ McLeod changed 
Colonial Mat's account name to Colonial Carpets in its internal invoice system, 
but the original account opened by Smith under the Colonial Mat name was never 
closed by either Smith or McLeod.^'° Business between the two companies 



198. 


Mat 560-61. 


199. 


/of. at 561. 


200. 


Id. at 559-60. 


201. 


Id. at 563. 


202. 


Id 


203. 


Id 


204. 


744 N.E.2d 459 (Ind. Ct. App. 2000). 


205. 


Mat 461. 


206. 


Id 


207. 


Id 


208. 


Id 


209. 


Id 


210. 


Id 



1340 INDIANA LAW REVIEW [Vol. 35:1321 



remained smooth until 1990, when McLeod stopped deliveries to Colonial 
Carpets because several invoices sent to Colonial Carpets had not been paid, the 
total amount coming to over $6000.^' ' After several demands for payment went 
unanswered, McLeod filed a lawsuit against Colonial Mat and Smith in 
September 1990.^'^ In November 1990, Colonial Mat was administratively 
dissolved by the Secretary of State because Colonial Mat had failed to file an 
annual report.^ *^ 

The case between McLeod and Smith remained pending in the trial court for 
ten years, and, finally, McLeod was awarded a judgment for the debt, plus 
interest of eighteen percent before the judgment and eight percent for after the 
judgment.^'"* Smith and Colonial Mat appealed to the court of appeals on two 
issues: that Colonial Mat was not the corporation to which McLeod' s invoices 
were addressed and therefore not liable for the judgment, and that Smith himself 
should not be held personally liable for Colonial Mat's debt because the 
guarantee agreement was invalid.^'^ 

As to the first issue, the court of appeals affirmed the long-held principle that 
piercing the corporate veil is a "fact-sensitive inquiry."^'^ As such, the reviewing 
court should give great deference to the trial court's determination to hold one 
corporation liable for the debt of a related corporation.^'^ Here, the court of 
appeals took into account several factors, other than the ones listed in Aronson 
by the Indiana Supreme Court,^'* as the court of appeals stated, "[w]e do not 
believe the eight Aronson factors were intended to be exclusive . . . ."^'^ The 
court of appeals distinguished Aronson from McLeod because in Aronson, the 
court was asked to hold a shareholder liable for the debts of a corporation, 
whereas in McLeod, the court here was being asked to hold a corporation 
accountable for another corporation's debts.^^° 

The additional factors considered by the court of appeals were (1) whether 
similar names were used by the two corporations; (2) whether the two 
corporations had similar management personnel (i.e., officers, directors and 
employees); (3) whether the two corporations were pursuing similar lines of 
business; and (4) whether the internal office structure and premises were 
identical (i.e., office phone numbers, business cards, etc.).^^' The court of 
appeals then applied these additional factors, finding that although McLeod (who 
as plaintiff had the burden to prove the Aronson factors) had not produced much 



211. Id. 

212. Id. 

213. Id at 462. 

214. Id 

215. Id 

216. Id (quoting Winkler v. V.G. Reed & Sons, Inc., 638 N.E.2d 1228, 1232 (Ind. 1994)). 

217. Id 

218. See supra note 1 80. 

219. McLeod, 744 N.E.2d at 463. 

220. Id ai 464. 

221. Id ai 463. 



2002] CORPORATE LAW 1341 



evidence, there was sufficient evidence in the record to find that holding Colonial 
Mat liable for the debts owed to McLeod was equitable.^^^ Most notable to the 
court of appeals was that the Colonial corporations (Colonial Mat and Colonial 
Industrial) were run from the same office, had the same office manager as the 
sole employee of both corporations, and had comingled fmancial accounts.^^^ 

The second issue on appeal concerned the validity of Smith's personal 
guarantee to McLeod and dealt with the protocol needed to create an enforceable 
continuing guarantee agreement in Indiana.^^"^ This issue is beyond the scope of 
this Article, as it is better discussed as a contracts issue. 

C *'Outside Reverse Piercing": Apollo Plaza Ltd. v. Antietam Corp.^^^ 

This was not the first time the parties to this dispute had been before the 
court of appeals. On their first occasion, the court, in a memorandum opinion, 
affirmed the judgment of the trial court in the litigation matter between Antietam 
and Alex Shiriaev.^^^ In the present matter, the court was called upon to analyze 
whether Apollo, a corporation wholly owned by Shiriaev, should be pierced to 
have Antietam 's judgment satisfied.^^^ 

Although not necessarily relevant to the issue of PCV, the background 
litigation provides an amusing story. Antietam Corporation was a construction 
business and had borrowed money from Alex Shiriaev, giving as collateral a 
security interest in a Bobcat that the corporation owned. ^^^ The Bobcat was 
ostensibly "stolen" from Antietam in October 1 994 and Shiriaev locked Antietam 
out of its offices and demanded Antietam assign the insurance proceeds from the 
stolen Bobcat to him.^^^ Antietam filed suit against Shiriaev, alleging conversion, 
and Shiriaev countered with a negligence action with respect to the lost 
Bobcat.^^^ Surprisingly, once the Bobcat was found at the residence of Shiriaev' s 
brother by a private detective, Shiriaev dropped his claims regarding the Bobcat. 
However, Antietam proceeded to trial with its claims against Shiriaev and was 
awarded over $130,000, plus legal fees.^^' 

Antietam attempted to enforce this judgment and obtain payment by freezing 
a bank account titled, "Alex Shiriaev d/b/a Apollo Plaza Limited."^^^ The trial 



222. /flf. at464. 

223. Id. 

224. /^. at 465-66. 

225. 75 1 N.E.2d 336 (Ind. Ct. App. 200 1 ). 

226. Shiriaev v. Antietam Corp., 733 N.E.2d 542 (Ind. Ct. App. 2000), trans, denied. 

227. Apollo Plaza, 751 N.E.2d at 337. 

228. Actually, the corporation was formed a few months after the loan and security interest 
were given, but after the corporation was formed, all assets of the former sole proprietorship were 
conveyed to the corporation. Id. 

229. Id 

230. Id 

23 1 . Id. The court of appeals affirmed this award. Shiriaev, 733 N.E.2d at 542. 

232. >4;7o//o/'/aza, 751N.E.2dat338. 



1342 INDIANA LAW REVIEW [Vol. 35:1321 



court conducted a hearing to decide whether Apollo's corporate veil should be 
pierced to satisfy Antietam's judgment against Shiriaev. The trial court found 
for Antietam.^" Apollo appealed, arguing that the trial court conducted an 
"outside reverse piercing" of Apollo's corporate identity because Apollo never 
had any dealings with Antietam.^^"^ In addition, Apollo claimed that Shiriaev was 
just a minority shareholder.^^^ Shiriaev also unsuccessfully tried to convince the 
judge that he was not involved in Apollo, having recently resigned as president 
of Apollo in favor of his brother.^^^ The court of appeals affirmed the trial 
court's findings, holding that "a contrary decision by the trial court would have 
allowed Shiriaev to further a fraud by using Apollo as the means to hide assets 
in order to avoid paying the legal judgment rendered against him."^^^ 

IV. Indiana Securities Act — Fraudulent or Deceitful Acts 

Most securities cases are litigated under the numerous federal securities 
statutes dealing with fraudulent sales and the like. It is surprising, therefore, to 
see a case like Carroll v. J.J.B. Hilliard,^^^ brought solely under Indiana 
securities law. One of the claims in Carroll was premised on Indiana Code 
section 23-2-1-12,^^^ which is almost identical in wording to the Securities 
Exchange and Commission Rule 10b-5.^''° However, Gertrude Carroll filed a 
lawsuit against R. Dale Cassiday and his brokerage firm. Milliard Lyons, under 
the Indiana Securities Act and not premised on any violations of federal 



233. Id 

234. Id 

235. Id 

236. /^. at 339. 

237. Mat 340. 

238. 738 N.E.2d 1069 (Ind. Ct. App. 2000). 

239. Section 12 reads, 

It is unlawful for any person in connection with the offer, sale or purchase of any 
security, either directly or indirectly, ( 1 ) to employ any device, scheme or artifice to 
defraud, or (2) to make any untrue statements of a material fact or to omit to state a 
material fact necessary in order to make the statements made in the light of 
circumstances under which they are made, not misleading, or (3) to engage in any act, 
practice or course of business which operates or would operate as a fraud or deceit upon 
any person. 
iND. Code § 23-2-1-12 (2001). 

240. It is identical except for the federal jurisdiction requirement in Rule lOb-5: "use of any 
means or instrumentality of interstate commerce, or of the mails or of any facility of any national 

securities exchange " 15 U.S.C. § 78j ( 1 998). As will be discussed below, although Cassiday 's 

presentation to Gertrude was done in person, and therefore the "instrumentality of interstate 
commerce" requirement might have been in question, there were subsequent phone calls made 
between Cassiday and Gertrude concerning the investments that might have qualified. But as 
Gertrude brought her lawsuit solely under Indiana law, this is mere speculation. 



2002] CORPORATE LAW 1343 



securities law.^*' 

Carroll was a seventy-five year old woman with the goal of increasing her 
annual income by changing her stock portfolio.^'*^ She contacted Cassiday in July 
1986 on the recommendation of a friend. Cassiday met with Carroll at her home 
in August 1986 and discussed her options. After the meeting, Cassiday prepared 
a detailed memo which summarized his conversations with Carrol 1.^"*^ Cassiday 
met with Carroll on another occasion in late August 1986, and at this meeting, 
Cassiday proposed a plan to Carroll to meet her goal of increased income.^"^ 
Cassiday suggested she invest in two mutual funds which had histories of having 
fairly high yearly yields, and each month Carroll would make withdrawals.^"*^ 
The overall plan was for the mutual funds to yield a yearly percentage higher 
than that of Carroll's yearly withdrawals.^"*^ 

Carroll decided to take Cassiday's suggestion.^"*^ In order to raise the money 
needed to invest in these mutual funds, Cassiday suggested Carroll sell eight of 
the stocks in her existing portfolio.^"** Cassiday warned Carroll that she would 
incur tax liability from the sale of her stocks, but also warned her that he was not 
an expert on taxes.^"*^ Carroll gave her authorization to sell on September 2, 
1986. All went according to plan. Cassiday sold the eight stocks, which netted 
Carroll approximately $127,000."^ Carroll purchased a new portfolio with the 
two mutual funds suggested by Cassiday and seven common stocks. However, 
in December 1986, one of Carroll's sons told Carroll that she should no longer 
conduct business with Cassiday .^^' Carroll terminated Cassiday's and his 
brokerage firm's services. It was not until Carroll discovered that her tax liability 
was going to be fifty percent higher than Cassiday had estimated did Carroll look 
into filing a lawsuit for fraud and violation of securities laws.^^^ Carroll filed her 
lawsuit on February 2, 1 990, and died on February 9, 1 998. Her sons proceeded 
with the lawsuit as representatives of Carroll's estate."^ 

Carroll sold her shares in one of the mutual funds that Cassiday suggested in 
1 99 1 and, ironically, had Carroll retained these shares, the total return of the fund 
would have covered Carroll's withdrawals and her investment would have 
appreciated in value.^^"* Carroll retained her shares in the second mutual fund 



24 1 . Carroll, 738 N.E.2d at 1 07 1 

242. Mat 1071-72. 

243. /i/. at 1072. 

244. Id. 

245. Id. 

246. Id 

247. /flf. atl073. 

248. Mat 1072. 

249. Id 

250. Mat 1073. 

251. Id 

252. Id 

253. Mat 1072-73. 

254. Mat 1074. 



1344 INDIANA LAW REVIEW [Vol. 35:1321 



suggested by Cassiday and that fund, as well, had a total return that covered 
Carroll's withdrawals in addition to appreciating in value.^" Both mutual funds 
were appropriate vehicles for Carroll to meet her stated goals of increasing her 
monthly cash flow.^^^ 

In her lawsuit, Carroll alleged that Cassiday committed fraud and violated the 
Securities Act with respect to his presentation to her and the sale and purchases 
of her portfolios.^^^ The trial court made several specific fmdings of fact, and 
concluded that neither Cassiday nor his brokerage firm were liable to Carroll 
(now her estate) under any theory al leged.^^* The court of appeals, through Judge 
Friedlander, affirmed.^^^ 

The first issue was Carroll's allegations that Cassiday's recommendations 
and presentation at their second meeting violated 710 Indiana Administrative 
Code section 1-1 7-1 (d), which defines the unethical practices of broker-dealers 
or investment advisors in Indiana Code section 23-2- 1 1 (a)(6). More specifically, 
Carroll contended that Cassiday did not sufficiently inform her that the 
withdrawals from the two mutual funds might consist of principal and interest.^^ 
This failure, Carroll further contended, violates 7 1 Indiana Administrative Code 
section l-17-l(d), which prohibits an investment advisor from presenting an 
investment scheme, the return on which would consist of "income and 
distributions from capital, or any other source."^^' The court found that Cassiday 
did not violate this section, and furthermore, that this section did not even apply 
to Cassiday's presentation.^^^ 

The court pointed to Cassiday's testimony at trial where he described his 
conversation with Carroll at their second meeting.^^^ Cassiday testified that he 
warned Carroll that should the mutual funds not give a yearly return higher than 
ten percent, Carroll's withdrawals might include both interest and principal, 
thereby dwindling the amount left in the fund.^^^ However, had Cassiday not 
given this warning, subsection (d) did not reach Cassiday's actions.^^^ The court 
limits subsection (d) to "Ponzi schemes."^^^ As the court described, "the primary 
purpose of subsection (d) is to prohibit brokers from representing a return on an 
investment that includes an infusion of capital supplied by later investors in the 
program in question."^^^ And if subsection (d) were to apply to the type of 



255. Mat 1075. 

256. Id. at 1074-75. 

257. /f/. at 1073. 

258. Mat 1075. 

259. Mat 1071. 

260. Mat 1076. 

261. iND.ADMIN.CODEtit. 710 r, 1-1 7-1 (d)( 1998). 

262. Carroll, 738 N.E.2d at 1076. 

263. Id. 

264. Mat 1073. 

265. M at 1076 (referencing IND. Admin. Code tit. 70 r. 1-17-I(d) (1998)). 

266. Mat 1077. 

267. Id. Or in other words, subsection (d) prohibited a pyramid scheme, where one investor 



2002] CORPORATE LAW 1345 



investment vehicle Cassiday suggested, the court added, subsection (e) of the 
same section would be nullified.^^* Subsection (e) clearly states that an 
investment advisor must point out to the client that distributions from 
investments might reduce the value of that investment, the very thing Cassiday 
had warned Carroll about.^^^ 

Carroll's second contention was that Cassiday violated section 23-2-1-12 
because he failed to inform her of the time period needed to recover her 
transactional costs.^^° Due to Carroll's age, the time to recover her costs would 
have been approximately her remaining life expectancy at age seventy- five.^^' 
Under this section, Cassiday was required to inform Carroll of all material facts 
about the investment portfolio that he was suggesting so as to not make his 
presentation misleading.^^^ Had Cassiday omitted a fact which would have been 
"relevant to the investment decision," then Cassiday would have violated the 
Securities Act.^^^ 

However, the court found that no material fact was omitted and upheld the 
trial court's determination by looking at two pieces of evidence.^^'* First, the 
court pointed to Carroll's undisputed goal of meeting with Cassiday and 
obtaining his advice — ^to increase her monthly income.^^^ Second, the court 
noted the expert testimony given by a president of a local broker dealer. This 
expert witness testified that had he been presented with Carroll's stated goal of 
increase in income, and not investment growth, he would not have made a time- 
to-recover-costs analysis.^^^ The witness also pointed out the fact that there was 
no regulation, either state or federal, or any industry custom to give such an 
analysis at all, regardless of the client's stated purpose for her investments.^^' 
Based on these two factors, the court declined to include within the duties of the 
broker-dealer a requirement to provide such an analysis.^'* 

Lastly, Carroll contended that Cassiday violated subsection (x) of 710 
Indiana Administrative Code section 1-17-1 by not conducting a reasonable 
inquiry into her tax liability.^'^ Carroll alleged that Cassiday indicated to her that 
her tax liability would be approximately $10,000, when she actually had to pay 



brings in two investors, and then those two investors bring in three investors. The creator of the 
scheme uses the later investors' money to pay "dividends" or distributions on the investment, but 
there has not really been any investing or growth. 

268. /^. at 1076. 

269. M at 1076-77. 

270. Mat 1077. 

271. Id. 

272. Id. (referencing IND. CODE § 23-2-1-12(2) (1998)). 

273. W. at 1077. 

274. Mat 1077-78. 

275. Mat 1077. 

276. Id 

111. Id &i ion. 

278. Id 

279. Id (citing iND. ADMIN. CODE tit. 710 r. 1-14-1 (x) (1998)). 



1346 INDIANA LAW REVIEW [Vol. 35:1321 



approximately $17,000.^*^ The court held that subsection (x) "requires brokers 
to conduct a reasonable inquiry into a customer's individual circumstances."^*' 
The court looked to the testimony of Cassiday and Carroll's accountant, Jim 
Winemiller. Cassiday testified that during his presentation, he informed Carroll 
that she would incur tax liability on her sales of stock, but that he was not an 
accountant and could not be sure whether $10,000 was an accurate figure. 
Carroll authorized the sale nonetheless.^*^ On the tfay after the sale, she called 
Winemiller to inform him of the sales and to ask about her tax liability. The 
court found it to be telling that Carroll continued to sell additional stocks even 
after her phone call with Winemiller.^*^ In short, the court determined that 
Cassiday conducted a reasonable investigation into Carroll's situation in order 
to consider all relevant information before suggesting an investment vehicle to 
Carroll.'** 

Looking at the opinion as a whole, it seems that the court was taken with the 
fact that Carroll was not an elderly woman who had fallen prey to Cassiday. 
Throughout the opinion, the court mentions the fact that prior to her dealings 
with Cassiday, Carroll had contact with other brokers.'*^ She had managed her 
portfolio and although she was not on the level of a stockbroker, Carroll had 
more than an average understanding of her investments.'*^ It was just an 
unfortunate happenstance that she felt she had been defrauded, although one 
wonders how she could have felt that way, looking at the returns her investments 
eventually did yield. But perhaps this is the benefit of hindsight. 

Conclusion 

One survey article cannot come close to discussing all the changes to Indiana 
corporate law in the past year. This Article has attempted to discuss case law in 
four different areas of corporate law in an attempt to provide a partial analysis 
of any shifts in the landscape. The two major shifts this year have been in the 
area of shareholder suits in closed corporations and suits brought under the DRS. 
Both G & N Aircraft, Inc. and Galligan outline remedies to which shareholders 
can be entitled, which was a slight expansion of the statutory remedies provided 
for by the IBCL. However, as the majority of the cases discussed in this article 
were court of appeals cases, the supreme court might decide to grant transfer and 
change the landscape even further. 



280. 


Id. 


281. 


Id. at 1078. 


282. 


Id at 1079. 


283. 


Id 


284. 


Id at 1077. 


285. 


Id at 1072, 1075 


286. 


Mat 1071-72. 



Recent Developments in Indiana Criminal 
Law and Procedure 



Joel M. SCHUMM* 

The survey period, October 1, 2000 to September 30, 2001, produced 
legislation and decisional law that both broke new ground and clarified existing 
confusion. The pages that follow provide a summary of some of the most 
significant developments in the realm of Indiana criminal law and procedure. 

I. Legislative ENACTMENTS 

The General Assembly enacted a number of bills to define new crimes, 
toughen penalties for existing crimes, and correct or clarify issues and problems 
raised in recent court opinions. 

A. New or Enhanced Offenses 

The General Assembly both created new offenses and amended existing 
statutes to criminalize previously legal conduct or enhance the penalty for 
previously illegal conduct. 

The new offense of "identity deception," a Class D felony, was created. It 
occurs when a person "knowingly or intentionally obtains, possesses, transfers, 
or uses the identifying information^'^ of another person: (1) without the other 
person's consent; and (2) with intent to harm or defraud the other person . . . ."^ 
The statute includes a number of exceptions, which apply to underage persons 
who use false identification to obtain alcohol, cigarettes, pornography, etc.^ In 
addition, the legislature created the offense of "Interference with a Firefighter," 
which can vary from a Class C infraction to a Class D felony, for various forms 
of conduct that hamper firefighters' ability to perform their duties.'^ 

The intimidation statute was amended to criminalize communication of a 
threat with intent "of causing: (A) a dwelling, a building, or another structure; 
or (B) a vehicle; to be evacuated . . . ."^ The base offense is a Class A 
misdemeanor but becomes a Class D felony if "the threat is communicated using 
property, including electronic equipment or systems, of a school corporation or 
other governmental entity."^ Finally, the battery statute was amended to create 
a Class A felony offense when the conduct "results in the death of a person less 



* Lecturer in Law, Indiana University School of Law— Indianapolis. B.A., 1992, Ohio 
Wesleyan University; M.A., 1994, University of Cincinnati; J.D., 1998, Indiana University School 
of Law-Indianapolis. 

1 . "Identifying information" is defined broadly to include, among other things, Social 
Security numbers, fingerprints, and telecommunication identiiying information. Ind. Code § 35- 
43-5-l(h) (Supp. 2001). 

2. /^. § 35-43-5-3.5(a). 

3. Id § 35-43-5-3.5(b). 

4. !d. § 35-44-4. 

5. W. §35-45-2-l(a)(3). 

6. /^. §35-45-2-l(b)(l)(D). 



1348 INDIANA LAW REVIEW [Vol. 35:1347 



than fourteen (14) years of age and is committed by a person at least eighteen 
(18) years of age."^ 

B. DNA Evidence 

The General Assembly also enacted two bills relating to DNA evidence that 
highlight such evidence may be a double-edged sword in criminal prosecutions. 
The first bill allows DNA evidence to be used to lengthen the statute of 
limitations for certain crimes, while the second bill allows many convicted felons 
greater access to DNA testing and analysis to exonerate themselves. First, the 
general statute of limitations of five years for Class B and C felonies was 
extended in prosecutions 

that would otherwise be barred . . . [to] one (1) year after the earlier of 
the date on which the state: (1) first discovers the identity of the 
offender with DNA (deoxyribonucleic acid) evidence; or (2) could have 
discovered the identity of the offender with DNA (deoxyribonucleic 
acid) evidence by the exercise of due diligence.* 

The statute also extended the one-year period to July 1 , 2002, for Class B and C 
felonies "in which the state first discovered the identity of the offender with 
DNA (deoxyribonucleic acid) evidence after the time otherwise allowed for 
prosecution and before July 1, 2001 . . . ."' The second bill established detailed 
procedures by which persons convicted of murder or a Class A, B, or C felony 
can petition the sentencing court to require DNA testing in certain 
circumstances. '° 

C. Crimes of Violence 

In Ellis V. State, ^^ the defendant was convicted of several crimes, including 
murder and two counts of attempted murder. He was sentenced to the maximum 
term of sixty-five years for murder and fifty years for each attempted murder, to 
be served consecutively. On appeal to the supreme court, he argued that the 
sentences for his attempted murder conviction could not exceed fifty-five years, 
the presumptive sentence for the next higher level felony. Indiana Code section 
35-50-l-2(c) limits the total of the consecutive terms of imprisonment to which 
a defendant may be sentenced "for felony convictions arising out of an episode 
of criminal conduct," except for "crimes of violence," to "the presumptive term 
for a felony which is one (1) class felony higher than the most serious of the 
felonies for which the person has been convicted."'^ The court noted that the 
statute clearly listed "crimes of violence," including murder and aggravated 



7. Id § 35-42-2-1 (a)(5). 

8. Id § 35-41-4-2(b). 

9. Id 

10. M§ 35-38-7. 

11. 736N.E.2d 731 (Ind. 2000). 

1 2. Id at 736 (citing Ind. Code § 35-50- 1 -2(c) ( 1 998)). 



2002] CRIMINAL LAW 1349 



battery, but did not include attempted murder.'^ Although aggravated battery is 
a lesser included offense of attempted murder, the court found this to be of no 
consequence in the face of the clear statutory language.''* In addition, the rule of 
lenity requires that the limitation be interpreted to apply "for consecutive 
sentences between and among those crimes that are not crimes of violence."'^ 
Accordingly, the court concluded that Ellis could be sentenced for his two 
attempted murder convictions to no more than fifty-five years, the presumptive 
sentence for murder.'^ 

Justice Boehm, joined by Justice Dickson in dissent, reasoned that the 
majority's construction was not consistent with legislative intent, would produce 
"upside-down or absurd results," and seemed to violate the proportionality 
requirement of article I, section 16 of the Indiana Constitution.'^ Although a 
minority view in 2000, Justice Boehm 's conclusion became the law in 200 1 when 
the General Assembly made its intent clear and amended Indiana Code section 
35-50-1 -2(a) to include "attempted murder" as a "crime of violence."'* 

D. Sentencing 

During the survey period the General Assembly either corrected or clarified 
a few statutory provisions regarding sentencing. First, the defmition of 
"minimum sentence" was updated for the offenses of murder (to forty-five years) 
and Class D felonies (to one-half year) to be consistent with the statutory scheme 
and the presumptive sentences that had been altered years earlier.'^ Second, the 
misdemeanor probation statute was amended to clarify that probation for any 
class of misdemeanor may be one year but "the combined term of imprisonment 
and probation for a misdemeanor may not exceed one (1) year."^° Finally, the 
habitual offender statute was amended, presumably in response to Ross v. State?^ 
and its progeny, as discussed in last year's survey .^^ Subsection (b) of the statute 
now prohibits the State from seeking to have a defendant sentenced as a habitual 
offender if "(1) the offense is a misdemeanor that is enhanced to a felony in the 



13. Id. 

14. Id.2Xmi. 

15. Id 

16. Id 

17. /</. at 741 (Boehm, J., dissenting). 

18. IND. Code § 3 5-50-1 -2(a)(2) (Supp. 2001). The statute was also amended to include 
"sexual misconduct with a minor as a Class A felony (IC 35-42-4-9)" within the definition. Id. § 
35-50-l-2(a)(ll). 

19. Id § 35-50-2-l(c). 

20. Id § 35-50-3-l(b). 

21. 729N.E.2dll3(Ind.2000). 

22. See Joel M. Schumm, Recent Developments in Indiana Criminal Law and Procedure., 34 
Ind. L. Rev. 645, 662-63 (2001). As explained in text, however, the amendment was the opposite 
of what prosecutors had vowed to seek, as certain offenses and categories of offenses have been 
removed from eligibility for enhancement under the general habitual offender statute. 



1350 INDIANA LAW REVIEW [Vol. 35:1347 



same proceeding as the habitual offender proceeding solely because the person 
had a prior unrelated conviction; or (2) the offense is an offense under IC 9-30- 
10-16orIC9-30-10-17."2' However, 

The requirements in subsection (b) do not apply to a prior unrelated 
felony conviction that is used to support a sentence as a habitual 
offender. A prior unrelated felony conviction may be used under this 
section even if the sentence for the prior unrelated offense was enhanced 
for any reason, including an enhancement because the person had been 
convicted of another offense [except several offenses under Title 9].^"^ 

II. Decisional Law Developments 

A. Search and Seizure 

Scores of opinions during the survey period addressed issues relating to 
searches and seizures under the Fourth Amendment, article I, section 1 1 of the 
Indiana Constitution, and allied Indiana statutory law. This survey is limited to 
a few significant cases that either broke new ground or raised issues likely to lead 
to future litigation. 

J. Vehicle Searches and Seizures. — In Lockett v. State ^^ the supreme court 
granted transfer to consider whether the Fourth Amendment^^ prohibits police 
from routinely inquiring about the presence of weapons during a traffic stop. 
After reviewing U.S. Supreme Court decisions on the general issues of the length 
and method of vehicle stops and concerns for officer safety, the court reiterated 
well-settled Fourth Amendment jurisprudence that allows police to order a 
motorist stopped for a traffic violation to exit his or her vehicle.^^ The court 
reasoned that "asking whether the stopped motorist has any weapons is far less 
intrusive and presents insignificant delay."^* Although the federal circuits are 
split on whether the Fourth Amendment permits police to ask questions unrelated 
to the purpose of the traffic stop, the court found no Fourth Amendment violation 
in Lockett?'^ The court noted that the officer smelled alcohol as he approached 
the vehicle and asked the occupant if he had any weapons during his 
investigation of that offense: "The question was justified by police safety 
concerns, and it did not materially extend the duration of the stop or the nature 



23. IND. Code § 35-50-2-8(b) (Supp. 2001). 

24. Id. § 35-50-2-8(e). 

25. 747N.E.2d 539 (Ind. 2001). 

26. The defendant waived any claim under the state constitution by failing to cite any 
authority or independent analysis supporting a standard different from the Fourth Amendment. Id. 
at 541. 

27. Id at 542. 

28. Id 

29. /t/. at 543. 



2002] CRIMINAL LAW 1351 



of the intrusion."^^ 

In a separate opinion in which he concurred in the result, Justice Rucker 
disagreed with the majority's adoption of a bright-line rule that allows officers 
routinely to ask drivers stopped for traffic violations if they are carrying a 
weapon.^' Instead, he would require the officer to have "an objectively 
reasonable safety concern before making such an inquiry."^^ Quoting from a 
Tenth Circuit case, he agreed that such routine questioning "could conceivably 
result in a full-blown search of the passenger compartment of the detainee's 
vehicle, no matter how minor the traffic infraction that initially prompted the 
stop, and even if the officer had no reasonable safety concerns when he posed the 
question."^^ 

Although the majority's approach is likely the one more consistent with the 
Fourth Amendment jurisprudence of the current membership of the U.S. Supreme 
Court, Justice Rucker' s concurring opinion is arguably the better-reasoned 
approach. It is certainly true that a simple weapon inquiry does not materially 
extend the duration of a traffic stop or the nature of the intrusion; however, the 
notion that such an inquiry is "justified by police safety concerns" is not so clear. 
First, Supreme Court authority allows citizens the right to refuse to answer an 
officer's questions during a Terry stop.'* Moreover, as Justice Rucker aptly 
pointed out, "the notion that asking a driver if he has any weapons somehow 
advances officer safety is suspect. In reality a driver could in fact be heavily 
armed and simply say no to an officer's inquiry."" Indeed, the holding in Lockett 
will likely do little to further the protection of police officers because the average 
citizen will likely answer truthfully in the negative and those who are illegally 
carrying guns may well be less forthright than Mr. Lockett, who admitted to 
having a handgun in his car.'^ Finally, by finding the state constitutional claim 
waived, the supreme court has left open the possibility of later striking down the 
practice under the reasonableness test of article I, section 1 1 ." However, in light 
of the court's heavy reliance on officer safety concerns, a state constitutional 
challenge would appear unlikely to succeed. 

Just a month before deciding Lockett, the supreme court took a slightly 
different approach in Wilson v. State^^ in which it addressed the propriety of 
police officers performing pat-down searches of motorists pulled over for traffic 
stops before asking them to enter their police vehicle. In Wilson, the defendant 
was pulled over for speeding, and the officer suspected that he was intoxicated. 



30. Id. 

31. /<i. at 544 (Rucker, J., concurring). 

32. Id. 

33. Id (quoting United States v. Holt, 229 F.3d 931, 940 (10th Cir. 2000)). 

34. Id. at 545 n.4 (Rucker, J., concurring) (citing Florida v. Royer, 460 U.S. 491, 497-98 
(1983)). 

35. Id 

36. See id. at 541. 

37. See generally Brown v. State, 653 N.E.2d 77, 79 (Ind. 1995). 

38. 745 N.E.2d 789 (Ind. 2001). 



1352 INDIANA LAW REVIEW [Vol. 35:1347 



Noting that neither the field sobriety tests nor the portable breath test required the 
motorist to enter the police vehicle and that the officer did not suspect that the 
motorist was armed, the court concluded that the search violated the Fourth 
Amendment because "the pat-down search was not supported by a particularized 
reasonable suspicion that Wilson was armed, and because there was no 
reasonably necessary basis for placing Wilson in the squad car . . . ."^^ 

Wilson is not cited or discussed in Lockett, but the two cases can be easily 
reconciled. In Lockett the defendant was not subjected to a Terry frisk and 
therefore, in the majority's view, particularized suspicion was not required as it 
was in Wilson.^^ Although a pat-down search is certainly more intrusive than the 
mere asking of a question, which is not a search or seizure standing alone, the 
majority opinion in Lockett does not base its holding on this distinction but rather 
on the more dubious issue of officer safety concerns. It would appear that those 
concerns were equal in both cases of suspected drunk driving. Moreover, the 
holding in Lockett would appear to suggest that officers cannot routinely ask 
motorists if they have any drugs in their vehicles because such an inquiry would 
not be justified on officer safety concerns. 

Finally, the supreme court and court of appeals addressed two other issues 
of first impression in the vehicle context. In Mitchell v. State, ^^ the supreme 
court held that the Indiana Constitution does not prohibit pretextual stops. The 
court reasoned that the potential for unreasonable police conduct is most likely 
to arise "not in the routine handling of the observed traffic violation, but in the 
ensuing police investigatory conduct that may be excessive and unrelated to the 
traffic law violation.'"*^ Although it is certainly true that most constitutional 
violations will occur during subsequent investigatory conduct, the court did not 
acknowledge that pretextual stops allow officers to observe potentially 
incriminating items in plain view and, in light of Lockett, ask questions that could 
lead motorists to incriminate themselves.*^ It would seem that the larger problem 
with pretextual stops, if they were deemed unconstitutional, would be the means 
by which a defendant could establish that a valid traffic stop was a pretext for 
another purpose.'** Short of an officer's admission that a stop was pretextual, the 
proof would seemingly come in the form of a pattern of pretextual stops by a 
certain officer, which might be difficult to establish depending on the specificity 



39. Mat 793. 

40. Compare Lockett, 747 N.E.2d at 541-43, with Wilson, 745 N.E.2d at 793-94. 
Nevertheless, Justice Rucker's concurring opinion in Lockett draws upon Terry and other U.S. 
Supreme Court authority to support his view that a weapon's inquiry should be based on some sort 
of particularized (and reasonable) suspicion. See Lockett, 747 N.E.2d at 544-45 (Rucker, J., 
concurring). 

41. 745 N.E.2d 775, 789 (Ind. 2001). 

42. Id3Xni. 

43 . See generally Wesley MacNeil Oliver, With an Evil Eye and Unequal Hand: Pretextual 
Stops and Doctrinal Remedies to Racial Profding, 74 TUL. L. REV. 1409, 1416-22 (2000) 
(reviewing the federal constitutional implications of pretextual stops). 

44. See generally id at \422-25. 



2002] CRIMINAL LAW 1353 



of police records and the demographics of an officer's given patrol area. 

In Wilkinson v. State,"^^ the court of appeals held that a random computer 
check of license plate numbers was not a search under the Indiana Constitution. 
In that case, the officer ran a random check on the license plate of a truck parked 
in a convenience store lot and learned that the truck was registered to Wilkinson, 
who was a habitual traffic violator. Because the driver of the truck matched the 
physical description provided from the license plate check, the officer stopped 
the truck as it departed the store lot, and upon confirming the identity of the 
driver, arrested him."*^ Relying on cases from other states, the court noted that 
"[a] search connotes prying into hidden places to observe items which are 
concealed; there is no search attendant to viewing an object which is open to 
view."*^ Although it affirmed the conviction that resulted from the random 
license plate check, the court nevertheless noted that it shared the defendant's 
concern that this procedure "could lead to pretextual stops" and in an unusual 
display of candor "question[ed] whether random checks of license plates in 
convenience store parking lots represent[ed] an efficient use of the limited 
resources of law enforcement agencies.'"** 

2. Execution of Warrants and Stale Probable Came. — In Huffines v. State, ^"^ 
the court of appeals addressed the interplay of Indiana Code section 35-33-5-7(b), 
which requires search warrants to be executed within ten days of issuance, with 
the Fourth Amendment and article I, section 1 1 of the Indiana Constitution. 
Adopting the "totality of the circumstances" approach used by federal courts, the 
court held that the State must demonstrate that the warrant was supported by 
probable cause at the time of execution. ^^ In that case, eight days lapsed between 
the time the warrant, which sought cocaine evidence and was based on a single 
observation and purchase, was issued and executed. Additionally, no criminal 
activity was suspected or corroborated during this time. Therefore, the court held 
that the search was improper under the Fourth Amendment.^' After considering 
Indiana cases of both pre-issuance and pre-execution delay, the court reached the 
same conclusion under the state constitution, seemingly applying the same 
requirement that probable cause continue to exist at the time of execution. ^^ The 
court did not specifically address the usual line of inquiry under article I, section 
1 1 , i.e., whether the "police behavior was reasonable."^^ 

Six months after Huffines, the court of appeals in Caudle v. State^^ addressed 
another claim of stale probable cause in a case in which the warrant was executed 



45. 743 N.E.2dl267(Ind.Ct.App. 2001). 

46. /^. at 1269. 

47. Id. at 1270 (quoting People v. Bland, 390 N.E.2d 65, 67 (III. App. Ct. 1979)). 

48. Id. 

49. 739 N.E.2d 1093 (Ind. Ct. App. 2000). 

50. /£/. atl097. 

51. M at 1097-98. 

52. 5ge jf/. at 1098-99. 

53. See generally Brown v. State, 653 N.E.2d 77, 79 (Ind. 1995). 

54. 749 N.E.2d 616 (Ind. Ct. App. 2001). 



1354 INDIANA LAW REVIEW [Vol. 35:1347 



seven hours before the ten-day statutory period would have expired. Assuming 
arguendo that the probable cause was stale, the court nevertheless affirmed the 
trial court's admission of evidence based on the good faith exception to the 
exclusionary rule.^^ Noting that the search preceded the issuance of the Huffines 
opinion by eighteen months, the court found that the detective was acting in good 
faith in delaying the execution of the warrant for nine days while he waited to 
catch the defendant at home.^^ The court acknowledged, however, that after 
Huffines "a question exists about whether or not a police officer can in good faith 
execute a warrant under circumstances similar to those in Huffines because that 
decision should cause an officer to no longer 'reasonably believe' that such a 
warrant would be valid" under the constitutional provisions.^^ 

On rehearing Caudle argued that federal circuit courts have held that the 
good faith exception does not apply to errors in the execution of warrants and 
should not have been applied in his case.^* Nevertheless, the court of appeals 
affirmed its earlier opinion, reiterating that the detective was permitted to rely on 
the ten-day statutory period when executing the warrant "unless the statute was 
'clearly unconstitutional.'"^^ Although many circuit courts have held that 
probable cause must exist at the time of execution of a warrant regardless of a 
statutory outer limit, some state courts have held that the execution of a warrant 
within the statutory period is per se timely.^ Because execution within the 
statutory period was not "clearly unconstitutional" in the absence of any Indiana 
authority and conflicting authority from other jurisdictions, the court affirmed the 
application of the good faith exception and the admission of the evidence seized 
during execution of the warrant.^' 

In light of Huffines and Caudle, one would expect that, in the future, law 
enforcement officers will execute warrants as soon as feasible and well before 
the ten-day statutory period. If they do not, however, and probable cause has 
dissipated in the interim, it would appear unlikely that an Indiana court will allow 
them to seek refuge in the good faith exception. The law is now both clear and 
simple: the statute sets an outer limit often days, but the relevant inquiry is 
whether probable cause continues to exist at the time of issuance. 

B. Confessions 

The Indiana Supreme Court addressed several challenges to the admissibility 
of confessions during the survey period; most of these were resolved in the 
State's favor in the trial court and affirmed on appeal by application of existing 
precedent and a highly deferential standard of review. Two opinions stand 



55. /f/. at 620-22. 

56. /£/. at622. 

57. Id. 

58. Caudle v. State, 754 N.E.2d 33, 34 (Ind. Ct. App. 2001). 

59. Id. at 35 (quoting Illinois v. Krull, 480 U.S. 340, 349-50 (1987)). 

60. Id 

61. Mat 36. 



2002] CRIMINAL LAW 1355 



out — one for its holding that significantly clarified the law relating to juvenile 
confessions and the other for its refusal to modify or reconsider existing law in 
an area where reconsideration seems appropriate. 

In Stewart v. State,^^ the supreme court addressed the admissibility of a 
juvenile's murder confession in the face of a waiver signed by his biological non- 
custodial father. According to statute, the constitutional rights of an 
unemancipated person under eighteen may be waived only "by the child's 
custodial parent, guardian, custodian, or guardian ad litem" if four conditions are 
met.^^ In relatively short order, the court held that Stewart's biological father 
was not a custodial parent. 

