The Estate of Richard A. Mayer, and Spangler, Jennings & Dougherty v. Lax, Inc., and David Lasco

Oct 07 2013, 6:01 am
FOR PUBLICATION
ATTORNEY FOR APPELLANT: ATTORNEY FOR APPELLEE:
LYLE R. HARDMAN MICHAEL RILEY
Hunt Suedhoff Kalamaros, LLP Rensselaer, Indiana
South Bend, Indiana
IN THE
COURT OF APPEALS OF INDIANA
THE ESTATE OF RICHARD A. MAYER, and )
SPANGLER, JENNINGS & DOUGHERTY, )
)
Appellants-Defendants. )
)
vs. ) No. 37A03-1207-PL-323
)
LAX, INC., and DAVID LASCO, )
)
Appellees-Plaintiffs. )
APPEAL FROM THE JASPER CIRCUIT COURT
The Honorable John D. Potter, Judge
Cause No. 37C01-0704-PL-168
October 7, 2013
OPINION - FOR PUBLICATION
BARNES, Judge
Case Summary
The Estate of Richard Mayer (“the Estate”) and the law firm of Spangler, Jennings
& Dougherty, P.C. (“Spangler Jennings”) appeal the trial court’s denial of their motion
for summary judgment against Lax, Inc., and David Lasco. We affirm in part, reverse in
part, and remand.
Issues
The dispositive issues we address are:
I. whether statements made by Mayer in counterclaims
filed against Lax and Lasco were absolutely privileged
and thus cannot support Lax and Lasco’s claims for
defamation, abuse of process, malicious prosecution,
negligent supervision and/or retention, tortious
interference with a business relationship, and tortious
interference with a contract;
II. whether Lax and Lasco’s claim against Spangler
Jennings for malicious prosecution survives Mayer’s
death;
III. whether there are any genuine issues of material fact
precluding summary judgment in favor of the Estate
and Spangler Jennings on Lax and Lasco’s abuse of
process claim; and
IV. whether Lax and Lasco may seek punitive damages
against the Estate and/or Spangler Jennings.
Facts
This case has its origins in litigation and construction disputes from the 1990s.
Lasco is the principal owner of Lax, which specializes in real estate development in
northern Indiana. Lax hired a company called J. Metro Excavating (“JME”) to perform
2
work on a project, but JME walked off the job in 1998 without completing its work.
Litigation ensued; Lax sued JME for breach of contract and intentional interference with
a prospective economic advantage, while JME filed a counterclaim alleging breach of
contract and fraud by Lax (“the first lawsuit”). On April 26, 2004, a jury returned a
verdict of $667,041 in favor of Lax on its complaint and a verdict of $47,198 in favor of
JME on its counterclaim. JME initiated an appeal from this judgment but did not pursue
it, and the appeal was dismissed.
Lax and Lasco subsequently began proceedings supplemental to recover its net
judgment against JME, but discovered that JME’s assets had previously been entirely
transferred to a new entity, Metro Excavating Corporation (“MEC”), which was owned
by the sons of the JME owner. On October 22, 2004, Lax and Lasco sued JME and MEC
and the owners of those companies, alleging that they had committed fraud and violations
of Indiana’s RICO and Bulk Sales Acts, and that MEC was a mere instrumentality of
JME (“the second lawsuit”). On December 29, 2004, Mayer prepared and filed an
answer on behalf of JME and MEC.1 Mayer was an attorney and shareholder in Spangler
Jennings. The answer included a counterclaim against Lax and Lasco, which stated:
1. The plaintiff, David Lasco, hereinafter referred to as
the “counterdefendant” on behalf of himself and Lasco [sic],
Inc., and his other entities and partners entered into and
developed a scheme, plan and conspiracy to default [sic] the
defendant. The counterdefendants solicited the aid of his
engineer, lawyers, and other individuals to perpetrate a fault
[sic] upon the Court, a jury, and the defendant with the
1
There is no designated evidence in the record that anyone besides Mayer worked in preparing and filing
this counterclaim.
3
specific intent of extracting monetary compensation from the
defendant.
2. Counterdefendant, through his conduct and the
conduct of co-conspirators perpetrated a series of transactions
that violated the Indiana Law Act, including the Indiana
RICO Act.
3. The counterdefendant with the aid of others developed
a pattern of action during the trial of Lax, Inc. against J.
Metro Excavating, Inc. so as to falsely present evidence and
testimony that work on the Double Tree site, which was the
subject matter of the litigation, was performed in accordance
with a 1996 grading plan when in fact the counterdefendants
and co-conspirators knew that the work was done in
accordance with a new plan that included work not agreed
upon by J. Metro Excavating, Inc. This fraudulent scheme
and practice was perpetrated for the sole purpose of obtaining
a judgment against J. Metro Excavating, Inc., which was
predicated upon fraud, perjury, false testimony and false
facts.
App. pp. 616-17. The counterclaim sought compensatory and punitive damages against
Lax and Lasco. On August 5, 2005, the trial court dismissed this counterclaim under
Indiana Trial Rule 12(B)(6) on the basis that it was “an impermissible collateral attack
upon the judgment of the Lake Superior Court in a different action pending between the
parties.” Id. at 619.
On August 17, 2005, Mayer filed an amended counterclaim on behalf of JME and
MEC, which stated:
1. That the Plaintiff, David Lasco, hereinafter referred to
as “Counter Defendant” for a period of some years to the
present, engaged in the development and execution of a
scheme, plan and conspiracy to commit, and to conspire to
4
commit, aid and abet in bribery, perjury, obstruction of
justice, intimidation, and business corruption and influence.
2. That Counter Defendant did attempt and/or did
develop a pattern of racketeering activities for the purposes of
perpetrating bribery, perjury, false testimony, intimidation,
obstruction of justice, and business corruption upon third
parties, including J. Metro Excavating, Inc.
3. That Counter Defendant, through a scheme of
enterprises, including corporations, partnerships, and limited
partnerships, attempted and/or created a pattern of
racketeering activity by acquiring or maintaining either
directly or indirectly an interest or control in such enterprises.
4. That Counter Defendant employed or associated with
such enterprises knowingly or intentionally conducted or
otherwise participated in activities which the enterprise
developed in a pattern of racketeering activities.
5. That Counter Defendant knowingly or intentionally
received proceeds directly or indirectly derived from a pattern
of racketeering activities and used or invested those proceeds
in properties acquired by Counter Defendant or established
and operated enterprises acquired by Counter Defendant.
6. That Counter Defendant abused the judicial process
and laws of Indiana in the promoting of his enterprises and
activities. Through intimidation, bribery, false statements,
perjury, and treats [sic], Counter Defendant committed harm
and damage to third parties, including the Counter Claimant.
7. That Lasco, [sic] Inc., Counter Defendant, was just one
of the enterprises developed and used by David Lasco for the
promotion of his racketeering and wrongful activities, in
violation of Indiana law and the Indiana RICO act.
Id. at 621-22. Again, this counterclaim sought compensatory and punitive damages
against Lax and Lasco.
5
On May 18, 2006, the trial court granted Lax and Lasco’s summary judgment
motion with respect to the amended counterclaim, concluding that it was barred by res
judicata because its arguments could have been raised and litigated in the prior lawsuit.
The trial court also found there was no evidence of any recoverable damages as a result
of any alleged racketeering activity by Lax and Lasco. There was no appeal from this
ruling. Lax and Lasco’s claims against JME and MEC remained pending until April
2008, when the case was settled. On January 7, 2009, upon Lax and Lasco’s motion, the
trial court ordered both the original and amended counterclaims sealed and prohibited
from public access because of the damaging allegations they contained.
At roughly the same time as Lax and Lasco were embroiled in the litigation with
JME and MEC, Lasco was pursuing an opportunity to construct a casino in northwest
Indiana on behalf of the Miami Tribe of Oklahoma (“MTO”). Lasco dealt with the MTO
through a separate entity created specifically for the casino project, Northwest Indiana
Consultants, LLC (“NIC”). NIC entered into a consulting contract with the MTO on
January 26, 2006. At some point, Lasco withdrew from involvement with the casino
project. Lasco claims his interest in managing the casino project, if it came to fruition,
was worth $13 million. Lasco contends he withdrew from the project because of damage
to his reputation caused by the counterclaims filed by Mayer.
