BANKING, BUSINESS, AND CONTRACT LAW FRANK SULLIVAN, JR.*, ** This Article surveys banking, business, and contract law decisions of the Indiana Supreme C ourt (“Court”) and Indiana Court of Appeals (“Court of Appeals”) between September 1, 2015, and August 31, 2016. This Article will not itemize every banking, business, and contract law case decided during the survey period. Instead, it will highlight cases illustrating some of the big-picture issues in these fields, as well as some practice pointers for both transactions lawyers and litigators. This Article will also discuss the Indiana Supreme Court’s commercial1 courts initiative and the enactment of new laws authorizing “Series LLCs” and harmonizing many provisions in five Indiana business entity statutes. I. C OM M ERCIAL C OURTS U PDATE The Indiana Supreme Court launched its commercial court pilot project during the survey period on June 1, 2016, in the following locations: • Allen Superior Court, Civil Division (Judge Craig Bobay) • Elkhart Superior Court 2 (Judge Stephen Bowers) • Vanderburgh Superior Court (Judge Richard D’Amour) • Floyd Superior Court 3 (Judge M aria Granger) • Lake Superior Court (Judge John Sedia) • M arion Superior Court, Civil Division 1 (Judge Heather W elch)2 Any civil case that is filed after June 1, 2016 (including both jury and non- jury cases; cases seeking injunctions, TROs, and declaratory judgments; and * Professor of Practice, Indiana University Robert H. McKinney School of Law. Justice, Indiana Supreme Court (1993-2012). LL.M., University of Virginia School of Law (2001); J.D., Indiana University Maurer School of Law (1982); A.B., Dartmouth College (1972). ** This Article is adapted from remarks delivered on September 22, 2016, at the Annual Indiana Law Update CLE program organized by Justice Steven H. David and Judge Cale J. Bradford. I thank Justice David and Judge Bradford for including me in this distinguished CLE program. I also thank Alexander Swider for his research assistance in connection with and Peter M. Elliott, Justin B. McGiffen, Dylan A. Pittman, and Andrea Kochert Townsend for their helpful comments on this Article. 1. This Article includes discussion of many so-called not-for-publication “memorandum” decisions of the Court of Appeals because such decisions often establish new law; clarify, modify, or criticize existing law; or involve legal or factual issues of unique interest or substantial public importance. Whatever the appellate rules are at the moment about the citation of memorandum decisions, they contain critical guidance on Indiana law and cannot be ignored. Indiana Appellate Rule 65 provides decisions of the Indiana Court of Appeals that are not published in West’s Northeastern Reporter “shall not be regarded as precedent and shall not be cited to any court except by the parties to the case to establish res judicata, collateral estoppel, or law of the case.” IND. R. APP. P. 65. 2. Order Establishing the Indiana Commercial Court Pilot Project, No. 94S00-1601-MS-31, 2016 Ind. LEXIS 29 (Ind. Jan. 20, 2016). Details on commercial courts generally and the history of their establishment in Indiana are contained in last year’s survey Article. See Frank Sullivan, Jr., Banking, Business, and Contract Law, 49 IND. L. REV. 981, 981-84 (2016). http://doi.org/10.18060/4806.1166 https://doi.org/10.18060/4806.01117 1180 INDIANA LAW REVIEW [Vol. 50:1179 derivative actions), is eligible for assignment to a “commercial docket” if the gravamen of the case relates to any of the following: 1. Business governance issues; 2. Trade secret, non-disclosure, non-compete, and employment agreements involving a business entity; 3. Disputes as to business activities relating to contracts or transactions; and 4. Cases otherwise falling within the general intended purpose of the commercial docket.3 As to the actual procedures for and mechanics of assignment, all of the parties to an eligible case must consent to assignment of the case to the commercial docket. This is an entirely voluntary system; if a party does not want its case to4 be on the commercial docket, it will have it within its power to keep it off. On5 the other hand, if a party wants its case to be on the com m ercial docket, it will require the acquiescence of all other parties in the case.6 That having been said, it is equally important to understand that the rule is structured in such a way that most of the defaults point toward an eligible case being on the commercial docket. For example, if a party filing a case designates7 it for the commercial docket, it will be placed on the commercial docket unless the other parties opt out within a specified period of time.8 Cases are being filed and resolved in a way that serves the very best interests of our business community and the lawyers who assist it. II. LENDING AND B ORROW ING The mandate of this Article includes “banking” and the author includes within that meaning litigation between lenders and borrowers. A. A “Dance” with the Legislature Court decisions sometimes provoke a legislative response followed by additional court decisions— a sort of “dance” or “dialogue.” This phenomenon9 3. Order Adopting Interim Commercial Court Rules for the Indiana Commercial Courts Pilot Project, No. 94S00-1601-MS-31, 2016 Ind. LEXIS 308 (Ind. Apr. 27, 2016) (IND. COMM. CT. INTERIM R. 2). 4. Id. (IND. COMM. CT. INTERIM R. 4). 5. Id. (IND. COMM. CT. INTERIM R. 4(B)) 6. Id. (IND. COMM. CT. INTERIM R. 4(D)(3), (E)(3), (F)(3)). 7. Id. (IND. COMM. CT. INTERIM R. 4 cmt. 4). 8. Id. (IND. COMM. CT. INTERIM R. 4(D)(2)). 9. See generally Shirley S. Abrahamson & Robert L. Hughes, Shall We Dance? Steps for Legislators and Judges in Statutory Interpretation, 75 MINN. L. REV. 1045 (1991) (expanding on the William B. Lockhart Lecture that Justice Abrahamson delivered at the University of Minnesota in March 1990). 2017] BANKING, BUSINESS, AND CONTRACT LAW 1181 materialized during the survey period in respect of U.S. Bank, N.A. v. M iller.10 In 2011, the Indiana Supreme Court decided Citizens State Bank of New Castle v. Countryw ide Home Loans, Inc. In that case, Countrywide held a11 purchase-money first mortgage on a residence. Citizens State Bank had a12 subordinate judgment lien on the same property that it had obtained by reducing some defaulted credit card debt to judgment. W hen the mortgage loan went into13 default, Countrywide foreclosed and took title to the property. It subsequently14 sold the property to Fannie M ae.15 The problem was that Countrywide had not joined Citizens State Bank in the foreclosure action and so Citizens State Bank’s judgment lien had not been foreclosed. W hen this was discovered, Citizens State Bank took the position that16 its lien continued to encumber the property, i.e., Fannie M ae owned the property subject to Citizens State Bank’s lien.17 The Indiana Supreme Court agreed, invoking a doctrine called “merger” which, the Court said, extinguished Countrywide’s mortgage at the point in time the property was conveyed to Countrywide: the mortgage “merged” with Countrywide’s title and was extinguished.18 This result, one justice said in dissent, was contrary to precedent. A nd even the19 majority conceded that it was contrary to the applicable rule enunciated in the Restatement of Property. But the majority nevertheless catapulted Citizens State20 Bank into first position, requiring Fannie M ae to deal with the Bank’s lien in order to clear its title.21 Here is where the “dance” with the legislature began. The real property community beat a line to the General Assembly and in its next session, the Legislature passed a statute overruling Citizens State Bank by abolishing the doctrine of merger. Henceforth, in situations like this, the property owner would22 be able to treat the junior lien as though the senior lien was still in place— which is what the Restatement and, the dissent had argued, precedent had dictated 10. 44 N.E.3d 730 (Ind. Ct. App. 2015), trans. denied sub nom. U.S. Bank, N.A. v. Evansville, 43 N.E.3d 1278 (Ind. 2016). 11. 949 N.E.2d 1195 (Ind. 2011). 12. Id. at 1196. 13. Id. 14. Id. 15. Id. 16. Id. 17. Id. at 1197. 18. Id. at 1199-1202. 19. I was the dissenting justice. See id. at 1202 (Ind. 2011) (Sullivan, J., dissenting). 20. Id. at 1197 (majority opinion) (citing RESTATEMENT (THIRD) OF PROPERTY: MORTGAGES § 8.5 cmt. a (1997)). 21. Id. at 1202. 22. Pub. L. No. 130-2012, § 7, 2012 Ind. Acts 2704-07 (codified at IND. CODE § 32-29-8-4 (2016)) (effective Mar. 19, 2012). 1182 INDIANA LAW REVIEW [Vol. 50:1179 should have happened in Citizens State Bank.23 Now the “dance” shifted back to the courts. In U.S. Bank v. M iller, essentially the same thing had happened as in Citizens State Bank. U.S. Bank’s predecessor24 in interest foreclosed on a purchase-money first mortgage but neglected to serve German American Bank’s predecessor which had a subordinate lien. U.S. Bank25 obtained title to the property through foreclosure and then sold the property to someone named Briones.26 W hen German American subsequently claimed that, under the authority of Citizens State Bank, it had a first lien on Briones’s property, U.S. Bank and Briones argued that under the new statute, they were entitled to foreclose German American’s interest as though the U.S. Bank mortgage was still in effect.27 But German American argued that the new statute was not available to U.S. Bank and Briones. W hy? Because the statute’s effective date in M arch, 2012,28 was long after the date of U.S. Bank’s transfer of title to Briones.29 The Court of Appeals held the new statute, not the Citizens State Bank decision, controlled. T he Indiana Supreme Court denied transfer, with the30 31 three justices still on the Court who were part of the Citizens State Bank majority joining the unanimous vote.32 B. Some Additional M atters of Priority In Amici R esources, LLC v. Alan D. Nelson Living Trust, the Court of33 Appeals had to sort out the relative priorities of three creditors to some real property. In late 2012, Sabine M atthies obtained a judgment against Solid Foundations Investment Properties, Inc. (“SFIP”). The following spring, SFIP34 purchased the real property at issue. The purchase was financed with a loan35 from the Alan D. Nelson Living Trust, secured by a mortgage. At the same time36 as the purchase, Amici Resources, LLC, loaned SFIP additional funds to renovate 23. Citizens State Bank and its legislative override are discussed, respectively, in Roger Bernhardt, Mortgages and Merger, ABA PROB. & PROP. 35 (Nov./Dec. 2012), and Rory O’Bryan, Mortgages: Legislative Preemption of Merger Doctrine, ABA PROB. & PROP. 44 (May/June 2013). 24. See generally U.S. Bank, N.A. v. Miller, 44 N.E.3d 730 (Ind. Ct. App. 2015), trans. denied sub nom. U.S. Bank, N.A. v. Evansville, 43 N.E.3d 1278 (Ind. 2016). 25. Id. at 732-33. 26. Id. at 733. 27. Id. at 736. 28. Id. 743. 29. Id. 30. Id. at 745. 31. U.S. Bank, N.A. v. Evansville, 43 N.E.3d 1278 (Ind. 2016) (denying transfer). 32. See generally id. 33. 49 N.E.3d 1046 (Ind. Ct. App. 2016). 34. Id. at 1048. 35. Id. at 1049. 