Julie R. Waterfield v. Richard D. Waterfield

FILED
Sep 09 2016, 8:29 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
Eric E. Snouffer Larry A. Mackey
Snouffer & Snouffer Mark J. Crandley
Fort Wayne, Indiana Barnes & Thornburg LLP
Indianapolis, Indiana
Daniel Sigler
Sigler Law LLC
Fort Wayne, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Julie R. Waterfield, September 9, 2016
Appellant-Plaintiff/Counter Defendant, Court of Appeals Case No.
92A03-1511-PL-1968
v. Appeal from the Whitley Superior
Court
Richard D. Waterfield, The Honorable Douglas M. Fahl,
Appellee-Defendant/Counter-Plaintiff. Judge
Trial Court Cause No.
92D01-0311-PL-232
Riley, Judge.
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STATEMENT OF THE CASE
[1] Appellant-Plaintiff/Counter-Defendant, Julie R. Waterfield (Julie), appeals the trial
court’s order denying her request to set aside the divorce decree entered in 1997
based on the allegation of fraud committed by Appellee-Defendant/Counter-
Plaintiff, Richard D. Waterfield (Richard), while negotiating a settlement leading to
the dissolution of the marriage. 1
[2] We affirm.
ISSUES
[3] Julie raises seven issues on appeal, which we consolidate and restate as the following
four issues:
(1) Whether the trial court properly denied Julie’s attempt to set aside the
Settlement Agreement she entered into based on fraud;
(2) Whether the trial court erred when it denied Julie’s motion for summary
judgment on Richard’s counterclaim for abuse of process;
(3) Whether the trial court properly sanctioned Julie for violating her court-
ordered discovery obligations; and
1
Even though the confidential filings were voluminous in this case, we have endeavored to maintain confidentiality
on appeal where appropriate. But an appellate judicial opinion that both decides the case and articulates the law
requires consideration of the underlying facts. Thus, we have included a number of facts derived from confidential
records in this opinion because we deem such information to be essential to the resolution of the litigation and
appropriate to further the establishment of precedent and the development of the law. See Drake v. Dickey, 2 N.E.3d
30, 32 (Ind. Ct. App. 2013, aff’d, 12 N.E.3d 875 (Ind. 2014).
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(4) Whether the trial court properly granted Richard an award of attorney fees.
FACTS AND PROCEDURAL HISTORY
[4] Julie and Richard were married in 1968. After 29 years of marriage, Julie filed for a
decree of dissolution on May 19, 1997. On August 25, 1997, without taking any
discovery, Julie commenced settlement negotiations with an opening offer of $25
million in cash, unstructured. Meanwhile, Richard had provided Julie with an
informal preliminary spreadsheet (the Disclosure Statement), enumerating the
property that Richard assumed to be part of the marital estate. A final version of the
Disclosure Statement was served on Julie on September 22, 1997. On October 9,
1997, and upon the expiration of her offer to settle, Julie served an initial discovery
request on Richard, seeking information about the assets in the marital estate and
their corresponding value. While Julie’s counsel served the discovery, the parties
continued their settlement discussions. Simultaneously with seeking a settlement,
Julie’s counsel advised Julie not to settle without conducting detailed discovery into
the marital estate. On three separate occasions, Julie’s counsel warned her that
“based upon what [Richard] has condescended to disclose to us, it is clear that you
want to agree to substantially less than what the [c]ourt would grant you.”
(Appellant’s App. p. 568).
[5] Despite her attorney’s warnings and cautions, Julie chose to settle the dissolution
and entered into a settlement agreement (Settlement Agreement), in which Richard
agreed to provide Julie $20 million in assets, consisting of $19,477,000 in cash and a
lake cottage on Clear Lake, near Fremont, Indiana. The divorce decree was entered
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on December 22, 1997, and incorporated the Disclosure Statement and the
Settlement Agreement. The Settlement Agreement provided that “[t]he parties agree
that the value and components of the [m]arital [e]state have previously been
discussed by them. The parties further agree that they have had the opportunity to
confer with separate counsel regarding the value and components of the [m]arital
[e]state, and the agreed-upon division of the [m]arital [e]state.” (Appellant’s App. p.
182). A handwritten annotation to this paragraph further elaborates that “[Richard]
represents that he has disclosed to [Julie] his material assets (including property
owned jointly with [Julie]) that he owned on 5-19-97 and his material liabilities on
such date.” (Appellant’s App. p. 182). On January 28, 1998, roughly a month after
the dissolution, Julie consulted with her attorney and expressed her regret to have
entered into the Settlement Agreement without full disclosure or discovery.
[6] On July 12, 2003, almost six years after the dissolution of her marriage, Julie filed a
Complaint, asserting that the Disclosure Statement provided by Richard had
undervalued assets in the marital estate and failed to identify and include others. In
her Complaint, she sought to set aside the Settlement Agreement and dissolution of
marriage decree, essentially claiming that Richard had committed fraud to the value
of $80 million. On March 1, 2004, Richard filed a counterclaim for abuse of process
and for statutory attorney fees. On July 8, 2005, Richard moved for partial summary
judgment on whether Julie could assert a fraud claim based on Richard’s alleged
misstatement on the value of the marital assets. On March 16, 2006, the trial court
granted the motion for partial summary judgment as to all of Julie’s claims based on
the valuation of assets. In its order, the trial court found, in part, as follows:
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Valuation is an issue of opinion that must be developed as part of a
litigant’s case and can be subject to contrary arguments during a
lawsuit. The undisputed facts show that [Julie] did not use the tools of
discovery, did not retain experts or have the marital assets valued for
herself. Instead she settled the dissolution proceeding without
exploring what the value of the marital assets were or developing her
own case as to the value of those assets.
(Appellant’s App. p. 54).
[7] During these proceedings, Julie made multiple allegations regarding her knowledge
of the marital assets and their corresponding values in settling her divorce.
Specifically, she alleged that Richard had deprived her of all assets and liabilities of
the parties’ marital estate, maintaining exclusive control thereof, as well as being
dependent on Richard’s representations. To defend against these claims, Richard
sought access to the entire file of Julie’s divorce counsel. Julie objected based on
privilege grounds. After protracted litigation, the trial court ultimately found a
partial waiver of the privilege and allowed Richard to access seven documents from
Julie’s divorce attorney’s file. On March 31, 2009, Richard filed his motion for
summary judgment. After a hearing, the trial court entered summary judgment in
favor of Richard on all of Julie’s claims.
[8] On December 3, 2012, Julie moved for summary judgment on Richard’s
counterclaim for abuse of process and for statutory attorney fees, which was
subsequently denied by the trial court on October 2, 2013. On February 28, 2014,
Julie requested certain documents from Richard related to his claim for attorney fees.
