Thor Industries, Inc. and Susidiaries v. Indaina Department of Revenue

ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
NATHAN J. HAGERMAN GREGORY F. ZOELLER
JEFFREY D. STEMERICK INDIANA ATTORNEY GENERAL
TAFT STETTINIUS & HOLLISTER LLP EVAN W. BARTEL
Indianapolis, IN WINSTON LIN
DEPUTY ATTORNEYS GENERAL
Indianapolis, IN
FILED
Sep 23 2016, 4:27 pm
IN THE CLERK
Indiana Supreme Court
INDIANA TAX COURT Court of Appeals
and Tax Court
THOR INDUSTRIES, INC. )
AND SUBSIDIARIES, )
)
Petitioners, )
)
v. ) Cause No. 49T10-1508-TA-00027
)
INDIANA DEPARTMENT OF STATE )
REVENUE, )
)
Respondent. )
ORDER ON PETITIONERS’ MOTION TO WITHDRAW ADMISSIONS
FOR PUBLICATION
September 23, 2016
WENTWORTH, J.
Thor Industries, Inc. and Subsidiaries (collectively “Thor”) has moved to withdraw
twenty-nine separately numbered requests for admissions that were conclusively
admitted by operation of law when Thor failed to timely respond to the Indiana
Department of State Revenue’s First Request for Admissions. The Court grants Thor’s
motion.
FACTS AND PROCEDURAL HISTORY
On August 6, 2015, Thor initiated an original tax appeal challenging the
Department’s Proposed Assessments of additional adjusted gross income tax, interest,
and penalties for the tax periods ending on July 31, 2008, July 31, 2009, and July 31,
2010. On June 9, 2016, about a week before settlement negotiations commenced, the
Department served Thor with its First Request for Admissions that asked Thor in effect
to repudiate the allegations in its petition within 30 days. On July 18, 2016, after the
time for responding lapsed, the Department contacted Thor to inquire about the status
of its response. Four days later, the Department moved for summary judgment and
designated as evidence, among other things, its First Request for Admissions. On July
27, 2016, Thor filed a Motion to Withdraw Admissions and Request for Oral Argument.
On August 26, 2016, the Court held an attorney’s conference to discuss matters
associated with the pending motions. That same day, the Court denied Thor’s request
for oral argument. Additional facts will be supplied as necessary.
LAW AND ANALYSIS
Indiana Trial Rule 36(B) governs requests to withdraw admissions. See Ind. Trial
Rule 36(B). Specifically, Trial Rule 36(B) provides that “the court may permit withdrawal
or amendment [of admissions] when the presentation of the merits of the action will be
subserved thereby and the party who obtained the admission fails to satisfy the court
that withdrawal or amendment will prejudice him in maintaining his action or defense on
the merits.” T.R. 36(B). “The party seeking withdrawal has the burden of demonstrating
that the presentation of the merits will be subserved by withdrawal, and the party who
has obtained the admissions has the burden of demonstrating that it will be prejudiced if
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the [] court permits withdrawal.” Cross v. Cross, 891 N.E.2d 635, 640 (Ind. Ct. App.
2008) (citation omitted). Even if both of these conditions are satisfied, however, the
Rule does not compel the Court to grant withdrawal or amendment. See General
Motors Corp., Chevrolet Motor Div. v. Aetna Cas. & Sur. Co., 573 N.E.2d 885, 889 (Ind.
1991).
I. Would Withdrawal Subserve the Presentation of the Merits
Thor claims that the presentation of the merits will be subserved by the
withdrawal of its admissions because it would prevent the litigation from ending without
addressing matters that are the basis of the Department’s Proposed Assessments.
(See Pet’rs’ Br. Supp. Their Mot. Withdraw Admis. (“Pet’rs’ Br.”) at 7-9.) Indeed, a
comparison of Thor’s petition with Thor’s deemed admissions supports this claim.
(Compare Pet’rs’ Br., Ex. A ¶¶ 8-27 with Pet’rs’ Br., Ex. F at 5-13.) The Department,
however, asserts that Thor cannot meet its burden by 1) simply claiming that the
admissions go to the core issues or 2) making a blanket request for withdrawal. (See
Resp’t Mem. Opp’n Pet’rs’ Mot. Withdraw Admis. (“Resp’t Mem.”) at 8-9.)