On December 21, 2006, Lax and Lasco filed the present suit against JME, Mayer,
and Spangler Jennings, raising various claims related to the counterclaims Mayer had
filed in the second lawsuit. Mayer died in November 2008. Lax and Lasco subsequently
6
filed two amended complaints. The second amended complaint sued only the Estate and
Spangler Jennings, there being no allegation or evidence that JME was involved with or
had in any way approved Mayer’s filing of the counterclaims. This complaint listed the
following claims against the Estate and Spangler Jennings combined: defamation; abuse
of process; malicious prosecution; tortious interference with a contract; and tortious
interference with a business relationship. The complaint also stated claims against
Spangler Jennings for negligent supervision and/or retention of Mayer, and alleged that
Spangler Jennings was both directly liable for the counterclaim filings and liable under
agency principles for Mayer’s conduct. The complaint sought compensatory and punitive
damages against both the Estate and Spangler Jennings.
On September 3, 2010, the Estate and Spangler Jennings moved for summary
judgment. Lax and Lasco filed a response and the trial court held a hearing on the matter.
On April 19, 2012, the trial court entered its order on the motion. It granted summary
judgment to the Estate only on Lax and Lasco’s claims for defamation and malicious
prosecution, but it denied summary judgment to Spangler Jennings as to those claims.
The trial court also rejected the Estate and Spangler Jennings’s argument that the
statements made in the counterclaims by Mayer were absolutely privileged. It further
concluded that there were genuine issues of material fact precluding summary judgment
for the Estate and Spangler Jennings on the claims of abuse of process, negligent
supervision and retention, and the tortious interference claims. It also held that Lax and
Lasco were not precluded from seeking punitive damages against both the Estate and
7
Spangler Jennings. The trial court certified its non-final order for interlocutory appeal,
and this court agreed to accept jurisdiction of it.
Analysis
Before turning to the merits, we address two preliminary procedural issues. First,
Lax and Lasco ask this court to reconsider its decision to accept jurisdiction over this
interlocutory appeal. Although the Estate and Spangler Jennings suggest that this is an
entirely inappropriate request, it is not unheard of. Specifically, “in rare instances
reconsideration of motions to accept or oppose discretionary interlocutory appeals may
be appropriate, such as where a successive motion demonstrates good cause why the
motions panel’s initial ruling should be reconsidered.” Bridgestone Americas Holding,
Inc. v. Mayberry, 854 N.E.2d 355, 360 (Ind. Ct. App. 2006), summarily aff’d in relevant
part, 878 N.E.2d 189, 191 n.2 (Ind. 2007). This court, while reluctant to overrule orders
issued by the motions panel, does have inherent authority to reconsider any decision
while an appeal remains pending. Simon v. Simon, 957 N.E.2d 980, 987 (Ind. Ct. App.
2011). “This is especially true where, . . . after considering a more complete record than
was available to the motions panel, and the appellate briefs, we have determined there is
clear authority establishing that the motions panel erred.” Id. In Simon, we dismissed a
discretionary interlocutory appeal when it became clear after briefing that the appellant
did not have standing to pursue the appeal. Id. at 989-90.
Here, Lax and Lasco do not point to any clear legal error by the motions panel in
permitting this interlocutory appeal to proceed, as was the case in Simon. In fact, it is not
8
entirely clear why Lax and Lasco think this appeal should not proceed. They seem to
argue that if any part of the trial court’s summary judgment ruling is reversed, we will
have permitted the Estate and Spangler Jennings to have collaterally attacked the
judgments in the first two lawsuits. That argument ignores that this suit was initiated by
Lax and Lasco to recover damages from the Estate and Spangler Jennings for allegedly
defamatory statements; the Estate and Spangler Jennings are not at this time attempting to
attack the judgments in the previous two cases. Additionally, much time and expense has
been invested in briefing and arguing this case in reliance upon this court’s decision to
hear the case. We cannot perceive a legal basis for overturning the motions panel’s
decision to accept jurisdiction over this interlocutory appeal.
Second, Lax and Lasco complain that the Estate and Spangler Jennings have acted
improperly by relating the contents of the second lawsuit counterclaims in their briefs and
other materials in this appeal after the trial court in the second lawsuit ordered the
contents of those counterclaims to be sealed and excluded from public access. According
to Indiana Administrative Rule 9(G)(4), an appellant must give this court notice that all
or part of a record in a case has been excluded from public access by trial court order and
references to the excluded material are supposed to be filed in accordance with the “green
paper” rule. The Estate and Spangler Jennings did not notify this court that they were
relying upon materials excluded from public access in this appeal, nor did they comply
with the “green paper” rule. On the other hand, the trial court order partially sealing the
9
record was made in the second lawsuit; nothing in the present case was excluded from
public access.
Additionally, material excluded from public access by trial court order may
nonetheless be made public on appeal if this court determines that:
(A) the [trial court order] was improper or is no longer
appropriate,
(B) public disclosure of the information is essential to the
resolution of the litigation, or
(C) disclosure is appropriate to further the establishment of
precedent or the development of the law . . . .
Ind. Admin. Rule 9(G)(4)(c)(ii). It is very difficult, if not impossible, to assess the
validity of Lax and Lasco’s claims, and the Estate and Spangler Jennings’s defenses to
those claims, without relating the content of the challenged counterclaims filed by Mayer
in the second lawsuit, which are presently under trial court seal. We also note that Lax
and Lasco initiated the present litigation, which is based solely upon the allegations in the
counterclaims, and thus risked further exposure of the counterclaims’ allegations. We
conclude that the sealing order in the second lawsuit should not be given continuing
effect in this appeal, as disclosure of the contents of the counterclaims is both “essential
to the resolution of the litigation” and “appropriate to further the establishment of
precedent or the development of the law . . . .” Id.
Turning to the merits, the standard of review for the grant or denial of a motion for
summary judgment is the same as it is for the trial court originally ruling on the motion:
10
whether there is a genuine issue of material fact, and whether the moving party is entitled
to judgment as a matter of law. Kroger Co. v. Plonski, 930 N.E.2d 1, 4-5 (Ind. 2010).
Summary judgment should be granted only if the designated evidence shows that there is
no genuine issue of material fact and the moving party is entitled to judgment as a matter
of law. Id. at 5. “All factual inferences must be construed in favor of the non-moving
party, and all doubts as to the existence of a material issue must be resolved against the
moving party.”2 Id.
I. Absolute Privilege
A. General Availability of Privilege
The Estate and Spangler Jennings argue that all of Lax and Lasco’s claims are
barred pursuant to the so-called “absolute privilege” that has been found to exist for
allegedly defamatory statements made in the course of a judicial proceeding. “Indiana
law has long recognized an absolute privilege that protects all relevant statements made
in the course of a judicial proceeding, regardless of the truth or motive behind the
statements.” Hartman v. Keri, 883 N.E.2d 774, 777 (Ind. 2008). This privilege is
founded on the necessity of preserving the due administration of justice by providing
actors in judicial proceedings with the freedom to participate in them without fear of
future defamation claims. Id. Statements made by parties in pleadings and other court
2
Consistent with this standard of review, we will assume that Mayer had no factual basis for making the
allegations in the second lawsuit counterclaims. The Estate and Spangler Jennings direct us to no
designated evidence that any of the allegations made in the counterclaims were true, although they
suggest that such evidence does exist.
11
filings enjoy this privilege “if the statements are pertinent and relevant to the litigation.”
Miller v. Reinert, 839 N.E.2d 731, 735 (Ind. Ct. App. 2005), trans. denied. Whether
statements made in judicial pleadings are pertinent and relevant is a question of law. Id.
Courts favor a liberal rule in favor of finding statements to be relevant and pertinent. Id.
Statements in a judicial proceeding will not enjoy an absolute privilege only if they are so
palpably irrelevant to the subject matter of the case that no reasonable person could doubt
their irrelevancy and impropriety. Id. “Lawsuits are not peace conferences. Feelings are
often wounded and reputations are sometimes maligned.” Briggs v. Clinton County Bank
& Trust Co. of Frankfort, Ind., 452 N.E.2d 989, 998 (Ind. Ct. App. 1983).
Lax and Lasco seem to assert in part that the irrelevancy of the second lawsuit
counterclaims was established by the trial court in that action dismissing the first filed
counterclaim as an impermissible collateral attack on the first lawsuit’s judgment,
granting summary judgment on the amended counterclaim on a res judicata basis, and
then ordering the sealing of both counterclaims for their prejudicial content. 3 It is, in fact,
true “‘that a litigant defeated in a tribunal of competent jurisdiction may not maintain an
action for damages against his adversary or adverse witnesses on the ground the
judgment was obtained by false and fraudulent practices or by false and forced
evidence.’” South Haven Sewer Works, Inc. v. Jones, 757 N.E.2d 1041, 1045 (Ind. Ct.