In turn, on June 17, 2014, Richard served Julie with a discovery request, seeking
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information as to when Julie’s attorney reviewed the file of her divorce counsel, as
well as the fees and rates charged by Julie’s lawyer. When Julie objected to the
discovery, Richard moved to compel Julie’s response on September 25, 2014, which
was granted by the trial court on October 24, 2014. The trial court ordered Julie to
provide responses to Richard’s discovery within ten days, or by November 3, 2014.
On that day, Julie served discovery responses, reiterating that she continued her
objections to much of the discovery. Three days later, on November 6, 2014, Julie
sought reconsideration of the discovery order, which was subsequently denied on
November 26, 2014.
[9] On November 10, 2014, Richard moved for a default judgment as a discovery
sanction due to Julie’s non-production of the requested discovery and failure to
diligently litigate the case. Nine days later, Julie filed her response to Richard’s
motion for sanctions, again repeating the objections already rejected by the trial court
and asserting:
She is not in a position to contest the reasonableness of [Richard’s]
attorney fees. That is not to say that [Julie] is admitting that fees are
owed in any way or that the disclosed fees are admissible at trial.
Only that [Julie] is not in a position to dispute the reasonableness of
the disclosed fees during a trial in this matter.
(Appellant’s App. p. 1800).
[10] On December 2, 2014, the trial court heard argument on the motion for sanctions,
including the sanction of default. Despite the November 3, 2014 deadline, Julie still
had not complied with the order compelling responses to the counterclaim discovery
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at the time of the hearing. Thus, Richard expressly asked the trial court to grant the
requested relief of a default judgment against Julie. At the close of the evidence, the
trial court took Richard’s request under advisement.
[11] Two days after the hearing, on December 4, 2014, Julie’s attorney commenced to
compile documents responsive to Richard’s counterclaim discovery request. On
December 29, 2014, Richard filed a notice with the trial court, notifying it of the
status on the outstanding discovery requests. At that point, Richard had still not
received complete discovery requests. On January 5, 2015, Richard again filed an
updated notice regarding Julie’s discovery responses with the trial court. The notice
indicated that although Julie had provided some additional documents, she remained
in noncompliance in many respects.
[12] On January 14, 2015, the trial court entered a default judgment as a discovery
sanction against Julie. The trial court found that Julie had engaged in a “repetitive
pattern” of disregarding the trial court’s discovery orders and her discovery
obligations. (Appellant’s App. p. 125). While the trial court opined that Julie had
been “given every opportunity to comply with the [c]ourt’s Order compelling
discovery,” the court concluded that Julie had “failed to comply with said Order.”
(Appellant’s App. p. 125). As such, allowing Julie even more time to satisfy her
obligations “would be fruitless and result only in further stalling and delay.”
(Appellant’s App. p. 126).
[13] Because the default judgment established liability on Richard’s counterclaim for
attorney fees, Richard petitioned the trial court for an award on March 5, 2015. Julie
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responded to this petition on June 24, 2015, and informed the trial court, for the first
time, that she was prevented from responding to the counterclaim discovery due to
an illness of her attorney and acknowledged that she still had not complied with the
trial court’s order compelling discovery. In his affidavit, Julie’s attorney affirmed
that he had begun gathering documents responsive to the counterclaim discovery on
December 4, 2014. However, on December 14, 2014, he became incapacitated to the
extent that he had to be admitted to the hospital. Julie’s attorney acknowledged that
while “the total fees produced” by Julie from December 1, 2001 till November 21,
2014 amounted to “. . . approximately $3[.]659 million. The actual amount billed . .
. was considerably higher.” (Appellant’s App. p. 2002). On October 23, 2015, the
trial court awarded Richard attorney fees in the amount of $842,021.
[14] Julie now appeals. Additional facts will be provided as necessary.
DISCUSSION AND DECISION
[15] Almost twenty years after the dissolution of her marriage to Richard, Julie appeals to
this court in an effort to re-open the Settlement Agreement underlying the divorce
decree. Claiming to have been the victim of fraud, Julie maintains that Richard
misrepresented both the composition and value of the assets in the marital estate.
Specifically, she asserts that by exploiting her trust, Richard induced Julie “to accept
a divorce settlement that was more than $80,000,000 below that to which she was
entitled.” (Appellant’s Br. p. 15). Within this overarching fraud allegation, Julie
also disputes the trial court’s summary judgment rulings on her claims with respect
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to attorney-client communications and the default judgment on Richard’s
counterclaims.
I. Fraud
[16] Indiana encourages settlement agreements to “promote the amicable settlements of
dissolution-related disputes,” on the expectation that “freedom of contract will . . . .
produce mutually acceptable accords, to which parties will voluntarily adhere.” Pohl
v. Pohl, 15 N.E.3d 1006, 1010 (Ind. 2014) (quoting Voight v. Voight, 670 N.E.2d 1271,
1277-78 (Ind. 1996)). A property settlement that is incorporated into a final divorce
decree is considered a binding contract, and the dissolution court may not modify
that settlement absent fraud, duress, or undue influence. Rothschild v. Devos, 757
N.E.2d 219, 223 (Ind. Ct. App. 2001). Because there is a strong presumption of
enforceability of contracts that represent the freely bargained agreement of the
parties, Indiana courts have not hesitated to enforce a divorce settlement agreement
that would have been in excess of the divorce court’s authority had it been crafted by
the divorce court and that was shown to be, over time, grossly inequitable. Pond v.
Pond, 700 N.E.2d 1130, 1136 (Ind. 1998). The interpretation of such an agreement,
as with any other contract, presents a question of law and is reviewed de novo. Bailey
v. Mann, 895 N.E.2d 1215, 1217 (Ind. 2008). Although a court is not bound to
accept every proffered settlement, “[i]n reviewing a settlement agreement, a court
should concern itself only with fraud, duress, and other imperfections of consent, or
with manifest inequities, particularly those deriving from great disparities in
bargaining power.” Voight, 670 N.E.2d at 1278. However, “the power to disapprove
a settlement agreement must be exercised with great restraint. A trial judge should
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not reject such agreements just because she believes she could draft a better one.” Id.
at 1277.
[17] Here, Julie is attempting to set aside the Settlement Agreement by contending that
fraud occurred pursuant to Indiana Trial Rule 60(B) during the negotiations which
culminated in the Settlement Agreement. We review the grant or denial of a Trial
Rule 60(B) motion for relief from judgment under an abuse of discretion standard.
Ross v. Bachkurinskiy, 770 N.E.2d 389, 392 (Ind. Ct. App. 2002). The trial court must
balance the need for an efficient judicial system with the judicial preference for
deciding disputes on the merits. Id. On appeal, we will not find an abuse of
discretion unless the trial court’s decision is clearly against the logic and effect of the
facts and circumstances before it or is contrary to law. Packer v. State, 777 N.E.2d
733, 738 (Ind. Ct. App. 2002), disapproved of on other grounds by Mosley v. State, 908
N.E.2d 599 (Ind. 2009). To meet the fraud requirement, Julie must show that “a
material representation of a past or existing fact was made which was untrue and
known to be untrue by the party making it, or else recklessly made, and that another
party did in fact rely on the representation and was induced thereby to act to his
detriment.” Plymale v. Upright, 419 N.E.2d 756, 760 (Ind. Ct. App. 1981).
