In May, the Indiana Supreme Court issued six civil opinions and granted transfer in two civil appeals. The Indiana Court of Appeals issued twenty-three published civil opinions, seven of which are briefly summarized in this column. The full text of each decision is available via Casemaker at www.inbar.org.
INDIANA SUPREME COURT
Dispute between Internet marketing firm and company for website design is not for "goods and services" pursuant to Indiana's Article 2 of the Uniform Commercial Code and, under the facts of this case, the company could not sustain conversion claim for website's removal
The Indiana Supreme Court tackled numerous issues of first impression to resolve a dispute between a company and an Internet marketing firm that created and hosted the company's website. Conwell v. Gray Loon Outdoor Mktg. Group, Inc., 906 N.E.2d 805 (Ind. 2009). Although the parties fulfilled their obligations under their written agreement, the company later refused to pay for hosting fees and additional changes it requested to the website. The marketing firm sued the company for payment, and the company counterclaimed that the marketing firm committed conversion by taking down the original website for which the company had already paid.
The Supreme Court first addressed whether Article 2 of Indiana's Uniform Commercial Code ("U.C.C.") or common law principles of contract law governed the parties' transaction. By applying the "predominant thrust" test to determine whether the transaction involved the transfer of goods or the performance of service, the Court held that "[a] website created under arrangements calling for the designer to fashion, program, and host its operations on the designer's server is neither tangible nor moveable in the conventional sense." Id. at 812. Because agreement of the parties "contemplated a custom design for a single customer and an ongoing hosting relationship[,]" the U.C.C. did not apply. Id.
The Court examined the marketing firm's claim for payment under common law principles and determined that although the website modifications were not contemplated by the parties' original agreement, the company requested the changes without inquiring into the amount the changes would cost. The marketing firm's invoice was the only evidence submitted to the trial court regarding the reasonableness of the charges, and there was evidence that a representative of the company accepted the price after receiving the invoice. Because there was no evidence that the marketing firm "participated in an unconscionable effort to 'strong arm' [the company] into paying an unreasonable fee," the Court affirmed the trial court's decision to enforce the parties' agreement, even though the marketing firm had not provided a cost estimate. Id. at 813.
Turning to the company's counterclaim that the marketing firm committed conversion by taking down the website for which the company paid, the Court analyzed how copyright law affected the legal status of the website. For the company's counterclaim to succeed, the website either had to be a "work made for hire" where the company was the original owner or the marketing firm had to have transferred ownership of the website to the company. The Court determined that the website was not a work made for hire because the marketing firm was an independent contractor, not the company's employee. The Court also concluded that language in the marketing firm's proposal that the company inherently owned the product was insufficient to transfer ownership of the website from the marketing firm to the company. The marketing firm did, however, have a nonexclusive license because the "parties intended to transfer a copyright, but failed to do so in writing." Id. at 816. Because a nonexclusive license is not an ownership interest under copyright law, however, the marketing firm did not commit conversion by removing the website, and the company's counterclaim failed.
Concurring in result, Justice Boehm wrote separately to explain that, in his view, a website is "property" for the purposes of tortious or criminal conversion. Id. at 817. Although the company was a licensee that could not sustain a conversion claim, Justice Boehm emphasized that licensees are not without remedy. In this case, the marketing firm arguably "created the problem that the licensed code no longer existed" and "had no right to seize both phases [of the website design] as collateral for its unpaid work on the second phase." Id. 818-19. Although the company's damages were "a matter of speculation on this record," Justice Boehm noted that the company could have asserted breach of license as either an affirmative defense or set-off. Because it did not, he concurred with the majority's result.
Evidence of discounted payments healthcare providers accept from insurance carriers on behalf of injured plaintiffs can be introduced into evidence to determine the reasonable value of the services to the extent it can be done without referencing insurance
The Indiana Supreme Court confronted "the question of how to determine the reasonable value of medical services when an injured plaintiff's medical treatment is paid from a collateral source at a discounted rate." Stanley v. Walker, 906 N.E.2d 852, 855 (Ind. 2009). In an opinion authored by Justice Sullivan, the Court held that evidence of a healthcare provider's acceptance of a reduced amount of compensation for services provided to a plaintiff may be introduced to help a jury determine the reasonable value of the services "[t]o the extent the discounted amounts may be introduced without referencing insurance." Id. at 853. The Court analyzed Indiana Rule of Evidence 413 and the "complexities of health care pricing structures[, which] make it difficult to determine whether the amount paid, the amount billed, or an amount in between represents the reasonable value of medical services." Id. at 857. Ultimately, the Court held that Indiana's collateral source statute does not bar evidence of discounted payments accepted by healthcare providers to determine the reasonable value of services. "Given the current state of the health care pricing system where . . . authorities suggest that a medical provider's billed charges do not equate to cost, the jury may well need the amount of the payments, amounts billed by medical providers, and other relevant and admissible evidence to be able to determine the amount of reasonable medical expenses." Id. at 858.