36. Id. 2017] BANKING, BUSINESS, AND CONTRACT LAW 1183 the property, secured by a second mortgage.37 The legal principles involved in establishing the priorities are basic but worth repeating. First, when M atthies’s judgment was recorded in the judgment docket in M arion County, it becam e a lien by operation of law on SFIP’s real property in M arion County. Second, M atthies’s judgment “instantly” attached as a lien38 to the property upon its subsequent acquisition by SFIP. Third, the mortgage39 granted to the Nelson Trust, because it was a “purchase-money mortgage,” had40 priority over the M atthies judgment lien.41 This left the question of the relative priority of the M atthies judgment lien and the Amici Resources second mortgage. An argument could be made that the42 two liens were equal in priority, both attaching at the moment the property that was purchased. But the Court of Appeals, relying on a century-old case addressing precisely that argument, held the M atthies judgment lien had priority over Amici Resources m ortgage lien because the latter had “been perfected subsequent to the creation of the judgment lien.”43 Sam uels v. Garlick warrants brief mention. The Garlicks gave a mortgage44 on some residential subdivision property to a financial institution, Saxon M ortgage, Inc., to secure repayment of a loan. The metes-and-bounds legal45 description was inaccurate in several respects, but the mortgage recited that the property was “commonly known as 8611 W est 96th Street, Zionsville.” Three46 years later, the Garlicks gave a second mortgage on the same property to Samuels. The legal description in this mortgage used lot numbers on a plat and47 recited that Lot 1 was “commonly known as 8611 W est 96th Street.”48 Samuels contended that the earlier mortgage to the financial institution was invalid because it did not sufficiently describe the mortgaged property. After a49 careful review of relevant statutes and case law, the Court of Appeals rejected Samuels’s contention: “The Saxon mortgage, which is in the Garlicks’ chain of title, put prospective purchasers or mortgagees on notice of an existing mortgage on property commonly known as 8611 W est 96th Street, Zionsville— the same 37. Id. 38. Id. at 1053 (citing IND. CODE § 34-55-9-2 (2016); Arend v. Etsler, 737 N.E.2d 1173, 1175 (Ind. Ct. App. 2000)). 39. Id. (citing Michaels v. Boyd, 1 Ind. 259, 260 (1848)). 40. A purchase-money mortgage is “[a] mortgage granted by a purchaser to secure purchase money has priority over a prior judgment against the purchaser.” IND. CODE § 32-29-1-4 (2016). 41. Amici Res., LLC, 49 N.E.3d at 1053 (citing IND. CODE § 32-29-1-4 (2016); RESTATEMENT (THIRD) OF PROPERTY (MORTGAGES) § 7.2 & cmt. B to (1997)). 42. Id. at 1052-53. 43. Id. at 1053 (citing Yarlott v. Brown, 149 N.E. 921, 922 (Ind. Ct. App. 1925)). 44. 49 N.E.3d 1116 (Ind. Ct. App. 2016). 45. Id. at 1117. 46. Id. 47. Id. 48. Id. at 1118. 49. Id. at 1117. 1184 INDIANA LAW REVIEW [Vol. 50:1179 address shown on Lot 1 of the . . . Plat, which is also in the Garlicks’ chain of title.”50 C. A Rare Foreclosure of (Only) a Junior Lien “The foreclosure of a junior lien upon real estate subject to prior liens and encumbrances is not a frequent occurrence, but it is not without precedent.” In51 Lake v. Butler, the Court of Appeals upheld a sheriff’s sale of real estate subject to prior liens and encumbrances conveying the second priority position of a mechanic’s lien holder, but only that second priority position. It had no effect52 on the first priority interest— a mortgage held by Bank of New York M ellon Trust Company.53 D. Hughley’s High Hurdle Black v. Deutsche Bank, and R.P. Leasing, LLC v. Chemical Bank provide54 55 useful reminders of Indiana’s non-movant-friendly summary judgment standard, first enunciated by the Indiana Supreme Court in Jarboe v. Landmark Community Newspapers of Indiana, Inc., and then powerfully reasserted by the Court in its56 unanimous 2014 opinion, Hughley v. State. 57 In the first case, Deutsche Bank sought sum m ary judgment in a foreclosure action, presenting the testimony of a senior loan analyst for the loan servicing company that the mortgagors were in default and had failed to cure. The58 mortgagors responded with an affidavit that they were not in default because they had tried to pay numerous times but the bank always refused. After Deutsche59 Bank got summary judgment, the Court of Appeals reversed, saying, “Although the Bank describes [the mortgagor’s] affidavit as self-serving, our supreme court has held that ‘a perfunctory and self-serving’ affidavit that controverts a prima facie case for summary judgment is enough to preclude summary judgment.”60 In the second case, R.P. Leasing, Chemical Bank sought summary judgment 50. Id. at 1122. 51. Lake v. Bulter, No. 18A04-1503-PL-129, 2016 WL 277736, at *1 (Ind. Ct. App. Jan. 22, 2016) (citing Vadevender v. Moore, 146 Ind. 44 (1896)) (unpublished disposition). 52. Id. at *2. 53. Id. 54. No. 29A02-1503-MF-149, 2016 WL 126720, at * 1 (Ind. Ct. App. Jan. 12, 2016) (unpublished disposition), trans denied, 48 N.E.3d 316 (Ind. 2016). 55. 47 N.E.3d 1211 (Ind. Ct. App. 2015). 56. 644 N.E.2d 118, 123 (Ind. 1994) (“Indiana does not adhere to Celotex [v. Catrett, 477 U.S. 317 (1986)] and the federal [summary judgment] methodology.”). 57. 15 N.E.3d 1000, 1003 (Ind. 2014) (holding “summary judgment [may] be precluded by as little as a non-movant’s mere designation of a self-serving affidavit” (internal quotations and citation omitted)). 58. Black, 2016 WL 126720, at *3. 59. Id. 60. Id. (quoting Hughley, 15 N.E.3d at 1004). 2017] BANKING, BUSINESS, AND CONTRACT LAW 1185 to collect the balance due on a promissory note and foreclose a mortgage on property in Indiana. The bank had earlier foreclosed on another of mortgagor’s61 properties in M ichigan, acquiring the property by means of a “credit bid” of62 $500,000. W hile the parties agreed that the calculation of the balance due on the63 note was to be reduced by the fair market value of the M ichigan property, the mortgagor maintained that there were genuine issues of material fact as to whether the value exceeded $500,000.64 The m ortgagor submitted the affidavit of its managing member stating that he owned the M ichigan property and that he believed the value of the property at the time of sale was more than $500,000. Under the H ughley standard, the Court of Appeals said this was “sufficient, though minimally so, to raise a factual issue to be resolved at trial, and thus to defeat the . . . sum mary judgment motion.” The Court thus denied Chemical Bank summary judgment.65 66 E. M ortgagors’ Comeback Short-lived In last year’s survey Article, I reported that mortgagors had had some success in the Court of Appeals during the prior year in reversing trial court judgments in favor of financial institution mortgagees.67 Things pretty much reverted to normal during this past year; there is not much to report in the way of successes on the part of mortgagors against financial institution mortgagees. (I counted fifteen Court of A ppeals opinions in favor of68 financial institution mortgagees in foreclosure cases. ) But there is one case69 61. R.P. Leasing, LLC v. Chem. Bank, 47 N.E.3d 1211, 1213-14 (Ind. Ct. App. 2015). 62. “A ‘credit bid’ refers to a situation in which a judgment creditor (e.g., a bank holding the mortgage) is the purchaser at its own foreclosure sale and bids the judgment instead of cash. Such a bid is as effective as payment in actual money would have been, and the amount of the judgment must be reduced by the amount of the credit bid.” Id. at 1213 n.1 (citations omitted). 63. Id. at 1214. 64. Id. at 1213-14. 65. Id. at 1216 (quoting Hughley, 15 N.E.3d at 1004). 66. Id. at 1217-18. 67. See Sullivan, supra note 2, at 985-87. 68. One success was Edler v. Regions Bank, No. 53A01-1512-MF-2264, 2016 WL 3941057 (Ind. Ct. App. July 21, 2016). 69. Scarr v. JPMorgan Chase Bank Nat. Ass’n, No. 21A01-1411-MF-466, 2015 WL 5427722 (Ind. Ct. App. Sept. 15, 2015) (unpublished disposition), trans. denied, 49 N.E.3d 107 (Ind. 2016); Hutchens v. BAC Home Loans Servicing, LP, No. 29A02-1503-MF-190, 2015 WL 5618843 (Ind. Ct. App. Sept. 24, 2015) (unpublished disposition); Ansari v. Bank of N.Y. Mellon, No. 29A02- 1412-MF-821, 2015 WL 5618829 (Ind. Ct. App. Sept. 24, 2015) (unpublished disposition); McEntee v. Wells Fargo Bank, N.A., No. 75A03-1502-MF-51, 2015 WL 6736534 (Ind. Ct. App. Nov. 4, 2015) (unpublished disposition); Pennington v. U.S. Bank Nat. Ass’n, No. 55A01-1503- MF-114, 2015 WL 7575101 (Ind. Ct. App. Nov. 25, 2015) (unpublished disposition), trans. denied, 1186 INDIANA LAW REVIEW [Vol. 50:1179 discussed in last year’s A rticle that returned to the Court of Appeals after remand— Lewallen Revocable Trust v. Fifth Third Mortgage — and once again,70 the mortgagor prevailed. The case involves some real estate owned by a family subject to a Fifth Third mortgage. A family trust owned fifty percent of the property; the only child, a71 son, owned the other half. At some point, Fifth Third refinanced the loan.72 73 W hen the bank rounded up the signatures on the new mortgage, it failed to obtain the signature of the son. The note and mortgage went into default and the bank74 ultimately foreclosed on the mortgage in 2011. In last year’s case, the Court of75 Appeals held the failure to secure the son’s signature on the new mortgage rendered the mortgage void with respect to the son’s one-half interest in the property.76 Apparently undaunted by or misreading the decision rendered by the Court of Appeals, the bank returned to the trial court a month later and asked the trial court for a decree of foreclosure covering the son’s interest, and the trial court granted the request.77 Back the case came to the Court of A ppeals, and the Court of A ppeals rather sternly held that the “trial court’s post-appeal order is barred by the ‘law of the case’ doctrine, under which an appellate court determination of a legal issue is binding on the trial court and on the Court of Appeals in any subsequent appeal 46 N.E.3d 446 (Ind. 2016); Turner v. Nationstar Mortg., LLC, 45 N.E.3d 1257 (Ind. Ct. App. 2015); Fish v. 2444 Acquisitions, LLC, 46 N.E.3d 1261 (Ind. Ct. App. 2015), trans. denied sub nom. Fish v. 2444 Acquisitions, 46 N.E.3d 1240 (Ind. 2016); Mattingly v. Nationstar Mortg., LLC, No. 30A01-1505-MF-402, 2016 WL 614654 (Ind. Ct. App. Feb. 16, 2016) (unpublished disposition); Roland v. Nationstar Mortg. LLC, No. 29A04-1508-MF-1241, 2016 WL 634148 (Ind. Ct. App. Feb. 17, 2016) (unpublished disposition); Rasaki v. Union Sav. Bank, No. 29A02-1506- MF-663, 2016 WL 1122113 (Ind. Ct. App. Mar. 22, 2016) (unpublished disposition); Williamson v. U.S. Bank Nat. Ass’n, 55 N.E.3d 906 (Ind. Ct. App. 2016); Rybicki v. U.S. Bank Nat. Ass’n, No. 45A04-1509-MF-1341, 2016 WL 2944238 (Ind. Ct. App. May 20, 2016) (unpublished disposition); Kuhn v. MidFirst Bank, No. 49A02-1512-MF-2097, 2016 WL 3092557 (Ind. Ct. App. June 2, 2016) (unpublished disposition); Plaut v. Wells Fargo Bank, N.A., No. 90A05-1509-MF-1390, 2016 WL 3277263 (Ind. Ct. App. June 15, 2016) (unpublished disposition); Rasaki v. Union Sav. Bank, No. 29A04-1510-MF-1779, 2016 WL 3369539 (Ind. Ct. App. June 16, 2016) (unpublished disposition). 