[18] Julie’s fraud argument is essentially two-fold: first, she asserts that she did not rely
on the privileged communications with her divorce counsel, but secondly, she
maintains that she did rely on Richard’s misrepresentations of the value of certain
assets of the marital estate. Reliance upon a misrepresentation is a material element
of the cause of action in fraud. Id. Reliance consists of two distinct parts: the fact of
reliance and the right of reliance. Id. at 761. While the fact of reliance means that
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the plaintiff actually relied on the misrepresentation, the right to rely is “more
difficult to determine.” Id. at 762. The right to rely “is bound up with the duty of
[an individual] to be diligent in safeguarding his interests.” Id. “The legal obligation
that a person exercise the common sense and judgment of which he is possessed is a
practical limitation on the actionability of various representations.” Id. Thus, “if a
party blindly trusts, where he should not, and closes his eyes, where ordinary
diligence requires him to see, he is willingly deceived and . . . cannot receive an
injury.” Pugh’s IGA, Inc. v. Super Food Services, Inc., 531 N.E.2d 1194, 1199 (Ind. Ct.
App. 1988) (quoting Frenzel v. Miller, 37 Ind. 1, 17 (Ind. 1871)), reh’g denied, trans.
denied.
A. Privileged Communications
[19] As a basis for her fraud allegation, Julie takes the position that she was ignorant of
her rights and responsibilities in choosing to settle the divorce proceedings. She
maintains that, despite the tools of civil discovery available to her, she stood in an
inferior position to Richard with respect to the composition and value of the marital
estate and had no cause, reason, nor avenue to independently discover or value the
estate. Therefore, as a result, she relied exclusively on Richard’s representations as
memorialized in the Discovery Statement. In an attempt to prevent protracted
litigation in a decade old dissolution decree, Richard sought the disclosure of Julie’s
divorce counsel’s attorney-client communications purporting to show that Julie was
warned against settling the divorce before full disclosure was made of the assets of
the marital estate. Faced with Richard’s motion to compel the production of certain
documents of Julie’s divorce attorney’s file, the trial court opined that the requested
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discovery was critical evidence relevant to Julie’s claim of reliance, ignorance, and
inferior position. Waiving the privilege over these documents, the trial court
recognized that these documents were the only source of information that could call
the veracity of Julie’s allegations into doubt.
1. Waiving the Privilege
[20] Julie now contends that the trial court erred in waiving the privileged nature of
certain documents with attorney-client communications. “The attorney-client
privilege is one of the oldest recognized privileges for confidential communications.
Purdue University v. Wartell, 5 N.E.3d 797, 806 (Ind. Ct. App. 2014). The privilege is
intended to encourage full and frank communication between attorneys and their
clients and thereby promote broader public interests in the observance of law and the
administration of justice. Id. “The privilege applies to all communication between
the client and his attorney for the purpose of obtaining professional legal advice or
aid regarding the client’s rights and liabilities.” Corll v. Edward D. Jones & Co., 646
N.E.2d 721, 724 (Ind. Ct. App. 1995).
The attorney-client privilege protects against judicially compelled
disclosure of confidential information regardless of whether the
information is to be disclosed by way of testimony or by court-ordered
compliance with a discovery request which a party has attempted to
resist. The harm to be prevented is not the manner in which the
confidence is revealed, but the revelation itself.
P.T. Buntin, M.D., P.C. v. Becker, 727 N.E.2d 734, 740 (Ind. Ct. App. 2000). “It is
well settled, however, that the confidential relationship of attorney and client is not
absolute for all purposes, but is a privilege which belongs to the client, and the client
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alone, to claim or waive; and where the client himself testifies concerning the
privileged matter, he then waives the privilege.” Key v. State, 235 N.E.2d 175 (Ind.
1956). Accordingly, like most privileges, the attorney-client privilege may be
expressly or implicitly waived. Brown v. Edwards, 640 N.E.2d 401, 406 (Ind. Ct. App.
1994), trans. denied.
[21] In the absence of an express waiver of the attorney-client privilege by Julie, we turn
to whether Julie implicitly waived the confidentiality of her divorce attorney’s
communications. Concluding that Julie waived the privilege, the trial court relied on
Mountain States Tel. & Tel. Co. v. DiFede, 780 P.2d 533 (Colo. 1989), which it found to
be on all fours with the situation before us. In DiFede, the plaintiff filed a complaint
seeking to set aside a transfer of real property and change of beneficiary executed by
her ex-husband, while the defendant asserted the claims were barred by a separation
agreement the plaintiff had signed. Id. at 537-38. The plaintiff sought to rescind the
separation agreement, contending she had been fraudulently induced to sign it
because her then-husband’s attorney, Raymond Wilder, had misled her about the
enforceability of the agreement when she signed it. Id. at 538. The defendant
responded that the plaintiff’s reliance on the attorney’s statements was unreasonable
because she had met with another attorney, Jack Foutch, ten days after she signed
the agreement who “must have told her” the agreement was enforceable. Id. The
DiFede court held that plaintiff had waived the attorney-client privilege with respect
to her conversation with Foutch, explaining:
When she alleged that she reasonably relied on Raymond Wilder’s
incorrect statement of the law, [plaintiff] injected her knowledge or
lack of knowledge of the correct statement of the law as a crucial issue
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relevant to her claim of fraud-in-the-inducement. Only Jack Foutch
and [plaintiff] know whether Jack Foutch disabused her of the
incorrect notion that the separation agreement was not immediately
enforeceable. It would be unfair for [plaintiff] to thrust her lack of
knowledge of the correct state of the law into the litigation by her
claim of fraudulent inducement while simultaneously retaining the
attorney-client privilege to frustrate attempts by [defendant] to prove
[her] knowledge of the correct state of the law and thereby negate the
very foundation necessary to prevail in [plaintiff’s] claim of fraudulent
inducement.
Id. at 544. In reaching this conclusion, the Colorado Supreme Court articulated a
three-prong test for establishing implied waiver. Id. at 543-44. First, the “assertion
of the privilege was the result of some affirmative act, such as filing suit, by the
asserting party.” Id. at 544. Second, “through this affirmative act, the asserting
party put the protected information at issue by making it relevant to the case.” Id.
And third, applying the “privilege would [deny] the opposing party access to
information vital to his defense.” Id.