Justice Dickson authored a dissenting opinion, joined by Justice Rucker, arguing that the majority's rule "contravenes the express requirements of the collateral source statute." Id. at 860 (citing Ind. Code § 34-44-1-2). The dissent also disagreed that the collateral source statute abrogated the common law collateral source rule because "the statute's precise language appears to create a limited exception to the common law rule, which is otherwise left intact." Id. at 862. "Under today's new rule, the existence and extent of any improvement to the accuracy of verdicts seems overwhelmed by the significant probability of incompleteness, confusion, and resulting unfairness, all further compounded by detrimental effects on the fairness and efficient administration of justice." Id. at 865.
Justice Boehm, joined by Chief Justice Shepard, wrote separately to respond to points made by the dissent and emphasized that "we hold today only that the discounted price actually paid for medical services is admissible evidence as to the reasonable value of those services. We do not hold that it is conclusive." Id. at 859.
Although claim against mother's estate was timely, daughter failed to rebut presumption that services rendered to her incapacitated mother were gratuitous because no evidence that daughter had an express or implied contract with mother's guardian
The Indiana Supreme Court unanimously reversed the trial court's denial of an estate's motion for summary judgment on a daughter's claim against her mother's estate for reimbursement for various expenses and personal services that the daughter rendered to her mother while the mother was subject to a guardianship. Estate of Prickett v. Womersley, 905 N.E.2d 1008 (Ind. 2009). First, the Court addressed the Estate's argument that the daughter's reimbursement claim was time-barred because she had not filed her claim in the guardianship proceeding. Interpreting the Guardianship Code, the Court held that Indiana Code § 29-3-10-1(d) does not require a claim to be filed against the guardianship estate and "in the absence of legislative direction mandating a guardian's approval, we are apprehensive of the administrative and other practical consequences of ordering a guardian's review of all claims filed in a probate estate that accrue during a decedent's guardianship." Id. at 1012. Therefore, the daughter's claim for reimbursement was not time-barred because she was not required to pursue it in the guardianship proceeding and she properly filed it against her mother's estate.
The Court reaffirmed the rebuttable presumption that services rendered by a family member are gratuitous. Although the daughter designated evidence that her mother signed a statement in front of two witnesses that she wanted her estate to compensate her daughter for her services, the Court held that the mother could not enter into a contract at the time she executed the statement and, consequently, "when the provider is a family member the implied contract must exist between that person and the incapacitated person's guardian." Id. at 1013. Because the daughter failed to produce evidence that she had an express or implied contract with her mother's guardian, she failed to rebut the presumption that her services were gratuitous as a matter of law.
An insurance company's policy was consistent with Indiana's uninsured motorist statute and insureds were not entitled to uninsured motorist benefits for the death of their unmarried adult son because they did not suffer bodily injury
The Indiana Supreme Court unanimously held that named insureds who brought an action against their automobile insurer to recover uninsured motorist benefits for the death of their unmarried adult son were not persons "legally entitled to recover damages" for their son's death. Bush v. State Farm Mut. Auto. Ins. Co., 905 N.E.2d 1003, 1008 (Ind. 2009). For purposes of its uninsured motorist coverage, the parents' insurance policy defined "insured" to include the named insureds and their relatives, which were defined as related persons primarily residing with the named insureds. Because their adult son no longer lived with his parents, he was not an insured under his parents' policy.
