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October 2013



Vol. 57, No. 3

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The Journal of the Indiana State Bar Association

RES GESTÆ October 2013

Vol. 57, No. 3




PRESIDENT’S PERSPECTIVE Daniel B. Vinovich, Highland, 2012-2013











Donald R. Lundberg, Indianapolis

Prof. Allison Martin, Indianapolis

19 JUDICIAL CRITICISM Mark S. Zuckerberg and Amanda K. Quick, Indianapolis

Maggie L. Smith, Indianapolis

Patricia P. Truitt, Lafayette



Susan J. Ferrer

GRAPHIC DESIGNER Vincent Morretino








Cover: Upon taking the Oath of Attorneys, several hundred new lawyers, including Jerod Adler (center), were welcomed to the practice of law at the bar admission ceremony Oct. 25 in downtown Indianapolis. (Photo by Vincent Morretino)

Res Gestae (USPS–462-500) is published monthly, except for January/February and July/August, by the Indiana State Bar Association, One Indiana Square, Suite 530, Indianapolis, IN 46204. Periodicals postage paid at Indianapolis, Ind. POSTMASTER: Send address changes to Res Gestae, c/o ISBA, One Indiana Square, Suite 530, Indianapolis, IN 46204. Subscriptions to members only, $5 annually from dues. All prior issues available exclusively from William S. Hein & Co., 1285 Main St., Buffalo, NY 14209. ISBA members are encouraged to submit manuscripts to the editor for possible publication in Res Gestae. Article guidelines can be obtained by calling 800/266-2581 or visiting Res Gestae’s printer, Print Directions, Inc., is an Indiana-certified Woman Business Enterprise. ©2013 by the Indiana State Bar Association. All rights reserved. Reproduction by any method in whole or in part without permission is prohibited. Opinions expressed by bylined articles are those of the authors and not necessarily those of the ISBA or its members. Publication of advertisements is not an implied or direct endorsement of any product or service offered.



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Presidential Citation recipients

E INDIANA STATE BAR ASSOCIATION One Indiana Square, Suite 530 Indianapolis, IN 46204 317/639-5465 • 800/266-2581 317/266-2588 fax •

OFFICERS President President-Elect Vice President Secretary Treasurer Counsel to the President

Daniel B. Vinovich, Highland James Dimos, Indianapolis Jeff R. Hawkins, Sullivan Todd J. Meyer, Lebanon Holly M. Harvey, Bloomington Hon. Michael N. Pagano, Crown Point

BOARD OF GOVERNORS 1st District 2nd District 3rd District 4th District 5th District 6th District 7th District 8th District 9th District 10th District 11th District 11th District 11th District Past President House of Delegates House of Delegates Young Lawyers Section

Shelice R. Tolbert, Crown Point Todd A. Etzler, Valparaiso James M. “Jay” Lewis, South Bend Hon. Thomas J. Felts, Fort Wayne Elizabeth B. Searle, Lafayette John A. Conlon, Noblesville Seth M. Lahn, Bloomington Angela L. Freel, Evansville J. Todd Spurgeon, New Albany Kimberly S. Dowling, Muncie Julia L. Orzeske, Indianapolis Chasity Q. Thompson, Indianapolis Clayton C. Miller, Indianapolis C. Erik Chickedantz, Fort Wayne Mitchell R. Heppenheimer, South Bend, Chair Jessie A. Cook, Terre Haute, Chair-Elect Reynold T. “Ren” Berry, Indianapolis, Chair

STAFF Executive Director Thomas A. Pyrz • Administrative Assistant Barbara Whaley • Associate Executive Director Susan Jacobs • Administrative Assistant Julie Gott • Director of Communications Susan J. Ferrer • Director of Public Relations & Social Media Carissa D. Long • Graphic Designer & Photographer Vincent Morretino • Legislative Counsel Paje E. Felts • Director of Section Services Maryann O. Williams • Administrative Assistant Barbara Mann • Local & Specialty Bar Liaison Catheryne E. Pully • Administrative Assistant Kim Latimore • CLE & Special Projects Director Cheri A. Harris • Coordinator of CLE & Special Projects Christina L. Fisher • Director of Meetings & Events Ashley Higgins • Bookkeeper & Convention Registrar Sherry Allan • Membership Records Coordinator Kevin Mohl • Receptionist Chauncey Lipscomb •

ach year at our Annual Meeting the ISBA president is permitted to award citations to recognize individuals for their exceptional contributions to our Association, the profession of law and the citizens of Indiana. This year it was my privilege to award six Presidential Citations. Here are the worthy recipients: The Hon. Thomas J. Felts, Fort Wayne, is judge of the Allen Circuit Court. Judge Felts received his B.A. from the University of Notre Dame in 1976 and his J.D. from the I.U. Maurer School of Law in 1979. He is a member of the Allen County and Indiana State (member, Board of Governors, 2011-13) bar associations. Judge Felts also currently serves as a board member on the Allen County Courthouse Preservation Trust, Indiana Judges Association, Allen County Community Corrections, Foellinger Foundation and the Indiana Judicial Conference. He is a member of the Indiana Commission on Courts, too. Judge Felts’ service on the aforementioned boards, including his stint on the ISBA Board of Governors, has been exemplary. In addition, his work on the Improvements in the Judicial System Committee and State Legislation Committee has led to continued success on tough issues for the ISBA. He served on other ISBA committees and task forces this year, including the Wellness Committee, Governance Task Force and Bench-Bar Symposium planning committee. He earned the nickname “Mr. Volunteer” for his multi-committee participation and enthusiasm to serve. We are extremely fortunate to have Judge Felts as the 2013-14 chair of the ISBA Leadership Development Academy. Seth M. Lahn, Bloomington, is a senior lecturer of law at the I.U. Maurer School of Law, leading its appellate advocacy and judicial field placement programs and directing the Protective Order Project. He is also of counsel at the Indianapolis firm Yarling & Robinson. He received his B.A. in history from Yale

University in 1979 and his J.D. from Yale Law School in 1982. Seth is a member of the Indiana State (counsel to the president, 201112; member, Board of Governors, 2012-14) and American bar associations, the Association of American Law Schools’ Section on Clinical Legal Education, and the Indiana Pro Bono Commission. Seth distinguished himself this year by his leadership that resulted in significant achievements for the ISBA. His involvement with respect to the Casemaker Improvements Committee led to the renegotiation of our contract and the addition of all Casemaker premium services at no additional charge for our members – amounting to significantly improved online legal research. He also chairs the board’s ad hoc diversity committee that provides recommendations to help diversify the ISBA, including the recent amendment of the Articles & Bylaws to add two “at large” seats on the Board of Governors. Seth continues to serve diligently on many other ISBA committees such as Membership & Membership Benefits, Pro Bono and Legal Education Conclave. John R. Maley, Indianapolis, is a partner at the firm Barnes & Thornburg, where he regularly represents publicly traded and private companies in regional and national litigation. He has served as an adjunct lecturer at the I.U. McKinney School of Law and lectures for the Indiana Bar Review. John received his B.A. from the University of Notre Dame in 1985 and his M.B.A. from Indiana University in 1994. He received his J.D., summa cum laude, from I.U. McKinney in 1988, where he was executive director of the Indiana Law Review. John’s many leadership positions have included chair of the Local Rules Committee, Southern District of Indiana; member of the Local Rules Committee, Northern District of Indiana; chair of the Marion County Local (continued on p. 7)



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PRESIDENT’S PERSPECTIVE continued from page 5 Rules Committee; president of the Indianapolis Chapter of the Federal Bar Association; president of the I.U. McKinney School of Law Alumni Association; and chair of the ISBA Appellate Practice Section. As chair of the State Bar’s CLE Committee this year, John led with extraordinary vision and resolve, resulting in the development of a program of training that is extremely professional and affordable for Indiana lawyers. Under his leadership, low cost and high quality became the watchwords of ISBA CLE programs. Clayton C. Miller, Indianapolis, is a partner at the firm Bamberger Foreman Oswald & Hahn in its Indianapolis office, practicing in the area of utility law. A former chief administrative law judge of the Indiana Utility Regulatory Commission and attorney advisor in the Office of Public Utility Regulatory Commission at the U.S. Securities & Exchange Commission in Washington, D.C., Clay earned his A.B. from Harvard University in 1987 and his J.D. from the I.U. Maurer School of Law in 1993, after which he served as a judicial clerk to former Chief Justice of Indiana Randall T. Shepard. Clay’s legal memberships include the Indianapolis, Indiana State and American bar associations. He has served as a board member of the ISBA and Indiana Bar Foundation for multiple years, and his continued energetic efforts on behalf of the ISBA and IBF were again apparent this year. His participation on the State Bar’s Audit Committee and Membership &

Membership Benefits Committee as well as his involvement with the Leadership Development Academy (LDA) and the board’s ad hoc diversity committee was outstanding. However, it was Clay’s chairmanship of the outreach & inclusion subcommittee of the Membership Committee, with his comprehensive research on our state legislature’s proposed constitutional amendment on same-sex marriage, that was truly noteworthy. Amy K. Noe is a practitioner at her firm in Richmond, Ind., Amy Noe Law, where she represents families and businesses in Wayne and surrounding counties. She earned her B.A. with honors from Earlham College in 1994 and her J.D., cum laude, from I.U. McKinney School of Law in 2000. Amy is a member of the Wayne County and Indiana State (district member, Board of Governors, 2005-07; counsel to the president, 2007-08; chair, Budget & Finance Committee, 2012-13; chair, Legal Ethics Committee, 2004-07) bar associations. She is also a member of the Indiana Supreme Court’s Committee on Character & Fitness and serves on the board of the Indiana Bar Foundation. Amy’s exceptional service this year for the ISBA on the Leadership Development Academy Committee and as chair of the Budget & Finance Committee is to be commended. Her dedication to the LDA was remarkable, and her tireless efforts involved in preparing and finalizing the budget resulted in a savings of more than $100,000 for the Association.

John C. Trimble, Indianapolis, is an attorney at the firm Lewis Wagner, where he maintains a practice that is dominated by catastrophic, complex and class action litigation in the state and federal courts. He received his B.A. from Hanover College in 1977 and his J.D., magna cum laude, from the I.U. McKinney School of Law in 1981. John is former president of the state defense bar, Defense Lawyer of the Year in 1991, and was the Defense Research Institute’s outstanding defense bar leader of the year in 2000. His current service to the profession is diverse and broad based. He serves as an officer for multiple entities – now as first vice president of the Indianapolis Bar Association, secretary of the Indianapolis Legal Aid Society, vice chair of the board of visitors of I.U. McKinney, and chair of the State Bar’s Improvements in the Judicial System Committee. Often at great sacrifice, his advice and action pertaining to sensitive lobbying issues, even in the 11th hour, have proven to be extremely effective. John’s preparation and sound advice are distinct and unparalleled. Congratulations to this year’s recipients of the ISBA Presidential Citation.



The Young Lawyers Section invites you to attend the annual

Indiana State Bar Association Judicial Reception Tuesday, Dec. 3, 2013 5:00 - 7:00 p.m.

JW Marriott Indianapolis 10 South West St. Indianapolis, IN 46204

Don’t miss this unique opportunity to network with your local judges and colleagues. Firms may sponsor this special event, or you may purchase individual tickets. Sponsoring organizations receive one complimentary ticket per $200 donation and will be recognized in State Bar publications. Call the ISBA at 317.639.5465 or 800.266.2581 for more information about registering for this event.

Pricing Information ❑ FREE - Tickets for judges are complimentary! ❑ $20 - ISBA Members or any spouse/guest of judge ❑ $40 - Non-ISBA Members


Payment Information:


❑ Check (make payable to Indiana State Bar Association)

City, State, Zip_________________________________________

Credit Card (3-4 digit Card Verification Code & signature required) ❑ VISA ❑ MasterCard ❑ Discover

Phone_______________________________________________ Fax__________________________________________________

Card Number__________________________________________ Exp. Date_____ /_____ 3-4 digit Card Verification Code_________



Indiana State Bar Association • One Indiana Square, Suite 530 • Indianapolis, IN 46204 317-639-5465 • 800-266-2581 Toll Free • 317-266-2588 Fax

Young Lawyers Section: Judicial Reception - 12/3/2013

Return completed registration form to: Fax 317-266-2588, Attn: Sherry Allan, or email, For more information, please call the ISBA at 317-639-5465.

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Indiana Law Survey video replays: a local bar collaboration Several replays scheduled around the state through the end of the year

Registration for each location is either through the local bar or the ISBA. Also, all seminar materials will be provided electronically. The registration fee is $375.

Court History & CLE set for Nov. 22 ‘From Cyprus to Indy & the Judge in Between: the Cypriot Mosaics Case & Judge James E. Noland’ he 6th annual Court History & CLE Symposium will be presented Friday, Nov. 22, at the Birch Bayh Federal Building & United States Court House, 46 E. Ohio St., downtown Indianapolis. The program is set to be held in the Hon. S. Hugh Dillin Memorial Courtroom (Courtroom 243). Sponsored by the Historical Society of the U.S. District Court for the Southern District of Indiana, this 3-hour CLE event (approval of


This year’s event will focus on one of the most publicized and fascinating cases to come before the court in recent memory – Autocephalous Greek-Orthodox Church of Cyprus v. Goldberg & Feldman Fine Arts, Inc. or the Kanakaria mosaics case. The case involved a collection of 6th-century mosaics that had been stolen from a church in Cyprus in the late 1970s and subsequently sold to a Carmel, Ind., art dealer. The ensuing litigation left the Hon. James E. Noland to grapple with issues of which, if any, foreign government had standing in the case; whether Indiana state law or Swiss law applied; if the claimants had practiced due diligence; and what guidelines, if any, he should recommend be used by future buyers of international artwork subject to American law. To help explore and understand this case, three attorneys who participated in the case, Sally Zweig, John Hoover and the Hon. Ezra Friedlander, will speak about their experiences and recollections. Following their presentation, retired Magistrate Judge Kennard Foster, who served as magistrate judge on the mosaics case, will make remarks about the case from his perspective. The final hour of the event will feature a roundtable discussion on the life and career of Judge Noland. Circuit Judge John Daniel Tinder will moderate a panel consisting of the Hon. Sarah Evans Barker, the Hon. Larry J. McKinney and Assistant U.S. Attorney Jill Julian, a former law clerk to Judge Noland. Registration is required for the event, and space is limited. RSVP by Nov. 15 to Denise Fort, Members of the Historical Society of the U.S. District Court for the Southern District of Indiana receive complimentary registration. For

nonmembers wishing to attend the event, the registration fee is $50 and includes a 1-year membership to the Court’s Historical Society. The fee may be paid by cash, check or money order at the event. For more information, contact Doria Lynch at: or 317/229-3729.