70. No. 15A01-1409-MF-396, 2015 WL 3500462 (Ind. Ct. App. June 2, 2015) (unpublished disposition). 71. Id. at *1. 72. Id. 73. Id. at *8. 74. Id. at *2. 75. Id. 76. Id. at *9. 77. Lewallen Revocable Tr. v. Fifth Third Mortg. Co., No. 15A01-1511-MF-2049, 2016 WL 3030917, at *2 (Ind. Ct. App. May 27, 2016) (unpublished disposition). 2017] BANKING, BUSINESS, AND CONTRACT LAW 1187 in the same case and involving substantially the same facts.” (The language of78 the Court of Appeals was actually a little tougher than that.) F. Credit Card Lending Except for Lewallen, m ortgage lenders widely prevailed at the Court of Appeals this year. On the other hand, two out of three credit card lending cases went the borrowers’ way. In both, the Court of Appeals reversed summary79 judgment in favor of the lenders, finding the lenders’ loan documentation to have been insufficient to support summary judgment.80 III. B USINESS LAW A. Legislative Developments The Indiana General Assembly established the Indiana Business Law Survey Commission in 1988 to recommend improvements to the state’s corporation and other business entity statutes. During the survey period, the Commission81 recommended and the Legislature enacted, during its 2016 session, a new statute authorizing “Series Limited Liability Companies.” The Commission also recommended for consideration during the Legislature’s 2017 session an ambitious project to consolidate and harmonize provisions of our state’s five principal current business entity statutes. This legislation was enacted following the conclusion of the survey period. 1. Series LLCs.— During the 2016 Indiana General Assembly, the legislature enacted a new article in Title 23— the title of the Indiana Code authorizing the various business entities permitted in Indiana. This new article took effect82 January 1, 2017, and authorizes “series LLCs.” W ith its enactment, Indiana became the fifteenth state to authorize series LLCs. It is a sufficiently new concept that the Uniform Law Commission— the83 principal national organization that drafts uniform state statutes like the U niform Commercial Code— has not yet finished drafting a uniform series LLC act.84 78. Id. 79. Menendez v. CACH, LLC, No. 29A02-1511-CC-2026, 2016 WL 4442487 (Ind. Ct. App. Aug. 23, 2016) (unpublished disposition); Reef v. Asset Acceptance, LLC, 43 N.E.3d 652 (Ind. Ct. App. 2015). 80. See generally Menendez, 2016 WL 4442487; Reef, 43 N.E.3d 652. 81. IND. CODE § 23-1-54-3 (2016). I was elected Vice-Chair of the Commission in September 2016. 82. Pub. L. No. 170-2016, § 19, 2016 Ind. Acts 1713-17 (codified at IND. CODE § 23-18.1 (2016)) (effective Jan. 1, 2017). 83. See J. Leigh Griffith & Alberto R. Gonzales, Series LLCs Part 1—Current Status, Multi- State Issues and Potential Uniform Limited Liability Company Protected Series Act, TAXES THE TAX MAG., at 67 (Oct. 2016), http://www.wallerlaw.com/~waller/portalresource/ lookup/wosid/cp- base-4-131006/media.name=/MAG_10-16_Griffith-Gonzales.pdf [https://perma.cc/4LKL-PDHG]. 84. See Limited Liability Company Protected Series Act, NAT’L CONF. COMMISSIONERS ON 1188 INDIANA LAW REVIEW [Vol. 50:1179 A series LLC structure perm its a limited liability company to segregate within the entity both assets and ownership, protecting them from general creditors or creditors of other series. W hereas a traditional parent-subsidiary relationship has always been able to accomplish this, one of the characteristics of a business entity is that, except as limited by contract, owners and creditors have undifferentiated rights to all assets. A series LLC , to repeat, permits an LLC to segregate its assets and ownership by one or more of what are called “series.” A family of m utual funds is an analog. A mutual fund family, usually organized as a business trust, will often have a “series” of funds within the family, each with its own assets and each with its own owners. They are not subsidiaries; they are all part of the same trust; yet their assets and owners are segregated from each other. For example, such a mutual fund might be a single trust composed of seventeen portfolios, each with separate series shares. An investor might purchase shares in the “Conservative Balanced Portfolio” which would give the investor rights with respect to the assets in that portfolio— the stocks and bonds in that mutual fund— but not with respect to the assets of any of the other sixteen portfolios. The expectation is that the series LLC will be a fairly specialized business entity without too many users. But its adoption demonstrates that Indiana is on the cutting edge of states m aking novel business structures available to entrepreneurs, enabling them to organize their innovative enterprises here. 2. Business Entity Statute Harmonization.— The 2016 session of the General Assembly featured series LLC. The 2017 session featured the business entity harmonization project. Because the 2017 session is outside the survey period,85 this project is only summarized here and will be discussed in detail in next year’s survey. Indiana has separate statutes governing corporations, limited liability86 partnerships, limited partnerships, nonprofit corporations, and limited87 88 89 liability companies. Yet the administrative provisions of these statutes have90 much in common, as do provisions governing mergers, share or interest exchanges, conversions, and domestications of these entities. But because these common provisions were enacted at different times and in different statutes, they often differ from one another. For example, existing law: • Permits corporations, LLPs, LPs, and LLCs to renew name reservations UNIFORM ST. LAWS (June 7, 2016) (draft), http://www.uniformlaws.org/shared/docs/series%20of% 20uninco rp o rated%20business%20entities/2016AM_LLCP rotectedSeries_Draft.pdf [https://perma.cc/Q7WP-LCWV]. 85. Pub. L. No. 118-2017, 2017 Ind. Acts 813 (eff. Jan. 1, 2018). 86. IND. CODE §§ 23-1-17 to 23-1-54 (2016). 87. Id. §§ 23-4-1-44 to 23-1-53. 88. Id. § 23-16. 89. Id. § 23-17. 90. Id. § 23-18. 2017] BANKING, BUSINESS, AND CONTRACT LAW 1189 but not NFPs.91 • Gives corporations, LPs, NFP’s, and LLCs a long list of safe harbors from triggering the foreign registration requirements— but does not do the same for LLPs.92 • Provides for corporations, LLPs, LPs, and LLCs to merge or convert93 94 into another such entity— but not to exchange ownership interests with another such entity.95 Additional inconsistencies abound. The Indiana Business Law Survey Commission strove to resolve those inconsistencies through its business entity harmonization project. This effort integrates provisions on business filings, names, registered agents, foreign entities, and administrative dissolution from the five current entity statutes, and gives them in a single home in the Indiana96 C ode. A second part of the project likewise integrates and consolidates97 provisions governing business mergers, interest exchanges, conversions, and domestications. The project drew much of its structure and language from two98 model uniform acts. The provisions of existing law affected by these changes99 are repealed. This is a very exciting development as it streamlines existing law greatly, gives much greater flexibility to entrepreneurs and their lawyers in organizing their affairs and transactions, and eliminates dozens upon dozens of traps for the unwary. The harm onization project was adopted by the Legislature and signed into law by Governor Eric Holcomb after the conclusion of the survey period. Its100 provisions will be described in greater detail in next year’s survey. 91. See id. §§ 23-1-23-2(a), 23-4-1-45.3(b), 23-1-16-2-2(a), 23-17-5-2(a), 23-18-2-9(a). 92. See id. §§ 23-1-49-1(a), 23-16-10-2(a), 23-17-26-1(b), 23-18-11-2(b). 93. See id. §§ 23-1-40-8(c), 23-4-53(c), 23-1-16-3-12(a), 23-16-3-13(c), 23-18-7-1(a), 23-18- 7-9(c). 94. See id. §§ 23-1-38.5-10(a)-(h), 24-4-1-54, 23-16-3-14, 23-18-7-10. 95. See id. §§ 23-1-40-2. 96. See supra Part III.A.2. 97. Pub. L. No. 118-2017, § 5, 2017 Ind. Acts 813, 820-67 (codified at IND. CODE § 23-0.5) (effective Jan. 1, 2018). 98. Id. § 6, 2017 Ind. Acts 813, 867-96 (codified at IND. CODE § 23-0.6) (effective Jan. 1, 2018). 99. Article 1 of the Uniform Business Organizations Code (UBOC Hub) (2011), NAT’L CONF. COMMISSIONERS ON UNIFORM ST. LAWS (Aug. 19, 2015), http://www.uniformlaws.org/ shared/docs/harmonization_of_business_entity_acts/HUB_Final_2014_2015aug19.pdf [https://perma.cc/3E5J-EQB8]; Model Entity Transactions Act (2007), NAT’L CONF. COMMISSIONERS ON UNIFORM ST. LAWS, (Aug. 19, 2015), http://www.uniformlaws.org/shared/ docs/entity_transactions/META_Final_2014_2015aug19.pdf [https://perma.cc/77EC-2LJL]. 100. See Pub. L. No. 118-2017, 2017 Ind. Acts 813-974. 1190 INDIANA LAW REVIEW [Vol. 50:1179 B. The Centrality of the UCC Operating Agreement C appas v. ThruPort Intermodal, LLC, drives home the centrality of101 operating agreements in the governance of limited liability companies. Cappas was both a member and a creditor of an LLC. W ith his apparent agreement and102 participation, the members met and voted to allow Cappas to withdraw as a partner. Cappas apparently had a change of heart and argued in this litigation103 that his withdrawal had not been effective— that he was still a mem ber of the LLC.104 The default rule under Indiana’s LLC act is that a member may not withdraw from a limited liability company before the dissolution and winding up of the LLC. But this rule is subject to the express terms of the operating agreement.105 106 The Court of Appeals took a very careful look at the operating agreement and the m inutes of the members’ meeting and concluded that Cappas’s withdrawal was consistent with the provisions of the operating agreement.107 C. Owner’s Limited Liability Waived by Contract The bedrock principle of limited liability shields business owners from personal liability for the debts and obligations of their businesses. A claimant108 trying to get around that principle and recover from an owner personally will typically employ the “piercing the corporate veil” exception. Yellow Book Sales109 & Distribution Co. v. JB M cCoy M asonry Inc., is a sobering reminder that the110 protections of the bedrock principle of limited liability can also be lost by contract— in this case, where the owner did not read the sm all print of a form contract.111 Yellow Book presented a customer with a one-sheet, fill-in-the-blanks form contract to buy a year of advertising in certain phonebooks. The signature block112 in the contract called for the “customer name,” after which was written “JB 101. No. 45A03-1508-PL-1242, 2016 WL 614751 (Ind. Ct. App. Feb. 16, 2016) (unpublished disposition). 102. See id. at *1. 103. Id. 104. Id. at *2. 105. IND. CODE § 23-18-6-6.1 (2016). 106. Id. 107. Cappas, 2016 WL 614751, *5. 