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HB 1117 – Business Damages to Lessees in Eminent Domain Claims

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Rep. Shackleford has introduced HB 1117 which provides for an award of business damages to lessors in eminent domain cases. If I had to guess, this is a reaction to the case of City of Kokomo v. Estate of Audra Newton. The bill defines a “business owner” as someone who owns and operates a business that was established at least five years prior to the eminent domain action. (It does not necessarily require that the business be in operation at the location that is the subject of the action for that long prior.) It requires the governmental entity exercising the power of eminent domain to notify the business owner. It then gives the business owner six months to submit a claim for business damages along with supporting documentation for the claim. Within four months after that, the person exercising eminent domain has to respond or else the counter-offer will be deemed to be $0. In the condemnation proceedings, the business owner is entitled to prospective and consequential damages sustained as a result of the condemnation. The legislation also expands attorney’s fees. Current law says that if the judgment awarded is better than the last offer by the government, the property owner can get attorney’s fees of up to $25,000. The proposed legislation would mandate a percentage of the benefit received be added as attorney’s fees (e.g. 33% of benefits up to $250,000) plus a discretionary (I think) kicker of additional fees on top of that under traditional fee shifting rules.

In the Newton case, the real estate was owned by Audra Newton who passed away. Her son inherited the property. For many years the parcel (“Main Street parcel”) was used by Kokomo Glass along with an adjacent parcel not being taken by the city (“Union Street parcel”). In December 2016, the City of Kokomo filed a condemnation complaint. The appraisers came back with a $100,000 valuation for portion of the Main Street parcel and $43,000 in damages to the residue (in other words, damage to the property owner for property not taken but not as valuable because of the loss of the portion that was taken). The City deposited the $143,000 with the court and received an order from the court entitling it to take possession. Kokomo Glass was no longer able to operate in that location. The Estate filed an objection to that amount, claiming it wasn’t enough. The City increased its offer to $160,000 before trial, but the Estate still declined and the matter went to a jury. The jury awarded $100,000 for the Main Street parcel and $205,600 for damages to the Union Street parcel. The court also entered judgment for the maximum $25,000 in attorney fees. On appeal:

The City contends that the Estate presented no evidence at trial that it had sustained any damages in excess of the $100,000 in damages for the taking of the Main Street parcel. The City points out that each element of additional damages alleged at trial were damages to Kokomo Glass, which is not only a separate entity from the Estate but is not an owner of either parcel. The City maintains that the only damages it owes to the Estate is $100,000, which is the fair market value of the Main Street parcel. We must agree.

Kokomo Glass was an S Corporation owned by the son who paid rent to the mother and then, after her passing, to the Estate. It was never made part of the litigation. The Court of Appeals observed in a footnote that “The holder of an unexpired leasehold interest in land is entitled to just compensation under the Fifth Amendment, for the value of that interest when the land is taken by eminent domain. Tenants are thus entitled to compensation for an unexpired term of a lease terminated by condemnation.” If I had to guess — and this is only a guess — Kokomo Glass’s leasehold interest was probably fairly short. Year-to-year or month-to-month or something. So, while the glass company would want to argue that, basically, the government should be responsible for disruption to the business for years in the future; the government would be arguing that the company only had a remaining lease term of a few months or whatever — they aren’t required to pay for a speculative renewal of the lease. The “business damages” referenced in HB 1117 arguably go beyond the value of the unexpired portion of a lease.

My objection to this is of a general nature where I feel like it’s an attempt to maximize corporate rights while allowing people to continue using the corporate form to minimize liabilities. If the government is taking the real estate, the business is getting more extensive rights to the real estate that the government has to pay for. But, if a creditor was going after the business for unpaid debts, you can rest assured that the creditor can’t get at the underlying real estate. Totally separate entities. The business only has a few months left on its current lease, you see. Not worth very much at all!