The insured parents argued that they were entitled to uninsured motorist benefits because their policy was inconsistent with Indiana's uninsured motorist statute-Indiana Code § 27-7-5-2-and, thus, unenforceable. The Court disagreed and emphasized that "the statute itself makes clear that it contemplates uninsured motorist coverage only for the 'insured's' bodily injury." Id. at 1005. The insurance company's policy was "consistent with the uninsured motorist statute by requiring that the insured sustain bodily injury to trigger uninsured motorist coverage." Id. Reaffirming a previous holding, the Court held that the definition of bodily injury includes emotional distress "only if it arises from a bodily touching." Id. (citing State Farm Mut. Auto. Ins. Co. v. Jakupko, 881 N.E.2d 654 (Ind. 2008)). "Indiana's uninsured motorist statute requires coverage only for bodily injuries sustained by an insured." Bush, 905 N.E.2d at 1007-08. Because the parents did not suffer bodily injury, they did not have uninsured motorist coverage for their adult son's death.
For purposes of the Family and Medical Leave Act, the 1250-hour requirement applies to an employee's overall service, not service in any particular position, and a trial court's exercise of equitable jurisdiction to award an employee front pay had to be discounted to reflect present day value
The Indiana Supreme Court addressed issues of first impression surrounding a full-time teacher, part-time football coach's claims against his school corporation employer under the Family and Medical Leave Act ("FMLA"). Gary Cmty. School Corp. v. Powell, 906 N.E.2d 823 (Ind. 2009). Although the school reinstated the employee to his full-time teaching position after his medical leave, it did not reinstate him to his head coaching position. Additionally, the school rejected him as head football coach in subsequent years, which the teacher argued was retaliatory conduct for comments he made to a local newspaper regarding the school's failure to restore him to his coaching position following his medical leave.
The Court held as an issue of first impression that "an employee filling multiple positions with the same employer is eligible for FMLA leave as to all positions if that employee has completed 1,250 total hours of service to that employer in the twelve months preceding the request for leave." Id. at 828. As the Court noted, "the test for [FMLA] eligibility is phrased in terms of 'hours of service' to an 'employer,' not service in any particular position." Id. Therefore, because the 1,250-hour requirement applies to an employee's overall service, the school corporation was required to reinstate the employee to both the full-time teaching position and the part-time coaching position. Additionally, the Court concluded that the employee presented sufficient evidence to support the jury's conclusion that the school corporation retaliated against him for voicing his complaints to a local newspaper, which were not permissible grounds for retaliation under FMLA.
The school corporation presented numerous arguments challenging the trial court's award of damages. As an issue of first impression, the Court concluded that although the trial court did not abuse its discretion by exercising equity jurisdiction and awarding front pay, "front pay should be discounted to present value. Without discounting, [the employee] would receive a windfall in the form of the use of the money years before it would have been earned." Id. at 834. The Court remanded the action to the trial court to discount the front pay award to present day value, but otherwise affirmed the trial court in all respects.
Employees' damages award for backpay after employer's violation of Indiana Civil Rights Act should not have been reduced by amount of unemployment benefits received
Two employees filed a complaint with the Michigan City Human Rights Commission ("Commission"), alleging that their employer violated the Indiana Civil Rights Act when it discriminated against them on the basis of race and terminated them for timecard fraud. Filter Specialists, Inc. v. Brooks, 906 N.E.2d 835 (Ind. 2009). The Commission concluded that race was the motivating factor behind the firings and awarded the employees damages for backpay and fringe benefits. The Indiana Supreme Court concluded that the employees proved their claim even though they did not introduce evidence of the ordinance establishing the Commission because the ordinance "has no bearing on whether [the employer] discharged [the employees] on the basis of race in violation of the Indiana Civil Rights Act." Id. at 845. Additionally, the employees presented substantial evidence to support the Commission's conclusion that they had suffered unlawful discrimination, even though there was "no smoking gun" regarding the employer's mental processes. Id. at 848.
Regarding damages, the Court agreed with a majority of federal circuit courts that "unemployment benefits should not be deducted from backpay awards in discrimination cases." Id. at 849. Consequently, the trial court erred by ordering the case remanded to the Commission because "the damages awarded to [the employees] should not have been affected by their receipt of unemployment compensation." Id. at 850.
INDIANA COURT OF APPEALS
> Father had independent cause of action against Indiana Patient's Compensation Fund for negligent infliction of emotional distress after he witnessed the death of his son, which was caused by the negligent conduct of healthcare providers. Ind. Patient's Comp. Fund v. Patrick, 906 N.E.2d 194 (Ind. Ct. App. 2009).
