Sahara Mart, Incorporated v. Indiana Department of State Revenue , 114 N.E.3d 36 ( 2018 )

ATTORNEY FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
BRETT J. MILLER CURTIS T. HILL, JR.
BINGHAM GREENEBAUM DOLL LLP ATTORNEY GENERAL OF INDIANA
Indianapolis, IN WINSTON LIN
DEPUTY ATTORNEY GENERAL
Indianapolis, IN
HAMISH S. COHEN
SEAN P. BURKE
RAYMOND J. BIEDERMAN
DAVID C. DICKMEYER
MATTINGLY BURKE COHEN &
BIEDERMAN LLP
Indianapolis, IN
FILED
IN THE Oct 26 2018, 3:21 pm
CLERK
INDIANA TAX COURT Indiana Supreme Court
Court of Appeals
and Tax Court
SAHARA MART, INCORPORATED, )
)
Petitioner, )
)
v. ) Cause No. 49T10-1709-TA-00017
)
INDIANA DEPARTMENT OF )
STATE REVENUE, )
)
Respondent. )
ORDER ON RESPONDENT’S MOTION FOR SANCTIONS AND CONTEMPT
FOR PUBLICATION
October 26, 2018
WENTWORTH, J.
Sahara Mart, Incorporated, has challenged the Indiana Department of State
Revenue’s final determination assessing it with unpaid Indiana sales tax liabilities for the
2013, 2014, and 2015 tax years (the years at issue). The matter is currently before the
Court on the Department’s “Motion for Sanctions and Contempt” (“Motion”). The Court,
being duly advised in the premises, grants the Department’s Motion.
FACTS AND PROCEDURAL HISTORY
Sahara Mart owned and operated two grocery stores in Bloomington, Indiana
during the years at issue. (Pet’r Original Tax Appeal Pet. (“Pet.”) ¶¶ 3, 4; Jt. Stip. Facts
¶¶ 3-5.) In May of 2016, after completing an audit, the Department determined that
Sahara Mart had underreported its taxable sales during the years at issue and failed to
remit the proper amount of sales tax to the State.. (See Pet. ¶ 7.) The Department
subsequently issued Proposed Assessments against Sahara Mart, including penalties
and interest, totaling approximately $6.8 million. (Pet. ¶ 8, Ex. B.) The Proposed
Assessments were based on gross annual sales figures the Department extrapolated
from Sahara Mart’s 2007 federal income tax return. (See Pet. ¶ 7.) (See also Pet., Ex.
C at 2 (indicating that the Department requested actual business records and receipts
from Sahara Mart during the audit to no avail).)
Sahara Mart protested the Proposed Assessments and provided the Department
with copies of a federal audit report that documented its gross sales for the 2008
through 2011 tax years. (Pet. ¶ 9.) On January 13, 2017, the Department issued a
Letter of Findings directing a supplemental audit in light of the federal report. (See Pet.,
Ex. C at 4.) After the supplemental audit was completed, the Department issued
revised Proposed Assessments reducing Sahara Mart’s total sales tax liabilities for the
years at issue to approximately $1.5 million. (Pet. ¶¶ 11-12, Ex. F.) Believing the
revised Proposed Assessments were still incorrect, Sahara Mart filed an original tax
appeal on September 25, 2017.
2
On March 29, 2018, while the case was pending, the Department deposed
Sahara Mart’s majority owner, Mr. Javad Noorihoseini. During the deposition,
Noorihoseini testified that Sahara Mart was generally operated by unpaid family
members, friends, and other volunteers. (See Deposition of Javad Noorihoseini
(“Noorihoseini Dep.”) at 17:7-22:16, 23:15-19, 69:20-70:4, 78:11-78:23.) Noorihoseini
further testified that while Sahara Mart occasionally paid for the services of independent
contractors and consultants, it had no employees. (See Noorihoseini Dep. at 18:11-
21:9 (stating unequivocally that Sahara Mart does not have, nor did it have during the
years at issue, “any employees”), 27:16-29:5 (testifying that “sometimes we have to hire
some people to consult with [our suppliers] on some levels if need be[ a]nd sometimes
we contract people to do things for a period of time” like moving or preparing things),
187:4-10.) In addition, Noorihoseini testified that approximately 40% of the beer and
alcohol Sahara Mart purchased annually for resale was never sold because it went bad
and had to be destroyed. (See Noorihoseini Dep. at 203:9-205:6, 208:10-209:17.)
Questioning the veracity of Noorihoseini’s deposition testimony, the Department
launched an “independent” investigation. (See Resp’t Corrected Br. Supp. Mot.