HB 1040 – Doing away with the “American Rule” for Attorney’s Fees

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Rep. Leonard has introduced HB 1040 which essentially abolishes the “American Rule” for attorney’s fees. The “American Rule” is the default for civil litigation in the U.S. and basically establishes that, unless a law or contract specifies to the contrary, each party bears their own legal fees. This is distinct from the “English Rule” where the loser pays attorney fees. HB 1040 would provide that “in all civil actions, the court shall award attorney’s fees as part of the cost to the prevailing party.” (emphasis added.) On its face, this doesn’t sound like such a bad idea. It sounds fair. Why shouldn’t the person who was wrong have to pay the person who was not wrong for the expense of litigation? But, as a practical matter, it would discourage middle class people from bringing or defending against lawsuits. Rich people can afford the risk. Poor people have nothing to lose. Middle class people could be wiped out by a debatable point of law or an arbitrary jury. It would also tend to inhibit settlements beyond a certain point. If the legal fees get to a certain level, parties in a tenuous financial situation might not have any realistic option besides seeing it through to the bitter end and hope they win.

SJR 9 – Prohibiting Court Funding Mandates

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Sen. Boots has introduced Senate Joint Resolution 9 which would amend the Indiana Constitution to prohibit courts from mandating state or local government to expend money for the operation of any court in the State. I have mixed feelings about this one. In my experience judges have been pretty restrained about mandating that money be spent for court operations. But, I have seen  such mandates in cases where it didn’t look like the County in question was trying to target the court; rather the county council was working with limited resources and county departments in general had to make due with less. Courts are state entities funded by the counties where they operate, so they are different from the standard county department, but those situations still at least felt problematic.

On the other hand, one rationale for giving the courts mandate power to secure the operation of the courts is to preserve judicial independence. You don’t want the state or a county that has been subject to an adverse decision or has a matter pending before the court to try to leverage more favorable decisions by granting additional funds or withholding them. Putting the courts at the mercy of other entities for their funding could obviously be abused.

I don’t know if anyone anywhere does it this way, but my knee-jerk thought is that it might be good to give the Supreme Court taxing authority and have it take responsibility for funding the courts.

State of Indiana Claims Right to Take Local Government Property Without Compensation

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Our Price: $1.00
Cheap!

West Lafayette Community School Corporation has sued Governor Holcomb in his official capacity (Cause 79C01-1909-PL-115 in the Circuit Court of Tippecanoe County) to challenge a law that requires local school corporations to make unused buildings available to charter schools for a dollar before they can sell them, leave them vacant, or (the law is less clear) lease them for non-school purposes. West Lafayette has an old building, Happy Hollow, that’s on its last legs and the school corporation has long term plans to use the site, likely as an early education facility, once it gets a solid model put together and can line up the proper funding. In the meantime, it’s being leased to the City of West Lafayette as a temporary city hall for which the City is paying the School a healthy lease payment which, in turn, is being used to fund School operations.

Earlier this year, the General Assembly passed HB 1641 which added IC 20-26-7.1 featuring the $1 lease/purchase requirements. (If a school sells real estate in violation of this requirement, proceeds from the sale go to the State to fund charter school grants). In the case of Happy Hollow, the school corporation arguably has to forego a revenue stream from the City lease or put long term plans on hold if a charter school expresses interest and an intent to get a charter school up and running in the next two years.

So that’s the background. Being a strong proponent of local government and of public schools, it will come as no surprise to anyone that I take the school’s side on this one. But that’s not what prompted me to write this.

In defending the lawsuit, Governor Holcomb (by counsel) has made the breathtaking argument:

“[T]he Takings Clauses and Just Compensation do not apply to the State’s relationship with political subdivisions.”

“[M]unicipalities and subdivisions of the State cannot request just compensation even if there is taking[.]”

The State’s argument does not offer any limitation to this principle which is unique to schools. The State can take local government property and not pay for it. Full stop. The argument is that local government is merely a “subalternate instrumentality” of the State government — in other words, local government is just a tool of State government, so there’s really been no loss if the State commandeers local property for its own purposes.

There is an old United States Supreme Court case, Board of Commissioners of Tippecanoe County v. Lucas, 93 U.S. 108 (1876) where the Court said, “the legislature of a state possesses the power to direct a restitution to taxpayers of a county or other municipal corporation of property exacted from them by taxation, into whatever form the property may be changed, so long as it remains in possession of the municipality.” (emphasis added)  It’s true that the State has a lot of power to direct the affairs of local government. So, if the State said that the school had to sell vacant property at market value and, for example, use the proceeds to buy school buses for itself, the “taking” argument would be much weaker. Yes, the State is meddling in local affairs, but taxes paid by local residents are not being diverted to other entities.