The undisputed facts were that Stewart was born out of wedlock, no court 
order of custody was admitted at trial or otherwise claimed to exist, and Stewart 
did not live with his biological father.^ The court considered a number of 
statutory provisions that did not provide "a direct answer" to the issue, but which 
all pointed to the conclusion that the term "custodial parent" applied to "either 
a person who has been adjudicated by a court to have legal custody of the child, 
or a parent who actually resides with the unemancipated juvenile."^^ Finally, the 
court rejected the State's contention, that because of the biological relationship, 
Stewart's father satisfied the statutory mandate that requires the juvenile's 
"parent" join in the waiver: "This contention plainly reads 'custodial' out of the 
statute. It seems clear that the statute contemplates consultation and waiver by 
a person in the close relationship afforded by either formal custody or actual 
residence in addition to a biological or adoptive relationship."^^ Because 
Stewart's father met neither test, the court held that admission of his confession 
was error.^^ Moreover, because the State's remaining evidence did not directly 
place Stewart at the scene of the murder, the court was unwilling to find that the 
error was harmless, that is, that it did not affect Stewart's substantial rights.^* 

Stewart represents an important victory for juvenile defendants by ensuring 
the voluntariness of their confessions through a requirement that the parent with 
whom they consult is one that is likely to make the consultation a meaningful 
one. Henry v. State,^^ on the other hand, rejects a requirement that could bolster 
the reliability of adult confessions. 

In Henry, the defendant confessed to the murder of an antique storeowner 
after being told by police that his fingerprints were found at the scene of the 



62. 754 N.E.2d 492 (Ind. 2001). 

63. Id. at 494 (citing iND. CODE § 31-32-5-1(2) (1998)). 

64. Mat 495. 

65. Id. at 495 & n.2. 

66. Id at 496. 

67. Id 

68. Id; see also Fleener v. State, 656 N.E.2d 1 140, 1 141 (Ind. 1995) (discussing harmless 
error under Indiana law, which differs from federal constitutional harmless error as explained in 
Chapman v. California, 386 U.S. 18 (1967)). 

69. 738 N.E.2d 663 (Ind. 2000). 



1356 INDIANA LAW REVIEW [Vol. 35:1347 



crime and a person in the store had identified him as the killer.^° However, 
"[njeither statement was true'V* the police had lied to Henry. 

Henry challenged the admissibility of his confession in the trial court, but his 
motion to suppress was denied.^^ On appeal he acknowledged the supreme court 
precedent of Light v. State,^^ which had upheld the admissibility of a confession 
following a four-hour interrogation punctuated by police conduct involving 
cursing, lying, and smacking the defendant on the arm,^"* but urged the court to 
revisit the issue and "announce a bright line rule which would render 
inadmissible[] a confession obtained solely by deceitful police activity ."^^ 

The court declined the invitation to revisit Light, preferring instead to 
continue to review each confession based on the "totality of the circumstances" 
test.^^ Although the court stated that it "continue[s] to disapprove of deceptive 
police interrogation tactics," it nevertheless upheld the admissibility of Henry's 
confession because he was a man of average intelligence; the interrogation was 
brief (one hour); he was Mirandized three times; the police made no threats or 
promises to him; and he did not ask for an attorney.^^ "Balanced against the 
officer's obvious deception, these facts tip the scales in favor of the conclusion 
that Henry's statement was not involuntary."^* 

The court's reasoning is less than compelling. Had Henry asked for an 
attorney or not been Mirandized, his confession would have been inadmissible 
as a matter of well-settled federal constitutional law.^^ What remains to support 
admissibility is Henry's "average intelligence" and the absence of any "threats 
or promises." If police deception truly "weighs heavily against the voluntariness 
of the defendant's confession,"*^ it is difficult to understand why police telling 
two separate lies during a short confession should be disregarded to support 
admissibility. As the court reiterated in Henry, the State must prove beyond a 
reasonable doubt that a confession was voluntarily given.*' This differs from the 
federal constitutional requirement of voluntariness merely by a preponderance 
of the evidence.*^ If the supreme court is serious about this heightened burden, 
one might suspect it to find the scales tipped in favor of inadmissibility in some, 
if not most, cases of police deception. Although the court relied on its opinion 
in Light, Light does not discuss the "beyond a reasonable doubt" standard and 



70. Id. at 664. 

71. Id. 

72. Id 

73. 547N.E.2ci 1073 (Ind. 1989). 

74. Henry, 738 N.E.2d at 664 (citing Light, 547 N.E.2d at 1079). 

75. Id. (citing Brief of Appellant at 9) (omission in original). 

76. Id 

77. Id at 665. 

78. Id 

79. See, e.g., Edwards v. Arizona, 451 U.S. 477 (1981). 

80. Henry, 738 N.E.2d at 665 (citing Heavrin v. State, 675 N.E.2d 1075, 1080 (Ind. 1996)). 

81. Id at664. 

82. Id. at 664 T\.\,5ee also Schumm, supra note 22, at 648-5 1 . 



2002] CRIMINAL LAW 1357 



was decided well before the court had adopted a consistent view on this 
heightened requirement. 

C. Waiver of the Right to Counsel 

In Poynter v. State,^^ the supreme court granted transfer to address 
inconsistencies in its prior opinions and those of the court of appeals regarding 
the requirements for a valid waiver of the right to counsel before a defendant 
elects self-representation. The defendant asserted, and the State agreed, that the 
record must reflect that such a waiver is knowing, intelligent, and voluntary.^"* 
However, the court in Poynter set out to define just what that standard means in 
practice. 

The court began by acknowledging the importance of the right at issue: "Of 
all the rights that an accused person has, the right to be represented by counsel 
is by far the most pervasive for it affects his ability to assert any other rights he 
may have."*^ To protect this important right, the U.S. Supreme Court has long 
held that a defendant who asserts his right to self-representation must be told of 
the "dangers and disadvantages of self-representation,"*^ although there are no 
prescribed "talking points" that the trial court must include in its advisement.*^ 
The trial court must make a "considered determination" that the waiver is 
voluntary, knowing, and intelligent, a determination that is made "with the 
awareness that the law indulges every reasonable presumption against a waiver 
of this fundamental right."** 

At issue in Poynter was whether a defendant's conduct in failing to hire 
counsel, despite warnings and advisements by the trial court, constituted a valid 
waiver. The court acknowledged that two of its prior cases had reached opposite 
results, although the latter case did not overrule or even discuss the former one.*^ 
Seizing the opportunity to clarify this "inconsistent precedent," the court 
considered the general standards from Supreme Court cases but then seemingly 
adopted^° the more specific approach of the Seventh Circuit, which considers 
four factors: "(1) the extent of the court's inquiry into the defendant's decision, 
(2) other evidence in the record that establishes whether the defendant 
understood the dangers and disadvantages of self- representation, (3) the 
background and experience of the defendant, and (4) the context of the 



83. 749 N.E.2(11 122 (Ind. 2001). 

84. /^. at 1123. 

85. Id at 1 125-26 (quoting United States v. Cronic, 466 U.S. 648, 654 (1984)). 

86. Id. at 1 126 (quoting Faretta v. California, 422 U.S. 806, 835 (1975)). 

87. Id 

88. Id (citing Johnson v. Zerbst, 304 U.S. 458, 464 (1938)). 

89. Id (citing Houston v. State, 553 N.E.2d 1 17 (Ind. 1990); Fitzgerald v. State, 257 N.E.2d 
305 (Ind. 1970)). 

90. The court never explicitly adopts the test but states that it 'Tind[s] this approach helpful 
in analyzing waiver of the Sixth Amendment right to counsel under the facts and circumstances of 
waiver by conduct cases." Id. at 1 128. 



1358 INDIANA LAW REVIEW [Vol. 35:1347 



defendant's decision to proceed pro se."^^ 

Applying the factors to Poynter's case, the court noted that the trial court had 
advised him of his trial rights and the procedural outcome of failing to secure 
counsel but did not advise him of the "dangers and disadvantages of self- 
representation," a factor that "weighs heavily against finding a knowing and 
intelligent waiver."^^ The defendant's background and unknown experience with 
the criminal justice system pointed in neither direction, and his conduct of 
choosing to go to work instead of hiring an attorney did not result in delays or 
appear to manipulate the process.^^ Weighing these factors, the court concluded 
that the record did not support a finding of a knowing and intelligent waiver.^* 

Poynter is significant not only because it clarified contradictory precedent 
but it also took a seemingly clear path that should be relatively easy to apply in 
future cases. Indeed, less than three months after Poynter was decided, the court 
of appeals applied it in Slay ton v. State ^^^ a case in which the trial court "made 
mention of counsel" at three pretrial hearings but never advised the defendant of 
disadvantages of self-representation. Because the other factors did not weigh in 
either direction, the court in Slayton similarly concluded that there had not been 
a knowing and intelligent waiver of counsel.^^ 

In both Poynter and Slayton, the trial court failed to advise the defendant of 
the dangers and disadvantages of self-representation, which proved to be the 
dispositive factor in finding the purported waivers of counsel invalid. Therefore, 
the lingering question for future cases is what form that advisement should take 
and whether a cursory advisement will be assailable on appeal. 

D. Statute of Limitations 

In Wallace v. State,^^ the supreme court granted transfer to address the 
applicability of the statute of limitations in a child molestation case. The 
defendant's two daughters testified that he had molested them during a sixteen- 
month period beginning in the summer of 1988.'* However, for reasons 
undisclosed in the record, the State did not file charges — ^four C felony counts of 
child molestation — until March of 1998.^' Although at the time of the offense 
the applicable statute of limitations for a Class C felony was five years, Wallace 
did not object to the charges on the basis that the statute of limitations had 
expired, but rather proceeded to trial by jury and was convicted of three of the 



91. 


Id. at 1 127-28 (quoting United States v. Hoskins, 243 F.3d 407, 


410 


(7th Cir. 2001)). 


92. 


Mat 1128. 








93. 


Id. 








94. 


Id 








95. 


755 N.E.2d 232, 236 (Ind. Ct. 


App.2001). 






96. 


Id at 237. 








97. 


753 N.E.2d 568 (Ind. 2001). 








98. 


Id at 569. 








99. 


Id 









2002] CRIMINAL LAW 1359 



counts. '^° 

Repeating well-established legal precepts, Justice Rucker, writing for the 
three-justice majority, observed that the applicable statute of limitations is "that 
which was in effect at the time the prosecution was initiated,"'^' and "the statute 
to be applied when arriving at a proper criminal penalty is that which was in 
effect at the time the crime was committed.'"^^ Because a "statute of limitations 
might be construed narrowly and in a light most favorable to the accused," the 
court rejected the State's argument that the extended statute of limitations from 
another subsection of the statute should apply to Wallace's crimes. '^^ Reiterating 
the primary purpose of the statute of limitation as ensuring against the "inevitable 
prejudice and injustice to a defendant that a delay in prosecution creates,"'^ the 
supreme court reversed Wallace's convictions because the State had not filed 
charges within the applicable five-year limitation period. '°^ 

Justice Boehm, joined by Justice Dickson in dissent, did not disagree with 
anything in the majority's opinion, save its conclusion. Relying on Indiana Trial 
Rule 8(c) and federal precedent, the dissent opined that defendants should be 
required to raise a statute of limitations defense in a pretrial motion or forfeit the 
claim on appeal.'^ It reasoned that this view was also consistent with policy 
considerations: "A criminal defendant, like a civil defendant, should not be able 
to sit on a statute of limitations defense until long after trial is completed. The 
result is a waste of taxpayer funds and court time."'^' Moreover, because many 
other "more fundamental" constitutional and statutory rights may be waived by 
criminal defendants either affirmatively or by failure to assert them, the dissent 
found no reason to accord more favorable treatment to a statute of limitations 
defense. '"« 

Although the dissent's view is arguably the better reasoned one, it correctly 
recognized its practical limitations. "In this case, affirming the conviction 
obviously sets the defendant up for an ineffective assistance of counsel claim, 
and the end result of my view may be the same as the majority's."'^ Moreover, 
it is questionable whether the dissent's approach would actually save judicial 
resources. It is unlikely that competent defense counsel, who realizes that raising 
a statute of limitations defense in a pretrial motion would lead to immediate 
dismissal of the charges, would nevertheless choose to proceed to trial to attempt 
to secure an acquittal with the knowledge that, should this effort fail, a guilty 
verdict would be set aside on appeal when the statute of limitations issue was 



100. Id. 

101. Id. 

102. Id 

103. Mat 570. 

104. Id (quoting Kifer v. State, 740 N.E.2d 586, 587 (Ind. Ct. App. 2000)). 

105. Mat 570-71. 

106. M. at 571-72 (Boehm, J., dissenting). 

1 07. Id. at 572 (Boehm, J., dissenting). 

108. Id. 

109. Id. 



1360 INDIANA LAW REVIEW [Vol. 35:1347 



raised. A defendant charged with any crime — most of all child molesting as in 
Wallace — would certainly prefer the quickest resolution of the case; lingering 
charges and an eventual trial are likely to take a serious toll on the defendant and 
his reputation in the community. It is hard to imagine a scenario where failing 
to raise the defense would be tactical, but rather, it would seem to be a classic 
example of deficient performance, which, when coupled with the obvious 
prejudice, constitutes an archetypical case of ineffective assistance. 

E. Voluntary Intoxication 

In 1996, the U.S. Supreme Court held in Montana v. Egelhoff^^^ that, 
consistent with the Due Process Clause, a state could prohibit a defendant from 
offering evidence of voluntary intoxication to negate the requisite mens rea of a 
criminal offense. Although the Indiana Supreme Court had struck down a 
legislative attempt to limit the use of voluntary intoxication as a defense in Terry 
V. State^ ' Mn 1 984, after Egelhojf the court noted that the Terry doctrine was "no 
longer good law"'*^ insofar as it was grounded in the federal constitutional 
guarantee of due process. In response to Egelhojf, the General Assembly in 1 997 
enacted Indiana Code section 35-41-2-5, which provides: "Intoxication is not a 
defense in a prosecution for an offense and may not be taken into consideration 
in determining the existence of a mental state that is an element of the 
offense . . . ."''' 

In Sanchez v. State, ^^^ the Indiana Supreme Court granted transfer to address 
whether the 1 997 statute violated various provisions of the Indiana Constitution. 
In addressing the claimed violation of article I, section 1 2 (the due course of law 
provision), the court reiterated that the first sentence of that provision applies 
only in the civil context,''^ but held that the second sentence, although not 
identical with the federal right to due process, included the "basic concepts of 
fairness that are frequently identified with 'due process' in the federal 
constitution.""^ However, recognizing that the General Assembly "redefined the 
mens rea element in Indiana to render irrelevant" evidence of voluntary 
intoxication, the court found no due course of law violation."^ The court also 
held that the statute did not violate article I, section 13 because that provision 
"does not require that any specific claim of a defense be recognized by Indiana 
law," and "[i]f the substantive law renders the evidence irrelevant . . . there is no 



110. 518 U.S. 37(1996). 

1 1 1. 465 N.E.2d 1085 (Ind. 1984). 

1 1 2. State V. Van Cleave, 674 N.E.2d 1 293, 1 302 n. 1 5 (Ind. 1 996). 

113. Ind. Code §35-41-2-5 (1998). 

1 1 4. 749 N.E.2d 509 (Ind. 2001 ). 

115. Mat 514. 

116. Id. at 515. The second sentence provides: "Justice shall be administered freely and 
without purchase; completely, and without denial; speedily, and without delay." Ind. Const, art. 
U§12. 

117. 5a«c^ez, 749 N.E.2d at 515. 



2002] CRIMINAL LAW 1361 



right under Article I, Section 13 to present it.""* In addition, the court found no 
violation of the jury's right to determine the law and facts under article I, section 
19 because "[t]he voluntary intoxication instruction does not unconstitutionally 
compel the jury to make a finding of intent.""' Finally, the court found no 
violation of the equal privileges and immunities clause of article I, section 23 
because the statute makes distinctions that are rationally related to legislative 
goals and a permissible balancing of the competing interests involved. '^^ 

Justice Sullivan, joined by Justice Rucker, concurred in the result, reasoning 
that the "principles underlying Terry remain sufficiently viable that we must 
adhere to this well-settled precedent," but nevertheless reached the same result 
because the erroneous reftisal of the intoxication instruction was harmless 
beyond a reasonable doubt. '^' 

F. Jury Instructions on Flight from Crime Scene 

Sorting though a decade of wishy-washy pronouncements on flight 
instructions, the supreme court in Dill v. State^^^ finally resolved long-standing 
confusion by holding that it is per se erroneous for trial courts to give an 
instruction that "flight and other actions calculated to hide a crime, though not 
proof of guilt, are evidence of consciousness of guilt and are circumstances 
which may be considered by [the jury] along with other evidence."'^^ 

The confusion began with BeUmore v. State,^^^ in which the supreme court 
found that the standard flight instruction did not violate the defendant's right to 
due process. However, the court recommended against future use of the 
instruction without articulating the reasons for its recommendation or otherwise 
providing guidance for alternative instructions.'^^ Post-Bellmore cases found no 
error in the giving of flight instructions but repeated the cautionary warning 
against such instructions.'^^ "Since BeUmore, we have repeatedly noted this 
recommendation [for disuse] but have not actually applied it to find error."'^^ 

In DilU the defendant objected to the instruction on several grounds, 
including the recommendation from BeUmore and its progeny, as well as its 
engendering of confusion and focusing of excessive attention on evidence of 
flight.'^* "Implementing [its] directive in BeUmore,'' the Dill court found that the 
trial court erred in giving the flight instruction because it was confusing; it 



118. /</. at 520-21. 

119. Id.2^52\. 

120. Id 2X522. 

121. Id. 2X 527 (Sullivan, J., concurring) (emphasis in original). 

122. 741 N.E.2d 1230 (Ind. 2001). 

123. /^. at 1231. 

124. 602N.E.2dlll(Ind. 1992). 

125. Z)///,741N.E.2datl231. 

126. /t/. at 1231-32. 

127. /flf. atl231. 

128. /cf. at 1232. 



1362 INDIANA LAW REVIEW [Vol. 35:1347 



unnecessarily emphasized certain evidence; and it had great potential to mislead 
the jury.^^^ Nevertheless, because the conviction was clearly sustained by the 
evidence and the jury could not properly have found otherwise, the court found 
the erroneous instruction to be harmless error. '^^ 

Chief Justice Shepard dissented, reasoning that putting flight instructions on 
"the extremely short list" of completely prohibited instructions runs counter to 
Indiana's trial practice, which includes "scores of instructions about particular 
aspects of various causes of action, given regularly by trial judges and regularly 
approved on appeal."'^ ^ In addition, the dissent made clear that the majority's 
new rule was a minority view, citing numerous state supreme court and federal 
circuit court opinions that have upheld properly worded flight instructions 
supported by sufficient evidence. '^^ Chief Justice Shepard concluded his dissent 
by noting that in the future he "would not be surprised to see defense counsel 
now begin to tender their own instructions on flight as a way to safeguard their 
clients against the possibility that the prosecutor might oversell the matter during 
final argument."'^^ 

The majority's opinion in Dill, although likely foreclosing the State from 
tendering or trial courts from giving flight instructions in the future, seems to 
give the green light to the State admitting evidence of flight at trial and arguing 
its significance in closing argument.^''* Without an instruction that places this 
evidence in some perspective, it seems entirely possible that a jury of laypersons 
untrained in the law will attach greater weight to the defendant's flight than it 
would if a proper, carefully- worded instruction had been given. Thus, as the 
dissent noted, defense counsel likely will want to craft an instruction that limits 
the significance of flight evidence in those cases where the trial court deems it 
admissible. Trial judges would seemingly be willing to give such an instruction 
when supported by the evidence, in part, because if tendered by the defendant, 
it would foreclose any claim of error on appeal. Refusing such an instruction, 
however, could present a viable issue for appeal, especially if the defendant 
could show that the prosecutor was overzealous in arguing the significance of 
flight in closing argument or that the evidence of flight admitted at trial was not 
relevant — issues that are likely to be fleshed out in ftiture cases, the sorting out 
of which "should prove challenging."^^^ 

G. Limits on Retrials After Hung Juries 
In Sivels v. State, ^^^ the supreme court addressed limitations on retrials after 



129. Id. 

130. Mat 1233. 

131. /flf. at 1 234 (Shepard, C.J., dissenting). 

132. Id. at 1234-35 (Shepard, C.J., dissenting). 

133. Id. at 1235 (Shepard, C.J., dissenting). 

134. See id. si mi. 

135. Id. at 1235 (Shepard, C.J., dissenting). 

136. 741 N.E.2d 1 197 (Ind. 2001). 



2002] CRIMINAL LAW 1363 



repeated hung juries. In that case, the defendant was charged with murder, 
felony murder, and robbery. He was acquitted of the felony murder and robbery 
charges in his first trial, but the jury could not reach a unanimous verdict on the 
murder charge."^ A second trial also resulted in a mistrial due to a hung jury, 
and the defendant then filed a motion to dismiss, alleging that the multiple 
prosecutions violated his right to due process. ^^* The trial court agreed with 
Sivels that it had the inherent authority to dismiss the case on this basis, but 
denied the motion on its merits. '^^ 

On direct appeal the supreme court agreed that the trial court possessed this 
authority to dismiss the case. After reviewing cases from several other 
jurisdictions, the court noted that "[w]hile different jurisdictions refer to different 
sources of the trial court's authority to dismiss after multiple mistrials, the 
majority of the appellate courts rely on precepts of fundamental fairness and 
notions of fair play and substantial justice."'*^ 

The supreme court proceeded to adopt guidelines for future use when trial 
courts are confronted with such a challenge. These include: 

(1) the seriousness and circumstances of the charged offense; (2) the 
extent of harm resulting from the offense; (3) the evidence of guilt and 
its admissibility at trial; (4) the likelihood of new or additional evidence 
at trial or retrial; (5) the defendant's history, character, and condition; (6) 
the length of any pretrial incarceration or any incarceration for related 
or similar offenses; (7) the purpose and effect of imposing a sentence 
authorized by the offense; (8) the impact of dismissal on public 
confidence in the judicial system or on the safety and welfare of the 
community in the event the defendant is guilty; (9) the existence of any 
misconduct by law enforcement personnel in the investigation, arrest, or 
prosecution of the defendant; (10) the existence of any prejudice to 
defendant as the result of passage of time; (11) the attitude of the 
complainant or victim with respect to dismissal of the case; and (12) any 
other relevant fact indicating that judgment of conviction would serve no 
useftil purpose.'"*' 

In addition, the court should consider "the number of prior mistrials and the 
outcome of the juries' deliberations, as known" and "the trial court's own 
evaluation of the relative strength of each party's case . . . ."''*^ The court 
declined to adopt a categorical rule limiting retrials to a specific number but 
instead held that trial courts are in the best position to weigh the relevant factors 
and that abuse of discretion is the appropriate standard for appellate review of the 



137. Id. at 1 198-99. Several months earlier, a jury was selected and dismissed (before being 
sworn) because of a continuance. Id. at 1 198. 

138. Id. 

139. /c/. at 1202. 

140. Mat 1201. 

141. Id (quoting Stale v. Sauve, 666 A.2d 1 164, 1 168 (Vt. 1995) (citations omitted)). 

142. Id (quoting State v. Abbati, 493 A.2d 513, 521-22 (N.J. 1985)). 



1364 INDIANA LAW REVIEW [Vol. 35:1347 



trial court's decision. ^^^ 

In reviewing the relevant factors in Sivels, the supreme court noted that the 
charged offense involved the beating and shooting of an unarmed man during the 
commission of a robbery.'^ The first two trials ended injuries that voted 7-5 and 
9-3 in favor of acquittal, and the defendant had been incarcerated without bond 
for two and a half years. '"^^ Perhaps most significantly, however, the trial court 
had indicated its own evaluation of the strength of the State's case and its belief 
that Sivels had committed the charged offense.''*^ Based on these considerations, 
the supreme court found no abuse of discretion in allowing the State to retry its 
case for a third time.'"*^ 

Although a fifteen-factor test may appear at first blush to be inadvisable, the 
test adopted by the supreme court in Sivels will likely be easily applied in future 
cases because, although it includes all the relevant considerations, generally only 
few will apply in a given case. More importantly, the supreme court properly 
gives the authority to dismiss charges to the trial court, whose time and docket 
is at the mercy of the State's repeated retrials in such cases. If repeated retrials 
result in hung juries and the trial court finds the State's evidence less than 
compelling, one would expect most trial judges to exercise the authority to 
dismiss a case. However, if the trial court declines to do so, the issue is now one 
that can be easily and meaningfully raised and reviewed on appeal. 

K Appellate Review of Sentences 

This year's survey concludes, as did last year's, with a review of the morass 
of appellate sentence review. As predicted, the constitutional amendment that 
eliminated the mandatory jurisdiction of the supreme court in all but death 
penalty and life without parole cases*^^ has, when combined with the court of 
appeals' new membership, led to the court of appeals' newfound role as the 
primary arbiter of appel late sentence review. '^^ 

Although several court of appeals opinions during the survey period reduced 
sentences as being manifestly unreasonable, the supreme court's newly- 
discretionary docket not surprisingly led to only two sentence reductions: one 
on direct appeal and one on transfer. On direct appeal, the supreme court, in 
Winn V. State,^^^ took the unusual action of finding that a thirty-year habitual 
offender enhancement added to a fifty-year sentence for rape was manifestly 



143. /^. at 1202. 

144. Id 

145. Id 

146. Id 

147. Id 

1 48. The constitutional amendment limited mandatory jurisdiction to death penalty cases but 
the supreme court retained jurisdiction for life without parole cases by rule. See IND. Appellate 
Rule 4(A)(1)(a). 

1 49. Schumm, supra note 22, at 669. 

150. 748 N.E.2d 352, 360 (Ind. 2001). 



2002] CRIMINAL LAW 1365 



unreasonable. Winn is unusual because the defendant did not challenge, and the 
court did not evaluate, the aggregate sentence as being manifestly unreasonable, 
as in most previous cases addressing such claims. Rather, the defendant 
requested that the habitual offender enhancement be attached to a crime other 
than the rape count and that his enhancement therefore be reduced from thirty to 
ten years because the two prior felony convictions that formed the basis for the 
enhancement were non-violent Class D felonies.'^' In addressing this claim, the 
court summarized the relevant factors of the nature of the offense (the defendant 
confronted the victim with a deadly weapon, struck her, threatened her, and 
required her to submit to more than one sexual act) and the character of the 
offender (an Operation Desert Storm veteran with a non-violent criminal history 
of misdemeanor or D felony offenses).'" In light of these considerations and the 
trial court's imposition of the maximum sentences for rape and criminal deviate 
conduct, the court concluded that imposing the maximum habitual enhancement 
by attaching it to the rape conviction was manifestly unreasonable and therefore 
ordered that the enhancement be reduced to ten years and attached to one of the 
class B or C felony counts, thereby reducing the aggregate sentence by twenty 
years.'" 

In Walker v. State,^^^ the supreme court granted transfer to address a claim 
that the "aggregate sentence" of eighty years for two counts of A felony child 
molesting was manifestly unreasonable.'" The court began by tracing the origins 
of article VII, section 4 of the Indiana Constitution, noting that the framers "had 
in mind the sort of sentencing revision conducted by the Court of Criminal 
Appeals in England.'"^^ In England, the appellate court 

shall, if they think a different sentence should have been passed, quash 
the sentence passed at trial, and pass such other sentence warranted in 
law by the verdict (whether more or less severe) in substitution therefore 
as they think ought to have been passed, and in any other case shall 
dismiss the appeal. '^^ 

Despite having its origins in such a liberal standard, Indiana appellate courts have 
exercised their responsibility "with great restraint, recognizing the special 
expertise of the trial bench in making sentencing decisions."'^* Although the 
deferential standard of review "means that trial court decisions will be affirmed 
on the great majority of occasions," the appellate courts should revise sentences 
when they are "manifestly unreasonable in light of the nature of the offense and 



151. Id 

152. /^. at 361. 

153. Id 

154. 747 N.E.2d 536 (Ind. 2001). 

155. Id Bi 53^. 

156. /^. at 537-38. 

1 57. Id. at 538 (quoting Criminal Appeal Act, 1907, 7 Edw. 7, ch. 23 § 4(3) (Eng.)). 

158. Id 



1366 INDIANA LAW REVIEW [Vol. 35:1347 



the character of the offender."'^^ 

In applying the standard to Walker's case, the supreme court noted that 
although he did not have a history of criminal behavior, he had molested the 
same child twice without physical injury, was on probation, and had fled the 
jurisdiction. '^° Weighing these considerations the court found that "this is some 
distance from being a worst offense or the most culpable offender" and ordered 
Walker's two forty-year sentences to be served concurrently.'^' 

Following Walker or other precedent, the court of appeals reduced sentences 
as being manifestly unreasonable in five cases during the survey period.'" 
Relying heavily on Walker, the court of appeals in Perry v. State^^^ held that 
consecutive sentences for dealing and conspiracy to deal cocaine were manifestly 
unreasonable because Perry's prior felony convictions were used as the 
aggravating circumstance to justify consecutive sentences and formed the basis 
of the habitual offender charge.'^ Accordingly, the case was remanded for the 
imposition of concurrent sentences. '^^ In a similar vein, in Simmons v. State^^^ 
the court ordered a reduction of the defendant's maximum fifty-year sentence for 
Class A felony child molesting to forty years because the defendant's "criminal 
history was not lengthy, did not demonstrate a tendency toward violence or a 
propensity to commit sexual acts, and was the only proper aggravating factor 
considered by the trial court . . . ."'^^ 

In Love v. State,^^^ the court of appeals reduced the defendant's maximum 
sentence of fifty years for possession with intent to deliver cocaine to the 
presumptive term of thirty years. The court based its decision on the defendant's 
lack of a violent criminal history and his youthful age of nineteen: "In 
sentencing Love to fifty years' imprisonment, the trial court has effectively 
determined that Love is beyond rehabilitation at age nineteen.'"^^ 

In contrast, in Peckinpaugh v. State^^^ the court reduced a sentence for 



159. Id. 

160. Id. 

161. Id 

162. This number does not include Mann v. State, 742 N.E.2d 1025 (Ind. Ct. App.), trans, 
denied, 753 N.E.2d 13 (Ind. 2001), cited in Walker as an example of a sentence properly reduced 
as manifestly unreasonable. Although Judge Baker noted in his dissent that he would have reduced 
the sentence under the manifestly unreasonable doctrine, id. at 1028-29 (Baker, J., dissenting), the 
majority relied on procedural sentencing doctrine in remanding "to the sentencing court with 
instructions to impose the forty-five year sentence it deemed appropriate after identifying and 
balancing the aggravating and mitigating circumstances." Id. at 1028. 

163. 751 N.E.2d 306 (Ind. Ct. App. 2001). 

164. IddX^W. 

165. Id 

166. 746 N.E.2d 81 (Ind. Ct. App.), trans, denied, 761 N.E.2d (Ind. 2001). 

167. Mat 93. 

168. 741 N.E.2d 789 (Ind. Ct. App. 2001). 

169. /^. at 795. 

170. 743 N.E.2d 1238 (Ind. Ct. App. 2001). 



2002] CRIMINAL LAW 1367 



burglary from the maximum of twenty years to the presumptive sentence often 
because of the nature of the offense. The court found the crime not to be a 
"particularly egregious example" of burglary and noted that no injury was 
attempted against the occupant and no damage was caused to the dwelling.'^' 
The court, however, upheld the maximum sentence of eight years for stalking 
because it was based on repeated harassment in the face of several warnings by 
law enforcement.'^^ The court also affirmed the decision to order the sentences 
served consecutively because of the defendant's need for an extended 
incarceration in a penal facility. '^^ 

Finally, in Biehl v. State^^^ the court of appeals broke new ground in finding 
a presumptive sentence to be manifestly unreasonable. Biehl, unlike the 
previously-discussed cases, presented both a mitigated nature of the offense and 
a sympathetic character of the offender. As to the nature of the offense, the court 
noted that the victims had to some extent sought out the defendant when they 
entered the bam where he was living, threw bricks and boards at him, and refused 
to leave when asked. *^^ As to the character of the offender, the court noted that 
the defendant, who was thirty-five years old, had no criminal history and had 
been suffering from a longstanding and severe mental illness.'^^ Weighing these 
considerations, the court found that the presumptive sentence of thirty years for 
voluntary manslaughter was manifestly unreasonable and ordered the sentence 
to be reduced to the minimum of twenty years. '^^ Not only did the supreme court 
deny the State's petition for transfer in Biehl, it also cited the case with approval 
several months later in Walker ^^ 

Although substantive sentence review in Indiana continues to challenge the 
appellate courts in large part because the unique nature of sentencing decisions 
which defy easy quantification, these opinions suggest a recognition of the 
important goal of consistency that has not been a constant feature in prior years. 
As highlighted in many of these opinions, the appellate courts seem especially 
concerned by consecutive sentences and appear more inclined to reduce a 
sentence when a defendant is given enhanced sentences for more than one 
offense and ordered to serve the counts consecutively, as in Walker and Perry. 
The Winn opinion also suggests that the same principle may begin to be applied 
to habitual offender cases; although the habitual offender enhancement is not a 
separate charge, it nevertheless represents the same sort of "piling on" as in 
consecutive sentencing cases. Winn also suggests somewhat of a departure from 
the usual considerations by looking at the predicate offenses that formed the 
basis of the habitual offender charge instead of the aggregate sentence. 



171. /f/. at 1243. 

172. Mat 1243-44. 

173. /t^. at 1244. 

174. 738 N.E.2d 337 (Ind. Ct. App. 2000), trans, denied, 753 N.E.2d 3 (Ind. 2001). 

175. Mat 339. 

176. /flf. at 339-40. 

177. Mat 341. 

1 78. See Walker v. State, 747 N.E.2d 536, 538 (Ind. 2001). 



1368 INDIANA LAW REVIEW [Vol. 35:1347 



Beyond these limitations, the remaining cases suggest a greater appreciation 
and depth of review for the relevant calculus of the "nature of the offense" and 
"character of the offender." In Peckinpaugh the court considered the specifics 
of the burglary offense and found that it did not call for a sentence beyond the 
presumptive. However, analysis of "nature of the offense" represents only half 
of the equation, and most cases have turned in larger part on the "character of the 
offender." The most salient attributes, as evidenced by the cases decided during 
the survey period, appear to be a lack of or minimal criminal history, a 
defendant's youthful age, and long-standing mental illness. 

Biehl is perhaps the most significant of these opinions because it represents 
the first successful challenge to a presumptive sentence. Previously, most 
successful challenges have been to sentences at or near the maximum and have 
led to reductions to the presumptive sentence (or above). The court of appeals' 
opinion in BiehU and the supreme court's later approval of it, makes clear that 
any sentence may be successfully challenged under the manifestly unreasonable 
doctrine. Although many, if not most, challenges to the presumptive sentence 
will likely prove unfruitful, a particularly mitigated nature of the offense or 
sympathetic character of the offender could lead to a reduction. However, 
reduction to the minimum sentence as in Biehl yjo\x\d appear unlikely unless both 
factors are particularly strong. 

In short, both the supreme court and court of appeals issued opinions that 
have begun to shape a landscape for consistency in substantive sentencing 
challenges. Many of the court of appeals' opinions relied heavily on and 
reconciled themselves with existing authority. Although these decisions have not 
taken the form of explicit sentencing principles, these recent cases represent a 
useful and large step in the direction of consistency in sentencing. 



Survey of Employment Law Developments 
FOR Indiana Practitioners 



Susan W. Kline' 
Ellen E. Boshkoff' 



Introduction: National Trends and Developments 

One immediate reaction to last year's terrorist attacks on the United States 
was an upsurge in religious observance and expression.' Issues of religious 
accommodation and tolerance in the workplace are therefore very much in the 
public eye. Ironically, it was on September 1 1, 2000 that the Seventh Circuit 
heard oral arguments in Anderson v. U.S.F. Logistics (IMC), Inc.,^ the "Have a 
Blessed Day"^ case. 

The controversy began when a representative of U.S.F.'s largest customer, 
Microsoft, complained about Elizabeth Anderson's use of this phrase in business 
communications."* Anderson twice ignored her supervisor's instruction not to use 
the phrase in correspondence to Microsoft.^ In a meeting called to discuss the 
situation, Anderson offered to refrain from using the phrase with any individuals 
who took offense, but her supervisor did not respond to the proposed 
accommodation.^ 

The next step was a written reprimand and distribution of a company policy 
to all Indianapolis employees instructing them to refrain from using "additional 
religious, personal or political statements" to communications with customers.^ 
Although the policy also prohibited such communications with co-workers, 
Anderson was allowed to continue wishing her fellow employees blessed days.* 

Anderson took the matter public and a local newspaper published an article 
that quoted a Microsoft spokesperson as saying Microsoft had no objection to the 
phrase.^ Based on her reading of the article, Anderson decided she could resume 
using the phrase. The day after the article appeared, Anderson again used the 



* Judicial Clerk to Chief Justice Randall T. Shepard, Indiana Supreme Court. B.S., 1 980, 
Butler University; M.B.A., 1992, Butler University; J.D., 2000, Indiana University School of 
Law—Indianapolis. 

* * Partner, Baker & Daniels, Indianapolis. B. A., 1 983, Swarthmore College; J.D., 1 990, 
Indiana University; Judicial Clerk to Chief Judge J. Clifford Wallace, Ninth Circuit Court of 
Appeals, 1990-91. 

1 . See Laurie Goodstein, As Attacks ' Impact Recedes, a Return to Religion as Usual, N. Y. 
Times, Nov. 26, 2001, at Al. 

2. 274 F.3d 470 (7th Cir. 2001). 

3. Mat 473. 

4. Id. 

5. See id. 

6. Id. 

1. /c/. at 474. 

8. Id. 

9. Id 



1370 INDIANA LAW REVIEW [Vol. 35:1369 



"Blessed Day" closing in a communique to Microsoft.'^ U.S.F. did not push the 
issue by imposing further discipline but did not retract the previous reprimand." 

For several months Anderson refrained from using the "Blessed Day" phrase. 
She then sent an e-mail to Microsoft with the phrase "HAVE A BLESSED 
DAY" in capital letters, surrounded by quotation marks. She received another 
reprimand.'^ 

More than six months later, Anderson brought suit under Title VII of the 
Civil Rights Act of 1964'^ (Title VII), claiming failure to reasonably 
accommodate her religious practice and seeking injunctive relief^ Judge John 
Daniel Tinder of the Southern Districtof Indiana denied a preliminary injunction, 
concluding that it was unlikely Anderson would succeed on the merits. ^^ 
Anderson filed an interlocutory appeal with the Seventh Circuit, which affirmed 
on December 14,2001.'^ 

Judges Cudahy, Easterbrook and Williams all agreed that because Anderson 
used the phrase only sporadically and had no religious commitment or 
requirement to use the phrase all the time, "an accommodation that allows her to 
use the phrase with some people but not with everyone could be a reasonable 
accommodation."^^ The court also noted that the employer had not sought "to 
denigrate" Anderson's belief.'^ In fact, U.S.F. had invited her to open a 
company-sponsored event by saying a prayer over the loudspeaker and allowed 
her to use the "Blessed Day" phrase with co-workers, display religious sayings 
in her work area, and listen to religious radio broadcasts at her work station.'^ 

The Anderson decision may help employers and employees better understand 
religious accommodation. An employer's obligation to provide reasonable 
religious accommodations is measured differently than under the ADA. 
Employers may legally refuse, as an undue hardship, religious accommodations 
that would involve more than de minimis cost.^° 

An important point, not raised in Anderson, is that Title VII's requirement 
of reasonable religious accommodation applies to any sincerely held religious 
belief, not merely traditional Judeo-Christian beliefs.^' On November 1 9, 2001 , 



10. Id. 

11. Id 

12. See id. 

13. 42U.S.C. §2000e(1994). 

14. Anderson, 274 F3daX 414. 

15. Anderson v. U.S.F. Logistics (IMC), Inc., 2001 U.S. Dist. LEXIS 2807, ♦45-46. (S.D. 
Ind. 2001). 

16. Anderson, 274 ¥ 3d at 410. 

17. 7^.476. 

18. Id 

1 9. Id. at 476-77. Note that the court did not say these accommodations were required, but 
it considered them as evidence of the employer's tolerance toward expressions of faith. Id. 

20. See Trans World Airlines, Inc. v. Hardison, 432 U.S. 63, 84 (1977) ("To require TWA 
to bear more than a de minimis cost in order to give Hardison Saturdays off is an undue hardship."). 