Sanctions and Contempt (“Dep’t Br.”) at 6, 9 (stating that “it seemed highly unlikely a
company could run two grocery stores each open seventy-six hours a week without any
employees or that it would destroy huge amounts of alcohol on an annual basis rather
than reducing its orders or otherwise adapting as a business”).) During the course of its
investigation, the Department secured affidavits from four individuals who averred that
during the years at issue, they had been employed by Sahara Mart and were paid,
mostly in cash, for each hour worked, and that they knew of other individuals who were,
3
like them, Sahara Mart employees.1 (See generally Dep’t Br. at 10-13 (citations
omitted).) The affiants also stated that they never witnessed any destruction of alcohol
by Sahara Mart. (See generally Dep’t Br. at 14 (citations omitted).) Finally, several of
the affiants stated that, after his deposition, Noorihoseini contacted them and attempted
to secure their “cooperation” in the event they were contacted by the Department. (See
generally Dep’t Br. at 16-20 (citations omitted).) One affiant averred that Noorihoseini
offered to pay her $1,000 “to cooperate.” (See Dep’t Br., Ex. 4 ¶¶ 18-20.)
On May 22, 2018, the Department filed its Motion, asserting that Sahara Mart
and Noorihoseini were “engaged in a fraudulent scheme to avoid paying taxes” and had
committed perjury and witness tampering. (See, e.g., Resp’t Proposed Findings and
Conclusions (“Dep’t Findings”) ¶¶ 10-12.) Consequently, the Department requested the
Court find them in contempt and sanction them – pursuant to both the Court’s inherent
power and the power granted to it under Trial Rule 37 – by dismissing the case with
prejudice and awarding the Department its attorney fees. (See Dep’t Br. at 20-26.)
(See also Dep’t Findings ¶¶ 1, 3.) As support for its Motion, the Department submitted
Noorihoseini’s deposition, the affidavits of the four individuals who claimed they were
Sahara Mart employees, and the affidavit of one of the Department’s attorneys.
1
The Department produced an affidavit by Amanda Christophel, who also claimed to be a
Sahara Mart employee, but she did not sign her affidavit. While the Department contends the
affidavit was signed electronically, it did not submit a copy of the affidavit that comports with the
electronic signature provisions contained in Indiana Trial Rules. (Compare Resp’t Proposed
Findings and Conclusions (“Dep’t Findings”) ¶ 29 with Ind. Trial Rule 86(I)(1) (indicating that
Indiana’s E-Filing system requires electronic signatures be indicated by either a graphic image
of the handwritten signature or “/s/” followed by the person’s name).) Consequently, the
affidavit will not be considered.
4
The Court conducted a show cause hearing on the Department’s Motion on July
12, 2018. On August 6, 2018, the parties filed proposed findings of fact and
conclusions of law. Additional facts will be supplied as necessary.
LAW
Contempt
Contempt involves a disobedience that undermines a court’s authority, justice,
and dignity. Witt v. Jay Petroleum, Inc., 964 N.E.2d 198, 202 (Ind. 2012). There are
two types of contempt: direct contempt and indirect contempt.2 Henderson v.
Henderson, 919 N.E.2d 1207, 1210 (Ind. Ct. App. 2010). Indirect contempt, which is at
issue in this case, involves acts that occur outside the court’s presence and personal
knowledge. Id. Pursuant to Indiana Code § 34-47-3-3, a person is guilty of indirect
contempt when he influences, or attempts to influence, a witness to give or abstain from
2
Contempt proceedings may also be generally categorized as civil or criminal, according to the
nature and purpose of the sanction imposed. Jones v. State, 847 N.E.2d 190, 199 (Ind. Ct.
App. 2006), trans. denied. A civil contempt is a violation of a court order resulting in a
proceeding for the benefit of the aggrieved party. Id. In other words:
It is not an offense primarily against the dignity of the court, but rather is
for the benefit of the party who has been injured or damaged by the
failure of another to conform to a court order issued for the private
benefit of the aggrieved party. Therefore . . . the primary objective of a
civil contempt proceeding is not to punish the defendant, but rather to
coerce action for the benefit of the aggrieved party. . . . [Thus, i]n a civil
contempt action [any] fine is to be paid to the aggrieved party, and [any]
imprisonment is for the purpose of coercing compliance with the order.
Duemling v. Fort Wayne Cmty. Concerts, Inc., 188 N.E.2d 274, 276 (Ind. 1963). “By contrast, a
criminal contempt is an act directed against the dignity and authority of the court that obstructs
the administration of justice and tends to bring the court into disrepute.” Jones, 847 N.E.2d at
199. “Accordingly, a criminal contempt sanction is punitive in nature because its purpose is to
vindicate the authority of the court, and it benefits the State rather than the aggrieved party.” Id.
See also Duemling, 188 N.E.2d at 276 (stating that “[p]unishment in the form of imprisonment or
a fine levied against the defendant, which goes to the State and not to the injured party, is
characteristic of a criminal proceeding”).