But that’s not the argument the Governor is making. Local government property can be used for any purpose the State wants. It doesn’t matter if taxpayers supported a local tax rate precisely because decisions about the use of those taxes were being made by the city council or school board. This goes well beyond taking local school property to subsidize charters. In principle, it could be used to sell off the Wayne County Courthouse in Richmond and use it to subsidize toll road operations in northern Indiana. Or whatever. Like I said, the argument doesn’t offer any limiting principle to the State’s authority to seize local government property without paying for it.

Now, if I had to guess, this is probably the case of an attorney operating out of Indianapolis trying to grind out a win without having run the argument past any political types. I highly doubt that Gov. Holcomb knows anything about this argument even though it’s being made in his name. I suspect the political types would understand that an assertion by the State of unfettered control over local resources is unlikely to be well received outside of the State House.

Definition of “Nonparty” – a post ten years in the making

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According to my blog metrics, one of my most persistent source of visits is, somewhat oddly, a post I wrote in 2009 entitled “HB 1318 – Definition of ‘nonparty’ in civil litigation.” As I explained then:

I am a little worried that I do not immediately grasp the significance of Rep. Lawson’s proposed legislation in HB 1318 which changes the definition of “nonparty” in civil litigation. A “nonparty” usually refers to someone involved in an incident that caused damage to someone but who has not been named as a party in the lawsuit. Typically, a victim will sue a tortfeasor for damage caused by that person. The tortfeasor will respond, in part, by saying, “hey, it’s not my fault, it’s Nonparty’s fault.” The victim then has an opportunity (usually) to bring the nonparty into the litigation, but if the nonparty is not named as a party, the nonparty can still be an “empty chair” at trial to whom a jury can assign some or all of the fault. (The nonparty would not be liable to the victim for the jury’s decision in this regard, rather the damage attributable to the nonparty would be money the victim could not recover from the tortfeasor who was named as a defendant.)

In any case, Rep. Lawson’s legislation would change the definition of nonparty from

A person who caused or contributed to cause the alleged injury, death, or damage to property who has not been joined in the action as a defendant.

to

a person who may be liable to the claimant, in whole or in part, for the damage claimed, but who has not been joined in the action as a defendant. The term does not include an employer of a claimant.

 

Today, the Court of Appeals wrote an opinion in the case of NIPSCO v. Josh’s Lawn and Snow. Josh’s was doing some landscaping, didn’t call before they dug, and punctured the gas line. However, before that happened, another contractor, Ziese had done some grading that removed sixteen to eighteen inches of soil, leaving only about two inches above the gas line. When NIPSCO sued Josh’s for the damage done to the pipe (plus, inevitably — attorney’s fees), Josh’s named Ziese as a nonparty. NIPSCO objected that Ziese didn’t owe a legal duty to NIPSCO to leave any particular amount of soil above the pipe and, absent a legal duty, couldn’t be a nonparty to whom fault could be attributed. The trial court didn’t buy the argument and, while finding Josh’s at fault and liable to NIPSCO, found that Josh’s was only 10% at fault and Ziese was 90% at fault, leaving Josh’s only responsible for 10% of the damages.

On appeal, the Court of Appeals notes that NIPSCO “does not argue on appeal that the small claims court should have assessed different percentages of liability to Ziese and Josh’s.” So, basically, on appeal it was going to live and die by whether a person had to have a legal duty — and, therefore potential liability to the Plaintiff — before it could be named as a nonparty. This brings us back to Rep. Lawson’s proposed legislation in 2009. In determining that legal duty and potential liability were not necessary for a person to be named as a nonparty, the Court of Appeals relied on a change to the definition that took place back in 1995. Rep. Lawson was essentially trying to revert the definition back to its old definition. The Court of Appeals explained:

[T]he small claims court was not required to find that Ziese had a legal duty of care toward NIPSCO in order to attribute  fault to Ziese. In Bulldog Battery Corporation v. Pica Investments, Inc., 736 N.E.2d 333, 336 (Ind. Ct. App. 2000), property owner Pica Investments sued neighbor Bulldog Battery for negligence when Bulldog’s property improvements led to increased runoff and flooding of Pica’s property. Bulldog asserted a nonparty defense that the negligent designs of its architect contributed to Pica’s damages. Id. at 337. Pica argued that Bulldog could not name its architect as a nonparty defendant because, pursuant to caselaw, an architect owed no duty to third parties such as Pica absent contractual privity or a design that was so negligent as to create an imminently dangerous condition. Id. In reversing the trial court’s grant of summary judgment to Pica on Bulldog’s nonparty defense, the court noted that until 1995, the comparative fault statute defined a nonparty as “‘a person who is, or may be[,] liable to the claimant in part or in whole for the damages claimed but who has not been joined in the action as a defendant by the claimant.” Id. (quoting I.C. § 34-4-33-2(a), emphasis in opinion). The statute was subsequently amended to define a nonparty as “‘a person who caused or contributed to cause the alleged injury, death, or damage to property but who has not been joined in the action as a defendant.’” Id. at 338 (quoting I.C. § 34-6-2-88, emphasis in opinion). Drawing on the change of statutory definition, the court rejected Pica’s argument that “‘[i]n naming a person as a nonparty, it is implicit that some legal duty must exist as to the plaintiff.’” Id. The court found that the amendment to the definition of ‘nonparty’ specifically excluded the concept of liability to focus instead on causation. Id. Thus, the court concluded that “whether or not the nonparty may be liable to the plaintiff is no longer a consideration.” Id.

The upshot is that a person who is at fault but who is, nevertheless, not potentially liable to the plaintiff can be named as a nonparty, relieving the named defendant of liability for those damages that were not the defendant’s fault even if it means that the plaintiff might not obtain a full recovery.

 

SBT and ProPublica Piece on Convictions of Chris Parish and Keith Cooper

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Christian Sheckler, writing for the South Bend Tribune, and Ken Armstrong, writing for ProPublica have a long, well-written piece on the investigations and subsequent convictions of Chris Parish and Keith Cooper in Elkhart County. If you enjoyed Making a Murderer, you’ll probably enjoy this article. The convictions arose out of an attempt to murder Michael Kershner in 1996. Cooper’s conviction was the subject of a pardon by Governor Holcomb in early 2017. Prior to that, it had become an election controversy when Governor Pence dragged his feet on making a decision about the pardon because he was running for Vice-President. Attorney General Hill also figured in the process since he was the Elkhart County Prosecutor, running for the AG position during the 2016 election. He had also run the Prosecutor’s office when it resisted some of Parish and Cooper’s efforts to have the conviction overturned.

Both Parish and Cooper were convicted as a result of a poor investigative process. Only after the convictions were they able to get reviewing courts to give the defects in the process the attention they deserved. That resulted in Cooper getting a deal that left the conviction in place but let him out of jail for time-served and, consequently, pursuing the pardon process to clear the conviction. Parish’s process was a little different. While Cooper had taken a deal for time-served, Parish took a chance after the initial conviction was overturned. He didn’t take a deal at that point — meaning he could have been prosecuted again. However, prosecutor’s declined to re-open the case against him at that point. He then was able to sue the City of Elkhart for the wrongdoing of its police officers and obtain a $4.9 million settlement.

Anyway, the story is worth a read. It’s deeply investigated and well-written. My only critique — and I may be off base here — is that the story has a “just so” feel to it; where the bad guys are a little too bad and the good guys are a little too good. Life’s messy, and I didn’t detect much of that messiness here – it’s pretty much bad cops and callous government officials railroading a couple of innocent guys. Which is maybe a minor critique. It seems pretty clear that Parish and Cooper had their lives upended and served significant amounts of time in jail for a crime they didn’t commit. This article does a solid job of explaining how that came to pass.

 

Indiana Supreme Court on maintaining both respondeat superior and negligent hiring actions

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Indiana Supreme Court on respondeat superior and negligent hiring

Respondeat superior or negligent hiring? Why not both?

On October 31, 2017, the Indiana Supreme Court decided the case of Sedam v. 2JR Pizza Enterprises. The background was that a Pizza Hut driver negligently caused the death of a person operating the scooter. The legal background was that the estate of the scooter operator wanted to hold the employer liable for the death. It sought to do so under two legal theories: 1) respondeat superior and 2) negligent hiring. Respondeat superior stands for the proposition that, if an employee negligently injures someone while acting in the course and scope of the employee’s employment, then the employer is liable for the damages caused. I have less experience with negligent hiring but, generally, the idea is that the employer isn’t being held vicariously responsible for the employee’s negligence but,  instead, the employer is being held responsible for its own negligence in employing the person. This employee was a bad or reckless person who hurt someone because the employer put the employee in a position where the employee had an opportunity to do so.