Regarding paralegals Dear Editor: Some years ago I was the chairman of the Indiana House of Representatives’ committee that handled all bills that proposed registration, certification or licensing for any profession. Every time the group making the proposal highlighted the benefits to the public. Unspoken was the desire by some in the profession to make the group providing the service more exclusive, so that those who qualified would be in a position to charge more for their services.


he Indiana State Bar Association is working with local bar associations in a variety of locations to cosponsor two-day video replays of the 2013 “Indiana Law Survey.” This is the long-running and well-attended program chaired by Indiana Court of Appeals Chief Judge Margret G. Robb. If you missed the live version Sept. 17-18, you can still earn 12 hours of CLE (to include 1 hour of Ethics) by attending this replay. This program helps support the I.U. McKinney Alumni Association scholarship fund. For information on dates, locations, program content and speakers, visit:


credit pending) will be held from 1-4:30 p.m.

So we should anticipate that if initial efforts to register are successful, then that will lead to certification and then to licensing. Just as I asked each group approaching the legislature, let me ask the proponents of this measure to be more specific as to the problem you would be solving. Yes, it would provide some help to lawyers in hiring paralegals to have a piece of paper to establish some minimum competency. But that should not affect the current hiring system, where the lawyer carefully examines the competency and background of applicants. “Don’t just stand there, do something” is an adage that should cause us to pause before we try to solve a problem that does not exist. Ray Richardson Attorney at Law Greenfield, Ind.



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By Bart A. Karwath and Brian E. Casey

Supreme Court: Health plan reimbursement provisions trump equitable doctrines


n April 16, 2013, the United States Supreme Court issued its opinion in U.S. Airways, Inc. v. McCutchen,1 a decision that will impact most cases involving an injured person who receives medical treatment paid for by a health plan governed by the Employee Retirement Income Security Act (ERISA),2 which includes most health plans established or maintained by an employer and/or an employee organization (excluding governmental plans and church plans).3 When injured persons receive medical treatment paid for by a health plan governed by ERISA, and a recovery is made by settlement or through litigation against a third party, the health plan’s right to reimbursement must be addressed. Most health plans provide that a plan participant or beneficiary must reimburse the health plan out of any recovery from third parties for all funds spent by the health plan on medical bills. On three occasions over the past 11 years, the Supreme Court has addressed conflicts over whether Bart A. Karwath and to what extent Barnes & Thornburg LLP health plans can Indianapolis, Ind. enforce such bursement provisions. McCutchen is the Supreme Court’s most recent effort to clarify the law in this area. In 2002, the Supreme Court first addressed health plan reimbursement issues in Great-West Life & Annuity Insurance Co. Brian E. Casey v. Knudson.4 The Barnes & Thornburg LLP Supreme Court held South Bend, Ind. that a health plan could not sue the 10


injured party who received medical benefits under the plan and recover from the injured party legal remedies such as a damages award against the injured person’s general assets, even though that person had made a recovery against a third party.5 The only available cause of action under ERISA to enforce the health plan’s reimbursement provisions is found in ERISA §502(a)(3), which provides only for equitable relief.6 The health plan’s claim was for money damages generally, not a claim against a specific asset or fund recovered from a third party; therefore, it was found to be a claim seeking legal, not equitable, relief.7 Accordingly, the health plan’s claim against the injured party in Knudson was not allowed.8 In Knudson, the Supreme Court suggested in dicta that a health plan might bring some type of an equitable claim, such as a claim for a lien against, or to impose an equitable trust over, a specific recovery the injured person might obtain in a settlement with or in litigation against a third party. The Supreme Court said: [A] plaintiff could seek restitution in equity, ordinarily in the form of a constructive trust or an equitable lien, where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant’s possession. A court of equity could then order a defendant to transfer title (in the case of the constructive trust) or to give a security interest (in the case of the equitable lien) to a plaintiff who was, in the eyes of equity, the true owner. ... Thus, for restitution to lie in equity, the action generally must seek not to impose personal liability on the defendant, but to restore to the plaintiff particular funds or property in the defendant’s possession.9

Because the recovered funds in Knudson were not in the injured

party’s possession, there could be no “equitable” relief awarded to the health plan, even though it characterized its claim as seeking “restitution.” The Supreme Court held that the relief being sought in Knudson was not equitable restitution, but rather, “restitution at law.”10 In 2006, the Supreme Court revisited the subject of health plan reimbursement. In Sereboff v. Mid Atlantic Medical Services, Inc., the Supreme Court picked up where it left off in Knudson and confirmed that a health plan could indeed assert an equitable lien or a constructive trust on monies an injured person recovers from a third party, but which have not been dissipated.11 By asserting a lien against, or trust over, the specific recovery from a third party, which had not yet been dissipated, the relief sought by the health plan was found to be “equitable” relief, even though the result was to take money that would otherwise go to the injured party and give it to the health plan.12 The lien imposed on the funds was considered an equitable lien established by agreement.13 The Supreme Court mentioned in a footnote that the injured party had attempted to argue that if the relief sought by the health plan was truly “equitable,” then equitable doctrines, such as the make-whole doctrine, should apply to limit or deny the health plan’s reimbursement claim.14 The Supreme Court determined that the issue had not been preserved and refused to address the argument.15 After Sereboff, a circuit split developed regarding the question left open in that footnote – i.e., might equitable doctrines apply to limit or deny a health plan’s reimbursement recovery contrary to the health plan’s provisions? Whether a health plan can expressly prohibit

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application of certain equitable doctrines that might otherwise apply to limit the amount of reimbursement, such as the make-whole doctrine and also the commonfund doctrine, was resolved differently among federal courts. The make-whole doctrine requires that the injured party be made whole before reimbursement of medical expenses to an insurer can occur.16 The common-fund doctrine generally requires that a party receiving a portion of a recovery pay a share of the fees and costs incurred in creating the recovery.17 Some courts held that such doctrines could apply even if the plan provided otherwise.18 Other courts disagreed and held that where the plan language expressly provided for the plan to be reimbursed and made whole first, and/or where the plan’s recovery was without any obligation to pay a share of the attorney fees or cost incurred to obtain the funds, the plan language controlled.19 In McCutchen, the Supreme Court resolved the circuit split that had developed over proper application of these two equitable doctrines where plan provisions appear to contradict such application.20 The injured party, James McCutchen, was a participant in a health plan sponsored and administered by his employer, U.S. Airways, Inc. The health plan covered McCutchen’s medical expenses “incurred as a result of a thirdparty’s actions – for example, another person’s negligent driving,” but also expressly required that any money received from a third party be returned to the plan to reimburse the plan for the medical expenses.21 McCutchen incurred $66,866 in medical expenses arising from a car accident. He hired a lawyer and agreed to a 40 percent contingency fee to pursue recovery against his own auto insurer and

the other driver. Between his own auto insurance and the other driver, McCutchen recovered $110,000, which was substantially less than the amount of his alleged damages. The lawyers claimed 40 percent of the recovery ($44,000), leaving $66,000.22 The health plan asserted a claim for $66,866 of the recovery, based on plan provisions that required McCutchen to “reimburse [U.S. Airways] for amounts paid for claims out of any monies recovered from [the] third party, including, but not limited to, your own insurance company as a result of judgment, settlement, or otherwise.”23 McCutchen disputed that U.S. Airways was entitled to any reimbursement. He argued that, because his recovery was such a small portion of his total damages, no recovery could be had by the health plan because he did not first

receive sufficient funds to be made whole.24 According to McCutchen, his alleged damages were well in excess of the amount recovered, and as a result there were no funds available for health plan reimbursement pursuant to the make-whole doctrine, which provides that a health plan should receive only those funds recovered that exceed the injured person’s total damages and therefore constitute a “double recovery.”25 McCutchen also argued that even if the health plan was entitled to reimbursement, the plan must contribute its fair share of the expenses and fees incurred in obtaining the recovery (i.e., any reimbursement by the plan must be reduced by 40 percent to cover a pro rata share of the attorney fees).26 (continued on page 12)

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REIMBURSEMENT PROVISIONS continued from page 11 The district court held in favor of the health plan.27 It decided that the health plan document unambiguously required full reimbursement, with no deduction for a proportionate share of the attorney fees.28 Accordingly, it held that the plan was entitled to be reimbursed prior to McCutchen receiving any funds, with no reduction for the attorney fees incurred in obtaining the funds.29 The Third Circuit reversed.30 It held that, because ERISA §502(a)(3) provides for only equitable relief, traditional equitable “doctrines and defenses” should apply to reduce the plan’s reimbursement rights, notwithstanding express plan language to the contrary.31 In other words, the Third Circuit held that the make-whole doctrine and the common-fund doctrine trumped the plan’s contrary language. In reviewing the Third Circuit’s decision, the Supreme Court said it was resolving “a circuit split on whether equitable doctrines can ... override an ERISA plan’s reimbursement provision.”32

Specifically, the Supreme Court said it was addressing whether two equitable doctrines, “limiting reimbursement to the amount of the [injured party’s] ‘double recovery’ and another requiring the party seeking reimbursement to pay a share of the attorney’s fees incurred in securing the funds from the third party,” applied even if the plan said otherwise.33 The Supreme Court held that, because the claim for reimbursement was based on an equitable lien by agreement, the terms of the agreement (i.e., the terms of the health plan) controlled.34 Because the health plan at issue unambiguously stated that the health plan would receive full reimbursement even though the injured party had not yet been made whole, the Supreme Court reversed the Third Circuit on the issue and held that the plan language controlled and precluded application of the otherwise applicable, equitable make-whole doctrine.35 The Supreme Court also held that, if the health plan document had made clear that reimbursement rights were not subject to the com-


mon-fund doctrine, which might otherwise apply in the reimbursement setting, the health plan in McCutchen could have also avoided any argument that it should pay a pro rata share of the attorney fees incurred in recovering monies from the third party.36 A majority of the Justices decided that, because the health plan in McCutchen did not clearly say that the common-fund doctrine did not apply, the health plan’s reimbursement rights should be subject to common-fund doctrine.37 They concluded that the common-fund doctrine was a proper “gap filler” in the absence of clear and unambiguous plan language to the contrary.38 As a result, the health plan had to reduce its reimbursement by a pro rata share of the fees and costs incurred in obtaining the recovery. The Supreme Court’s decision in McCutchen will result in injured persons who receive medical benefits under a health plan governed by ERISA keeping less of the funds they recover from third parties, and more of such funds being paid instead to the health plan for reimbursement of medical benefit payments. The injured person’s health plan must, however, contain express, unambiguous provisions that require the health plan be reimbursed first, before the injured person, and require that the reimbursement be made without reduction for any fees or costs incurred in obtaining the recovery. For practitioners in the Seventh Circuit, McCutchen is consistent with the rule previously recognized by the Seventh Circuit in Administrative Committee of WalMart Stores, Inc. v. Varco.39 The decision in McCutchen should not be viewed as establishing a new rule or a change in the law of the Seventh Circuit. Instead it has solidified and confirmed what the (continued on page 14)



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REIMBURSEMENT PROVISIONS continued from page 12 law of the Seventh Circuit has been for nearly 10 years. In light of McCutchen, attorneys who represent health plans should make sure that their clients’ plan reimbursement provisions are clear, unambiguous and expressly provide for the plan to receive full reimbursement prior to the injured person receiving any of the funds obtained from a third party, and




that plan reimbursement rights are not subject to the common-fund doctrine or any other equitable rule or doctrine that could mandate payment of a share of the fees and/or costs incurred in obtaining monies from a third party or otherwise reduce the reimbursement obligation. Attorneys who represent injured parties need to determine


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early on in the representation what their clients’ health plans provide with respect to reimbursement. As the Court in McCutchen noted, if the health plan requires that it receive full reimbursement first, without reduction for a share of the fees incurred to obtain the funds from a third party, it could result in the injured party recovering little or nothing, or actually being made worse off (as was a potential outcome in McCutchen), due to the need to make reimbursement to the health plan and pay the lawyers all of their fees out of the remaining funds (if any) after reimbursement is made to the health plan.40 If there will be little or nothing left for injured parties after paying the lawyers and reimbursing the health plan, injured parties will have little or no incentive to pursue claims against third parties. Reimbursements that might otherwise be obtained for health plans might be uncollected because the injured party has no incentive to obtain a recovery. Health plans would, in such circumstances, have to decide whether they want to directly pursue (and fund) litigation against third parties or simply go without otherwise available reimbursements. For this reason, a health plan should be willing to reduce its reimbursement claim so that the injured person has greater

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incentives to pursue recovery from the third party. Before McCutchen, often the issue of what portion of recovered funds must be reimbursed to health plans out of a personal injury recovery was the subject of negotiation. It is not unusual for such negotiations to occur well before a recovery is obtained. The primary impact of McCutchen is to give a relative advantage to a health plan in its negotiations with the injured party and his or her personal injury lawyer, so long as the health plan contains a reimbursement provision that expressly and unambiguously rejects the make-whole doctrine and the common-fund doctrine.

18. See CGI Techs. and Solutions, Inc. v. Rose, 683 F.3d 1113, 1123 (9th Cir. 2012); U.S. Airways, Inc. v. McCutchen, 663 F.3d 671, 673 (3d Cir. 2011).