108. See IND. CODE §§ 23-1-26-3 (2016) (shareholders of corporations); Id. § 23-18-3-3 (limited liability companies); Aronson v. Price, 644 N.E.2d 864, 867 (Ind.1994); Country Contrs., Inc. v. A Westside Storage of Indianapolis, Inc., 4 N.E.3d 677, 687 (Ind. Ct. App. 2014). I was the author of Aronson. 109. See Aronson, 644 N.E.2d at 867; Longhi v. Mazzoni, 914 N.E.2d 834, 839 (Ind. Ct. App. 2009); Country Contrs., Inc., 4 N.E.3d at 687. 110. 47 N.E.3d 388 (Ind. Ct. App. 2015). 111. See generally id. 112. Id. at 389. 2017] BANKING, BUSINESS, AND CONTRACT LAW 1191 M cCoy M asonry, Inc.” On the next line was written “Robin J. B rooks,113 Owner.” Immediately after the signature line, in caps and bold, the contract114 said, “Authorized Signature Individually and for the Customer.” Following that115 language, the words “Read paragraph 15F on the reverse hereof” were written in non-bold text and as a parenthetical. Paragraph 15F included these provisions:116 The signer agrees that he/she has the authority and is signing this agreement . . . in his/her individual capacity[.] . . . By his/her execution of this agreement, the signer personally and individually undertakes and assumes, jointly and severally with the Customer, the full performance of this agreement, including payment of amounts due hereunder.”117 The Court of Appeals held that by signing the form contract, B rooks had contracted away her statutory right to limited liability.118 D. Agency: Liability in Contract for the Acts of an Agent A business will be bound to a contract purportedly made on its behalf by a person who is the entity’s agent, defined as a person having express, apparent, or implied authority to act on the entity’s behalf. As B&R Oil Co. v. Stoler shows,119 the question of a lawyer’s agency is a critical one when it comes to settlement negotiations. The case involved a dispute between two affiliated oil and gas distributors on one side and eighteen of their gas station tenants on the other side. The tenants maintained that during face-to-face negotiations in late 2014,120 both sides agreed to the terms of settlement of pending litigation. The121 distributors took the position that none of the representatives of the distributors at the negotiations had authority to bind the companies. I will deal with the122 agency issue here and the contract formation issue later in this Article. The distributors were represented at the negotiation by three individuals: outside counsel; an executive of the companies; and their in-house counsel.123 W ith respect to outside counsel, “the sole act of retaining an attorney does not 113. Id. at 390. 114. Id. 115. Id. 116. Id. 117. Id. at 389-90. 118. Id. at 394. The trial court had found Brooks not personally liable under the contract. Id. at 392 n.6. 119. No. 71A03-1503-PL-114, 2016 WL 276722 (Ind. Ct. App. Jan. 21, 2016) (unpublished disposition), trans. denied, 54 N.E.3d 372 (Ind. 2016). 120. Id. at *1. 121. Id. 122. Id. The distributors also contended that no enforceable oral agreement was reached on that date because the parties did not reach an agreement on all material terms. Id. at *8. This issue is discussed infra Part IV.B.3. 123. Id. at *2. 1192 INDIANA LAW REVIEW [Vol. 50:1179 give the attorney the implied or the apparent authority to settle or compromise a claim in an out of court proceeding.” Specifically, retention in and of itself124 neither confers the implied authority to settle a claim, nor is it a manifestation by the client to third parties such that the attorney is clothed with the apparent authority to settle. 125 Nevertheless, the trial court concluded, and the Court of Appeals affirmed, the three individuals here enjoyed at least apparent authority if not actual authority to bind the distributors. “Apparent authority refers to a third party’s126 reasonable belief that the principal has authorized the acts of its agent; it arises from the principal’s indirect or direct manifestations to a third party and not from the representations or acts of the agent.” The trial court and Court of Appeals’127 analysis on the element of principal’s m anifestations was solid: W hen the distributors sent only these three individuals to a mediation where the parties were required to have representatives with settlement authority, the tenants could reasonably have believed that the distributors had authorized the acts of the individuals.128 E. Liability in Tort for the Acts of an Agent The liability of an employer for the torts of an employee is an im portant theme in agency law. The Court of Appeals gave it clear and careful explication in Ansari v. Sirius Satellite Radio. An employee of Sirius Satellite Radio sent,129 during his work hours, num erous hostile communications by text and email to Ansari from his personal cellphone. The employee and Ansari had had a minor130 child together and, at the time of the communications, were engaged in ongoing custody litigation.131 Ansari sued Sirius, seeking to hold Sirius liable for the employee’s ongoing harassment based on a theory of respondeat superior. But the Court of Appeals132 held, because there was no connection between the employee’s conduct and his employment, the continued harassment fell outside the scope of his employment, precluding respondeat superior. 133 The key determination in such cases is whether the employee’s conduct falls within the scope of employment, and Ansari does a good job applying the 124. Id. at *7 (quoting Koval v. Simon Telelect, Inc., 693 N.E.2d 1299, 1301 (Ind. 1998)). 125. Id. (citing Koval, 693 N.E.2d at 1301). 126. Id. 127. Id. at *6 (quoting Menard, Inc. v. Dage-MTI, Inc., 726 N.E.2d 1206, 1210 (Ind. 2000) (internal citations omitted)). 128. Id. at *7. 129. No. 29A05-1509-PL-1435, 2016 WL 3060134 (Ind. Ct. App. May 31, 2016) (unpublished disposition). 130. Id. at *1. 131. Id. 132. Id. 133. Id. at *4. 2017] BANKING, BUSINESS, AND CONTRACT LAW 1193 relevant factors here. Another good case in this regard, though older, is Hurlow134 v. M anaging Partners, Inc., where the Court set forth a useful two-prong test135 for determining scope of em ployment: (1) if an employee’s act furthered the employer’s business interest to an appreciable extent, or (2) if an employee’s authorized acts and unauthorized acts are so closely associated that the employee can be said to have acted within the scope of his employment.136 IV. C ONTRACT LAW A. State v. International Business M achines Corp. The biggest contract case of the year was State v. IBM . The underlying137 contract was an agreement between the Indiana Family and Social Services Administration (“FSSA”) and technology behemoth IBM to automate the State’s system for administering welfare benefits over ten years at a cost of $1.3 billion. Not quite three years after execution, FSSA terminated the contract for138 cause, citing, inter alia, IB M ’s “numerous and repeated quality and timeliness failures.” By this time, IBM had been paid $437 million. The State sued for139 140 $170 million in damages; IBM counterclaimed for $52 million. 141 By the time the Indiana Supreme Court handed down its decision on M arch 22, 2016, alm ost six years had elapsed since the lawsuit was filed on M ay 13, 2010, and more than nine years since the underlying contract was signed on December 27, 2006. Over that time, the issue in the case had crystallized to142 whether IBM ’s breach of the contract was “material.” W hen the Court took up143 the issue, four very experienced lower court judges had split 2-2 on the issue: M arion Superior Court Judge David J. Dreyer and Indiana Court of Appeals144 Judge Ezra H. Friedlander concluded IBM had not materially breached the145 contract; Indiana Court of Appeals Judges Nancy Harris Vaidik and John G. 134. See id. 135. 755 N.E.2d 1158 (Ind. Ct. App. 2001). 136. Id. at 1163. 137. 51 N.E.3d 150 (Ind. 2016). 138. The Court explained that FSSA sought to replace its current system with one “based on a ‘remote eligibility’ model [that] . . . would allow Indiana citizens to apply for welfare benefits ‘via web and call center’ without the need for face-to-face meetings with a case worker, and eligibility determinations would be done on a centralized, statewide basis rather than in local county welfare offices.” Id. at 153. 139. Id. at 157. 140. Id. at 167. 141. Id. at 157. 142. Id. at 153. 143. Id. at 158-61. 144. State v. IBM, No. 49D10-1005-PL-021451, Judgment at 47 (Ind. Super. July 18, 2012). 145. State v. IBM, 4 N.E.3d 696, 747 (Ind. Ct. App. 2014) (Friedlander, J., dissenting), aff’d., 51 N.E.3d 150 (Ind. 2016). 1194 INDIANA LAW REVIEW [Vol. 50:1179 Baker concluded it had.146 One of the many interesting things about this case is that the trial court and Court of Appeals majority applied essentially the same method of analysis to the materiality question but reached different results. Then, the Indiana Supreme Court applied a different method of analysis but reached the same result as the Court of Appeals majority.147 The difference in analysis turned on the availability of common law factors to assess the materiality of a contract breach. Under the common law, Indiana courts generally apply factors articulated in Restatement (Second) of Contracts § 241. The trial court applied these factors and found no material breach on148 IBM ’s part. The Court of Appeals majority applied these factors and found149 material breach.150 The Indiana Supreme Court recognized that this is the general approach used to determine the materiality of a breach but held “where a contract itself provides the standard for what constitutes a material breach, this is the standard that governs. The common law standard only applies in the absence of a contractual provision regarding what constitutes a material breach.”151 Standing alone, this seems an unremarkable proposition, consistent in all respects with conventional notions of freedom of contract and private ordering: The defaults of the common law give way to the express written agreement of the parties. So did the plain language of the contract between FSSA and IBM provide for evaluating the materiality of a breach? Yes, said the Supreme Court, the contract provides the standard for what constitutes a material breach. Specifically, the [contract] provides that a breach is material if it is “material considering this Agreement as a whole.” It further provides that a series of breaches, none of which individually constitutes a breach of the Agreement, may nevertheless “collectively constitute a breach of this Agreement which is material when considering this A greement as a whole. . . .”152 The Court then applied this standard to the trial court’s judgment and found its conclusion that IB M did not materially breach the contract to be erroneous for five principal reasons: • The contract listed the State’s satisfaction with IBM ’s performance as a performance measure and the evidence showed that the State’s 146. Id. (majority opinion). 147. Compare id., with State v. IMB, 51 N.E.3d 150 (Ind. 2016). 148. Frazier v. Mellowitz, 804 N.E.2d 796, 803 (Ind. Ct. App. 2004) (citing RESTATEMENT (SECOND) OF CONTRACTS § 241 (1981)). 