5
giving testimony in a case before the court. See IND. CODE § 34-47-3-3 (2018). A
party’s failure to make or cooperate in discovery may also be regarded as an act of
indirect contempt. See Ind. Trial Rule 37(B)(2)(d). These instances of indirect
contempt are sanctionable by fines, imprisonment, or the payment of reasonable
attorney’s fees. See IND. CODE § 34-47-3-6(c) (2018); T.R. 37(B).
Discovery
“Discovery is the process by which the parties to an action ascertain the
existence of material facts previously unknown.” Jacob v. Chaplin, 639 N.E.2d 1010,
1012 (Ind. 1994) (citation omitted). Indiana’s discovery rules are designed to allow a
liberal exchange of information essential to litigate all relevant issues and to promote
settlement. See Whitaker v. Becker, 960 N.E.2d 111, 115 (Ind. 2012); Trost-Steffen v.
Steffen, 772 N.E.2d 500, 512 (Ind. Ct. App. 2002), trans. denied.
Pretrial discovery procedures are intended to “‘make a trial less a game of blindman’s
bluff and more a fair contest with the basic issues and facts disclosed to the fullest
practicable extent.’” Whitaker, 960 N.E.2d at 115 (citations omitted).
“Discovery is designed to be self-executing with little, if any, supervision of the
court.” Trost-Steffen, 772 N.E.2d at 512 (citation omitted). Nonetheless, Trial Rule 37
provides a court with broad latitude to sanction those who “[f]ail[] to make or cooperate
in discovery[.]” T.R. 37(B). For instance, if a litigant fails to obey a court order to
provide or permit discovery, Trial Rule 37 permits a court to treat the disobedience as
contempt, prohibit the disobedient party from introducing designated matters into
evidence, dismiss the action or proceeding or any part thereof, render a default
judgment against the disobedient party, or require the disobedient party to pay the
6
reasonable attorney’s fees of his opponent. See T.R. 37(B)(2). Courts have construed
the acts of producing forged documents, lying in depositions or in answering
interrogatories, soliciting witnesses to lie in their depositions, and destroying evidence,
as failures to make or cooperate in discovery under both Indiana Trial Rule 37 and its
nearly identical federal equivalent, Federal Rule Civil Procedure 37. See, e.g., Prime
Mortg. USA, Inc. v. Nichols, 885 N.E.2d 628, 650-51 (Ind. Ct. App. 2008) (citations
omitted); Ramirez v. T&H Lemont, Inc., 845 F.3d 772, 775-76 (7th Cir. 2016); Brady v.
U.S., 877 F. Supp. 444, 452-54 (C.D. Ill. 1994). See also Fed. R. Civ. P. 37.
Power of the Court
A court has “the inherent power to punish parties in the course of ‘maintaining its
dignity, securing obedience to its process and rules, rebuking interference with the
conduct of business, and punishing unseemly behavior.’” City of Gary v. Major, 822
N.E.2d 165, 169 (Ind. 2005) (citing State v. Shumaker, 157 N.E. 769, 775 (Ind. 1927)).
See also Prime Mortg., 885 N.E.2d at 651 (stating that “‘the inherent powers doctrine is
most often invoked where a party commits perjury or destroys or doctors evidence’”
(quoting Quantum Commuc’n Corp. v. Star Broad., Inc., 473 F. Supp. 2d 1249, 1269
(S.D. Fla. 2007))). Indeed, as the Indiana Supreme Court has explained, a court’s
inherent power to sanction both the attorneys and the parties appearing before it is a
necessary precondition to the exercise of its independent judicial power:
To deny a court the power to enforce obedience to its lawful orders
against parties who have been subjected properly to its jurisdiction
in the first instance, is to nullify its effectiveness as an independent
branch of our government. The power of a court to enforce
compliance with its orders and decrees duly entered is inherent. No
statutory sanction is needed. In both equity and law a court would
be powerless to give effective relief were its arms tied by such
requirements . . . To protect the proper functioning of judicial
7
proceedings, we also have imbedded this [inherent] power in
numerous court rules [such as in Indiana Trial Rule 37]. Similarly,
the judicial power encompasses the [inherent] ability to hold a
litigant in contempt.
Noble Cty. v. Rogers, 745 N.E.2d 194, 198 (Ind. 2001) (citations omitted).
ANALYSIS
During the show cause hearing, Sahara Mart was provided the opportunity to
present evidence to show why it and Noorihoseini should not be held in contempt. See,
e.g., IND. CODE §§ 34-47-3-5, -6 (2018); Holman v. Holman, 472 N.E.2d 1279, 1284
(Ind. Ct. App. 1985) (supporting the proposition that once the Court was informed of the
facts alleged to constitute the perjury and witness tampering, Sahara Mart was to be
given the opportunity to prove why it and Noorihoseini should not be held in contempt).
Sahara Mart, however, did not deny, explain, or excuse the facts underlying the
Department’s contempt charge; rather, it moved to 1) dismiss the Motion on the basis
that the Department violated Indiana Rule of Evidence 408, 2) strike Noorihoseini’s
deposition, and 3) strike the affidavits submitted by the Department. (See, e.g., Show
Cause Hr’g Tr. at 13, 20, 28, 52.)
