Cardinal Health Ventures, Inc v. Michael Scanameo, M.D., Carol Scanameo, and Michael Scanameo, M.D., Inc

FILED
Oct 04 2017, 10:50 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEES
Kevin M. Quinn Donald K. McClellan
Bose McKinney & Evans LLP McClellan & McClellan
Indianapolis, Indiana Muncie, Indiana
Peter H. Drumm
Benadum, Cecil & Drumm
Muncie, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Cardinal Health Ventures, Inc., October 4, 2017
Appellant-Defendant, Court of Appeals Case No.
18A02-1703-CT-487
v. Interlocutory Appeal from the
Delaware Circuit Court
Michael Scanameo, M.D., Carol The Honorable John M. Feick,
Scanameo, and Michael Judge
Scanameo, M.D., Inc., Trial Court Cause No.
Appellees-Plaintiffs. 18C04-1308-CT-16
Bradford, Judge.
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Case Summary
[1] On August 5, 2013, Appellees-Plaintiffs Michael Scanameo, M.D., Carol
Scanameo, Michael Scanameo, M.D., Inc. (collectively, “the Scanameos”),
filed suit against Appellant-Defendant Cardinal Health Ventures, Inc.
(“Cardinal Health”), alleging that Cardinal Health committed securities fraud.
Specifically, the Scanameos alleged that Cardinal Health sold shares in two
medical clinics to the Scanameos knowing that the shares were “worthless.” In
suing Cardinal Health, the Scanameos sought to recover the sum paid for the
shares plus interest and reasonable attorney’s fees. Also on August 5, 2013, the
Scanameos made a timely request for a jury trial. The Scanameos later filed a
motion asking the trial court to strike their request for a jury trial. Cardinal
Health did not consent to the Scanameos’ request. This interlocutory appeal
follows the issuance of the trial court’s order granting the Scanameos’ motion.
Concluding that the trial court erred in granting the Scanameos’ motion, we
reverse and remand the matter to the trial court with the instruction that the
case be re-set on the jury trial calendar.
Facts and Procedural History
[2] According to the factual allegations levied by the Scanameos, in September of
2007 and on June 30, 2008, Cardinal Health sold shares of two medical clinics
to the Scanameos for the collective sum of $542,453.88. On August 5, 2013,
the Scanameos filed suit against Cardinal Health alleging that Cardinal Health
committed securities fraud. Specifically, the Scanameos alleged that Cardinal
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Health sold shares in two medical clinics to the Scanameos, knowing that the
shares were “worthless.” Appellant’s App. Vol. II, p. 17. In suing Cardinal
Health, the Scanameos sought to recover the sum paid for the shares plus
interest and reasonable attorney’s fees. Also on August 5, 2013, the Scanameos
made a timely request for a jury trial. The Scanameos filed an amended
complaint on November 12, 2013. The amended complaint did not include any
substantive changes.
[3] On August 31, 2016, the Scanameos filed a motion to strike their request for a
jury trial. Cardinal Health filed a response in opposition to the Scanameos’
motion on September 14, 2016. At the conclusion of a September 22, 2016
hearing on the motion, the trial court took the matter under advisement. On
February 1, 2017, the trial court issued an order granting the Scanameos’
motion. This interlocutory appeal follows.
Discussion and Decision
[4] Cardinal Health contends on appeal that the trial court erred in granting the
Scanameos’ motion to strike their prior request for a jury trial. We agree.
I. The Right to Trial By Jury
[5] Section 20 of Article I of the Indiana Constitution provides that “[i]n all civil
cases, the right of trial by jury shall remain inviolate.” However, “[t]he right to
a jury trial in civil cases is guaranteed only in those actions which were triable
by jury at common law prior to June 18, 1852.” Midwest Fertilizer Co. v. Ag-
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Chem Equip. Co., 510 N.E.2d 232, 233 (Ind. Ct. App. 1987) (citing Ind. Tr. Rules
38(A); Estate of Ballard v. Ballard, 434 N.E.2d 136, 140 (Ind. Ct. App. 1982)).