A. The Core Issues
The Department first claims that Thor cannot demonstrate that the merits of the
case will be subserved solely by showing that the admitted matters concern the core
issues in the case. (See Resp’t Mem. at 8 (citing Bryant v. County Council of Lake
County, 720 N.E.2d 1, 6 (Ind. Ct. App. 1999), trans. denied).) More recently, however,
the Court of Appeals has clarified that a litigant may meet its burden of establishing that
withdrawal will subserve the presentation of the merits in this manner. See generally
Costello v. Zavodnik, 55 N.E.3d 348 (Ind. Ct. App. 2016). Nonetheless, even if the
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proposition in Bryant on which the Department relies were not suspect, it is well settled
that Court of Appeals’ decisions are persuasive, but not controlling, authority by which
the Court is bound. See, e.g., LeSea Broad. Corp. v. State Bd. of Tax Comm’rs, 512
N.E.2d 506, 509 (Ind. Tax Ct. 1987), adopted by 511 N.E.2d 1009 (Ind. 1987)
(demonstrating, among other things, that decisions of the Indiana Court of Appeals are
persuasive, not controlling authority in the Tax Court). Accordingly, the Department’s
argument that Thor has not shown that withdrawal will subserve the presentation of the
merits on this basis is not persuasive.
B. The Blanket Request for Withdrawal
The Department has also asserted that Thor cannot meet its burden to establish
that the presentation of the merits of its case will be subserved by the withdrawal of its
admissions because blanket requests for the withdrawal of deemed admissions are
prohibited by Trial Rule 36(A). (See Resp’t Mem. at 8-9 (citing T.R. 36(A); General
Motors, 573 N.E.2d at 886-89; Larson v. Karagan, 979 N.E.2d 655 (Ind. Ct. App. 2012);
Mullins v. Parkview Hosp., Inc., 830 N.E.2d 45 (Ind. Ct. App. 2005), aff’d in part and
vacated in part by 865 N.E.2d 608 (Ind. 2007)).) Neither the language of Trial Rule
36(A) nor the holdings in the cases analyzing the Rule prohibit, however, blanket
requests to withdrawal deemed admissions. Specifically, Trial Rule 36(A) sets forth
only the procedures for propounding and responding to requests for admissions, not the
procedures for filing motions to withdraw admissions. See T.R. 36(A). Furthermore,
while the cited cases concern the withdrawal of some, but not all, of the litigants’
admissions, none suggests that the specificity was due to a prohibition against raising
blanket requests for withdrawal or a requirement that litigants “must separately identify
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why withdrawal is appropriate for each admission[,]” as the Department urges.
(Compare Resp’t Mem. at 8 with General Motors, 573 N.E.2d at 886 (indicating that
appeal involved the withdrawal of three admissions only); Larson, 979 N.E.2d at 659-60
(indicating that appeal involved the grant of summary judgment, not the withdrawal of
admissions); Mullins, 830 N.E.2d at 60 (linking the number of admissions at issue to the
appellant’s arguments and the propriety of summary judgment).) Finally, when a litigant
advances the same rationale for the withdrawal of all of its admissions, like here, the
Court neither requires nor expects a continuous repetition of this rationale for the
withdrawal of each of the litigant’s admissions. Accordingly, the Court finds that Thor
established that the withdrawal of its admissions subserves the presentation of the
merits in this case.
II. Would Withdrawal Prejudice the Department
Trial Rule 36(B) provides a defense against the withdrawal of deemed
admissions: a showing of prejudice against the opponent of the withdrawal. See T.R.
36(B). “‘[P]rejudice’ does not mean that the party who has obtained the admission will
lose the benefit of the admissions; rather, it means that the party has suffered a
detriment in the preparation of his case.” City of Muncie v. Peters, 709 N.E.2d 50, 55
(Ind. Ct. App. 1999) (citation omitted), trans. denied. In other words, the prejudice
contemplated under Trial Rule 36(B) relates to the difficulty a party may face in proving
its case because it suddenly needs to obtain evidence to prove a matter that had been
deemed admitted. See id. For example, prejudice may be shown in instances “where
the party obtaining the admission is unable to produce key witnesses or present
important evidence.” Id. (citations omitted).
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Here, the Department claims that it will be prejudiced by the withdrawal of Thor’s
admissions because it places the viability of its motion for summary judgment at issue
“by triggering a sudden need for witnesses and evidence to support matters that the
Department thought were firmly established” in less than a two-month period. (Resp’t
Mem. at 9-10.) The Department also claims that if Thor’s Motion were granted, it would
be deprived of the opportunity to fairly and to fully conduct discovery given the
deadlines under the current case management plan (the “CMP”). (See Resp’t Mem. at
11.)
The facts of this case, however, belie the Department’s claims. Indeed, when the
July 12, 2016, deadline for responding to the Department’s First Request for
Admissions arrived, the parties were in the middle of settlement negotiations. (See,
e.g., Resp’t Mem. at 4-5.) Thor’s counsel admitted to the Court that he inadvertently
missed the deadline because he believed (albeit incorrectly) that counsel for the
Department agreed that all deadlines would be suspended together with the deadlines
for other discovery to facilitate settlement negotiations.1 (See Pet’rs’ Br., Ex. B ¶¶ 6-13.)