1. Indiana Rule of Evidence 408
At the outset, Sahara Mart argued that the Court should dismiss the contempt
charge because the Department “violated Rule of Evidence 408” by twice referring in its
written brief to a settlement conversation that occurred between the parties. (See Show
Cause Hr’g Tr. at 20-21 (citing Dep’t Br. at 3, 17).) Sahara Mart explained that the
Department violated the Evidence Rule by “using [the] settlement conference as a
preliminary step to proving witness tampering.” (Show Cause Hr’g Tr. at 21-22, 41-42.)
(See also Pet’r Findings Fact and Conclusions Law (“Sahara Mart’s Findings”) ¶
8
34(3)(a)-(c).) Indiana Rule of Evidence 408, titled “Compromise Offers and
Negotiations[,]” states as follows:
(a) Prohibited Uses. Evidence of the following is not admissible on
behalf of any party either to prove or disprove the validity or amount
of a disputed claim or to impeach by a prior inconsistent statement or
a contradiction:
(1) furnishing, promising, or offering, or accepting, promising to
accept, or offering to accept a valuable consideration in
order to compromise the claim; and
(2) conduct or a statement made during compromise
negotiations about the claim. Compromise negotiations
include alternative dispute resolution.
(b) Exceptions. The court may admit this evidence for another
purpose, such as proving a witness’s bias or prejudice, negating a
contention of undue delay, or proving an effort to obstruct a criminal
investigation or prosecution.
Ind. Evidence Rule 408.
The Department’s two references only indicate that the Department notified
Sahara Mart during the settlement conference that it had begun to contact individuals
who claimed to be paid employees of Sahara Mart and that its settlement position would
be informed by what it learned. (See Dep’t Br. at 2-3, 17.) (See also Show Cause Hr’g
Tr. at 30-31.) This information does not fall within Rule 408’s evidentiary prohibition
because the Department provided the references not to prove or disprove the validity of
Sahara Mart’s claim, but to inform the Court that it had notified Sahara Mart of its recent
discovery activities. See Evid. R. 408. Moreover, the two references to the settlement
conference were contained in the Department’s brief, and as attorney statements, they
do not constitute evidence. See, e.g., Campania Mgmt. Co. v. Rooks, Pitts & Poust,
290 F.3d 843, 853 (7th Cir. 2002) (stating that “it is universally known that statements of
9
attorneys are not evidence”); Utilimaster Corp. v. Ind. Dep’t of State Revenue, 967
N.E.2d 92, 95-96 (Ind. Tax Ct. 2012) (explaining that a concern about confusing the trier
of fact with what is – or is not – evidence generally arises in the context of a jury trial
rather than a bench trial). (See also Show Cause Hr’g Tr. at 26 (where the Court
reminds an attorney that his argument does not constitute evidence).) The Court thus
denies Sahara Mart’s motion to dismiss the Department’s Motion for a “Rule 408
violation.”3
2. Noorihoseini’s Deposition
During the show cause hearing, Sahara Mart moved to strike the Noorihoseini
deposition on the basis that it was “not authenticated by a court reporter’s certification.”
(Show Cause Hr’g Tr. at 5-6.) More specifically, Sahara Mart has explained that
[the] deposition transcript [submitted to the Court w]as not [] signed
by [Noorihoseini]. Although the Indiana Trial Rules provide
procedures to allow the use of an unsigned deposition transcript, [the
Department] did not even attempt to follow those procedures here.
See T.R. 30(E)(4). Without a T.R. 30(E)(4) certificate, the Depo may
not be used “with the same force and effect as though the original
had been signed by the witness.”
(Sahara Mart’s Findings ¶ 34(2)(a)-(c).)
Indiana Trial Rule 30(E) requires that a deponent be permitted to read and sign
her deposition and, if desired, change any answer given in the deposition. Ind. Trial
Rule 30(E)(1)-(2). If, however, the deponent fails to either sign the deposition or return
it entirely, the transcribing reporter must: 1) execute a certificate as to those facts; and
3
During the show cause hearing, Sahara Mart’s counsel also claimed that the contempt charge
should be dismissed because the Department “violated Disciplinary Rules 3.3(c) and (e).”
(Show Cause Hr’g Tr. at 20.) Because Sahara Mart did not develop this allegation any further
(see generally Show Cause Hr’g Tr.; Pet’r Findings Fact and Conclusions Law (“Sahara Mart’s
Findings”)), the argument is waived.
10
then 2) deliver the certificate to the party who took the deposition. See T.R. 30(E)(3)-
(4). The deposition may then be used by any party “with the same force and effect as
though it had been signed” by the deponent. T.R. 30(E)(3)-(4).