34. Id. at 1547-48, 1551.

19. See Zurich Am. Ins. Co. v. O’Hara, 604 F.3d 1232, 1237 (11th Cir. 2010), cert. denied, 131 S. Ct. 943 (2011); Admin. Comm. of Wal-Mart Stores, Inc. v. Shank, 500 F.3d 834, 838 (8th Cir. 2007), cert. denied, 522 U.S. 1275 (2008); Moore v. CapitalCare, Inc., 461 F.3d 1, 9-10 and n.10 (D.C. Cir. 2003); Bombardier Aerospace Emp. Welfare Benefits Plan v. Ferrer, Poirot & Wansborough, 354 F.3d 348, 362 (5th Cir. 2003), cert. denied, 541 U.S. 1072 (2004); Admin. Comm. of Wal-Mart Stores, Inc. v. Varco, 338 F.3d 680, 692 (7th Cir. 2003), cert. denied, 542 U.S. 945 (2004).

37. Id. A minority of the Justices dissented on this issue, noting that certiorari had been granted “on a question that presumed the [health plan’s] terms were unambiguous – namely, ‘where the plan’s terms give it an absolute right to full reimbursement.’” Id. at 1551. Writing for the minority, Justice Scalia said, “The Court thus has no business deploying against petitioner an argument that was neither preserved in nor fairly included within the question presented ... .” Id. (citation omitted).

35. Id. at 1548-51. 36. Id. 1549-51.

38. Id. at 1549-51. 39. 338 F.3d 680 (7th Cir. 2003).

20. 133 S. Ct. at 1542-43.

40. McCutchen, 133 S. Ct. at 1550.

21. Id. at 1542.

Bart Karwath is a partner in the Indianapolis office of Barnes & Thornburg LLP. He is a member of the firm’s ERISA Litigation, Commercial Litigation and Construction Law practice groups.

22. Id. at 1543. 23. Id. (alterations in original). 24. Id. at 1543-44. 25. Id. at 1545. 26. Id. at 1544. 27. Id. (discussing the district court’s decision). 28. Id.

1. 133 S. Ct. 1537 (2013).

29. Id.

2. 29 U.S.C. §§ 1001, et seq.

30. Id. (discussing the Third Circuit’s decision).

3. See 29 U.S.C. §§ 1002(1), (3)-(6), (32)-(33) and 1003 (excluding governmental plans and church plans and defining terms “employee welfare benefit plan,” “employee benefit plan,” “plan,” “employee organization,” “employer,” “employee,” “governmental plan” and “church plan”).

31. Id.

Brian Casey is a partner in the Litigation Department of Barnes & Thornburg LLP’s South Bend office. He concentrates his practice in business litigation, particularly securities and ERISA litigation, as well as appellate practice.

32. Id. 33. Id. at 1542-43.

4. 534 U.S. 204 (2002). 5. Id. For a detailed discussion of Knudson, see Bart A. Karwath, “ERISA health plan reimbursement claims after Great-West Life & Annuity Insurance Company v. Knudson,” Res Gestae, April 2004, at 36-39. 6. ERISA §502(a)(3), codified at 29 U.S.C. §1132(a)(3), provides: A civil action may be brought – ... by a participant, beneficiary or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate relief(i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan ... .

Expert investment management for portfolios of $500,000 or more.

7. 534 U.S. at 213-14. 8. Id. at 218. 9. Id. at 213-14 (emphasis deleted, citations omitted). 10. Id. at 213 (emphasis in original). 11. 547 U.S. 356 (2006). 12. Id. at 362-63.


13. Id. at 368.

14. Id. at 368 n.2. 15. Id.

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16. See, e.g., Davis v. NEPCO Emps. Mut. Benefit Ass’n, 51 F.3d. 752, 754 (7th Cir. 1995). 17. See, e.g., Sutton v. Bernard, 504 F.3d 688, 691-92 (7th Cir. 2007). 1:17 PM



RG 10.13_RG 09.05 10/29/13 10:30 AM Page 16

By Tonya J. Bond

Law firm creates environment of wellness




lews Shadley Racher & Braun LLP (PSRB) is well known for its long history in environmental law. What many people may not know about, however, is PSRB’s equally longstanding environment of wellness. “PSRB has had a wellness program since it was founded nearly 25 years ago,” says partner and health care & life sciences practice group chair John Bridge, adding that it was a revolutionary idea when the firm started in August of 1988. “In the early years, it involved an exercise program complete with a personal trainer who would visit the firm.” The focus on health and wellness has grown along with the firm. Three times a week, the firm now offers onsite core strengthening and yoga classes for employees to attend at no charge. PSRB provides an exercise area complete with equipment that staff members can use whenever they have a break or need to reduce stress. Walking, running and biking groups routinely form both formally and informally. The firm provides healthy snacks such as pretzels, fresh fruit and unlimited bottled water for employees to grab whenever they need sustenance. Healthy options are always available for the daily lunch order. In addition, PSRB has a “healthy lunch series” where it brings in a speaker on a specific health topic and provides a free healthy lunch to all employees who attend. Even the end-ofyear bonus has traditionally included a link to health! Surveys have been sent to staff members in December with questions such as “Have you not Tonya J. Bond smoked in the last Plews Shadley year?”; “Do you wear Racher & Braun LLP Indianapolis, Ind. your seatbelt 99.5 cent of the time you RES GESTÆ • OCTOBER 2013

Pennsylvania St. in the historic Stenz Building.

Fit to Practice drive or ride in a motor vehicle?”; and “Have you participated in at least two organized events (5K or longer) or completed the Mini Marathon?” Staff members were able to earn a “health incentive bonus” of $50 for each healthy habit they achieved. The Indiana Department of Health recently recognized PSRB’s efforts by selecting the firm as one of only 20 small business worksites to receive aerobic and strength training equipment. The State gave PSRB a $2,500 voucher to buy items, including dumbbells with a rack, a stationary bike, Exertube resistance bands, yoga mats, a bike rack, a pedometer and a heart rate monitor. PSRB also has automatic defibrillators in each of its five buildings at its Indianapolis location as well as at its South Bend office in case an employee or visitor has a cardiac event. Thankfully, they have never had to be used! The firm also has offered CPR classes to all staff members. Perhaps one of the most innovative health and wellness initiatives provided to full-time employees and their family members on PSRB’s health insurance plans is the relationship with Novia CareClinics LLC. PSRB became a Novia client in the fall of 2012. Participants can utilize the services of Novia’s first multi-employer center for downtown Indianapolis employers, conveniently located at 429 N.

“When the original model for the workplace health & wellness center was one employer/one center, the centers could only be open for short periods,” says Bridge. “One of Novia’s clients said they wanted to share the costs of its center with another nearby employer, and today the model of a health center for small and medium-sized employers is switching to a shared health and wellness center. It works very well for our firm, which has about 60 employees. Every one of the five employers sharing our center on Pennsylvania Street has equal access to it, almost like we are a 1,000-employee business with our own center.” The 1,200-square-foot health & wellness center offers primary care services at NO CHARGE to registered participants and is open more than 30 hours a week. PSRB employees can schedule appointments online and have access to a doctor and nurses, lab work, and nearly 150 common generic drugs, all at no cost to the patient. With the convenience and no-cost concept, it’s nearly impossible not to take advantage of it, even for busy professionals who are hesitant to stop the clock for health and wellness. Speaking of wellness, the center offers a wellness coach who works with participants on their personal health challenges, such as obesity, managing diabetes or smoking cessation. The wellness coach educates, motivates and encourages participants to move toward more healthy lifestyles to decrease the host of health problems associated with these various challenges. The wellness coach visits PSRB for lunch sessions to share important health information (continued on page 18)

“Talk to a Lawyer Today” Public Service • Jan. 20, 2014 Registration Form “Life’s most persistent and urgent question is, ‘What are you doing for others?’” – Dr. Martin Luther King Jr. This annual ISBA and Indiana Pro Bono Commission program is designed as a legal information clinic, to be held on the MLK holiday Monday, Jan. 20, 2014. Participating lawyers are asked to donate 2 hours to speak with the general public on the phone or in person about legal issues. There are several locations throughout the state. All volunteers will be contacted by the site coordinators for their locations to confirm the times and places to volunteer. Please mail or fax this form to the appropriate site coordinator listed below.

Name: ___________________________________________________________________________________________ Address: __________________________________________________________________________________________ Phone: hone: ____________________________________________________________________________________________ Attorney I.D. number: ________________________________________________________________________________ Email address: ______________________________________________________________________________________ I wish to volunteer 2 hours of my time for “Talk to a Lawyer Today” on Monday, Jan. 20, in the district checked below. District A

District E

District I

Jasper, Lake, Newton & Porter counties

Cass, Fulton, Grant, Howard, Miami, Pulaski, Tipton & Wabash counties

Bartholomew, Brown, Decatur, Jackson, Jennings, Johnson, Rush & Shelby counties

Judith H. Stanton, Executive Director NWI Volunteer Lawyers, Inc. 652 E. Third St., P.O. Box 427 Hobart, IN 46342 219-942-3404 • 219-945-0995 (fax)

Luisa Michelle White, Plan Administrator Wabash Valley Volunteer Attorneys, Inc. Indiana Legal Services – Lafayette 8 N. 3rd St., Suite 102 Lafayette, IN 47901 800-382-7581 • 765-412-5863 (direct)

District B

District F

Elkhart, Marshall, Kosciusko, St. Joseph, LaPorte & Starke counties

Blackford, Delaware, Hamilton, Hancock, Henry, Jay, Madison & Randolph counties

Mark Torma, Plan Administrator Volunteer Lawyer Network, Inc. 117-1/2 N. Main St. South Bend, IN 46624 574-277-0075 • 574-277-2055 (fax)

Christianne Brock, Pro Bono Coordinator District 6 Access to Justice, Inc. P.O. Box 324 New Castle, IN 47362 765-521-6979 • 800-910-4407

District G District C Adams, Allen, Dekalb, Huntington, LaGrange, Noble, Steuben, Wells & Whitley counties Terry McCaffrey, Executive Director Volunteer Lawyer Program of NE Indiana, Inc. 927 S. Harrison Ft. Wayne, IN 46802 260-407-0917

District D Benton, Boone, Carroll, Clinton, Fountain, Montgomery, Parke, Tippecanoe, Vermillion, Warren & White counties Timothy E. Peterson, Plan Administrator Indiana Legal Services-Lafayette 639 Columbia St., P.O. Box 1455 Lafayette, IN 47902-1455 765-423-5327 • 800-382-7581 765-423-2252 (fax)

Marion County Kim Latimore, Staff Liaison Pro Bono Committee Indiana State Bar Association One Indiana Square, Suite 530 Indianapolis, IN 46204 317-639-5465 • 800-266-2581

District H Clay, Greene, Hendricks, Lawrence, Monroe, Owen & Putnam counties Diane Walker, Plan Administrator District 10 Pro Bono Project, Inc. P.O. Box 8382 Bloomington, IN 47407-8382 812-339-3610 • 812-339-3624 (fax)

Alaina Sullivan, Executive Director Legal Aid-District Eleven, Inc. 1531 13th Street, Suite G330 Columbus, IN 47201 877-378-0358 (intake line) 812-314-2721 (plan administrator direct line) 812-372-3948 (fax)

District J Dearborn, Fayette, Franklin, Jefferson, Ohio, Ripley, Switzerland, Union & Wayne counties Frank Cardis, Plan Administrator Legal Volunteers of Southeast Indiana, Inc. 318 N. Walnut Street Lawrenceburg, IN 47025 812-537-0123 • 877-237-0123 812-537-7090 (fax)

District K Daviess, Dubois, Gibson, Knox, Martin, Perry, Pike, Posey, Spencer, Sullivan, Vanderburgh, Vigo & Warrick counties Beverly Corn Plan Administrator Volunteer Lawyer Program of Southwestern Indiana 915 Main St., Suite 208 Evansville, IN 47708 812-402-6303 • 812-402-6304 (fax)

District L Clark, Crawford, Floyd, Harrison, Orange, Scott & Washington counties Andrew Adams, Plan Administrator Southern Indiana Pro Bono Referrals, Inc. 705 E. Court Ave. Jeffersonville, IN 47130

RG 10.13_RG 09.05 10/29/13 10:30 AM Page 18

FIT TO PRACTICE continued from page 16 and sponsors fun events such as a contest to encourage participants to drink more water. You may wonder whether this health & wellness center concept can help your firm. It can and will in a number of ways. The first is the transactional value. Instead of paying retail at a hospital or doctor’s office, the employers are paying wholesale – paying doctors and nurses an hourly fee without markup and paying wholesale for labs and generic medications. Because of the realized savings to employers, participating employees and their families get the services for free, which encourages better preventive health care participation as well as helps to eliminate barriers to health care. Preventive care helps participants to avoid illness and detect any health issues early, avoiding acute and chronic care, which results in even more health care savings.

Bridge says employers also see improved productivity from employees. “Normally, employees must take off a half-day to see their doctors. However, they can go to Novia around the corner and return in half an hour thanks to the clinic’s always-on-schedule, 20-minute visits. The quality of care is also better since that’s longer than the average 5-7 minutes a patient spends with their family doctor.” He added, “I think PSRB may be the first Novia client that bills by the hour. You can’t bill effectively when you’re home sick, with sick kids, or not at your best because you don’t feel well. Any time saved by getting quality care, but in a short time period, will benefit professional firms like ours.” Bridge says employers who use health & wellness centers typically see healthier employees and experience improvements in rates of absenteeism and presenteeism

(when employees are at work but not feeling their best or at their most productive). It’s still early for PSRB to calculate hard cost savings from its relationship with Novia. Those cost savings typically appear after the first year. Novia clients with similar health & wellness programs have seen leveling off, and in some cases reductions, in per-employee costs for health care soon after establishing the health & wellness benefit. “Any law firm, accounting firm, architecture firm or other professional company could benefit from a similar relationship,” said Bridge. “Our people have expressed true delight at the high quality of care, the ease and timeliness of getting appointments, and the lack of any cost to them. We expect this to be a win for everybody.”