149. State of Indiana v. IBM, No. 49D10-1005-PL-021451, Judgment at 38, 47 (Ind. Super. July 18, 2012). 150. IBM, 4 N.E.3d at 715-16. 151. State v. IBM, 51 N.E.3d 150, 161 (Ind. 2016). 152. Id. at 159 (quotations are from the contract) (internal citations omitted). 2017] BANKING, BUSINESS, AND CONTRACT LAW 1195 dissatisfaction was reasonable in light of IBM ’s own adm issions.153 Because this performance measure was part of the contract, “considering the A greement as a whole” mandated that it be considered. The trial154 court was wrong not to do so.155 • The contract provided for liquidated damages in the event that IBM failed to achieve certain timeliness metrics. The trial court held IB M ’s156 payment of these damages constituted an alternative means of performance and, as such, IBM ’s failure to meet these timeliness metrics was not a material breach. But the Court said that the liquidated157 damages provision did not limit any applicable state termination rights.158 Considering the Agreement as a whole, payment of liquidated damages did not excuse IBM ’s breach.159 • The trial court found the Great Recession, certain natural disasters, and an unanticipated surge in applications for a particular welfare program excused IBM ’s performance. The Supreme Court disagreed. As to160 161 the economy and natural disasters, IBM had force majeure clauses available to it but did not invoke them. As to the increased volume in162 the welfare program, IBM ’s compensation had been increased to cover the additional work.163 • The contract was conceived to create a “remote eligibility” system to replace the existing “face-to-face” system. The trial court found the164 State’s motive for terminating the contract was its determination to abandon the commitment to remote eligibility and replace it with a hybrid system. This might have been the case, the Supreme Court said,165 but the State’s motive for terminating the contract was irrelevant— “only the written terms of the contract matter.”166 • The trial court itemized ten benefits that the State received as a consequence of the work done by IBM and utilized them its m ateriality assessment. The Supreme C ourt said, however, that the standard of167 considering the contract as a whole “does not involve consideration of 153. Id. at 163. 154. Id. 155. Id. 156. Id. at 163-64. 157. Id. at 164. 158. Id. 159. Id. 160. Id. 161. Id. 162. Id. 163. Id. at 165. 164. See supra note 138. 165. IBM, 51 N.E.3d at 166. 166. Id. 167. Id. at 166-67. 1196 INDIANA LAW REVIEW [Vol. 50:1179 the benefits received by the State,” and found that such benefits could168 not be considered because “benefits received by the State” do not ameliorate a material breach.169 The bottom line for the Supreme Court was that “numerous and repeated failures on the part of IBM . . . collectively constitute[d] a breach of the [contract].” Consideration of IB M ’s payment of liquidated damages, the effect170 of the economic downturn, flooding, or unanticipated volume, the State’s motive in terminating, or the benefits received by the State were impermissible under the contract’s standard for measuring materiality: considering the contract “as a whole.” The breach was material and the State was entitled to damages.171 172 I am not so sure. The Court is certainly correct, I think, in holding the defaults of the common law give way to the express written agreement of the parties. But the Court seems to read the standard of considering the “contract as a whole” as narrowing what the trial court can consider. I think the more straightforward reading of a “consider as a whole” standard is to expand the field of possible considerations— including, not excluding, that failure to achieve timeliness metrics had been liquidated; that extraordinary events had impeded performance; that the State changed its mind on what it originally wanted; and that the State received significant benefits. B. Interpreting and Enforcing Particular Types of Contracts 1. Employment Contracts.— During last year’s survey period, the Indiana Court of Appeals had decided two employment contract cases, one in favor of the employer and the other in favor of the employee; in both cases reversing the decisions of the trial court. To make matters more intriguing, the Indiana173 Supreme Court had granted transfer in both cases. During the survey period, the Court of A ppeals was reversed in both, reinstating the decisions of the trial court judges. In Hewitt v. Westfield Washington Schools, an elementary school principal,174 also employed as a teacher, had been fired. The principal prevailed in the Court175 of Appeals on his breach of contract action, on grounds that he was entitled to, but had not received, the protections of the teacher termination statute. But the176 Supreme Court disagreed, finding he was not entitled to the protections of the 168. Id. at 166. 169. Id. at 167. 170. Id. 171. Id. at 168. 172. Id. 173. See Sullivan, supra note 2, at 995-96. 174. 46 N.E.3d 425 (Ind. 2015). 175. Id. at 427. 176. Hewitt v. Westfield Washington Sch. Corp., 24 N.E.3d 459, 467-68 (Ind. Ct. App. 2014), rev’d, 46 N.E.3d 425 (Ind. 2015). 2017] BANKING, BUSINESS, AND CONTRACT LAW 1197 statute and that he had received the procedural due process to which he was177 entitled, which was limited in any event. Employer won.178 179 In AM General LLC v. Armour, an employer had attem pted to satisfy its180 obligation to its retired president under the long-term incentive plan portion of his employment agreement not with cash— but with a promissory note! The Court181 of Appeals found there were genuine issues of fact as to whether cash payments were required, but the Supreme Court disagreed and found satisfying the182 obligations of the employment contract with anything other than cash constituted a breach. Employee won.183 184 The most important employment contract case of the year was the widely- reported Gregg Appliances, Inc. v. Underwood, in which senior management185 employees staked claim to a portion of the $40 m illion death benefit from a life insurance policy following the 2012 passing of the company’s CEO. The claim186 was based on a compensation plan that awarded bonuses to specified executives if the company’s annual “EBITDA” was $112,300,000 or more. EBITDA is a187 term commonly understood to mean “earnings before interest, taxes, depreciation, and amortization,” but the precise meaning of EB IT D A was the central issue in the case. If the $40 million in insurance proceeds was included, EBITDA188 equaled $143,552,000 and the employees were entitled to $25,000 bonuses; if not, EBITDA fell below the $112,300,000 floor and the employees were entitled to no bonuses at all.189 At the trial court, the company argued that while its incentive plan used the term EBITDA, what it really intended was EBITDA adjusted to deduct the life insurance proceeds. The trial court found no ambiguity and granted summary190 judgment for the employees. 191 177. Hewitt, 46 N.E.3d at 431. 178. Id. at 433. 179. Id. at 435. 180. 46 N.E.3d 436 (Ind. 2015). 181. Id. at 437-38. 182. AM Gen., LLC v. Armour, 27 N.E.3d 817, 821 (Ind. Ct. App.), rev’d, 46 N.E.3d 436 (Ind. 2015). 183. AM Gen., LLC, 46 N.E.3d at 442. 184. Id. 185. 57 N.E.3d 831 (Ind. Ct. App. 2016), trans. granted, opinion vacated, 49S02-1701-PL-25, 49A04-1509-PL-1434, 2017 WL 363177 (Ind. Jan. 19, 2017). 186. Id. at 832. 187. Id. 188. See generally id. 189. Id. at 833. 190. Id. at 835. 191. Court’s Order Denying Defendants’ Motion for Summary Judgment and Granting Plaintiff’s Cross-Motion for Summary Judgment on Behalf of the Certified Class at 14-15, Underwood v. Gregg Appliances, Inc., No. 49D05-1302-PL-007683 (Ind. Super. July 17, 2015) (“The plain and ordinary meaning of the acronym EBITDA is Earnings Before Interest, Taxes, 1198 INDIANA LAW REVIEW [Vol. 50:1179 Just as it was a relatively simple matter for the trial court to decide in favor of the employees, so too was it relatively simple for the Court of Appeals to reverse. It was “clear” to the Court of Appeals that the life insurance proceeds should not be included within the meaning of EBITDA. First and foremost, the192 entire executive compensation arrangement demonstrated an intent to “reward company-wide profitability, and not to reward senior management for the death of key personnel.” Second, and of equal consequence, there was evidence in the193 past that EBITDA had been adjusted for items that are one time in nature— even when those adjustments resulted in higher bonuses. To the Court of Appeals,194 EBITDA, as used in the incentive compensation plan, could not have been meant to “include a one-time event in the form of insurance proceeds that did not reflect the company’s performance.” T he company was entitled to summary195 judgment.196 But the case did not end there. In January, 2017, after the end of the survey period, the Indiana Supreme Court assumed jurisdiction over the case. Per197 Court rule, the decision of the Court of Appeals is vacated and the case stands before the Supreme Court as though on direct appeal from the trial court. The198 Court held oral argument on the case on February 23, 2017. In early M arch199 2017, the company declared bankruptcy.200 Three additional employment contract cases— Ritchie v. Community Howard Regional Health, Warren v. Board of School Trustees of Springs Valley201 Community School Corp., and Sheets v. Birky — illustrate the wide range of202 203 legal issues that arise when employment is terminated. W hile extended treatment of these non-contract issues is beyond the scope of this survey, the fact that they can easily arise warrants giving them brief attention. Depreciation, and Amortization. The fact that HHGREGG intended EBITDA to refer to adjusted EDITDA is of no consequence. Reasonably intelligent persons reading the acronym would not differ as to its meaning. Thus, the term EBITDA is not ambiguous.”). 192. Gregg Appliances, 57 N.E.3d at 834. 193. Id. (internal quotation marks and citation omitted). 194. Id. 195. Id. at 835. 196. Id. (internal quotation marks and citation omitted). 197. Gregg Appliances Inc. v. Underwood, 49S02-1701-PL-25, 49A04-1509-PL-1434, 2017 WL 363177 (Ind. Jan. 19, 2017). 198. IND. R. APP. P. 58(A). 199. Oral Arguments Online, courts.IN.gov, http://mycourts.in.gov/arguments/default. aspx?id=2053&view=detail [https://perma.cc/236G-JC7V] (last visited May 11, 2017). 200. hhgregg, Inc., Current Report (Form 8-K) (Mar. 6, 2017), https://www.sec.gov/Archives/ edgar/data/1396279/000139627917000023/a8-kshell3617.htm [https://perma.cc/X5BV-SMQP]. The Supreme Court had not issued any decision in the case as of June 24, 2017. 201. 51 N.E.3d 1212 (Ind. Ct. App. 2016), reh’g denied, (July 13, 2016). 202. 49 N.E.3d 559 (Ind. Ct. App. 2015), reh’g denied, (Apr. 15, 2016). 203. 54 N.E.3d 1064 (Ind. Ct. App. 2016). 