3
Lax and Lasco also argue that allowing the Estate and Spangler Jennings to claim an absolute privilege
for the contents of the counterclaims would allow them to “re-litigate” the verdict in the first lawsuit and
the rulings in the second lawsuit. Appellee’s Br. p. 19. That argument is somewhat confusing, in that
allowing the absolute privilege to bar the current lawsuit brought by Lax and Lasco would have no effect
on the results in the first and second lawsuits.
12
Ohio App. 2001) (quoting Dodd v. Estate of Yanan, 625 N.E.2d 456, 457 (Ind. 1993)). It does
not appear, however, that a ruling finding a pleading’s allegations to be legally invalid,
for res judicata or other reasons, necessarily establishes that the pleading’s contents were
so palpably irrelevant to the litigation. Lax and Lasco cite no authority to that extent. To
the contrary, courts in other jurisdictions have noted that the absolute privilege for
statements made during judicial proceedings is not dependent upon the allegations being
relevant “in the technical legal sense.” Defend v. Lascelles, 500 N.E.2d 712, 715 (Ill.
App. Ct. 1986), app. denied. In other words, simply because a case is subject to dismissal
or summary judgment for being legally unsound does not mean the absolute privilege
evaporates. This would improperly eliminate the privilege in a vast number of cases.
The parties differ as to the effect of the case of Stahl v. Kincade, 135 Ind. App.
699, 192 N.E.2d 493 (1963). That case established the principal in Indiana for the first
time that in order for the “absolute privilege” to apply, statements made during litigation
must be “relevant and pertinent to the litigation or bear some relation thereto.” Stahl, 135
Ind. App. at 707, 192 N.E.2d at 497. In that case, a plaintiff filed suit against defendants
for nuisance and trespass, and the defendants filed a counterclaim alleging the plaintiff
was living in an adulterous relationship with a married man and seeking an injunction
prohibiting the plaintiff from doing so. The plaintiff sued the defendants for libel based
on the allegations in the counterclaim. On appeal, this court held that the allegations in
the counterclaim were “not relevant or pertinent to the matter in controversy and had no
relation thereto” and that the defendants “did not have reasonable or probable cause to
13
believe the matter to be relevant or pertinent,” and thus the allegations were not
absolutely privileged. Id. at 708, 192 N.E.2d at 497.
The Estate and Spangler Jennings suggest Stahl was overruled by the adoption of
Indiana Trial Rule 13(B) in 1971. Rule 13(B), the permissive counterclaim rule, allows
“as a counterclaim any claim against an opposing party not arising out of the transaction
or occurrence that is the subject-matter of the opposing party’s claim.” Thus, the Estate
and Spangler Jennings contend, because it is clear that a permissive counterclaim may
raise claims wholly unrelated to a plaintiff’s complaint, there is no need for allegations in
a counterclaim to be “relevant or pertinent” to the litigation in order for the absolute
privilege to apply. However, numerous cases decided after 1971, including cases from
the Indiana Supreme Court, have continued to refer to the “relevant and pertinent”
requirement for the absolute privilege to apply. See, e.g., Hartman, 883 N.E.2d at 777;
Miller, 839 N.E.2d at 735.
Regardless, we believe that whether the absolute privilege applies is not dependent
upon whether allegations were made in an original complaint, or a counterclaim, or a
crossclaim. In other words, relevancy is not necessarily measured with respect to the
pleadings of an opposing party, but with respect to a cause of action or defense raised by
the party claiming the privilege. Here, Mayer accused Lax and Lasco of engaging in
conduct violating RICO laws (as Lax and Lasco had accused JME and MEC of doing).
Mayer was entitled to bring a private RICO cause of action against Lax and Lasco. See
AGS Capital Corp., Inc. v. Product Action Intern., LLC, 884 N.E.2d 294, 308 (Ind. Ct.
14
Ohio App. 2008) (citing Ind. Code § 34-24-2-6), trans. denied. Mayer’s allegations in the
counterclaims, while no doubt inflammatory, were related to that stated cause of action.
Additionally, to the extent Mayer was attempting to set aside the first lawsuit’s verdict by
alleging fraudulent conduct by Lax and Lasco, he would have been entitled to publicly
make such claims under Indiana Trial Rule 60(B)(3), and the allegations of the
counterclaims are related to those claims. That Mayer used an incorrect procedural
vehicle for setting aside a verdict, and in fact could not recover damages on his claims,
does not render the contents of the counterclaims unprivileged.
The statements Mayer made in the counterclaims would have been equally
privileged if he had filed them in an original complaint or in a motion to set aside the first
verdict. We can conceive of hypothetical statements Mayer could have made that would
have been completely irrelevant to his stated causes of action and may not have been
protected by an absolute privilege—statements that had nothing to do with a RICO claim
or claim of fraud in procurement in the first verdict. There are no such allegations in the
counterclaims. As such, we hold that the allegations were protected by the absolute
privilege for statements made during judicial proceedings.
B. Extent of Privilege
That is not the end of this case, however. We must still determine whether the
Estate and Spangler Jennings may claim the protection of the absolute privilege as a
defense to all of Lax and Lasco’s causes of action. In a footnote of their brief, the Estate
and Spangler Jennings claim the absolute privilege would bar all of Lax and Lasco’s
15
claims. For this proposition they cite Williams v. Tharp, 914 N.E.2d 756 (Ind. 2009).
That case, however, dealt with the “qualified privilege” for reporting suspected crimes to
law enforcement, not the “absolute privilege” for statements made during judicial
proceedings. Moreover, the alleged torts in Williams were defamation, false
imprisonment, intentional infliction of emotional distress, and negligence. See id. at 769.
The majority of the other cases the Estate and Spangler Jennings cite on the issue of
“absolute privilege” were defamation, libel, or slander cases. See, e.g., Chrysler Motors
Corp. v. Graham, 631 N.E.2d 7 (Ind. Ct. App. 1994), trans. denied. Other torts related to
defamation, or relying upon defamatory statements as proof of wrongdoing, may also be
barred by the absolute privilege. See Hartman, 883 N.E.2d at 776-77 (holding absolute
privilege barred claims for libel, slander, and malicious interference with an employment
contract). Thus, we conclude that the absolute privilege bars Lax and Lasco’s actions for
defamation, negligent supervision and retention, tortious interference with a business
relationship, and tortious interference with a contract. The trial court erred in not
entering summary judgment in favor of the Estate and Spangler Jennings on those
claims.4
4
Lax and Lasco clearly cannot pursue a negligent supervision and/or retention case against Spangler
Jennings for another reason. The law in Indiana is well-settled that there is no cause of action for
negligent hiring and/or retention when an employer has stipulated that an employee was acting within the
scope of employment when an alleged tort was committed. Board of School Comm’rs of City of
Indianapolis v. Pettigrew, 851 N.E.2d 326, 332 (Ind. Ct. App. 2006), trans. denied. Spangler Jennings has
stipulated that Mayer was acting within the scope of his employment when he filed the counterclaims,
thus obviating the negligent hiring and/or retention claim. See id. Lax and Lasco have failed to convince
us that we should ignore that stipulation.
16
Whether the absolute privilege should be used to defeat claims for malicious
prosecution or abuse of process requires much more detailed consideration. The
elements of malicious prosecution are: (1) the defendant instituted or caused to be
instituted an action against the plaintiff; (2) the defendant acted maliciously in so doing;
(3) the defendant had no probable cause to institute the action; and (4) the original action
was terminated in the plaintiff’s favor. Crosson v. Berry, 829 N.E.2d 184, 189 (Ind. Ct.
App. 2005), trans. denied.5 An abuse of process claim requires a showing that a
defendant had: (1) an ulterior purpose or motives; and (2) a willful act in the use of
process not proper in the regular conduct of a proceeding. Watson v. Auto Advisors,
Inc., 822 N.E.2d 1017, 1029 (Ind. Ct. App. 2005), trans. denied.
Those causes of action are based on the malicious or abusive use of the judicial
system and are not subject to an absolute privilege. As our supreme court has stated,
although it is preferable to give lawyers “broad protection from those who believe the
lawyer has made wrongful use of the judicial process . . . , attorneys have not been
clothed with absolute protection from liability for all of the actions they take on behalf of
clients” if, for example, they have engaged in fraud, collusion, or tortious conduct against
third parties. National City Bank, Indiana v. Shortridge, 689 N.E.2d 1248, 1251 (Ind.
1997) (addressing abuse of process claim). Under this language, not everything a lawyer
files in court on behalf of a client is absolutely privileged from being the subject of a
lawsuit by a third party. In other words, if actions for malicious prosecution and abuse of
5
Crosson also established that a malicious prosecution action can be based on the filing of a
counterclaim. Crosson, 829 N.E.2d at 191.