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RG 10.13_RG 09.05 10/29/13 10:31 AM Page 19

By Donald R. Lundberg

Lawyers and judicial criticism revisited


A recent judicial criticism case The Court recently decided a judicial criticism case in which a majority, for the first time, rejected the Disciplinary Commission’s charges of unethical judicial criticism. Matter of Dixon, pdf/10081301per.pdf (Oct. 8, 2013). The case is interesting on several levels, including its context. It arose out of a controversy at the University of Notre Dame when President Obama visited in 2009 to give a commencement address and accept an honorary degree. The president’s presence on the campus was viewed by some as controversial because of the perceived disparity between the president’s views on abortion and Catholic doctrine. A number of individuals chose to express their disfavor with the president’s visit by demonstrating on campus. This resulted in the arrest of 88 individuals who were charged in a single, consolidated case with trespassing. The respondent represented most of the defendants and planned to defend on grounds that the defendants had a contractual right originating in canon law to pray on campus. The judge assigned to the case was the Hon. Jenny Pitts Manier of the St. Joseph Superior Court. Judge Manier is married to a retired Notre Dame professor who was alleged to have advocated prochoice causes within the Notre

Dame community. The respondent filed a motion for change of judge for cause supported by his own affidavit, which was denied. A month later, the respondent filed a motion to reconsider Judge Manier’s unwillingness to recuse – this time supported by the respondent’s lengthier affidavit. The reconsideration motion and supporting affidavit pointed out Judge Manier’s husband’s alleged advocacy of pro-choice causes. In addition, the respondent pointed to some of Judge Manier’s rulings in an earlier and unrelated case, Kendall v. City of South Bend, over which she had presided, in which a pro-life supporter was enjoined from certain activities in proximity to an abortion facility. In that case, the respondent unsuccessfully sought to intervene on behalf of a non-party, Michael Marsh, who claimed his conduct was similar to Kendall’s and that he would be negatively affected by the outcome in Kendall. In support of the motion to reconsider, the respondent alleged that some of Judge Manier’s rulings in Kendall were erroneous. Judge Manier certified her denial of a change of judge for interlocutory appeal, but the issue was mooted by her decision to recuse after she filed a grievance with the Commission against the respondent. On a side note, it is extraordinarily rare (if not unprecedented) for the Court to identify the grievant in a lawyer discipline decision. One suspects that the reason for Judge Manier’s recusal was a matter of public record in the underlying case.

Lawyer discipline charges In its charging complaint, the Disciplinary Commission pointed to four statements that it alleged violated Rule of Professional Conduct 8.2(a). That rule states: “A lawyer shall not make a state-

ment that the lawyer knows to be false or with reckless disregard as to its truth or falsity concerning the qualifications or integrity of a judge. …” This standard provides two alternative grounds for lawyer discipline. The first is when a lawyer knowingly makes a false statement concerning judicial qualifications or integrity. The second is when a lawyer makes such a statement in reckless disregard of its truth or falsity. Most lawyer discipline cases are pursued under the second, reckless-disregard standard. See, e.g., Matter of Atanga, 636 N.E.2d 1253, 1257 (Ind. 1994). The allegedly improper statements are important to understanding the case, so I will set them out in full. 1. “Such large scale litigation [referring to threated civil litigation by the defendants against the university], and the results therefrom, could adversely impact Notre Dame’s bottom line, which in turn could have a negative impact on Notre Dame’s current and future employees. It is in Prof. Manier’s interest to see that this does not occur. In short, Judge Manier and her husband are simply too intertwined with, and invested in, the University of Notre Dame and its mission to be allowed to preside over these cases.” 2. “Judge Manier’s inability to admit the intellectual and political (in the sense of policy setting) consanguinity between her husband’s career mission and Notre Dame’s current mission calls into profound question her ability to navigate the waters of defendants’ legal defenses related to their contractual rights to be where they Donald R. Lundberg were when they were Barnes & Thornburg LLP arrested.” Indianapolis, Ind.


have written before about judicial criticism by lawyers. Lundberg, “Lawyers and Judicial Criticism,” Vol. 49, No. 9 Res Gestae 34 (May 2006). As discussed in that article, Indiana has a significant body of lawyer discipline case law dealing with the topic. Each of those cases has resulted in lawyer discipline – albeit not without controversy among the justices of the Supreme Court.

(continued on page 20)



RG 10.13_RG 09.05 10/29/13 10:31 AM Page 20

ETHICS CURBSTONE continued from page 19 3. “Judge Manier’s ruling applying the injunction to Mrs. Kendall can be explained in only one of two ways: either Judge Manier did not understand the privity requirement of Trial Rule 65, or she did not feel duty bound to apply the rule because she was biased in favor of the abortuary.”

4. “Judge Manier’s refusal to allow Marsh into the case, when she knew Mrs. Kendall wanted out of the case, demonstrates to me that she was willing to ignore the applicable legal standards in order to move the case in a direction that negatively affected Marsh’s legal rights without giving him the

ability, as required by Trial Rule 24, to have a voice in the process or defend the same.” Of these statements, the hearing officer found that there was no basis for concluding that the first statement violated Rule 8.2(a). The Commission did not contest that finding before the Supreme Court. The hearing officer also concluded as a general matter that the statements of fact at issue were “arguably correct or reasonably supported by available information” or were essentially legal statements applying the standard for judicial recusal to the facts. Nonetheless, the hearing officer concluded that certain portions of statements two through three violated Rule 8.2(a) because they claimed that Judge Manier intentionally committed error due to an improper motive.

Objective or subjective standard?

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On review of the hearing officer’s report, the Supreme Court identified a threshold question – should the reckless-disregard standard be a subjective or objective one? The standard of Rule 8.2(a) is identical to the constitutionally mandated, actual-malice standard articulated by the U.S. Supreme Court in New York Times v. Sullivan, 376 U.S. 254 (1964), to govern defamation cases brought by public officials or public figures. The U.S. Supreme Court subsequently decided that the New York Times standard for reckless disregard was a subjective one, requiring a showing that the speaker “actually had a high degree of awareness of probable falsity.” HarteHanks Communications, Inc. v. Connaughton, 491 U.S. 657, 688 (1989). In other words, even if the same speech would be reckless if spoken by a reasonable speaker, it will not be actionable unless the

RG 10.13_RG 09.05 10/29/13 10:31 AM Page 21

speaker personally doubted the truth of the statement when it was made. The question framed by our Supreme Court is whether the reckless-disregard standard in Rule 8.2(a), applying as it does exclusively to lawyers, is also subjective or instead is objective. This distinction can be outcome determinative (although it was probably not in Dixon) inasmuch as the lawyerspeaker may genuinely believe a statement at issue is true even though a reasonable lawyer would not. Concluding that this was a question of first impression in Indiana, the Court reviewed a number of past lawyer discipline cases and concluded that Indiana should use an objective standard, which it characterized as the majority view in the country. The Court found justification for applying a more stringent standard to lawyers when speaking about judges than is constitutionally required when citizens speak about public officials (including judges) and public figures for the following reasons: (1) there is a societal interest in public confidence in the fairness of the judicial process, and objectively reckless lawyer speech that undermines that confidence is entitled to less protection, and (2) lawyers have special duties to the courts arising from their role as officers of the court.

that the standard is an objective one, how should the Commission make a showing of recklessness by clear and convincing evidence? Remember, because the Court chose an objective standard due to lawyers being a special case and not the New York Times standard applicable to non-lawyers, presumably the objective standard should be that of the reasonable lawyer. Should the Disciplinary Commis-

sion be required to prove what the reasonable lawyer would have done by calling a lawyer as an expert witness (which could be disputed by defense expert testimony), or should the hearing officer (who is always a lawyer) and the justices of the Supreme Court (all of whom are lawyers) be permitted to apply the objective standard without the (continued on page 22)

Summarizing the objective standard, the Court said the pertinent question was as follows: “Did the attorney lack any objectively reasonable basis for making the statement at issue, considering its nature and the context in which the statement was made?”

Open questions? While helpful in clarifying the Rule 8.2(a) standard, the Court’s discussion leaves open three other intriguing questions. First, given RES GESTÆ • OCTOBER 2013


RG 10.13_RG 09.05 10/29/13 10:31 AM Page 22

ETHICS CURBSTONE continued from page 21 aid of expert testimony? And relatedly, even if the Commission isn’t required to call an expert witness, should the respondent be precluded from calling a lawyer expert witness in an effort to prove that the statement at issue was not objectively reckless? The Court has generally been averse to the use of expert testimony in lawyer discipline cases,

but that is so because the use of an expert on the law of lawyer professional responsibility invades the province of the Court to decide questions of law. Matter of Keller, 792 N.E.2d 865, 867 (Ind. 2003). It is arguably a different situation when the expert testimony is tendered, much like it is in a legal malpractice case to establish standard

of care, to opine on reasonable lawyer conduct. Because the Court has not previously held definitively that the standard of Rule 8.2(a) is an objective one, it has not had occasion to squarely address this question. Second, even if a lawyer’s statement was objectively reckless at the time it was made, should truth be a defense? Stated otherwise, should a lawyer whose statement was objectively reckless when made be able to avoid discipline if it turns out that the reckless statement just happened to be true? Take for example a lawyer who recklessly accuses a judge of being a crook. What if it turns out that, unbeknownst to the lawyer, the lawyer’s statement just happened to be true when it was made? The Court addressed this question cryptically in Matter of Garringer, 626 N.E.2d 809 (Ind. 1994). Garringer insisted that his statements about judges were true and complained on review of the hearing officer’s findings that he was deprived of an opportunity to demonstrate the truth of his statements at the trial of the discipline case. The Court rejected his contention, stating, “Respondent failed to show any factual basis whatsoever that could even remotely lead to reliable evidence supporting Respondent’s theory of widespread conspiracy.” Id. at 813. On the other hand, the Court stated that it would not “retry the Wade bankruptcy or Respondent’s allegations of malfeasance therein.” Id. at 812. And in Matter of Atanga, 636 N.E.2d 1253 (Ind. 1994), the Court intimated, without squarely holding, that a lawyer might not be allowed to pursue a claim of truthfulness. “During the course of the proceedings in this case, Respondent introduced witnesses and attempted to have them cite their opinions as to the qualifica(continued on page 24)



ISBA Young Lawyers Section




Dec. 3, 2013

- AGENDA QUICK LOOK 7:30 am – 8:00 am 8:00 am – 8:10 am 8:10 am – 4:00 pm 5:00 pm – 7:00 pm

Registration and Breakfast Welcome and Introductions CLE Presentation Judicial Reception

Network with young lawyers, local judges and bar leaders at the annual Judicial Reception. As an AP Seminar attendee, you can attend this reception at half price!

Seminar: 7:30 am - 4:00 pm Reception: 5:00 pm - 7:00 pm JW Marriott 10 S. West St. Indianapolis, IN 46204 6 hrs. of Ethics CLE: This course fulfills the requirement for new attorneys. Registration includes: Electronic program materials (to include new “Workplace Survival Guide”), breakfast, lunch and access to a half-price ticket to YLS Judicial Reception immediately following.

CLE Pricing Information ISBA Member with less than 3 years of practice

ISBA member, more than 3 years

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❑ $65 for AP Seminar ❑ $75 for AP Seminar and Judicial Reception ❑ $75 for AP Seminar ❑ $95 for AP Seminar and Judicial Reception


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Indiana State Bar Association • One Indiana Square, Suite 530 • Indianapolis, IN 46204 317-639-5465 • 800-266-2581 Toll Free • 317-266-2588 Fax

Young Lawyers Section: Applied Professionalism CLE - 12/3/2013

A $25 service fee will be applied to cancellations received on or before 11/26/13. No refunds on cancellations received after 11/26/13. If you send someone else in your place, please provide ISBA with that person’s name.

Return completed registration form to: Fax 317-266-2588, Attn: Sherry Allan, or email, For more information, please call the ISBA at 317-639-5465.

RG 10.13_RG 09.05 10/29/13 10:31 AM Page 24

ETHICS CURBSTONE continued from page 22 tions of Judge Johnson. There was no foundation established that these witnesses presented information to the Respondent which he employed in forming conclusions before his public statements. The witnesses’ testimony was properly deemed to be irrelevant by the Hearing Officer.” Id. at 1257. On the other hand, in Matter of Wilkins, 777 N.E.2d 714 (Ind. 2002), 782 N.E.2d 985 (Ind. 2003) (opinion on rehearing on sanction only), the Court intimated the opposite: “[W]e find that the respondent offered no evidence to support his contentions that, for example, the Court of Appeals was determined to find for appellee, no matter what. Without evidence, such statements should not be made anywhere. With evidence, they should be made to the Judicial Qualifications Commission.” 777



N.E.2d 714 at 717. See also Matter of Crenshaw, 815 N.E.2d 1013, 1014 (Ind. 2004). Current law on this question is muddled. Truth is a defense in defamation cases governed by the New York Times standard, but we now know that our Supreme Court is not going to apply the undiluted New York Times standard to lawyers. Third, if untruthfulness is an element of a reckless-disregardbased Rule 8.2(a) charge, who has the burden of proof? To use my example, should the Commission be required to call the judge as a witness to prove he is not a crook, or should it be up to the respondent to prove that the judge is a crook? The cases cited earlier certainly imply that if truthfulness is an element of a reckless-disregard claim, the burden will fall on the respondent to demonstrate truth

as an affirmative defense rather than on the Commission to affirmatively prove falsity.