21. See Bushouse v. Local Union 2209 UAW, 164 F. Supp. 2d 1066, 1072 n.l4 (N.D. Ind. 



2002] EMPLOYMENT LAW 1371 



the Equal Employment Opportunity Commission (EEOC) and U.S. Departments 
of Justice and Labor issued a joint statement reaffirming their commitment to 
combat workplace discrimination based on religion, ethnicity, national origin or 
immigration status.^^ The statement urged victims of workplace bias to promptly 
report incidents to allow timely investigation.^^ The statement specifically refers 
to acts directed toward individuals who are, or are perceived to be, Arab, 
Muslim, Middle Eastern, South Asian or Sikh.^'* 

The EEOC has therefore put employers on renewed notice that adverse 
actions or harassment based on religious or national affiliation, physical or 
cultural traits and clothing, perception and association may violate Title VII. ^^ 
As of December 6, the EEOC had already logged 166 formal workplace 
discrimination complaints specifically related to the September 1 1 attacks.^^ 

Another tolerance-related issue on the rise is disability harassment.^^ This 
has become the fourth most frequent form of harassment claim (following racial, 
sexual, and national origin harassment), with 2,400 complaints logged annually .^^ 
A New Jersey man with dyslexia and other neurological impairments recently 
won a six-figure jury award.^^ Other cases have involved allegations of 
horseplay targeting a mentally retarded restaurant worker, hostility toward and 
ostracism of an HIV-infected woman, and taunting of a man with bipolar illness 



2001). 

22. Press Release, U.S. Equal Employment Opportunity Commission, EEOC and 
Departments of Justice and Labor Issue Joint Statement Against Workplace Bias in Wake of 
September 1 1 Attacks, at http://eeoc.gOv/press/l 1-19-01. html (last visited Nov. 19, 2001). 

23. Id. 

24. Id. 

25. See U.S. Equal Employment Opportunity Commission, Employment Discrimination 
Based on Religion, Ethnicity, or Country of Origin, at http://eeoc.gov/facts/fs-relig_ethnic.html 
(last visited Dec. 12,2001). 

26. Press Release, U.S. Equal Employment Opportunity Commission, EEOC Confers with 
Minority Groups on Combating September 1 1 Backlash Discrimination, at http://ee0c.g0v/press/l 2- 
12-Ol.html (last visited Dec. 12, 2001). 

27. See Reed Abelson, Employers Increasingly Face Disability-Based Bias Cases, N.Y. 
Times, Nov. 20, 2001 , at CI . Note that the Seventh Circuit has yet to decide in favor of a plaintiff 
on a disability harassment claim. In each case raising such a claim, the court has therefore assumed 
without deciding that the claim is cognizable under the Americans with Disabilities Act (ADA). 
See, e.g., Casper v. Gunite Corp., 2000 U.S. App. LEXIS 16241, * 12 (7th Cir. 2000) (unpublished 
opinion); Silk v. City of Chicago, 194 F.3d 788, 803-04 (7th Cir. 1999). The Seventh Circuit has 
signaled its receptivity to such claims by noting that a cause of action for disability harassment 
appears to exist based on ADA language prohibiting discrimination in any "term, condition, or 
privilege of employment" — language that parallels Title VII. Casper, 2000 U.S. App. LEXIS 
16241 at * 12-13. During the survey period, the Fourth and Fifth Circuits, which are usually 
considered relatively conservative, recognized claims of hostile environment based on disability. 
See Marcia Coyle, New Tool for Job Bias Suits, Nat'l L.J., May 14, 2001 at Al. 

28. Abelson, supra note 27. 

29. Id. 



1372 INDIANA LAW REVIEW [Vol. 35:1369 



as a "psycho" and "freak."^° 

Employees who are appropriately sensitive to issues of race and gender may 
not be as well educated when it comes to disabilities. These issues become more 
complicated when an employer is entrusted with medical information about an 
employee because, for example, the employee has submitted a certification in 
support of a request for leave under the Family and Medical Leave Act (FMLA). 
Employers must protect the disabled individual's privacy by strictly limiting 
disclosure of information regarding the disability to those with a legitimate need 
to know.^' 

These privacy concerns have been affected by the September 1 1 attacks. On 
October 3 1 , 200 1 , the EEOC issued technical assistance to employers concerned 
about special needs of disabled employees in the event of an emergency 
evacuation.^^ According to the EEOC, when an employer knows of an employee 
disability, it may inquire about special emergency assistance needs. However, 
the EEOC cautions that employers should not assume that all disabled 
individuals require special help, but should rather consult the individuals who are 
best able to assess their own situations. The information also helps employers 
determine how much medical information they may request, and with whom they 
may share it." 

The remainder of this Article will review some of the survey year's most 
significant and interesting legal developments affecting Indiana employers and 
employees. It begins by looking at Title VII, the Americans with Disabilities Act 
(ADA), the Age Discrimination in Employment Act (ADEA), and other federal 
law developments. It continues with a summary of worker's compensation and 
other state law developments, followed by a brief update on the force and effect 
of arbitration agreements. It concludes by mentioning three pending cases worth 
monitoring. 

I. Title VII 

A. What Qualifies as an Adverse Action? 

Under McDonnell Douglas' burden-shifting method of proof,^* a plaintiff 
establishes a prima facie case of discrimination by showing she was a protected 
class member who performed satisfactorily but suffered some adverse 
employment action to which others outside the class were not subjected.^^ 
Similarly, a party claiming retaliation under Title VII must show that because he 



30. Id 

31. See 42 U.S.C. § 121 12(d)(3H4) (1994). 

32. U.S. Equal Employment Opportunity Commission, EEOC Provides Technical Assistance 
to Employers on Requesting Medical Information as Part of Emergency Evacuation Procedures, at 
http://eeoc.gov/press/10-3 1-01 .html (last visited Oct. 3 1, 2001). 

33. Id. 

34. McDonnell Douglas Corp. v. Green, 41 1 U.S. 792 (1973). 

35. Grube v. Lau Indus., 257 F.3d 723, 728 (7th Cir. 2001). 



2002] EMPLOYMENT LAW 1373 



engaged in a protected activity he suffered an adverse employment action.^^ 

A key issue in several recent cases has been whether the alleged action was 
legally adverse (sometimes referred to as a "tangible employment action").^^ In 
Stutler V. Illinois Department of Corrections^ the court provided a brief recap of 
some Seventh Circuit holdings on this point.^* The court requires a "'significant 
change in employment status, such as hiring, firing, failing to promote, 
reassignment with significantly different responsibilities, or a decision causing 
a significant change in benefits'" that materially alters the terms and conditions 
of employment.^^ Negative performance evaluations, job title changes, greater 
travel distance to work and/or loss of a telephone or workstation do not qualify 
standing alone/^ Retaliatory harassment by a supervisor or co-workers may 
qualify but only if it is sufficiently severe."*' Here, the court held that neither 
Stutler' s lateral transfer with no loss of benefits or responsibilities nor an 
"unpleasant" working environment qualified as a legally adverse action."^^ 

In Molnar v. BoothJ^^ the court took a more liberal view in a case involving 
a junior high school principal who allegedly propositioned a teaching intern.'*'* 
On the intern's first day on the job, the principal "ogled her and made 
appreciative noises," then took her into his office and suggested that he could 
provide permanent room space and supplies not normally available to junior 
teachers."*^ In ensuing weeks he did other things that Molnar perceived as 
advances, such as calling her to his office to discuss personal matters and inviting 
her out on his boat."*^ Molnar's rejection of these offers led to retraction of the 
art supplies and the offer of an art room, plus a negative evaluation (later 
retracted) that could have kept Molnar from receiving her teaching license."*^ 

A jury awarded Molnar $500 in actual damages and $25,000 in punitive 
damages.^* The Seventh Circuit affirmed, calling the tangible employment action 
issue close but concluding that confiscation of essential supplies and a negative 
evaluation were sufficiently adverse.*^ Although the criticism was temporary, it 



36. Stutler v. 111. Dep't of Corr., 263 F.3d 698, 702 (7th Cir. 200 1 ). 

37. See, e.g., Haugerud v. Amery Sch. Dist., 259 F.3d 678, 698 (7th Cir. 2001) (citing 
Burlington Indus., Inc. v. Ellerth, 524 U.S. 742, 761 (1998)). 

38. 5/«r/er, 263 F.3d at 703 (citations omitted). 

39. Haugerud, 259 F.3d at 698 (quoting Burlington Indus., Inc. v. Ellerth, 524 U.S. 742, 761 
(1998); citing Rabinovitz v. Pena, 89 F.3d 482, 488 (7th Cir. 1996)). 

40. Stutler, 763 F.3d at 703 (citing Hill v. Am. Gen. Fin., Inc., 218 F.3d 639, 645 (7th Cir. 
2000); Place v. Abbott Labs., Inc., 215 F.3d 803, 810 (7th Cir. 2000)). 

41. Id. 

42. Mat 702-04. 

43. 229 F.3d 593 (7th Cir. 2000). 

44. Id. Sit 591. 

45. Id. 

46. Id. 

47. /^. at 597-98. 

48. Id. at 599. 

49. /^. at 600. 



1374 INDIANA LAW REVIEW [Vol. 35:1369 



threatened Molnar's career for a period of time. ^° The court was concerned about 
allowing supervisors to punish employees and then avoid liability by reversing 
the action later.^^ 

In Russell v. Board of Trustees^^ the court deemed a five-day unpaid 
suspension materially adverse.^^ Plaintiff Russell claimed a spotless thirty-year 
employment record.^"* Russell's problem arose when she filled out a time card 
in advance, anticipating that she would be attending a full day of training." A 
flat tire caused her to miss the afternoon session of the training, and she failed to 
correct the entry when she submitted the card the next day.^^ When Russell 
returned from a two week vacation, her supervisor asked how the seminar went.^^ 
Russell responded that she only attended the morning session, and immediately 
acknowledged her error when shown the time card discrepancy.^* 

Russell claimed the resulting five-day suspension was an act of retaliation for 
her complaints about her supervisor's mistreatment of female employees.^^ The 
district court held that the suspension was not sufficiently adverse to be 
actionable.^^ The Seventh Circuit disagreed, finding the entry on a formerly 
spotless record that Russell committed "theft of services" by "falsifly ing]" a time 
record even worse than the loss of five days' pay.^* 

Other employees were less successful during the survey period in proving 
adverse employment actions. In Haugerudv. Amery School District, ^^ a longtime 
custodial worker claimed that her employer tried to pressure her into resigning, 
told male custodians not to help female custodians, gave her additional 
responsibilities not assigned to males, and intentionally interfered with her work 
performance." The court concluded that the alleged incidents could collectively 
constitute a pervasively hostile environment.^ However, Haugerud was never 
disciplined, demoted, terminated, denied wage or benefit opportunities or 
increases, or made to perform more menial tasks.^^ The appeals court therefore 
affirmed summary judgment for the school district on the sex discrimination 



50. /flf. at 600-01. 

51. Id. 

52. 243 F.3d 336 (7th Cir. 2001). 

53. Mat 341. 

54. Id. 

55. Mat 339. 

56. Mat 339-40. 

57. M at 340. 

58. Id. 

59. Id. Among other things, the supervisor allegedly said one female employee "dressed like 
a whore," called another a bitch, and called Russell "grandma." Id. at 339. 

60. M. at 341. 

61. Id. 

62. 259 F.3d 678 (7th Cir. 2001). 

63. M. at 684-87. 

64. M. at 698. 

65. M. at 692. 



2002] EMPLOYMENT LAW 1375 



claim, although it reversed on the harassment claim. ^^ 

In Grube v. Lau Industries,^^ the plaintiffs complaint arose from a shift 
reassignment after more than twenty years working the day shift.^* The court 
said, "Title VII simply was never intended to be used as a vehicle for an 
employee to complain about the hours she is scheduled to work or the effect 
those hours have upon the time an employee spends with family members. "^^ 
The change in working hours was not, therefore, an adverse employment action^*^ 

In Aviies v. Cornell Forge Co. ,^' the plaintiff argued that "[c]alling the police 
on someone is always an adverse act."^^ The Seventh Circuit had considered this 
case in a previous appeal and remanded^^ On successive appeal, Aviies 
mischaracterized the earlier Seventh Circuit opinion, which held that a false 
report that Aviies was armed and lying in wait outside the plant after threatening 
his supervisor cow/flf constitute an adverse action.^"* At the ensuing trial, however, 
it was established that Aviies was escorted by police from the plant after he 
refused to leave following a suspensions^ Aviies then ignored police instructions 
not to return and parked within two blocks of the plant entranceS^ 

Someone from the plant telephoned the police to report Aviies' presenceS^ 
In response to an officer's question the caller expressed uncertainty but said 
Aviies might be armed.^* The police forcibly removed Aviies from the vicinity 
of the plant but did not arrest him.^^ The appeals court agreed with the district 
court that Aviies suffered no adverse action, because Aviies did not prove the 
report false.*° Furthermore, any injury Aviies incurred was unforeseeable 
because the company caller had no reason to expect that Aviies would resist or 
that the police would overreact in removing Aviies from the area.*' 

B. Standards and Methods of Proof 
This survey marks the first full year following the Supreme Court's decision 



66. Id. at 700. 

67. 257 F.3d 723 (7th Cir. 2001). 

68. /c/. at 728. 

69. Id. 2X129. 

70. /^. at 729-30. 

71. 241 F.3d 589 (7th Cir. 2001). 

72. /flf. at 590, 593. 

73. Ariles v. Cornell Forge Co., 1 83 F.3d 598 (7th Cir. 1999). 

74. 241 F.3d at 593. 

75. /£/.at591. 

76. Id 
11. Id. 

78. Id. 

79. /c/. at 591-92. 

80. /c/. at 593. 

81. /flf.at592. 



1376 INDIANA LAW REVIEW [Vol. 35:1369 



in Reeves v. Sanderson Plumbing Products, Inc.,^^ a case many believed would 
have a significant impact on summary judgment practice in employment 
discrimination cases.*^ In Reeves, the Court resolved a circuit split regarding the 
standard of proof necessary for a plaintiff to survive a motion for judgment as a 
matter of law.^ At issue was whether a trier of fact could infer discrimination 
from the falsity of the employer's explanation for its action (known as the 
"pretext" standard) or whether the plaintiff had to present additional evidence of 
intentional discrimination ("pretext plus").^^ Opting for the lower standard, the 
Court ruled that "[i]n appropriate circumstances, the trier of fact can reasonably 
infer from the falsity of the explanation that the employer is dissembling to cover 
up a discriminatory purpose."^^ 

Reeves was hailed as a major victory for plaintiffs*^ and seemed to signal a 
sea change in approach to dispositive motions in employment cases. Early 
predictions were that Reeves would make it easier for an employment plaintiff 
to get to a jury and harder for jury verdicts to be overturned.** 

Actual experience, however, has proved otherwise. Based on the limited 
post-Reeves data available, several authors have found no significant change in 
the number of cases being resolved on motion, nor on the fate of summary 
judgment rulings on appeal.*^ 

Seventh Circuit practice seems consistent with this finding. During the 
survey period, the Seventh Circuit considered appeals of summary judgment 
rulings in seventy-two employment discrimination cases. The Seventh Circuit 
affirmed the entry of summary judgment in sixty- two of these cases, affirmed in 
part in five more, and reversed outright in only five.^ 

An interesting point is that the Seventh Circuit rarely cited the Reeves 
decision in these cases. Only twelve of the summary judgment discrimination 



82. 530 U.S. 133(2000). 

83. See Philip M. Berkowitz, An Early Analysis of the Impact o/ Reeves v. Sanderson, 
N.Y.L.J., Sept. 28, 2000, at 5. 

84. See Susan W. Kline, Survey of Employment Law Developments for Indiana Practitioners, 
34 IND. L. REV. 675, 678 (2001). 

85. See Berkowitz, supra note 83. 

86. Reeves, 530 U.S. at 147. 

87. See, e.g., Tim A. Baker, Supreme Court Decision Eases Burden for Discrimination 
Plaintiffs, iND. LAW., July 19, 2000, at 4. 

88. See, e.g., Marcia Coyle, New High Court Bias Ruling May Spark More Jury Trials, 
Settlements, Nat'l L.J., June 26, 2000 at Bl ("Employers will likely face more jury trials, increased 
pressure for settlement and greater caution in making employment-related decisions because of an 
age bias ruling by the U.S. Supreme Court."); Linda Greenhouse, The Justices Make It Easier to 
Win Suits for Job Bias, N.Y. TIMES, June 13, 2000 at A24; Peter N. Hillman, Risks of 
Discrimination Suits Increase for Employers Following Supreme Court Ruling in Reeves, Emp. 
LITIG. REP., July 1 1, 2000 at 3. 

89. See, e.g., Tamara Loomis, Employment Bias; After 'Reeves, ' Little Has Changed in the 
Circuit, N.Y.L.J., July 5, 2001, at 5. 

90. Authors' calculations. 



2002] EMPLOYMENT LAW 1 3 77 



cases decided during the survey period contain any mention of Reeves, and most 
of those cases cite the decision only in passing.^' The explanation for this 
omission may be that Reeves did not technically change the standards in the 
Seventh Circuit — ^which has always been a "pretext" circuit.^^ Thus, pre-Reeves 
case law on summary judgment standards remains viable in this circuit. 

One case illustrating the continuity of standards in the Seventh Circuit is 
Pugh V. City of Attica?^ Pugh, a former city animal control officer, sued the city, 
alleging discharge due to a perceived disability and retaliation for protesting 
police harassment.^"* In its motion for summary judgment, the employer 
presented its explanation for the discharge — ^that it believed Pugh had 
misappropriated funds.^^ The trial court granted summary judgment for the 
city.^ 

On appeal, Pugh attempted to bring the case within the Reeves framework by 
arguing, among other things, that he had not actually committed the misconduct 
for which he had been fired.'^ In support of this argument, Pugh relied on his 
own denials and explanation of the incident.^* Pugh argued that this created a 
dispute regarding whether the employer's explanation for its decision was 
"unworthy of credence."^^ 

The Seventh Circuit summarily rejected this argument. Relying on pre- 
Reeves case law, the court ruled that the issue on summary judgment was not 
whether Pugh had actually misappropriated funds, but whether the city had 
honestly believed that he did so: 

Mr. Pugh's argument is misplaced. By arguing that he did not mishandle 
funds, he has not cast any doubt on the honesty of the City's belief that 
he had engaged in such conduct. Mr. Pugh offers no evidence to suggest 
that the City had additional information or knowledge . . . which would 
have indicated that the City did not truly believe that Mr. Pugh had 
misappropriated funds. '°^ 

Based on the city's evidence explaining its investigation and conclusions, the 

Seventh Circuit easily found that the city had met this "honest belief standard. '°^ 

The plaintiff in Logan v. Kautex Textron North America^^^ was similarly 

unable to capitalize on Reeves. Plaintiff Logan's six co-workers evaluated her 



91. Authors' calculations. 

92. See, e.g., Sheehan v. Donlen Corp., 173 F.3d 1039 (7th Cir. 1999). 

93. 259 F.3d 619 (7th Cir. 2001). 

94. /f/. at 621, 624. 

95. /flf. at624. 

96. Id. 

97. Id.?x621. 

98. Id 

99. Id 

100. Id 

101. Mat 629. 

102. 259 F.3d 635 (7th Cir. 2001). 



1378 



FNDIANA LAW REVIEW 



[Vol. 35:1369 



performance at the end of her probationary period, and four recommended that 
she not be offered permanent employment. '^^ Logan attributed the decision to 
retaliation for her complaints about two alleged racial comments and one alleged 
threat to her job security, all made by one of the voting co-workers. '^"^ Kautex, 
according to Logan, attributed its decision to Logan's "bad attitude, sabotaging 
tanks, performance, and absenteeism."'®^ Logan argued that this inconsistency 
would allow a jury to infer that these proffered reasons were not the actual 
reasons for her discharge.'^ 

The Seventh Circuit disagreed, noting that all the reasons except absenteeism 
were related and concluding, "no reasonable jury could find that Logan was 
terminated for any reason other than that she was voted out by her team."'°^ The 
court acknowledged that race discrimination may be camouflaged under the label 
"attitude," but Logan failed to produce any objective evidence that Kautex was 
engaging in such a subterfuge. '°* 

On the other hand. Reeves may have made a difference in a few of the close 
cases decided during the survey period. For example, in Bell v. Environmental 
Protection Agency ^^^ the court showed a willingness to consider the substantive 
merits of the employment decision in question. There, sixteen candidates applied 
for four available promotions. '^^ All selectees were white, native-born 
Americans.'" Two African-American applicants sued claiming racial 
discrimination, and two other foreign-born applicants sued claiming national 
origin discrimination."^ 

The selection process included a personal interview and a rating system."^ 
Two successful applicants achieved ratings of sixty-nine and two scored a perfect 
seventy- five."* Two plaintiffs achieved perfect scores, one scored sixty-nine, 
and one scored sixty-three."^ All four plaintiffs had been employed by the EPA 
for a longer time than any selectee, and each plaintiff had received more service 
achievement awards than at least three selectees."^ The plaintiffs presented 
statistical data suggesting that the EPA promoted blacks and foreign-born 
employees less often than non-black and native-bom employees, although only 



103. /c/. at 638. 

104. /^. at 638, 640. 

105. /fl?. at640. 

106. Id. 

107. Id. 

108. /J. at 640-41. 

1 09. 232 F.3d 546 (7th Cir. 2000). 

110. /(i. at 549. 

111. Id 

112. W. at 548. 

113. /t/. at 549. 

114. Id 

115. Id 

116. /f/. at 551. 



2002] EMPLOYMENT LAW 1 3 79 



the data on foreign-bom employees qualified as statistically significant."^ They 
also presented a memorandum written before the promotion decision was made 
by one of the interview panelists, expressing the opinion that two plaintiffs were 
better qualified than two selectees."* 

The court held that the comparative qualifications evidence and statistics 
precluded summary judgment on the discrimination claims."^ It said, "Even if 
the pieces of evidence were not conclusive by themselves, they sufficiently 
countered the EPA's assertion that it honestly believed it was promoting the best 
candidates."'^° 

The court was similarly receptive to the plaintiffs arguments in Gordon v. 
United Airlines, Inc. '^' In Gordon, a probationary flight attendant on layover in 
Los Angeles found his hotel room unsatisfactory.'^^ The crew desk was closed, 
so he decided to return home to Chicago to shower and change clothes, then 
return in time for his next scheduled flight. *^^ He checked in at the Chicago crew 
desk and (by his account) offered to carry out this plan, but was excused from the 
assignment.'^"* United ultimately terminated Gordon for the unauthorized 
schedule deviation, and he claimed race and age discrimination.'^^ 

The district court granted summary judgment to United. '^^ The Seventh 
Circuit reversed in a split decision. '^^ The majority focused on United's lack of 
a clear definition of "unauthorized deviation" and noted that it was a rarely- 
invoked infraction.'^* In addition, it was unclear who decided Gordon should be 
charged with an unauthorized deviation, and the only other "unauthorized 
deviation" action on record did not result in the (white female) employee's 
termination.'^^ The court said: 

A reasonable jury could conclude, given United's inconsistent definition 
of unauthorized deviation, the rarity with which the unauthorized 
deviation provision was invoked, the disparate ways it was applied when 
it was invoked in Mr. Gordon's case, and United's inability to identify 
the management employee responsible for characterizing Mr. Gordon's 
conduct, that United's stated reason was a pretext for discrimination. '^° 



117. /flf. at 553-54. 

118. Mat 551-52. 

119. M. at 554. 

120. Id. 

121. 246 F.3d 878 (7th Cir. 2001). 

122. /rf. at881. 

123. /c/. at 881-83. 

124. /(i. at 882. 

125. Mat 880. 

126. Id. 

127. Mat 893. 

128. Mat 890. 

129. M. at 891-92. 

130. M. at 893. 



1380 INDIANA LAW REVIEW [Vol. 35:1369 



Judge Easterbrook dissented, saying that the McDonnell Douglas approach 
"has become so encrusted with the barnacles of multi-factor tests and inquiries 
that it misdirects attention."'^' The proper summary judgment focus, he argued, 
was whether a reasonable trier of fact could conclude that Gordon was 
terminated because of his age or raceJ^^ Unless United's explanation for the 
discharge was "a fraud on the court — not just an overreaction, but a 
lie" — summary judgment was proper.'" Even foolish, trivial or baseless reasons 
are sufficient, Easterbrook asserted, as long as they are honestly believed and 
nondiscriminatory.'^'* Here, there was no evidence that United tried "to pull the 
wool over judicial eyes" or "bamboozle the court," and Easterbrook disagreed 
that "blunders and intra-corporate disarray support an inference of deceit."'^^ He 
characterized the majority view as "'added vigor' in action" and noted that 
"[s]ummary judgment is a hurdle high enough without 'added vigor'"'^^ 

The last word on the subject of summary judgment standards during the 
survey period was Alexander v. Wisconsin Department of Health & Family 
Services. '^^ Prompted, most likely, by Judge Easterbrook's dissent in Gordon^ 
the Seventh Circuit used the case as a vehicle to address the court's prior use of 
the phrase "added rigor" in employment cases. '^* In 1992, the court first said it 
reviewed summary judgment dispositions in such cases with "added rigor" 
because intent is a central issue, and subjective issues such as good faith and 
intent are "notoriously inappropriate" questions for summary judgment. '^' Since 
1 992, the "added rigor" wording has appeared in thirty published Seventh Circuit 
opinions.''*^ 

In Alexander, the court explained that this phrase merely emphasized that 
employment discrimination cases usually involve questions of credibility and 
intent, which are seldom appropriate summary judgment issues.'"*' Despite the 
implication, grants of summary judgment in employment discrimination cases are 
reviewed under the same standards as all other cases in which summary judgment 
is granted."*^ 

Plaintiff Alexander offered evidence of racially offensive remarks by co- 



rn. Id, 

132. Id. 

133. /^. at 894. 

134. Id. (quoting Hartley v. Wis. Bell, Inc., 124 F.3d 887, 890 (7th Cir. 1997)). 

135. /£/. at 894-95. 

136. /flf. at896. 

137. 263 F,3d 673 (7th Cir. 2001). 

138. /f/. at 680-81. 

139. Id. at 681 (quoting McCoy v. WGN Cont'l. Broad. Co., 957 F.2d 368, 370-71 (7th Cir. 
1992); Stumph v. Thomas & Skinner, Inc., 770 F.2d 93, 97 (7th Cir. 1985)). 

140. Mat 681 n.2. 

141. Mat 681. 

142. Id. (citing Wallace v. SMC Pneumatics, Inc., 103 F.3d 1394, 1396 (7th Cir. 1997)). 



2002] EMPLOYMENT LAW 1381 



workers.''*^ He offered no evidence, however, that his five-day suspension for a 
confrontation with a co-worker, his ten-day suspension for insubordination, and 
his eventual termination for making a threatening gesture were either motivated 
by discrimination or in retaliation for his complaints of racial discrimination."*'* 
The court therefore affirmed summary judgment for the employer. '^^ 

The case trend indicates that, while Reeves may have had some impact in the 
Seventh Circuit, that effect appears modest and somewhat sporadic. Judge 
Easterbrook's dissent in Gordon makes clear that the court is not united in its 
view of the required proof for summary judgment. This area of law therefore 
warrants continued monitoring. 

Two other cases dealing with standards and methods of proof are worth brief 
mention, although the Seventh Circuit gave fairly short shrift to the plaintiffs 
novel burden-of-proof argument in Price v. City of Chicago }^^ Price argued that 
Title VII allows a plaintiff to establish disparate impact liability by showing that 
the employer refused to adopt an alternative employment practice with a lesser 
adverse impact.'"*' The dispute arose after Price, who is African- American, 
received the same score on a qualifying examination as another older but equally 
senior police officer.'"** The older officer got the only promotion available 
because the city used birth dates to break such ties.'"*' Although Price argued that 
this practice had a disparate impact on African-Americans, the record did not 
support her assertion. '^^ Alternatively, Price argued that her employer should 
have been required to promote her as well as the older officer as a less 
discriminatory alternative.*^' 

The court made clear that proof of disparate impact is required for the 
plaintiffs prima facie case. '^^ Only after such proof must the employer show that 
the challenged practice is job-related.'" If the employer succeeds, the plaintiff 
may offer evidence that the justification is pretextual because a less 
discriminatory alternative is available.'^"* Price placed the alternatives analysis 
at the wrong end of the process, and her claim failed. '^^ 

The final survey period case worth noting dealt with comments as evidence 
of harassment. In Mason v. Southern Illinois University^^^^ an African- American 



143. 


Id. at 683. 


144. 


/(f. at 683-88. 


145. 


Id. at 689. 


146. 


251 F.3d 656 (7th Cir. 2001). 


147. 


Id. at 659. 


148. 


Id. at 658. 


149. 


Id. at 658-59. 


150. 


Id. at 659. 


151. 


Id. at 660. 


152. 


Id. 


153. 


Id. 


154. 


Id. 


155. 


Id. at 66\. 


156. 


233 F.3d 1036 (7th Cir. 2000), 



1382 INDIANA LAW REVIEW [Vol. 35:1369 



campus police dispatcher's claim of supervisory harassment was based in part on 
racist comments by co-workers. *^^ The Seventh Circuit held that comments 
neither Mason nor his supervisor ever heard were properly excluded at trial. '^^ 
The trial court did allow evidence of comments made by the supervisor or in the 
supervisor's presence. '^^ The concurring opinion emphasized that, in order to use 
co-worker comments to prove harassment by a supervisor, the plaintiff must 
show that the supervisor was or should have been aware that the words or deeds 
offered as evidence would lead to co-worker misconduct.*^ 

C The Continuing Violation Doctrine 

As a general rule, discrimination charges must be based on alleged 
misconduct that occurred during specified filing timeframes. Plaintiffs 
sometimes argue, however, that earlier misconduct should be considered under 
the continuing violation doctrine. This doctrine allows plaintiffs to link 
otherwise time-barred acts to acts within the limitations period.*^' 

During the survey period, the Seventh Circuit issued two noteworthy 
opinions discussing this doctrine. In Sharp v. United Airlines, Inc.,^^^ the airline 
offered to reinstate fourteen flight attendants who sued on grounds of sex, age, 
and disability discrimination after they were terminated for exceeding weight 
restrictions.'^^ Plaintiff Sharp turned the offer down because she was pregnant, 
although she could have accepted and immediately taken maternity leave. '^ She 
later asked United to renew the offer on the same terms, but United declined to 
do so despite Sharp's ongoing efforts to persuade various United officials. '^^ 

Two years after United declined to renew the offer. Sharp brought suit.'^^ 
The Seventh Circuit found the continuing violation doctrine inapplicable and 
said, "[A]n employer's refusal to undo a discriminatory decision is not a fresh act 
of discrimination."'^' 

The plaintiff in Shanoffv. Illinois Department of Human Services^^^ was 
similarly unsuccessful in invoking the continuing violation doctrine. '^^ Shanoff 



157. Mat 1039-41. 

158. Mat 1045. 

159. M. at 1047. 

160. M at 1048 (Ripple, J., concurring). 

161. Shanoff V. 111. Dep't of Human Servs., 258 F.3d 696, 703 (7th Cir. 2001). 

162. 236 F.3d 368 (7th Cir. 2001). 

163. Mat 369. 

164. Mat 370. 

165. M 

166. M. 

1 67. Id. at 373 (quoting Lever v. Northwestern Univ., 979 F.2d 552, 555-56 (7th Cir. 1 992)). 

168. 258 F.3d 696 (7th Cir. 2001). 

169. M at 703. Plaintiff ShanofTdid succeed in convincing the appeals court to reverse 
summary judgment for the employer, because a reasonable jury could have found that alleged 
supervisory remarks made during the limitations period that expressed animosity toward Shanoff s 



2002] EMPLOYMENT LAW 1383 



claimed that he suffered a hostile work environment based on actions by his 
supervisor such as referring to Shanoff as a "haughty Jew" and threatening to 
"keep [his] white Jewish ass down."^^° Shanoff first complained internally in 
November 1997, after several hostile remarks, but was told that the employer 
would take no action to resolve the situation.'^' At that point, the court held, 
Shanoff was on notice that he had a substantial claim and the filing clock began 
to run.'^^ Shanoff did not sue until October 1998, so the court only considered 
allegations that fell within the 300 days prior to that filing dateJ^^ 

Different circuits have adopted varying continuing violation standards.'^'* 
The Seventh Circuit holds that plaintiffs may not procrastinate; they must sue "as 
soon as the harassment becomes sufficiently palpable that a reasonable person 
would realize [he] had a substantial claim under Title VII" in order to base claims 
on conduct prior to the limitations period. '^^ 

The U.S. Supreme Court may soon shed some light on the continuing 
violation question. The Court has granted certiorari in Morgan v. National 
Railroad Passenger Corp. '^^ Plaintiff Morgan claimed race-based harassment 
that occurred over a four-year period. '^^ The Ninth Circuit held that courts can 
consider time-barred conduct if "the evidence indicates that the alleged acts of 
discrimination occurring prior to the limitations period are sufficiently related to 
those occurring within the limitations period."'^* It found the pre- 1 imitations 
conduct at issue sufficiently related under the totality of the circumstances to 
invoke the doctrine. ^^' 

D. Remedies 
The U.S. Supreme Court answered an important question in Pollard v. E.I. 



race and religion were sufficiently severe to create a hostile work environment. Id. at 706. 

170. Mat 698, 700. 

171. M. at 699-700. Compare to Frazier v. Delco Elec. Corp., 263 F.3d 663, 666 (7th Cir. 
2001) (allegedly harassing conduct that occurred while the company said it was investigating 
Frazier's complaints not time-barred; it is "a principle more fundamental than the doctrine of 
continuing violation" that an employer "cannot plead for time to rectify a situation of harassment 
... but deny the time to the victim of the harassment to learn that the company has failed to rectify 
it after all"). 

172. 5Aa«o/^ 258 F.3d at 703-04. 

173. Id. 

174. See Lisa S. Tsai, Note, Continuing Confusion: The Application of the Continuing 
Violation Doctrine to Sexual Harassment Law, 79 TEX. L. REV. 531 (2000). 

1 75. Shanoff, 258 F.3d at 703 (quoting Galloway v. Gen. Motors Serv. Parts Operations, 78 
F.3d 1 164, 1 166 (7th Cir. 1996)). 

176. 232 F.3d 1008 (9th Cir. 2000), cert, granted, 533 U.S. 927 (2001). 

177. Mat 1010-13. 

178. Mat 1015. 

179. Mat 1017-18. 



1384 INDIANA LAW REVIEW [Vol. 35:1369 



DuPont de Nemours & Co. '^^ by holding that front pay is not an element of 
compensatory damages under the Civil Rights Act of 1991J*' Pollard sued for 
CO- worker sexual harassment and received $300,000 (the maximum 
compensatory damages available to her under the Act) plus additional amounts 
for back pay, benefits and attorney fees.'^^ The district court expressed the view 
that $300,000 was insufficient to compensate Pollard but followed Sixth Circuit 
precedent holding that front pay was subject to the cap.'^^ 

The U.S. Supreme Court looked to the original language of the Civil Rights 
Act of 1964, which was very similar to the National Labor Relations Act 
(NLRA) and which provided remedies of injunction and/or reinstatement with 
or without back pay.'*^ The NLRA's back pay provision had consistently been 
interpreted to allow compensation up to the employee's reinstatement date, even 
if that occurred after judgment.^** 

In Title VII parlance, post-judgment compensation is considered front pay.'*^ 
After the 1964 Act was expanded in 1972 to allow "any other equitable relief," 
all circuits that addressed the issue allowed front pay, including front pay in lieu 
of reinstatement when reinstatement was not a viable option.'*^ 

The Court concluded in Pollard thait Congress intended to provide additional 
remedies when it passed the 1991 Act.'** The 1991 Act therefore expands 
previously available remedies by allowing compensatory and punitive damages 
in addition to front pay pending or in lieu of reinstatement.'*^ 

The Seventh Circuit took this rationale a step farther in Hertzberg v. SRAM 
Corp. '^ A jury awarded Hertzberg $20,000 in punitive damages for sexual 
harassment, but found for the employer on Hertzberg's retaliatory discharge 
claim. Despite the latter fmding, the district court added equitable relief in the 
form of back and front pay to the award, reasoning that but for the harassment, 
Hertzberg would not have left the company.'^' 

The Seventh Circuit acknowledged Pollard's holding that the 1991 Act left 
previously available equitable remedies undisturbed, and reasoned that the 
required showing for those equitable remedies was also unchanged. '^^ Therefore, 
a plaintiff who leaves her job because of discrimination must prove actual or 
constructive discharge to earn the equitable remedy of reinstatement or back and 



180. 


532 U.S. 843 (2001). 


181. 


Id. at 845. 


182. 


Id. 


183. 


Id at 846-47. 


184. 


/^. at 848. 


185. 


/t/. at 849. 


186. 


Id 


187. 


Id. at 849-50. 


188. 


/t/. at 851. 


189. 


Id at 853. 


190. 


261F.3d651 (7th Cir. 2001) 


191. 


/J. at 654, 657. 


192. 


/J. at 659. 



2002] EMPLOYMENT LAW 1 3 85 



front pay in lieu of reinstatement. ^^^ Hertzberg failed to do so because the only 
bases for relief she argued were sexual harassment and retaliatory discharge, and 
the jury rejected the latter claim J^"^ The appeals court therefore reversed the lost 
pay award. ^^^ 

In reaching this conclusion, the Seventh Circuit distinguished "ordinary" 
sexual harassment, defined as hostile conduct that an employee is expected to 
endure while seeking redress, from "aggravated" harassment that makes working 
conditions so intolerable that the employee is forced to resign (i.e., is 
constructively discharged).'^ Only in the latter case may an employee who quits 
his job receive post-resignation back and front pay.'^^ 

Another remedies issue addressed during the survey period was punitive 
damages. The Seventh Circuit reheard EEOC v. Indiana Bell Telephone Co. '^^ 
en banc to consider whether evidence regarding arbitration and a collective 
bargaining agreement is admissible on the issues of whether an employer 
responded reasonably to a sexual harassment complaint and whether the 
employer's state of mind justified punitive damages.'^ The district court had 
disallowed the evidence for all purposes.^^ 

The original Seventh Circuit panel held the evidence admissible on both 
points. ^^' Judge liana Diamond Rovner wrote a spirited dissent in which she 
deplored a "pattern of inaction in the face of . . . unrelenting misconduct" that 
spanned twenty years, and concluded that "Ameritech has won ... the right to 
invoke the collective bargaining agreement as an excuse for sitting on its hands 
while [employee Gary] Amos kept on terrorizing his female colleagues."^°^ 

The rehearing inspired four different decisions, with the majority holding 
arbitration and collective bargaining agreements inadmissible on the question of 
liability, but admissible as a defense to punitive damages.^^^ Judge Easterbrook 
wrote: 

An employer is entitled to show that things were not as bad as they 
appeared .... The district court's order enabled the EEOC to ask the 
jury rhetorically why any conscientious employer would have acted as 
Ameritech did unless it wanted harm to befall female workers, while 



193. Id 

194. Id. at 661. 

195. Id 

196. /^. at 658. 

197. Id 

198. 256 F.3d 516 (7th Cir. 2001) (en banc). 

199. Mat 519. 

200. Id 

20 1 . 2 1 4 F.3d 8 1 3, 825 (7th Cir. 2000), vacated and reh 'g en banc granted by No. 99- 1155, 
2000 U.S. App. LEXIS 22797 (7th Cir. Sept. 6, 2000). 

202. Id. at 826, 836 (Rovner, J., concurring in part and dissenting in part). 

203. Ind Bell Tel. Co., 256 F.3d at 519, 528-29, 531, 537. 



1386 



INDIANA LAW REVIEW 



[Vol. 35:1369 



disabling Ameritech from giving what may have been its best answer.^^"* 

Employers will no doubt take issue with some of the court's reasons for 
disallowing this evidence on the liability issue. A majority of the court agreed 
that collective bargaining agreements and arbitration systems are not imposed 
upon employers by forces beyond their control, and called employers "wrong to 
suppose that an arbitrator is some outside force even ex post its agreement to a 
given arbitration clause," because the contract defines the arbitrator's 
authority.^^^ Here, if Ameritech feared that Amos' discharge would be 
overturned by an arbitrator, the majority suggested that it could have 
"transfer[ed] Amos to an empty room and give[n] him make- work tasks" because 
"[f]eatherbedding ensues from some collective bargaining agreements, and the 
lateral arabesque solves many a personnel problem. "^°^ 

Two additional Seventh Circuit survey period cases dealt with punitive 
damages. In both, the court discussed and applied Kolstadv. American Dental 
Association,^^^ a 1999 U.S. Supreme Court case that clarified when punitive 
damages are available in Title VII cases. To justify punitives under Kolstad, an 
employer must act "in the face of a perceived risk that its actions will violate 
federal law," but need not be specifically aware that it is engaging in 
discrimination.^^^ The plaintiff must show that the discriminatory actor was a 
managerial agent acting within the scope of her employment.^*^ The employer 
may avoid punitive damages by proving that it made a good faith effort to 
implement an antidiscrimination policy .^^° 

In Bruso v. United Airlines, Inc.,^^^ an airline supervisor claimed he was 
demoted in retaliation for reporting sexual harassment of female employees by 
a fellow supervisor.^'^ The district court granted summary judgment to the 
airline on the issue of punitives without applying the Kolstad framework.^ '^ The 
Seventh Circuit reversed, noting that the managerial agents who demoted Bruso 
were aware of Title VII's antidiscrimination principles and United's zero- 
tolerance antidiscrimination policy.^''* Bruso presented evidence that the 
investigation of the alleged harasser's conduct was merely a sham to discredit 
Bruso and to cover for management's failure to address the harassment sooner.^'^ 
The appeals court therefore found a triable issue on the question of punitive 



204. /^. at 528. 