[22] In her Complaint, Julie contended that she reasonably relied on Richard’s
representations of the composition and value of the assets in the marital estate. She
asserted that Richard
maintained exclusive control over, and made all decisions concerning,
the business activities involving the parties’ marital assets. [Richard]
also maintained all information regarding the assets and liabilities of
the parties’ marital assets, depriving Julie of any access to that
information. Therefore, as [Richard] intended, Julie was dependent
on [Richard’s] representations as to the extent and value of the parties’
marital assets in making her decision to enter into the [Settlement
Agreement].
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(Appellant’s App. p. 155). In her answers to counterclaims, Julie claimed that she
“was never provided with an honest and complete explanation with regard to the
meaning, significance or consequence of the documents she was asked to sign by
[Richard], including the Settlement Agreement.” (Appellant’s App. p. 219). And in
her response to requests for admissions, when asked to admit that she could have
obtained an independent valuation, Julie asserted that she was not “given reason to,
or would have thought to ask for such.” (Appellant’s App. p. 1961).
[23] By Julie placing her complete and ultimate reliance on Richard’s representations at
the core of her fraud allegation, Richard sought to refute these claims by requesting
access to Julie’s divorce attorney’s file as these “communications with Julie are the
only source of the information regarding what [her divorce attorney] told her about
the marital estate, the process for discovery of it, and the settlement.” (Appellee’s Br.
p. 28). Julie objected, claiming that those communications were shielded by the
client-attorney privilege.
[24] Similar to the plaintiff in DiFede, when Julie alleged that she had relied exclusively
on Richard’s representations and Disclosure Statement, Julie injected her knowledge
or lack of knowledge of her alternatives and legal discovery tools as a crucial issue
relevant to her claim of fraud. Only Julie’s divorce attorney and Julie would know
whether her divorce counsel disabused her of the incorrect notion that she had no
other alternatives than to rely on Richard. Although Julie now contends that
Richard could have obtained this information through her deposition, Julie’s
argument simply changes the forum in which the privilege would have been raised.
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Regardless of the discovery device, Julie would have continued to shield herself
behind the privileged nature of the attorney-client communication.
[25] Indiana courts have previously held that evidentiary privileges created “to shield
selected information from discovery . . . may not be wielded as swords at the will of a
party.” Madden v. Ind. Dept. of Transp., 832 N.E.2d 1122, 1128 (Ind. Ct. App. 2005).
In other words, “a party may not place an issue before the trier of fact and then assert
a privilege to prohibit the introduction of evidence regarding that issue.” Id. Julie
may not repeatedly testify to her alleged inferior standing, claim ignorance of the
right to conduct discovery and independent valuations, and use that testimony as a
sword against Richard while, at the same time, shielding Richard’s effort to obtain
evidence to the contrary by asserting the privilege. By repeatedly disclaiming her
divorce attorney’s influence and advice in the matter and stating that she only relied
upon Richard’s representation, Julie relinquished her right to hide evidence to the
contrary behind her privilege. By having chosen the sword, Julie must now
relinquish the shield. Accordingly, the trial court did not abuse its discretion by
waiving the privilege.
2. Right to Rely
[26] The disclosed privileged communications unequivocally establish that Julie was
advised not to settle the dissolution proceeding before full discovery was conducted.
Julie’s divorce attorney cautioned Julie on at least three separate occasions that her
share of the marital estate would increase beyond what she was willing to settle for if
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she engaged in discovery. Specifically, on October 9, 1997, divorce counsel sent a
letter to Julie, informing her:
Without conducting discovery, there is no way that we know how
much your marital estate is worth, how it is structured, or how it is in
your best interest to divide it. Basically, I cannot advise you to make
any proposal to settle and strongly advise you against making any
decisions before having full disclosure and appraisals.
(Appellant’s App. p. 567). Julie signed an acknowledgment, foregoing her attorney’s
legal advice to conduct discovery. On November 13, 1997, Julie’s divorce counsel
again required Julie to sign a similar acknowledgment. In this letter, Julie was
advised:
Once again, I must advise you against proceeding in this manner.
You have not allowed me to conduct discovery, obtain appraisals, or
consult financial experts as is necessary with this type of marital estate.
Further based upon what [Richard] had condescended to disclose to
us, it is clear that you want to agree to substantially less than what the
[c]ourt would grant you. There is no doubt in my mind that you
would receive 50%, if not more, of the marital net worth. Based upon
[Richard’s] disclosure which I would presume offer low valuations,
you are accepting less than one third. Clearly, this is not in your best
interest. Please acknowledge your understanding of my advice by
signing below.
(Appellant’s App. p. 574). Julie signed the letter. Shortly before the settlement, Julie
received a third caution from her attorney. On December 12, 1997, Julie was
informed:
Once again, I must advise you against entering into the property
settlement your husband is proposing. Without a doubt the settlement
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to you therein of $20,000,000 is substantially less than that which a
court would order. I strongly advise you to turn down this offer,
arrange for appraisals and conduct full discovery, and negotiate for a
minimum of 50%. As you are aware, I have been extremely unhappy
with the limited and incomplete documentation which [Richard] has
condescended to give us. Its incomplete nature makes me highly
suspicious that even the limited disclosure is not accurate. Based even
upon that limited disclosure, you are accepting substantially less than
50% of what he is willing to admit the net worth of the marital estate
is.
Please reconsider your decision to enter this [Settlement Agreement].
In the event that you do wish to proceed, please indicate that you
understand my concerns and advice by signing below.
(Appellant’s App. p. 575). Again, Julie acknowledged her attorney’s caution but
entered into the Settlement Agreement within days of the letter.
[27] Accordingly, Julie was aware that unless she conducted discovery into the assets and
liabilities of the marital estate, she would receive substantially less by entering into
the Settlement Agreement. Now, nearly two decades later, Julie decides she wants
to follow her divorce attorney’s advice and probe the values of the marital assets by
alleging Richard committed fraud by misrepresenting the net worth of the marital
estate—misrepresentations upon which she claimed to have relied on exclusively.
[28] However, by acknowledging that she understood the risk when declining to conduct
a full discovery, Julie surrendered her right to rely on Richard’s representations.
Because Julie “blindly trusted,” against the advice of her attorney, and “closed her
eyes, where ordinary diligence required her to see,” she became willingly deceived
and therefore cannot claim to have exclusively relied on Richard. See Pugh’s IGA,
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Inc., 531 N.E.2d at 1199. Thus, “[o]ne who knows of a risk and voluntarily exposes
one’s self to that risk cannot later recover for a resulting injury.” Kaken
Pharmaceutical Co., Ltd. v. Eli Lilly and Co., 737 F. Supp. 510, 519 (S.D. Ind., 1989)
(applying Indiana law); Frenzel, 37 Ind. at 17. Parties on notice to a possible
misrepresentation cannot refuse to use tools available to them to learn of the true
facts and later claim a right to rely on the misrepresentation. See, e.g., McCutchan v.