The challenge here was to case law holding that, if an employer admits that the employee was acting in the scope and course of his or her employment, the victim cannot pursue both a respondeat superior and negligent hiring action. There is one injury and, if the employee was negligent, the employer is vicariously liable for it. Pursuing a negligent hiring action adds nothing to it.

So, if the victim is going to collect on the injury anyway, why pursue a negligent hiring claim? Or at least why do you care so much that you go to the Supreme Court seeking an opportunity? Or, from the other angle, if you’re the employer and you are going to be held liable anyway, why do you care which route the victim comes from?

I’m not involved with this case, so I can only speculate. But I think it has to do with the amount of damages that are ultimately awarded. The legal fiction is that compensatory (as opposed to punitive) damages are determined based solely on the injury sustained. The character or wealth of the person who caused the injury should have nothing to do with it. In this case, there was a death, and the damages should be based on that. The legal presumption is that it shouldn’t matter whether the person who caused the death was a sinner or a saint, a billionaire or a pauper. The injury is the same and the jury should calculate the damages the same regardless. (Plaintiff’s ability to collect on the damages is a separate matter.) Lawyers don’t really know what any given jury is going to do. But, the common wisdom of lawyers seems to be that, even with the same set of damages, a jury that’s mad at the tortfeasor will put a higher price tag on the damages than a jury that isn’t particularly mad at the tortfeasor.

In this case, if the jury mostly just hears that the employee worked for a pizza place and got into an accident, the damages awarded will probably be lower than if the jury hears about what a bad person the driver was and maybe hear some big numbers having to do with the profits Pizza Hut makes by reason of its cut-rate hiring practices. From reading the case, I believe the Plaintiff could pursue just the negligent hiring claim without the respondeat superior claim. But negligent hiring is tougher to prove, so I assume most plaintiffs will stick with the bird in the hand they have with respondeat superior.

Indiana’s Mixed Feelings on Syringe Exchanges and the Opioid Epidemic

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Yesterday, I went to a symposium at the IU-McKinney School of Law in Indianapolis. It was billed as State Governments’ Role in Bridging the Urban/Rural Divide. The symposium wasn’t that, exactly. I heard a lot about concerns in rural Indiana, not so much about concerns in urban Indiana, little about getting urban to care about rural concerns, and nothing about getting rural to care about urban concerns.

But it was good nonetheless. The first part was about limited access to justice in rural areas — mainly there just aren’t as many lawyers per person. There was a bit about the ethical challenges rural attorneys face because conflicts are easy to come by with so few people in the area. The second major part was about gerrymandering. And the third main part was a presentation by Jim McClelland, the executive director of Indiana’s Drug Treatment, Prevention, and Enforcement division. (I’ve seen him referred to as Indiana’s Drug Czar.)

He is a supporter of Indiana’s syringe exchange programs. Saying he was initially opposed or uncertain about such programs, he said in the presentation that, among other things, his daughter’s experience as a nurse helped persuade him.  This is contrary to Indiana’s Attorney General, Curtis Hill, who has been critical of such programs. From what I’ve seen anecdotally, these two are perhaps representative of the divide generally between law enforcement officials who tend to be opposed and policy-makers with more generalized responsibilities who tend to be cautiously in favor.

Opposition to the programs make intuitive sense. If you’re fighting arson, you don’t hand out cans of gasoline and matches. There’s a concern that if you give addicts needles and other paraphernalia necessary to take the opioid drugs, you’re just encouraging them, perhaps encouraging new users, and maybe making the problem worse. To those who view this as more of a health crisis than a criminal epidemic, the critique looks similar to opposition to handing out condoms for pregnancy and disease prevention on the grounds that it will promote sex.

Indiana General Assembly needle exchange program

Needles are cheaper than livers.

McClelland says that the evidence suggests that handing out needles doesn’t increase drug use. The primary utility is in reducing transmission of HIV and Hepatitis C which are hugely expensive to treat. I think he cited $400,000 per person for HIV. I don’t think he gave a number for Hepatitis C, but it isn’t cheap. He also said that, of course, needles alone aren’t a solution for reducing addiction. The utility of syringe exchanges in terms of trying to reduce the addiction problem is that it serves as a touch point with the system where you can try to get the addicts connected with medicine and counseling. McClelland gave some statistics about medicine without counseling and counseling without medicine. Neither was very good. Worse still was just trying to stop on your own. Access to the medications and qualified professionals is not very good. As he put it, “it’s easier to get high than to get help.”