Claims which historically arose in equity “are to be tried to the court.” Id.
(citing Lewandowski v. Beverly, 420 N.E.2d 1278, 1282 (Ind. Ct. App. 1981)).
Thus, “the key determination to be made is whether the claim involved is legal
or equitable in character.” Id. (citing Ballard, 434 N.E.2d at 140; Winney v. Bd.
of Comm’rs of Vigo Cty., 174 Ind. App. 624, 369 N.E.2d 661, 664 (1977)).
[6] “Indiana recognizes that ‘[t]he character of an action is determined by its
substance, not its caption or formal denomination.’” Id. (quoting English Coal
Co. v. Durcholz, 422 N.E.2d 302, 308 (Ind. Ct. App. 1981)). In determining
whether a claim is legal or equitable in nature, “we must examine the totality of
the pleadings and relief sought.” Id. (citing Hiatt v. Yergin, 152 Ind. App. 497,
520, 284 N.E.2d 834, 846-47 (1972) (overruled on other grounds)).
The test, then, for deciding the right to a jury in a civil action
requires a classification of the claim or cause of action as either
sounding in equity or at law. When this process of classification
and analysis leads to the determination that the claim or cause of
action, or any essential part thereof, is of equitable jurisdiction,
the entire action is drawn into equity and the right to a jury is
extinguished. Conversely, where the claim or cause of action is
not such as to invoke equity jurisdiction, it is to be considered to
be an action at law where the right to trial by jury must be
provided after a timely demand.… Certainly, if a claim presents
only questions of law and presents no question of fact, there will
be no function for a jury. But issues of law which are properly
left only to the court may be contained within a particular claim
which also presents issues of fact, and the critical distinction to be
made … is the character of the claim itself that being either
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equitable or legal. In either case, issues of law within a claim for
relief will be determined by the court, either by a separate
decision or by instructions to the jury. However, where there are
material issues of fact in an action which was a legal action at
common law and not an equitable action, the right to trial by jury
is preserved.
Winney, 174 Ind. App. at 628-29, 369 N.E.2d at 663-64.
[7] In requesting that the trial court strike their request for a jury trial, the
Scanameos argued that while a prior version of Indiana Code section 23-19-5-9
explicitly stated that claims brought under the statute could be decided by either
a jury or the trial court, the amended version of the statute was not clear as to
whether claims could still be determined by a jury or should only be tried by the
court. The Scanameos point to the phrase “determined by the court or
arbitrator,” arguing that the phrase indicates that claims should only be decided
by the trial court. We disagree.
[8] The relevant portion of the amended version of Indiana Code section 23-19-5-9
provides, in relevant part, as follows:
(a) Except as provided in section 11 of this chapter, a person is
liable to the purchaser if the person sells a security in violation of
this article, including a violation of IC 23-19-4-12(d)(9) or IC 23-
19-4-12(d)(13). It is a defense if the person selling the security
sustains the burden of proof that either the person did not know,
and in the exercise of reasonable care could not have known, of
the violation or the purchaser knowingly participated in the
violation. An action under this subsection is governed by the
following:
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(1) The purchaser may maintain an action to recover
the consideration paid for the security, less the
amount of any income received on the security, and
interest at the greater of eight percent (8%) per
annum or the rate provided for in the security from
the date of the purchase, costs, and reasonable
attorney’s fees determined by the court or arbitrator, upon
the tender of the security, or for actual damages as
provided in subdivision (3).
(Emphasis added). The phrase “and reasonable attorney’s fees determined by
the court or arbitrator” is set off from the rest of the statutory language by a set
of commas. As such, in interpreting the language of the statute, we conclude
that the phrase “determined by the court or arbitrator” applies to any award of
the attorney’s fees and not the statute as a whole.