205. /cf. at 521-22. 

206. Mat 524. 

207. 527 U.S. 526(1999). 

208. Id. at 536. 

209. Id at 543. 

210. Mat 545. 

211. 239 F.3d 848 (7th Cir. 2001). 

212. Mat 852-53. 

213. Mat 859. 

214. Mat 859-60. 

215. Mat 860-61. 



2002] EMPLOYMENT LAW 1 3 87 



damages.^'^ 

The court was less receptive to the plaintiffs argument in Cooke v. Stefani 
Management Services, Inc}^^ Plaintiff Cooke, a gay bartender, was fired the day 
after he rejected his male supervisor's advances.^^* A jury awarded Cooke $7500 
in back pay and lost benefits and $10,000 punitive damages.^'^ 

The employer appealed the punitive damage award,^^° citing Kolstad's good 
faith effort defense. Stefani had sexual harassment policies, conducted 
management training, and displayed an anti-harassment poster.^^' Although the 
reporting policy for harassment lacked a provision allowing the complainant to 
bypass his or her manager if that manager was the harasser, the court said that 
Cooke should have exercised common sense and talked to someone higher in the 
chain of command.^^^ 

Because the manager committed "rogue acts motivated by a desire to amuse 
himself, not benefit his employer," the court refused to impute the manager's 
knowledge of harassment to the company.^^^ The court therefore reversed the 
punitive damages award based on the employer's good faith efforts defense.^^"^ 

Though it does not involve a substantive employment law issue, Kenseth v. 
Commission of Internal Revenue^^^ involves taxation of attorneys' fee awards, an 
issue that can significantly affect remedies available for employment 
discrimination. In that case, the plaintiff settled an age discrimination suit with 
his former employer.^^^ Pursuant to a contingent fee agreement, the attorney 
deducted forty percent of the settlement proceeds for his fee, and paid the 
remainder of the settlement to the plaintiff, who did not report as taxable income 
the $91,800 deducted by the law firm. ^^^ 

The tax court ruled that the entire amount was taxable as income, and the 
Seventh Circuit acknowledged a circuit split but found the tax court resolution 
of the issue "clearly correct. "^^* The court reasoned that the attorneys' fees were 
simply part of the "cost of generating income" and thus part of gross income like 
other business expenses.^^^ 

That attorneys' fees are part of gross income does not mean, of course, that 
they are actually taxed in all cases. As the Seventh Circuit pointed out in 



216. Mat 861. 

217. 250 F.3d 564 (7th Cir. 2001). 

218. Mat 565. 

219. M. at 566. 

220. Mat 568. 

221. Id. 

111. Id. at 569. 

111. Id 

114. Id. at 570. 

225. 259 F.3d 881 (7th Cir. 2001). 

226. Mat 882. 

227. Id 

228. M. at 883, 885. 

229. Mat 883-84. 



1388 INDIANA LAW REVIEW [Vol. 35:1369 



Kenseth, a taxpayer may deduct those fees as a miscellaneous itemized 
deduction.^^^ However, due to limitations on this and other deductions, it is 
unlikely that the taxpayer will be able to deduct the full amount paid to his or her 
attorneys. Further, attorneys' fees are not deductible for purposes of the 
alternative minimum tax.^^* 

The practical effect of Kenseth may be that it will become more expensive 
for an employer to settle an employment discrimination case because the 
employee will seek additional compensation to defray the "tax effect" of the 
ruling. In Kenseth's situation, the Seventh Circuit's ruling cost the employee an 
additional $26,992.^^^ Ironically, Kenseth may have its greatest impact on 
"nuisance value" settlements, because the tax impact of the settlement may dwarf 
its value to the plaintiff. 

Practitioners may also wish to take note of United States v. Cleveland 
Indians Baseball Co. ,^" a U.S. Supreme Court case dealing with payroll taxes on 
settlements. The question there was whether Social Security and unemployment 
taxes are assessed in the year a back pay award is actually paid, or the year the 
wages should have been paid.^^* The answer made a $100,000 difference in that 
case because in 1994 a group of former Indians players collected settlements 
totaling over $2 million for violations of free agency rights that occurred in 1986 
and 1987.^^^ These players all exceeded the taxable wage ceilings in 1986 and 
1 987, but they were no longer team employees in 1 994.^^* The Court sided with 
the Internal Revenue Service and held that the tax is assessed when the wages are 
actually paid.^^^ 

II. Americans With Disabilities ACT 

A. Substantial Limitation in a Major Life Activity 

To qualify for the employment-related protections of the Americans with 
Disabilities Act, a person must prove an impairment that substantially limits one 
or more of his major life activities.^^* Regulations define a substantial limitation 
as the inability to perform a major life function or a significant restriction in the 
duration, manner or condition under which the plaintiff can carry out the activity 



230. U at 882. 

231. Id. 

232. Kenseth owed $17,000 in alternative minimum tax. In addition, his deduction was 
reduced by two percent ($5298) due to the floor on miscellaneous itemized deductions and by 
$4694 due to the overall limitation on itemized deductions. Id. at 882. 

233. 532 U.S. 200 (2001). 

234. Id. at 204. 

235. /^. at 204, 207. 

236. /c/. at 207. 

237. /fi^. at 207-08. 

238. 42 U.S.C. § 12102(2) (1994). Alternatively, a plaintiff may show a record of such an 
impairment or that he was regarded as having such an impairment. Id. 



2002] EMPLOYMENT LAW 1 3 89 



compared to the general populace.^^^ Some examples of major life activities are 
walking, seeing, hearing, speaking, breathing, learning, and — ^according to EEOC 
regulations — ^working.^'*^ A limitation on working must significantly restrict a 
plaintiffs ability to perform a class of jobs or a broad range of jobs in various 
classes.^"*' 

The U.S. Supreme Court recently handed down Toyota Motor 
Manufacturing, Inc. v. Williams^^^ addressing whether a substantial limitation 
in performing manual tasks due to carpal tunnel syndrome qualifies an employee 
for reasonable accommodation under the ADA.^'*^ Williams, an assembly line 
worker, developed problems gripping tools and working with her arms elevated 
and outstretched.^"*^ A reassignment to quality control temporarily resolved the 
situation, but this solution broke down when additional duties were assigned to 
quality control workers.^^^ Toyota refused to relieve Williams of these additional 
duties and she sued, asserting that Toyota should have accommodated her carpal 
tunnel syndrome.^"*^ 

The Sixth Circuit held that Williams was substantially limited in the major 
life activity of performing manual tasks, and awarded her partial summary 
judgment on the issue of whether she was disabled under the ADA.^'*^ Justice 
O'Connor, writing for a unanimous Court, disagreed, saying "[T]he Court of 
Appeals did not apply the proper standard ... it analyzed only a limited class of 
manual tasks and failed to ask whether respondent's impairments prevented or 
restricted her from performing tasks that are of central importance to most 
people's daily lives."^"*' 

In proving a substantial limitation in a major life activity — here, the activity 
of performing manual tasks — ^the Court said a plaintiff must offer more than 
medical diagnosis of impairment.^**' The evidence must show a substantial 
limitation in the context of the plaintiffs own experience, which requires 
individualized assessment.^^^ This is especially true when dealing with a 
condition such as carpal tunnel syndrome, which has widely varying 
symptoms.^^* 

In this assessment, the "central inquiry" is how well the plaintiff can perform 



239. 5ee 29 C.F.R.§ 1630.2(1) (2002). 

240. 29C.F.R. § 1630.2(i)(2002). 

241 . Webb v. Clyde L. Choate Mental Health & Dev. Ctr., 230 F.3d 991 , 998 (7th Cir. 2000). 

242. 534 U.S. 184(2002). 

243. Linda Greenhouse, Justices Try to Determine the Meaning of Disability, N.Y. TIMES, 
Nov. 8, 2001, at A 18. 

244. W^/7/wm5,534U.S.at686. 

245. Mat 686-87. 

246. Mat 687. 

247. Mat 686. 

248. Mat 690. 

249. Mat 69 1-92. 

250. Mat 692. 

251. Mat 693. 



1390 INDIANA LAW REVIEW [Vol. 35:1369 



tasks that are centrally important to daily life, not just to the plaintiffs particular 
job.^^^ Here, Williams' ability to do personal hygiene tasks and household chores 
was relevant.^^^ Her difficulty with repetitive work requiring elevation of her 
arms and hands to shoulder level for long periods of time was not.^^"* Williams 
could still brush her teeth, wash her face, bathe, tend a flower garden, prepare 
breakfast, do laundry, and tidy up her house.^^^ She avoided sweeping, 
occasionally needed help getting dressed, and was less frequently able to play 
with her children, garden, and drive long distances, but "these changes in her life 
did not amount to such severe restrictions in the activities that are of central 
importance to most people's daily lives that they establish a manual-task 
disability as a matter of law."^^^ The Court therefore reversed the partial 
summary judgment Williams won in the Sixth Circuit.^^^ 

The Court left two significant questions unanswered. First, it expressed no 
opinion on whether working should be considered a major life activity.^^* 
Second, the Court noted that the ADA does not authorize any agency to interpret 
the term "disability," but did not decide whether the EEOC regulations are 
entitled to any deference because Toyota did not attack the reasonableness of 
those regulations."^ 

During the survey period, the Seventh Circuit dealt with three other notable 
cases where substantial limitation in a major life activity was a central issue. In 
Contreras v. Suncast Corp.^^ the plaintiffs back injury allegedly made him 
unable to lift more than forty-five pounds for a long period of time, do strenuous 
work, or drive a forklift more than four hours daily .^^' The court "fail[ed] to see 
how such inabilities constitute a significant restriction on one's capacity to work, 
as the term is understood within the ADA" because they would not preclude the 
plaintiff from performing any broad class of jobs.^^^ Other circuits have said that 
a restriction on lifting as little as twenty-five pounds is not significant under the 
ADA definition.^" 

Contreras went on to make the novel claim that he was disabled in the major 
life activities of sexual reproduction and engaging in sexual relations because his 



252. Id. 

253. Id. 

254. Id 

255. Id 

256. /^. at 694. 

257. Id 

258. /^. at 689. 

259. Id at 689-90. 

260. 237 F.3d 756 (7th Cir. 2001). 

261. Mat 763. 

262. Id 

263. Id. (citing, inter alia, Wooten v. Farmland Foods, 58 F.3d 382, 384, 386 (8th Cir. 1995) 
(holding that plaintiff was not substantially limited in major life activity of working where plaintiff 
was restricted to light duty with no working in cold environment and no lifting items weighing more 
than twenty pounds). 



2002] EMPLOYMENT LAW 1391 



ability to engage in intercourse dropped from a rate of twenty times per month 
before his injury to two times per month after.^^ He pointed out that in Bragdon 
V. Abbott,^^^ the U.S. Supreme Court recognized that reproduction is a major life 
activity and implied that engaging in sexual relations may be as well.^^^ 
However, Bragdon dealt with the impact of HIV on reproductive ability. ^^^ The 
Seventh Circuit declined to extend that holding and rejected Contreras' argument 
that his decreased capacity for sex due to his bad back qualified as an impairment 
substantially limiting a major life activity. ^^ 

The court found the plaintiffs situation in Lawson v. CSX Transportation, 
Inc}^^ more persuasive. Lawson's diabetes required him to administer insulin 
injections three times a day, to test his blood sugar four to six times a day, 
exercise, and to carefully monitor his diet."° The court readily determined that 
this condition was a physical impairment, because it affected Lawson's joints, 
eyes, and metabolic, vascular, urinary and reproductive systems. The court also 
accepted that eating is a major life activity under the ADA, because it is central 
to life. 

The more difficult question was whether Lawson's diabetes substantially 
limited him in the activity of eating, because the U.S. Supreme Court held in 
Sutton V. United Airlines, IncP^ that corrective or mitigating measures must be 
taken into account in this evaluation."^ This did not require, as the district court 
concluded, that Lawson's actual physical ability to ingest food be restricted; 
rather, the analysis considers the difficulties that the treatment regimen caused 
and the consequences of noncompliance."^ 

Even with the insulin, Lawson's "perpetual, multi-faceted and demanding 
treatment regime" required constant vigilance.^^* Any breakdown in that regime 
would have "dire and immediate" consequences including dizziness, weakness, 
loss of concentration and impairment of bodily functions.^^^ Lawson's situation 
went well beyond mere dietary restrictions; in fact, the treatment itself could 
cause hypoglycemia and trigger these life-threatening symptoms."^ 

The court acknowledged language in Sutton saying "[a] diabetic whose 
illness does not impair his or her daily activities" would not qualify as disabled 



264. /t/. at 763-64. 

265. 524 U.S. 624 (1998). 

266. Contreras, 237 F.3d at 763-64. 

267. Id at 764. 

268. Id. 

269. 245 F.3d 916 (7th Cir. 2001). 

270. Mat 918. 

271. 527 U.S. 471 (1999). 

272. /J. at 482. 

273. 245 F.3d at 924. 

274. Id 

275. Id 

276. /flf. at 924-25. 



1392 INDIANA LAW REVIEW [Vol. 35:1369 



under the ADA.^^^ It noted, however, that Sutton requires an individualized 
inquiry and did not say that diabetes could never qualify as a disability .^^* Not 
only w^ere Lawson's daily activities inipaired even after taking insulin treatment 
into account, but the life- long duration and severity of the condition further 
convinced the court that Lawson was entitled to ADA protection.^^^ The court 
therefore remanded for further proceedings.^'^ 

A final case, EEOC v. Rockwell International Corp,^^^ provides insight 
regarding the evidence required to establish that a condition constitutes a 
"substantial limitation" on the major life activity of working. Rockwell 
Corporation required applicants for positions in its plant to undergo "nerve 
conduction tests."^'^ The tests were designed to confirm the presence of 
neuropathy — ^a condition characterized by sensory loss and muscle weakness.^*^ 
Rockwell believed that individuals with abnormal test results were more likely 
to develop repetitive stress injuries, such as carpal tunnel syndrome.^^"* The 
entry-level positions for which Rockwell was hiring — ^trimmer, finisher, final 
finisher and assembler — ^all involved repetitive motion.^'^ Therefore, Rockwell 
refused to hire any nonskilled applicant who scored outside the normal range on 
the nerve conduction test.^'^ 

The EEOC brought suit on behalf of seventy-two job applicants rejected on 
the bases of the test results.^'^ Notably, Rockwell stipulated that all of the 
applicants were otherwise qualified for the positions they sought.^** In addition, 
none of the applicants suffered from any impairments at the time that they were 
turned away by Rockwell.^*' Instead, the EEOC argued that Rockwell had 
perceived the applicants as disabled — in this case, as unable to perform jobs 
requiring frequent repetition or the use of vibrating power tools.^'^ 

Although the case was based on a "regarded as" theory, this did not prove 
significant to court's analysis. Instead, the court considered whether Rockwell 
regarded the applicants as suffering from a condition that would, if true, 
constitute a bona fide disability .^^' Thus, the court's decision turned on whether 



277. Id.2LX916. 

278. Id. 

279. Id. 

280. Id at 932. 

281. 243 F.3d 1012 (7th Cir. 2001). 

282. Id. at 1014. See also infra Part II.G (discussing EEOC action against employer that 
conducted genetic testing of employees for susceptibility to carpal tunnel syndrome). 

283. Rockwell Int'l Corp., 243 F.3d at 1012. 

284. See id. 

285. M. 

286. Id 

287. Id 

288. /£/. atl015. 

289. Id 

290. Id. at 1016. 

291. Mat 1017. 



2002] EMPLOYMENT LAW 1393 



the inability to perform repetitive motion jobs, such as the jobs at issue, 
constituted a substantial limitation on the major life activity of working.^^^ 

In resolving this issue, the Seventh Circuit considered the type of evidence 
required to meet this defmition of disability. Rockwell argued that the EEOC 
could sustain its burden of proof only by presenting quantitative vocational data 
regarding the jobs available in the relevant market.^^^ The EEOC, on the other 
hand, suggested that it could prove that Rockwell regarded the applicants as 
disabled based solely on the Rockwell's admitted perception that the applicants 
could not perform four specific jobs in its plant.^^"* 

The Seventh Circuit struck a middle ground between the two approaches. 
The court stopped short of holding that a plaintiff "cannot prevail without 
quantitative evidence of the precise characteristics of the local job market."^^^ 
On the other hand, the court suggested that such evidence would almost always 
be necessary. In affirming the entry of summary judgment for Rockwell,^^^ the 
court held that "this is not one of the rare cases in which the claimants' 
impairments are so severe that their substantial foreclosure from the job market 
is obvious."^^^ 

This conclusion seems reasonably consistent with the result of Toyota v. 
Williams. The Seventh Circuit's resolution of Rockwell shows that ADA 
plaintiffs seeking relief based on actual or perceived repetitive stress injuries, 
particularly carpal tunnel syndrome, face an uphill evidentiary battle. 

B, Attendance as a Job Requirement 

During the survey period, the Seventh Circuit twice reiterated its stance that 
most jobs require regular attendance. In Amadio v. Ford Motor Co.^^^ an 
assembly line worker took seventy weeks of sick leave in the three years prior to 
his termination.^'^ The district court rejected his bid for ADA protection in part 
because his inability to work on a regular basis made him unable to perform all 
essential job functions.^°° The Seventh Circuit agreed, citing previous holdings 
that work attendance is an essential employment requirement for clerical 
workers, teachers, account representatives, production employees, and plant 
equipment repairmen.^^* The Seventh Circuit stopped short of saying that every 



292. Id. 

293. Id. Due to the district court's rulings regarding expert reports, the EEOC was unable to 
present evidence from a vocational expert. Id. at 1016. 

294. /rf. at 1016-17. 

295. /c/. at 1017. 

296. Mat 1018. 

297. W. 1017 (emphasis added). 

298. 238 F.3d 919 (7th Cir. 2001). 

299. Id2X92\. 

300. A/, at 924. 

301. Id. at 927 (citing Jovanovic v. In-Sink-Erator Div. of Emerson Elec. Co., 201 F.3d 894 
(7th Cir. 2000); Waggoner v. Olin Corp., 169 F.3d 481 (7th Cir. 1999); Corder v. Lucent Tech., 



1394 INDIANA LAW REVIEW [Vol. 35:1369 



job requires attendance, but easily concluded that Amadio's position should be 
on that list because factory maintenance and production require employees to be 
on the premises.^^^ 

In EEOC V. Yellow Freight System, Inc. ,^°^ a forkl ift driver with AIDS-related 
cancer also had a "woeful" attendance record.^^"* As in Amadio, the Seventh 
Circuit emphasized, "[L]et us be clear that our court, and every circuit that has 
addressed this issue, has held that in most instances the ADA does not protect 
persons who have erratic, unexplained absences, even when those absences are 
a result of a disability."^^^ The plaintiffs job, like Amadio's, required his 
presence at the employer's work site.^*^ Because he was not fulfilling the 
essential job function of regular attendance, his ADA claim failed.^^^ 

C Reasonable Accommodation and Seniority Systems 

One difficult area for employers is the interplay between reasonable 
accommodation and seniority systems. The U.S. Supreme Court has granted 
certiorari in US Airways, Inc. v. Barnetf^^ to address this question. In that case, 
an injured cargo handler was transferred to a mailroom position that did not 
require heavy lifting.^*^^ He was then bumped from that job by a more senior 
employee under the airline's non-union bidding system,^ '° 

A Ninth Circuit panel originally agreed with the district court that the airline 
did not violate the law by following its legitimate seniority system.^ ^^ The court 
later granted rehearing en banc and reversed on this issue, holding that "a 
seniority system is not a per se bar to reassignment" although it is a factor in 
evaluating undue hardship on the employer.^ '^ 

D. Direct Evidence of Discrimination in Training 

In Hoffman v. Caterpillar, Inc.,^^^ the Seventh Circuit considered an 
interesting aspect of the ADA: the prohibition against discrimination in "regard 
to job application procedures, the hiring, advancement, or discharge of 



Inc., 162 F.3d 924 (7th Cir. 1998); Nowak v. St Rita High Sch., 142 F.3d 999 (7th Cir. 1998); 
Vande Zande v. Wis. Dep't of Admin., 44 F.3d 538 (7th Cir. 1995)). 

302. Id. (citing Jovanovic, 201 F.3d at 900). 

303. 253 F.3d 943 (7th Cir. 2001). 

304. /c^. at 945-46, 949-50. 

305. Mat 948. 

306. /^. at 949. 

307. /J. at 948-50. 

308. 228 F.3d 1 105 (9th Cir. 2000), cert, granted, 532 U.S. 970 (2001). 

309. /c/. at 1108. 

310. Mat 1109, 1119-20. 

311. Bamett v. U.S. Air., Inc., 1 96 F.3d 979 (9th Cir. 1 998), vacated and rehearing en banc 
granted, 201 F.3d 1256 (9th Cir. 2000). 

312. 228F.3datll20. 

313. 256 F.3d 568 (7th Cir. 2001). 



2002] EMPLOYMENT LAW 1395 



employees, employee compensation, yo6 training, and other terms, conditions 
and privileges of employment."^ '^ Hoffman, who is missing her lower left arm, 
indexed documents in Caterpillar's optical services department.^ '^ She was able 
to perform all essential functions of that job with accommodations such as a 
typing stand.^'^ She requested training on a high-speed scanner upon which the 
department's productivity relied.^ '^ Her supervisor denied the request because 
he thought that clearing paper jams and straightening documents as they came out 
of the machine required the use of two hands.^'* 

Hoffman lost at the district court level because she failed to show that the 
supervisor's refusal to train her affected her compensation, benefits, hours, title 
or promotion potential. ^'^ She therefore had not shown an adverse employment 
action, which (as discussed above) is generally required in employment 
discrimination cases following the McDonnell Douglas framework.^^° 

The Seventh Circuit questioned the assumption that denial of training must 
materially affect a disabled individual's employment to be actionable, noting that 
Hoffman's was the rare case involvingdirect evidence of discriminatory intent.^^' 
The court took into account the fact that plaintiffs alleging discrimination in 
hiring, termination or other statutorily listed actions are not required to separately 
prove that the action was materially adverse, and concluded, "[W]ith respect to 
employment actions specifically enumerated in the statute, a materially adverse 
employment action is not a separate substantive requirement."^^^ It remanded the 
case to allow Hoffman to prove her physical capability to operate the scanner.^^^ 

E. Direct Threats to Health or Safety 

Another interesting ADA provision deals with employees who pose 
"significant risk to the health or safety of others that cannot be eliminated by 
reasonable accommodation."^^* In Emerson v. Northern States Power Co.^^^ 
Emerson, a customer service representative, handled mostly routine customer 
calls, but also spent up to ten percent of her time fielding calls about gas and 
electrical emergencies.^^^ After she fell and hit her head while rollerblading, she 
experienced occasional panic attacks that required her to take breaks of 



314. 


Id. at 575 (citing 42 U.S.C. § 121 12(a) (1994)) (emphasis added). 


315. 


Id. at 570. 


316. 


Id 


317. 


Id 


318. 


Id. Sit 511. 


319. 


See id. at 514. 


320. 


Id. at 514. 


321. 


Id. at 516. 


322. 


Id. at 575-76. 


323. 


Id. at 576-77. 


324. 


42 U.S.C. § 121 11(3) (1994). 


325. 


256 F.3d 506 (7th Cir. 2001). 


326. 


Id. at 508. 



1396 INDIANA LAW REVIEW [Vol. 35:1369 



indeterminate duration.^^^ Northern States Power Co. (NSP) rejected Emerson's 
request that someone else handle safety-sensitive calls during these episodes 
because it could not ensure that a co-worker or supervisor would always be 
available when needed.^^* Iteventuallyterminated her employment after no other 
mutually agreeable assignment could be found.^^^ 

NSP defended its action on the basis that Emerson posed a direct threat under 
the ADA defmition."^ The Seventh Circuit agreed, looking to duration of the 
risk and the nature, severity, likelihood, and imminence of potential harm.^^' It 
noted that Emerson had already suffered two panic attacks on the job and agreed 
that the attacks amounted to a direct threat in a job that required prompt and 
accurate response to power emergencies.^^^ NSP could not sufficiently reduce 
that risk by any reasonable accommodation.^^^ 

F. Contingent Workers 

The EEOC issued guidance during the survey period on the ADA's 
applicability to workers provided by staffing firms such as temporary agencies."'* 
The agency's position is that these workers frequently qualify as employees of 
both the agency and the client, so both must offer ADA protections. The 
guidelines cover several important questions. Disability-related questions and 
medical examinations are not permissible, according to the agency, until the 
individual has been offered an assignment with a particular client. Merely 
adding the individual to an agency roster of available staffers is not enough. The 
staffing firm bears responsibility for reasonable accommodations in the 
applications process, but both the firm and client may be responsible for on-the- 
job accommodations. The guidelines also talk about how undue hardship is 
measured if both entities provide accommodations."^ 

G. Genetic Testing 

Another issue on the EEOC's agenda during the survey period was its first 
lawsuit challenging genetic testing under the ADA."^ Burlington Northern Santa 



327. /^. at 508-09. 

328. Mat 509-10. 

329. Mat 510. 

330. Mat 513-14. 

331. Mat 514. 

332. Id. 

333. M. at 514-15. 

334. Press Release, U.S. Equal Employment Opportunity Commission, EEOC, Enforcement 
Guidance: Application of the ADA to Contingent Workers Placed by Temporary Agencies and 
Other Staffing Firms (Dec. 22, 2000), at http://www.eeoc.gov/docs/guidance-contingent.html. 

335. Id. 

336. Press Release, U.S. Equal Employment Opportunity Commission, EEOC, EEOC Petitions 
Court to Ban Genetic Testing of Railroad Workers in First EEOC Case Challenging Genetic Testing 
Under Americans with Disabilities Act (Feb. 9, 200 1 ), at http://www.eeoc.gov/press/2-9-0 1 -c.html. 



2002] EMPLOYMENT LA W 1397 



Fe Railroad allegedly tested blood samples of employees who filed work-related 
injury claims based on carpal tunnel syndrome, without the employees' 
knowledge or consent."^ The EEOC took the position that the ADA forbids 
genetic testing as a prerequisite of employment, and that tests intended to predict 
future disabilities are irrelevant to the employee's present job performance 
capabilities."* On April 17, 2001, the railroad agreed to stop the testing 
program, but stipulated to preserve related evidence pending resolution of 
discrimination charges that were filed."^ 

in. AGE Discrimination in Employment Act 

A, Statistical Evidence 

In October 2000, in Adams v. Ameritech Services, /wc.,'^ the Seventh Circuit 
issued an important decision on the role of statistical evidence in age 
discrimination cases. The plaintiffs, who had been terminated during a company- 
wide reduction in force (RIF), proffered expert reports that examined correlations 
between employee ages and termination rates.^"** The district court ruled that the 
reports were not admissible for several reasons, including unreliability of the 
underlying information, lack of causation analysis, lack of control for other 
variables, and the likelihood of jury confusion. ^"^^ It then granted summary 
judgment to the defendants on all significant issues in the case.^^^ 

The Seventh Circuit remanded for reconsideration, pursuant to the Daubert 
standard, of whether the expert reports were "prepared in a reliable and 
statistically sound way, such that they contained relevant evidence."^^ The court 
held that regression analysis is not a prerequisite to admissibility and that, if 
bolstered by other evidence, a report may meet the Daubert standard even if it 
merely eliminates the possibility that a RIF's disproportionately adverse effect 
on Age Discrimination Employment Act (ADEA) protected employees was due 
to mere chance.^^^ 

The Seventh Circuit handed down two other decisions during the survey 
period that dealt with statistical evidence and the ADEA. In Kadas v. MCI 
Systemhouse Corp.^^^ Judge Posner took the opportunity, in affirming summary 



337. Id. 

338. Id. 

339. See, e.g.. Settlement with EEOC Requires Employer to Stop Genetic Testing, EMP.Litig. 
Rep., May 15, 2001, at 4. 

340. 23 1 F.3d 414 (7th Cir. 2000). The Seventh Circuit does not recognize disparate impact 
claims of age discrimination. Id. at 422. 

341. Id sX 425. 

342. Id. at 427. 

343. /^. at 417. 

344. Mat 425. 

345. M. at 425, 427-28. 

346. 255 F.3d 359 (7th Cir. 2001). 



1398 INDIANA LAW REVIEW [Vol. 35:1369 



judgment for the employer, to clarify three statistical evidence issues in 
discrimination cases.^"*^ First, he addressed dicta that has appeared in opinions 
from five different circuits suggesting that if the supervisor who "riffed" the 
plaintiff was older than the plaintiff, that fact would weigh heavily against a 
finding of age discrimination,^"** Judge Posner offered "counterdictum" that "the 
relative ages of the terminating and terminated employee are relatively 
unimportant" for several reasons.^^^ He noted that older people often do not feel 
old and in fact prefer to work with younger people, and might wish to protect 
themselves against potential age discrimination by proactively winnowing out 
other older workers.^^^ He also noted that people are often oblivious to their own 
prejudices.^^' In this case, the plaintiff was terminated within months of his 
hiring, and arguably a discriminatory employer would be much more likely to 
decline to hire older workers than to invite lawsuits by hiring and then promptly 
firing them.^" 

Judge Posner' s second point dealt with a circuit split on whether statistical 
evidence is only admissible in proving discrimination if it reaches a five percent 
significance level, that is, two standard deviations.^^^ He described the five 
percent benchmark as an arbitrary measure adopted by scholarly publishers, and 
said, "Litigation generally is not fussy about evidence."^^* Under the Daubert 
standard the judge must determine whether the significance level is worthy of the 
fact-finder's consideration in the context of the case and the particular study. ^^^ 

Finally, Judge Posner discussed another circuit split, on whether statistical 
evidence alone can establish a prima facie case of intentional discrimination if 
it is deemed sufficiently significant.^^^ He concluded, "Although it is unlikely 
that a pure correlation, say between age and terminations, would be enough . . . 
it would be precipitate to hold that it could never do so.""^ He offered the 
example of a RIF of 1 00 out of 1 000 employees, where all 1 00 were age forty or 



347. Mat 361-63. 

348. See id. at 361 (citations omitted). 

349. Id. 

350. Id 

351. Id 

352. /t/. at 361-62. 

353. /(i. at 362. 

354. Id 

355. Mat 362-63. 

356. Mat 363. 

357. Id. See also Bell v. EnvtI. Prot. Agency, 232 F.3d 546 (7th Cir. 2000). The plaintiffs 
alleged disparate treatment in promotions based on race and national origin discrimination in 
violation of Title VII. Id. at 548. Their statistical evidence was too broad to establish a prima facie 
case of systemic disparate treatment, but was admissible as probative evidence of pretext. Id. at 
553. The national origin data was statistically significant and *'suggest[ed] a general pattern of 
discrimination toward the foreign bom." Id. at 553-54. The data examining differences based on 
race was not statistically significant but was nonetheless admissible as circumstantial evidence of 
possible discrimination. Id. at 554. 



2002] EMPLOYMENT LAW 1399 



older and all those retained were under forty, as a case where the statistics alone 
might justify shifting the burden to the employer to explain.^^* 

B. Disparate Impact Claims 

The disparate impact theory is widely accepted as a means of establishing 
employer liability under Title VII, and Congress codified this theory when it 
amended Title VII in 1991 .^^^ The ADEA contains no comparable language. In 
Adams v. Ameritech Services, Inc. ,^^ the Seventh Circuit acknowledged a circuit 
split on the cognizability of disparate impact claims under the ADEA and 
reiterated its stance that "disparate impact is not a theory available to age 
discrimination plaintiffs in this circuit."^^' 

The U.S. Supreme Court has granted certiorari to resolve this issue in Adams 
V. Florida Power Corp.^^^ a case brought by 1 1 7 former employees of a Florida 
utility company. ^^^ More than seventy percent of the workers terminated in a 
corporate reorganization were at least forty years old, and therefore protected 
under the ADEA.^^ They claimed that the corporate environment was 
"pervaded by ageism" and "subtle systemic bias."^^^ With Adams v. Florida 
Power Corp. , the U.S. Supreme Court will decide whether older workers may sue 
claiming that company layoffs targeted them more heavily than younger workers. 
This decision could have widespread implications for employers, particularly if 
troubled economic times, including layoffs, continue. 

Indiana employment practitioners should watch for the decision in this case 
to see if it alters the Seventh Circuit's stance by interpreting the ADEA to 
prohibit policies that appear neutral but that affect older workers more harshly. 

C. Tender Back Rule 

On December 1 1, 2000, the EEOC issued a final regulation^^ on the ADEA 
"tender back" rule, addressing the U.S. Supreme Court's 1998 decision in Oubre 
V. Entergy Operations, Inc?^^ The Older Workers Benefits Protection Act of 
1990 (OWBPA)^^* amended the ADEA and, among other things, permitted 



358. /:arfflj, 255 F.3d at 363. 

359. 5ee 42 U.S.C.§ 121 12(b)(3)(A) (1994). 

360. 231 F.3d 414 (7th Cir. 2000). 

361. /flf. at 422 (citing Blackwell v. Cole Taylor Bank, 1 52 F.3d 666, 672 (7th cir. 1 998) (citing 
cases on both sides of issue from various circuits); Maier v. Lucent Techs, Inc., 120 F.3d 730, 735 
& n.4 (7th Cir. 1997); EEOC v. Francis W. Parker Sch., 41 F.3d 1073, 1077-78 (7th Cir. 1994)). 

362. 255 F.3d 1322 (1 1th Cir. 2001), cert granted, 122 S. Ct. 643 (2001). 

363. Linda Greenhouse, Ju^/icia/Ca^j^/f^^/ej 'Speech to Be Reviewed by Justices, N.Y. TIMES, 
Dec. 4, 2001, at A16. 

364. Id 

365. Id 

366. 29 C.F.R. § 1625.23 (2000). 

367. 522 U.S. 422 (1998). 

368. 29 U.S.C. §626(0(1998). 



1400 INDIANA LAW REVIEW [Vol. 35:1369 



employees to waive their ADEA rights in return for consideration such as 
increased severance or early retirement benefits.^^^ Such waivers are, however, 
governed by specific OWBPA requirements, such as a requirement that the 
waiver be written in understandable language."^ 

Prior to the regulation, an employee who entered into a waiver agreement but 
thereafter sought to bring suit under the ADEA faced two obstacles arising out 
of traditional contract law. First, the "tender back" rule required an individual 
who wished to challenge a waiver to first repay the consideration received for the 
waiver.^^' Second, the "ratification" principle provided that an individual who 
failed to return the payment was deemed to have approved the waiver."^ 

The final EEOC rule directs that neither of these principles applies to ADEA 
waivers."^ The new rule provides that any condition precedent or penalty to 
challenge an ADEA waiver is invalid, including tender-back requirements and 
provisions that an employer may recover attorney's fees or damages because of 
the filing of an ADEA suit.^^^ Therefore, employees who wish to challenge the 
validity of their ADEA waivers may do so without first repaying the amount 
received for signing the waiver. If the employee prevails in overturning the 
waiver and then proves age discrimination and obtains a monetary award, the 
employer may, however, be able to deduct the amount paid for the waiver in 
calculating the amount owed.^^^ 

IV. OTHER Federal Law Developments 

A. Family and Medical Leave Act 

The U.S. Supreme Court has granted certiorari in its first case involving the 
Family and Medical Leave Act (FMLA). In Ragsdale v. Wolverine Worldwide, 
Inc.^^^ the plaintiff was entitled to up to seven months of medical leave under the 
employer's policy.^^^ She took time off for cancer treatment, and the company 
failed to tell her that the time would count toward her FMLA entitlement.^^^ 
When she was unable to return to work at the end of the seven months, the 
employer terminated her for exhausting all available leave, including FMLA 



369. Id. 

370. 29U.S.C. §626 (0(1 )(AHG)( 1998). 

371. See U.S. Equal Employment Opportunity Commission, Questions and Answers: Final 
Regulation on "Tender Back" and Related Issues Concerning ADEA Waivers, at 
http://www.eeoc.gov/regs/tenderback-qanda.html [hereinafter Questions and Answers] (last visited 
Dec. 15,2000). 

372. Id. 

373. 29 C.F.R. § 1625.23(a) (2000). 

374. 29 C.F.R. § 1625.23(b). 

375. 29 C.F.R. § 1625.23(c); see also Questions and Answers, supra note 371 . 

376. 218 F.3d 933 (8th Cir. 2000), cm. ^ra/iteJ, 533 U.S. 928 (2001). 

377. /</.at935. 

378. Id. 



2002] EMPLOYMENT LAW 1 40 1 



Department of Labor regulations make it "the employer's responsibility to 
designate leave, paid or unpaid, as FMLA-qualifying, and to give notice of the 
designation to the employee."^*° Employees retain their rights to twelve weeks 
of FMLA leave if their employers fail to notify them that leave will count under 
the FMLA.'^' 

The Eighth Circuit concluded that this latter regulation creates rights not 
conferred by statute, and invalidated it.^^^ The Sixth Circuit reached the opposite 
conclusion in Plant v. Morton International, Inc?^^ The pending Supreme Court 
decision should resolve this circuit split. 

Two Seventh Circuit cases during the survey period provide a helpful 
reminder that the proper focus in FMLA cases is whether the employer acted 
against an employee because he took leave to which he was entitled. In Gilliam 
V. United Parcel Service, Inc.,^^ the plaintiff told his supervisor that he wanted 
a "few" or a "couple" of days to join his fiancee, who had just given birth to their 
child.^^^ The supervisor allowed him to take Friday off, waiving the collective 
bargaining agreement's ten-day notice requirement.^*^ 

Gilliam did not contact the employer again until the following Thursday, 
when he heard his supervisor was trying to locate him.^*^ The union contract 
required a call by the start of the shift on the third working day of leave, that is, 
the Tuesday after the Friday he first took leave.^** UPS terminated Gilliam for 
abandoning his job.^*^ Gilliam argued that he was entitled to leave of up to 120 
days under the FMLA without informing UPS of his expected date of return.^^° 

The Seventh Circuit affirmed summary judgment for UPS saying, "[T]he 
FMLA does not provide for leave on short notice when longer notice readily 
could have been given. Nor . . . does it authorize employees on leave to keep 
their employers in the dark about when they will retum."^^' Because Gilliam did 
not give the thirty days notice that Department of Labor regulations require for 
foreseeable leaves, UPS could have insisted that he wait that long to take leave.^^^ 
Furthermore, he was not fired for taking leave, but for failing to let his employer 



379. 


Id. 


380. 


Id at 937 (quoting 29 C.F.R. § 825.208(a) (2001)). 


381. 


Id (quoting 29 C.F.R. §§ 825.208(c), 825.700(a) (2001)) 


382. 


Id at 939. 


383. 


212 F.3d 929 (6th Cir. 2000). 


384. 


233 F.3d 969 (7th Cir. 2000). 


385. 


Id at 970. 


386. 


Id 


387. 


Id 


388. 


Id 


389. 


Id 


390. 


Id 


391. 


Id. 3X911. 


392. 