2017] BANKING, BUSINESS, AND CONTRACT LAW 1199 On appellate review in Ritchie v. Community Howard Regional Health was204 a civil procedure issue: whether a cardiologist was entitled to a preliminary injunction to prevent the M edical Executive Committee of Community Howard Regional Health, Inc. from suspending his medical staff privileges. A lthough205 the physician presented strong evidence that his performance was not substandard as alleged, the Court of Appeals found the Indiana Peer Review A ct, which206 severely limits the availability of injunctive relief, to apply. “Absent malice, the207 peer review committee is the legislature’s choice for dealing with these issues. Courts are ill-equipped to conduct an independent review of patient care absent evidence from expert witnesses on the standard of care and any countervailing evidence in opposition thereto.”208 There are several interesting takeaways in Warren v. Board of School Trustees of Springs V alley Community School Corp., a case involving the209 termination of a public school elementary teacher. First, the Court of Appeals210 held a determination in an unemployment compensation proceeding that the teacher was discharged for cause was not entitled to collateral estoppel effect in this litigation, which challenged the legality of the termination itself. Second,211 the Court of Appeals held the school board had violated the Open Door Law 212 when conducting the meeting announcing the teacher’s termination. The school213 board had announced that it would meet in executive session at 5:00 PM , followed by a public meeting at 7:00 PM or as soon thereafter as the executive session ended. However, the executive session continued until after 2:00 AM214 the following morning, at which time the board held a very brief public meeting, announcing the teacher’s termination, all without notifying the teacher, her lawyer, or her union representative, all of whom were in the building. The215 Court of Appeals held this violated the Open Door Law because the school board had “convened the meeting at a time unreasonably departing from the time stated 204. Ritchie, 51 N.E.3d 1212. 205. Id. at 1214. 206. IND. CODE §§ 34-30-15-1 to -23 (2016). 207. Ritchie, 51 N.E.3d at 1217. 208. Id. at 1220. 209. 49 N.E.3d 559 (Ind. Ct. App. 2015), reh’g denied, (Apr. 15, 2016). 210. Id. at 562. 211. Id. at 559 (citing IND. CODE § 22-4-17-12(h) (2016)) (“This statute clearly precludes the use of unemployment proceedings in subsequent civil suits.”)). The court’s finding here is particularly noteworthy since the Court of Appeals itself affirmed the unemployment compensation determination in a separate case. See Warren v. Review Bd. of Ind. Dep’t of Workforce Dev., No. 93A02-1311-EX-949, 2014 WL 1390567 (Ind. Ct. App. May 7, 2014). 212. The Open Door Law requires “all meetings of the governing bodies of public agencies . . . be open at all times for the purpose of permitting members of the public to observe and record them.” IND. CODE § 5-14-1.5-3(a) (2016). 213. Warren, 49 N.E.3d at 568-69. 214. Id. at 567. 215. Id. 1200 INDIANA LAW REVIEW [Vol. 50:1179 in the notice.”216 Despite prevailing on these issues, the teacher failed to persuade the Court of Appeals to overturn the trial court’s grant of summary judgment to the school board on her breach of contract and defamation claims.217 The issues in Sheets v. Birky all sound in tort. The discharged employee,218 the CEO of a credit union, had suffered a cerebral hemorrhage but eventually returned to work. Shortly thereafter, a subordinate reported to a company219 telephone hotline, questioning the CEO’s cognitive abilities and fitness to perform his responsibilities. About seven months later, the CEO was220 discharged. 221 The CEO alleged defamation per se on the part of the reporting employee, vicarious liability for the defamation on the part of the credit union, and a variety of torts on the part of a consulting firm that assisted the credit union in m onitoring the hotline and dealing with the CEO’s medical condition. T he222 charges against the consulting firm are outside the scope of the survey, but the prospect of a defam ation claim following termination of an employee is sufficiently common to warrant attention.223 M aking defamatory statements can be actionable but isn’t necessarily defamation per se. W hy does it matter? Damages are presumed in an action for defamation per se but m ust be proven otherwise. As such, the standard for224 proving defamation per se is higher. In particular, if words become defamatory225 only when understood in the context of extrinsic evidence, they are not defamatory per se. Here, the Court of Appeals agreed with the trial court that226 the employee’s hotline report regarding the CEO’s fitness “did not impute occupational misconduct without resort to extrinsic evidence[,]” and so did not constitute defamation per se.227 2. C onstruction, Remodeling, and Landscaping Contracts.— Four disputes over construction, remodeling, or landscaping contracts during the survey period are worthy of attention. 216. Id. (citing IND. CODE § 5-14-1.5-5(h) (2016), which provides “[n]otice has not been [properly] given . . . if a governing body of a public agency convenes a meeting at a time so unreasonably departing from the time stated in its public notice that the public is misled or substantially deprived of the opportunity to attend, observe, and record the meeting”). 217. Id. at 566. 218. 54 N.E.3d 1064 (Ind. Ct. App. 2016). 219. Id. at 1067. 220. Id. at 1067-68. 221. Id. at 1068. 222. Id. 223. See id. 224. Dugan v. Mittal Steel USA Inc., 929 N.E.2d 184, 186 (Ind. 2010). 225. See Sheets, 54 N.E.3d at 1070. 226. Dugan, 929 N.E.2d at 186. 227. Sheets, 54 N.E.3d at 1071. 2017] BANKING, BUSINESS, AND CONTRACT LAW 1201 Ambrose v. Dalton Construction, Inc., involved a dispute between228 homeowners and a construction company over a contract to build an in-ground swimming pool. As the pool neared completion, the homeowners became229 dissatisfied and ordered the contractor to demolish the pool and start over.230 W hen the contractor refused, the homeowners withheld payment. The trial231 court awarded the contractor payment in full plus costs and attorney fees, as authorized by the Indiana M echanic’s Lien Act. The Court of Appeals affirmed232 and added appellate attorney fees.233 In Rusnak v. Brent Wagner Architects, a construction company sued the234 Rusnaks for payment on a contract to build a new house. The Rusnaks235 defended on grounds of shoddy workmanship and filed a third party complaint against their architect. Their contract with the architect included the architect’s236 agreement to “act as the Owner’s representative and provide administration of the Contract between the Owner and Contractor[,] . . . includ[ing] visiting the site, . . . [and] rejecting nonconforming W ork[.]”237 The architect sought summary judgment, contending that because its contract with the Rusnaks contained an exculpatory clause, the architect could not be held liable for the contractor’s inferior workmanship. The Court of Appeals rejected238 the architect’s contention. 239 [T]he clause relieving [the architect] of liability for the contractor’s performance of the work does not excuse [the architect] from meeting its own obligation to reject work it knows fails to conform to the contract documents, plans, and specifications. If the exculpatory clause were interpreted to mean that [the architect] cannot be held accountable for failing to reject non-conforming work because the work itself is the 228. 44 N.E.3d 707 (Ind. Ct. App. 2015), as clarified on reh’g, 51 N.E.3d 320 (Ind. Ct. App. 2016), trans. denied, 50 N.E.3d 147 (Ind. 2016). 229. Id. at 710. 230. Id. at 711. 231. Id. 232. Id. at 712. The Indiana Mechanic’s Lien Act provides that a lienholder who prevails is entitled to recover “reasonable attorney’s fees.” IND. CODE § 32-28-3-14(a) (2016). 233. Ambrose, 44 N.E.3d at 715-16. The mechanic’s lien statute also encompasses attorney’s fees associated with appellate proceedings. IND. CODE § 32-28-3-14(a) (2016). Attorney’s fees under the mechanic’s lien statute were also approved in Boyer Construction Group Corp. v. Walker Construction Co., 44 N.E.3d 119 (Ind. Ct. App. 2015). 234. 55 N.E.3d 834 (Ind. Ct. App.), trans. denied, 59 N.E.3d 251 (Ind. 2016). 235. Id. at 836. 236. Id. 237. Id. (emphasis omitted). According to the court, these provisions are included in “AIA Document B155 Standard Form of Agreement Between Owner and Architect for a Small Project.” Id. 238. Id. at 841. 239. Id. 1202 INDIANA LAW REVIEW [Vol. 50:1179 province of the contractor, then [the architect’s] clearly stated responsibility to reject n on -conforming work is essentially meaningless.240 Warfield v. Dorey involved a contractor identified by an insurance241 company to repair roof damage suffered by an insured hom eowner during a hailstorm . The contractor and the adult daughter of the insured negotiated a242 contract covering the roof and several other items not covered by insurance.243 W hen the contractor was not paid after completing the work, he sued on the contract.244 The trial court granted summary judgment for the contractor but the Court of Appeals reversed. T he Court of Appeals focused on the homeowner’s claim245 that the agreement with the contractor was void because it violated the Indiana H om e Improvement Contracts Act (HICA). The record was clear that the246 contractor had not complied in many respects with the requirements of the statute. But although the hom eowner claimed to the contrary, the Court of247 Appeals emphasized the statute does not void contracts that violate its requirements. Rather, the statute leaves it to the trial court to determine whether248 voiding the contract was an appropriate remedy.249 The court then applied the balancing test regularly used by Indiana courts to determine if a contract violates public policy. Here, the Court of Appeals250 concluded the contract did violate public policy because the contractor was not licensed at the time he solicited the roofing work and because the contractor failed to apply for the required building permit. Said differently, the court251 concluded the appropriate remedy for intentionally misleading a customer that the contractor was licensed and providing work according to code was to declare the contract void.252 Several interesting things happened in Kaetzel v. Woods, an opinion that253 240. Id. 241. 55 N.E.3d 887 (Ind. Ct. App. 2016), reh’g denied, (July 22, 2016). 242. Id. at 889. 243. Id. 244. Id. at 889-90. 245. Id. at 895. 246. Id. at 891. The Indiana Home Improvement Contracts Act is codified at IND. CODE § 24- 5-0.5 (2016). 247. Id. at 891. 248. Id. at 892. 249. Id. at 893. 250. Id. These factors were first compiled in Fresh Cut, Inc. v. Fazli, 650 N.E.2d 1126, 1130 (Ind. 1995). I was the author of Fresh Cut. 251. Warfield, 55 N.E.3d at 894. 252. Id. 253. No. 62A01-1507-CC-837, 2016 WL 3639917 (Ind. Ct. App. July 8, 2016) (unpublished disposition). 