17
process are to be allowed, it would seem that statements made in judicial proceedings
must be a part of those actions and cannot be barred by an absolute privilege.
This court, in fact, has explicitly held that even if an absolute privilege applies for
statements made during a judicial proceeding and bars an action for defamation, an
aggrieved party “may file an action for ‘wrongful civil proceedings’ if the proceedings
are terminated in his favor and were initiated without probable cause and for an improper
purpose.” Briggs, 452 N.E.2d at 998. Also, in Trotter v. Indiana Waste Systems, Inc.,
632 N.E.2d 1159, 1164-65 (Ind. Ct. App. 1994), this court held that absolute privilege
barred a plaintiff’s action for slander of title but then went on to separately address
whether there was a genuine issue of fact on the plaintiff’s malicious prosecution claim
without giving any indication that that claim was barred by the absolute privilege. A vast
number of other jurisdictions also hold that even where an absolute privilege bars an
action for defamation based on statements made during a judicial proceeding, it does not
bar an action for malicious prosecution. See Hogen v. Valley Hosp., 195 Cal. Rptr. 5,
7 (Cal. Ct. App. 1983); Goldstein v. Serio, 496 So. 2d 412, 414-15 (La. Ct. App. 1986),
writ denied; Keys v. Chrysler Credit Corp., 494 A.2d 200, 204 (Md. 1985); McKinney v.
Okoye, 806 N.W.2d 571, 579 (Neb. 2011); Rainier’s Dairies v. Raritan Val. Farms, 117
A.2d 889, 895 (N.J. 1955); Mantia v. Hanson, 79 P.3d 404, 408-09 (Or. Ct. App. 2003);
Crowell v. Herring, 392 S.E.2d 464, 468 (S.C. Ct. App. 1990). We see no reason to
depart from this wealth of authority and, thus, hold that the absolute privilege for
18
communications made during a judicial proceeding does not bar Lax and Lasco’s cause
of action for malicious prosecution arising from such communications.
The case law regarding absolute privilege and abuse of process claims is not as
overwhelmingly uniform. In one case, this court applied an absolute privilege defense to
defeat an abuse of process claim. Miller, 839 N.E.2d at 735. In that case, however, there
was no appellee’s brief filed and no analysis or discussion of whether an absolute
privilege should defeat a cause of action for abuse of process. We therefore find it of
little persuasive value on this issue. We observe that in Shortridge, although our supreme
court did not use the phrase “absolute privilege,” it did discuss the “broad protection”
given to attorneys representing clients in judicial proceedings and acknowledged the
strict “technical requirements” for proceeding with either a malicious prosecution or
abuse of process cause of action, but still held that in proper circumstances a cause of
action will lie against an attorney for abuse of process. Shortridge, 689 N.E.2d at 1251-
52. We read this case as clearly indicating that in Indiana, the defense of absolute
privilege does not apply to properly-stated and proven causes of action for abuse of
process. See also Alexandru v. Dowd, 830 A.2d 352, 355 (Conn. App. Ct. 2003),
certification denied; Isobe v. Sakatani, 279 P.3d 33, 50 (Haw. Ct. App. 2012); Goldstein,
496 So. 2d at 414-15; McGranahan v. Dahar, 408 A.2d 121, 128 (N.H. 1979); Superior
Constr., Inc. v. Linnerooth, 712 P.2d 1378, 1382 (N.M. 1986); but see Umansky v.
Urquhart, 148 Cal. Rptr. 547, 549 (Cal. Ct. App. 1978) (holding absolute privilege
applies to abuse of process claims). We conclude that, as with the malicious prosecution
19
claim, Lax and Lasco’s cause of action for abuse of process is not barred by an absolute
privilege.
II. Malicious Prosecution Claim Against Spangler Jennings
Lax and Lasco concede that the malicious prosecution action against the Estate is
barred by Mayer’s death. Indiana Code Section 34-9-3-1(a) (“the Survival Statute”)
provides:
If an individual who is entitled or liable in a cause of action
dies, the cause of action survives and may be brought by or
against the representative of the deceased party except actions
for:
(1) libel;
(2) slander;
(3) malicious prosecution;
(4) false imprisonment;
(5) invasion of privacy; and
(6) personal injuries to the deceased party;
which survive only to the extent provided in this chapter.
However, Lax and Lasco argue, and the trial court concluded, that the malicious
prosecution claim against Spangler Jennings is still viable. Lax and Lasco contend that
they may proceed on their malicious prosecution claim against Spangler Jennings under
either a respondeat superior or direct liability theory.6
6
Respondeat superior is the tort theory of vicarious liability that applies in the context of employer-
employee or “master-servant” relationships. Columbus Reg’l Hosp. v. Amburgey, 976 N.E.2d 709, 714
20
We first note that our supreme court has stated, “The inconvenience and hardship
of the common-law rule relating to remedies on the death of a party has resulted quite
generally . . . in the adoption of liberal statutes in regard to the survival and revival of
actions.” Crawfordsville Trust Co. v. Ramsey, 178 Ind. 258, 267, 98 N.E. 177, 180-
81 (1912). It further held that survival statutes should be liberally construed in favor of
the survival of actions when possible. Id. Keeping that maxim in mind, we examine the
facts here.
A. Respondeat Superior
The law in Indiana is unclear as to whether the death of an agent and subsequent
barring of a cause of action because of that death also bars a cause of action against the
principal, where the principal’s liability is wholly dependent upon the agent’s conduct.
The general rule has been stated that if a “servant or agent is released of liability, no
liability can be imputed to the principal,” and that a judgment in favor of an employee
requires judgment in favor of the employer if the employer’s liability is based solely upon
the employee’s acts. Comer-Marquadt v. A-1 Glassworks, LLC, 806 N.E.2d 883, 887
(Ind. Ct. App. 2004). Our supreme court has said that the reason for this general rule is
that because, under the doctrine of respondeat superior, an employer has a right of action
for indemnity against an employee if the employer is found liable for the employee’s
conduct, “‘and such right would be defeated by a verdict and judgment which released
(Ind. Ct. App. 2012). Respondeat superior liability arises when an employee commits a wrongful act
within the scope of his or her employment. Id. Spangler Jennings has stipulated that Mayer was acting
within the scope of his employment when he prepared and filed the counterclaims.
21
the [employee].’” Health & Hosp. Corp. of Marion County v. Gaither, 272 Ind. 251, 260,
397 N.E.2d 589, 595 (1979) (quoting Childress v. Lake Erie & W. R. Co., 182 Ind. 251,
256, 105 N.E. 467, 469 (1914)).
However, the only Indiana case that appears to have directly addressed the specific
issue of an employee’s death and the vicarious liability of an employer is Biel, Inc. v.
Kirsch, 130 Ind. App. 46, 153 N.E.2d 140 (1958). In that case, the driver of an
automobile belonging to Biel, Inc., caused an accident with a motorcycle driven by
Kirsch. Kirsch sued both the driver and Biel, Inc. under a respondeat superior theory.
The driver died before trial, and Kirsch dismissed the driver’s estate from the action,
because recovery against the estate was limited to $1,000 by the version of the Survival
Statute in effect at the time. Kirsch subsequently obtained a judgment solely against Biel,
Inc., for $17,000. On appeal, this court held that the liability of Biel, Inc., as master
could not exceed that of the deceased driver. It stated in part, “Why . . . isn’t it logical to
say that a statute that partially relieves a dead tort feasor’s estate from liability to an
injured person will automatically relieve the tort feasor’s master to a similar extent where
the master’s liability is predicated solely upon the doctrine of respondeat superior.” Biel,
130 Ind. App. at 53-54, 153 N.E.2d at 143-44. This court reversed the judgment against
Biel, Inc.
Biel relied in large part upon Boor v. Lowery, 103 Ind. 468, 3 N.E. 151 (1885).
Boor stated the rule, “That an action the purpose of which is to recover for an injury to
the person cannot be maintained after the death of the person committing the injury is, we
22
think, supported by all the authorities . . . .” Boor, 103 Ind. at 473, 3 N.E. at 153. In
accordance with this rule, the Boor court reversed a medical malpractice judgment
against the estate of a deceased surgeon. Id. at 476, 3 N.E. at 155. However, the court
declined to hold that the injured plaintiff was barred from seeking recovery against the
deceased surgeon’s medical practice partner. Id., 3 N.E. at 155-56. Instead, it stated that
the surgeon’s death “did not ipso facto abate the action as to his co-defendant” and that
something other than the fact of the surgeon’s death would be required to end the action
as to his partner. Id., 3 N.E. at 156. Thus, Boor does not support Biel’s holding that the
death of an alleged tortfeasor automatically causes the action to abate as to other parties
who may be jointly liable with the tortfeasor.