Id 



1 402 INDIANA LAW REVIEW [Vol. 35 : 1 369 



know on a timely basis when he expected to return to work.^^^ 

The plaintiff in Kohls v. Beverly Enterprises Wisconsin, Inc.^^^ was 
unsuccessful for a similar reason.^^^ Kohls, an activities director at a nursing 
home, took maternity leave.^^ Shortly before the leave began, she admitted to 
errors in checking account records she maintained for a resident's trust fund.^^^ 
During her absence, her temporary replacement outshone her in several 
respects.^^^ Kohls was terminated the day she returned from leave based on 
alleged misappropriation of funds and unsatisfactory job performance.^^^ 

The Seventh Circuit affirmed summary judgment for the employer, saying 
that although an employee may not be terminated for taking FMLA leave, she 
may be terminated for poor performance if the same action would have been 
taken absent the leave/°° This is true even if the problems for which the 
employee is terminated come to light as a result of the employee's absence 
during the leave/^' Kohls argued that the reasons given for her firing were 
pretextual, and that the real reason was that the employer liked the temporary 
replacement better /°^ The court countered by saying, "Nothing in the record 
indicates that [the employer] preferred [the temporary replacement] for any 
reason related to Kohls' taking of leave.'"*^^ 

B. State Immunity 

On February 21, 2001, the U.S. Supreme Court held in Board of Trustees of 
the University of Alabama v. Garretf^ that the Eleventh Amendment bars suit 
in federal court by state employees to recover money damages for the state's 
failure to comply with title I of the ADA."*^^ In the aftermath of Garrett, the 
Seventh Circuit revisited its conclusion in Varner v. Illinois State University^^^ 



393. Id. 

394. 259 F.3d 799 (7th Cir. 2001). 

395. /^. at 801. 

396. Id. 

397. Id. at 802. While she was on leave, the employer determined that Kohls did not always 
record dates and check numbers for transactions; threw away bank statements without reconciling 
the account; did not record what checks written to "cash" were for; and could not account for a 
$30.93 check. Id 

398. See id. The replacement responded to several programming complaints by substantially 
revamping Kohls' programs. Id. Numerous residents, their family members, and co-workers 
wanted the temporary staff member to stay on permanently in the activities position. Id. at 806. 

399. Id at 803. 

400. M at 805, 807. 

401. /J. at 806. 

402. Id 

403. Id 

404. 531 U.S. 356(2001). 

405. Id 

406. 226 F.3d 927 (7th Cir. 2000). 



2002] EMPLOYMENT LAW 1403 



C'Varner IF) that the Equal Pay Act (EPA) qualifies as "remedial or preventive 
legislation aimed at securing the protections of the Fourteenth Amendment," so 
that state immunity is inapplicable/^^ In Varner II, which was decided before 
Garrett, the court contrasted the EPA with statutes aimed at age and disability 
discrimination/^^ The former focuses on gender-based classifications that 
receive heightened constitutional scrutiny, while the latter types of claims receive 
only rational basis review /^^ 

In Garrett, the Supreme Court considered whether Congress had identified 
"a history and pattern of unconstitutional employment discrimination by the 
States against the disabled," and concluded that it had not/'^ In Cherry v. 
University of Wisconsin System Board of Regents, "^^^ an EPA case, the defendant 
tried to convince the Seventh Circuit that "no abrogation of States' immunity 
against federal statutory claims is valid without express findings in the statute 
itself, grounded in sufficient legislative record evidence, that States had engaged 
in a pattern and practice of committing unconstitutional conduct of the type being 
prohibited by that statute.'"*'^ The Seventh Circuit disagreed, finding no 
indication in Garrett of a bright-line rule requiring such specific findings, and 
reaffirmed the holding of Varner //that state immunity does not preclude EPA 
suits/^^ 

C The Fair Labor Standards Act "Window of Correction "for 
Improper Deductions from Exempt Employees 

The Fair Labor Standards Act requires that executive, administrative, and 
professional employees be paid on a salary basis in order to be classified as 
exempt from overtime pay/'"* These employees must receive a predetermined 
compensation amount each pay period that is not subject to reduction based on 
the quality or quantity of work/'^ Department of Labor regulations offer a 
"window of correction" for employers to remedy improper deductions/'^ The 
Seventh Circuit reversed its position regarding when this window of correction 
is available in Whetsel v. Network Property Services, LLC.^^^ 



407. Id. at 936 (quoting Coll. Sav. Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 
U.S. 627, 639 (1999)). 

408. /^. at 934. 

409. Id, 

410. 531 U.S. at 368. 

411. 265 F.3d 541 (7th Cir. 2001). 

412. /^. at 552. 

413. /t/. at 553. 

414. See Auer v. Robbins, 519 U.S. 452, 454-55 (1997) (citing Fair Labor Standards Act of 
1938, 52 Stat. 1060 (codified as amended in sections of 29 U.S.C), 29 C.F.R. §§ 541.1-541.3 
(1996)). 

415. Id. at 455 (citing 29 C.F.R. § 541.1 18(a) (1996)). 

416. See 29 C.F.R. § 541.1 18(a)(6) (2001). 

417. 246 F.3d 897 (7th Cir. 2001). 



1404 INDIANA LAW REVIEW [Vol. 35: 1369 



Plaintiff Whetsel was one of sixteen employees treated as exempt/'* She 
filed suit after leaving the company, claiming that she should have been paid for 
overtime because the employer had an unwritten policy that subjected her and 
other exempt employees to possible pay deductions for partial-day absences/'^ 
She cited four salaried employees allegedly subjected to partial-day deductions 
on eight occasions/^*^ The employer had circulated a memo to all employees 
acknowledging that partial-day deductions from exempt employee salaries 
occurred on "isolated occasions," but further saying that past and current policy 
was not to deduct for partial day absences of salaried employees, even if they had 
insufficient benefit time available to cover the missed time/^' It also repaid the 
four affected salaried employees/^^ 

The secretary of the Department of Labor interprets the regulation to deny 
curative opportunities to employers with policies of deducting pay from exempt 
employees as a disciplinary measure /^^ In a prior case, the Seventh Circuit had 
concluded differently, although arguably in dicta/^^ In Whetsel, the court 
overruled this conclusion and adopted the Department of Labor position, 
"[W]hen an employer has a practice or policy of improper deductions as defined 
. . . the window of correction provided in 29 C.F.R. § 541.118(a)(6) is not 
available."*^^ It remanded the case to resolve the issue of whether this 
employer's actions did constitute such a practice or policy/^^ 

V. Worker's Compensation 

A. Employer-Employee Relationship 

In GKNCo. V. Magness*^^ the Indiana Supreme Court clarified the analysis 
for determining whether an employer-employee relationship exists for worker's 
compensation purposes/^* Magness, a truck driver hired by a subcontractor, 
suffered injuries while working on a highway construction project and sued 
GKN, the general contractor/^^ GKN argued that Magness was its employee as 
well as the subcontractor's employee, so his exclusive remedy was worker's 
compensation/^^ 



418. /J. at 899. 

419. Id. 

420. Id 

421. Id. 

All. /^. at 899-900. 

423. /^. at 900-01. 

424. Id. at 903 (citing DiGiore v. Ryan, 172 F.3d 454, 465 (7th Cir. 1999)). 

425. /^. at 904. 

426. /c/. at 904-05. 

427. 744 N.E.2d 397 (Ind. 2001). 

428. Mat 402-03. 

429. Mat 399-400. 

430. Mat 400. 



2002] EMPLOYMENT LAW 1405 



The supreme court applied the seven-factor analysis of Hale v. Kemp^^^ but 
emphasized that the factors must be weighed in a balancing test and not tallied 
in a majority-wins approach/-^^ Furthermore, the right to exercise control weighs 
most heavily, rather than intent of the parties, as previous cases had indicated."*" 
After applying this revised approach, the court concluded that Magness was not 
a GKN employee/^* 

The court also clarified the burden of proof in jurisdictional challenges where 
the employer argues that the trial court lacks jurisdiction because worker's 
compensation is the plaintiffs exclusive remedy /^^ The employer carries the 
burden of proving that the complaint falls under worker's compensation unless 
the complaint itself demonstrates that an employment relationship exists."*^^ In 
the latter case, the burden shifts to the employee to show why worker's 
compensation would not apply /^^ The court therefore disapproved language in 
prior cases indicating that if an employer raises the issue of preclusion under the 
worker's compensation statute, the employee automatically assumes the 
burden.^^* 

The degree of judgment involved in this seven-factor test was illustrated in 
Degussa Corp. v. Mullens.*^'* There, the court applied the analysis and split two- 
to-two on the conclusion."*^^ Reasonable minds will often differ when applying 
the factors to a particular set of facts. 

B. Purely Emotional Injury 

The Indiana Court of Appeals held in two cases that worker's compensation 
does not apply to purely emotional injuries. In Branham v. Celadon Trucking 
Services, Inc.J*^^ Judge Kirsch prefaced his analysis by quoting, "The law does 
not provide a remedy for every annoyance that occurs in everyday life. Many 
things which are distressing or may be lacking in propriety or good taste are not 
actionable."'"' 

Plaintiff Branham fell asleep during a work break, and a co-worker dropped 



43 1 . 579 N.E.2d 63, 67 (Ind. 1 991 ) (listing the most important factors as right to discharge, 
mode of payment, supplying tools or equipment, belief of the parties in the existence of employer- 
employee relationship, control over means used in results achieved, length of employment, and 
establishment of work boundaries). 

432. 744 N.E.2d at 402. 

433. Id at 402-03 (citing Rensing v. Ind. State Univ. Bd. ofTr., 444N.E.2d 1 170 (Ind. 1983)). 

434. /^. at 407. 

435. Mat 403-04. 

436. /t/. at 404. 

437. Id 

438. Id 

439. 744 N.E.2d 407 (Ind. 2001). 

440. Id. at 414. Justice Rucker did not participate. /^. at 41 5. 

441. 744 N.E.2d 514 (Ind. Ct. App. 2001). 

442. Id at 518 (quoting Kelley v. Post Publ'g Co., 98 N.E.2d 286, 287 (Mass. 1951)). 



1406 INDIANA LAW REVIEW [Vol. 35:1369 



his own pants so another prankster could photograph the two men in a suggestive 
pose/"*^ Management found out what had happened after the picture circulated 
among other co-workers/'*'* Both perpetrators received a week's unpaid 
suspension, and the photographer was demoted.'*'*^ Branham was so humiliated 
by the incident that he left the company/'*^ 

The court of appeals observed that Indiana's worker's compensation statute 
covers on-the-job injuries, defined as including disabilities resulting in an injured 
employee's inability to work and impairments in the form of loss of physical 
function/"*^ Branham 's injury was not physical, and he remained fully fit for 
employment.'*^^ Therefore, the worker's compensation statute did not preclude 
Branham 's tort claims, although those claims failed on the merits.'*'*^ 

A similar result was obtained in Dietz v. Finlay Fine Jewelry Corp.^^^ Dietz, 
a sales clerk, sold fine jewelry for a company that leased space in L.S. Ayres 
retail stores/^' She gave an unauthorized discount to a customer who had 
become irritated because Dietz had to seek help in processing her transaction, 
and the assistance was slow in coming/^^ The store security manager called 
Dietz in for an hour-long interview during which he allegedly insisted that she 
stay in the room and accused her of stealing jewelry to support a substance abuse 
problem /^^ As in Branham^ the court of appeals held that worker's 
compensation did not preclude Dietz's tort claims because Dietz alleged no 
physical injury or loss of physical function/^'* It remanded for consideration of 
her false imprisonment and defamation charges.'*^^ 

C When Is Expert Testimony Required? 

Two survey period cases provide guidance on the role of expert testimony in 
worker's compensation cases. The first is Muncie Indiana Transit Authority v. 
Smith,*^^ where the issue was whether Smith's carpal tunnel syndrome arose out 
of his employment as a bus driver.'*^^ None of the medical records Smith offered 



443. 


/t/. at 518-19. 


444. 


Id. at 519. 


445. 


Id. 


446. 


Id 


447. 


Id. at 520 (citing Perry v. Stitzer Buick GMC, Inc., 637 N.E.2d 1282, 1288-89 (Ind. 


1994)). 




448. 


Id 


449. 


Id at 520-25. 


450. 


754 N.E.2d 958 (Ind. Ct. App. 2001). 


451. 


/^. at 963. 


452. 


Id 


453. 


Id. at 963-64. 


454. 


Id. at 965. 


455. 


/(i. at 971. 


456. 


743 N.E.2d 1214 (Ind. Ct. App. 2001). 


457. 


/c/. at 1215. 



2002] EMPLOYMENT LAW 1407 



as evidence contained any opinion as to the cause of this condition, and Smith 
was the sole witness at the worker's compensation hearing/^^ The court 
considered guidance from other states regarding what qualifies as competent 
evidence of causation in worker's compensation cases and concluded that both 
lay and expert evidence are admissible if "the injury was not caused by a sudden 
and unexpected external event.'"*^' If, however, "the cause of the injury is not 
one which is apparent to a lay person and multiple factors may have contributed 
to causation, expert evidence on the subject is required.'"*^ Smith offered no 
expert evidence, so his claim failed."*^* 

In Schultz Timber v. Morrison,^^ a truck driver suffered broken bones and 
a punctured lung when a load shifted, causing his truck to overturn."*" 
Thereafter, he experienced severe headaches that were exacerbated by physical 
activity/^ Schultz argued that only the testimony of a vocational expert could 
satisfy Morrison's burden of proof that he could not obtain or perform reasonable 
types of employment."*^^ Schultz' s vocational expert testified that Morrison could 
work an eight-hour day of light or "light plus" duty/^ Morrison offered only 
testimony by his two treating physicians, who said that Schultz' s expert failed to 
consider Morrison's level of pain and ability to function with that pain.'*^^ 

The court held, "Although vocational experts are utilized in many workmen's 
compensation cases, they are not a prerequisite to obtaining total permanent 
disability payments.'"*^^ Here, Morrison's doctors testified that Morrison could 
not stand, walk, or read for extended periods of time, could not make repetitive 
motions with his shoulders and arms, and required pain medication that interfered 
with cognitive functions/^^ The appeals court upheld the Worker's 
Compensation Board's four-to-three decision granting Morrison total and 
permanent disability /^^ 

D. Acquiescence 

The issue in Wimmer Temporaries, Inc. v. Massoff^^ was whether the 
employer acquiesced in the claimant's violation of a conspicuously posted safety 



458. Mat 1216. 

459. Mat 1217. 

460. id. 

461. M. at 1218. 

462. 751 N.E.2d 834 (Ind. Ct. App. 2001). 

463. M. at 836. 

464. Id. 

465. Id. 

466. M. at 837. 

467. Mat 836-37. 

468. Mat 837. 

469. M 

470. Id at 836. 

471 . 740 N.E.2d 886 (Ind. Ct. App. 2000). 



1408 INDIANA LAW REVIEW [Vol. 35:1369 



rule/^^ Massoff, a caster working on a temporary basis at a foundry, failed to 
shut down a piece of equipment before cleaning a spout/^^ This was common 
practice, although a posted safety notice threatened disciplinary action against 
anyone found inside the safety enclosure while the equipment was running/^"* 

The employer emphasized that no one specifically told Massoff to violate the 
written rule/^^ The statute denies compensation if an employee knowingly fails 
to obey a conspicuously posted, reasonable rule of the employer ."^^^ The court, 
however, focused on the fact that before the safety rule was posted Massoff was 
trained to clean with the table in operation, and other employees continued to 
follow this practice after the rule's posting/^^ Any shutdown slowed production 
and increased scrap/^* Six hours before Massoff s accident, a co-worker and a 
team leader saw Massoff violating the rule and, although both had disciplinary 
authority, said nothing/^^ The court affirmed the award of benefits to Massoff, 
finding that the employer acquiesced in the safety violation/*^ 

VI. State Law Developments 

A. Indiana 's Wage Payment Statute 

The Indiana Supreme Court has granted transfer in St. Vincent Hospital & 
Health Care Center, Inc. v. Steele^^^ to decide whether the liquidated damages 
provisions of Indiana's Wage Payment Statute*'^ govern the amount of pay as 
well as the frequency .^*^ St. Vincent owed Dr. Steele bi-weekly compensation 
under an employment agreement."**^ In years three and four of the agreement, St. 
Vincent began to exclude payment for certain services because it believed the 
payments were impermissible under proposed Health Care Financing 
Administration regulations.^*^ Steele sued, and the trial court granted him 
summary judgment. Under the Indiana Wage Payment Statute's treble damages 
provision, the court awarded Steele $277,812.92 in unpaid wages and 



472. /^. at 887. 

473. /df. at 887-88. 

474. /£/. at888. 

475. 7^. at 889. 

476. 7^. (citing IND. Code §22-3-2-8 (1998)). 

477. 7^. at 892. 

478. Id. 

479. Id. 

480. 7^. at 892-93. 

48 1 . 742 N.E.2d 1 029 (Ind. Ct. App. 200 1 ), trans, granted and opinion vacated, 76 1 N.E.2d 
413 (Ind. 2001). 

482. Ind. CODE §22-2-5-2 (1998). 

483. St. Vincent Hasp., 742 N.E.2d at 1032. 

484. 7^. at 1030. 

485. 7J. at 1031. 



2002] EMPLOYMENT LAW 1409 



$555,625.84 in liquidated damages, plus attorney fees/*^ 

St. Vincent appealed, arguing that the statute covers only the frequency, not 
the amount, of payment.^*^ The statute reads, in relevant part: 

Sec. 1. (a) Every person, firm, corporation, limited liability company, 
or association, their trustees, lessees, or receivers appointed by any 
court, doing business in Indiana, shall pay each employee at least 
semimonthly or biweekly, if requested, the amount due the 
employee .... 

(b) Payment shall be made for all wages earned to a date not more than 
ten ( 1 0) days prior to the date of payment . . , ."*** 

Alternatively, St. Vincent argued that it had a good faith basis for 
withholding a portion of Steele' s wages.**^ 

The court of appeals noted conflicting authority, and was persuaded by 
Steele's argument that if the statute only deals with frequency of payment, an 
employer could avoid any penalty by paying a de minimis amount at least 
biweekly, regardless of the amount of salary actually due.'*'^ It also noted the 
statutory language "the amount due," and affirmed the trial court's award."*^' It 
rejected St. Vincent's argument for a good faith exception, because no such 
exception appears in the statute."*^^ 

The Indiana Supreme Court granted transfer,^^^ thereby vacating this holding, 
and heard oral argument on September 19, 2001 . A decision will be forthcoming 
in due course. 

The court of appeals dealt with another aspect of the Wage Payment Statute 
during the survey period in Wank v. St. Francis College.^^^ This time the 
question was whether severance pay offered in connection with a reduction in 
force is covered by the statute.^^^ Plaintiff Wank's position was eliminated as a 
result of a merger, and the college offered him a severance package in 
recognition of his years of service."*^ 

Almost immediately thereafter, the college separately advised Wank that the 
severance bonus package was contingent upon Wank's execution of an 
agreement releasing the college from liability .*^^ When Wank declined to sign 
the release, the college paid him only wages due, including accrued vacation 



486. /J. at 1031-32. 

487. /f/. at 1032. 

488. /^. (citing IND. Code § 22-2-5-1 (1998)). 

489. /c/. at 1035. 

490. /f/. at 1033-35. 

491. /flf.atl035. 

492. Id. 

493. St. Vincent Hosp. & Health Care Ctr., Inc. v. Steel, 761 N.E.2cI 413 (Ind. 2001). 

494. 740 N.E.2d 908 (Ind. Ct. App. 2000). 

495. /£/. at 909-10. 

496. /flf.at909. 

497. /rf.at910. 



1410 INDIANA LAW REVIEW [Vol. 35:1369 



pay/^^ Wank sued, but the trial court held that Wank had no employment 
contract and that the severance pay was not a wage under the Wage Payment 
Statute/'^ 

Wank argued on appeal that he earned the severance pay through his years 
of service, making the amount in effect deferred compensation.^^ The court of 
appeals disagreed, although it reiterated that merely calling a payment a bonus 
does not automatically exempt it from the statute.^^' Compensation that accrues 
during an employee's tenure is a wage, even when payment is deferred, if it 
relates to work performed. ^^^ 

Here, however, the court concluded that although the severance pay was 
based on years of service, it was not connected to work performed.^^^ Also, the 
college had no severance pay policy, so the offered amount was an optional 
bonus in recognition of Wank's past service rather than compensation accrued 
during employ ment.^^ Because the package was not a term of Wank's 
employment, the court concluded, "absent a policy creating an entitlement to 
severance pay, such compensation is not a wage for purposes of the Wage 
Payment Statute. The severance package at issue . . . was a discretionary, 
gratuitous benefit offered to employees as an act of benevolence."^^^ 

B. Enforceability of Vacation Pay Accrual Policies 

Another survey period case applying Indiana law is worth noting. Damon 
Corp. V. Estes^^ dealt with vacation pay liability upon termination.^^^ Damon's 
employee handbook read: "Employees will receive their vacation pay, when 
eligible, on the regular payday, the week following their anniversary date. An 
employee does not earn vacation pay each year until his/her anniversary date."^°* 
Estes, upon termination, claimed entitlement to vacation pay calculated from his 
most recent anniversary date (August 27, 1999) to his termination date (May 1 , 
2000).^^^ The trial court awarded him $121 .14 plus costs.^'^ 

The court of appeals reversed, accepting Damon's argument that its company 



498. Id. 

499. Id. at 9 1 0. The trial court found genuine issues of material fact on St. Francis' promissory 
estoppel claim, and denied summary judgment on that question. Id. 

500. /^. at 911. 

501. Mat 912-13. 

502. See id 2A 913. 

503. Id. 

504. Id 

505. /^. at 913-14. 

506. 750 N.E.2d 891 (Ind. Ct. App. 2001). 

507. See id at 892. 

508. Id. 

509. Id. 

510. Id 



2002] EMPLOYMENT LAW 1411 



policy precluded "accrued" vacation time.^'^ The court cited Die & Mold, Inc. 
V. Western, ^^^ where it characterized vacation pay as "additional wages, earned 
weekly" but went on to say, "where only the time of payment is deferred . . . 
absent an agreement to the contrary, the employee would be entitled to a pro rata 
share of it to the time of termination."^'^ The court in Die & Mold, Inc. went on 
to say that any agreement or published policy to the contrary would be 
enforceable.^'"* Here, a policy Estes had acknowledged in writing clearly stated 
that an employee earned no vacation pay until his anniversary date.^'^ The court 
therefore reversed and upheld the policy as written.^'^ 

VII. The Force and Effect of Arbitration Agreements 

An important and ongoing issue is how far employers may go in requiring 
employees to agree to arbitrate employment disputes. On March 21, 2001, the 
U.S. Supreme Court resolved a circuit split by upholding an arbitration 
agreement in Circuit City Stores, Inc. v. Adams. ^^^ Plaintiff Adams signed a form 
as part of his application process when Circuit City hired him in 1995, agreeing 
to submit all employment disputes to binding arbitration.^'* Two years later, he 
brought suit in state court alleging employment discrimination under California 
law.^'^ The Ninth Circuit interpreted language in the Federal Arbitration Act 
exempting "contracts of employment of seamen, railroad employees, or any other 
class of workers engaged in foreign or interstate commerce" as excluding 
virtually all employment contracts from the Act's coverage."^ It reversed the 
federal district order compelling arbitration."' 

The U.S. Supreme Court reversed the court of appeals in a five-to-four 
decision based upon the text of the statute rather than its legislative history."^ 
The majority interpreted the Act's exemption narrowly as excluding only 
transportation worker employment contracts from coverage."^ Justice Anthony 
M. Kennedy, writing for the majority, noted, "Arbitration agreements allow 
parties to avoid the costs of litigation, a benefit that may be of particular 



511. /£/. at893. 

512. 448 N.E.2d 44 (Ind. Ct App. 1983). 

513. Damon Corp. , 750 N. E.2d at 893 (quoting Die & Mold. /«c. , 448 N . E.2d at 48) (emphasis 
supplied). 

5 1 4. Id. (quoting Die & Moid. Inc., 448 N.E.2d at 47-48). 

515. See id. 

516. Id. 

517. 532 U.S. 105(2001). 

518. /^. at 109-10. 

519. Mat 110. 

520. Id. at 109 (referring to 9 U.S.C. § 1 (2000)). 

521. /flf. atl24. 

522. Mat 119, 124. 

523. Mat 119. 



1412 INDIAN A LAW REVIEW [Vol. 35:1369 



importance in employment litigation. "^^^ The Court was not persuaded by the 
attorneys general of twenty-two states, who argued as amici that the Federal 
Arbitration Act should not be read to pre-empt state employment laws that 
protected employees by prohibiting them from signing away their rights to pursue 
state-law discrimination actions in court."^ 

The decision clarified the overall scope of the Federal Arbitration Act but 
left many questions unanswered. The Court reiterated a prior holding that "by 
agreeing to arbitrate a statutory claim, a party does not forgo the substantive 
rights afforded by the statute; it only submits to their resolution in an arbitral, 
rather than a judicial, forum."^^^ It remains to be seen whether workers who 
agree to arbitration retain their rights to collect punitive damages and attorney 
fees, and to pursue class actions. Another open question is how broadly the 
classes of transportation workers specifically referenced in the statute will be 
defined. 

On June 20, 2001, five Democratic members of the U.S. House of 
Representatives introduced legislation to amend the Federal Arbitration Act and 
overturn the holding of Circuit City.^^^ Sponsor Dennis Kucinich attacked 
mandatory employment dispute arbitration agreements as depriving employees, 
who have inferior bargaining power, of their rights to due process, trial by jury, 
discovery and appeal."* 

In another recent development, the U.S. Supreme Court has held that an 
agreement between an employer and an employee to arbitrate employment 
disputes does not bar the EEOC from pursuing such victim-specific relief as back 
pay, reinstatement, and damages."^ The case arose when Eric Baker, who signed 
a mandatory arbitration agreement as a condition of employment at a Waffle 
House restaurant, suffered a seizure sixteen days after he began working as a grill 
operator. ^^° He filed a charge with the EEOC after he was discharged, and the 
EEOC filed an enforcement action.^^' 

Justice John Paul Stevens, writing for the six-justice majority, said that Title 
VII "clearly makes the EEOC the master of its own case" and that the Federal 
Arbitration Act "does not mention enforcement by public agencies; it ensures the 
enforceability of private agreements to arbitrate, but otherwise does not purport 
to place any restriction on a nonparty's choice of a judicial forum."^^^ Although 
the EEOC does not file many lawsuits (fewer than 300 in 2000, compared to 



524. /c^. at 123. 

525. /c^. at 121-22. 

526. Id. at 123 (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991)). 

527. Susan J. McGoIrick, House Democrats Introduce Legislation to Overturn High Court 's 
Circuit City Ruling, DAILY LAB. Rep., June 21, 2001, at A-3. 

528. Id 

529. EEOC V. Waffle House, Inc., 122 S. Ct. 754 (2002). 

530. Id at 758. 

531. Id 

532. Id at 762-63. 



2002] EMPLOYMENT LAW 1413 



nearly 80,000 discrimination complaints received),^" the Court's conclusion is 
important because employees with arbitration agreements will likely continue to 
file discrimination complaints with the EEOC, hoping that the agency will pursue 
damages on their behalf. 

CONCLUSION: The Watch List 

Three noteworthy employment law cases, not discussed above, are pending 
before the U.S. Supreme Court. In Edelman v. Lynchburg College,^^^ the Court 
will consider the validity of the EEOC's regulation permitting individuals to 
"verify" their charges by signing to affirm that the assertions are true after the 
filing deadline has passed.^^^ The EEOC mailed a draft charge to plaintiff 
Edelman on March 18, 1998, but he did not file the charge until April 1 5, which 
was thirteen days past the filing deadline."^ Edelman pointed to a signed letter 
he sent the EEOC the previous November 1 4, and an EEOC regulation saying 
"[a] charge may be amended to cure technical defects or omissions, including the 
failure to verify the charge, or to clarify or amplify allegations made therein. 
Such amendments . . .will relate back to the date the charge was first 
received.""^ 

The Fourth Circuit concluded that this regulation contravened statutory 
language limiting the EEOC's authority and establishing certain prerequisites: 
charges "shall be in writing under oath or affirmation and shall contain such 
information and be in such form as the Commission requires.""*' It 
acknowledged contrary authority from the Fifth, Seventh, Eighth, Ninth and 
Tenth Circuits but affirmed dismissal of Edelman's charge as untimely filed.^^^ 

Another case worth watching is Swierkiewicz v. Sorema,^^^ which deals with 
Rule 1 2(b)(6) motions. Plaintiff Swierkiewicz' s national origin complaint stated 
only that he is Hungarian, others employed by Sorema were French, and his 
termination was motivated by national origin discrimination. He supported his 
claim of age discrimination only by asserting that the company president said he 
wanted to "energize" Swierkiewicz' s department.^"*' 



533. /flf. at 762 n.7. 

534. 228 F.3d 503 (4th Cir. 2000), cert, granted, 533 U.S. 928 (200 1 ). 

535. Susan McGolrick, New Term to Begin with Bumper Crop of Employment-Related Cases 
to Be Heard, DAILY LAB. REP., Sept. 28, 2001 , at B-1 . 

536. £flfe//«a«, 228 F.3d at 506. 

537. Id at 507 (quoting 29 C.F.R. § 1601.12(b) (2001)). 

538. Id at 508 (quoting 42 U.S.C. § 2000e-5(b) (1994)). 

539. Id at 510-1 1 (citing Lawrence v. Cooper Cmtys., Inc., 132 F.3d 447 (8th Cir. 1998); 
Philbin v. Gen. Elec. Capital Auto Lease, Inc., 929 F.2d 321 (7th Cir. 1991); Peterson v. City of 
Wichita, 888 F.2d 1307, 1308 (10th Cir. 1989); Casavantes v. Cal. State Univ., 732 F.2d 1441, 
1442-43 (9th Cir. 1984); Price v. S.W. Bell Tel. Co., 687 F.2d 74 (5th Cir. 1982)). 

540. 2001 U.S. App. LEXIS 3837 (2nd Cir. 2001) (unpublished opinion), cert, granted, 533 
U.S. 976(2001). 

541. Id 



1414 INDIANA LAW REVIEW [Vol. 35:1369 



The Second Circuit affirmed the district court ruling granting Sorema's 
motion to dismiss for failure to state a plaim.^*^ The U.S. Supreme Court's 
decision should provide guidance on the subject of what a plaintiff must plead 
to withstand such a motion to dismiss. 

The third case, Echazabal v. Chevron USA, Inc.,^^^ presents an interesting 
issue of statutory interpretation under the ADA. The ADA prohibits 
discrimination against "otherwise qualified" individuals, including "using 
qualification standards . . . that screen out or tend to screen out an individual with 
a disability."^'*'* However, the ADA provides an affirmative defense that allows 
employers to adopt as a "qualification standard" the requirement that the 
individual not pose "a direct threat to the health or safety of other individuals in 
the workplace."^'*^ At issue in Echazabal is whether the employer may also adopt 
qualification standards to protect the disabled employee from threats to his or her 
own health.^'*^ The Ninth Circuit ruled that the employer may not adopt such 
standards, creating a conflict with a prior ruling from the Eleventh Circuit.^'*^ 
The Supreme Court has agreed to hear the case.^'*^ 



542. Id. (citing FED. R. Civ. P. 12(b)(6) (1994)). 

543. 226 F.3d 1063 (9th Cir. 2000), cert, granted, 122 S. Ct. 456 (2001). 

544. 42U.S.C. § 12112(b)(6). 

545. Id § 12113. 

546. Echazabal, 226 F.3d at 1064. 

547. Id at 1072, 1075; Moses v. American Nonwovens, Inc., 97 F.3d 446 (1 1th Cir. 1996). 

548. 122 S.Ct. 456 (2001). 



The Continuing Complexity of 
Indiana Rule of Evidence 404(b) 

Jeffrey O. Cooper* 

Introduction 

Of the numerous provisions in the Indiana Rules of Evidence, few have 
proved as complicated in application as Rule 404(b). The rule — ^which provides 
generally that evidence of crimes, wrongs, or acts other than the conduct that is 
the subject of the particular case is not admissible as proof of the actor's 
character, but is admissible for other purposes' — has produced challenging cases 
in each of the years since the Indiana Rules of Evidence went into effect in 1 994. 
This past year was no exception, as decisions of the Indiana Supreme Court and 
the Indiana Court of Appeals confronted the numerous problems of application 
raised by the rule.^ Because the rule remains the subject of confusion eight years 
after the adoption of the Indiana Rules of Evidence, and more than twenty-five 
years after the adoption of a parallel provision in the Federal Rules of Evidence, 
this Article will focus not on the full range of issues addressed by the courts 
under the Indiana Rules of Evidence during the survey period, but rather will 
focus on the past year's Rule 404(b) cases. 

I. The Substantive Requirements of Rule 404(b) 

Rule 404(b), at its heart, has three substantive requirements. First, the rule's 
reference to "other crimes, wrongs, or acts" means that the proffered evidence 
must involve a crime, wrong, or act that is not itself the subject of the case in 
which the evidence is sought to be introduced. Second, the rule excludes 
evidence of such acts if offered solely as character evidence to show action in 
conformity with that character in the events giving rise to the case. In other 
words, the evidence must not be used to support the "forbidden inference" that, 
because an individual has engaged in wrongdoing on occasions other than those 
at issue in the particular case, she must have done so on the occasion pertinent 
to the case as well.^ If the evidence is offered for another purpose, however, it 



* Associate Professor of Law, Indiana University School of Law— Indianapolis. 

1. Rule 404(b) provides: 

Evidence of other crimes, wrongs, or acts is not admissible to prove the character of a 
person in order to show action in conformity therewith. It may, however, be admissible 
for other purposes, such as proof of motive, intent, preparation, plan, knowledge, 
identity, or absence of mistake or accident, provided that upon request by the accused, 
the prosecution in a criminal case shall provide reasonable notice in advance of trial, or 
during trial if the court excuses pre-trial notice on good cause shown, of the general 
nature of any such evidence it intends to introduce at trial. 
IND. R. EviD. 404(b). 

2. The survey period for this Article is the year beginning October 1 , 2000 and terminating 
September 30, 2001. 

3. See Thompson v. State, 690 N.E.2d 224, 233 (Ind. 1997). 



1416 INDIANA LAW REVIEW [Vol. 35:1415 



may be admitted. Finally, because of the danger that the jury will indulge in the 
forbidden inference even if the evidence is offered for a proper purpose, the court 
must engage in a careful Rule 403 balancing to ensure that the probative value 
of the Rule 404(b) evidence is not substantially outweighed by the danger of 
unfair prejudice. Each one of these requirements raises difficulties in 
application. 

A. What Are "Other Crimes, Wrongs, or Acts? " 

L "Crimes, Wrongs, or Acts. " — Rule 404(b) implicates evidence of "crimes, 
wrongs, or acts."* If the evidence in question does not specifically reference an 
act, the Indiana Supreme Court has held that Rule 404(b) does not apply. Thus, 
a witness's statement that she feared the defendant was not barred by Rule 
404(b), even though the jury reasonably could infer from the witness's testimony 
that the defendant had engaged in acts that engendered her fear.^ In addition, it 
is not enough that there be evidence of a particular act; the act must also be 
wrongful in some sense.^ 

The Indiana Court of Appeals reiterated both of these points during the past 
year. In Allen v. Stated during the defendant's trial on a charge of burglary, the 
prosecution sought to introduce evidence that, during questioning by the police, 
the defendant offered to purchase drugs as a confidential informant and that 
"[h]e'd done these things in the past."* The court initially determined that the 
reference to "these things" plausibly could be interpreted to mean that the 
defendant had previously acted as a confidential informant, not that the defendant 
had previously made drug purchases.^ Evidence of having acted as an informant, 
however, would not be barred by Rule 404(b), because there was nothing 
wrongful about the act.'° And while evidence of having previously acted as a 
confidential informant might support an inference that the defendant had 
previously engaged in misconduct, Rule 404(b) did not bar evidence that merely 
raised such an inference." 

The line thus seems to be drawn clearly: if direct evidence of an act by the 
defendant is presented. Rule 404(b) is implicated, whereas if the evidence 
presented requires an inference to support the conclusion that the defendant 
engaged in an act, the Rule does not apply. One recent decision of the Indiana 
Supreme Court, however, introduced a note of uncertainty. In McCarthy v. 
•S/a/e,^^ the defendant, a high school teacher, was charged with sexual misconduct 



4. IND. R. EVID. 404(b). 

5. See Haak v. State, 695 N.E.2cl 944, 947 (Ind. 1998). 

6. See Allen v. State, 743 N.E.2d 1222 (Ind. Ct. App. 2001). 

7. Id. 

8. /£/. atl232. 

9. Mat 1232 n.l3. 

10. Id. at 1232. 

11. Id 

12. 749 N.E.2d 528 (Ind. 200 1 ). 



2002] EVIDENCE 1417 



with a minor based on allegations that he had molested two of his students. At 
trial, the prosecution presented evidence that the defendant had played "strip 
perdiddle," a sexual game with two other underage girls. '^ The trial court 
admitted the evidence over the defendant's objection that the evidence was 
improper under Rule 404(b)."* The supreme court, concluding that the trial 
court's decision was correct, questioned whether the evidence of the defendant's 
participation in "strip perdiddle" even constituted evidence of other acts within 
the meaning of the Rule. '^ 

The court's objection is difficult to fathom. Playing a game that involves 
removing one's clothes unquestionably constitutes conduct and thus would seem 
to fit within the Rule. The most likely basis for the court's objection is that the 
conduct at issue in McCarthy was not sufficiently wrongful to fall under the 
Rule. Again, though, the uncertainty that the court suggests seems unfounded. 
The inclusion of "wrongs, or acts" in Rule 404(b) suggests that an act need not 
be criminal to fall within Rule 404(b). '^ And while an adult male teacher who 
plays a non-contact stripping game with minor females over whom he has 
authority may not be engaged in criminal conduct, his act certainly is wrongful 
in the ordinary sense of the word. In any event, the court did not ultimately 
resolve the issue, resting its decision on other grounds, '^ hence it would seem 
best not to make too much of this aspect of the opinion. 

2. "Other. " — Courts commonly refer to Rule 404(b) as addressing evidence 
of "prior" acts.'* In many instances, this may simply be because, as a factual 
matter, the events discussed under Rule 404(b) in the particular cases occurred 
prior to the events underlying those cases. Repeated use of the word "prior," 
however, may suggest, at least implicitly, that the rule requires that the acts in 
question have occurred before the events giving rise to the case. 

The rule contains no such requirement, as a case from this past year 
demonstrates. In Murray v. State,^^ the Indiana Supreme Court considered under 
Rule 404(b) evidence of uncharged conduct that occurred concurrently with the 
conduct that was the subject of the criminal charge. The defendant, charged with 
attempted murder following the shooting of an acquaintance, claimed that the 
shooting had been accidental.^® To rebut this claim, and as evidence that the 
defendant had intended tci^hoot the victim, the prosecution offered evidence that 
the defendant did not have a license for the handgun used in the shooting. The 



13. Mat 535. 

14. /c/. at 536. 

15. Mat 536-37. 

1 6. See Christopher B. Mueller & Laird C. Kirkpatrick, Evidence 2 1 6 (2d ed. 1 999). 

1 7. See infra notes 23-24 and accompanying text. 

18. See Dickens v. State, 754 N.E.2d 1, 4 (Ind. 2001) ("Rule 404(b) protects against 
convictions based on past actions . . . rather than facts relevant to the matter at issue."); Grain v. 
State, 736N.E.2d 1223, 1234-35 (Ind. 2000); Allen v. State, 743 N.E.2d 1222, 1232 (Ind. Ct. App. 
2001); Atwell v. State, 738 N.E.2d 332, 336 (Ind. Ct. App. 2000). 

19. 742 N.E.2d 932 (Ind. 2001). 

20. Mat 933. 



1418 INDIANA LAW REVIEW [Vol. 35:1415 



court, noting that carrying a handgun without a license was a crime, concluded 
that the evidence was admissible under Rule 404(b) as evidence of an other act 
relevant to the defendant's intent to engage in the charged conduct: when a 
person unlawfully in possession of a firearm "openly brandishes" the weapon, "a 
factfinder could conclude that the person was highly motivated by a specific 
intent for doing so."^' 

B, Purpose for Offering the Evidence 

Rule 404(b) bars evidence of other crimes, wrongs, or acts only when offered 
for the purpose of showing the actor's character as a means of highlighting that 
the actor behaved in a manner consistent with that character on the occasion at 
issue in the particular case. If the evidence is offered for a purpose other than as 
support for this "forbidden inference," the evidence may be admitted. Because 
evidence admitted for a proper purpose may be misapplied by the jury in support 
of the forbidden inference, however, the court is obliged to ensure that the true 
purpose for offering the evidence is a proper one. 

The Indiana Supreme Court and Indiana Court of Appeals have proved 
receptive to arguments that evidence of other acts is being offered for a purpose 
other than as character evidence, with one significant exception. Following 
Wickizer v, State^^ the courts carefully scrutinize other-acts evidence that is 
offered to show intent. For the most part, though, the cases in this past year 
demonstrate that reversal on the ground that evidence is offered for an improper 
purpose under Rule 404(b) is unusual, as is reversal on the ground that the 
probative value of the evidence is substantially outweighed by the danger of 
unfair prejudice. 