Blanck, 846 N.E.2d 256, 265 (Ind. Ct. App. 2006) (“[A] purchaser of property has no
right to rely upon the representations of the vendor of the property as to its quality,
where he has a reasonable opportunity of examining the property and judgment for
himself as to it qualities.”). Julie’s acknowledgment of her counsel’s advice but
subsequent denial to comply with it prevent her now from bringing a fraud claim as
she cannot establish a right to rely on Richard’s alleged misrepresentations of the
marital estate. 2
II. Abuse of Process
[29] Next, Julie contends that the trial court erred by denying her summary judgment on
Richard’s counterclaim of abuse of process. Our standard of review for summary
judgment appeals is well established. We review summary judgment de novo,
applying the same standard as the trial court: “Drawing all reasonable inferences in
favor of . . . the nonmoving parties, summary judgment is appropriate of the
designated evidentiary matter shows that there is no genuine issue as to any material
2
Because we affirm the trial court’s decision based on the ground that Julie cannot establish a right to rely, we do
not need to analyze whether Richard misrepresented the composition and value of the marital estate.
Court of Appeals of Indiana | Opinion 92A03-1511-PL-1968 | September 9, 2016 Page 19 of 37
fact and that the moving party is entitled to judgment as a matter of law.” Williams v.
Tharp, 914 N.E.2d 756, 761 (Ind. 2009). The initial burden is on the summary-
judgment movant to “demonstrate[] the absence of any genuine issue of fact as to a
determinative issue,” at which point the burden shifts to the non-movant to to “come
forward with contrary evidence” showing an issue for the trier of fact. Id. at 761-62
(internal quotation marks and substitution omitted). And “[a]lthough the non-
moving party has the burden on appeal of persuading us that the grant of summary
judgment was erroneous, we carefully assess the trial court’s decision to ensure that
he or she was not improperly denied his or her day in court.” McSwane v.
Bloomington Hosp. & Healthcare Sys., 916 N.E.2d 906, 909-10 (Ind. 2009) (internal
quotation marks omitted).
[30] A party claiming abuse of process must show a misuse or misapplication of process
for an end other than that which it was designed to accomplish. I.A.E., Inc. v. Hall,
49 N.E.3d 138, 157 (Ind. Ct. App. 2015), trans. denied. 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 substantively proper under the circumstances, then the party’s
intent is irrelevant.” Estate of Mayer v. Lax, Inc., 998 N.E.2d 238, 256 (Ind. Ct. App.
2013) (quoting Watson v. Auto Advisors, Inc., 822 N.E.2d 1017, 1029 (Ind. Ct. App.
2005), trans. denied), 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
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importance.” Nat’l City Bank of Ind. v. Shortridge, 689 N.E.2d 1248, 1252 (Ind. 1997),
supplemented at 691 N.E.2d 1210 (Ind. 1998).
[31] “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.
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 that the reasonableness of an
attorney’s action 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.’” Shortridge, 689 N.E.2d at 1253 (quoting
Wong v. Tabor, 422 N.E.2d 1279, 1288 (Ind. Ct. App. 1981)). 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 1287).
[32] On November 12, 2003, Julie initiated the lawsuit by claiming that Richard had
undervalued and understated the marital assets in his Disclosure Statement
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incorporated in the 1997 divorce decree. Denying these allegations, Richard filed a
counterclaim for abuse of process on March 1, 2004. Julie filed a motion for
summary judgment on Richard’s counterclaims, which was subsequently denied by
the trial court on October 2, 2013.
[33] In denying summary judgment, the trial court concluded, in pertinent part,
12. Taken in the light most favorable to Richard, the facts show that
in a short span between 2002 and 2003, the following events occurred:
(1) Richard re-married; (2) Julie’s attitude toward him worsened; (3)
she gradually cutoff communications with him; (4) she began claiming
that she was wronged in the divorce; (5) she retained as her lawyer an
individual with whom she had previously maintained a serious
romantic relationship; and (6) she filed the lawsuit.
13. These facts create an inference that Julie filed her lawsuit for the
ulterior motive of causing stress and emotional damage to Richard.
14. Julie’s desire to hold this lawsuit over Richard’s head as a punitive
measure is further demonstrated by her actions in prosecuting it.
While her claims were still pending, she did not even take a single
deposition but allowed the case to linger on the [c]ourt’s docket for
years. She refused to communicate with Richard, work to resolve
family differences, or even come to any [c]ourt hearings at which
Richard would be in attendance.
15. Indeed, Julie has told her children and family counselor that she
did not bring this action to recover damages or obtain the type of
monetary relief she claims is the appropriate remedy for her fraud
claim. She has specifically told Richard’s daughter that the case was
not about obtaining the very monetary recovery she claims is her
motive.
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16. Richard is entitled to all inferences from the facts to be taken in
his favor. Given the context out of which this lawsuit arose and
Julie’s own statements and conduct, there is at a minimum a dispute
of fact about whether she engaged in this frivolous and failed litigation
for an ulterior motive of spite, revenge and a desire to cause harm,
harassment and emotional distress to Richard.
17. Julie is also not entitled to summary judgment on the second
element of the abuse of process claim, which involves “a willful act in
the use of process not proper in the regular conduct of the
proceeding.”
***
20. Julie’s lawsuit was not an “authorized or “proper use of process
but has instead been found to be legally and factually deficient in the
[c]ourt’s earlier two summary judgment orders.
***
25. Julie’s own affidavit creates an issue of fact about her proper use
of process. [Julie’s divorce attorney’s] notes show that she met with
Julie about a month after the divorce became final and that Julie
acknowledged her regret about the settlement, stating that it was
without full disclosure or discovery. In a note in her file, [Julie’s
divorce attorney] stated that: “Near end of meeting, client tells me that
she really appreciated everything I did for her, realizes she really
restricted me by refusing to allow pursuit of full discovery. Says that
looking back, she knows I was right and that she should have
permitted it, as she could have still decided to take the same agreement
she did (but be fully informed).” However, Julie’s own affidavit
creates an issue of fact on this issue by directly contradicting what [her
divorce attorney] said: “In the weeks and months following the
divorce settlement, I never expressed to [my divorce attorney] the
statements she attributed to me in her January 1998 notes, namely,
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that I regretted the settlement or that I apologized for any actions I
took with respect to the divorce litigation.” Far from supporting
summary judgment in her favor, Julie’s statement contesting [her
divorce attorney’s] notes itself creates an issue of fact that cannot be
resolved on her motion for summary judgment.
(Appellant’s App. pp. 103-104, 106) (internal references omitted).
[34] The designated facts reflect that Julie, even though the divorce decree was issued in
1997, waited until 2003 before filing the current lawsuit, alleging fraud in an attempt
to set aside the divorce decree. Shortly before the filing, counsel from both parties
met to discuss the merits of Julie’s anticipated suit. Nevertheless, after the meeting,
she filed the lawsuit without waiting for the letter that her own counsel had requested
regarding the issues addressed at the meeting. Julie’s current counsel did not review
her divorce counsel’s file, which would have revealed her divorce counsel’s advice
pertaining to the settlement and which could have prevented these proceedings.