The subsequent procedural history of Biel is unusual. Our supreme court denied
transfer on July 1, 1959. However, that denial of transfer was accompanied by an
opinion from two justices, stating their belief that this court’s reasoning was incorrect.
The opinion stated in part:
The fact that upon the death of an agent the liability in a
negligence case is limited or extinguished against his estate,
should not accrue to the benefit of the principal and release
the principal also from liability.
There is no analogy in the instant case and one in which a
jury or court finds the agent not guilty of negligence for
which the principal at the same time is held liable. The
negligence still exists, even though the agent may die or his
liability be limited by statute in the case before us.
*****
23
It likewise follows that a privilege personal to an agent or his
estate may not be claimed or taken advantage of by a
principal to avoid liability.
Biel, Inc. v. Kirsch, 159 N.E.2d 575, 575-76 (Ind. 1959) (Arterburn & Landis, JJ.,
concurring).
On October 27, 1959, the court issued an order dismissing a petition for rehearing
on the transfer decision and withdrew the previous opinion on the denial of transfer.
Accompanying that order, however, was a unanimous per curiam opinion stating, “While
we do not approve of the reasoning of the Appellate Court in its opinion it appears in 153
N.E.2d 140, we do, however, concur in the result reached in that court.” Biel, Inc. v.
Kirsch, 240 Ind. 69, 70, 161 N.E.2d 617, 618 (1959). The court explained that it believed
the driver of the Biel, Inc., vehicle was not acting within the scope of employment or as
the company’s agent at the time of the accident and, therefore, the company could not be
liable for the driver’s conduct. Id. at 73, 161 N.E.2d at 618. The court did not address
the issue of whether the driver’s death would have caused the action against the employer
to terminate.
We believe that although Spangler Jennings vigorously argues otherwise, it is
clear that this court’s reasoning in Biel was unanimously rejected by our supreme court.
In fact, two different Indiana federal district court judges reached the conclusion that this
court’s reasoning in Biel was repudiated by our supreme court. See Bingaman v. Gordon
Baking Co., 186 F. Supp. 102, 104 (N.D. Ind. 1960); Parrott v. Ellis Trucking Co., 179 F.
Supp. 534, 535 (S.D. Ind. 1960). Another federal district court more recently reached the
24
same conclusion regarding Biel and cited the original concurring opinion from the denial
of transfer as persuasive authority in holding that abatement of an action against an agent
because of death does not cause the action to terminate as to the principal. Schimpf v.
Gerald, Inc., 2 F. Supp. 2d 1150, 1159-60 (E.D. Wis. 1998).
Spangler Jennings notes that the Survival Statute was amended in 1959, and that
the legislature at that time (nor at the time of subsequent amendments in 1982, 1989, and
1998) did not add any language purporting to overrule this court’s decision in Biel.
Spangler Jennings argues that if the legislature had disagreed with Biel, it could have
acted to overrule it, but it did not. See Durham ex rel. Estate of Wade v. U-Haul Int’l,
745 N.E.2d 755, 761 (Ind. 2001) (noting that “When it disagrees with judicial rulings, the
legislature can act.”). However, the Survival Statute, since its original inception in the
1800s, has always been silent on the issue of vicarious liability, both before and after
Biel. And, given that our supreme court expressly disagreed with this court’s reasoning
in Biel, the legislature may have deemed it unnecessary to address that reasoning, either
by adopting it or rejecting it. We take no guidance from the legislature’s failure to amend
the Survival Statute after Biel.
We have not been able to find any case from any jurisdiction that comports with
this court’s original decision in Biel. When the issue has been directly addressed, the
cases uniformly hold that termination of an action against an agent-tortfeasor because of
death does not cause the action to terminate against a principal. Such cases include, in
addition to Bingaman and Parrott and Schimpf: Soraghan v. Henlopen Acres, Inc., 236
25
F. Supp. 489, 491 (D. Del. 1964); Rogers v. Carmichael, 192 S.E. 39, 47 (Ga. 1937);
Smith v. Republic Underwriters, Waco, Tex., 103 P.2d 858, 862 (Kan. 1940); Manson v.
Wabash R.R. Co., 338 S.W.2d 54, 57 (Mo. 1960); Wiebe v. Seely, 335 P.2d 379, 390-
91 (Or. 1959); Johns v. Hake, 131 P.2d 933, 934-35 (Wash. 1942). These cases generally
hold that termination of an action because of an alleged agent-tortfeasor’s death is not the
same as a judgment on the merits or an exoneration of the agent’s conduct, which would
flow to the principal, but is instead a form of personal immunity from suit, which is not
transferable to others. See Schimpf, 2 F. Supp. 2d at 1160. Also, courts have specifically
rejected the argument that allowing an action to proceed against a principal after the
action has terminated against the agent because of death would impede the principal’s
ability to seek indemnity from the agent or his estate, which is a separate issue from the
principal’s liability to a third party. See Rogers, 192 S.E. at 47; Wiebe, 335 P.2d at 391.
We also note that numerous restatements of the law support the proposition that
termination of an action against an agent because of death does not terminate an action
against the principal based on the agent’s conduct. For example:
In an action against a principal based on the conduct of a
servant in the course of employment:
*****
(b) The principal has no defense because of the fact that:
*****
(ii) the agent had an immunity from civil liability as to the
act.
26
RESTATEMENT (SECOND) OF AGENCY (1958) § 217.
Also:
If two defendants are joined in an action for the same harm,
judgment can properly be entered against one and in favor of
the other, except when the judgment is entered after trial on
the merits and the liability of one cannot exist without the
liability of the other.
RESTATEMENT (SECOND) OF TORTS § 883 (1979) (emphasis added). Commentary to this
provision includes:
When the liability of one party to an action is based entirely
on a wrongful act by another, a judgment necessarily based
upon the finding that the first is liable and that the second is
not, is inconsistent with itself unless the second party has a
personal immunity or has been discharged from liability.
A different restatement provision regarding vicariously liability reads:
(1) A judgment against the injured person that bars him from
reasserting his claim against the defendant in the first action
extinguishes any claim he has against the other person
responsible for the conduct unless:
*****
(b) The judgment in the first action was based on a defense
that was personal to the defendant in the first action.
RESTATEMENT (SECOND) OF JUDGMENTS § 51 (1982) (emphasis added). Taken together,
these provisions support the idea that a procedural defense to an action that is personal to
an agent, and not based on the merits of the action, does not preclude proceeding with a
cause of action against the principal under a respondeat superior theory.
27
In light of the great weight of authority, and in effecting the policy favoring
survival of actions when possible, we hold that termination of a cause of action against an
alleged agent-tortfeasor because of death does not require termination of a cause of action
against the agent’s principal. Such termination does not reflect upon the merits of the
case. We see no indication in the Survival Statute that our legislature intended to permit
employers or other principals to avoid liability for their employee or agent’s misconduct
simply because of the employee or agent’s death. In the absence of legislative authority
to the contrary, the immunity from liability for certain torts afforded by the Survival
Statute does not transmit to a surviving principal. Likewise, it is the tortious acts of the
tortfeasor that are imputed to another under respondeat superior—not the tortfeasor’s
liability or lack thereof. Thus, Lax and Lasco may continue to pursue their malicious
prosecution action against Spangler Jennings under a respondeat superior theory.
B. Direct Liability
We now address Lax and Lasco’s argument that Spangler Jennings is also directly
liable for the filing of the counterclaims. First, Lax and Lasco argue in their brief “that a
‘direct action can be pursued against the attorney and his law firm by an opposing party
for pleadings that rise to the level of abuse of process or malicious prosecution.’”
Appellee’s Br. pp. 8-9. For this proposition, Lax and Lasco cite Shortridge, 689 N.E.2d
at 1252. However, this quote is from the trial court’s order in this case, not from
Shortridge. See App. p. 1161. In fact, Shortridge contains no discussion at all regarding
when, whether, or under what circumstances a law firm may be directly liable, as
28
opposed to vicariously liable, for torts committed by one of its attorneys. Shortridge does
not support the imposition of direct liability against Spangler Jennings.
Lax and Lasco also argue that Spangler Jennings could be directly liable for
Mayer’s conduct by virtue of ratification. “Ratification is the adoption of that which was
done for and in the name of another without authority.” Maxitrol Co. v. Lupke Rice Ins.