Sahara Mart’s complaint that the copy of Noorihoseini’s deposition submitted to
the Court does not contain a certificate from the transcribing reporter, however, is of no
moment here. Indeed, Indiana Trial Rule 32(D)(4), titled “Effect of errors and
irregularities . . . As to completion and return of deposition[,]” provides:
Errors and irregularities in the manner in which the testimony is
transcribed or the deposition is prepared, signed, certified, sealed,
indorsed, transmitted, filed, or otherwise dealt with by the officer
under [Trial] Rules 30 and 31 are waived unless a motion to
suppress the deposition or some part thereof is made with
reasonable promptness after such defect is, or with due diligence
might have been ascertained.
Ind. Trial Rule 32(D)(4). Accordingly, it was up to Sahara Mart to demonstrate during
the show cause hearing that it had, with reasonable promptness, moved to suppress
Noorihoseini’s deposition, alleging a defect. See, e.g., S. Ind. Gas & Elec. Co. v.
Robertson, 354 N.E.2d 348, 349-50 (Ind. Ct. App. 1976) (explaining that a party’s
objection to an unsigned deposition was timely made the same day it received the
deposition from the reporter).
Noorihoseini was deposed on March 29, 2018, and a copy of that deposition was
sent to him for review on April 11, 2018. (See Show Cause Hr’g Tr. at 5-7; Resp’t
Notice Submission (“Dep’t Notice”) (filed Aug. 14, 2018), Ex. A.) Neither he nor Sahara
Mart, however, moved to suppress the deposition or any part thereof before the show
cause hearing held nearly three months later. This lack of promptness is further
compounded by the fact that neither Sahara Mart nor Noorihoseini has ever presented
11
an argument that there were inaccuracies in the substance of Noorihoseini’s deposition
testimony as transcribed. (See Show Cause Hr’g Tr.; Sahara Mart’s Findings.) See
also Dotson v. Stryker Corp., Case No. 18A-PL-220, 2018 WL 4003006, *5-6 (Ind. Ct.
App. Aug. 3, 2018) (finding that the deponent’s failure to sign a deposition was not fatal
when there were no claimed inaccuracies in the substance of the deponent’s
testimony). Accordingly, the Court may properly consider Noorihoseini’s deposition and
denies Sahara Mart’s objection to its use.4
3. The Affidavits
Finally, Sahara Mart argues that all five affidavits submitted by the Department
should be stricken because each suffers from one or more infirmities that render it
inadmissible. (See Show Cause Hr’g Tr. at 24.) Specifically, Sahara Mart explains that
each of the affidavits should be stricken because they either: a) constitute hearsay; b)
contain speculation and legal conclusions; c) were submitted with inadmissible
attachments; or d) contain irrelevant information. (See Sahara Mart’s Findings ¶ (1)(a)-
(h).)
a) Hearsay
Sahara Mart has raised what it refers to as a “double hearsay” objection with
respect to two of the affidavits. (See Show Cause Hr’g Tr. at 24, 47-48; Sahara Mart’s
Findings ¶ 34(1)(g).) Sahara Mart related its objection to specific statements made as
proof of a fact within each of the affidavits and provided its reasons why these
statements constituted inadmissible hearsay. (Compare Show Cause Hr’g Tr. at 24, 47-
48 with Ind. Evidence Rule 801(a)-(c).) Accordingly, Sahara Mart’s objection is
4
On August 10, 2018, the Department moved to strike Sahara Mart’s Trial Rule 30(E)(4)
objection as “untimely.” The Department’s motion to strike is denied.
12
sustained, and the Court strikes paragraphs 4 and 9 of the Stahl affidavit (Dep’t Br., Ex.
5) and paragraphs 3, 4, and 5 of the Bartel affidavit (Dep’t Br., Ex. 7). The striking of
the specific portions of these affidavits does not, however, have an impact on the
outcome of the Court’s disposition of the Motion.
Sahara Mart has further posited a broad and overarching hearsay objection to all
the affidavits. Its entire argument supporting this general objection is as follows:
Each of the affidavits is a statement that: “(1) is not made by the
declarant while testifying at the trial or hearing; and (2) is offered in
evidence to prove the truth of the matter asserted.” Evid. R. 801(c).
The Affidavits, therefore, constitute inadmissible hearsay to which no
exception applies. Holmes v. Nat’l Collegiate Student Loan Tr., 94
N.E.3d 722, 725 (Ind. Ct. App. 2018) (“Inadmissible hearsay
contained in an affidavit may not be considered . . . .”).
(Sahara Mart’s Findings ¶ 34(1)(a).)