At that point, the deadlines under the CMP allowed for just over one month for written
discovery, just over three months for depositions, just over six months for filing
dispositive motions, and no trial date had been set. See generally Order, filed Dec. 1,
2015 (approving the parties’ joint motion for a case management plan); Joint Notice Am.
Deadlines, filed Feb. 26, 2016; Joint Notice Am. Deadlines, filed Apr. 29, 2016. Rather
1
The Department’s claim that Thor’s counsel intentionally failed to respond to its First Request
for Admissions is unpersuasive. (See Resp’t Mem. Opp’n Pet’rs’ Br. at 12-13.) While the Court
does not condone such inadvertent actions, “‘it does not further the interests of justice to
automatically determine all the issues in a lawsuit and enter summary judgment against a party
because a deadline was missed.’” Gary Mun. Airport Authority Dist. v. Peters, 550 N.E.2d 828,
831 (Ind. Ct. App. 1990) (citation omitted).
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than utilize that time to conduct additional discovery, the Department quickly moved for
summary judgment just ten days later on July 22, 2016, having secured admissions on
the “heart” of the case, i.e., the propriety of the Department’s Proposed Assessments.
(Compare, e.g., Pet’rs’ Br., Ex. A at ¶¶ 17-27 (challenging the conclusions of the
Department’s Letter of Findings that upheld the Proposed Assessments) with Pet’rs’ Br.,
Ex. F at 9 (admitting that “[t]he Proposed Assessments were properly issued”).)
Moreover, the Department’s decision to move for summary judgment automatically
vacated all deadlines under the CMP. See Order ¶ 5, filed Dec. 1, 2015 (providing that
the filing of a dispositive motion “shall automatically vacate this case management plan
unless otherwise ordered by the Court”).
The Department’s hasty motion for summary judgment suggests that its reliance
on the deemed admissions was unreasonable. See Kerkhof v. Kerkhof, 703 N.E.2d
1108, 1113 (Ind. Ct. App. 1998) (explaining that while a litigant’s reasonable reliance on
admitted matters could qualify as prejudice, such reliance is often unreasonable when
the deemed admissions concern the central issues in a case). The Department’s
reliance was unreasonable because both parties knew that the subject matter of each
deemed admission was intended for litigation. See Gary Mun. Airport Authority Dist. v.
Peters, 550 N.E.2d 828, 831-32 (Ind. Ct. App. 1990) (providing that a litigant’s reliance
on admissions is unreasonable when the parties know the admitted matters are
intended for litigation). Less than a week after the Department filed its Motion, Thor
promptly confirmed that the Department’s reliance on its deemed admissions was
unreasonable by seeking the withdrawal of, and thereby contesting, all the deemed
admissions. Because the facts before the Court demonstrate that the Department’s
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reliance on Thor’s deemed admissions was unreasonable, that the Department, not
Thor, placed the viability of its summary judgment motion at issue, that the case had not
been set for trial, and that the CMP deadlines have all been vacated, the Department
has not established that it will prejudiced by the withdrawal of Thor’s admissions. See,
e.g., Costello, 55 N.E.3d at 353 (finding no prejudice when the matter had not yet been
set for trial, the appellee still had time to prepare his case, and there was no evidence
that the appellee’s reliance on the admissions impaired his ability to prepare his case).
CONCLUSION
In instances like these, where a litigant’s use of Trial Rule 36(B) contravenes the
Rule’s important purpose of more quickly and efficiently reaching a resolution based on
the actual facts, the Court may withdraw the admissions when the presentation of the
merits will be subserved and the party benefitting from them is not prejudiced. See,
e.g., id. at 353-54. Indeed, Trial Rule 36(B) “‘is not intended to provide a windfall to
litigants[,]’” nor is it to be used as a “‘gotcha’ device” or “‘as a trap to prevent the
presentation of the truth in a full hearing[;]’” instead, it is to be used “‘as a tool for the fair
disposition of litigation with a minimum of delay.’” See id. at 354 (citations omitted).
Accordingly, and in keeping with this Court’s long-standing policy of deciding cases on
their merits, the Court GRANTS Thor’s Motion. Consistent with the Court’s Order of
August 26, 2016, the Department shall file a Notice regarding its intent to maintain or
withdraw its Motion for Summary Judgment on or before September 30, 2016.
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Thereafter, the Court will direct the parties regarding all remaining matters by separate
cover.
SO ORDERED this 23th day of September 2016.
Martha Blood Wentworth
Judge, Indiana Tax Court
Distribution: Nathan J. Hagerman, Jeffrey D. Stemerick, Evan W. Bartel, Winston Lin
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