Agency, Inc., 924 N.E.2d 179, 183 (Ind. Ct. App. 2010), trans. denied. Ratification cures
an agent’s lack of authorization by the principal and causes a transaction by the agent to
be authorized. Id. Ratification is a question of fact that requires evidence that a principal
has knowingly accepted the benefits of an unauthorized transaction. Id. at 183-84. “A
principal has the right to presume that his agent has followed instructions and has not
exceeded his authority.” Id. at 184. Even if the requirements of ratification were met
here, Lax and Lasco cite no authority for the proposition that ratification is a form of
direct, as opposed to vicarious, liability. Ratification only transforms an unauthorized act
by an agent for which the principal would not have had any liability into one in which the
principal has vicarious liability because it knowingly accepted the benefits of the agent’s
unauthorized conduct.
Lax and Lasco also seem to argue that Spangler Jennings is directly liable for
Mayer’s conduct because of his status as a shareholder in the firm, thus making Spangler
Jennings and Mayer one and the same. They cite no authority for this proposition. In
fact, as we will discuss, there is no evidence that Mayer held a managerial role within
Spangler Jennings, which is the only circumstance under which we could envision direct
29
liability of Spangler Jennings for Mayer’s conduct. We conclude that Mayer’s status as a
shareholder alone was insufficient to make Spangler Jennings directly liable for his
conduct.
Finally, Lax and Lasco assert that Spangler Jennings is directly liable for
malicious prosecution not only for Mayer’s conduct, but those of other attorneys at the
firm as well. Lax and Lasco have not identified any such attorneys. As support for this
claim, they cite Spangler Jennings billing records dating from August 1998 through June
2004. Those records, while reflecting some work performed by other Spangler Jennings
attorneys, pertain exclusively to litigation of the first lawsuit. There are no billing
records pertaining to the second lawsuit and the filing of the counterclaims, which were
signed only by Mayer. Those counterclaims are the exclusive basis of Lax and Lasco’s
claims and they have not directed this court to any evidence that any attorney other than
Mayer drafted and approved their filing. In sum, we see no basis upon which Lax and
Lasco can hold Spangler Jennings directly liable for the filing of the counterclaims.
III. Abuse of Process
Next, the Estate and Spangler Jennings argue that there are no genuine issues of
material fact and that they are entitled to judgment as a matter of law on Lax and Lasco’s
abuse of process claim. A plaintiff claiming abuse of process must show a misuse or
misapplication of process7 for an end other than that which it was designed to accomplish.
7
An abuse of process claim may be predicated upon the filing of a complaint. See Lindsay v. Jenkins,
574 N.E.2d 324, 326 (Ind. Ct. App. 1991).
30
Watson, 822 N.E.2d at 1029. The two elements of abuse of process are: (1) ulterior
purpose or motives; and (2) a willful use of process not proper in the regular conduct of
the proceedings. Id. “If a party’s ‘acts are procedurally and substantively8 proper under
the circumstances’ then his intent is irrelevant.” Id. (quoting Reichhart v. City of New
Haven, 674 N.E.2d 27, 31 (Ind. Ct. App. 1996), trans. denied). There is no basis for an
abuse of process claim if legal process is used to accomplish an outcome that the process
was designed to accomplish. Id. “‘The purpose for which the process is used is the only
thing of importance.’” Shortridge, 689 N.E.2d at 1252.
“‘The gravamen of [abuse of process] is not the wrongfulness of the prosecution,
but some extortionate perversion of lawfully initiated process to illegitimate ends.’” Id.
(quoting Heck v. Humphrey, 512 U.S. 477, 486 n.5, 114 S. Ct. 2364, 2372 n.5 (1994)).
Unlike a malicious prosecution action, an action for abuse of process does not necessarily
require proof that the action was brought without probable cause or that the action
terminated in favor of the party alleging abuse of process. Lindsay v. Jenkins, 574
N.E.2d 324, 326 (Ind. Ct. App. 1991), trans. denied. It does appear, however, that an
action’s lack of validity can be highly relevant in examining an abuse of process claim.
Our supreme court has held the reasonableness of an attorney’s action in instituting
litigation should be judged by an objective standard and whether “‘no competent and
reasonable attorney familiar with the law of the forum would consider that the claim was
worthy of litigation on the basis of the facts known by the attorney who instituted suit.’”
8
In the Estate and Spangler Jennings’s brief, they omit the “and substantively” part of this test.
31
Shortridge, 689 N.E.2d at 1253 (quoting Wong v. Tabor, 422 N.E.2d 1279, 1288 (Ind. Ct.
App. 1981)).9 There must be evidence that an attorney filed a claim for a purpose other
than aiding his or her client in adjudicating his or her claim. Id. Additionally, there must
be evidence that the attorney “‘knowingly initiated proceedings for a clearly improper
purpose,’” which requires more than evidence of a questionable belief as to the merits of
a case, or the failure to fully investigate all facts before filing suit. Id. (quoting Wong,
422 N.E.2d at 1987).
Applying these principles to the present case, in order to succeed upon their abuse
of process claim, Lax and Lasco must prove that Mayer had an illegitimate purpose in
filing the counterclaims—a purpose other than aiding his clients at the time, MEC and
JME, in their dispute with Lax and Lasco. Lax and Lasco argue that the illegitimate
purpose was to harm Lasco’s reputation and, specifically, his involvement in the MTO
casino. In other words, if Mayer’s true motivation in filing the counterclaims was to have
the first lawsuit’s judgment set aside, or to recover damages for his clients, then there
would be no abuse of process claim. However, if Mayer’s true motivation was to damage
Lasco’s reputation, there could be an abuse of process claim.
The Estate and Spangler Jennings contend that the counterclaims were
procedurally proper filings under Indiana Trial Rules 13 and 15 and, therefore, cannot
form the basis of an abuse of process claim. However, the Estate and Spangler Jennings
9
Wong solely addressed a claim of malicious prosecution, while Shortridge solely addressed a claim of
abuse of process. Still, the Shortridge court clearly deemed it appropriate to rely heavily upon Wong in
establishing the parameters of an abuse of process claim.
32
provide no analysis as to whether those counterclaims were substantively proper. The
trial court dismissed the first counterclaim as an impermissible collateral attack upon the
first judgment, and it granted summary judgment on the second counterclaim for
essentially the same reasons. Those rulings were not appealed, nor do the Estate and
Spangler Jennings now argue that they were flawed. Mayer was seeking, on behalf of his
clients, damages from Lax and Lasco for their allegedly fraudulent conduct in procuring
the first judgment. Again, “‘a litigant defeated in a tribunal of competent jurisdiction
may not maintain an action for damages against his adversary or adverse witnesses on the
ground the judgment was obtained by false and fraudulent practices or by false and
forced evidence.’” South Haven Sewer Works, Inc. v. Jones, 757 N.E.2d 1041,
1045 (Ind. Ct. App. 2001) (quoting Dodd v. Estate of Yanan, 625 N.E.2d 456, 457 (Ind.
1993)). Also, Mayer never sought to have the lawsuit in the first judgment set aside
through the proper channels of a Trial Rule 60(B)(3) motion to set aside.
There is scant direct evidence that Mayer had ill will towards Lasco and wanted to
harm his reputation by filing the counterclaims; the best evidence that Lax and Lasco can
point to is that Mayer evidently inquired about Lasco’s interest in the MTO casino before
the counterclaim was filed, implying that Mayer was aware of that interest and wanted to
harm it. In Lindsay, 574 N.E.2d at 326, we reversed a grant of summary judgment in
favor of an abuse of process defendant where the plaintiff had submitted an affidavit
averring that the defendant had told another person that it would cost the plaintiff more to
defend against the allegedly abusive lawsuit than it would cost the defendant to bring it.
33
Thus, there was direct evidence in Lindsay that the defendant was improperly using
litigation to harm the plaintiff. In Shortridge, however, the supreme court considered the
fact that a lis pendens filing was entirely improper under Indiana law as sufficient to
avoid summary judgment in favor of the attorneys who had filed the lis pendens notice
and who were later sued for abuse of process. See Shortridge, 689 N.E.2d at 1253-54.
Although there does not appear to have been direct evidence that the attorneys acted
maliciously in filing the lis pendens notice, the supreme court said that “[a]n examination
of the motivation behind the decision of the . . . attorneys to file the [lis pendens notice] is
a question of fact that is subject to conflicting inferences.” Id. at 1253. Here, even if
there is no direct evidence that Mayer had an improper motive in filing the counterclaims,
we conclude that it is enough to avoid summary judgment on Lax and Lasco’s abuse of
process claims that the counterclaims were so legally deficient and allegedly lacking in
any factual basis as to create a genuine issue of fact as to whether Mayer had an improper
motive in filing them. The trial court correctly denied the Estate and Spangler Jennings’s
motion for summary judgment on this claim.