> Oral findings and conclusions that are "thoroughly detailed in the record" satisfy the purpose of special findings under Indiana Trial Rule 52(A). Nunn Law Office v. Rosenthal, 905 N.E.2d 513 (Ind. Ct. App. 2009). Additionally, an attorney employed under a contingency fee contract who is discharged prior to occurrence of the contingency is limited to quantum meruit recovery.
> Trial court should have granted party's request for a hearing on motion to change venue pursuant to Indiana Trial Rule 75(A) because of conflicting evidence and the lack of evidence regarding the location of plaintiff's principle office. Painters Dist. Council 91 v. Calvert Enter. Electronic Servs., Inc., 906 N.E.2d 254 (Ind. Ct. App. 2009).
> The Indiana Motor Vehicle Protection Act, commonly known as the Lemon Law, "obligates a consumer to demonstrate that the vehicle was subject to repair at least four times and that the same defective condition remained unresolved after the fourth attempt." Metro Health Profs., Inc. v. Chrysler, LLC, 905 N.E.2d 1026, 1033 (Ind. Ct. App. 2009). Once a consumer has met the four-repair requirement and files a claim shortly after the fourth attempt, as a matter of law, the automobile manufacturer is obligated to either refund the amount the buyer paid or provide a replacement vehicle of comparable value.
> Employee's claim against political subdivision employer is governed by the three-year statute of limitations contained in the Federal Employers' Liability Act instead of the two-year statute of limitations governing Indiana personal injury claims. Januchowski v. N. Ind. Commuter Trans. Dist., 905 N.E.2d 1041 (Ind. Ct. App. 2009).
> Bureau of Motor Vehicles' policy of revoking driving privileges after class members whose recorded personal information did not match information on file with the Social Security Administration violated federal due process because the BMV failed to articulate ascertainable standards for current identification holders. Leone v. Ind. Bureau of Motor Vehicles, 906 N.E.2d 172 (Ind. Ct. App. 2009). The policy did, however, have the rational basis of preventing identity theft, and the trial court properly denied the class members' request for a preliminary injunction because the class failed to show an injunction would be in the public interest.
> Jim Mansfield was initially declared the winner of the Muncie mayoral election but his opponent, Sharon McShurley, was declared the winner after a recount. Mansfield v. McShurley, --- N.E.2d ---, No. 18A02-0804-CV-375 (Ind. Ct. App. 2009). The trial court dismissed Mansfield's statutory challenge to the election as well as his amended complaint asserting a quo warranto action. On appeal, the Court of Appeals held that a statutory contest action "may not be brought outside the statutorily prescribed time frames even if, as in the case before [the Court of Appeals], the election result changes by virtue of a recount." Additionally, the trial court did not err by dismissing the quo warranto complaint because the recount commission did not act unlawfully by declining to count certain absentee ballots.
TRANSFER ORDERS
> Babes Showclub v. Lair, 901 N.E.2d 44 (Ind. Ct. App. 2009) (whether a police officer's claims for injuries he suffered responding to a complaint on the club's premises were barred by the Fireman's Rule), transfer granted on May 7, 2009.
> Ind. Family & Soc. Servs. Admin. v. Meyer, 900 N.E.2d 74 (Ind. Ct. App. 2009) (whether the trial court had discretion to respond to procedural error by granting a belated extension of time), transfer granted on May 14, 2009.
George T. Patton, Jr., is a partner at Bose McKinney & Evans LLP, Indianapolis/Washington, D.C. and co-chair of its Appellate Group. He was the first chair of the ISBA Appellate Practice Section, served as an Adjunct Assistant Professor of Appellate Advocacy and Procedure at the Indiana University School of Law-Bloomington for five years, and has written four articles on recent developments in Indiana appellate procedure for the Indiana Law Review. George's book on the 2001 Indiana Appellate Rules is 24 Indiana Practice-Appellate Procedure (3d Ed. West Publishing Co. 2001 & 2006 Supp.).
Kellie M. Barr is an associate at Bose McKinney & Evans LLP, Indianapolis, and works on business, commercial, and appellate litigation. Upon graduating from the Indiana University School of Law-Bloomington, Kellie served as a law clerk to Chief Judge John G. Baker at the Indiana Court of Appeals. Kellie is the co-author of an article on recent developments in Indiana appellate procedure to be published in the Indiana Law Review later this year.
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