There was a person in the audience who asked a question which he put in a more circumspect manner but basically suggested that, when addiction was seen as mostly a problem among minorities, it was not viewed as a health concern, but now that addiction is a problem among rural white communities, it’s viewed as less a criminal concern and more a health concern. McClelland declined to be drawn into that question, viewing his job as being to do what he can to help Indiana to mitigate this problem regardless of whether its policy approaches have been right or wrong in the past.

My exposure to Mr. McClelland was listening to him for 45 minutes, so this is not a hugely well-informed opinion, but I do get the distinct impression that Gov. Holcomb has made a good appointment for this job.

Judge Busch to resign from Tippecanoe Circuit Court at the end of the year

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Dave Bangert, writing for the Lafayette Journal & Courier, has an article on Judge Tom Busch’s announcement that he is going to be retiring as judge for the Circuit Court of Tippecanoe County. I learned a lot of what I know about practicing law from Tom. He was a partner with the firm when I signed on as an associate. I had just become partner in January of 2002 when a position on the bench opened up upon the death of Judge Heid. I still remember eating lunch at the Triple XXX Family Restaurant when Tom told us he was going to seek the position. That moment was significant for me because I felt like it’s when the training wheels came off for me as an attorney. Our other partner, Dave Luhman, was still a strong presence at the firm, but I had mostly been doing collections and work for Tom while I was an associate. When Tom left, a lot of his case load went to me directly and I didn’t have him to lean on anymore. It was scary, but it worked out.

Tom has done a great job as a judge over the years. He was a judge you wanted looking at your case, particularly if you had a novel argument or a non-routine matter to look at. He has a great curiosity about the law. (As an associate, that could be frustrating when he sent you back for the nth revision of a brief, but it’s a good quality in a lawyer or a judge!) Back in 2014, he left his position as judge of Superior Court 2 to run for the Circuit Court position which he won. When he retires at the end of the year, Governor Holcomb will fill the position. There are three years left on Judge Busch’s term, but I think there will now be an election in November which will result in a full six year term beginning January 2019. So, Governor Holcomb’s replacement will serve for a year under the governor’s appointment.

And Judge Busch will get to see more of his family which is truly far flung at this point. He’s earned it!

The Legislative Services Agency Turns 50

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The Indiana Law Blog has a post noting that LSA is having a celebration of its 50th anniversary tomorrow (March 7). Marcia was there at its founding in 1967 (and worked for its predecessor). Its creation came during a time of legislative reform generally. The agency is nonpartisan and is responsible for drafting legislation, calculating the fiscal impact of proposed legislation, and providing legislators — to the extent possible — with unbiased advice. Legislators obviously have partisan interests to serve as well, and for this, they have caucus attorneys who can and sometimes do draft legislation. But, for the most part, the bulk of the legislation is drafted by LSA. I’m biased, but I’d put the clarity and functionality of our Indiana Code up against  any state’s, and it’s far more usable and understandable than the United States Code. (As an LSA staffer, it was not my job to offer policy advice. So, I won’t – at this point – comment on the merit of the policies reflected in that Code.)

I was only there from 1996 – 1999, but the agency had a significant impact on me. Legislative drafting exercises some different muscles than the more narrative brief writing or drafting contracts (which is, stylistically,  maybe a hybrid between briefs and legislation). It forces a precision that can be helpful. (In many ways, I think legislative drafting and computer programming have a lot in common.) It gave me an interest and an insight into the legislative process which (in combination with my unpursued dream of being a newspaper columnist) morphed into this blog. And, it gave me some marketable skills that I was able to parlay into the job I have now.

Most of all, I was fortunate to work with some really great people. (My boss was kind enough to arrange to have himself appointed judge for a day so he could be the officiant when Amy and I got married.) I think the list of people who worked there when I was there is getting pretty small, but I think the culture of quiet diligence and professionalism still endures, and that’s a tremendous asset to the State.

So, from DI #93, Happy 50th Birthday to LSA!