IV. Punitive Damages
Finally, the Estate and Spangler Jennings argue that the trial court erred in
concluding that Lax and Lasco could seek punitive damages from them. Given our
previous rulings, the question is whether a fact-finder could be permitted to award
punitive damages against Spangler Jennings if it is found liable on the malicious
34
prosecution claim or against either the Estate or Spangler Jennings if they are found liable
on the abuse of process claim.
Although the trial court stated that “Indiana law is silent” on the issue of whether a
plaintiff can recover punitive damages from a deceased tortfeasor’s estate, our supreme
court did in fact directly rule on the issue in Crabtree ex rel. Kemp v. Estate of Crabtree,
837 N.E.2d 135 (Ind. 2005). The court reviewed numerous cases from other
jurisdictions, the majority of which barred punitive damages in such situations, and held:
We believe the majority view is persuasive and hold that
Indiana law does not permit recovery of punitive damages
from the estate of a deceased tortfeasor. The central purpose
of punitive damages is to punish the wrongdoer and to deter
him from future misconduct, not to reward the plaintiff and
not to compensate the plaintiff. “[T]he plaintiff has no right
or entitlement to an award of punitive damages in any
amount. Unlike a claim for compensatory damages, the trier
of fact is not required to award punitive damages even if the
facts that might justify an award are found.” Cheatham v.
Pohle, 789 N.E.2d 467, 472 (Ind. 2003) . . . .
Crabtree, 837 N.E.2d at 139. The court did not believe that “affirmative justice thus
would be done by allowing the deceased’s innocent heirs to be punished for the
wrongdoing of the decedent.” Id. It did leave open the possibility that it might consider
the availability of punitive damages “[i]f we ever encounter a case where a tortfeasor
seems to have considered his own death as an escape from punitive damages incident to
some intentional tort . . . .” Id.
Lax and Lasco argue that Crabtree is “distinguishable” from the present case. It is
true that Crabtree dealt specifically with a situation where children of a deceased
35
tortfeasor were seeking punitive damages from their father’s estate; the court noted that
because punitive damages usually are excluded from insurance coverage, any such
damages would be payable from the father’s estate to the detriment of the heirs—the
children—with their attorney and the State being the only net beneficiaries of an award of
punitive damages. Id. at 139-40. However, it does not appear that the court intended to
limit application of its holding to the particular fact pattern in that case, as opposed to
making an observation as to why precluding recovery of punitive damages from a
deceased tortfeasor’s estate was “especially significant here . . . .” Id. at 139 (emphasis
added). Instead, we believe the court clearly intended to establish a general rule that
punitive damages are not recoverable from the estate of a deceased tortfeasor, with the
only possible exception being if the tortfeasor committed suicide to attempt to escape
such damages. There is no indication that Mayer committed suicide. The trial court
erred in ruling that Lax and Lasco could attempt to recover punitive damages from the
Estate.
We now turn to whether Lax and Lasco may attempt to recover punitive damages
from Spangler Jennings. It is unclear in Indiana whether a plaintiff generally may
recover punitive damages from a tortfeasor’s employer strictly under respondeat superior
principles, regardless of whether the tortfeasor is still alive or of any independent
misconduct by the employer.10 In Stevenson v. Hamilton Mutual Ins. Co., 672 N.E.2d
10
In Infinity Products, Inc. v. Quandt, 775 N.E.2d 1144, 1154 (Ind. Ct. App. 2002), and Stroud v. Lints,
760 N.E.2d 1176, 1185 (Ind. Ct. App. 2002), this court directly held that a corporation may be held
vicariously liable for punitive damages assessed against an employee. Transfer was granted in both cases
36
467, 474 (Ind. Ct. App. 1996), trans. denied, this court held that if an employer is held
directly liable for punitive damages by virtue of its own misconduct, then an insurance
company should not cover such damages, but if punitive damages are vicariously
imposed solely because of an employee’s misconduct, then insurance should cover them.
Obviously, Stevenson proceeded on the assumption that punitive damages could be
vicariously imposed against an employer for employee misconduct without any evidence
of misconduct by the employer.
Stevenson relied upon Norfolk & W. Ry. Co. v. Hartford Acc. & Indem. Co., 420
F. Supp. 92 (N.D. Ind. 1976). In that case, the court extensively examined Indiana law
concerning the imposition of punitive damages against corporations. It noted that the
first Indiana Supreme Court cases to address the issue seemed to be inconsistent
regarding whether a corporation can be held liable for punitive damages for an
employee’s misconduct on a purely vicarious basis, or whether some independent
wrongdoing by corporate management was required. Norfolk, 420 F. Supp. at 95-96
(citing Jeffersonville R.R. Co. v. Rogers, 28 Ind. 1 (1867) and Jeffersonville R.R. Co. v.
Rogers, 38 Ind. 116 (1871)). The Norfolk court also observed that cases from this court
explained permitting awards of punitive damages against a corporation “as resting on the
ground that since a corporation could not be held criminally liable, the assessment of
punitive damages against it would not offend Indiana’s prohibition against double
punishment.” Id. at 96 (citing Baltimore & Ohio S.W. R.R. Co. v. Davis, 44 Ind. App.
and both opinions were vacated, but in neither case did our supreme court address the question of holding
an employer liable for punitive damages assessed against an employee.
37
375, 380, 89 N.E. 403, 405 (1909); Indianapolis Bleaching Co. v. McMillan, 64 Ind. App.
268, 270-71, 113 N.E. 1019, 1020 (1916); Nicholson’s Mobile Home Sales, Inc. v.
Schramm, 164 Ind. App. 598, 606, 330 N.E.2d 785, 791 (1975)).
In 1984, the General Assembly passed new legislation regarding punitive
damages. In pertinent part, “It is not a defense to an action for punitive damages that the
defendant is subject to criminal prosecution for the act or omission that gave rise to the
civil action.” Ind. Code § 34-24-3-3. This statute changed the existing common law rule
automatically precluding both an award of punitive damages and criminal prosecution
against one defendant. Cheatham v. Pohle, 789 N.E.2d 467, 472 n.3 (Ind. 2003). Thus,
the continued validity of cases such as Davis, Indianapolis Bleaching, Nicholson’s, and
Norfolk is doubtful because they were based upon the abrogated common law rule. Also,
as noted by the Norfolk court, the early cases from our supreme court are unclear on
whether a corporation may be held vicariously liable for punitive damages based solely
upon an agent’s conduct, or whether there must be some independent misconduct by the
corporation’s management to support an award of punitive damages.
In attempting to discern what the law in Indiana should be on this question, we
first note that other jurisdictions are very much in conflict on the issue. See generally 22
Am. Jur.2d Damages §§ 590-95 (2003); compare also Bierman v. Aramark Refreshment
Servs., Inc., 198 P.3d 877, 884 (Okla. 2008) (“Punitive or exemplary damages may be
assessed against an employer for an employee’s act under the doctrine of respondeat
superior. There is no requirement that an employer participate in or ratify the conduct of
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an employee to be liable for punitive or exemplary damages under the doctrine of
respondeat superior.”), with Currie v. Cundiff, 870 F. Supp. 2d 581, 586 (S.D. Ill. 2012)
(noting that under Illinois law, if liability of a corporation is premised upon respondeat
superior, a plaintiff must show “complicity” of corporate management in acts of agent
before punitive damages may be imposed against the corporation). The American Law
Institute has embraced the “complicity” approach, as indicated by the following:
Punitive damages can properly be awarded against a master
or other principal because of an act by an agent if, but only if,
(a) the principal or a managerial agent authorized the doing
and the manner of the act, or
(b) the agent was unfit and the principal or a managerial agent
was reckless in employing or retaining him, or
(c) the agent was employed in a managerial capacity and was
acting in the scope of employment, or
(d) the principal or a managerial agent of the principal ratified
or approved the act.
RESTATEMENT (SECOND) OF TORTS § 909 (1979); see also RESTATEMENT (SECOND) OF
AGENCY § 217C (1958).
Turning to the current state of Indiana law on punitive damages, we first discuss
our supreme court’s decision in Orkin Exterminating Co., Inc. v. Traina, 486 N.E.2d
1019 (Ind. 1986). In that case, an exterminator employed by Orkin carried a modified
firearm into a home while on business, against a supervisor’s direct orders, where it
accidentally discharged and injured the homeowner. A jury awarded the homeowner and
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his wife $67,000 in compensatory damages and also awarded $400,000 in punitive
damages against Orkin under respondeat superior. Our supreme court reversed the
punitive damages award. It first listed general principles regarding punitive damages,
including that they “are not compensatory in nature but are designed to punish the
wrongdoer and to dissuade him and others from similar conduct in the future.” Orkin,
486 N.E.2d at 1022. Further, punitive damages should be awarded only “with the
realization that the plaintiff has already been awarded all that he is entitled to receive as a
matter of law.” Id. Anything that a plaintiff receives in addition to compensatory
damages “is a windfall,” and when deciding whether to allow recovery of punitive
damages, “all thoughts of benefiting the injured party should be laid aside and the sole
issues are whether or not the Defendant’s conduct was so obdurate that he should be
punished for the benefit of the general public.” Id. Ultimately, the court found
insufficient evidence of conscious and intentional misconduct in Orkin’s hiring and
retention of the employee and reversed the award of punitive damages. Id. at 1024.