Sahara Mart did not provide the Court with anything more than the quoted
definition of hearsay, see Evid. R. 801(a)-(c), and a case citation in the apparent belief
that the Court would develop legal arguments on its own and relate them to specific
statements within each affidavit. The Court is not an advocate and will not do Sahara
Mart’s work for it. Accordingly, the Court denies all of Sahara Mart’s remaining hearsay
objections.
b) Speculation and Legal Conclusions
The four affiants stated that during the years at issue, they were paid for their
work at Sahara Mart, they were employees of Sahara Mart, and described when they
worked at Sahara Mart, what their responsibilities were while they were working there,
how they were paid, and how much they were paid. (See generally Dep’t Br., Exs. 2-5.)
Sahara Mart contends that the affidavits must be stricken because the “‘question of
13
whether an individual is an employee . . . is a legal conclusion’” and “a lay witness
cannot provide a legal conclusion.” (Show Cause Hr’g Tr. at 46-47; Sahara Mart’s
Findings ¶ 34(1)(c) (citation omitted).)
Indiana Rule of Evidence 704 states that witnesses (in this case, the affiants)
may not testify to legal conclusions. Ind. Evidence Rule 704(b). Nonetheless, the
Court’s legal conclusion whether an individual is an employee derives from the
existence of certain facts, including whether one believes herself to be an employee.
See, e.g., Mortg. Consultants, Inc. v. Maheny, 655 N.E.2d 493, 495-96 (Ind. 1995);
Bauermeister v. Churchman, 59 N.E.3d 969, 974-76 (Ind. Ct. App. 2016) (citation
omitted). Thus, the attestations of the affiants that Sahara Mart paid them for services
rendered as employees is evidence that is properly considered by the Court. The Court
therefore denies Sahara Mart’s motion to strike the affidavits on the basis they contain
inadmissible speculation and legal conclusions.
c) Affidavit Attachments
The Department attached to one of the affidavits at issue a copy of a text
message conversation between Noorihoseini and that affiant. In this text message
conversation, Noorihoseini asked the affiant to contact another alleged Sahara Mart
employee because she would not respond to him, and he needed her “to cooperate.”
(See Dep’t Br., Ex. 4 ¶ 25, Ex. A.) The Department attached to another affidavit both a
Facebook “screenshot” of a comment by another alleged employee that stated Sahara
Mart did “not treat [its] employees well” together with an additional text message
conversation. (See Dep’t Br., Ex. 7 ¶ 4, Exs. 1, 2.) During the show cause hearing,
14
Sahara Mart moved to strike all three attachments because they were “incomplete.”
(See Show Cause Hr’g Tr. at 24, 49.) (See also Sahara Mart’s Findings ¶¶ 15, 17.)
Pursuant to Indiana Evidence Rule 106, Sahara Mart should have, during the
show cause hearing, followed up its objection by requiring “the introduction . . . of any
other part – or any other writing or recorded statement – that in fairness ought to be
considered” with the submitted attachments. See Ind. Evidence Rule 106. It did not do
so, and despite having a subsequent opportunity to provide that information in its
findings of fact and conclusions of law, it failed to identify the additional information that
would have made the evidence complete. (See Show Cause Hr’g Tr.; Sahara Mart’s
Findings.) Consequently, the Court denies Sahara Mart’s objection to strike the
affidavits on the basis that their attachments were incomplete.5
d) Relevance
Finally, Sahara Mart has objected to the admissibility of the affidavits on the
grounds that they are “full of” irrelevant information. (See Show Cause Hr’g Tr. at 23-25
(complaining about statements in the affidavits that Sahara Mart sold alcohol on
Sundays, that its “z-tapes” were inaccurate, that Noorihoseini skimmed cash from the
company, and that he authorized the creation of fake invoices), 49-50 (complaining
about statements in the affidavits that Sahara Mart paid individuals in cash); Sahara
Mart’s Findings ¶ 34(1)(f).) Sahara Mart argues that these statements have nothing to
do with whether or not Sahara Mart had employees or destroyed alcohol and are thus
used for the sole purpose of “inflaming” the Court. (Show Cause Hr’g Tr. at 23, 49.)
5
In its findings of fact and conclusions of law, Sahara Mart also referred to the attachments as
“uncertified[] and unauthenticated[.]” (Sahara Mart’s Findings ¶ 34(1)(d).) Because Sahara
Mart provided no further explanation or analysis for this claim, the Court will not address it.
15
Evidence is considered relevant if “(a) it has any tendency to make a fact more or
less probable than it would be without the evidence; and (b) the fact is of consequence
in determining the action.” Ind. Evidence Rule 401. Here, the Court must make a
factual determination whether Sahara Mart through Noorihoseini 1) lied about not
paying its workers and having no employees, 2) lied about destroying alcohol, and 3)
attempted to influence a witness to give, or abstain from giving, testimony in the case.
The affiants’ challenged statements are relevant to the Court’s factual determination
because they will affect the probability of two consequential facts: whether Sahara Mart
operated using volunteers not employees and whether it destroyed rather than sold
certain alcohol. Accordingly, the Court denies Sahara Mart’s objection to strike the
affidavits on the basis that their content is irrelevant.