1. Routine Application. — Many of the instances in which evidence is 
admitted under Rule 404(b) are routine: the evidence plainly relates to an aspect 
of the case other than the defendant's character. In McCarthy v. Stated for 
example, the defendant, accused of sexual misconduct with a minor, disclaimed 



21. Id. 

11. 626 N.E.2d 795 (Ind. 1993). 

23. 749 N.E.2d 528 (Ind. 2001 ). The McCarthy decision is more notable for the fact that it 
applies harmless error analysis to a deprivation of the defendant's right to cross-examine witnesses, 
as guaranteed by the Sixth Amendment of the U.S. Constitution and article 1, section 13 of the 
Indiana Constitution. Id. at 534. In rejecting the defendant's argument that deprivation of the right 
to cross-examine witnesses should be considered Qrror perse, the court discarded court of appeals 
precedent that had supported the defendant's position. Id. at 533-34 (overturning Tucker v. State, 
728 N.E.2d 261 , 262 (Ind. Ct App. 2000), trans, denied; Kleinrichert v. State, 530 N.E.2d 32 1 , 322 
(Ind.Ct. App. 1 988); Higginbothamv. State, 427 N.E.2d 896, 901 (Ind. Ct. App. \9%\\ overruled 
on other grounds by Micinski v. State, 487 N.E.2d 150 (Ind. 1986); Pfefferkom v. State, 413 
N.E.2d 1088, 1090 (Ind. Ct. App. 1980); Haeger v. State, 390 N.E.2d 239, 241 (Ind Ct. App. 
1 979)). The court noted that the U.S. Supreme Court had previously determined that harmless error 
analysis should be used to assess the impact of violations of the right to impeach for bias. Id. at 534 
(citing Delaware v. Van Arsdall, 475 U.S. 673, 684 (1986)). 



2002] EVIDENCE 1419 



knowledge of the game in which he had allegedly indulged with the minor victim 
before molesting her. To demonstrate that the defendant did in fact have 
knowledge of the game, the prosecution introduced evidence from two minor 
witnesses who testified that the defendant had played the game with them as 
well. The supreme court held that this use of the evidence to show knowledge 
was proper.^'* 

Prior acts of violence by the defendant against the victim of the charged 
offense are often admitted to show motive, the idea being that the prior acts 
demonstrate a hostile relationship between the defendant and the victim, a 
relationship that in turn explains the charged conduct. This use of the evidence 
avoids the forbidden inference by focusing not on the defendant's propensity for 
violence broadly but rather on the particulars of the defendant's relationship with 
the victim. In Wrinkles v. State,^^ for example, the trial court admitted (without 
objection from defendant's counsel) evidence that, two months prior to 
murdering his wife and two others, the defendant had pointed a gun at his wife.^^ 
On collateral review, the Indiana Supreme Court concluded that the failure to 
object did not deprive the defendant of effective assistance of counsel, because 
the evidence was properly admissible to show motive.^^ 

Cases in which evidence is excluded can be equally clear-cut. In Buchanan 
V. State^^ a child-molesting case, the trial court admitted over the defendant's 
objection photographs and drawings seized from his home of children in various 
states of undress, accepting the prosecution's argument that the materials 
constituted evidence of the defendant's plan to molest young children. The court 
of appeals made short work of the argument. To constitute proper evidence of 
plan, the court asserted, the charged offense and the evidence of other acts "*must 
... be so related in character, time, and place of commission as to establish sorhe 
plan which embraced both the prior and subsequent criminal activity and the 
charged crime. '"^^ Under this test, the drawings and photographs did not 
constitute evidence of an overarching plan. 

2. Intent. — An effort to show intent is a proper purpose for introducing 



24. A/cCflr%, 749N.E.2dat536. 

25. 749 N.E.2d 1 179 (Ind. 2001). Wrinkles is most noteworthy for its conclusion that 
criminal defendants may not be required to wear stun belts in the courtroom. Id. at 1 195. The court 
acknowledged the need for defendants to wear restraints in limited circumstances, but concluded 
that, unlike shackles and other forms of restraint, stun belts generated a fear in the minds of their 
wearers that had the potential to chill defendants from participating fully in their own defense. See 
id. at 1194-96. Justice Boehm, concurring in the result, opined that stun belts should not be 
categorically barred, reasoning that, because they were less visible than shackles and thus were less 
likely to be observed by the jury, some defendants might prefer them. See id. at 1205 (Boehm, J., 
concurring). 

26. See id atn96&n.7. 

27. ld.2X\\91. 

28. 742 N.E.2d 1018 (Ind. Ct. App. 2001). 

29. Id. at 1022 (quoting Lannan v. State, 600 N.E.2d 1334, 1339 (Ind. 1992)). Lannan, it 
should be noted, predated the adoption of the Indiana Rules of Evidence. 



1420 INDIANA LAW REVIEW [Vol. 35:1415 



evidence of other acts under Rule 404(b). Permitting evidence of other acts to 
be introduced to show intent in criminal cases is problematic, however, in that 
evidence tending to show intent is almost always relevant in such cases. 
Moreover, the intent argument, which the rule recognizes as proper, is not far 
removed in operation from the forbidden inference based on character. Each is 
in a sense a propensity argument; the intent argument is simply more narrowly 
focused on a particular aspect of the defendant's state of mind, rather than on his 
general character. 

Recognizing this reality, in the 1 993 case of Wickizer v. State^^ the Indiana 
Supreme Court held that evidence of other acts may not be offered to show intent 
unless the defendant specifically denies intent. A mere denial of involvement in 
the offense does not amount to a denial of intent; rather, the defendant must 
argue that, whatever conduct he may have engaged in, he did not possess the 
necessary mens rea for the offense.^' In many instances, it is readily apparent 
that the defendant has made the requisite denial, thus opening the door to other- 
act evidence probative of intent. In Grain v. State^^ for example, the defendant, 
charged with murder of his wife, claimed that her death was accidental.^^ This 
claim allowed the prosecution to introduce evidence of several prior batteries by 
the defendant against his wife as evidence of the requisite intent.^^ And in 
Murray v. State^^ when the defendant, charged with attempted murder, claimed 
that he shot the victim by accident, the Indiana Supreme Court held that the 
prosecution could properly introduce evidence that the defendant's possession 
of the firearm was illegal, on the theory that one in possession of an illegal 
firearm would not casually flaunt it but would reveal it only if there were intent 



30. 626 N.E.2d 795 (Ind. 1993). 

31. The federal courts of appeals, applying the parallel federal rule, are divided in their 
approaches as to whether the defendant must controvert intent before evidence of other acts may 
be introduced pursuant to Rule 404(b). A number follow an approach similar to that of Wickizer. 
See United States v. Karas, 950 F.2d 3 1 , 3 7 ( 1 st Cir. 1 99 1 ); United States v. Colon, 880 F.2d 650, 
656-57 (2d Cir. 1989); United States v. Walton, 602 F.2d 1 176, 1 180-81 (4th Cir. 1979); United 
States v. Silva, 580 F.2d 144, 148 (5th Cir. 1978). Other circuits take the position that, where the 
crime is a specific intent crime^ evidence of other acts may be used to demonstrate intent even if the 
defendant did not specifically place intent at issue. See United States v. Himelwright, 42 F.3d 777, 
782 (3d Cir. 1994); United States v. Hadley, 918 F.2d 848, 851-52 (9th Cir. 1990); United States 
V. Weddell, 890 F.2d 1 06, 1 07-08 (8th Cir. 1 989); United States v. Mazzanti, 888 F.2d 1 1 65, 1 1 70- 
71 (7th Cir. 1989), cert, denied, 495 U.S. 930 (1990); United States v. Soundingsides, 820 F.2d 
1232, 1237-38 (10th Cir. 1987); United States v. Williams, 816 F.2d 1527, 1531 (1 1th Cir. 1987); 
United States v. Hamilton, 684 F.2d 380, 384 (6th Cir), cert, denied, 459 U.S. 976 (1982). The 
position of the D.C. Circuit appears still to be unresolved, although in admitting other-acts evidence 
to demonstrate intent, the court in one case did note that the defendant had squarely placed his 
intent at issue. See United States v. Watson, 894 F.2d 1345, 1349 (D.C Cir. 1990). 

32. 736 N.E.2d 1223 (Ind. 2000). 

33. Id at 1235. 

34. Id at 1235-36. 

35. 742 N.E.2d 932 (Ind. 2001). 



2002] EVIDENCE 1421 



to use it.^^ 

Although the Wickizer rule is now well established, it sometimes proves 
troublesome in application. A recent decision of the Indiana Court of Appeals 
suggests that it can be difficult to determine whether a defendant has placed his 
intent in issue. In Weme v. Slate,^^ the defendant was charged with molesting a 
six-year-old child who lived nearby. According to the child-victim, the defendant 
had touched her several times "on her shorts" in the pelvic area.^^ The 
defendant's attorney asserted in his opening statement, without explaining the 
significance of the assertion, that the case "was an over the clothing type 
touching case."^^ Based on this argument, the trial court concluded that the 
defendant had denied intent and therefore had opened the door to evidence of a 
prior incident of molestation.'*^ 

A divided panel of the court of appeals disagreed. Writing for the majority, 
Judge Mathias noted that the defendant's opening statement did not explicitly 
assert that the alleged touching had been inadvertent or accidental; rather, it 
simply "sought early on to minimize the seriousness of the charge and thus the 
unfavorable light in which some jurors may have viewed" the defendant."*' 
Dissenting, Judge Bailey noted that the defendant "did not deny that the touching 
took place"; rather, the emphasis on the fact that the alleged touching occurred 
over the victim's clothes "suggest[ed] inadvertence."^^ The split is perhaps 
understandable, given the lack of clarity in the defense counsel's argument; the 
interpretations of both the majority and the dissent seem plausible. The Weme 
decision therefore is somewhat troubling; however, perhaps because of the fact- 
specific nature of the split in the appellate panel, the Indiana Supreme Court 
denied transfer."*^ 

3. Other Purposes. — Although Rule 404(b) lists a number of purposes for 
which other-acts evidence may be admissible, it is important to remember that 
the list set forth in the Rule is not exclusive.'*^ Indiana courts are receptive to 
other-acts evidence offered for purposes other than those listed in the Rule, 
provided they are satisfied that the proffered purpose is not simply a stand-in for 
the forbidden inference. Thus, in Dickens v. State^^ a murder prosecution, the 
fact that the defendant was observed in possession of a handgun two days before 



36. Mat 933. 

37. 750N.E.2ci420(Ind. Ct. App. 2001). 

38. /</. at421. 

39. Id. 2Lt 422. 

40. Id. 

41 . Id. at 423. The majority further concluded that the trial court's error was not harmless. 
See id. at 423-24. 

42. Id. at 425 (Bailey, J., dissenting). 

43. Weme V. State, 761 N.E.2d 418 (Ind. 2001). 

44. Dickens v. State, 754 N.E.2d 1,4 (Ind. 2001); Atwell v. State, 738 N.E.2d 332, 336 n.4 
(Ind. Ct. App. 2000). 

45. 754N.E.2dl (Ind. 2001). 



1422 INDIANA LAW REVIEW [Vol. 35:1415 



the murder was deemed relevant to the issue of opportunity/^ A somewhat more 
complicated situation arose in Atwell v. Siate*^ In Atwell, the defendant was 
charged with attempted murder after shooting a neighbor. The shooting occurred 
after the victim intervened in an argument between the defendant and the 
defendant's girlfriend."*^ At trial, the victim acknowledged that he had threatened 
to hit the defendant prior to the shooting; he explained his threat by saying that, 
several nights before the shooting, the defendant had hit his girlfriend, and that 
the victim wanted to prevent that from happening again."*^ On appeal, the court 
rejected the defendant's argument that the evidence that the defendant had 
previously hit his girlfriend was inadmissible because it invited the jury to 
indulge in the forbidden inference; instead, the court accepted the government's 
argument that the other-acts evidence was properly admitted on the question of 
whether the victim provoked the shooting in some manner.^° 

C Rule 403 Balancing 

That evidence of other acts is being offered for a proper purpose and is 
relevant to that purpose is not sufficient to warrant its admission; the court must 
also determine, pursuant to Rule 403, whether "its probative value is 
substantially outweighed by the danger of unfair prejudice, confusion of the 
issues, or misleading the jury, or by considerations of undue delay, or needless 
presentation of cumulative evidence."^' Of course, Rule 403 applies generally 
to all forms of evidence, not simply to those offered under Rule 404(b). The 
need for balancing is especially acute under Rule 404(b), however, because of the 
constant danger that the jury will fall prey to the allure of the forbidden 
inference. The danger of unfair prejudice is always present in Rule 404(b) cases, 
then; the only question is how that danger compares to the evidence's probative 
value when considered for its proper purpose. 

The Indiana Supreme Court has recognized the importance of Rule 403 
balancing in determining admissibility under Rule 404(b), specifically directing 
courts to undertake the balancing inquiry when considering other-acts evidence." 
In practice, however, reversals on appeal based on Rule 403 have been rare. In 
part, this is because of the standard of review: an appellate court will not 
overturn a trial court's determination that evidence does not violate Rule 403 
absent abuse of discretion. ^^ Beyond that, though, the Indiana Supreme Court has 
effectively set the tipping point between probative value and unfair prejudice at 
such a high level that even highly prejudicial evidence is deemed admissible if 



46. Mat 4. 

47. 738 N.E.2d 332 (Ind. Ct. App. 2000). 

48. Id. at 334. 

49. Id. at 334-35. 

50. /d/. at 336. 

51. iND. R. EviD. 403. 

52. Hicks V. State, 690 N.E.2d 215, 221 (Ind. 1997). 

53. Grain v. State, 736 N.E.2d 1223, 1235 (Ind. 2000). 



2002] EVIDENCE 1423 



it has minimal probative value. 

An example from this past year was Grain v. State.^^ In Grain, the defendant 
was charged with murder after allegedly beating his wife severely in a motel 
room and leaving her to die.^^ At trial, the prosecution offered evidence that, at 
the time of the defendant's arrest, the defendant had four outstanding battery 
charges involving the victim in the five months prior to her death, as well as two 
prior battery convictions, one three years old and one six years old, both 
involving the victim. The prosecution contended, and the trial court agreed, that 
these charges and convictions were proper other-acts evidence, admissible to 
show intent by rebutting the defendant's argument that the victim's death had 
been accidental.^^ On appeal, the supreme court agreed that the evidence was 
proper to show intent; it also concluded that the evidence withstood Rule 403 
scrutiny. The four battery charges, being close in time to the victim's death, had 
sufficient "probative force" to warrant admission. The two prior convictions 
were "in the lower range of probative value," given the passage of time and the 
fact that, with the admission of the four battery charges, the evidence of the prior 
convictions was cumulative.^^ Nevertheless, the court concluded that the 
admission of the convictions did not constitute an abuse of discretion.^* 

Grain focuses largely on assessing the probative value of the proffered 
evidence; it largely fails to consider the extent of the danger of unfair prejudice 
caused by the evidence. The court acknowledges that "[a]t some point testimony 
about every incident of violence between the [defendant and the victim] becomes 
more prejudicial than probative."^^ Beyond that, though, the court has little to 
say. It briefly suggests that if the testimony about the prior convictions had been 
both "graphic" and "prejudicial," it might have excluded the evidence.^^ Again, 
though, the court says virtually nothing about what would make evidence in this 
context prejudicial. In particular, the failure to acknowledge the inherent unfair 
prejudice lurking in the forbidden inference undermines the court's own previous 
insistence on the importance of Rule 403 balancing in the Rule 404(b) context. 
Given the one-sided nature of the court's inquiry, it is not surprising that, as long 
as the evidence's probative value is more than de minimis, the court concludes 
that it is not barred by Rule 403.^^ 



54. 736 N.E.2d 1223 (Ind. 2000). 

55. Id. at 1229. 

56. Mat 1235-36. 

57. /i/. atl236&n.9. 

58. Mat 1236. 

59. Id at 1236 n.9 (quoting Hicks v. State, 690 N.E.2d 215, 222 (Ind. 1997)). 

60. Id 

61. Crain dealt with a Rule 403 problem in another portion of the opinion as well. To 
illustrate expert testimony, the prosecution presented not photographs, video, or charts, but the 
murder victim's own skull, which the jury was invited to examine up-close. See id. at 1233-34. 
On appeal, the Indiana Supreme Court acknowledged that the use of the victim's skull in this 
manner was "unsettling," but concluded that "the skull was neither particularly gruesome nor 
ominous." Id. at 1234. Although the court expressed a preference for other means of illustrating 



1424 INDIANA LAW REVIEW [Vol. 35:1415 



Only once in this past year did the Indiana Court of Appeals conclude that 
evidence of other acts proffered under Rule 404(b) should be excluded under 
Rule 403, and the circumstances of that case demonstrate the limited 
circumstances in which the courts are willing to make such a decision on Rule 
403 grounds. In Buchanan v. State,^^ the defendant, charged with child 
molesting, objected to the introduction of photographs of semi-nude children and 
drawings of nude children seized from his home, claiming that the evidence 
violated both Rule 404(b) and Rule 403." The government responded that the 
photographs and drawings were properly admitted under Rule 404(b) as evidence 
of the defendant's motive and plan.^"* The court of appeals disagreed, concluding 
that the evidence was relevant to neither motive nor plan." Having reached that 
conclusion, it further opined that Rule 403 required exclusion of the evidence 
because "the sheer volume of the drawings and photographs" was "extremely 
prejudicial."^^ This decision reinforces the impression that the only 
circumstances in which the Indiana courts are willing to bar Rule 404(b) 
evidence under Rule 403 are those in which the evidence is not proper under 
Rule 404(b) to begin with. 

II. Procedural Requirements of Rule 404(b) 

Rule 404(b) requires that "upon request by the accused, the prosecution in 
a criminal case shall provide reasonable notice in advance of trial, or during trial 
if the court excuses pre-trial notice on good cause shown, of the general nature 
or any such evidence it intends to introduce at trial. "^^ 

The absence of a firm deadline for the provision of notice under Rule 404(b) 
occasionally causes difficulties. In Hatcher v. State ^^^ for example, the 
prosecution informed the defendant six days before his trial for murder that it 
intended to offer evidence concerning a protective order that the victim had 
previously obtained against him.^^ The defendant objected, claiming that six 
days advance notice was not "reasonable" within the meaning of Rule 404(b) and 
that the state had failed to demonstrate good cause for its untimely disclosure. 
The trial court rejected the defendant's contention, and the Indiana Supreme 
Court affirmed. The purpose of the notice requirement, the court asserted, "Ms 
to reduce surprise and to promote the early resolution of questions of 



the expert's testimony, it ultimately concluded that the use of the victim's skull did not constitute 
an abuse of discretion. See id. 

62. 742N.E.2d 1018 (Ind. Ct. App. 2001). 

63. /^. at 1021. 

64. ld.2X\021. 

65. Id. 

66. Mat 1022-23. 

67. iND. R. EviD. 404(b). 

68. 735 N.E.2d 1 155 (Ind. 2000). 

69. See id. at 1158. 



2002] EVIDENCE 1425 



admissibility."'^® Neither of these purposes was offended: the emergency 
protective order that the prosecution sought to introduce had been disclosed to 
the defendant during discovery, as had the identity of the Rule 404(b) witnesses 
that the prosecution intended to call. In addition, the trial court was able to 
resolve the dispute in a timely manner, without disrupting the trial/' 

Although exclusion for lack of timely notice is relatively unusual, a decision 
from this past year demonstrated that such a decision has real teeth. In Johnson 
V. State,^^ the trial court found inadequate notice by the government identifying 
the names of potential Rule 404(b) witnesses but failing to state the general 
nature of their testimony .^^ The court therefore excluded the other-acts evidence. 
The prosecution then moved to dismiss the charges and, once that motion was 
granted, refiled the charges, adding a number of new counts relating to the 
previously-excluded witnesses.^* On appeal, the Indiana Supreme Court found 
the tactic improper, noting: "If the State may circumvent an adverse evidentiary 
ruling by simply dismissing and refiling the original charge, and also 'punish' the 
defendant for a successful procedural challenge by piling on additional charges, 
defendants will as a practical matter be unable to avail themselves of legitimate 
procedural rights."^^ 

Conclusion 

Rule 404(b) continues to prove among the most troublesome of the Indiana 
Rules of Evidence, and controversial decisions have been common in the years 
since the Rule was adopted.'^ This is perhaps not surprising, given the multiple 
factors at play in any application of Rule 404(b). Yet the decisions applying 
Rule 404(b) in the past year suggest that the application of the Rule has stabilized 
in some ways. There remain areas in the application of the Rule that could profit 
from further explication by the Indiana Supreme Court, particularly in the nature 
of the Rule 403 balancing that Rule 404(b) requires.^^ But as the courts become 
more familiar with the contours of the Rule, there is reason to hope that its 
application will continue to become more consistent. 



70. Id. (quoting Abdul-Musawwir v. State, 674 N.E.2d 972, 975 (Ind. Ct. App. 1996)). 

71. 5ee/c/. at 1158-59. 

72. 740 N.E.2d 118 (Ind. 2001). 

73. 5ee/W. at 119-20. 

74. See id at no. 

75. /flf. atl21. 

76. I have discussed Indiana decisions applying Rule 404(b) in my two previous surveys for 
the Indiana Law Review. See Jeffrey O. Cooper, Recent Developments in Indiana Evidence Law, 
32 Ind. L. Rev. 811, 819-22 (1999); Jeffrey O. Cooper, Recent Developments Under the Indiana 
Rules of Evidence, 30 iND. L. REV. 1049, 1051-56 (1997). 

77. See supra notes 5 1 -66 and accompanying text. 



Survey of Recent Developments in 
Indiana Product Liability Law 



Joseph R. Alberts* 



Introduction 

The first year of the Twenty-first Century was a busy one for Indiana judges 
and practitioners in the area of product liability law.' During the 2001 survey 
period, which is October 1 , 2000 to September 30, 200 1 ^ state and federal courts 
in Indiana answered some lingering questions, tackled some new issues, and 
added to an already impressive body of law interpreting the Indiana Product 
Liability Act ("IPLA").' 

This survey does not attempt to address in detail all cases decided during the 
survey period that apply Indiana product liability law. Rather, it examines 
selected cases that are representative of the seminal product liability issues that 
courts applying Indiana law have handled during the relevant time frame. This 
survey also provides some background information and context where 
appropriate. 

I. Cases Interpreting Statutory Definitions 
All claims users or consumers'* file in Indiana against manufacturers^ and 



* Senior Litigation Attorney, Dow AgroSciences LLC, Indianapolis; B.A., cum laude, 
1991, Hanover College; J.D., magna cum laude, 1994, Indiana University School of 
Law— Indianapolis; Chairman, Product Liability Section, Defense Trial Counsel of Indiana ( 1 999- 
2001); Chairman, Corporate Counsel Section, Indiana State Bar Association. The author thanks 
Brenda Ferguson, Knight Anderson, James Boyers, Jeff McKean, Nelson Nettles, and Tom 
Jarzyniecki for their contributions. 

1 . Many commentators and courts use the term "products liability" when referring to actions 
alleging damages as a result of defective and/or unreasonably dangerous consumer products. The 
applicable Indiana statutes, however, utilize the term "product liability" (no "s"). This survey 
follows the lead of the Indiana General Assembly and likewise employs the term "product liability." 

2. This Article includes some cases decided on the periphery of those dates. 

3. The Indiana General Assembly first enacted the IPLA in 1978. See Pub. L. No. 141, § 
28, 1978 Ind. Acts 1298, 1308, repealed by 1995 Ind. Acts 4051 (1995). It originally covered 
claims in tort using both negligence and strict liability theories. In 1983, the legislature amended 
the statute to apply only to strict liability actions. See Pub. L. No. 297-1983, § 1, 1983 Ind. Acts 
1815. In 1995, the legislature amended the statute to once again encompass tort theories of 
recovery based on both strict liability and negligence theories. See Pub. L. No. 278- 1 995, §1,1 995 
Ind. Acts 405 1 ; see also Progressive Ins. Co. v. Gen. Motors Corp., 749 N.E.2d 484, 487 n.2 (Ind. 
2001). 

4. For purposes of application of the IPLA, "consumer" means: 

(1) a purchaser; (2) any individual who uses or consumes the product; (3) any other 
person who, while acting for or on behalf of the injured party, was in possession and 
control of the product in question; or (4) any bystander injured by the product who 
would reasonably be expected to be in the vicinity of the product during its reasonably 



1428 INDIANA LAW REVIEW [Vol. 35:1427 



sellers^ for physical harm^ a product* causes are statutory. The IPLA governs all 
such claims "regardless of the substantive legal theory or theories upon which the 
action is brought."^ The 1 995 amendments to the IPLA incorporated negligence 
principles in cases in which claimants base their theory of liability upon either 
defective design or inadequate warnings. '° "Strict liability" remains only in cases 
in which the theory of liability is a manufacturing defect." The 1995 
amendments also limited actions against sellers,'^ more specifically defined the 
circumstances under which a distributor or seller can be considered a 
manufacturer,'^ converted the traditional state of the art defense into a rebuttable 



expected use. 
IND. Code § 34-6-2-29 (1998). "User" has the same meaning as "consumer." Id. § 34-6-2-147. 

5. For purposes of application of the IPLA, "manufacturer" means "a person or an entity 
who designs, assembles, fabricates, produces, constructs, or otherwise prepares a product or a 
component part of a product before the sale of the product to a user or consumer." Id. § 34-6-2- 
77(a). "Manufacturer" also includes a seller who 

(1) has actual knowledge of a defect in a product; (2) creates and furnishes a 
manufacturer with specifications relevant to the alleged defect for producing the product 
or who otherwise exercises some significant control over all or a portion of the 
manufacturing process; (3) alters or modifies the product in any significant manner after 
the product comes into the seller's possession and before it is sold to the ultimate user 
or consumer; (4) is owned in whole or significant part by the manufacturer; or (5) owns 
in whole or significant part the actual manufacturer. 
Id. 

6. For purposes of application of the IPLA, "seller" means "a person engaged in the business 
of selling or leasing a product for resale, use, or consumption." Id. § 34-6-2-136. 

7. For purposes of application of the IPLA, "physical harm" means "bodily injury, death, 
loss of services, and rights arising from any such injuries, as well as sudden, major damage to 
property." Id. § 34-6-2-1 05(a). It does not include "gradually evolving damage to property or 
economic losses from such damage." Id. § 34-6-2- 105(b). 

8. For purposes of application of the IPLA, "product" means "any item or good that is 
personalty at the time it is conveyed by the seller to another party." Id. § 34-6-2-1 14(a). The term 
does not encompass a "transaction that, by its nature, involves wholly or predominantly the sale of 
a service rather than a product." Id. § 34-6-2-1 14(b). 

9. /^. §34-20-1-1. 

10. See id §34-20-2-2. 

1 1 . See id. The editors of Bums Indiana Statutes Annotated have included a title that could 
be misleading to their readers. The short title the editors have chosen for Indiana Code section 34- 
20-2-2 is "Strict Liability— Design Defect." iND. Code Ann. § 34-20-2-2. That title might cause 
a reader to incorrectly assume that the statute allows a claimant to prove a design defect case 
without proving as part of that claim that the manufacturer or seller failed to conform to what is 
really a negligence standard — the exercise of "reasonable care under the circumstances in designing 
the product." iND. CODE § 34-20-2-2. 

12. See id §34-20-2-3. 

13. See id §34-20-2-4. 



2002] PRODUCT LIABILITY 1429 



presumption/'* and injected comparative fault principles into product liability 
cases. '^ 

As such, cases interpreting the IPLA are of the utmost importance. The 
following cases are a sampling of those decided during the survey period that 
interpret terms the IPLA incorporates.'^ 



14. See id. § 34-20-5-1. The presumption is that the product is not defective and that the 
product's manufacturer is not negligent. Id The IPLA entitles a manufacturer or seller to such a 
presumption if, 

before the sale by the manufacturer, the product: (1) was in conformity with the 
generally recognized state of the art applicable to the safety of the product at the time 
the product was designed, manufactured, packaged, and labeled; or (2) complied with 
applicable codes, standards, regulations, or specifications established, adopted, 
promulgated, or approved by the United States or by Indiana, or by any agency of the 
United States or Indiana. 
Id 

15. The 1995 amendments changed Indiana law with respect to fault allocation and 
distribution in product liability cases. The Indiana General Assembly made it clear that a defendant 
cannot be liable for more than the amount of fault "directly attributable to that defendant," as 
determined pursuant to Indiana Code section 34-20-8, nor can a defendant "be held jointly liable 
for damages attributable to the fault of another defendant." Id. § 34-20-7-1. 

The 1995 amendments now require the trier of fact to compare "the fault of the person 
suffering the physical harm, as well as the fault of all others who caused or contributed to cause the 
harm." Id. § 34-20-8- 1(a). The statute requires that the trier of fact compare such fault "in 
accordance with IC 34-51-2-7, IC 34-51-2-8, or IC 34-51-2-9." Id The IPLA mandates that 
[i]n assessing percentage of fault, the jury shall consider the fault of all persons who 
contributed to the physical harm, regardless of whether the person was or could have 
been named as a party, as long as the nonparty was alleged to have caused or 
contributed to cause the physical harm. 
Id § 34-20-8-l(b). 

Practitioners also should recognize that the definition of "fault" for purposes of the IPLA is 
not the same as the definition of "fault" applicable in actions that the Comparative Fault Act 
governs. Compare id. § 34-6-2-45(a), with id. § 34-6-2-45(b). For purposes of the IPLA, the 
definition of "fault" does not include the "unreasonable assumption of risk not constituting an 
enforceable express consent, incurred risk, and unreasonable failure to avoid an injury or to mitigate 
damages." Id. 

1 6. As noted in the opening paragraph of this survey Article, there are several cases that this 
piece does not address in great detail that are, nevertheless, worthy of special mention. One such 
case is Rogers ex rel. Rogers v. Cosco, Inc., 737 N.E.2d 1 158 (Ind. Ct. App. 2000), trans, denied, 
761 N.E.2d 419 (Ind. 2001), which the Indiana Court of Appeals decided on November 2, 2000. 
Although that decision technically falls within the survey period for this Article, last year's survey 
Article fully addressed it. See Joseph R. Alberts & David M. Henn, Survey of Recent Developments 
in Indiana Product Liability Law, 34 iND. L. REV. 857, 882-86, 917-20 (2001). 

In addition to Rogers, there are several published state and federal cases that Indiana product 
liability practitioners may be interested in that are not reviewed in this article because, although 
they are product liability cases, substantive product liability issues are not the focus of the opinions. 



1430 INDIANA LAW REVIEW [Vol. 35:1427 



See In re Bridgestone/Firestone, Inc., ATX, ATX II, & Wilderness Tires Products Liability 
Litigation, 1 55 F. Supp. 2d 1069 (S.D. Ind.) (applying Michigan and Tennessee substantive law to 
claims involving tort, contract, consumer protection, express and implied warranty, and unjust 
enrichment claims; applying federal law on RICO and Magnuson-Moss warranty issues), 
reconsideration granted in part by 205 F.R.D. 503 (S.D. Ind. 2001), rev 'din part by 2SS F.3d 1013 
(7th Cir. 2002); In re Bridgestone/Firestone, Inc., ATX, ATX II, & Wilderness Tires Products 
Liability Litigation, 199 F.R.D. 304 (S.D. Ind. 2001) (allowing plaintiff to voluntarily dismiss 
federal action and pursue state action if she paid defendants any filing fees they incurred); In re 
Bridgestone/Firestone, Inc., ATX, ATX II, & Wildemess Tires Products Liability Litigation, 131 
F. Supp. 2d 1027 (S.D. Ind. 2001) (finding plaintiffs entitled to discovery about defendants' 
motions to dismiss on forum non conveniens grounds); In re Bridgestone/Firestone, Inc., ATX, 
ATX II, & Wilderness Tires Products Liability Litigation, 129 F. Supp. 2d 1207 (S.D. Ind. 2001) 
(determining case management procedures); In re Bridgestone/Firestone, Inc., ATX, ATX II, & 
Wildemess Tires Products Liability Litigation, 129 F. Supp. 2d 1202 (S.D. Ind. 2001) (denying 
plaintiffs' request to join tire dealer who would defeat diversity jurisdiction); In re 
Bridgestone/Firestone, Inc., ATX, ATX II, & Wildemess Tires Products Liability Litigation, 198 
F.R.D. 654 (S.D. Ind. 2001) (allowing press to intervene in case, but limiting intervention to 
responses to motions for protective orders); In re Bridgestone/Firestone, Inc., ATX, ATX II, & 
Wildemess Tires Products Liability Litigation, 128 F. Supp. 2d 1198 (S.D. Ind. 2001) (denying 
plaintiffs' motion to remand case to state court); In re Bridgestone/Firestone, Inc., ATX, ATX II, 
& Wildemess Tires Products Liability Litigation, 128 F. Supp. 2d 1 196 (S.D. Ind. 2001 ) (refusing 
to issue suggestion for remand of case to state court); Szabo v. Bridgeport Machines, Inc., 199 
F.R.D. 280 (N.D. Ind. 2001) (addressing, in a case involving the manufacture of an allegedly 
defective machine, class certification, choice of law, and misrepresentation); Ray-Hayes v. 
Heinamann, 743 N.E.2d 777 (Ind. Ct. App. 2001) (holding, in product liability case alleging 
defective passenger vehicle restraint, that trial court erred by dismissing plaintiffs' cause of action 
despite the fact that the summonses were filed after the expiration of the statute of limitations 
period), vacated by 760 N.E.2d 1 72 (Ind.), rev 'd on reh 'g, 768 N.E.2d 899 (Ind. 2002); Allstate 
Ins. Co. V. Dana Corp., 737 N.E.2d 1 177 (Ind. Ct. App. 2000) (insured manufacturer did not own 
contaminated groundwater within the meaning of insurance policy's exclusion), ajfd in part and 
vacated in part, 759 N.E.2d 1049 (Ind. 2001). 

There are also several helpful opinions, by federal district judges, that are available from 
sources other than official reporters. Note that those cases made available to the public only by way 
of the Southern District of Indiana's web site are not intended for publication either electronically 
or in paper form. Aside from the law of the case doctrine, federal district judges' decisions have 
no precedential authority and are not binding on other courts, other judges within the district, or 
even other cases before the same judge, N.H. Ins. Co. v. Farmer Boy AG, Inc., No. I/P 98-003 1 -C- 
T/G, 2000 U.S. Dist. LEXIS 19502, at ♦ 1 n.l (S.D. Ind. Dec. 19, 2000); see also Howard v. Wal- 
Mart Stores, Inc., 160 F.3d 358, 359 (7th Cir. 1 998); Malabarba v. Chi. Tribune Co., 149F.3d690, 
697 (7th Cir. 1998); Old Republic Ins. Co. v. Chuhak & Tecson, P.C, 84 F.3d 998, 1003 (7th Cir. 
1 996). There are a number of federal cases that might be helpful to practitioners but are not 
available in the official reporter system. See Chubb Group of Ins. Cos. v. Buddy Gregg Motor 
Homes, Inc., No. IP 00-1378-C H/G, 2001 U.S. Dist. LEXIS 5040 (S.D. Ind. Apr. 17, 2001) 
(dismissing manufacturer's cross-claim against seller finding that Indiana allows implied 
indemnification only under narrow exceptions that the cross-claim did not meet); In re Lawrence 



2002] PRODUCT LIABILITY 1431 



A. Recovery of Damage to Defective Product 

Two related cases decided on June 6, 2001, by the Indiana Supreme Court 
reaffirm that the IPLA does not allow a claimant to recover for damages to the 
defective product itself even when "other property" is damaged in the event or 
accident that also destroys or damages the defective product. 

In the first case, Progressive Insurance Co. v. General Motors Corp. ,'^ three 
insurance companies sued General Motors and Ford in subrogation in five 
separate cases after vehicles were destroyed in fires allegedly caused by defects 
in the wiring, the fuel lines, and transmission lineJ* Because the vehicles 
themselves were the only property the fires allegedly damaged, the manufacturers 
filed motions for summary judgment in the trial court.'' They argued, in part, 
that the owners, and therefore their subrogees, may not recover damages in 
product liability claims under the IPLA.^^ The trial courts granted summary 
judgments to the manufacturers in two of the cases and denied them in the other 
three.^' 

Considering itself bound by precedent in Martin Rispens & Son v. Hall 
Farms, Inc?^ and Reed v. Central Soya Co,}^ the court of appeals affirmed those 
decisions in the consolidated appeal that ensued.^'* In doing so, the court of 
appeals, in the language of Justice Boehm, expressed the view that "policy 
considerations favored the plaintiffs' claims under the [IPLA]."^^ Because the 



W. Inlow Accident Litig., No. IP 99-0830-C H/G, 2001 U.S. Dist. LEXIS 2747, Prod. Liab. Rep. 
(CCH)*j| 16,044(S.D. Ind. Feb. 7, 2001) (discussing indemnification and contribution, compliance 
with Local Rule 56.1, personal knowledge required for an affidavit, exclusivity provision in the 
Indiana Worker's Compensation Act, federal preemption pursuant to the Federal Aviation Act, and 
the quantum of evidence necessary to defeat summary judgment motion); Land v. Yamaha Motor 
Corp., No. IP 00-220-C H/G, 2000 U.S. Dist. LEXIS 201 17 (S.D. Ind. Dec. 20, 2000) (denying 
plaintiffs attempt to add non-diverse defendants to defeat federal jurisdiction); N. H. Ins. Co. , 2000 
U.S. Dist. LEXIS 19502 (deciding tort, contract claims arising out of installation of ventilation 
system in hog breeding facility). 

17. 749 N.E.2d 484 (Ind. 2001). 

1 8. See id. at 486. The three insurers were Progressive Insurance Co., United Farm Bureau 
Insurance Co., and Foremost Insurance Co. See id. at 486 n. 1 . 

19. See id 2X^9^6. 

20. See id. 

21. See id at 491. 

22. 621 N.E.2d 1078 (Ind. 1993). 

23. 621 N.E.2d 1069 (Ind. \99'i\ modified on reh'g,6W^.E.ldU {\r\d. 1994). 

24. The court of appeals affirmed the two cases where summary judgment was granted and 
reversed the three where it had been denied. See Progressive Ins. Co. v. Gen. Motors Corp., 730 
N.E.2d 218 (Ind. Ct. App. 2000), vacated, 749 N.E.2d 484 (Ind. 2001). 

25. Progressive Ins. Co., 749 N.E.2d at 486. Although acknowledging the decisions in 
Martin Rispens and Reed, the court of appeals nevertheless seemed troubled by the proposition that 



1432 INDIANA LAW REVIEW [Vol. 35:1427 



issue was "a recurring subject of transfer petitions," the Indiana Supreme Court 
granted transfer and reaffirmed the position in Martin Rispens and Reed that 
there is no recovery under the [IPLA] where the claim is based on damage to the 
defective product itself.^^ 

The IPLA provides, in relevant part: 

[A] person who sells, leases, or otherwise puts into the stream of 
commerce any product in a defective condition unreasonably dangerous 
to any user or consumer or to the user's or consumer's property is 
subject to liability for physical harm caused by that product to the user 
or consumer or to the user's or consumer's property if: 

(1) that user or consumer is in the class of persons that the seller 
should reasonably foresee as being subject to the harm caused by the 
defective condition; 

(2) the seller is engaged in the business of selling the product; and 

(3) the product is expected to and does reach the user or consumer 
without substantial alteration in the condition in which the product is 
sold by the person sought to be held liable under this article.^^ 

"Physical harm" for purposes of the IPLA means "bodily injury, death, loss of 
services, and rights arising from any such injuries, as well as sudden, major 

damage to property The term does not include gradually evolving damage to 

property or economic losses from such damage."^* 

Justice Boehm's opinion in Progressive framed the issue as whether the 
IPLA "imposes liability when the 'harm' caused by a 'product' is damage to the 
product itself, and not personal injury or damage to other property."^^ The 
insurance companies argued that the term "property" includes the "product," 
pointing out that the user or consumer "presumably views the product that self- 
destructs as his or somebody else's property. "^° In response, the court wrote that 
"[ajlthough it is undoubtedly true that 'products' are ordinarily somebody's 
'property,' we think that 'property' as used in the [IPLA] does not embrace the 
product itself"^* 

In its earlier Reed decision, the Indiana Supreme Court concluded that the 
legislature already had determined that the plaintiffs only remedy lay in contract 



a consumer may not recover under the IPLA for damage caused by a defective product unless the 
product also damages other property or injures a person. See Progressive Ins. Co., 730 N.E.2d at 
220-2 1 . Because the court of appeals recognized its inability to "recast" the Martin Rispens and 
Reed opxmons, it was constrained to affirm the trial court's entry of summary judgment for GM in 
two of the cases and to reverse the denials of summary judgment in the other three. Id. at 221 . 