Orkin is not directly on point here. In that case it does not appear that the employee was
alleged to have committed an intentional tort in the course of employment, as opposed to
mere negligence, unlike Mayer. Still, the opinion overall does seem to embody
skepticism about holding a corporation liable for punitive damages without some
evidence that the corporation, through its management, engaged in some independent
behavior warranting punitive damages.
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The case of Husted v. McCloud, 450 N.E.2d 491 (Ind. 1983), is instructive. In
that case, one partner in a law firm misappropriated client funds and was convicted of
theft and forgery. His law firm subsequently was found liable in compensatory and
punitive damages for the stolen funds. Analyzing the case under the Indiana Uniform
Partnership Act, our supreme court held the firm was liable for compensatory damages;
although the attorney’s conversion of funds was not within the scope of the partnership’s
business, the acceptance of the client’s funds and entrustment of them with the attorney
was within said scope. Husted, 450 N.E.2d at 494. However, the court reversed the
imposition of punitive damages against the firm. Id. at 495. It held, “Indiana prohibits
awarding such damages against an individual who is personally innocent of any
wrongdoing. Punitive damages are not intended to compensate a plaintiff but rather are
intended to punish the wrongdoer and thereby deter others from engaging in similar
conduct in the future.” Id. Although not strictly speaking a respondeat superior case,
Husted is persuasive authority for the proposition that our supreme court is not currently
inclined to permit the vicarious imposition of punitive damages against a corporation or
other principal in the absence of some evidence of managerial wrongdoing or
“complicity” in an agent’s wrongdoing.
We conclude that consistent with the purposes of punitive damages in Indiana,
including deterrence of the person or entity against which they are imposed, such
damages should not be imposed against a corporation strictly on the basis of respondeat
superior for an employee’s misconduct. In order to award punitive damages against the
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employer, there must be evidence of positive or collusive action by the employer as
indicated by the Restatement sections quoted above, such as prior authorization of the
doing and the manner of the agent’s act; that the agent was unfit and the employer was
reckless in employing and/or retaining the agent; that the agent was employed in a
managerial capacity and was acting within the scope of his or her employment when the
tort was committed; or that the employer ratified or approved the agent’s action after the
fact. These situations are consistent with Indiana law that an award of punitive damages
against an individual ordinarily requires a finding of willful and wanton conduct.
Davidson v. Bailey, 826 N.E.2d 80, 89 (Ind. Ct. App. 2005).
Here, there is no evidence in the record that Spangler Jennings’s management
approved Mayer’s filing of the counterclaims ahead of time because as a shareholder or
“partner” in the firm, Mayer’s actions generally were not approved ahead of time by a
supervising attorney. Also, there is no evidence that Mayer was an unfit employee—i.e.,
there is no evidence that Mayer ever had, apart from the filing of the counterclaims, acted
inappropriately in his employment. As for Mayer’s managerial status, Lax and Lasco
deposed Daniel Gioia, Spangler Jennings’s managing attorney and president of the firm
at the time the counterclaims were filed, who described the firm’s management structure
as consisting of a Board of Directors and an Executive Committee within the Board;
Mayer was not mentioned as belonging to either the Board or the Executive Committee.
Thus, Mayer’s status as a shareholder in the firm was insufficient by itself to give him
“managerial” status within the firm.
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We do believe there are outstanding genuine issues of material fact as to whether
Spangler Jennings’s management ratified Mayer’s actions and whether Mayer’s actions
met the requisite punitive damages standard of willful and wanton conduct. A principal’s
ratification of intentionally tortious conduct by an agent, as opposed to ratification of a
contract, has rarely been addressed in Indiana. It appears to be accepted, however, that
ratification of a tort must be made with full knowledge of the act, including its tortious
character or the surrounding circumstances. 30 C.J.S. Employer-Employee Relationship
§ 199 (2007). Ratification may be inferred only from acts that clearly and unequivocally
evince an intention to ratify. Id. Failure to discharge an employee who has committed
misconduct may be evidence of ratification. Baptist v. Robinson, 49 Cal. Rptr. 3d 153,
167 (Cal. Ct. App. 2006), rev. denied. “The theory of ratification is generally applied
where an employer fails to investigate or respond to charges that an employee committed
an intentional tort . . . .” Id. An employer who has knowledge of an employee’s course
of conduct but does not reprimand or discipline the employee may be found to have
ratified that conduct. 30 C.J.S. Employer-Employee Relationship § 199 (2007).
“Whether an employer has ratified an employee’s conduct is generally a factual
question.” Baptist, 49 Cal. Rptr. 3d at 167.
The designated evidence is that on August 25, 2005, after the amended
counterclaim was filed, counsel for Lax and Lasco wrote a letter to Gioia, complaining
that the counterclaims Mayer filed lacked any factual basis and were harming Lasco’s
business reputation and urging Spangler Jennings “to carefully review this situation and
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take all necessary steps for mitigation of damages.” App. p. 741. Gioia testified in his
deposition that the firm’s Executive Committee did in fact look into the matter, including
whether there was any factual basis for the counterclaims.11 The firm ended up taking no
disciplinary action against Mayer. Also, Spangler Jennings retained the fees Mayer
charged for preparing the counterclaims within a firm-wide pool and paid Mayer a salary;
Mayer did not receive the fees directly. However, there currently is no designated
evidence in the record that any of the allegations in the counterclaims were true and, thus,
we assume for purposes of summary judgment that the allegations were baseless. Thus,
again, viewing the evidence in a light most favorable to Lax and Lasco as summary
judgment nonmovants, there is evidence that Mayer filed highly inflammatory
accusations against Lax and Lasco with no factual basis, and that this was brought to the
attention of Spangler Jennings management, who then investigated the matter but took no
action against Mayer despite the lack of any factual basis for the counterclaims, while
retaining the fees Mayer had charged for preparing them. This evidence raises genuine
issues of material fact as to whether Spangler Jennings ratified willful and wanton
conduct by Mayer and, therefore, the trial court correctly denied summary judgment to
Spangler Jennings on the issue of punitive damages.
Conclusion
The statements Mayer made in the counterclaims were covered by the absolute
privilege for statements made during judicial proceedings. However, that privilege does
11
Gioia refused to go into detail regarding what the Executive Committee learned, claiming that
information to be privileged.
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not bar Lax and Lasco’s lawsuits for malicious prosecution and abuse of process.
Additionally, even though the cause of action for malicious prosecution is barred against
the Estate by the Survival Statute, that cause of action remains viable against Spangler
Jennings. Also, the Estate and Spangler Jennings have not established that they are
entitled to judgment as a matter of law on the abuse of process claim. Lax and Lasco
cannot continue pursuing punitive damages against the Estate, but they can continue
pursuing them against Spangler Jennings. Although Lax and Lasco may continue
seeking recovery against Spangler Jennings on their malicious prosecution and abuse of
process claims, they may do so only under a respondeat superior theory, not a direct
liability theory.
We reverse the denial of summary judgment to the Estate and Spangler Jennings
on the claims for negligent supervision and/or retention, tortious interference with a
business relationship, and tortious interference with a contract, and direct that summary
judgment be entered in the Estate’s and Spangler Jennings’s favor on those claims. We
reverse the denial of summary judgment to Spangler Jennings on the defamation claim
and direct that summary judgment be entered in its favor on that claim. We also reverse
the denial of summary judgment to the Estate regarding Lax and Lasco’s seeking of
punitive damages against it and direct that summary judgment be entered in favor of the
Estate on that claim. We affirm the granting of summary judgment in the Estate’s favor
on the defamation and malicious prosecution claims. We affirm the denial of summary
judgment on the malicious prosecution claim against Spangler Jennings and the denial of
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summary judgment on the abuse of process claim as to both the Estate and Spangler
Jennings. We also affirm the denial of summary judgment in favor of Spangler Jennings
on the punitive damages issue. We remand for further proceedings consistent with this
opinion.
Affirmed in part, reversed in part, and remanded.
NAJAM, J., and BAILEY, J., concur.
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