[9] In order to determine whether the parties have a constitutional right to a jury
trial in this case, we must look to the character of the Scanameos’ action. See
Midwest Fertilizer, 510 N.E.2d at 233. In bringing the underlying action, the
Scanameos alleged that Cardinal Health committed securities fraud. The
United States District Court of Delaware and the United States District Court
of Colorado have concluded that parties are entitled to a jury trial in cases
alleging securities fraud. See Serv. Grp. Inc. v. Essex Intern, Inc., 74 F.R.D. 379
(D. Del. 1977); Kline Hotel Partners v. Aircoa Equity Interest, Inc., 729 F. Supp. 740
(D. Colo. 1990). The Scanameos neither explain nor point to any authority
suggesting a reason why we should not find the holdings of these cases to be
persuasive. In addition, we have previously concluded that jury trials are
appropriate in cases alleging fraud. See generally Plymale v. Upright, 419 N.E.2d
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756, 761, 763 (Ind. Ct. App. 1981) (providing that reliance upon a
misrepresentation is a material element of a cause of action in fraud and a
determination of whether such reliance was justified is a matter for the jury to
determine).
[10] Further, the Scanameos request a monetary judgment and do not request
equitable relief. The United States Supreme Court has previously determined
that “insofar as [a] complaint requests a money judgment it presents a claim
which is unquestionably legal.” Dairy Queen, Inc. v. Wood, 369 U.S. 469, 476
(1962). Likewise, this court long ago held that where a complaint seeks only to
recover compensation by way of monetary damages, “[t]here was no available
error in submitting the trial of the cause to a jury.” Robertson v. McPherson, 4
Ind. App. 595, 597, 31 N.E. 478, 478 (1892). Given the persuasive decisions of
two different United States District courts coupled with the fact that the
Scanameos do not request equitable relief but rather only monetary damages,
we conclude that the character of the Scanameos’ action is such that would
entitle the parties to a jury trial.
II. Indiana Trial Rule 38
[11] With respect to a litigant’s right to a jury trial, Trial Rule 38 provides as follows:
(A) Causes triable by court and by jury. Issues of law and issues
of fact in causes that prior to the eighteenth day of June, 1852,
were of exclusive equitable jurisdiction shall be tried by the court;
issues of fact in all other causes shall be triable as the same are
now triable. In case of the joinder of causes of action or defenses
which, prior to said date, were of exclusive equitable jurisdiction
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with causes of action or defenses which, prior to said date, were
designated as actions at law and triable by jury--the former shall
be triable by the court, and the latter by a jury, unless waived; the
trial of both may be at the same time or at different times, as the
court may direct.
(B) Demand. Any party may demand a trial by jury of any issue
triable of right by a jury by filing with the court and serving upon
the other parties a demand therefor in writing at any time after
the commencement of the action and not later than ten (10) days
after the first responsive pleading to the complaint, or to a
counterclaim, crossclaim or other claim if one properly is
pleaded; and if no responsive pleading is filed or required, within
ten (10) days after the time such pleading otherwise would have
been required. Such demand is sufficient if indorsed upon a
pleading of a party filed within such time.
T.R. 38. Trial Rule 38(D) further provides that once a demand for trial by jury
has been made, it “may not be withdrawn without the consent of the other
party or parties.” In addition, “a jury trial demand is not a pleading” but rather
“is the invocation of a constitutional right which, once timely invoked, survives
and need not be refiled” if a party amends its complaint or answer after the
demand is made. Hamlin v. Sourwine, 666 N.E.2d 404, 408 (Ind. Ct. App.
1996).
[12] In this case, it is undisputed that the Scanameos filed a timely demand for a jury
trial. It is also undisputed that Cardinal Health did not consent to the
subsequent withdrawal of the demand for a jury trial. As such, pursuant to the
clear language of Trial Rule 38(D), the demand for a jury trial may not be
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withdrawn. The trial court, therefore, erred in granting the Scanameos’ motion
to strike the previously submitted demand for a jury trial.
[13] The judgment of the trial court is reversed and the matter remanded to the trial
court with the instruction that the case be re-set on the jury trial calendar.
May, J., and Barnes, J., concur.
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