During the ensuing litigation, Julie did not take a single deposition and allowed the
case to remain inactive on the trial court’s docket. Accordingly, we cannot say that
Julie used the legal process to accomplish an outcome which the process was
designed to accomplish. See Estate of Mayer, 998 N.E.2d at 256.
[35] Julie now maintains that there must be some action other than pursuing a lawsuit to
support abuse of process. However, misusing the process is the core of the tort—
once that burden of proof is satisfied, no other action needs to be established. “There
is no liability for use of the legal process unless it has been used to achieve an end
other than one which the process was designed to accomplish.” Central Nat’l Bank of
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Greencastle v. Shoup, 501 N.E.2d 1090, 1095 (Ind. Ct. App. 1986), reh’g denied. “The
only important factor is the purpose for which the process is utilized.” Id.
[36] Turning to Julie’s intention, we note, like the trial court, that there is a genuine issue
of material fact that Julie’s motive in pursuing a ‘do-over’ of the divorce decree was
honorable. Although Richard appeared to try to repair their relationship even after
the divorce was finalized, Julie told her friends that she filed for divorce to “teach
[Richard] a lesson” and to impress upon him the need to prioritize “her needs and
giv[e] her more respect.” (Appellant’s App. p. 1654). Despite Julie’s claim that her
motivation for bringing the suit rested on her desire to re-litigate the marital estate
after discovering the alleged fraud in 1999, the designated evidence reflects that
Julie’s attitude worsened after she realized that Richard “had moved on and began
traveling with [his] new companion and future wife.” (Appellant’s App. p. 1654).
Julie gradually lessened communications while her hostility increased, resulting in an
escalation of the situation with Richard’s remarriage in 2002. Even though she knew
about the purported fraud, she did not file the present suit until 2003, after Richard
had remarried.
[37] Our supreme court has held that the reasonableness of an attorney’s action 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.’” Shortridge, 689 N.E.2d at 1253 (quoting Wong, 422 N.E.2d at 1288).
The facts before us, especially the timing of the lawsuit together with the absence of
an investigation into Julie’s divorce attorney’s file prior to initiation, lead us to
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conclude that there is a genuine issue of material fact that Julie misapplied the
judicial process for an end other than that which it was designed to accomplish. See
I.A.E., Inc., 49 N.E.3d at 157. Accordingly, we affirm the trial court’s denial of
Julie’s motion for summary judgment on Richard’s counterclaim for abuse of
process.
III. Default Judgment
[38] Lastly, Julie disputes the trial court’s award of a default judgment as a discovery
sanction in favor of Richard. The trial court issued the default judgment in Richard’s
counterclaim proceedings. Specifically, in an effort to fully litigate his counterclaim,
Richard attempted discovery, seeking to establish when, if ever, Julie’s counsel had
reviewed Julie’s divorce counsel’s file and to obtain the fees and rates of Julie’s
attorney to demonstrate the reasonableness of his own attorney’s fees. Finding, after
two months, that Julie was not in compliance with Richard’s discovery requests and
motion to compel, the trial court entered a default judgment against her and
subsequently awarded Richard attorney fees in the amount of $842,021. After an
unsuccessful motion to set aside the default judgment pursuant to T.R. 60(B), Julie
now appeals the decision.
[39] The trial court may relieve a party from a default judgment upon one of several
grounds set forth in Indiana Trial Rule 60(B). King v. United Leasing Inc., 765 N.E.2d
1287, 1289 (Ind. Ct. App. 2002). A trial court’s decision as to whether to set aside a
default judgment is given substantial deference on appeal. Charnas v. Estate of Loizos,
822 N.E.2d 181, 184 (Ind. Ct. App. 2005). Our review of the trial court’s refusal to
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set aside a default judgment is limited to determining whether there has been an
abuse of discretion. Id. Thus, on appeal, the burden is on the appellant to
demonstrate that the trial court’s decision was clearly against the logic and effect of
the facts and circumstances before the court, or that the trial court misinterpreted the
law. Id. Although a default judgment plays an important role in the maintenance of
an orderly, efficient judicial system as a weapon for enforcing compliance with the
rules of procedure and for facilitating the speedy determination of litigation, in
Indiana there is a marked judicial deference for deciding disputes on their merits and
for giving parties their day in court, especially in cases involving material issues of
fact, substantial amounts of money, or weighty policy determinations. Id.
[40] In her appellate brief, Julie advances several arguments on which the trial court’s
default judgment could be reversed—none of which explicitly invoke any of the
grounds of T.R. 60(B). Nevertheless, we will attempt to address Julie’s claims.
A. Relevance of the Discovery on Attorney Fees
[41] Julie’s main contention centers on the continued relevancy of her attorney fees in
light of her acceptance of the reasonableness of Richard’s attorney fees. She
maintains that because she did not contest the reasonableness of Richard’s attorney
fees, the rate charged by her own attorneys became irrelevant and, thus, the trial
court’s order to compel was erroneous and, she was entitled to ignore it.
[42] Generally, Indiana follows the American Rule, which requires each party to pay his
or her own attorney fees absent an agreement between the parties, statutory
authority, or rule to the contrary. Fackler v. Powell, 891 N.E.2d 1091, 1098 (Ind. Ct.
Court of Appeals of Indiana | Opinion 92A03-1511-PL-1968 | September 9, 2016 Page 27 of 37
Ohio App. 2008), trans. denied. Here, the trial court awarded the fees pursuant to Indiana
Code section 34-52-1-1, which provides in relevant part, that the trial court
[m]ay award attorney’s fees as part of the cost to the prevailing party,
if the court finds that either party:
(1) Brought the action or defense on a claim or defense that is
frivolous, unreasonable, or groundless;
(2) Continued to litigate the action or defense after the party’s claim
clearly became frivolous, unreasonable, or groundless; or
(3) Litigated the action in bad faith.
By awarding statutory fees, the trial court may look at the responsibility of the parties
in incurring the attorney fees. Ind. High School Athletic Ass’n, Inc. v. Schafer, 913
N.E.2d 789, 794 (Ind. Ct. App. 2009). The trial court has personal expertise he or
she may use when determining reasonable attorney fees. Id.