2017] BANKING, BUSINESS, AND CONTRACT LAW 1203 demonstrates how incredibly valuable not-for-publication of opinions can be. Kaetzel is a dispute between homeowners and a contractor hired to construct a new house. First, although the parties proffered a short term sheet as their254 contract, the trial court found there had been no “meeting of the minds” and, as such, no contract was formed. The court then resolved the contractor’s claim255 that it had been underpaid as one of quantum meruit. After working through256 that analysis, the court found the contractor had been overpaid by approximately $10,000 for work on the house but was due approximately $6000 for some extra work not related to the construction of the house. None of these determinations257 were appealed.258 Second, after two non-party subcontractors testified as to work they had performed at the contractor’s direction, the trial court concluded the homeowners owed these subcontractors approximately $15,000. Although finding the259 evidence supported these awards, the Court of Appeals reversed on grounds that the subcontractors were not parties to this lawsuit.260 Third, the trial court awarded the homeowners approximately $39,000 on their counterclaim against the contractor for shoddy workmanship. But on what261 grounds? Not breach of contract; remember that the trial court had held there was no contract and that holding had not been appealed. Rather, the homeowners contended the contractor breached implied warranties against certain construction defects that the Indiana New Home Construction W arranties Act (NHW CA)262 imposes on a builder in favor of the first occupant of a newly constructed residence. The Court of Appeals reversed the $39,000 award, despite it having263 been within the evidence, because the NHW CA only protects an initial hom e buyer “who executes a contract with the builder.” In the absence of a written264 contract, the homeowners did not enjoy the statutory implied warranties.265 Taken together, Ambrose, Rusnak, Warfield, and Kaetzel represent an impressive body of work. Although each of the cases starts out looking for all the world like common law contract disputes, three of them turn in part on the application of a statute— the M echanic’s Lien Act (Ambrose), Home266 254. Id. at *1. 255. Id. at *2. 256. Id. 257. Id. 258. Id. at *3. 259. Id. at *4-5. 260. Id. at *5. 261. Id. at *3. 262. IND. CODE § 32-27-2-1 to -11(2016). 263. Kaetzel, 2016 WL 3639917, at *3. 264. Id. 265. Id. at *3-4 (citing IND. CODE §§ 32-27-2-2, 32-27-3-1(6) (2016)). 266. See generally 44 N.E.3d 707 (Ind. Ct. App. 2015), as clarified on reh’g, 51 N.E.3d 320 (Ind. Ct. App. 2016), trans. denied, 50 N.E.3d 147 (Ind. 2016). 1204 INDIANA LAW REVIEW [Vol. 50:1179 Improvement Contracts Act (Warfield), and the New Home Construction267 W arranties A ct (Kaetzel). This is a good reminder that even when we think we268 know what the common law answer to a particular legal question is, there is often a statute lurking out there that controls the law in the area. 3. Releases and Settlement Agreements.— Perhaps it is not surprising in an era when fewer and fewer cases are going to trial that disputes would break out over releases and settlement agreements. By my count, there were a half dozen such cases decided by the Court of Appeals this year— and a couple more dealing with arbitration clauses. I trust you see the irony. Parties attempt to avoid litigation but end up in the courtroom anyway— litigating whether their settlement agreement had been honored or even litigating whether they had settled at all. B&R Oil Co. v. Stoler is the most important of these cases. Some weeks269 after a negotiation between two affiliated oil and gas distributors on one side and eighteen of their gas station tenants on the other side, the distributors repudiated the purported agreement on two grounds. First, they claimed their negotiators270 did not have authority to settle. This issue is discussed earlier in this A rticle.271 272 Second, they maintained that even if there had been the requisite authority to settle, any oral agreement that was reached was not enforceable because the parties did not reach an agreement on all material terms.273 The law is clear that: Parties may make an enforceable contract which obligates them to execute a subsequent final written agreement. However, it is necessary that agreement shall have been expressed on all essential terms that are to be incorporated in the document. In other words, the document is understood to be a mere memorial of the agreement already reached and may not contain a material term that is not already agreed on.274 The evidence showed that the parties continued to negotiate after the conclusion of the mediation concerning language releasing the distributors from future liability to the tenants. Y et the Court of Appeals held— and this is really275 the key holding— the “fact that the parties did not immediately agree on the language of [their written agreement] does not conclusively establish that the 267. See generally 55 N.E.3d 887 (Ind. Ct. App. 2016), reh’g denied, (July 22, 2016). 268. See generally No. 62A01-1507-CC-837, 2016 WL 3639917 (Ind. Ct. App. July 8, 2016) (unpublished disposition). 269. No. 71A03-1503-PL-114, 2016 WL 276722 (Ind. Ct. App. Jan. 21, 2016) (unpublished disposition), trans. denied, 54 N.E.3d 372 (Ind. 2016). 270. Id. at *1. 271. Id. 272. See supra Part III.D. 273. B&R Oil Co., 2016 WL 276722, at *8. 274. Id. at *8-9 (quoting Sands v. Helen HCI, LLC, 945 N.E.2d 176, 180 (Ind. Ct. App. 2011)). 275. Id. at *9. 2017] BANKING, BUSINESS, AND CONTRACT LAW 1205 parties did not reach an agreement on all material terms at the . . . mediation.”276 Rather, the court said, “[O]ngoing negotiations may simply indicate that the parties initially disagreed as to whether the proposed draft agreement accurately captured the material terms of the settlement reached at the mediation.”277 In this case, the tenants’ release was among the most material terms in the agreement. But the trial court had concluded the tenants’ release was not the278 subject of the post-mediation negotiations. Rather, the distributors tried to add279 some language releasing themselves of future liability to the tenants, an issue that had not been raised before and which, the trial court held, was not material. The280 C ourt of Appeals affirmed the trial court’s factual determination that the parties reached an agreement with respect to the tenants’ release at the mediation.281 Ellison v. Town of Yorktown and Jonas v. State Farm Life Insurance Co.282 283 are more straightforward exemplars of courts being called up to decide whether a settlement agreement was enforceable. Ellison involved the settlement of eminent domain litigation, Jonas a dispute over a life insurance policy with a284 large death benefit. In both, the trial court found the settlement agreements285 were enforceable and the Court of Appeals affirmed. T he cases are worth286 mentioning for two reasons. First, they are good reminders that settlement agreements are contracts and subject to standard principles of contract interpretation. Second, they contain a good review of core principles of contract287 interpretation: “offer and acceptance”; “consideration”; and “mutual assent”288 289 or “meeting of the minds.”290 Jonas has an interesting twist. At issue was whether the settlement agreement was not enforceable because it did not comply with the Indiana Alternate Dispute Resolution (ADR) Rules in two respects: it was neither in writing nor signed by the parties; and because its enforceability turned on communications during291 negotiations required to be kept confidential. But the dispute being settled was292 276. Id. 277. Id. 278. Id. 279. Id. 280. Id. at *10. 281. Id. at *9-10. 282. 47 N.E.3d 610 (Ind. Ct. App. 2015). 283. 52 N.E.3d 861 (Ind. Ct. App.), trans. denied, 59 N.E.3d 251 (Ind. 2016). 284. See generally 47 N.E.3d 610. 285. See generally 52 N.E.3d 861. 286. See Ellison, 47 N.E.3d at 621; Jonas, 52 N.E.3d 861. 287. See Ellison, 47 N.E.3d at 617; Jonas, 52 N.E.3d at 868. 288. Ellison, 47 N.E.3d at 617. 289. Id. at 619. 290. Id.; Jonas, 52 N.E.3d at 868. 291. IND. ALTERNATIVE DISPUTE RESOLUTION Rule 2.7(E)(2). 292. IND. ALTERNATIVE DISPUTE RESOLUTION Rule 2.11. 1206 INDIANA LAW REVIEW [Vol. 50:1179 pending in federal court. The Indiana ADR Rules did not apply to the293 settlement negotiations in this case, the court held, because there was no pending case in Indiana state court at the time of the negotiations.294 W hat about the federal case? At the time of the settlement negotiations, Jonas had appealed a district court decision to the Seventh Circuit. Jonas argued in295 the case discussed here that State Farm should not be able to enforce the settlement agreement because it had not raised the issue of the settlement agreement to the Seventh Circuit. But State Farm could not move to dismiss the296 Seventh Circuit case because it was not the appellant. Nor was there any297 jurisdictional basis for filing an enforcement action in federal court. And, the298 Court of Appeals found State Farm did not take any action in the federal litigation that was inconsistent with its right to enforce the settlement agreement in state court.299 Sm ith v. Bowling is an example of where parties agree they reached an300 enforceable settlement agreement but dispute whether it had been complied with. The underlying litigation was between two partners in a residential301 construction business and concerned an alleged breach of fiduciary duty. The302 mediated settlement agreement required a partnership accounting. The303 accountant had great difficulty given the poor state of partnership financial records and accounting systems but finally produced an accounting. One of the304 partners challenged the accounting as not meeting the requirements of the settlement agreement. The Court of Appeals treated the matter as one of305 standard contract interpretation and affirmed the trial court’s conclusion that306 the accounting had been prepared in accordance with the provisions of the mediated settlement agreement. 307 4. Insurance Contracts.— Only one insurance contract case warrants discussion in this year’s survey. Founders Insurance Co. v. M ay resurrects a308 293. Jonas, 52 N.E.3d at 865. 294. Id. at 869. 295. Id. at 865. 296. Id. at 869. 297. Id. at 870. 298. Id. 299. Id. at 871. 300. No. 03A01-1511-CC-2103, 2016 WL 3639931, (Ind. Ct. App. July 8, 2016) (unpublished disposition). 301. See generally id. 302. Id. at *1. 303. Id. 304. Id. at *1-2. 305. Id. at *1. 306. Id. at *5 (citing Fresh Cut, Inc. v. Fazli, 650 N.E.2d 1126, 1133 (Ind.1995)). 307. Id. at *6. 308. 44 N.E.3d 56 (Ind. Ct. App. 2015), trans. denied, 43 N.E.3d 1279 (Ind. 2016). 2017] BANKING, BUSINESS, AND CONTRACT LAW 1207 decades-old debate over whether Indiana’s mandate that drivers must carry309 minimum levels of liability insurance, including uninsured and underinsured motorist coverage, exists for the purpose of providing financial protection to310 drivers or providing auto accident victims with a source and means of recovery. W here the victim is himself or herself a driver, the debate is not squarely joined because if the victim cannot collect on the tortfeasor’s insurance, the victim has his or her own uninsured motorist coverage. 