No rule violations Returning then to the Court’s resolution of the charges in Dixon, the respondent defended on the basis that he was obligated by applicable rules and law to make a direct case for judicial disqualification on the basis of personal bias or prejudice. Further, the respondent sought Judge Manier’s disqualification on the basis of appearance of bias or prejudice because Rule 2.11(A) of the Indiana Judicial Code requires a judge to disqualify in any case “in which the judge’s impartiality might reasonably be questioned.” This, too, is an objective standard. Even if a judge does not harbor actual bias or prejudice against a party’s cause, disqualifica-

RG 10.13_RG 09.05 10/29/13 10:31 AM Page 25

tion is required if the facts and circumstances are such that it would reasonably appear to reasonable observers that the judge is biased or prejudiced. In determining, contrary to the hearing officer’s recommendation, that the respondent did not violate Rule 8.2(a) as charged, the Court noted the need of lawyers for “wide latitude in engaging in robust and effective advocacy on behalf of their clients – particularly on issues, as here, that require criticism of a judge or a judge’s ruling.” (Emphasis added.) Reviewing the hearing officer’s findings regarding statements numbered two through four above, the Court concluded that statement two did not suggest an improper judicial motive, only a basis for a claim of personal bias or prejudice, which the Court had earlier determined should be given wide latitude. The Court acknowledged that statements three and four were similar to the statements that resulted in discipline in Wilkins. The Court distinguished this case from Wilkins by contrasting Wilkins’ statement, which it characterized as “the attorney’s speculation,” with the respondent’s support for claims of judicial bias or prejudice in the form of a lengthy recitation of facts and many pages of related documentation. The Court contrasted the cases thus: “In contrast, the objectionable statement in Wilkins seems to have been more of a random pot-shot than relevant argument.”

current professional standards.” (Quoting hearing officer’s report.) What is the lesson of Dixon when measured against the long line of Indiana cases disciplining lawyers for improper judicial criticism? It is, I would suggest and taking the Court at its word, that there will be “wide latitude” for client advocacy when it comes to the unique context of an advocate directly informing a judicial officer why he believes she is biased or prejudiced against his client or his client’s cause and should be disqualified from the case. That said, any allegation of judicial bias or prejudice must be adequately supported and have a non-frivolous basis for success. Nonetheless, to use Justice Rucker’s turn of phrase in his Dixon defense, there would appear to be “little to no daylight” between directly communicating to a judge why a party believes she harbors bias or prejudice against that party and Wilkins, where the

statements about the Court of Appeals were directed to the Supreme Court in its capacity as a court conducting appellate review of the decision of the Court of Appeals. Discipline cases against lawyers for improper judicial criticism have seen an unusual degree of divergence of opinion within the Supreme Court. Dissents in lawyer discipline cases are rather rare except on the question of appropriate sanction. Wilkins was decided by a three-member majority, with two justices, Sullivan and Boehm, passionately dissenting, not on sanction, but on the merits. In a strange procedural twist, Justice Rucker, who had been in the majority, recused after the case was decided but while it was under review on a petition for rehearing. Matter of Wilkins, 780 N.E.2d 842 (Ind. 2003) (Rucker, J. recusing). (continued on page 26)

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Lack of unanimity Justice Rucker dissented from the four-member majority opinion on the basis that statements three and four were indistinguishable from the Wilkins statement and the respondent’s “comments went beyond legal argument, they became personal, and violate

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RG 10.13_RG 09.05 10/29/13 10:31 AM Page 26

ETHICS CURBSTONE continued from page 25 This left a four-member Court to entertain a petition for rehearing seeking a reduction in sanction from a 30-day suspension. By this time, there was no remaining member of the Court who thought a 30-day suspension was appropriate, with then-Chief Justice Shepard and now-Chief Justice Dickson believing that a public reprimand

was the proper sanction. Justices Sullivan and Dickson, as dissenters, were of the opinion that Wilkins had not violated Rule 8.2(a) and accordingly should not be disciplined at all. A two-to-two vote would have required the 30-day suspension, a sanction no justice any longer thought was right, to stand. It was only by agreeing to

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grant rehearing and side with the Chief Justice and Justice Dickson as to sanction only that Justice Boehm created a three-justice majority to reduce the sanction to a public reprimand. This act, he contended, would “free parents everywhere from that burden� of explaining to their children how a lawyer could be sanctioned in a way that no justice on the Court thought was warranted. Matter of Wilkins, 782 N.E.2d 985 (Ind. 2003) (opinion on rehearing). Dissention in the Court on judicial criticism cases was not reserved for Wilkins. Justice Sullivan filed a strong dissent to the sanction in Atanga, and now we have Justice Rucker in dissent from the majority opinion in Dixon, finding no sanctionable judicial criticism. Seeking judicial disqualification for cause is treacherous terrain. Dixon is an important step forward in giving lawyers a road map for navigating that territory. That said, there remain plenty of sinkholes, ravines and hidden obstacles. Often, the better choice is not to go there. But lawyers have clients to serve, and sometimes it is unavoidable. Dixon and its antecedents are essential reading for any lawyer who ventures forth.

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RG 10.13_RG 09.05 10/29/13 10:31 AM Page 28

By Prof. Allison Martin

Six tips for writing effective demand letters



awyers are frequently engaged to write demand letters – letters sent to request payment or some other action from opposition in a dispute. Demand letters may be sent to opposing counsel or an opposing party. They can be effective tools in pre-litigation settlement efforts and may become important later, even if a settlement is not initially reached. In “WordWise” this month, let’s explore how lawyers can write effective demand letters. Grounded in mediation/negotiations research and good legal writing practices, here are six tips:

Keep your goals in mind

When drafting your demand letter, consider these main objectives: (1) to show that your client is serious; (2) to spur the opposition into action; (3) to ultimately save money and time, and to avoid unintended costs, such as destroyed relationships, the loss of control, and the lack of creative solutions; (4) to reach a mutually beneficial outcome; and (5) to appear reasonable and willing to work with the opposition – for the benefit of the opposition initially and perhaps at court later on. Also, keep in mind any longterm goals. If your case is based on alleged tortious conduct in Indiana, for example, you will want to heed the Tort Prejudgment Interest Statute (TPIS) and recent Indiana Supreme Court opinions interpreting that statute.1 Accordingly, if you make a settlement offer in your demand letter and know that you will Prof. Allison Martin seek prejudgment IU McKinney School of Law interest later should Indianapolis, Ind. a judgment ultimately be obtained, it would 28


be wise to send the letter within one year of filing the lawsuit, include a provision requiring that payment be made within 60 days after the offer is accepted, and specifically reference TPIS in the letter.2

Weigh your strategies Since legal negotiations often begin with a demand letter, it is important to heed strategic lessons learned through research in the mediation and negotiation context: (1) first impressions are difficult to overcome; (2) people generally take self-interested positions and become entrenched in those positions; (3) when confronted with anger, people respond with greater anger; (4) positive emotions facilitate settlement; (5) extreme initial offers likely result in better settlements for the offeror; (6) framing outcomes in terms of gains rather than losses affects choices – people tend to opt for certain gain over certain loss, and opt for uncertain loss over certain loss; and (7) people who are allowed to tell their side through an integrative fact and legal narrative are more likely to settle.3 Further, legal-negotiation theory counsels “to avoid threats, blame, and shame; to view the negotiation as a collaborative rather than a competitive process; to avoid focusing on zero-sum solutions; and to frame the negotiation as a win-win proposition.”4 It would be wise, therefore, to frame a demand letter in a positive, collaborative light, focusing on gains for both sides rather than losses, and building trust from the outset. Try to tell an integrative narrative of the client’s side. If you are putting forth an initial offer, you want to aim high. When considering how the opposition will respond, take into account that “person’s goals, personality, background, and vulnerabilities.”5 Of course, with this cooperative spirit

in mind, “[a] demand letter is not the proper place to make concessions or admissions that may come back to haunt you later.”6 For example, if you have a weaker claim and a stronger claim, your best strategy may well be to remain silent on the weaker claim to avoid antagonizing your opposition and to maintain credibility.7 Similarly, try to “avoid ambiguous conciliatory language that might grant unintended rights,” such as offering an extension of time that would not be in your client’s best interests.8

Follow your ethical obligations Certain ethical obligations are particularly relevant when drafting a demand letter. The Rules of Professional Conduct require that the client must be consulted about the contents of the letter, and the lawyer must abide by the client’s decision whether to settle a dispute.9 A lawyer should not use “offensive tactics” and should treat opposition with “courtesy and respect.”10 A lawyer shall not use means that only serve “to embarrass, delay, or burden a third person.”11 Also, when writing to opposing counsel, a lawyer should not threaten disciplinary action to gain an advantage in civil litigation.12 Further, when writing the letter, a lawyer may not knowingly make a false statement of material fact or law.”13 With regard to statements of fact, applying this rule requires a lawyer to distinguish between what is fact and what is opinion. Whether a statement is regarded as factual depends upon circumstances.14 Some statements made during negotiations, like “[e]stimates of price or value” or whether a party would be willing to accept a settlement offer, are ordinarily considered opinion rather than fact.15 However, “the ABA Ethics Committee has concluded

RG 10.13_RG 09.05 10/29/13 10:31 AM Page 29

that both a lawyer’s settlement authority and a client’s bottom-line can be material facts to a negotiation.”16 As for omissions, a lawyer is generally not required to inform the opposition of relevant facts17 but must disclose any material fact “when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6.”18 And, of course, the wise lawyer will avoid committing any other kind of professional misconduct, such as using words that manifest bias or prejudice,19 using words that suggest an ability to improperly influence a government agency,20 or using words that suggest the lawyer is disinterested when sending a letter to an opposing party rather than opposing counsel.21

Stay within the bounds of the law Be sure that any demands comply with applicable local, state and federal law. For example, you may qualify as a debt collector and therefore need to comply with the Fair Debt Collections Practices Act.22 In addition, it is prudent to know the limits of certain criminal laws, such as intimidation23 and bribery,24 and any relevant civil laws, such as fraud.25 Some laws (e.g., debt collection laws) now even require that a demand letter be sent before filing a lawsuit.26 On the other hand, the Bankruptcy Code prohibits collection efforts of any kind when a bankruptcy automatic stay is in place.27

who have good reputations.”30 Thus, a good reputation can increase chances of success; a bad reputation may undermine them.31

Know the writing mechanics and delivery methods Open your demand letter by identifying yourself as your client’s legal representation and identifying your client’s demand. In the paragraphs to follow, present a wellcrafted statement of the supporting facts chronicling the history of the dispute and the applicable law, the extent to which will depend upon your strategy. As a general rule, the letter should be no longer than two pages; it is not meant to be as detailed as a trial brief. Your tone and language will play a significant role in the letter. A more dispassionate tone is wise to avoid antagonizing the opposition and to appear more reasonable. A professional, courteous tone often captures more readers.

Further, be sure that your language is appropriate not only for your immediate audience but for anyone who may eventually read the letter. A good rule of thumb is to assume that your letter will be published in the newspaper and write accordingly. At the close of the letter, it is good to remind the reader of your client’s demand and to provide a clear, reasonable deadline for action. As with all persuasive writing, an overall theme should be woven throughout the letter. Also, grammar, spelling and punctuation matter. As for delivery, in addition to regular mail, it is best to use certified mail, return receipt requested, or some other similar service or technology that shows proof of receipt. While the concept of demand letters may be simple, writing effective demand letters can be compli(continued on page 30)

‘Cultivate’ a good reputation28 Tactics used by a negotiator are correlated to the opposing lawyer’s reputation.29 “Negotiators tend to use more competitive negotiation tactics with those who, through dishonest or overly competitive behavior, have a negative reputation and are more forthcoming with those RES GESTÆ • OCTOBER 2013


RG 10.13_RG 09.05 10/29/13 10:31 AM Page 30

WORDWISE continued from page 29 cated. It is hoped that these six tips will help you be more successful in resolving disputes for your clients. 1. Ind. Code §34-51-4; Wisner v. Laney, 984 N.E.2d 1201 (Ind. 2012); Alsheik v. Guerrero, 979 N.E.2d 151 (Ind. 2012); Inman v. State Farm Mut. Auto. Ins. Co., 981 N.E.2d 1202 (Ind. 2012); Kosarko v. Padula, 979 N.E.2d 144 (Ind. 2012). 2. Ind. Code §34-51-4-6. See also Wisner, 984 N.E.2d at 1212 (“the better practice for lawyers in the future would be to cite the statute in the settlement letter and make it very clear that the letter is intended to invoke the statute, including the 60-day settlement window and the possibility of prejudgment interest”). 3. Carrie Sperling, “Priming Legal Negotiations through Written Demands,” 60 Cath. U. L. Rev. 107, 119-126 (Fall 2010). 4. Id. at 140-41. 5. Bret Rappaport, “A Shot Across the Bow: How to Write an Effective Demand Letter,” 5 J. Ass’n Legal Writing Directors 32, 35 (Fall 2008). 6. Charles R. Calleros, Legal Method and Writing 526 (5th Ed. 2006). 7. Id. 8. Id. 9. Rules 1.2(a); 1.4; 1.4, comment [5] (“when there is time to explain a proposal made in a negotiation, the lawyer should review all important provisions with the client before proceeding to an agreement”).

13. Rule 4.1(a). 14. Rule 4.1, comment [2]. 15. Id. Compare Fire Ins. Exchange v. Bell by Bell, 643 N.E.2d 310 (Ind. 1994) (lawyer representation about policy limits considered a fact), with Wheatcraft v. Wheatcraft, 825 N.E.2d 23 (Ind. Ct. App. 2005) (lawyer representation about valuation of company based on appraisal considered an opinion). 16. Art Hinshaw, “Teaching Negotiations Ethics,” 63 J. Legal Educ. 82, 86 (August 2013) (citing ABA Comm. on Ethics & Prof’l Responsibility, Formal Op. 93-370 (1993); ABA Comm. on Ethics & Prof’l Responsibility, Formal Op. 06439 (2006)). It is important to note that, generally, a lawyer has a right to rely on material representations made by an opposing lawyer during negotiations. Fire Ins. Exchange, 643 N.E.2d at 313. 17. Rule 4.1, comment [1]. 18. Rule 4.1(b). Though not tailored specifically to negotiations, Rules 1.2(d), 3.3(b) and 8.4(c) also require a lawyer to avoid assisting a client’s criminal or fraudulent conduct. 19. Rule 8.4(g). 20. Rule 8.4(e).