[43] In considering the reasonableness of an attorney’s fees, it makes no difference
whether the obligation to pay the fee is based on a statutory provision or on a prior
agreement. Boonville Convalescent Ctr., Inc. v. Cloverleaf Healthcare Servs., Inc., 834
N.E.2d 1116, 1127 (Ind. Ct. App. 2005), trans. denied. Instead, the determination of
reasonableness of an attorney’s fee requires consideration of all relevant
circumstances. Id. Specifically, we must look to Professional Conduct Rule 1.5(a),
which lists the following non-exclusive factors to be considered:
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(1) The time and labor required, the novelty and difficulty of the
questions involved, and the skill requisite to perform the legal
service properly;
(2) The likelihood, if apparent to the client, that the acceptance of the
particular employment will preclude other employment by the
lawyer;
(3) The fee customarily charged in the locality for similar legal
services;
(4) The amount involved and the results obtained;
(5) The time limitations imposed by the client or by the circumstances;
(6) The nature and length of the professional relationship with the
client;
(7) The experience, reputation, and ability of the lawyer or lawyers
performing the services; and
(8) Whether the fee is fixed or contingent.
[44] Despite Julie’s allegation that she did not dispute the reasonableness of Richard’s
attorney fee request, we conclude that Richard’s discovery request for Julie’s
attorney’s fees remained relevant. We emphasize that it is the trial court’s
responsibility—and not Julie’s—to determine the reasonableness of Richard’s request
for an attorney fee award. As such, relevant evidence to absolve this responsibility is
evidence which “is of consequence in determining the action.” Ind. Evidence Rule
401(b). Faced with claims which sought an award of $80 million dollars, impugned
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Richard’s integrity, and resulted in numerous repetitive filings with voluminous
discovery over more than a decade, the trial court would have been hard pressed to
compare this situation with other “similar legal services.” See Prof. Conduct R.
1.5(a). Accordingly, the amount that Julie expended for the exact same lawsuit
reflects on the reasonableness of Richard’s fees. The relevance of Julie’s fees to
Richard’s fee petition is furthermore underscored by what this discovery disclosed.
Although by her own admission her disclosure is “substantially” underreported, Julie
has paid more than $3 million in fees and costs, while, by contrast, Richard
expended $842,000. Because the amount Julie paid in fees and the rate charged by
her attorneys is relevant to the fee issues remaining, the trial court did not abuse its
discretion by compelling the discovery.
[45] Moreover, it should be noted that even though Julie persisted in arguing that she
conceded the reasonableness of Richard’s attorney fees, we conclude otherwise.
Julie did not stipulate to the reasonableness of Richard’s fees in her objection and
response to the counterclaim discovery request, nor did she raise this issue until after
Richard sought a default for her non-compliance with the order to compel discovery.
Specifically, it is not until November 19, 2014, when Julie asserted that she “is not in
a position to contest the reasonableness of [Richard’s] attorney fees. That is not to
say that [Julie] is admitting that fees are owed in any way or that the disclosed fees
are admissible at trial. Only that [Julie] is not in a position to dispute the
reasonableness of the disclosed fees during a trial in this matter.” (Appellant’s App.
p. 1800). Mindful of the litigious character of this suit, we agree with Richard that
“Julie’s carefully chosen words freed her for a future flip-flop at a time when she
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decided she was ‘in the position’ to contest Richard’s fees.” (Appellee’s Br. p. 44).
Therefore, we decline to categorize Julie’s statement as a stipulation to the
reasonableness of Richard’s fees.
B. Lack of Warning before Entry of Default Judgment
[46] Next, Julie contends that the trial court abused its discretion in entering a default
judgment as a discovery sanction because it had failed to give her advance warning
of this possible sanction. Indiana’s discovery rules are designed to “allow a liberal
discovery process, the purposes of which are to provide parties with information
essential to litigation of the issues, to eliminate surprise, and to promote settlement.”
Brown v. Katz, 868 N.E.2d 1159, 1165 (Ind. Ct. App. 2007). Discovery is intended to
require “little, if any supervision or assistance by the trial court.” Hatfield v. Edward J.
DeBartolo Corp., 676 N.E.2d 395, 399 (Ind. Ct. App. 1997), reh’g denied, trans. denied.
Although “concealment and gamesmanship were [once] accepted as part and parcel
of the adversarial process,” we have unanimously declared that such tactics no
longer have any place in our system of justice. Outback Steakhouse of Florida, Inc., v.
Markley, 868 N.E.2d 65, 77 (Ind. 2006). Today, “the purpose of pre-trial discovery is
‘to make a trial less of a game of blindman’s bluff and more a fair contest with the
basic issues and facts disclosed to the fullest practicable extent.’” Id. (quoting United
States v. Proctor & Gamble Co., 356 U.S. 677, 78 S. Ct. 983, 2L.Ed.2d 1077 (1958)).
[47] However, when the goals of discovery are not being met, Indiana Trial Rule 37
provides the trial court with tools to enforce compliance. Brown, 868 N.E.2d at 1165
(citing Hatfield, 676 N.E.2d at 399). Indiana Trial Rule 37(B)(2) permits the trial
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court to sanction a party for its failure to comply with discovery orders by, among
other things, entering a default judgment against the party. As the Supreme Court
has explained, the purpose of sanctioning discovery violations is “not merely to
penalize those whose conduct may be deemed to warrant such a sanction, but to
deter those who might be tempted to such conduct in the absence of such a
deterrent.” Nat’l Hockey League v. Metro. Hockey Club, Inc., 427 US. 639, 643, 96 S. Ct.
2778, 49 L. Ed. 2d 747 (1976).
[48] Despite Julie’s argument to the contrary, we have previously held that T.R. 37 does
not require a trial court to impose a lesser sanction or warning before entering a
default judgment. Brown, 868 N.E.2d at 1169; Burns v. St. Mary Med. Ctr., 504
N.E.2d 1038, 1039 (Ind. Ct. App. 1987). Furthermore, even if the trial rules would
have required a warning before imposing a default judgment as a discovery sanction,
Julie had ample notice that her actions could trigger a default judgment. On
November 10, 2014, Richard moved for a default judgment due to Julie’s disregard
of the trial court’s motion to compel. At that point, Julie was warned that a future
default judgment was a possibility. During the December 2, 2014 hearing, the
parties extensively discussed the sanction of default. Nevertheless, instead of issuing
a ruling, the trial court took the matter under advisement, allowing Julie time to
comply with Richard’s counterclaim discovery request. On January 14, 2015, the
trial court issued the default judgment, after entering a finding that Julie had engaged
in a “repetitive pattern” of disregarding the trial court’s discovery order. (Appellant’s
App. p. 125). Accordingly, under these facts, Julie had a two-month warning that a
default judgment had been requested and was impending.
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[49] Moreover, we cannot say that this sanction is unduly harsh or unjust. As a general
matter, trial courts “should seek to apply sanctions which have a minimal [e]ffect on
the evidence presented at trial and the merits of the case.” Wright v. Miller, 989
N.E.2d 324, 330 (Ind. 2013). In the instant case, the evidence reflects that the trial
court entered the default judgment based on a lengthy and continuous history of
disregard for the trial court’s orders. Richard served Julie with the discovery request
on his counterclaim on June 17, 2014. After Julie’s objection, Richard filed a motion
to compel, which was granted by the trial court on October 24, 2014. The trial court
informed Julie that she had to comply by November 3, 2014. However, instead of
serving the requested information on that day, Julie reiterated her objections to
Richard’s discovery. Three days later, Julie sought reconsideration of the trial
court’s order to compel, which was subsequently denied on November 24, 2014. On
November 10, 2014, Richard requested a default judgment as a discovery sanction.