26. Progressive Ins. Co., 749 N.E.2d at 486. 

27. IND. CODE § 34-20-2-1 (1998). 

28. Id §34-6-2-105. 

29. Progressive Ins. Co., 749 N.E.2d at 487. 

30. Id 

31. Id 



2002] PRODUCT LIABILITY 1 43 3 



law "where the loss is purely economic,^^^^ and there is no damage to other 
property and no personal injury."^^ Also significant to the Progressive court was 
the fact that the General Assembly did not provide for recovery for injury to the 
product itself even though it amended the IPLA in 1995, well after the Indiana 
Supreme Court's rulings in Reed and Martin Rispens: 

[T]he legislature has not acted in the face of two opinions from this 
Court concluding that the legislature did not intend that damage to the 
product itself be recoverable under the [IPLA], That silence is not 
insignificant. 

Rejection of a tort claim for self-inflicted damage to a product is a 
choice the legislature is plainly free to make. It is grounded in the 
distinction between tort and contract law. It also involves a number of 
different policy considerations. As a general matter, when the product 
does not operate up to expectations and deprives its user of the benefit 
of the bargain, commercial law sets forth a comprehensive scheme 
governing the buyer's and seller's rights.^"* 

The insurance companies also argued that the fire damage was "sudden" and 
therefore covered by the IPLA, whereas the injury suffered in Martin Rispens 
(damage to a watermelon crop) developed over time.^^ The Progressive court 
rejected any distinction between the situation before it and the one before the 
court in Martin Rispens. The majority rejected the argument that "the issue turns 
on whether 'sudden, major' damage is incurred"^^ noting "[t]hat may be the case 
in many product malfunctions, including those involving no fire or other self- 
destructive result. It may be a necessary component of a products liability claim, 
but it is not itself sufficient."^^ 

Near the conclusion of the opinion, the Progressive court addressed 
additional policy arguments raised by the insurance companies, including that it 



32. Justice Boehm's majority opinion acknowledges that "'property damage' is distinct from 
'economic damage . . .'" from the point of view of the policyholder's insurance coverage. Id. at 
488. The opinion also notes: 

However, when addressing the validity vel non of a tort or products liability claim 
based on failure of a product, the self-destruction of the product through property 
damage, if caused by an external force, is indistinguishable in consequence from the 
product's simple failure to function. In both cases, the owner's loss is the value of the 
product. Thus, the United States Supreme Court and others refer to damage to the 
product itself as "economic loss" even though it may have a component of physical 
destruction. Viewing such a loss as purely "economic loss" and not personal or 
property damage loss is consistent with Indiana law in other contexts as well. 
Id. 

33. Id (citing Reed v. Cent. Soya Co., 621 N.E.2d 1069 (Ind. 1993)). 

34. /af. at489. 

35. See id. at 489-90. 

36. Id. at 490. 

37. Id. (footnote omitted). 



1434 INDIANA LAW REVIEW [Vol. 35:1427 



is simply unfair for them to bear the burden of the cost of compensating 
consumers for products that are defective. In response, the court observed that: 

[t]he insurers can rewrite their policy exclusions to deal with this if they 
choose. Presumably competitive forces compel them to cover these 
risks, but if some insurers seek to write the coverage out of their policies, 
this is their choice. To the extent insurance regulators insist on such 
coverage, the fairness of that position is not an issue for this Court. 
[0]ne efficient way for economic losses to be managed is through 
insurers because they have the ability to adjust their rates to reflect their 
loss experience .... The legislative policy to favor this means of 
addressing the problem is entirely rational. If it is to be changed, the 
General Assembly must make that determination.^^ 

Justice Rucker concurred in the result in a separate opinion in which Justice 
Dickson joined. The concurring opinion merely states that the doctrine of stare 
decisis compelled the outcome, citing Martin Rispens and Reed?*^ 

In the second case decided on June 6, 2^0\ , Fleetwood Enterprises, Inc. v. 
Progressive Northern Insurance Co. ,^^ the court disposed of essentially the same 
issue as in Progressive^ but in a case in which the product defect at issue 
allegedly damaged both the product itself and other property. The Fleetwood 
court held that personal injury and property damage to other property from a 
defective product are actionable under the IPLA, but that their presence does not 
create a claim for damage to the product itself."*' 

In Fleetwood, a, fire destroyed a motor home that Fleetwood manufactured 
and some of the owner's personal property inside the motor home. Progressive 
Insurance had issued a homeowner's policy covering the motor home and 
reimbursed the owner for the value of the motor home and the personal 
property ."^^ As subrogee. Progressive sued Fleetwood under a product liability 
theory to recover its losses. The trial court refused to give Fleetwood's tendered 
jury instruction stating that the only amount of damages it could consider was the 
loss of personal property. Instead, the trial court read the Indiana pattern jury 
instruction allowing for recovery of fair market value of destroyed property at the 
time of its destruction."^^ The jury awarded Progressive the full value of the 
motor home and the personal property plus prejudgment interest. "*"* 

The Indiana Supreme Court began its discussion by citing Progressive for the 
proposition that the IPLA does not provide recovery when the only damage is to 



38. M at 491 (citation omitted). 

39. See id. at 491-92 (Rucker, J., concurring). 

40. 749 N.E.2d 492 (Ind. 2001). 

41. Mat 493. 

42. The homeowner's insurance policy "paid the owner $1 62,500 for damages to the motor 
home and $6,587.89 for damages to other personal property in the home." Id. 

43. Id. The trial court chose to read Indiana Pattern Jury Instruction No. 1 1 .40. Id. 

44. The total judgment for Progressive was $2 1 5,969.24. Id. 



2002] PRODUCT LIABILITY 1 43 5 



the defective product itself."*^ The court acknowledged, however, that other 
decisions, including its /?ee<i decision, "have discussed that doctrine in language 
suggesting that damage to the product might be recoverable under a products 
liability theory if the defective product also causes personal injury or damage to 
other property.'"*^ Whether damage to the defective product itself is recoverable 
in product liability where it is accompanied by damage to other property or 
personal injury is a question about which the Fleetwood court found a paucity of 
authority. The Fleetwood court discussed only one relevant case, Dutsch v. Sea 
Ray Boats, Inc.,^^ an Oklahoma decision in which the court permitted recovery 
of damage to the defective product when accompanied by damage to other 
property even though Oklahoma is a state that does not permit recovery when the 
only damage is to the defective product itself. 

In the case before it, the Fleetwood coxxrX recognized that there was damage 
to "other" personal property in the motor home. There is no question that the 
IPLA contemplates recovery for such "other" personal property. "However," the 
court wrote, "we find no persuasive reason to sustain a products liability claim 
for damage to the product if it is accompanied by personal injury or damage to 
other property when there is no products liability claim if that other damage is 
absent.""^^ On that point, the Fleetwood court commented that the reason given 
in Dutsch for its contrary finding (avoidance of dual theory trials) did "not seem 
very forceful.""^^ The court, recognizing that a product liability claim in Indiana, 
unlike Oklahoma, is governed by statute and that there is no support in the IPLA 
for the result reached in Dutsch^ reasoned that 

[p]recedent from this Court has not regarded the "product" whose defect 
gives rise to liability as "property" whose damage gives rise to a claim 
under the [IPLA]. That result, apparently accepted by the legislature, 
dictates disallowance of the claim for damage to the defective product, 
whether or not accompanied by other damage. Thus, for the same 
reasons given in Progressive^ we hold that damage caused to other 
property by a defective product does not create a claim for damage to the 
product itself. We also think there are other persuasive reasons to reject 
the Dutsch rule. If recovery hinges on the presence of other damage, 
many cases will be launched into quests for some collateral damage. An 
oil stain on a garage floor from a failed engine or a burnt blade of grass 



45. Id. 

46. Id. In Reed, the court wrote that, "where the loss is solely economic in nature, as where 
the only claim of loss relates to the product's failure to live up to expectations, and in the absence 
of damage to other property or person, then such losses are more appropriately recovered by 
contract remedies." Reed v. Cent. Soya Co., 621 N.E.2d 1069, 1074-75 (Ind. 1993), modified on 
reh 'g, 644 N.E.2d 84 (Ind. 1994). 

47. 845P.2dl87(Okla. 1992). 

48. F/eerwoo^, 749 N.E.2d at 495. 

49. Id 



1436 INDIANA LAW REVIEW [Vol. 35:1427 



from a fire should not create a claim where none existed.^° 

Accordingly, the court determined that the trial court erred in failing to instruct 
the jury that damage to the product itself was not recoverable under the IPLA.^' 
As in Progressive, Justice Rucker concurred in the result in a separate 
opinion in which Justice Dickson joined. The concurring opinion states that the 
doctrine of stare decisis compelled the outcome, citing Martin Rispens and 
Reed.''' 

B. Bystanders 

The opinion of the court of appeals in Stegemoller v. ACandS, Inc.P raised 
an interesting definitional question and, in the process of answering it, confirmed 
that the IPLA has subsumed "common law" negligence in Indiana product 
liability cases. At issue in Stegemoller was whether the plaintiff qualified as a 
"user" or a "consumer" of an allegedly defective product and, if she did not, 
whether she could maintain a separate "common law" negligence claim, that was 
not within the IPLA's purview.^^ According to the Indiana Court of Appeals, the 
answer to both questions is "no."^^ The Indiana Supreme Court has since 
reversed the court of appeals' opinion.^^ This survey Article reviews the court 
of appeals decision. The opinion of the Indiana Supreme Court will presumably 
be treated in next year's survey Article. 

In Stegemoller^ Lee Stegemoller worked for several years as a union insulator 
for many different companies and, during the course of his career, worked with 
asbestos products.^^ He and his wife, Ramona, contended that some of the 
asbestos dust remained on his clothes when he left the various jobsites and that 



50. Id. (citation omitted). 

5 1 . See id. The court determined that the trial court's failure to read the appropriate jury 
instruction gave the jury "the mistaken impression that it should award full damages for the motor 
home ... if it determined that Fleetwood was liable." Id. The court ultimately affirmed the jury's 
award of damages in the amount of $6,587.89 for the personal property, but reversed the damages 
award in the amount of $162,500 for the motor home. See id. at 496. 

52. See id. (Rucker, J., concurring). The same issues were raised and addressed by the court 
of appeals in Hitachi Construction Machinery Co. v. AMAXCoal Co., 737 N.E.2d 460 (Ind. Ct. 
App. 2000). On August 28, 2001, the Indiana Supreme Court denied appellee's and cross- 
appellant's petition to transfer. See Hitachi Constr. Mach. Co. v. AMAX Coal Co., 761 N.E.2d 416 
(Ind. 2001). 

53. 749 N.E.2d 1216 (Ind. Ct. App.), trans, granted, 761 N.E.2d 423 (Ind. 2001 ), rev 'd, 767 
N.E.2d 974 (Ind. 2002). 

54. See id at 1218. 

55. See id at 1219-20. 

56. See Stegemoller v. ACandS, Inc., 761 N.E.2d 423 (Ind. 2001), rev'd, 767 N.E.2d 974 
(Ind. 2002); see also Camplin v. ACandS, Inc., 768 N.E.2d 428, 429 (Ind. 2002); Martin v. 
ACandS, 754 N.E.2d 52 (Ind. Ct. App. 2001), trans, granted, 2002 Ind. LEXIS 158 (Ind. Feb. 15, 
2002). 

57. See Stegemoller, 749 N.E.2d at 1217-18. 



2002] PRODUCT LIABILITY 1437 



she inhaled the dust that he brought home from his workplace.^* Ramona "was 
diagnosed with colon cancer, pulmonary fibrosis and pleural thickening," which 
she alleged was caused by inhalation of asbestos fibers, specifically "as the result 
of interacting with [her husband] and laundering his work uniforms."^^ 

The Stegemollers sued several entities believed to be responsible for 
Ramona's condition because they were either involved in the manufacture or sale 
of asbestos-containing products, are the successors-in-interest to such entities, or 
had some other alleged responsibility for her physical condition.^ Several of 
those entities filed motions to dismiss, asserting that Ramona was not a "user" 
or "consumer" as defined by the IPLA and therefore had no cause of action.^' 
The trial court agreed and dismissed her claims because she did not fall within 
the IPLA and, further, because there is no common law negligence claim for a 
user or consumer who sues a seller or a manufacturer for that which the IPLA 
contemplates and governs." 

The court of appeals affirmed the trial court's decision on both grounds.^^ 
With respect to the definitional matter, the salient question was whether Ramona 
qualified as a "user" or a "consumer" of an asbestos product under the IPLA. For 
purposes of application of the IPLA, "consumer" means: 

( 1 ) a purchaser; 

(2) any individual who uses or consumes the product; 

(3) any other person who, while acting for or on behalf of the injured 
party, was in possession and control of the product in question; or 

(4) any bystander injured by the product who would reasonably be 
expected to be in the vicinity of the product during its reasonably 
expected use.^ 

"User" means the same as "consumer."^^ 

Because the Stegemollers did not establish that Ramona either used, 
consumed, possessed, or controlled any of the asbestos products with which Lee 
worked, the only claim they could make was that Ramona was a "bystander."^^ 
In order to be considered a "bystander," however, the Stegemoller court 
recognized that Stegemollers had to prove that Ramona was a person reasonably 
expected to be in the vicinity of asbestos products during their use in an 



58. /^. at 1218. 

59. Id. 

60. Specifically, the Stegemollers argued that the asbestos material originated from the 
products attributable to those entities or from the premises for which they were responsible. Id. 
They also alleged that some of the defendants "participated in a conspiracy to conceal the known 
hazards of asbestos from the public." Id. 

61. Id 

62. Id 

63. /rf. at 1220. 

64. IND. Code §34-6-2-29 (1998). 

65. Id § 34-6-2-147. 

66. Stegemoller, 749 N.E.2d at 1219. 



1438 INDIANA LAW REVIEW [Vol. 35:1427 



"industrial setting."^^ She was not. Indeed, the Stegemollers never argued that 
Ramona was present at any of the sites where Lee came into contact with 
asbestos or that she was in the vicinity when the products were being used as 
industrial insulation products in an industrial setting.^* 

The Stegemoller court rejected the argument that Ramona may recover 
simply because the appellees reasonably should have foreseen that she would be 
in the vicinity of the asbestos-containing products during their expected use in 
an industrial setting.^^ According to the court, such an argument ignores the 
plain meaning of the IPLA because Ramona could not "meet the requirement that 
she was an individual who would have reasonably been expected to be in the 
vicinity of asbestos-containing insulation material meant for industrial purposes 
during the reasonably expected use of the product."^° 

Alternatively, the Stegemollers argued that Ramona should be able to 
maintain "a separate claim under the common law of negligence even though she 
may not qualify as a user, consumer or bystander" under the IPLA.^' The court 
rejected the argument that an independent common law negligence theory is 
viable in Indiana apart from the IPLA under the circumstances presented.^^ The 
Stegemoller court first pointed out that "the IPLA governs all actions brought to 
recover for personal injury caused by a product regardless of the substantive legal 
theory ."^^ The court next reviewed two important Indiana cases in this regard, 
Dague V. Piper Aircraft Corp?^ and Interstate Cold Storage, Inc. v. General 
Motors Corp. ''^ The Interstate decision makes it clear that the IPLA governs both 
strict liability and negligence claims.^^ 

C. The IPLA 's "Product " Requirement 

The IPLA governs all claims users or consumers file in Indiana against 
manufacturers and sellers for physical harm that a product causes. As used in 



67. Id. 

68. Id. 

69. Id 

70. Id 
1\. Id 

72. See id. at 1220. 

73. M at 1219 (citing IND. CODE § 34-20-1-1 (1998)). The court also pointed to Indiana 
Code section 34-6-2-1 1 5, which provides that "[pjroduct liability action" means one that is brought 
"(1) against a manufacturer or seller of a product; and (2) for or on account of physical harm; 
regardless of the substantive legal theory or theories upon which the action is brought." Id. (citing 
iND. Code § 34-6-2-1 15 (1998)). 

74. 418 N.E.2d 207 (Ind. 1981). The Dague court observed that "it seems clear the 
legislature intended that the act govern all product liability actions, whether the theory of liability 
is negligence or strict liability in tort .... The [IPLA] expressly applies to all product liability 
actions sounding in tort, including those based upon the theory of negligence . . . ." Id. at 212. 

75. 720 N.E.2d 727 (Ind. Ct. App. 1999). 

76. See Stegemoller, 749 N.E.2d at 1220 (citing Interstate, 720 N.E.2d at 730). 



2002] PRODUCT LIABILITY 1 439 



Indiana Code section 34-20-2-1, a "product" is "any item or good that is 
personalty at the time it is conveyed by the seller to another party. "^^ The term 
"does not apply to a transaction that, by its nature, involves wholly or 
predominately the sale of a service rather than a product."^* Thus, whether the 
sale of a "product" occurred can be a dispositive threshold question because only 
manufacturers or sellers who place "products" into the stream of commerce may 
be liable under the IPLA. Such was the case in R.R. Donnelley & Sons Co. v. 
North Texas Steel Co. ^^ an opinion that is significant to Indiana practitioners for 
a number of reasons. 

The R.R. Donnelley case involved the collapse of large metal storage racks 
at the R.R. Donnelley & Sons Co. ("RRD") facility in Warsaw, Indiana.^^ RRD 
purchased the racks from Associated Material Handling Industries, Inc. 
("Associated"). Associated purchased the racks from Frazier Industrial Co. 
("Frazier"). Frazier designed the racks and contracted with North Texas Steel 
Co. ("NTS") to manufacture the component parts.*' 

Frazier gave NTS written instructions on how to manufacture [the] parts. 
NTS received raw steel from the steel mill, and then cut, punched, 
welded, and painted the steel. Frazier instructed NTS to ship the 
component parts of the storage racks from its Texas plant to RRD's plant 
in Warsaw, . . . where the racks were . . . erected. Associated supervised 
the installation of the racks . . . .*^ 

RRD sued NTS, Associated, and Frazier, claiming more than $12 million in 
economic loss as a result of the collapsed racks and asserting product liability, 
breach of contract, and negligence claims.*^ Associated and Frazier settled with 
RRD before trial. The trial court "granted summary judgment to NTS on the 
breach of contract and negligence claims," leaving the parties to try only the 
product liability claim against NTS.*"* At trial, RRD argued that NTS defectively 
welded the rack's component parts.*^ "NTS countered that the welds were 
sufficient to hold the load" and "did not cause the collapse," and argued that 
Frazier defectively designed the system.*^ According to the court, the trial 



77. IND. Code §34-6-2-1 14(a) (1998). 

78. Id. §34-6-2-1 14(b). 

79. 752 N.E.2d 1 12 (Ind. Ct. App. 2001), trans, denied, 2002 Ind. LEXIS 433 (Feb. 22, 
2002). 

80. See R. R. Donnelley, 752 N.E.2d at 1 20. RRD used the racks to store catalogs. The racks 
collapsed on June 14, 1994, during a shift change. Id. Because the accident occurred before June 
30, 1995, the 1995 amendments to the IPLA did not apply. 

81. Id 

82. Id 

83. Id 

84. Id 

85. Id 

86. Id 



1 440 INDIANA LAW REVIEW [Vol . 3 5 : 1 427 



"amounted to a battle of the experts as to the cause of the accident."^^ The jury 
returned a defense verdict.** 

RRD appealed all claims, and NTS cross-appealed regarding the trial court's 
denial of its summary judgment on the product liability claim.*^ The court of 
appeals handled the product liability claim first. The "product liability" issue 
was whether "NTS created a product sufficient to invoke the [IPLA] by cutting, 
punching, welding and painting" the steel Frazier provided.^^ NTS argued that 
it merely provided labor and that the work it performed for Frazier "was 
predominately the sale of a service and, therefore, not subject" to the IPLA.^^ 
NTS supported its argument by pointing out that it "billed Frazier based on the 
number of production hours required, and that the purchase order reflected that 
NTS was billing for 'labor costs.'"^^ Relying on the court of appeals' 1998 
decision in Lenhardt Tool & Die Co. v. Lumpe^^ RRD argued that NTS was 
subject to liability under the IPLA.^'* 

The R.R. Donnelley court found Lenhardt "instructive" and cited it for the 
proposition that "where an entity reconditions, alters, or modifies a product or 
raw material to the extent that a new product has been introduced into the stream 
of commerce, the entity is a manufacturer and provider of products under the 
[IPLA]."^^ In the court's view, NTS "modified a raw material, steel, to produce 
the component parts of the RRD rack system" and, in so doing, transformed the 
steel into a "'new product' that [was] substantially different from the raw 
material used."^ Accordingly, the R.R. Donnelley court concluded that "NTS 
introduced a new product into the stream of commerce and provided products," 
not merely services to RRD.'^ 

Judge Tinder's unpublished federal order^* in New Hampshire Insurance Co. 



87. /^. at 120-21. 

88. Id. dii\2\ n.l. 

89. Id at 12). The trial court denied NTS's motion for summary judgment on the product 
liability issue and, at the same time, granted RRD's cross-motion for summary judgment on the 
same issue. Id. 

90. Id 

91. Id 

92. Id. NTS cited deposition testimony by a Frazier employee stating that, when Frazier 
subcontracts for its work, it buys labor from the contract fabricators. Id. 

93. 703 N.E.2d 1079 (Ind. Ct. App. 1998). 

94. R.R. Donnelley,752}^.E.2d Hi \2\-22. 

95. Id. at 122 (quoting Lenhardt, 703 N.E.2d at 1085). Lenhardt involved a plant that 
"would ship solid blocks of metal" to the defendant along "with drawings and specifications." Id. 
The defendant "would then machine the block of metal into molds per the designs found in the 
drawings and specifications." Id. 

96. Id 

97. Id. Accordingly, NTS was a "manufacturer" and "provider" of products under the IPLA, 
and the trial court "did not err in denying NTS's Motion for Summary Judgment" on that issue. Id. 

98. As noted earlier, unpublished federal orders have extremely limited precedential value. 
See supra note 16. Such decisions are included in this survey because they are instructive for 



■m 



2002] PRODUCT LIABILITY 1441 



V. Farmer Boy AG, Inc.^ also is instructive to practitioners on this issue. That 
order, among other things, reaffirms that a prima facie case under the IPLA 
requires that the party pursuing the claim show that a "product" is involved. '°° 
In that case, Clark Electric Heating and Cooling ("Clark") installed a custom 
ventilation system and related electrical materials at a hog breeding facility. Less 
than one year later, lightning struck the facility, disabled the ventilation system, 
and resulted in the loss of 1 88 pregnant sows. The insurance carrier, as subrogee 
for the owner of the facility, sued Clark, alleging that its improperly designed 
electrical system caused the ensuing property loss.'°' 

In a similar case, Sapp v. Morton Buildings, Inc.,^^^ the Seventh Circuit Court 
of Appeals, applying Indiana law, held that the remodeling of a bam into a stable 
was a transaction involving predominately the sale of a service rather than a 
product.^®^ In light of Sapp, Judge Tinder agreed that Clark's installation of a 
custom-fit electrical system involved "wholly or predominately the sale of a 
service rather than a product."'^^ It is also interesting to note that Clark argued 
that it was entitled to summary judgment on the breach of warranty claim to the 
extent the plaintiffs were pursuing a claim for breach of implied warranty in 
tortJ*^^ Judge Tinder agreed, concluding that "[t]he theory of breach of implied 
warranty in tori is a theory of strict liability in tort and, therefore, has been 
superseded by the theory of strict liability."'^ However, the plaintiff could 
proceed on a warranty theory so long as it was limited to a contract theory. '°^ 

D. Strict Liability in Inadequate Warning Cases 

Although it is not published in an official federal reporter and has very 
limited precedential value,'*^' Judge Young's decision in Eve v. Sandoz 
Pharmaceutical Corp.^^ illustrates why inadequate warning cases are 
challenging and confusing when both negligence and strict liability theories are 
used. Ellen and Matthew Eve claimed that Ellen suffered serious and disabling 
injuries after she was administered several doses of two pharmaceuticals in the 
days following the delivery of her second child. "° Sandoz Pharmaceutical Corp. 



practitioners despite the fact that they may not be binding. 

99. No. IP 98-003 1-C-T/G, 2000 U.S. Dist. LEXIS 19502 (S.D. Ind. Dec. 19, 2000). 

100. /</. at*7. 

101. Seeid.2X*3-*A. 

102. 973 F.2d 539 (7th Cir. 1992). 

103. /c/. at 541. 

104. N.H. Ins. Co., 2000 U.S. Dist. LEXIS 19502 at ♦7-*8 (citation omitted). 

105. 5geiV/. at*9-*10. 

106. Id.z!i*9. 

107. /</. at*10. 

1 08. See supra note 1 6. 

109. No. IP 98-1429-C-Y/S, 2001 U.S. Dist. LEXIS 4531 (S.D. Ind. Mar. 7, 2001). 

1 1 0. Ellen received seven oral doses of Methergine in the hospital in the three days following 
delivery. See id. at *4. Methergine is "used to reduce the size of the uterus and postpartum 



1442 INDIANA LAW REVIEW [Vol. 35: 1427 



(now known as Novartis Pharmaceutical Corp.) manufactured the drugs, both of 
which contained package inserts containing warnings, precautions, indications, 
instructions, and other material required and approved by the United States Food 
and Drug Administration.'*' 

Novartis requested partial summary judgment on many of the plaintiffs' 
claims, one of which was their strict liability claim. Novartis argued that, under 
Indiana law, product liability fai lure-to- warn cases are governed by negligence 
standards, regardless of the causes of action formally pled."^ Plaintiffs 
responded by arguing that, "although strict liability product claims and 
negligence claims involve similar analysis, that fact alone" should not be the 
basis for summary judgment."^ After reviewing the briefs and the law. Judge 
Young concluded that he found "no definitive answer" to the question presented 
and, accordingly, found "no clear reason" why Novartis' motion should be 
granted.""* 

With respect to the "law" reviewed in Eve, it appears to be limited to case 
law and, specifically, to Ortho Pharmaceutical Corp. v. Chapman. ^^^ After a 
brief review of the differences between fai lure-to- warn cases based on strict 
liabi lity and fai lure-to- warn cases based on negligence, the court determined that 
"'there is no practical difference between the two theories in [the fai lure-to- warn] 
context' because the ordinary negligence concept of duty-to-wam governs.""^ 
Having so stated. Judge Young recognized that the Chapman court also 
referenced an Oregon case that distinguished the two theories and summarized: 

[T]he main difference between the two theories is that with strict 
liability cases, the dangerousness of the drug is at issue whereas with 
negligence cases the seller's culpability is at issue, or as it has been 
described, "the distinction lay in 'the manner in which the decisional 
functions are distributed between the court and the jury.'" ... In other 
words, the difference is that with strict liability cases, "actual or 
constructive knowledge need not be proved. Otherwise the tests of 
culpability and dangerousness are identical.""^ 



hemorrhage." Id at *2. Ellen "received six doses of Parlodel in the hospital" and was sent home 
with more. Id. at *5. Parlodel is used to inhibit postpartum lactation. Id. at *2. 

111. Mat*2,*29-*31. 

112. See id. at *S9-*90. 

113. M at*90. 

114. Id. 

115. 388N.E.2d 541 (Ind. App. 1979). 

1 16. Eve, 2001 U.S. Dist. LEXIS 4531 at *90-*91 (quoting Chapman, 388 N.E.2d at 550) 
(alteration by court). 

1 1 7. Id. at *91-*92 (citations omitted) (discussing Chapman's citation to Phillips v. Kimwood 
Machine Co., 525 P.2d 1033 (Or. 1974)). The specific language Chapman borrowed from Phillips 
is as follows: 

In a strict liability case we are talking about the condition (dangerousness) of an article 
which is sold without any warning, while in negligence we are talking about the 



2002] PRODUCT LIABILITY 1443 



The C/za/7/wa« court also cited a California decision stating that strict liability had 
yet not been applied to a failure-to-wam pharmaceutical case in that state. "^ 

Judge Young's order briefly discusses Chapman's explanation about why, 
from a jury instruction standpoint, it is to a plaintiffs' advantage to bring both a 
strict liability and a negligence claim, stating that: 

At some points the Chapman court indicates it is to plaintiffs' 
benefit to pursue only one theory and in other points, the court indicates 
that it is to plaintiffs' benefit to pursue both theories. Thus, the most 
that can be taken from this opinion is that it may behoove a plaintiff to 
elect one of the two theories — strict liability failure to warn or 
negligence — ^yet the court does not mandate that proposition. ' '^ 

Judge Tinder's opinion, in Spangler v. Sears, Roebuck & Co.^^^ appears to 
admonish counsel against pursuing claims based on both strict liability and 
negligence in the same case: 

Cases in which recovery is sought under the alternative theories of strict 
liability and negligence are marked by necessity of confusing and 
inconsistent jury instructions regarding such matter as comparative fault 
and the open and obvious danger defense. The failure to elect one or the 
other of these theories can result in an unnecessarily lengthy trial, a 
confused and unconvinced jury and a disappointed plaintiff.'^' 

Following the lead of Judge Tinder in Spangler, Judge Young ultimately 
concluded in Eve that it might be in plaintiffs' best interest to elect to pursue only 
one theory when the case goes to trial, but that he simply could not grant 
Novartis' motion for summary judgment at the time it was presented. '^^ 

Because Judge Young's decision does not specifically address the point, 
readers must assume that the court and the parties acknowledged that the post- 
1995 statutory language was inapplicable because Eve's claim accrued in the 
days after Eve delivered her second child in October 1989, nearly six years 



reasonableness of the manufacturer's action in selling the article without a warning. The 
article can have a degree of dangerousness because of a lack of warning which the law 
of strict liability will not tolerate even though the actions of the seller were entirely 
reasonable in selling the article without a warning considering what he knew or should 
have known at the time he sold it. 
/•/zi7//p5,525P.2datl039. 

1 1 8. See Eve, 2001 U.S. Dist. LEXIS 453 1 at *92-*93. The California case cited in Chapman 
is Love V. Wolf, 38 Cal. Rptr. 183, 197-98 (Ct. App. 1964). 

1 19. Eve, 2001 U.S. Dist. LEXIS 4531 at *95. 

120. 752 F. Supp. 1437 (S.D. Ind. 1990), ajpdon reconsideration, 759 F. Supp. 1337 (S.D. 
Ind. 1991). 

121. Eve, 2001 U.S. Dist LEXIS 4531 at *95-*96 (quoting Spangler, 752 F. Supp. at 1441 
n.3). 

122. Mat*96. 



1444 INDIANA LAW REVIEW [Vol. 35:1427 



before the 1 995 amendments to the IPLA took effect. '^^ The General Assembly ' s 
1995 amendments to the IPLA, which eliminate strict liability as a theory of 
product liability recovery in warning defect and design defect cases, should clear 
up the confusion in cases such as Eve. Indiana Code section 34-20-2-2 now 
provides that strict liability remains only in cases in which the theory of liability 
is a manufacturing defect. 

II. Limitations AND Repose Issues 

A. Limitations Issues 

A claimant filing a tort-based product liability claim in Indiana must do so 
within two years after the cause of action "accrues."'^'* The IPLA does not define 
the meaning of "accrues," but Indiana courts have adopted a discovery rule for 
the accrual of tort-based damage claims caused by an allegedly defective 
product. '^^ Under the discovery rule a cause of action accrues when the claimant 
knew or should have discovered that he or she "suffered an injury or 
impingement, and that it was caused by the product or act of another."'^^ 

On March 16, 2001, the Indiana Supreme Court issued a much-anticipated 
decision in Degussa Corp. v. Mullens. ^^^ The decision confirms that the date 
upon which a product liability claim accrues may depend upon a subjective 
analysis of a patient's communications with his or her doctor about when a 
causal link between a disease and the defendant's product is established. Lenita 
Mullens was an employee of an animal feed company,'^* "whose responsibilities 



1 23. The 1995 amendments to the IPLA apply to causes of action that accrue after June 30, 
1995. 5'ee Pub. L. No. 278-1995, § 16, 1995 Ind Acts 405 1,4062. The important events triggering 
the claim in Chapman occurred between 1968 and 1970, several years before Indiana first enacted 
the IPLA in 1978. In deciding the issues before it, the Chapman court had to rely entirely upon the 
Restatement (Second) of Torts and other case law. As discussed above, the IPLA encompassed and 
governed both strict liability and negligence theories until 1983, when it was amended to govern 
only strict liability cases. In 1995, the legislature amended the IPLA to once again encompass and 
govern strict liability theories (for manufacturing defects) and negligence theories (for design defect 
and inadequate warnings). 

124. iND. Code § 34-20-3-1 (1998). 

125. For an excellent discussion of accrual issues, see Nelson A. Nettles, When Does a 
Product Liability Claim "Accrue"? When Is It "Filed"?, iND. LAW., May 9, 2001, at 23. 

126. Barnes v. A.H. Robins Co., 476 N.E.2d 84, 87-88 (Ind. 1985). 

127. 744 N.E.2d 407 (Ind. 2001). 

1 28. "Mullens began work for Grow Mix, a company formed by Richard Martin and Agritek 
Bio Ingredients, Inc. ... to produce feed additive products for Agritek." Id at 409. According to 
the court, there was some dispute about "whether Mullens was employed by Grow Mix or Gro- 
Tec," two separate companies "housed in the same building." Id. at 409 n. 1 . A significant portion 
of the opinion is related to Mullens' employment status in connection with application of the 
exclusive remedy for tort claims provided by the Indiana Worker's Compensation Act. The 
employment-related issues are not addressed in this survey. 



2002] PRODUCT LIABILITY 1445 



included the physical mixing of liquid and dry ingredients to make animal 
feeds."'^^ Three to four months after starting her job on September 4, 1990, 
"Mullens experienced a persistent cough that would diminish after she went 
home from work and on weekends.'"^*^ 

Within the next year or so, Mullens sought treatment for what the treating 
physicians determined was bronchitis.'^' After the antibiotics prescribed during 
her second trip to the emergency room did not clear up her condition, Mullens 
saw her general practitioner on March 17, 1992. During that visit, her general 
practitioner "told Mullens that it was possible that her coughing and breathing 
problems were work-related, but that there were several other potential 
causes.'"^^ A few days later, on March 26, 1992, Mullens saw a pulmonary 
specialist who repeated that it was possible that work-related chemical exposure 
"was triggering an injury caused by something else." A follow-up with the same 
specialist on June 11, 1992, revealed that Mullens' "airflow obstruction and its 
relationship to her work environment" was still "unclear."'" Mullens saw yet 
another pulmonary specialist in June 1992, who repeated what her general 
physician and her first specialist had said: "that chemical exposure at work might 
be related to her ailments but that other causes were possible."'^* 

On March 25, 1994, Mullens filed suit against her alleged employer and 
manufacturers, sellers, and suppliers of various chemical ingredients used in the 
animal feed. It was not until March 1 994 that Mullens and her attorney "received 
the first unequivocal statement from any doctor that her lung disease was caused 
by exposure to chemicals consistent with those" used at her workplace. '^^ The 
defendants joined in a motion for summary judgment, arguing that Mullens failed 
to assert her claims within the two-year statute of limitations.'^^ The trial court 



129. Mat 409. 

130. Id 

131. See id. Mullens was treated for bronchitis in March 1 991 and again in February 1 992. 



Id 



132. Id 

133. Id. While Mullens was working with the pulmonary specialist in April of 1992, 
representatives of Degussa Corporation "visited her at work and told her that their product could 
not be causing her medical problems." Id. Degussa produced "one of the ingredients used in 
making the feeds." Id. at 409 n.2. 

1 34. Id. at 409 (emphasis added). 

135. Mat 409-10. 

136. Agritek also filed a motion to dismiss Mullens' tort claims against it, claiming that 
Mullens was an employee and, therefore, "the Indiana Worker's Compensation Act provided her 
exclusive remedies for work-related injuries on the job." Id. at 410. The trial court's denial of 
Agritek's separate motion is also the subject of a large portion of the opinion. Interestingly, Justice 
Rucker did not participate because he had been part of the court of appeals panel that decided the 
case at that level. That turned out to be significant because the justices split two to two on the 
question of whether the Worker's Compensation Act precluded Agritek's tort liability to Mullens. 
Mat 409. As such, the trial court's denial of Agritek's motion to dismiss was affirmed. Id. As 
explained supra, this survey does not address the employment-related issues. See supra note 1 28. 



1446 INDIANA LAW REVIEW [Vol. 35:1427 



denied the motions, but the court of appeals reversed after concluding that 
Mullens failed to file her claims within the limitations period. '^^ The Indiana 
Supreme Court affirmed the trial court, concluding that Mullens' timely filed her 
claim because it accrued sometime after she began seeing the second specialist.'^* 
The Degussa court began its analysis by drawing a comparison between the 
facts before it and those presented in recent medical malpractice cases. The court 
initially agreed with the court of appeals that "a plaintiff need not know with 
certainty that malpractice caused his injury, to trigger the running of the statutory 
time period."'^^ According to the court, "[o]nce a plaintiffs doctor expressly 
informs the plaintiff that there is a 'reasonable possibility, if not a probability' 
that an injury was caused by an act or product, then the statute of limitations 
begins to run and the issue may become a matter of law."''*^ The Degussa court 
further explained that 

[wjhen a doctor so informs a potential plaintiff, the plaintiff is deemed 
to have sufficient information such that he or she should promptly seek 
"additional medical or legal advice needed to resolve any remaining 
uncertainty or confusion" regarding the cause of his or her injuries, and 
therefore be able to file a claim within two years of being informed of a 
reasonably possible or likely cause. An unexplained failure to seek 
additional information should not excuse a plaintiffs failure to file a 
claim within the statutorily defined time period. 

Although "events short of a doctor's diagnosis can provide a 
plaintiff with evidence of a reasonable possibility that another's" product 
caused his or her injuries, a plaintiffs mere suspicion or speculation that 
another's product caused the injuries is insufficient to trigger the 
statute.'^' 

In applying the foregoing standard to the case before it, the court recognized 
that although Mullens "might have suspected that a chemical from work was the 
cause of her problems when she first visited" her general practitioner on March 
1 7, 1 992, the best that the doctor could do was emphasize that there was "a range 
of potential causes."''*^ Indeed, telling a patient that a particular product or act 
is but one of several possible causes of an injury triggers a "complex of factually 
and legally relevant questions about how the physician conveyed the information 
to the patient and what emphasis the physician placed on the potentially tortious 
cause over other causes. "^''^ It was undoubtedly important to the court that 
Mullens "diligently followed" her doctor's recommendations, "undergoing 
further tests and attempting to gather information" about her condition and its 



1 37. Degussa, 744 N.E.2d at 4 1 0. 

138. /of. at 408-09. 

139. Mat 411. 

140. Id. (quoting Van Dusen v. Stotts, 712 N.E.2d 491, 499 (Ind. 1999)). 

141. M at 4 1 1 (citations omitted). 

142. Id. 

143. Id 



2002] PRODUCT LIABILITY 1 447 



possible cause or causes before filing suit.'*'* The Degussa court concluded that 

[o]n March 1 7, 1992, Mullens merely suspected that work products 
had something to do with her illness and [her general practitioner] said 
nothing to confirm, deny, or even strengthen her suspicions. In light of 
the ongoing medical consultation that Mullens undertook between March 
1 7, 1 992, and March 25, 1 994, the date Mullens filed her complaint, we 
do not believe that the statute was triggered as late as March, 1994, as 
argued by Mullens. However, we also see nothing in the record to 
indicate that on March 1 7, 1 992 (or even in the following eight days that 
would have been outside of the statutory period), Mullens's physicians 
had yet informed her that there was a reasonable possibility, if not 
probability, that her ailments were caused by work chemicals.''*^ 

In addition to the important holding in Degussa, practitioners should be 
aware that judges on the Indiana Court of Appeals continue to disagree about 
whether the filing of a summons after the expiration of the statute of limitations 
constitutes the timely filing of the lawsuit. In Ray-Hayes v. Heinamann,^*^ the 
parent and natural guardian of a child injured in an automobile accident sued 
both the driver of the vehicle and two entities allegedly involved in its 
manufacture and design. The plaintiff alleged that her daughter was injured 
while riding as a passenger in a 1991 Nissan Sentra driven by the defendant, 
Heinamann. She contended that Heinamann fell asleep at the wheel, resulting in 
a collision with a cement culvert wall."*^ The accident occurred on October 2 1 , 
1997. Plaintiff filed the initial complaint against Heinamann on July 22, 1998. 
On September 13, 1999, plaintiff amended her complaint to include two entities 
alleged to be responsible for a defective restraint system, Nissan North America, 
Inc. and Nissan Motor Company, Ltd. (the "Nissan defendants"). The 
summonses for those two defendants were not filed with the court until January 
21,2000.''*' 

The Nissan defendants filed a motion to dismiss because Hayes failed to file 
the summons relating to them until after the statute of limitations had expired (on 
October 21, 1999). Citing Fort Wayne International Airport v. Wilburn,^^'^ the 
trial court agreed and dismissed the Nissan defendants. The court of appeals 
reversed, pointing out that Rule 3 of the Indiana Rules of Trial Procedure 
provides that "[a] civil action is commenced by filing a complaint with the court 
or such equivalent pleading or document as may be specified by statute."'^^ 
Because the plaintiff in Ray-Hayes filed her complaint within the applicable 



144. Id. 

145. /^. at 41 1-12. 