28. Art Hinshaw, “Teaching Negotiation Ethics,” 63 J. Legal Educ. 82, 94 (August 2013). 29. Id. 30. Id. (citations omitted). 31. Id.

Clinical Professor of Law Allison Martin joined I.U. McKinney’s legal writing program in 2003, after teaching legal writing at both the University of Illinois and the University of Alabama. Before teaching, Prof. Martin clerked for an Illinois Supreme Court justice and practiced civil litigation with a Chicago law firm and the Illinois Attorney General’s Office. She has been a faculty advisor for the Moot Court Society since she arrived at the law school, advising the school’s national teams and the National Professional Responsibility Moot Court Competition.

21. Rule 4.3. 22. 15 U.S.C. §§ 1692-1692o (2000). See also Scott J. Burnham, “What Attorneys Should Know About the Fair Debt Collection Practices Act, or, the 2 Dos and the 200 Don’ts of Debt Collection,” 59 Mont. L. Rev. 179 (2000). 23. Ind. Code §35-45-2-1. 24. See, e.g., Ind. Code §35-44.1-1-2; 18 U.S.C. §201.

11. Rule 4.4(a).

25. See, e.g., Wheatcraft, 825 N.E.2d 23, 31 (in action to set aside divorce decree, party could not show actionable fraud against lawyer).

12. ABA Formal Op. 94-383 (1994).

26. Sperling, supra note 3, at 30-31.

10. Rule 1.3, comment [1].

27. 11 U.S.C. §362(a)(6). See also In re Kondritz, 10-12630-FJO-7, 2011 WL 2292292 (Bankr. S.D. Ind. June 8, 2011).

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RG 10.13_RG 09.05 10/29/13 10:31 AM Page 32

By Mark S. Zuckerberg and Amanda K. Quick

Exceptions to the bankruptcy discharge



s the economy continues to recover from the depths of the Great Recession, bankruptcy filings have become a fact of life for many people. A personal bankruptcy filing immediately gives debtors relief from their financial burdens by means of the automatic stay. At the end of a bankruptcy case, debtors are able to get a fresh financial start by discharging the vast majority of their debts. Creditors, on the other hand, are generally left with no recourse against debtors who have obtained a bankruptcy discharge. Old promissory notes, judgments and garnishment orders are rendered virtually meaningless in the face of a discharge. Attempts to collect on a discharged debt are a violation of the Bankruptcy Code and can result in hefty sanctions and damage awards for debtors. However, it may come as a surprise to many debtors, creditors and their counsel that the dischargeability of debts is by no means cut and dry. Exceptions to discharge in Chapter 7 bankruptcy abound in Mark S. Zuckerberg the Bankruptcy Code Bankruptcy Law Office of under 11 U.S.C. §523. Mark S. Zuckerberg, P.C. Subject to a few excepIndianapolis, Ind. tions, the majority of these debts are also non-dischargeable in Chapter 13.1 Many of these exceptions are automatic and do not require any action to be taken by creditors. Other exceptions require creditors to commence adversary proceedings objecting to the discharge of Amanda Koziura Quick their debt. Although SK Dick & Associates, LLC there are certain time Indianapolis, Ind. limits that apply for



the commencement of an adversary proceeding, in many cases successful creditors come out of a debtor’s bankruptcy case with an enforceable debt.

Automatic exceptions to discharge Bankruptcy Code §523(a) sets forth numerous exceptions to the bankruptcy discharge, many of which are automatic. The first type of non-dischargeable debt is set forth in Code §523(a)(1) for certain types of taxes. Dischargeability depends on several factors, including the priority status of the tax liability, the filing date of the returns and whether there is any indicium of fraud or willful evasion. Priority taxes include trust fund and income taxes for which a return is last due within three years before filing a bankruptcy petition and for which the tax was assessed at least 240 days before the bankruptcy petition.2 Other factors must also be considered when determining priority status of back tax obligations. Another automatic exception to discharge is debt falling within the definition of “domestic support obligation.”3 A domestic support obligation is defined by the Bankruptcy Code and covers debts that accrue before, on or after the order for relief for child support, alimony or spousal maintenance.4 Domestic support obligations cannot be discharged in either Chapter 7 or Chapter 13 bankruptcy. There is a separate exception to discharge for debts arising out of a property settlement agreement or divorce decree.5 Unlike domestic support obligations, these debts may be discharged in Chapter 13, but not in a Chapter 7 case.6 Student loans are another type of debt that is generally not dischargeable in bankruptcy. Bankruptcy Code §523(a)(8)

excepts both federally backed and private student loans from discharge unless doing so would impose an undue hardship on a debtor and his or her dependents. The Seventh Circuit has adopted the majority approach when it comes to the “undue hardship” test.7 This three-pronged test basically requires an impossibility of repayment in order for a debtor to obtain a discharge of student loan debt. The debtor must bring an adversary proceeding within his or her bankruptcy case in order for the court to make a determination as to dischargeability. Condominium and homeowners’ association fees that become due and payable following the filing of a bankruptcy petition are also non-dischargeable in Chapter 7 proceedings.8 Debtors are responsible for these fees until legal title to real estate is out of their name. This often comes as a surprise in the months and years following a bankruptcy filing for many debtors who chose to “surrender” their interest in real estate in their bankruptcy case. Surrendering real estate has no effect as to who holds legal title to the land. Debtors need to be aware of this fact and their ongoing obligations that “run with the land” until the real estate is legally owned by another person or entity. While certainly not an exhaustive list, these are a few of the most common types of debts that are automatically not included in a debtor’s bankruptcy discharge. As previously mentioned, not all exceptions to discharge are automatic. Several require a creditor to file a timely adversary proceeding objecting to discharge within 60 days of the first date set for the meeting of creditors.9

RG 10.13_RG 09.05 10/29/13 10:31 AM Page 33

Money, property or services obtained by false pretenses or actual fraud The first type of debt under Bankruptcy Code §523(a) that requires a creditor to take affirmative action regarding dischargeability falls under subsection (2). This statutory subsection provides an exception to discharge for a debt for “money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by false pretenses, a false representation or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition.”10 Allegations concerning dischargeability under Bankruptcy Code §523(a)(2)(A) were at the forefront of the recent adversary case In re Julian, No. 12-50275,

2013 Bankr. LEXIS 665 (Bankr. S.D. Ind. Feb. 20, 2013). Prior to the debtors filing for bankruptcy relief, a couple hired the debtorhusband to complete roof repairs to their residence. Satisfied with his work, they hired the debtorhusband to do further renovation work on their home and entered into a written contract. Over the course of several months, the creditors paid debtorhusband a total of $18,200 for materials and labor. They quickly grew unhappy with the progress of the renovations and the quality of work. They sued the debtor-husband in state court and obtained a total judgment of $15,283.10. It was thereafter that debtor-husband and his wife filed a Chapter 7 proceeding and the creditors initiated the adversary proceeding.

In its analysis of whether the debt was non-dischargeable under Bankruptcy Code §523(a)(2)(A), the bankruptcy court noted that this section lists three separate grounds for non-dischargeability: actual fraud, false pretenses and false representation. The Seventh Circuit has formulated two different tests for this Code section.11 The first test is for “false pretenses” and “false representation.” The second test examines grounds for nondischargeability based on “actual fraud.” Under all prongs of Code §523(a)(2)(A), a creditor must successfully prove the debtor acted with intent to deceive. Since direct proof is not always available, it can be inferred by the surrounding circumstances.12 A creditor also must show causation between the (continued on page 34)

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RG 10.13_RG 09.05 10/29/13 10:31 AM Page 34

BANKRUPTCY continued from page 33 creditor’s injury and debtor’s acts by proving the creditor “justifiably” relied upon the debtor’s false pretense, false representation or actual fraud.13 The bankruptcy court ultimately determined the debt was in fact dischargeable. The court found no evidence of “false pretenses” or “false representations” made by the debtor-husband in the matter. Furthermore, the court found that the debt was not incurred by “actual fraud” as there was no proof of fraudulent intent at the time the debt was incurred. In its decision, the court noted “the greater the extent of the debtor’s performance, the less likely an intent to defraud.”14 The debtor here had completed at least half of the renovations and hired someone to do the portion he was not comfortable completing himself. A mere breach of contract or failure to perform promised work does not, by itself, make a debt dischargeable under Code §523(a)(2)(A).15 The factual scenario involving a contractor who does not start or finish work he was hired to do is often contested as a non-dischargeable debt in bankruptcy proceedings. Generally, there are two ways to establish fraud or misrepresentation under Code §523(a)(2)(A) in bankruptcy.16 First, a creditor can prove

that a contractor executed a contract without ever intending to comply with the contract’s terms. A creditor can also make a showing that a contractor made intentional misrepresentations of a material fact or qualification when soliciting work.

Fraud or defalcation in fiduciary capacity Bankruptcy Code §523(a)(4) sets forth an exception to discharge for debts resulting from “fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.” The recently decided case In re Stover from the Bankruptcy Court for the Southern District of Indiana provides a detailed discussion of this Code section.17 Stover involved creditors of the debtor that filed an adversary proceeding seeking non-dischargeability of their debt under Code §523(a)(4) and several other Code sections. The debtors were in the sign-making business prior to filing Chapter 7 bankruptcy. The plaintiffs contracted with debtor-husband to make a sign for their real estate business, giving him a several thousand dollar down payment. Debtorhusband began installation and construction of the sign. However, a fire at his company’s premises destroyed his equipment, tools and the plaintiffs’ partially completed

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sign. They filed a state court lawsuit, and debtors subsequently filed their bankruptcy petition. Plaintiffs initiated the adversary complaint, and debtor-defendants moved for summary judgment on all counts. Under Code §523(a)(4), there are three possibilities for recovery. “Fraud or defalcation while acting in a fiduciary capacity” requires a debtor to have owed a fiduciary duty to the creditor. This is solely a question of federal law. According to the Seventh Circuit, a debtor can be a fiduciary even without an express trust if there is a “difference in knowledge or power between the fiduciary or principal which ... gives the former a position of ascendancy over the latter.”18 It is not enough to be a fiduciary; the debtor must also engage in “fraud or defalcation” while acting in his or her fiduciary capacity. “Fraud” under this Code section requires intentional deceit, and “defalcation” involves “a failure to account for money or property that has been entrusted to another.”19 Even if a debtor is not a fiduciary, indebtedness may be declared non-dischargeable under this section if the debt is a result of “embezzlement” or “larceny.” The bankruptcy court found that the debtor-defendants were not fiduciaries to the plaintiffs. They were merely parties to a contract. The debt that arose in this case was the result of a breach of contract, not a breach of fiduciary duties owed to the plaintiffs. Since neither embezzlement nor larceny were asserted in plaintiffs’ complaint, the bankruptcy court granted in part the defendant-debtors’ motion for summary judgment under Code § 523(a)(4). (continued on page 36)

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RG 10.13_RG 09.05 10/29/13 10:31 AM Page 36

BANKRUPTCY continued from page 34 Willful and malicious injury by the debtor The third type of debt that requires a creditor to bring an adversary proceeding objecting to discharge is set forth in Bankruptcy Code §523(a)(6). This subsection provides an exception to discharge for debts arising out of the “willful and malicious injury by the debtor to another entity or to the property of another entity.” In Kawaauhau v. Geiger, 523 U.S. 57 (1998), the United States Supreme Court was faced with the question as to the scope of this exception to discharge. The debt at issue in that case arose from a medical malpractice judgment that was attributable to negligent or reckless conduct. The Court was called upon to determine whether this type of debt fell within the statutory exception for “willful and malicious injury.”

The Supreme Court held that the debt did not fall within the exception set forth in Bankruptcy Code §523(a)(6) and thus was dischargeable. It determined that a finding of willful and malicious injury under this subsection requires “actual intent to cause injury.”20 Intentional acts that cause injury do not fall within the exception. As noted by the Bankruptcy Court for the Northern District of Indiana in In re Young, 428 B.R. 804, 818 (Bankr. N.D. Ind. 2010), the “Geiger standard is extremely strict for creditors to meet.” This is how it should be, however, since “exceptions to discharge are to be construed strictly against a creditor and in favor of the debtor.”21 The lengthy list of exceptions to discharge in the Bankruptcy Code can abruptly halt a debtor’s path to a fresh financial start. The

truth is, however, that even where exceptions to discharge apply, a debtor is still often able to get relief by means of a bankruptcy filing. By discharging their legal obligation on other debts, debtors can free up funds to repay non-dischargeable debts. Since the 2005 amendments to the Bankruptcy Code, Chapter 13 no longer offers the “super” discharge it once did. However, a Chapter 13 bankruptcy filing can still be a useful tool for priority and other non-dischargeable Chapter 7 debts. 1. See 11 U.S.C. §1328. 2. See 11 U.S.C. §507(a)(8). 3. 11 U.S.C. §523(a)(5). 4. 11 U.S.C. §101(14A). 5. See 11 U.S.C. §523(a)(15). 6. See 11 U.S.C. §1328. 7. In re Roberson, 999 F.2d 1132 (7th Cir. 1993); Brunner v. New York State Higher Educ. Serv., Corp., 831 F.2d 395 (2d Cir. 1987). 8. 11 U.S.C. §523(a)(16). 9. See Fed.R.Bankr.P. 4007. 10. 11 U.S.C. §523(a)(2)(A). 11. In re Julian, No. 12-50275, 2013 Bankr. LEXIS 665 (Bankr. S.D. Ind. Feb. 20, 2013) (citing In re Scarpello, 272 B.R. 691, 699-700 (Bankr. N.D. Ill. 2002); McClellan v. Cantrell, 217 F.3d 890, 894 (7th Cir. 2000)). 12. Id. (citing In re Hanson, 432 B.R. 758, 773 (Bankr. N.D. Ill. 2010)). 13. Id. (citing Fields v. Mans, 516 U.S. 59, 74-75, 116 S.Ct. 437, 133 L.Ed.2d 351 (1995)). 14. Id. (citation omitted). 15. Id. (citing McClellan, 217 F.3d at 893). 16. Id. (citing In re Henderson, 432 B.R. 598, 622 (Bankr. N.D.N.Y. 2010)). 17. In re Stover, No. 12-50023, 2012 Bankr. LEXIS 4814 (Bankr. S.D. Ind. Oct. 12, 2012). 18. Id. (citing In re Marchiando, 13 F.3d 1111, 1115-16 (7th Cir. 1994)). 19. Id. (citing Hanson, 432 B.R. at 774-75). 20. Kawaauhau v. Geiger, 523 U.S. 57, 61 (1998). 21. In re Young, 428 B.R. 804, 817-18 (Bankr. N.D. Ind. 2010) (citing In re Scarlata, 979 F.2d 521, 524 (7th Cir. 1992); In re Zarzynski, 771 F.2d 304, 306 (7th Cir. 1985)).