Again, Julie objected, repeating the objections which had been rejected by the trial
court twice already. On December 2, 2014, the trial court heard arguments and took
the matter under advisement, to ultimately enter a default judgment on January 14,
2015.
[50] Throughout these proceedings, Julie offered no abatement of her misconduct; rather,
her counsel admitted under oath that he did not even begin to gather the compelled
discovery until the trial court took the matter under advisement. While we
empathize with counsel’s health problems, these did not incapacitate him until
December 14, 2014, more than a month after the order to compel discovery had been
entered. Given the trial court’s earlier orders, Julie’s insistence that the evidence
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sought was not relevant or discoverable 3 was in bad faith and in contumacious
disregard of the trial court’s discovery order and motion to compel. Therefore, based
on the unique facts before us, we agree with the trial court that the imposition of a
default judgment was not unduly harsh.
IV. Attorney Fees Award
[51] Lastly, Julie contends that the trial court erred when entering the order awarding
attorney’s fees without requiring Richard to litigate the underlying merits of his
counterclaim. In Shoulders v. State, 462 N.E.2d 1034, 1035 (Ind. 1984), our supreme
court noted that “[t]he effect of the default judgment is that the facts as alleged in the
petition are deemed admitted. However, the court must determine whether as a
matter of law the facts as alleged in the petition entitle the petitioner to relief.” The
record reflects that the underlying merits had been litigated and determined by the
trial court when it rejected Julie’s motion for summary judgment on Richard’s
counterclaim by order of October 2, 2013. At that point, the trial court concluded
that “Richard can establish a misuse of process and Julie is not entitled to summary
judgment.” (Appellant’s App. p. 108). By thereafter entering the default judgment
against Julie on Richard’s counterclaims, the trial court clearly established Julie’s
liability. By affirming the default judgment, we—by logical extension—also affirm
3
Julie insisted that the Rules of Professional Conduct prevented her from complying with the discovery order, as the
information requested was privileged information. However, as a general rule, information regarding a client’s
attorney fees is not protected by the attorney-client privilege because the payment of fees is not considered a
confidential communication between attorney and client. See, e.g., Hueck v. State, 590 N.E.2d 581, 585 (Ind. Ct.
App. 1992), reh’g denied, trans. denied.
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Julie’s liability on Richard’s counterclaims. Julie may not now collaterally attack her
liability on the counterclaims through the award of attorney fees.
[52] Furthermore, we cannot conclude that the trial court abused its discretion by
entering an award of statutory attorney fees in favor of Richard. Indiana Code
section 34-52-1-1(b) provides, in relevant part, that the trial court
May award attorney’s fees as part of the cost to the prevailing party, if
the court finds that either party:
(1) Brought the action or defense on a claim or defense that is
frivolous, unreasonable, or groundless;
(2) Continued to litigate the action or defense after the party’s claim or
defense clearly became frivolous, unreasonable, or groundless, or
(3) Litigated the action in bad faith.
[53] Mindful of these criteria, the trial court awarded fees “in light of Julie’s conduct
through this litigation, including but not limited to her disobedience of the [c]ourt’s
discovery order and the misrepresentation to the [c]ourt made relating to that order.”
(Appellant’s App. p. 147). Specifically, the trial court noted that either Julie or her
counsel have engaged in a pattern of misconduct that includes:
(1) Misrepresenting (under oath) when her counsel reviewed the critical
documents in [Julie’s divorce attorney’s] file. While counsel and
Julie claim to have not reviewed that file until the [c]ourt ordered it
disclosed in June of 2005, her counsel’s own billing records reflect
time entries for [the file’s review] as early as February of 2004;
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(2) Billing astronomical sums throughout the lawsuit, including more
than 200 hours of meetings and telephone calls that apparently did
not occur; and
(3) Continuing to delay resolution of a lawsuit that had no basis in law
or fact years after that reality should have been obvious to any
reasonable person.
(Appellant’s App. p. 147).
[54] We review de novo the trial court’s legal conclusion that a party litigated in bad faith
or pursued a frivolous, unreasonable or groundless claim or defense, and then review
the trial court’s decision to award attorney fees and the amount thereof under an
abuse of discretion standard. Chapo v. Jefferson Co. Plan Com’n, 926 N.E.2d 504, 509
(Ind. Ct. App. 2010). A claim or defense is “frivolous” if it is taken primarily for the
purpose of harassment, if the attorney is unable to make a good faith and rational
argument on the merits of the action, or if the lawyer is unable to support the action
taken by a good faith and rational argument for an extension, modification, or
reversal of existing law. Id. at 509-510. A claim or defense is unreasonable if, based
on the totality of the circumstances, including the law and the facts knows at the time
of filing, no reasonable attorney would consider that claim or defense was worthy of
litigation. Id. A claim or defense is “groundless” if no facts exist which support the
legal claim presented by the losing party. Id. A trial court is not required to find an
improper motive to support an award of attorney fees; rather, an award may be
based solely upon the lack of a good faith and rational argument in support of the
claim. Id.
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[55] The facts, as recounted in this lengthy opinion, more than sufficiently justify the trial
court’s statutory fee award. The trial court was addressed by an attorney who failed
to diligently research the file of his predecessor prior to launching into a protracted
litigation, who filed motions in which he reiterated claims already rejected by the
court, who was nonresponsive to discovery, and who persisted in litigation claims
that had become clearly groundless or unreasonable. Mindful that “the statute
strikes a balance between respect for an attorney’s duty of zealous advocacy and the
important policy of discouraging unnecessary and unwarranted litigation,” here,
Julie’ attorney blatantly ignored his discovery obligations, trial court’s orders, and
continued to engage in questionable litigation tactics, overstepping the boundaries of
zealous litigation and entering the realms of vexatious litigation. Mitchell v. Michell,
695 N.E.2d 920, 924 (Ind. 1998). Accordingly, we affirm the trial court’s imposition
of an attorney fee award.
CONCLUSION
[56] Based on the foregoing, we conclude as follows: (1) the trial court properly decided
that Julie failed to establish that Richard had committed fraud during the
negotiations leading to the Settlement Agreement; (2) the trial court properly denied
Julie’s motion for summary judgment on Richard’s counterclaim for abuse of
process; (3) the trial court’s imposition of a default judgment was just; and (4)
Richard is entitled to an award of attorney fees.
[57] Affirmed.
[58] Kirsch, J. and Pyle, J. concur
Court of Appeals of Indiana | Opinion 92A03-1511-PL-1968 | September 9, 2016 Page 37 of 37