4. Perjury and Witness Tampering
The Department has presented several pieces of evidence to support its
allegations that Sahara Mart and Noorihoseini committed perjury and witness
tampering6 and are therefore in contempt of court. Rather than refute the facts
presented in that evidence that underlies the Department’s contempt charge, Sahara
Mart chose to challenge the admissibility of the Department’s evidence. Those
admissibility challenges, however, have proven unsuccessful. After considering the
admissible evidence, the Court holds that Sahara Mart – through Noorihoseini – has
committed both perjury and witness tampering.
6
Sahara Mart claims there can be no witness tampering here because the affiants were not, at
least yet, named as witnesses. (See Show Cause Hr’g Tr. at 43.) The Court does not find this
claim persuasive given the plain language of Indiana Code § 34-47-3-3. See IND. CODE § 34-
47-3-3 (2018) (indicating by its language that it also applies to improper influence directed
toward potential witnesses).
16
One commits perjury by making “a false, material statement under oath or
affirmation, knowing the statement to be false or not believing it to be true[.]” IND. CODE
§ 35-44-2-1 (2018). To support a finding of perjury, the evidence must show that the
false statement attested to is material to the outcome of the case. See Pollard v. State,
29 N.E.2d 956, 958 (Ind. 1940); Paschall v. State, 717 N.E.2d 1273, 1276 (Ind. Ct. App.
1999).
Here, Noorihoseini testified that one of the affiants, Brooke Henry, was never
paid for her services, but she testified that she was paid by Sahara Mart for her services
as a full-time nutritional adviser and alcohol purchaser at Sahara Mart for approximately
17 years. (Compare Noorihoseini Dep. at 20:3-11 with Dep’t Br., Ex. 3.) Moreover, all
the affiants swore they were paid during the relevant time periods. (See Dep’t Br., Exs.
2-5.) Neither Noorihoseini nor Sahara Mart rebutted this evidence. Consequently, as
finder of fact, the Court finds that Noorihoseini made false statements under oath that
Sahara Mart workers were generally unpaid.
Noorihoseini’s false statements are material to the outcome of the underlying
case. For purposes of perjury, a material fact is one that is reasonably calculated to
mislead an investigation. See Daniels v. State, 658 N.E.2d 121, 123 (Ind. Ct. App.
1995) (citations omitted). Noorihoseini’s false statements about Sahara Mart operating
with unpaid volunteers rather than employees was reasonably calculated to lead the
Department to believe the so-called volunteers would not have evidence material to this
matter. Sahara Mart’s business practices and the manner and accuracy by which it
kept its books and records – including its payment practices – are central to the claims
and defenses in this matter. (See, e.g., Pet. ¶¶ 16-19 (alleging that because Sahara
17
Mart had federal records to support its gross sales during the year at issue, it was
unnecessary for the Department to do its own best information assessment).)
Accordingly, the Court holds that Sahara Mart and Noorihoseini committed perjury.
The evidence also shows that Sahara Mart and Noorihoseini engaged in witness
tampering.7 Indeed, the Department submitted two affidavits into evidence
demonstrating that Noorihoseini attempted to influence potential witnesses into saying
something that was not true and even offered to pay for such false statements.
(Compare Noorihoseini Dep. at 20:3-11 with Dep’t Br., Ex. 3 ¶ 18, Ex. 4 ¶¶ 19-26.)
Again, Sahara Mart and Noorihoseini did not attempt to rebut the substance of this
evidence. The Court therefore finds that Sahara Mart – through Noorihoseini – was
also engaged in witness tampering.
5. Sanctions
Having found that Sahara Mart and Noorihoseini committed perjury and witness
tampering, the Court finds them in contempt and that sanctions are appropriate.
Sanctions must be “just” in light of the particular circumstances of the case. See, e.g.,
T.R. 37(B)(2); Prime Mortg., 885 N.E.2d at 649 (“‘The only limitation on [a] court in
determining an appropriate sanction is that the sanction must be just’” (citation
omitted)). See also Smith v. Borg-Warner Auto. Diversified Transmission Prods.
Corp., No. IP 98-1609-C-T/G, 2000 WL 1006619, *7 (S.D. Ind. July 19, 2000) (“The
measure of sanctions to be imposed, if any, must be proportionate to the conduct and
circumstances justifying sanctions” (citation omitted)). To that end, many other courts
7
Witness tampering is “[t]he act or an instance of obstructing justice by intimidating, influencing,
or harassing a witness before or after the witness testifies[.]” BLACK’S LAW DICTIONARY 1840
(10th ed. 2014).