RG 10.13_RG 09.05 10/29/13 10:31 AM Page 37

By Maggie L. Smith

Appellate civil case law update


ec. 31 marks the expiration of the two-year grace period delaying implementation of the amendments to Appellate Rule 9 regarding the filing of the Notice of Appeal. Beginning Jan. 1, all Notices of Appeal must be filed in the Court of Appeals, not in the trial court. As of Jan. 1, the failure to file the Notice of Appeal in the Court of Appeals before the deadline passes will forfeit a party’s right to an appeal because the improper filing of a Notice of Appeal is a jurisdictional defect that cannot be cured after the deadline has passed. In July, the Indiana Supreme Court issued three civil opinions and granted transfer in two civil cases. The Indiana Court of Appeals issued 21 published civil opinions. The full texts of these opinions are available via Casemaker at

SUPREME COURT DECISIONS Unanimous Supreme Court holds that Grandmother had no legal right to pursue visitation under the statute, and in this circumstance the only cure is to hold original order was void ab initio After Father murdered Mother in front of their two children, the paternal grandmother sought grandparent visitation with the children. The guardians allowed visitation, but learned that Grandmother violated the terms of visitation and a no-contact order by taking the children to the jail to visit Father and allowing Father to communicate with the children. The guardians sought to revoke visitation, arguing that Grandmother was not entitled

to seek visitation in the first place and, therefore, the original visitation order was void. A unanimous Supreme Court agreed, holding that the Grandparent Visitation Act allows only the parents of the deceased parent of the child to seek visitation. In re Guardianship of A.J.A., 991 N.E.2d 110 (Ind. 2013) (David, J.). The Supreme Court then rejected Grandmother’s argument that her son is “for all intents and purposes deceased,” finding “there is clearly a difference between those who, as Grandmother argues, are essentially dead because they are in prison, and those who are dead.” Having determined that Grandmother was not entitled to seek the original order, the Supreme Court had to determine whether the original order on grandparent visitation was void or merely voidable. A void judgment is a complete nullity from the beginning and has no legal effect. On the other hand, a voidable judgment is not null and can be confirmed or ratified and “[u]ntil superseded, reversed, or vacated, it is binding, enforceable, and has all the ordinary attributes and consequences of a valid judgment.” The Supreme Court concluded that the trial court’s original order granting Grandmother grandparent visitation was void and thus without legal effect. “Grandmother did not have standing under the strict terms of the grandparent visitation statute as has been stated herein. This is a case where Grandmother had no legal right to pursue grandparent visitation under the statute. Remand cannot cure the defect. The only cure is to hold the original order was void ab initio.”

Unanimous Supreme Court determines that failure to include required fees when filing proposed medical malpractice complaint with Indiana Department of Insurance does not affect filing date of proposed complaint The Medical Malpractice Act requires a plaintiff to file a proposed medical malpractice complaint with the Indiana Department of Insurance before she can file a medical malpractice complaint in the trial court. Weeks before the statute of limitations for the plaintiffs’ medical malpractice action ran, their attorney sent a proposed medical malpractice complaint to the Department of Insurance. Their attorney, however, inadvertently omitted the $7 statutory filing and processing fee. The plaintiffs then filed their complaint in the trial court. A few days before the statute of limitations ran, the Department of Insurance notified the plaintiffs of the omitted fees and informed the plaintiffs that their proposed complaint would “not be considered filed with the Department until the filing fees … [were] received.” The same day that the statute of limitations ran, the plaintiffs put the fees in the mail. The fees were received by the Department of Insurance three days after the statute of limitations ran, and the proposed complaint was then file-stamped as of that date. A unanimous Supreme Court in Miller v. Dobbs, 991 N.E.2d 562 (Ind. 2013) (Massa, J.), held a proposed complaint is considered time- Maggie L. Smith ly filed under the Medical Frost Brown Todd



Indianapolis, Ind.

(continued on page 38) RES GESTÆ • OCTOBER 2013


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RECENT DECISIONS 7/13 continued from page 37 Malpractice Act “when a copy of the proposed complaint is delivered or mailed by registered or certified mail to the commissioner.” Thus, a proposed complaint will be filed “regardless of whether the required fees are submitted with it; the fees ‘accompany’ the filed complaint, but they are not actually part of it.”


sued to recover unused vacation time.

Unanimous Supreme Court concludes that union’s interpretation of its own bylaws and constitution can prevent payment of unused vacation time to elected officials, but will have no effect on whether non-elected employee is entitled to payment

Indiana law provides that employers are not legally required to compensate employees for their unused vacation time, but if an employee is promised vacation time by his employer, the general rule is that the employee is entitled to use that time or save it for use or payment at a later date. This general rule is subject to exception by an arrangement or policy of the employer that either places a prerequisite on an employee’s ability to use the promised vacation time or prevents the employee from using the vacation time after a date certain or period of time.

After two elected officials lost a union election, they sued to recover unused vacation time. The wife of one of the elected officials was a clerical employee with the union and was also let go and likewise

The question in Commissioner of Labor ex rel. Shofstall v. International Union of Painters and Allied Trades AFL-CIO, CLC Dist. Council 91, 991 N.E.2d 100 (Ind. 2013) (Massa, J.), “is whether the union


bylaws and constitution are an ‘arrangement or policy’ preventing the disbursement of accrued but unused vacation pay to officers or employees of the Union upon termination.” With regard to the elected officials, a unanimous Supreme Court concluded that a provision in the bylaws providing that the employee shall “receive two weeks paid vacation per year” constituted an “arrangement or policy” regarding vacation time. The union contended that this policy was actually a “use-it-or-lose-it” policy. The Supreme Court accepted this interpretation and affirmed summary judgment in favor of the union, finding, “How a union, or any voluntary association, chooses to compensate its elected officers and staff is certainly a matter of union governance, and as such, is generally an internal matter. Those rules and policies are promulgated by the association leadership, and under our precedent, that leadership has the authority to interpret those rules and policies.” With regard to the non-elected clerical employee, the Supreme Court concluded that neither the union’s constitution nor its bylaws contained a policy for clerical employees. The union was therefore required to establish it had some other “arrangement or policy” that limited employees’ right to accrued vacation. Finding that genuine issues of fact existed as to whether such a policy existed and, if it did, what it was, the Supreme Court held that the union failed to make a sufficient showing to entitle it to summary judgment.

RG 10.13_RG 09.05 10/29/13 10:31 AM Page 39

SUPREME COURT TRANSFER DISPOSITIONS The Indiana Supreme Court granted transfer in the following two civil cases, with the opinions to follow at a later date: • Groce v. American Family Insurance Company, 986 N.E.2d 828 (Ind. Ct. App. 2013) (Najam, J.), transfer granted July 11 (dealing with applicable statute of limitations on insureds’ claim against insurance agent for alleged inadequacy of the replacement cost coverage). • Alva Elec., Inc. v. Evansville Vanderburgh School Corp., 984 N.E.2d 668 (Ind. Ct. App. 2013) (Kirsch, J.), transfer granted July 11 (dealing with competitive bidding requirements for contract to renovate school corporation’s administration building that was facilitated by private foundation).


trial, the plaintiffs moved to exclude Dr. Ehrie’s testimony “as it relates to the standard of care of [the physician] or the pathology slides,” which the trial court overruled, finding that “Plaintiffs failed to show any surprise or that undue prejudice would transpire to them if Dr. Ehrie was permitted to testify” in accordance with the subject matter contained in the notice. At trial, the hospital called Dr. Ehrie as its expert pulmonologist. Responding to a line of plaintiffs’ questions posed to the physician’s expert, Dr. Fahey, the physician questioned Dr. Ehrie on crossexamination in his capacity as a pathologist, not as an expert pulmonologist. Plaintiffs objected, stating that Dr. Ehrie had never been disclosed as an expert pathologist and that the opinions that he had given had not been disclosed during discovery.

The trial court agreed with Plaintiffs, struck Dr. Ehrie’s testimony as a pathologist, and instructed the jury not to consider that testimony. After the jury returned a verdict for the physician and hospital, the trial court granted relief from judgment pursuant to Indiana Trial Rule 60(B)(3) and ordered a new trial, finding that the physician’s attempt “to confront the Plaintiffs with new and previously undisclosed expert witness opinions at trial” was “misconduct” that “prevented the Plaintiffs from fully and fairly preparing and presenting their case.” A unanimous Court of Appeals in Dumont v. Davis, 992 N.E.2d 795 (Ind. Ct. App. 2013) (Baker, J.), disagreed. The court first found that Plaintiffs were responsible for Dr. Fahey’s opinions being presented to the jury and that the physi(continued on page 40)

Unanimous Court of Appeals finds that trial court erred in reversing jury verdict in favor of defendant based upon alleged misconduct After the plaintiffs filed a medical malpractice complaint against the decedent’s treating physician and the hospital caring for her, the hospital identified Dr. Ehrie as its expert witness and disclosed his opinions, and the physician identified Dr. Fahey as his expert witnesses and disclosed his opinion. The physician did not list Dr. Ehrie as one of his expert witnesses. The plaintiffs did not depose either Dr. Ehrie or Dr. Fahey. Six months before trial, the physician sought leave to examine Dr. Ehrie as an expert witness for use at trial. The plaintiffs did not object to the motion, and the trial court granted it. Shortly before



RG 10.13_RG 09.05 10/29/13 10:31 AM Page 40

RECENT DECISIONS 7/13 continued from page 39 cian had disclosed Dr. Fahey’s opinion before trial, but Plaintiffs chose not to depose him. With regard to Dr. Ehrie, the court found that Plaintiffs chose not to depose him, were aware that he might testify as to pathological opinions before trial, but that Plaintiffs “fail[ed] to prepare for that contingency” and then chose not to call their own pathologist even though they had disclosed one. Thus, the court concluded, there was no misconduct. But “even if the trial court was correct that [physician’s] counsel committed misconduct, we would still believe that the trial court should not have granted the Plaintiffs’ request for a new trial. Rather, the error was remedied when the Plaintiffs’ counsel objected to Dr. Ehrie’s testimony, the trial court excluded the testimony in its entirety, and the jury was timely admonished not to consider Dr. Ehrie’s testimony that had been elicited by counsel.” Finally, the court held that the trial court erred “if and to the extent” that the trial court was influenced by the plaintiffs’ improper tender of an affidavit from a juror stating that the jury

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did consider Dr. Ehrie’s stricken testimony in reaching its verdict: “[A] jury trial … is eroded if a trial court judge can employ a jury’s explanatory statement to vacate its verdict.”

liability company of an instrument for apparently carrying on in the usual way the business or affairs of the limited liability company, binds the limited liability company … .” I.C. §23-18-3-1.1(b).

As a matter of first impression, Court of Appeals holds that LLC member ‘apparently carr[ied] on in the usual way the business’ of the LLC, which was to act as general partner of the Limited Partnership

The siblings argued that the limited partnership “is not in the business of selling real estate” and that Candace was not “apparently carrying on in the usual way the business or affairs” of the LLC when she executed the Purchase Agreement. The Court of Appeals disagreed: “The business of the LLC was, simply, to act as the general partner of the Limited Partnership, which owned the real estate. The Limited Partnership Agreement gave the LLC ‘the full and exclusive power’ to manage and operate the Limited Partnership’s affairs, including the power to ‘buy and sell any real or personal property[.]’” Thus, when Candace signed the Purchase Agreement she “apparently carr[ied] on in the usual way the business” of the LLC, which was to act as the general partner of the Limited Partnership.