1 46. 743 N.E.2d 777 (Ind. Ct. App. 2001 ), vacated by 760 N.E.2d 1 72 (Ind.), rev 'd on reh 'g, 
768 N.E.2d 899 (Ind. 2002). 

147. Id 

148. Id 2X111 -n, 

149. 723 N.E.2d 967 (Ind. Ct. App.), trans, denied, 735 N.E.2d 237 (Ind. 2000). 

1 50. Ray-Hayes, 743 N.E.2d at 779-80 (alteration by court). 



1448 INDIANA LAW REVIEW [Vol. 35:1427 



statutory time period governing accrual of product liability actions,'^^ the 
majority determined that she complied with Rule 3 and that the trial court erred 
in dismissing her cause of action.'" 

The majority opinion in Ray-Hayes is openly at odds with Wilburn, which 
earlier held that a plaintiff must tender the complaint, the summons, and the fee 
before the statute of limitations expires for the action to be deemed commenced. 
The dispute centers around the Indiana Supreme Court's decision in Boostrom 
V. Bach}^^ The Wilburn court overly relied upon Boostrom when it stated that 
"[t]he plaintiff, of course, controls the presentation of all the documents 
necessary to commencement of a suit: the complaint, the summons, and the 
fee. . . . [Plaintiff] thus filed two of the three items necessary to the 
commencement of her action."'^"* The Wilburn court interpreted the Boostrom 
footnote to mean that commencement of all actions requires the presentation of 
a complaint, summons, and a fee before the statute of limitations expires. '^^ The 
majority in Ray-Hayes disagreed, pointing out that Boostrom "involved a small 
claims action" and that it "should be limited ... to its facts."'^^ In addition, the 
Ray-Hayes court recognized that Rule 3 of the Indiana Rules of Trial Procedure 
contains no language requiring that the summons be filed before the statute of 
limitations expires. '^^ 

Judge Sullivan's dissent in Ray-Hayes crystallizes the discord because, in his 
view, it is not within the court of appeals' prerogative to overrule what he termed 
"a clear and unmistakable ruling of the Indiana Supreme Court."'^^ Judge 
Sullivan wrote that the court in Wilburn recognized that Boostrom was a small 
claims matter, but pointed out that the rules governing small claims actions 
consider the complaint or the notice of claim to be the summons, and, as such, 
the plaintiff in small claims litigation "is not required to tender a separate 
summons to the court for issuance by the Clerk."'^' 



151. "[A] product liability action must be commenced: ( 1 ) within two (2) years after the cause 
of action accrues . . . ." IND. Code § 34-20-3-(b) (1998). 

1 52. Ray-Hayes, 743 N. E.2d at 780. The majority in Ray-Hayes acknowledged that Rule 4(B) 
requires the filing of a summons contemporaneously with the filing of a complaint. Id. The 
majority also acknowledged that Ray-Hayes failed to comply with Rule 4(B)'s contemporaneous 
filing requirement. Id. However, the trial court had explicitly dismissed the case pursuant to the 
holding in Wilburn and the court of appeals' failure to tender the summonses within the limitations 
period was technically not a per se violation of Rules 3 and 4(B). See id. 

153. 622 N.E.2d 175 (Ind. 1993). 

1 54. 723 N.E.2d at 968 (emphasis and omission by court) (quoting Boostrom, 622 N.E.2d at 
177 n.2). 

155. See id. 

156. See Ray-Hayes,lAZ^.E.2d 2X119. 

157. Mat 779-80. 

158. Id. at 781 (Sullivan, J., dissenting). 

159. Id 



2002] PRODUCT LIABILITY 1 449 



Judge Sullivan wrote: 

Nevertheless, our Supreme Court clearly and unmistakably used 
terminology applicable to commencement of a suit under the Rules of 
Trial Procedure. In doing so, it left no doubt that in normal civil 
litigation the 'documents necessary to the commencement of a suit: the 
complaint, the summons, and the fee' must all be filed. '^° 

Judge Sullivan concluded that the plaintiff simply failed to commence suit 
without the tender of a summons to the court for issuance and that the statute of 
limitations barred plaintiffs' claim because it expired before they "commenced" 
suit.'^' 

On January 2, 2002, the court granted transfer of the Ray-Hayes case. The 
court of appeals' decision in Ray-Hayes was vacated, the trial court's dismissal 
affirmed, and the supreme court reversed itself on rehearing. '^^ 

B. Repose Issues 

Indiana Code section 34-20-3-1 provides, in relevant part, that "a product 
liability action must be commenced: (1) within two (2) years after the cause of 
action accrues; or (2) within ten ( 1 0) years after the delivery of the product to the 
initial user or consumer."'^^ Practitioners generally refer to the latter of those 
clauses as the product liability statute of repose. In last year's decision in 
Mcintosh V. Melroe Co. ,'^ the Indiana Supreme Court held that application of the 
statute of repose does not violate the Indiana Constitution.*" In the wake of that 
landmark pronouncement, several court of appeals opinions addressed statute of 
repose issues during the survey period. All of those opinions involved product 
liability cases alleging injury as the result of exposure to asbestos products. In 
January 2002, the Indiana Supreme Court heard oral argument in the case of 



160. Id. (quoting Boostrom v. Bach, 622 N.E.2d 175, 177 n.2 (Ind. 1993)) (emphasis by 
court). 

161. /fif. at 782 (Sullivan, J., dissenting). 

1 62. See 760 N.E.2d 1 72 (Ind.), rev 'd on reh 'g, 768 N.E.2d 899 (Ind. 2002). 

163. Ind. Code § 34-20-3- 1(b) (1998). The same section also provides that "if the cause of 
action accrues at least eight (8) years but less than ten ( 1 0) years after that initial delivery, the action 
may be commenced at any time within two (2) years after the cause of action accrues." Id. § 34-20- 
3-1 . As the statute makes clear, a claimant must bring a product liability action in Indiana within 
two years after it accrues, but in any event, not longer than ten years after the product is first 
delivered to the initial user or consumer. Such is true unless the action accrues in the ninth or tenth 
year after delivery, in which case the ftill two-year period is preserved, commencing on the date of 
accrual. Accordingly, the longest possible time period in which a claimant may have to file a 
product liability claim in Indiana is twelve years after delivery to the initial user or consumer, 
assuming accrual at some point in the twelve months immediately before the tenth anniversary of 
delivery. 

164. 729 N.E.2d 972 (Ind. 2000). 

165. Mat 973. 



1450 INDIANA LAW REVIEW [Vol. 35:1427 



Allied Signal Inc. v. Ott. Practitioners anticipate that the Ott decision will help 
resolve the repose issue once and for all. This survey reviews those court of 
appeals decisions handed down during the survey period. Next year's survey 
period promises some more definitive answers in this area. 

Product liability cases involving asbestos products are unique in several 
ways, not the least of which is the manner in which the legislature chose to 
address the applicable repose period. Indiana Code section 34-20-3-2 provides 
that "[a] product liability action that is based on: (1) property damage resulting 
from asbestos; or (2) personal injury, disability, disease, or death resulting from 
exposure to asbestos; must be commenced within two (2) years after the cause 
of action accrues."'^^ That exception applies, however, "only to product liability 
actions against: (1) persons who mined and sold commercial asbestos; and (2) 
funds that have, as a result of bankruptcy proceedings or to avoid bankruptcy 
proceedings, been created for the payment of asbestos related disease claims or 
asbestos related property damage claims."^^^ 

The crux of the continuing controversy is the phrase "persons who mined and 
sold commercial asbestos." Plaintiffs argue that the "and" should be read as an 
"or," while defendants contend that the statute creates an exception to the 
limitations and repose periods only for claims against those entities that both 
mined and so\d commercial asbestos.'^* There is also a debate about the intended 
meaning of the term "commercial asbestos." 

In the statute of repose context, courts have answered nearly all of the 
questions raised in favor of the plaintiffs. Black v. ACandS, Inc.^^^^ Poirier v. 
A.P. Green Services, Inc.,^^^ Fulkv. Allied Signal, Inc.,^^ Parks v. A. P. Green 



166. IND. Code § 34-20-3-2(a) (1998). The statute further provides that an action "accrues 
on the date when the injured person knows that the person has an asbestos related disease or injury" 
and that the "subsequent development of an additional asbestos related disease or injury ... is a 
separate cause of action." M §34-20-3-2(a)(2)-(b). 

167. Id. § 34-20-3-2(d). 

168. Three years ago, in Sears Roebuck & Co. v. Noppert, 705 N.E.2d 1065 (Ind. Ct. App. 
1999), the court of appeals addressed the applicability of the ten-year product liability statute of 
repose in the context of a claim for alleged exposure to asbestos. The Noppert court did so as part 
of a larger discussion about the timeliness of a motion to correct errors pursuant to Rule 60(B) of 
the Indiana Rules of Trial Procedure. Part of the Noppert court's analysis concluded that, "as a 
matter of law, the Nopperts [did] not have a meritorious defense" because the exception to the ten- 
year product liability statute of repose contained in Indiana Code section 34-20-3-2 applies only 
to claims against persons who mined and sold commercial asbestos and against funds described in 
that section. Id. at 1067-68 & n.6. With respect to the first category of defendants (miners and 
sellers), the court made it clear that the entities to which the statute applies are entities that both 
mined and sold commercial asbestos, stating that "while courts in Indiana have on occasion 
construed an 'and' in a statute to be an 'or,' we find that there is no ambiguity in this statute 
requiring such an interpretation." Id. at 1068. 

169. 752 N.E.2d 148 (Ind. Ct. App. 2001). 

170. 754 N.E.2d 1007 (Ind. Ct. App. 2001). 

171. 755N.E.2dll98(Ind.Ct. App. 2001). 



2002] PRODUCT LIABILITY 1 45 1 



Industries, Inc.}^^ and Allied Signal, Inc. v. Herring^^^ all involve workers or 
their estates who claimed injury or death as the result of working with or around 
asbestos-containing products. Those claimants sued sellers of asbestos- 
containing products, alleging damages caused by inhalation of asbestos dust. In 
each case, a majority of the judges held that the exception to the IPLA repose 
period, created by section 34-20-3-2, applies to entities that mine commercial 
asbestos, even if they do not sell it, and to entities that sell commercial asbestos, 
even if they do not mine it. The following language from the majority opinion 
in Black provides the underpinning for the rulings: 

Clearly, the intent of the legislature in enacting § 34-20-3-2 was at 
least in part to acknowledge the long latency period of asbestos-related 
injuries. Without the § 34-20-3-2 exception, the statute of limitations 
and statute of repose would be meaningless for the vast majority of 
people harmed by exposure to asbestos. Asbestos-related injuries would 
truly be a wrong without a remedy. Equally clear is that the legislature 
thus could not have intended by enacting § 34-20-3-2 to so severely limit 
the means of recovery. '^^ 

Judge Mathias authored a lengthy dissenting opinion in Black, concluding 
that the statute of repose on its face is unambiguous and clearly applies only to 
those companies who both mined and sold commercial asbestos, not all sellers 
of asbestos-containing products. '^^ In doing so. Judge Mathias found two recent 



172. 754 N.E.2d 1052 (Ind. Ct. App. 2001). 

173. 757 N.E.2d 1030 (Ind. Ct. App. 2001). 

1 74. 752 N.E.2d at 1 54. While the court of appeals was considering the Black case, groups 
interested in the issues raised in that and other related cases sought to address it in the General 
Assembly. House Bill 1757, first introduced in the Indiana House of Representatives on January 
1 7, 2001 , was designed to change the asbestos statute of repose in Indiana Code section 34-20-3-2. 
The proposed modifications sought to expand the potential pool of asbestos defendants by allowing 
claims against mere sellers of asbestos containing products as opposed to "persons who mined and 
sold commercial asbestos." The bill went to House committee where it passed unopposed and then 
passed the House of Representatives on March 6, 2001 . When members of the defense bar learned 
about the bill, they opposed it in the Senate. The proposed legislation failed in Senate committee. 

175. Id at 158 (Mathias, J., dissenting). Judge Mathias wrote: 

The two verbs "mined" and "sold" are conjoined by the coordinating conjunction 
"and." The use of "and" alone is enough to, and does, conjoin the verbs "mined" and 
"sold" into a single verb element within the statute's complex noun phrase. The 
conjoined verbs "mined and sold" modify "persons" through the relative pronoun 
"who," which specifies the action related to, and thereby helps to define, the "persons" 
that are the subject of the complex noun phrase. In light of its language and 
grammatical structure, I conclude that section two is unambiguous. 

In contrast, the majority alters the statutory language at issue by inserting the 
phrase "persons who" before the statute's existing language, "sold commercial 
asbestos." Only when words are considered to have been palpably omitted should the 
court add those words into the statute. I cannot reach that conclusion here. The 



1452 INDIANA LAW REVIEW [Vol. 35:1427 



court of appeals' opinions "instructive,"'^^ distinguished an opinion written by 
the Indiana Supreme Court, '^^ and asserted that it was not the court's prerogative 
to adjudicate legislative policy determinations.'^* In addition, Judg^ Mathias 
concluded that Indiana Code section 34-20-3-2 does not violate either article I, 
section 12 or article I, section 23 of the Indiana Constitution. '^^ 

Judge Mathias also dissented from the majority's opinions in Poirier and in 
Fulk for the same reasons stated in his dissent in Black}^^ 

The opinion in Jurich v. Garlock, Inc}^^ ultimately determines that the 
statute of repose is inapplicable but gets there in a peculiar way. Although the 



majority's grammatical interpretation is not the product of divination of "clearly 
contrary legislative intent" so as to properly fall within the extremely limited sanction 
of Dague v. Piper Aircraft Corp., 275 Ind. 520, 526, 418 N.E.2d 207, 21 1 (1981). 
/^. at 158-59 (citations omitted). 

1 76. Id. at 1 59. The two cases that Judge Mathias found "instructive'* were Novicki v. Rapid- 
American Corp., 1()1 N.E.2d 322 (Ind. Ct. App. 1999), and Sears Roebuck & Co. v. NopperU 705 
N.E.2d 1065 (Ind. Ct. App. 1999). The Noppert court determined that defendant "Sears was not 
a miner of asbestos" and that "the statutory exception to the statute of repose for asbestos-related 
claims applies only when the defendants are 'miners and stWexs of commercial asbestos.'" Black, 
752 N.E.2d at 159 (Mathias, J., dissenting) {(\\xoX\ng Noppert, 705 N.E.2d at 1068) (emphasis by 
court). Similarly, the Novicki court determined that the asbestos statute of repose applies "'only 
to cases in which the defendant both mined and sold commercial asbestos.'" Id. (quoting Novicki, 
707 N.E.2d at 324). Judge Mathias disagreed with the majority's characterization of the 
determinations as "dicta." Id. 

1 77. Judge Mathias distinguished Covalt v. Carey Canada. Inc. , 543 N.E.2d 382 (Ind. 1 989), 
because iND. Code § 33-1-1 .5-5.5 (1993) (the predecessor of IhfD. CODE § 34-20-3-2 (1998)) went 
into effect after the facts giving rise to the decision arose and because it was limited by its own 
terms "'to the precise factual pattern presented,' i.e., an action against an asbestos mining company 
filed prior to the enactment of [iND. CODE § 34-20-3-2]." Black, 752 N.E.2d at 160 (Mathias, J., 
dissenting). 

178. Id. On this point, Judge Mathias wrote: 

Neither the majority nor I can rightfully claim to fully know what the General Assembly 
"clearly" intended when it drafted, considered and enacted the statutory language at 
issue. However, I must reiterate that when a statute is unambiguous, "we may not 
ignore the clear language of a statute, regardless of our view as to its wisdom." The 
legislature has wide latitude in determining public policy, and we may not substitute our 
own policy judgment for that of the legislature. "To the contrary, it is the duty of the 
courts to interpret a statute as they find it, without reference to whether its provisions 
are wise or unwise, necessary or unnecessary, appropriate or inappropriate, or well or 
ill conceived." 
/<af. at 160-61 (citations omitted). 

179. /flf. at 161-62. 

180. See Fulk v. Allied Signal, Inc., 755 N.E.2d 1 198, 1207 (Ind. Ct. App. 2001) (Mathias, 
J., dissenting); Poirier v. A.P. Green Servs., Inc., 754 N.E.2d 1007, 1013 (Ind. Ct. App. 2001) 
(Mathias, J., dissenting). 

181. 759 N.E.2d 1066 (Ind. Ct. App. 2001). 



2002] PRODUCT LIABILITY 1453 



court recognized as "reasonable" the Black majority's conclusion, it disagreed 
that the defendants sold "commercial asbestos."'*^ The Jurich court determined 
that the defendants sold asbestos-containing products, not "commercial 
asbestos," which, in its view, "refers to either 'raw' or processed asbestos that is 
incorporated into other products."'^^ Accordingly, the Jurich court concluded 
that the General Assembly did not intend the exception to the IPLA's statute of 
repose to apply to defendants that merely sold asbestos-containing products.'^'* 
The Jurich court nevertheless concluded that the defendants could not use 
the IPLA's statute of repose to bar the claim because it violates article 1 , section 
12 of the Indiana Constitution as applied.'^^ The salient constitutional question 
was whether the Jurichs had a vested right in their claim J*^ The Jurich court 
determined that they did, although it recognized what it called the "axiomatic 
principle" that there is no vested or property right in any common law rule and 
that "the General Assembly can make substantial changes to the existing law 
without infringing on citizen rights."'*^ The "key distinction," according to the 
Jurich court, was that the Jurichs had a vested right, but "not in a rule of common 
law in the abstract."'** Rather, the claim was vested because Nicholas Jurich had 
been injured by the defendant's products "at a time when Indiana courts 
recognized common law product liability actions without an equivalent to the 
later-enacted [IJPLA's statute of repose and thus without reference to the length 
of time a product had been in the stream of commerce.'"*^ The court further 
explained: 

Mr. Jurich allegedly inhaled and was injured by asbestos dust from 
defendants' products for at least twenty-five years before the [I]PLA's 
effective date, from 1953 to 1978. During this period of protracted 
exposure to asbestos, there was no equivalent to the [IJPLA's statute of 
repose, which places a strict time limitation on bringing product liability 
claims based on a product's age that did not exist at common law. To 
the extent his twenty-five years of asbestos exposure before the [I]PLA's 
effective date contributed to Mr. Jurich's later development of 
mesothelioma, the statute of repose cannot constitutionally be used to 
bar claims stemming from that exposure. Otherwise, the Jurichs' valid 
claims under common law, which could not be known for many years, 
would be effectively retroactively barred by the [I]PLA and their vested 
right to a complete tort remedy would be taken away by the legislature. 
. . . Such a time limitation is an unreasonable legislative impediment 



182. /^. at 1069-71. 

183. Id. 1071. 

184. Id. 

185. /i/. at 1077. 

186. 5ee/^. at 1074-75. 

187. Id at 1075-76 (quoting Mcintosh v. Melroe Co., 729 N.E.2d 972, 978 (Ind. 2000)). 

188. /^. at 1076. 

189. Id 



1454 INDIANA LAW REVIEW [Vol. 35:1427 



on the bringing of an otherwise valid claim, due to the very long latency 
period of the development of asbestos-related diseases and the 
impossibility of the plaintiffs knowing whether such a disease is slowly 
progressing in his or her body. This represents a denial of justice that is 
inconsistent with Article I, Section 12 of the Indiana Constitution, as 
intQrpretQd by Martin V. Richey.^^ 

As of this writing, these issues are either before the Indiana Supreme Court 
or are pending a decision on transfer in Blacky Jurich, and Herring}^^ As noted 
earlier, on November 20, 2001, the Indiana Supreme Court in the case o^ Allied 
Signal, Inc. v. O//'^^ accepted jurisdiction of an Allen Superior Court 
interlocutory order denying motions for summary judgment after finding, like 
Jurich, that Indiana Code section 34-20-3-2 violates article I, sections 1 2 and 23, 
"as applied to asbestos cases only.'"^^ In light of the reasoning and implications 
of these decisions, as well as the discord among court of appeals judges, 
highlighted by Judge Mathias's dissents in Black, Poirier, and Fulk, the Indiana 
Supreme Court has agreed to consider the constitutionality of the asbestos statute 
of repose. For those same reasons, it seems likely that the Indiana Supreme 
Court will consider and resolve the statutory construction issue as well. 

Two unpublished federal decisions also may be helpful to Indiana 
practitioners who have cases that involve repose issues. In the first case. Miller 
V. Honeywell International Inc., ^'^^ a Bell UH-1 helicopter crashed on March 1, 
1 997, while on an Indiana National Guard training mission. The plaintiffs are the 
crew members aboard the helicopter as well as the estate of the pilot killed in the 
crash. Plaintiffs alleged that "the failure of the forward reduction gear assembly 



190. Wat 1076-77. 

191. In Blacky the court of appeals denied appellees joint petition for rehearing on December 
10, 2001, and on January 15, 2002, the case was transmitted on transfer to the Indiana Supreme 
Court. In Jurich, the petition to transfer was filed on November 1 9, 2001 . The court of appeals in 
Herring denied appellants' petition for rehearing on January 14, 2002, and thereafter appellants 
filed a petition to transfer on February 13, 2002. The same issues are pending transfer in yet 
another case, Harris v. A.C. & S., Inc., 766 N.E.28 383 (Ind. Ct. App. 2002), a case decided after 
the survey period. 

1 92. Supreme Court Cause Number 02S04-0 1 1 0-CV-599; Court of Appeals Cause Number 
02A04-0110-CV-462. 

193. Order at 1 (Nov. 20, 2001). The trial judge entered his order on July 20, 2001. Id 
Pursuant to Appellate Rule 14(B)(1), the trial court on September 26, 2001, certified its July 20 
order for interlocutory appeal. Id. In accordance with Appellate Rules 5(B) and 14(B)(2), Allied 
Signal filed a motion asking the court of appeals to accept the interlocutory appeal and a petition 
to have the Indiana Supreme Court assume immediate jurisdiction over the matter pursuant to 
Appellate Rule 56(A). Id. In the supreme court's order accepting jurisdiction, the court noted that 
had the order "been entered as a final judgment," there would have been jurisdiction pursuant to 
Appellate Rule 4(A)(1)(b). Id 

194. IP 98-1 742 C-M/S, 2001 U.S. Dist. LEXIS 5574, Prod. Liab. Rep. iCCH)% 16,095 (S.D. 
Ind. Mar. 7,2001). 



2002] PRODUCT LIABILITY 1455 



component of the helicopter's engine" caused the accident. '^^ That component 
contained "three planetary gears, ... all mounted in a carrier assembly unit."'^^ 
One of the planetary gears allegedly failed, "breaking into several pieces and 
causing the crash."'^^ 

Honeywell Corporation is the successor-in-interest to the company that 
originally built the engine in 1971 and sold it to the U.S. Army.'^* In 1977, the 
Army inspected the carrier assembly involved in the crash before placing it in 
inventory until 1990, when the Army installed it in the helicopter that crashed 
during a rebuild of the engine.'^ The Missouri National Guard overhauled the 
engine again in 1996, installing "new planetary gears and roller bearings."^^° 

Honeywell argued first that it could not be held liable for alleged design or 
manufacturing defects involving engine components that it manufactured before 
1987 because the IPLA precludes causes of action that accrue "more than ten 
years after a product is sold."^°' Honeywell also argued that it could not be held 
liable for "alleged defects in the planetary gears that were used as replacement 
parts within the ten year" repose period "because it neither manufactured nor 
sold those replacement gears to the Army."^°^ Plaintiffs countered that the IPLA 
does not bar their cause of action against the original manufacturer because the 
engine involved was rebuilt within ten years of the accident.^^' Plaintiffs also 
argued that "even if Honeywell was not the primary manufacturer of the 
replacement planetary gears, [it] was still responsible for providing, and then 
revising, the design specifications that were used in making them.''^^"* 

The Miller court agreed with Honeywell's first argument, holding that the 
IPLA bars all of plaintiffs' claims "that are based solely on alleged pre-sale 
defects in the engine or carrier assembly."^^^ The court disagreed with 
Honeywell's second argument, however, denying its motion for summary 
judgment regarding defects "in the replacement planetary gears or any alleged 
duty to warn regarding potential dangers to plaintiffs who use the replacement 
gears in the expected manner."^^^ 

The Miller decision is helpful to practitioners because it effectively 
delineates the difference between the repose and limitations periods. It also 
recognizes the two situations in which a manufacturer can be liable even beyond 
the ten years after delivery to the initial user or consumer: (1) when the 



195. 


Id. at *4. 


196. 


Id. at *4-*5. 


197. 


Id. at *5. 


198. 


Id 


199. 


Id at *6. 


200. 


Id at ♦6-*7. 


201. 


Id at *2. 


202. 


Id at *2-*3. 


203. 


Id at *3. 


204. 


Id 


205. 


M at*3-*4. 


206. 


Id at *4. 



1456 INDIANA LAW REVIEW [Vol. 35:1427 



manufacturer supplies replacement parts for the product and the replacement 
parts are the cause of the plaintiffs injury;^°^ and (2) when the manufacturer 
rebuilds the product, to the point of significantly extending the life of the product 
and rendering it in like-new condition.^^* 

In the case before the court, Honeywell sold the engine in question to the 
Army in 1971, which is when the statute of repose began to run. The facts did 
not establish that Honeywell rebuilt the engine and then reinjected it into the 
steam of commerce or that Honeywell exercised any significant control over the 
rebuilding process.^^^ Indeed, the Army rebuilt the engine and continued to use 
it for its own purposes. As such, the court rejected plaintiffs' argument that the 
original manufacturer should be held liable for defects in the rebuilt product and 
therefore "the statute of repose clock should begin to run again from the time the 
rebuilt product is delivered to its initial consumer."^'® Even if the service 
performed on the carrier assembly in 1977 constituted a rebuild and that 
Honeywell's predecessor "exercised significant control over the rebuilding 
process," the statute of repose would have expired by 1987.^" Thus, Honeywell 
could not be liable for pre-sale alleged defects in the engine or carrier assembly 
notwithstanding the 1990 and 1996 rebuilds. 

The planetary gears, however, were a different story because they were 
replacement parts.^'^ Because a replacement part is a manufactured product in 
its own right, Honeywell and its co-defendants could be held liable "to the extent 
that [they were] a manufacturer of the replacement planetary gears and the 
planetary gears themselves were defective."^^^ Because issues of fact remained 
concerning supply, exercise of control, inspection, and design specifications of 
the planetary gears, Judge McKinney denied summary judgment to the 
defendants on the statute of repose issue with respect to the planetary gears.^"* 

Judge McKinney was, nevertheless, "troubled by the possibility implicit in 
[its] discussion that a designer of a product could find itself faced with unending 
liability for its original design, contrary to the Indiana legislature's apparent 
intent."^'^ Judge McKinney continued: 



207. In such a situation, the ten-year statute of repose begins to run from the time the 
manufacturer supplied the parts. See Richardson v. Gallo Equip. Co., 990 F.2d 330, 331 (7th Cir. 
1993); Black v. Henry Pratt Co., 778 F.2d 1278, 1284 (7th Cir. 1985). 

208. In this situation, the statute of repose begins to run from the time the rebuilt product is 
delivered into the stream of commerce. Miller, 2001 U.S. Dist. LEXIS 5574 at *19 (citing 
Whitaker v. T.J. Snow Co., 953 F. Supp. 1034 (N.D. Ind. 1997), aJTcl, 151 F.3d 661 (7th Cir. 
1998); Denu v. W. Gear Corp., 581 F. Supp. 7 (S.D. Ind. 1983)). 

209. SeeiddLt*2U*22. 

210. Id. at *2\'*23. 

211. /^. at*24. 

212. Seeidai*21. 

213. Id 

214. Id 2it*3\'*35. 

215. Id at ♦30. 



2002] PRODUCT LIABILITY 1 457 



If, for example, a third party manufacturer bought the design rights, and 
then the original designer had nothing more to do with the manufacturing 
of the product from that day on, it would seem to defeat the whole point 
of the statute of repose for the original designer to continue to be held 
responsible indefinitely for actions by the third party over which it had 
no further control .... 

However, this case does not present the proper set of facts with 
which to test the issue under Indiana law. Although the precise 
contractual relations and obi igations between the Army, Precision Gear, 
and [Honeywell] are unclear to the Court, it is evident from the record 
that all three parties continued to cooperate in manufacturing and testing 
the safety of the planetary gears that Precision was producing. It is 
simply not the case that [Honeywell] provided the Revision AK 
blueprints in 1986 and then had nothing more to do with manufacturing 
the planetary gears.^'^ 

One final point unrelated to the repose issues should be made. According to 
the court, Honeywell's motion "encompasses liability for defects in design and 
manufacture, as well as liability for the duties to warn or to instruct about the 
proper use of these products."^'^ In discussing the elements of and requirements 
for a cause of action under the IPLA, the court recognized that a plaintiff 
maintains a "strict liability" action against a product manufacturer if the product 
contains a defective^'* condition unreasonably dangerous to the user or 



216. Id. at *30-*32. Judge McKinney added a few words about the interaction between the 
IPLA's statute of repose and the post-sale duty to warn. Although plaintiffs did not state it 
explicitly, according to Judge McKinney, plaintiffs seemed to be suggesting that the law should 
impose upon Honeywell a post-sale duty "to warn the Army of the problem" with the planetary 
gears and that "the statute of repose should begin to run from the moment" that Honeywell's 
predecessor "discovered what the problem was." Id. at *35. Judge McKinney wrote that the IPLA 
statute of repose "cannot be circumvented by asserting that the manufacturer continued to be 
negligent (indefinitely) for failing in its duty to warn of known dangers after the product was 
delivered to its initial user." Id. at *35-*36 (citing Dague v. Piper Aircraft Corp., 418 N.E.2d 207 
(Ind. 1981)). He continued: 

Therefore, the statute of repose for those defects began to run from the time that the 
defective product was delivered to the initial user. It follows that an inquiry into when 
[Honeywell] discovered the defect can have no relevance with regard to whether [its] 
exposure to liability for failure to warn has expired. All that matters is: when was the 
product, to which the duty to warn attached, first placed into the stream of commerce? 
Id at *36. 

217. /^. at*2. 

218. A product is considered defective under the IPLA if it contains physical flaws but also 
if the seller "fails to . . . give reasonable warnings of danger about the product; or give reasonably 
complete instructions on [its] proper use . . . ." Ind. Code § 34-20-4-2 (1998); accord Miller, 2001 
U.S. Dist. LEXIS 5574 at *15-*16. 



1458 INDIANA LAW REVIEW [Vol. 35:1427 



consumer.^'^ The court likewise recognized that before a manufacturer may be 
held "strictly liable," the user must have been "in the foreseeable class of persons 
who might be harmed, ... the product must have reached the user without 
substantial alteration," and "the defective condition must have been present in the 
product at the time it was conveyed to the initial user or consumer."^^^ Because 
the court's explanation is intended to address those situations in which a 
manufacturer may be "strictly liable" and because the case before it involved 
alleged defects in manufacturing, design, and by virtue of inadequate warnings, 
the court's summary of Indiana law needs to be augmented. As noted in previous 
sections, the IPLA provides that claimants may pursue a "strict liability" theory 
only in cases in which the theory of liability is a manufacturing defect.^^' Thus, 
the court's discussion nicely sets out the elements of proof in a product liability 
case, but practitioners should not interpret those elements as applying only in 
"strict liability" (i.e., manufacturing defect) cases. 

In the other federal case. Land v. Yamaha Motor Corp.^^^ the estate of a man 
who was killed in an explosion while trying to start a WaveRunner sued the 
manufacturer. The WaveRunner involved "was first sold or delivered to a 
consumer on July 28, 1987, more than ten years before the explosion," which 
occurred on June 25, 1998.^^^ After determining that Indiana law applied, the 
court held that the IPLA's ten-year statute of repose barred the claim. ^^"^ In doing 
so, the court rejected plaintiffs' attempt to circumvent the statute of repose by 
arguing that defendants breached duties to warn users of dangerous defects in the 
WaveRunner long after the original sale.^^^ Citing Mcintosh v. Melroe Co.^^^ 
Judge Hamilton also rejected plaintiffs' argument that the statute of repose 
violates article I, section 23 of the Indiana Constitution. ^^^ 

III. Toxic Exposure Summary Judgment Standard 

Indiana appellate courts handed down five important decisions addressing the 
summary judgment standard in cases in which product liability defendants argued 
that they were entitled to summary judgment because of a lack of evidence of 
exposure to their product. As was true with statute of repose issues, cases 
involving exposure to asbestos products are in the vanguard. 



219. /fif. at*14-*15. 

220. /f/. at*15. 

22 1 . See IhfD. CoDE § 34-20-2-2 ( 1 998). 

222. No. IP 00-220-C H/G, 2001 U.S. Dist. LEXIS 2732, Prod. Liab. Rep. (CCH) \ 16,045 
(S.D. Ind. Mar. 8, 2001), affd. 111 F.3d 514 (7th Cir. 2001). 

223. Mat*l. 

224. Id. at *2. 

225. Id. at*8-*10. 

226. 729 N.E.2d 972 (Ind. 2000). 

227. Land, 2001 U.S. Dist. LEXIS 2732 at ♦ 10-* 11. The Seventh Circuit affirmed Judge 
Hamilton in Land v. Yamaha Motor Corp., Ill F.3d 514 (7th Cir. 2001), which was decided 
beyond the survey period. 



2002] PRODUCT LIABILITY 1459 



In the asbestos context, claimants must properly identify the products to 
which they claim exposure in order to satisfy both the legal and factual causation 
requirements necessary for sustenance of their cases. Most practitioners refer to 
that threshold evidentiary process as "product identification." In this regard, 
resolution of a product identification summary judgment motion requires the 
court to determine whether there is, as a matter of law, sufficient product 
identification evidence for the trier of fact to sustain a finding of causation 
against a given defendant. 

On September 10, 2001, the Indiana Supreme Court addressed the product 
identification issue in Owens Corning Fiberglass Corp. v. Cobb}^^ Cobb, a 
former pipe fitter, sued more than thirty manufacturers or distributors of 
asbestos-containing products. As the case progressed toward trial, Cobb settled 
with some defendants and other defendants were otherwise dismissed.^^^ Cobb 
and Owens Coming Fiberglass Corp. ("OCF") filed cross-motions for summary 
judgment. Cobb's motion for summary judgment argued that OCF had not 
presented sufficient evidence to support its affirmative defenses, including its 
non-party defense.^^^ OCF's motion for summary judgment argued that "Cobb 
had failed 'to provide any evidence that he was exposed to asbestos-containing 
products manufactured or distributed' by [OCF]."^^' The trial court "denied 
without comment" OCF's motion for summary judgment.^^^ 

After suffering an adverse judgment at trial, OCF appealed the trial court's 
denial of summary judgment with respect to its product identification motion and 
the trial court's partial denial of its nonparty affirmative defense. The Indiana 
Court of Appeals reversed, remanding the case to the trial court with instructions 
to vacate the damage awards and to enter summary judgment in favor of OCF.^" 
On transfer, the Indiana Supreme Court affirmed the trial court's denial of OCF's 
motion for summary judgment.^^"* 

OCF argued that Cobb did not provide any evidence to prove that he had 
been exposed to asbestos-containing products that OCF manufactured or 
distributed. According to OCF, the record showed that "'Cobb could not identify 
a single occasion at [sic] which he had been exposed to [OCF's] product. '"^^^ 
Cobb testified in his deposition that he had been on several job sites where Kaylo 
(the brand name of a line of OCF's insulation products) was used while he 



228. 754 N.E.2cl 905 (Ind. 2001). 

229. Mat 907, 914. 

230. See id. at 907-08. 

231. /^. at 908. 

232. Id. 

233. See Owens Coming Fiberglass Corp. v. Cobb, 714 N.E.2d 295, 303-04 (Ind. Ct. App. 
1999), trans, granted, 735 N.E.2d 219 (Ind. 2000), and vacated by 754 N.E.2d 905 (Ind. 2001). 
The court of appeals' ruling rendered moot the nonparty defense issue. 

234. 754 N.E.2d at 916. On the nonparty issue, the court reversed the trial court's grant of 
Cobb's motion for summary judgment with respect to co-defendant Sid Harvey, Inc., and it reversed 
the trial court's judgment in favor of Cobb. Id. 

235. /c^. at 909. 



1460 



INDIANA LAW REVIEW 



[Vol. 35:1427 



worked for Indianapolis Public Schools.^^^ He recalled seeing the boxes of Kaylo 
at some of the sites, but he never personally installed the products and he could 
not recall at which job sites he saw the boxes or the Kaylo being installed.^^^ 
Although Cobb did not install asbestos products, he testified that "he worked 
near others who did."^^^ Cobb also testified that he occasionally removed and 
repaired pipe covering previously installed by other crews, but he did not know 
what company manufactured the pipe covering he removed and repaired.^^^ 

According to the Cobb court, such evidence was sufficient to establish a 
genuine issue of material fact with respect to whether OCF's asbestos caused 
Cobb's injuries: 

Cobb's testimony established that Cobb worked at multiple sites where 
asbestos products were used; Cobb worked near people installing pipe 
insulation containing asbestos; and boxes of Kaylo pipe insulation 
products were present on the work sites. We find it to be a reasonable 
inference, not conjecture or speculation, that the insulation from the 
Kaylo boxes was being installed at the worksites where it was present 
and not simply being stored there.^'*^ 

Before the Indiana Supreme Court decided Cobb in September, the court of 
appeals already had issued two "product identification" opinions and handed 
down a third one just days after the release of the opinion in Cobb. Those cases 



236. /fi^. at 909-10. 

237. Id. 

238. /t/. at 909. 

239. /^. at910&n.3. 

240. Id. at 910. Because the court determined that Cobb presented sufficient evidence to 
establish a genuine issue of material fact "as to exposure," the court did not address whether OCF 
demonstrated "the absence of any genuine issue of fact as to a determinative issue." Id. at 909. 
(citing Jarboe v. Landmark Cmty. Newspapers of Ind., Inc., 644 N.E.2d 1 1 8, 1 23 (Ind. 1 994)). The 
Jarboe citation is a significant occurrence because it will be interesting to see whether the Indiana 
Supreme Court is willing to modify the Jarboe standard in a toxic exposure case. Celotex Corp. 
V. Catrett, 477 U.S. 3 17 (1986), the case out of which the now-famous federal summary judgment 
standard arose, was an asbestos case. As many product liability practitioners well know, such cases 
nearly always hinge on a claimant's ability to properly identify or recall the allegedly-offending 
product or products that caused or contributed to his or her injuries. The Celotex standard is helpful 
in achieving some judicial control over that type of litigation. Indiana's disavowal of Celotex 
occurred in a more "traditional" setting. Indeed, Jarboe was a wrongful discharge case. Thus, in 
cases in which product identification is an essential, threshold issue, Indiana courts may need to 
examine the propriety and utility of continuing to adhere to 2i Jarboe summary judgment standard. 
Clearly, the Cobb court did not need to address the issue in light of its ultimate conclusion. 
Practitioners should, however, be attuned to the fact that the justices are cognizant that the threshold 
evidence necessary to shift the movant's initial burden is a question separate and apart from the 
sufficiency of the non-movant's evidence to prove legal and factual causation. 



2002] PRODUCT LIABILITY 1461 



are Black v. ACandS, Inc.,^^^ Poirier v. A. P. Green Services, Inc.^^^ and Parks v. 
A.P. Green Industries, Inc?^^ In all three instances, the courts did not have the 
benefit of the Cobb analysis. In all three instances, the court of appeals affirmed 
lower court decisions to grant summary judgment to defendants in cases 
presenting facts that are