18
have explained that “[a]s a fraud on the court, perjury may warrant the sanction of
dismissal[.]” See, e.g., Montano v. City of Chicago, 535 F.3d 558, 564 (7th Cir. 2008);
Brady, 877 F. Supp. at 453 (“‘False testimony in a formal proceeding is intolerable’”
(citation omitted)). Moreover, because “witness tampering is among the most grave
abuses of the judicial process . . . it warrants a substantial sanction.” Ramirez, 845
F.3d at 782 (citations omitted).
a) Dismissal
In light of the evidence before the Court, the Department suggests that dismissal
of Sahara Mart’s case with prejudice is an appropriate sanction. Dismissal is a severe
sanction given its finality, but the Court finds that the contempt detailed in this opinion is
so egregious that it warrants just such a result.
During his deposition, Noorihoseini abused the discovery process by attempting
to hide from the Department the identity of individuals who were paid for regular and
continuous services to Sahara Mart and thus had knowledge about Sahara Mart’s
business practices. This deception not only impeded overall trial preparation, but also
prejudiced the Department, which had to expend time and money gathering and
presenting evidence of the perjury at the show cause hearing. Upon learning that the
Department discovered and interviewed several of these individuals, Noorihoseini
abused the judicial process further by asking several of the individuals to provide – or
conceal – certain information, even offering money in exchange for their “cooperation.”
The Court will not tolerate Sahara Mart’s blatant attempts to deceive both its opponent
and this Court. Accordingly, the Court exercises its authority under both Trial Rule 37
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and the Court’s inherent power by imposing the just sanction of dismissal of this case
with prejudice.
b) Attorney’s Fees
Once a party has been found in contempt of court, reasonable attorney fees may
be awarded to the opposing party. See I.C. § 34-47-3-6(c); T.R. 37(B). See also Crowl
v. Berryhill, 678 N.E.2d 828, 831 (Ind. Ct. App. 1997) (stating it is within a court’s
inherent power to award attorney’s fees for civil contempt). Accordingly, the
Department seeks attorney’s fees “incurred in defending this action, taking
[Noorihoseini’s] Deposition, investigating the false claims made therein, calling and
interviewing non-disclosed, non-party witnesses and bringing this Motion before the
Court.” (Show Cause Hr’g Tr. at 19, 57; Dept’s Findings ¶ 37.) In support of that
request, the Department submitted the affidavit of its attorney, Hamish S. Cohen, to
show that it incurred $65,270.70 in expenses between December 20, 2017 (the date the
Department filed its appearance in the case) and July 12, 2018 (the date of the show
cause hearing). (See Aff. Hamish S. Cohen, Ex. A (filed July 16, 2018).)
In response, Sahara Mart contends the Department’s request is unreasonable.
Specifically, it states
[t]hey’re not entitled to fees from Day 1. . . . [Instead,] it would be
solely related to the month of May of 2018, perhaps into June[.] . . .
And by the way, about half of the fees in the invoice for May are
totally unrelated to [Noorihoseini’s] deposition[.]
(Show Cause Hr’g Tr. at 25-26.) (But see also Sahara Mart’s Findings ¶ 36
(acknowledging that it “has likely engaged in inappropriate conduct by attempting to
influence the testimony of a potential witness” and that a sanction of $5,000 would
therefore be reasonable).)
20
The Court finds the guidance provided in the plain language of Trial Rule 37 that
limits attorney’s fees to those incurred as a result of the other party’s discovery
violation/failure instructive. T.R. 37(B). See also Popovich v. Ind. Dep’t of State
Revenue, 50 N.E.3d 407, 413-14 (Ind. Tax Ct. 2016). Accordingly, the Court finds that
the appropriate reimbursement period in this case began on March 30, 2018, the day
after the Department took Noorihoseini’s deposition in which he lied, through July 12,
2018, the day of the show cause hearing. Indeed, it was during this time period that the
Department had to adjust its entire approach in handling the case to account for the
newly-discovered deceptive efforts of Sahara Mart and Noorihoseini. Upon review of
the Department’s evidence as to this time period, the Court finds the Department’s
expenses of $45,000.00 to be reasonable.
CONCLUSION
At the outset of the show cause hearing, Sahara Mart informed the Court that it
took the charges against it seriously and that it “d[idn’t] come to th[e] courtroom
throwing whatever [it] c[ould] at the wall to see what st[uck.]” (Show Cause Hr’g Tr. at
13-14, 20, 50-51.) But as described throughout this opinion, that is exactly what Sahara
Mart did: it came to Court and attempted to avoid the charges of perjury and witness
tampering merely by making a series of poorly-developed – and ultimately unsuccessful
– evidentiary objections. Accordingly, the Court GRANTS the Department’s Motion.
The Court hereby ORDERS this cause DISMISSED with prejudice. The Court
21
also ORDERS Sahara Mart to pay the Department’s reasonable attorney’s fees in the
amount of $45,000.00.
SO ORDERED this 26th day of October, 2018.
Martha Blood Wentworth, Judge
Indiana Tax Court
DISTRIBUTION:
Brett J. Miller, Winston Lin, Hamish S. Cohen, Sean P. Burke, Raymond J. Biederman,
David C. Dickmeyer
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