The Cain Family Farm is a limited partnership composed of four siblings, who are also the only members of the LLC, which is the sole general partner of the limited partnership. The limited partnership held title to 17 tracts of real property covering approximately 400 acres and contracted with an auction company to sell all tracts at a public auction. After the auction, three siblings challenged whether their other sibling, Candace, had authority to enter into a purchase agreement with a bidder at the auction. A unanimous Court of Appeals in Cain Family Farm, L.P. v. Schrader Real Estate & Auction Co., 991 N.E.2d 971 (Ind. Ct. App. 2013) (Najam, J.), held that “Cain Family Farm placed Candace in a position to perform acts appearing reasonable to a third person such as [the bidder], including executing the … Purchase Agreement, and their action in doing so was sufficient to endow Candace with apparent authority.” As a matter of first impression, the court also interpreted the following statutory provision: “[E]ach member [of a limited liability company] is an agent of the limited liability company for the purpose of the limited liability company’s business or affairs, and the act of any member, including the execution in the name of the limited

OTHER COURT OF APPEALS DECISIONS • “Judicial notice excuses the party having the burden of proving a fact from producing formal proof to establish that fact … . Twin Lakes suggests, and we agree, that there is no question that the report [of the court-appointed appraisers] was inadmissible as a kind of fact in this case because the amount of damages was not only ‘subject to reasonable dispute,’ but was in fact the entire dispute underlying the case. Of the possible kinds of law of which a court may take judicial notice, only ‘records of a court of this state’ appears to potentially fit the court-appointed appraisal. However, while a party’s pleading may be judicially noticed, the facts in those pleadings are not necessar-

RG 10.13_RG 09.05 10/29/13 10:31 AM Page 41

ily subject to judicial notice … . What seems clear is that facts within the report, namely the damages calculated by the appraisers, were not suitable for judicial notice. The court-appointed appraisers’ report was thus improperly judicially noticed and admitted for consideration.” Twin Lakes Regional Sewer Dist. v. Teumer, 992 N.E.2d 744 (Ind. Ct. App. 2013) (Robb, C.J.). • For purposes of the Child Wrongful Death Act, “to be ‘enrolled’ in a vocational program means no more than to be actively participating in such a program.” With regard to whether a 20-yearold decedent’s participation in an informal apprenticeship under his father’s supervision qualifies as a “vocational program,” there is “no reason to impose a requirement that these educational programs contain a component of traditional classroom instruction … . We believe that disallowing coverage based solely on a program’s informality and focus on real-world, on-the-job training as opposed to classroom learning would ignore the practical realities of many courses of vocational study and exclude those in pursuit of a number of traditional trade designations from the operation of the CWDS.” Longest ex rel. Longest v. Sledge, 992 N.E.2d 221 (Ind. Ct. App. 2013) (Friedlander, J.). • “Although we have not found a case directly on point … Trial Rule 23 supports the conclusion that the trial court may amend, alter, modify and even revoke or rescind a previous order certifying a class. In our view, there is no logical reason to hold that the trial court may never revoke or rescind such an order. To hold otherwise would mean that once a class action is certified, the class cannot be later decertified, even if subsequently discovered facts and evidence suggest the class should not have been

certified in the first instance.” Ramsey v. Lightning Corp., 991 N.E.2d 132 (Ind. Ct. App. 2013) (Baker, J.).

nine years, we conclude that the prepayment premium fairly compensates Fannie Mae for the interest lost. As a result, we conclude that the prepayment premium here is enforceable as a matter of law.” Weinreb v. Fannie Mae, 993 N.E.2d 223 (Ind. Ct. App. 2013) (Riley, J.).

• “We conclude that the prepayment premium here constitutes a liquidated damages provision … . Given Fannie Mae’s Loan with a fixed interest rate over a period of

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RG 10.13_RG 09.05 10/29/13 10:31 AM Page 42

By Sharon D. Nelson, Esq., and John W. Simek

The iPhone 5s: How secure is the Touch ID?


© 2013 by Canadapanda


t came as no surprise that the new iPhone was hacked within a couple of days of its release. The hack was hyped in the headlines all out of proportion to the hack itself. And the security vulnerability uncovered was really old and tattered. We have known for a long time that fingerprints could be compromised. But it was downright fun to read in SC Magazine that there was already a crowd-sourced bounty to crack the iPhone 5s – the first Apple product to feature authentication via a fingerprint scan – even before the phone was released. The bounty was around $20,000 when we saw it, though the amount dropped later when someone reneged on his or her pledge. Within two days of the phone’s release, the German biometrics hacking team of the Chaos Computer Club (CCC) – an interesting name – successSensei Enterprises, Inc. fully bypassed the bioFairfax, Va. metric security of Apple’s Touch ID.



Here is the methodology that was used as described by the CCC. “First, the residual fingerprint from the phone is either photographed or scanned with a flatbed scanner at 2400 dpi [dots per inch]. Then the image is converted to black & white, inverted and mirrored. This image is then printed onto a transparent sheet at 1200 dpi. To create

the mold, the mask is then used to expose the fingerprint structure on photosensitive PCB material. The PCB material is then developed, etched and cleaned. After this process, the mold is ready. A thin coat of graphite spray is applied to ensure an improved capacitive response. This also makes it easier to remove the fake fingerprint. Finally, a thin film of white wood glue is smeared into the mold. After the glue cures the new fake fingerprint is ready for use.” We have to say that this methodology doesn’t sound all that easy to us. But it would certainly be relatively simple for someone who was targeting a specific phone and knew what he or she was doing. We do agree with CCC’s statement that “[i]t is plain stupid to use something that you can’t change and that you leave everywhere every day as a security token.” And we agree that whereas law enforcement officials can’t compel you to divulge your PIN, they could swipe your phone over your handcuffed hands. There are some security safeguards in place. You can’t unlock the phone with a fingerprint only

RG 10.13_RG 09.05 10/29/13 10:31 AM Page 43

if the device hasn’t been unlocked in 48 hours or has been reset – then you need the traditional PIN. Apple has emphasized that the fingerprint data will be encrypted and stored locally on a device – never uploaded to a cloud. But still … we take our fingerprints everywhere we go – is this really a good security mechanism? It would have been a true advancement if Apple had permitted users to choose both fingerprint authentication and a PIN. But this option is not available, even to those who would elect two-factor authentication in the name of security. Still, we are mindful that the Touch ID is better than no PIN – which is where many iPhone users are now. It may even be more secure than a four-digit PIN as well. And to put things in context, any evildoer must steal your phone as well as your fingerprint to get to your data. The odds of that happening are not great – unless you are targeted. Our recommendation remains the complex password, certainly for lawyers who do carry sensitive data on their phones. Also remember that the iPhone even stores data (e.g., screen shots) that you didn’t intentionally save, which may include confidential information. On a side note, the worst Apple flaw we’ve seen is the issuance of iOS 7, which included an easy way to deactivate “Find my iPhone” or “Find My iPad” even when the device is locked. All a bad guy has to do is turn on airplane mode, which can be done via Siri or in the Control Center, a feature new to iOS. Since that will disable mobile and Wi-Fi features, the location apps are defeated. How the Apple security geniuses let that one get through is beyond us. If you are like most security specialists and tired of Apple’s slow response, just go to the Control Center and turn off the

“Access on Lock Screen” feature. (Last-minute update: Apple released iOS 7.0.2, a minor patch, on Sept. 26, and it fixes two lock screen bugs, but it is unclear as we go to press whether the bugs identified above are resolved). It is gratifying to see Apple paying more attention to security, even if there are some missteps along the way. Security for smartphones will continue to evolve. The technological futurists all recognize that we live in a “Passwords are Dying” world and that two-factor authentication is a certain requirement for lawyers in the fairly near term. We are fans of tokens (something you have) along with passwords (something you know) as the mechanism for authenticating. The problem with biometrics – fingerprints, retina scans, etc. – is that they can all ultimately be compromised. And this is why all lawyers should attend a security CLE update at least once a year – nothing evolves as fast as technology and the recommended means of securing it! Sharon D. Nelson and John W. Simek are the president and vice president, respectively, of Sensei Enterprises, Inc., a legal technology, information security and digital forensics firm based in Fairfax, Va. © 2013 Sensei Enterprises, Inc.

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LONG-TERM DISABILITY. Attorney Charles A. Carlock seeks referrals on claims for long-term disability (ERISA) benefits. Tele., 317/573-5282 or 866/573-5283. SOCIAL SECURITY DISABILITY – Soultana S. Myers, Myers Hockemeyer & McNagny, LLP, 116 N. Chauncey St., Columbia City, IN 46725. Accepting Social Security disability clients in northern Indiana. Member of National Organization of Social Security Claimants’ Representatives. Toll-free: 888/248-2224.

Special Services QDRO PREPARATION FIRM: Avoid this malpractice trap by allowing us to prepare your QDROs for you. We are an Indiana law firm and have quick turnaround time on QDRO preparation. Please call us at 317.719.0200 or email for our information and pricing. OSHA SAFETY EXPERT WITNESS in construction and industry accidents. U.S. Dept. of Labor Authorized Trainer. Former OSHA inspector. OSHA Safety Expert, Inc., contact Wendell Rust toll-free at 877/544-4323, email: PRESCRIPTION ERRORS. Pharmacist attorney will consult, assist in case preparation, depositions and medical research or as co-counsel. Dennis L. Rorick, RPh., J.D., 260/351-4801. COAL, OIL, GAS – Leases, Surface Use Agreements, Title Opinions, Due Diligence, Royalty Determination. Hugh R. Hunt, Attorney at Law, 10 N. Court St., Sullivan, IN 47882; phone, 812/241-1480. MISSING HEIRS & WITNESSES located, intestate heirs verified. Complete family lineage establishment. Mark E. Walker & Company, LLC – Indiana Private Investigator Firm; 800-982-6973; STOCKBROKER/SECURITIES FRAUD. Former Indiana Securities Commissioner who works with investors and attorneys in brokerage disputes. Available for referrals, consulting, co-counsel or expert witness affiliations. No charge for initial evaluations. Maddox, Hargett & Caruso, Mark E. Maddox, 317/598-2040, 800/505-5515.

HEALTH CARE PROVIDER license defense. Experienced nurse attorney is available to represent nurses, physicians, pharmacists, dentists, veterinarians and other licensed health care professionals before the various licensing boards or to respond to an attorney general’s office license investigation. Lorie A. Brown, RN, MN, JD,, 317/465-1065.

Miscellaneous ELDER MEDIATION: A Way to Resolve Family Conflict, Advanced Mediation Training; Friday, Dec. 6, 2013; 9 a.m. to 4:30 p.m. Location: NASW-Indiana Chapter, 1100 W. 42nd St., Krannert Hall, Indianapolis, IN 46208. Lunch & refreshments included. NASW or IAM member, $130; nonmember, $160. Register online:; phone: 317/923-9878. MEDIATION CME SEMINARS: 12/6, 10-5:15. Prefiling Divorce, using Caring Language, and/or Elder Mediation. To register: 260/483-7660 or LAW OFFICE, 4911 E. 56th St., Indpls., 2 openings for off-site attys. $200 mo. includes recept., conf. rooms, copier & fax, VM, wireless Internet, mail del. & name on marquee. John Norman, 317/254-1443, or norman.john.e OFFICE SPACE – Attorneys located in the Chase Building at 111 Monument Circle in downtown Indianapolis looking to share extra office space. Secretarial services available if needed. Reply to Res Gestae, Box 071302, Indiana State Bar Association, One Indiana Square, Suite 530, Indianapolis, IN 46204 and reference Monument Circle office space. OFFICE SPACE: Attorneys located in the Gold Building at 151 N. Delaware St. in downtown Indianapolis looking to share extra office space. Secretarial services available. Possible referrals. Low rent. Reply to and reference “Gold Building” office space. QDRO PREPARATION FIRM: Avoid this malpractice trap by allowing us to prepare your QDROs for you. We are an Indiana law firm and have quick turnaround time on QDRO preparation. Please call us at 317.719.0200 or email for our information and pricing.

Email or fax your classified word ad to Susan Ferrer, or 317/266-2588. You will be billed upon publication. ISBA members 40¢ per word, $10 minimum Nonmembers 60¢ per word, $15 minimum

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By Patricia P. Truitt

Lawyers and artists collaborate



he Tippecanoe County Bar Association’s executive committee could not imagine a collection of paintings of Indiana courthouses without Tippecanoe County being represented. This became a challenge that culminated in the selection of an original work depicting our lovely, eclectic courthouse at an event in late April. Envisioning this as a bar association project that could involve county officials, Indiana artists, the legal community and two law-related charities, the Tippecanoe County Bar organized a committee of four attorneys, three artists and representatives from our local Legal Aid board and CASA office. At our first meeting in June of 2012, the committee established the outline for a courthouse art competition that would conclude with an exhibit of the entries to be offered for sale, with 30 percent of sale proceeds being divided between Tippecanoe County’s Legal Aid program and CASAs for Kids Fund. We chose a date when the snowbirds would have returned to Indiana but before the Purdue University community left for summer activities, far enough in the future that artists would have time to complete their works. We selected an overall theme, “Under the Dome” (UTD), and approached the Tippecanoe County Commissioners for permission to use the courthouse for the event. This required a county sponsor – CASA obliged – and adequate insurance, a licensed caterer and arrangements for security. It was fortunate that the paintings that usually hang in our courthouse were being moved to our local art museum for a period that corresponded with our dates. The artists on our committee put together a prospectus and arranged for a website,, where interested artists could find the competition rules (size, media, $20 entry fee, deadlines, etc.), history of the courthouse and other necessary Patricia P. Truitt information. By the end of March, Truitt, Ray & Sharvelle LLP we had more than 50 paid entries! Lafayette, Ind.



“Under the Dome” had its own logo and colors, which were used with all of the materials related to the event: the prospectus, letters, tickets, postcards and posters. Ball Eggleston, PC donated $1,000 for a cash award for the competition winner whose work would be selected by a group of three judges: Mark Ruschman, Chief Curator of Fine Arts at the Indiana State Museum, attorney Jane B. Merrill, co-chair of the ISBA Courthouse Art Committee, and Ellie Haan, renowned Indiana art collector. Several other law firms contributed cash and seed money for the project. We gave talks and solicited pre-event pledges through letters and emails, inviting attorneys, downtown businesses and art collectors to be Purchase Award Sponsors, so we would have a pool of funds to entice Indiana artists to participate. We received more than $3,000 in pledges. In addition to typical publicity channels and materials, we linked the UTD website to the Tippecanoe County Bar Association website,, and sent emails to our members who were wonderfully responsive. Tickets at $20 a piece for the opening of “Under the Dome” April 26 were made available at various downtown locations and online through The ticket price covered two drinks and hors d’oeuvres catered by the Lafayette Country Club, a chance to view and purchase a variety of original works of art depicting the New Acoustic Quintet of wonderful musicians who donated their talents to the event, and the opportunity to purchase original artwork depicting the site where we practice our profession. Doing “Under the Dome” was much more than merely selecting a representation of Tippecanoe County for the ISBA’s Courthouse Collection. It was a wonderful collaboration among lawyers, the county and the arts community to celebrate our unique courthouse, which is the center of our county.

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Res Gestae - October 2013  

October edition of Res Gestae, the journal of the Indiana State Bar Association.

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