311 In Founders Insurance Co., the tortfeasor, driving without a license and without the knowledge or permission of the owner, struck and killed a bicyclist.312 The insurance company argued that the language of the policy excluded coverage in such circumstances— which it clearly did. But the victim did not have a car313 and did not have insurance. The estate argued that to deny coverage314 contravened the public policy embodied in the legislative mandate of providing compensation to accident victims.315 A majority of the Court of A ppeals ruled in favor of the insurance company, grounding its decision in the im portance of predictability. To rule to the316 contrary, the court said, would make the enforceability of the insurance contract turn on the status of an accident victim. In dissent, Judge M elissa S. M ay called317 the decision “harsh and unfair” because it provided “protection for drivers injured in motor vehicle accidents but . . . no remedy for pedestrians, bicyclists, or other persons who need not or cannot prove financial responsibility.”318 Although the issue had been percolating for many years, the Supreme319 Court declined to take up the case, voting 3-2 to deny transfer.320 309. Cf. Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d 664, 672 (Ind. 1997); Pekin Ins. Co. v. Super, 912 F. Supp. 409, 412 (S.D. Ind. 1995); Motorists Mut. Ins. Co. v. Morris, 654 N.E.2d 861 (Ind. Ct. App. 1995); Transamerica Ins. Co. v. Henry, 563 N.E.2d 1265, 1268 (Ind. 1990); Am. Underwriters Grp., Inc. v. Williamson, 496 N.E.2d 807, 810 (Ind. Ct. App. 1986). 310. The Indiana Financial Responsibility Act (IND. CODE §§ 9-25-4-1 to -12 (2016)). 311. See, e.g., Colonial Penn Ins. Co., 690 N.E.2d at 672 (“Even if we agree . . . that the purpose underlying the Financial Responsibility Act is to provide a source of minimum compensation for accident victims, that goal is satisfied here because the third parties in this case had uninsured motorist coverage.”). 312. Id. at 57. 313. Id. at 58. Under the terms of the policy, the insurer had no obligation to extend coverage because the driver did not have a valid driver’s license at the time of the accident nor did the driver have a reasonable belief that she was entitled to use the truck on that date. Id. 314. Id. at 57. 315. Id. at 59. 316. Id. at 64. 317. Id. at 63-64. 318. Id. at 65 (May, J., dissenting). 319. See supra note 309. 320. Founders Ins. Co. v. May, 43 N.E.3d 1279 (Ind. 2016) (David, J., Massa, J., and Slaughter, J., voting to deny transfer; Rush, C.J., and Rucker, J., voting to grant transfer). 1208 INDIANA LAW REVIEW [Vol. 50:1179 C. Interpreting Particular Contract Clauses 1. Non-Competition Covenants.— One of the things that I learned during the past year from one of my students is that covenants not to compete are void as a m atter of statutory law in California and that that policy is thought to be part321 of the reason for the Silicon Valley technology boom. The student, Jordan322 K yle, wrote a paper arguing that Indiana would be better off— would better promote entrepreneurship and innovation— if it, too, would declare covenants not to compete unenforceable.323 It was a good paper but Jordan Kyle is swimming upstream against a strong current of Indiana law. In both of the following covenant-not-to-compete cases, the court enforced the covenant: • In Duermit v. Odyssey Healthcare, Inc., after employment of the324 executive director of a hospice care provider was terminated, the executive solicited and received appointment to a similar position in Indianapolis with a competitor. The Court of Appeals affirmed a325 preliminary injunction that prohibited the executive from engaging in any competitive business or activity within fifty miles of Indianapolis, raiding the hospice’s employees, and using or disclosing the hospice’s referral sources and proprietary and trade-secret information.326 • In Janowiak v. Watcon, Inc., a field engineer at a water treatment327 services and related products company terminated his employment contract and began selling similar products and services for a competitor in the same area. The Court of A ppeals affirmed the preliminary328 injunction barring the engineer for a period of two years from soliciting orders from customers of his prior employer and from divulging any of his prior employer’s confidential information. In the exercise of “blue329 pencil” authority, the court did not enforce a provision of the employment contract that prohibited the engineer from going to work for 321. Jordan Kyle, Indiana’s Ineffective Covenants Not to Compete: Improving Innovation by Following California Law and Utilizing Current Massachusetts Ideology to Grow Jobs in the Hoosier State 13 (2016) (unpublished manuscript on file with the author). 322. Id. at 13-14. 323. Id. at 18-21. For a recent lengthy discussion of this issue in the popular press, see Conor Dougherty, How Noncompete Clauses Keep Workers Locked In, N.Y. TIMES (May 13, 2017) https://www.nytimes.com/2017/05/13/business/noncompete-clauses.html [https://perma.cc/C6XA- N429]. 324. No. 29A02-1503-PL-146, 2015 WL 9590759 (Ind. Ct. App. Dec. 31, 2015) (unpublished disposition). 325. Id. at *1. 326. Id. at *13. 327. No. 71A04-1512-PL-2154, 2016 WL 4245426, (Ind. Ct. App. Aug. 11, 2016) (unpublished disposition). 328. Id. at *1. 329. Id. at *10. 2017] BANKING, BUSINESS, AND CONTRACT LAW 1209 a competitor.330 2. Arbitration Clauses.— The growing ubiquity of arbitration clauses is the subject of frequent attention, even in the popular press. Allied Professionals331 Insurance Co. v. Neff Realty, LLC, where a trial court denied an insurer’s332 request to enforce a policy’s arbitration clause against a claimant, provides a good lesson on some basic principles.333 W hether parties have agreed to arbitrate is a matter of contract interpretation, subject to standard rules of contract construction. In Allied Professionals, there334 was an explicit arbitration clause, so determining the existence of an agreement to arbitrate was not at issue. Rather, the claimant argued that the insurer had335 waived its right to arbitrate the dispute because its demand to arbitrate was untimely. This line of argument was a non-starter because the policy contract336 itself “unambiguously reserved questions of arbitrability for the arbitrator.”337 Here is the key point. W hen an arbitration clause delegates determinations of arbitrability to the arbitrator, courts treat the delegation as valid and leave any challenge to the validity of the arbitration agreement as a whole for the arbitrator. And even in the absence of a delegation clause, courts presume that338 arbitrators should resolve disputes about procedural preconditions for arbitration, including waiver, delay, or a like defense.339 There is some dicta in Allied Professionals that appears with frequency in the 330. Id. 331. See e.g., Jessica Silver-Greenberg & Robert Gebeloff, Arbitration Everywhere, Stacking the Deck of Justice, N.Y. TIMES (Oct. 31, 2015), https://www.nytimes.com/2015/11/01/business/ dealbook/arbitration-everywhere-stacking-the-deck-of-justice.html?_r=0 [https://perma.cc/R64B- VZGZ]. 332. No. 49A02-1601-PL-29, 2016 WL 3615773 (Ind. Ct. App. July 6, 2016) (unpublished disposition), trans. denied, 62 N.E.3d 1201 (Ind. 2016). In a second case involving an arbitration clause during the survey period, Madison County Board of Commissioners v. American Federation of State County & Municipal Employees Local 3609, 45 N.E.3d 868 (Ind. Ct. App. 2015), transfer denied, 45 N.E.3d 1211 (Ind. 2016), a county challenged an arbitrator’s decision made pursuant to the arbitration clause of a public employee collective bargaining agreement as beyond the scope of the arbitrator’s authority. The Court of Appeals analyzed the claim using the Indiana Uniform Arbitration Act, Indiana Code section 34-57-2, and held that the county had established no basis for correcting or vacating the arbitrator’s award. Madison Cty. Bd. of Comm’rs, 45 N.E.3d at 876. 333. Allied Prof’ls Ins. Co., 2016 WL 3615773, at *1. 334. MPACT Const. Grp., LLC v. Superior Concrete Constructors, Inc., 802 N.E.2d 901, 906 (Ind. 2004) (citing AGCO Corp. v. Anglin, 216 F.3d 589, 593 (7th Cir. 2000)). I was the author of this opinion. 335. Allied Prof’ls Ins. Co., 2016 WL 3615773, at *1. 336. Id. at *2. 337. Id. The Arbitration Clause states that “[a]ny questions as to arbitrability of any dispute or claim shall be decided by the arbitrator.” Id. at *1. 338. Id. at *2 (citing Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 70-73 (2010)). 339. Id. 1210 INDIANA LAW REVIEW [Vol. 50:1179 arbitration cases that I do not think is quite right. The C ourt of Appeals says,340 “[I]n construing arbitration agreements, all doubts are to be resolved in favor of arbitration.” It cites an Indiana Supreme Court opinion, M PACT Construction341 Group, LLC v. Superior Concrete Constructors, Inc., as authority for this342 proposition, but here is what M PACT actually says on the subject: [I]mposing on parties a policy favoring arbitration before determining whether they agreed to arbitrate could frustrate the parties’ intent and their freedom to contract. The [United States] Supreme Court has made this clear— “arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” Additionally, courts have regularly distinguished the treatment given questions of the existence of an agreement to arbitrate and questions of the scope of an agreed-to arbitration clause. . . . Using the policy favoring arbitration to decide whether the parties did in fact agree to arbitrate does not answer the question but rather avoids having to decide it. Only after it has been determined that the parties agreed to arbitrate their disputes does the policy favoring arbitration play an important role.343 3. Options to Renew Leases.— Last year’s survey examined two cases in which com m ercial tenants held over but never indicated to their landlords that they were exercising the renewal options provided in the leases. Both vacated344 before the end of what would have been the end of the renewal terms. The345 landlords took the position that the tenants had, by the mere fact of holding over, exercised the renewal options and were liable for rent for the balance of the renewal term.346 The cases were Pearman v. Jackson and Norris Ave. Professional Building347 Partnership v. Coordinated Health, LLC. Both cases recognize the renewal348 notice requirement is a condition precedent to tenants’ exercise of the option term, but because the condition exists for the benefit of the landlords, the landlords have the right to waive compliance. The question, then, was whether349 the landlords had waived compliance by allowing the tenants to hold over and 340. See, e.g., Nat’l Wine & Spirits, Inc. v. Ernst & Young, LLP, 976 N.E.2d 699, 706 (Ind. 2012) (dicta). 341. Allied Prof’ls Ins. Co., 2016 WL 3615773, at *1. 342. 802 N.E.2d 901, 905 (Ind. 2004). 343. Id. at 906 (citations omitted) (quoting AT&T Techs. v. Commc’ns. Workers of Am., 475 U.S. 643, 648 (1986)). 344. See Sullivan, supra note 2, at 997-98. 345. See id. 346. See id. 347. 25 N.E.3d 772 (Ind. Ct. App. 2015). 348. 28 N.E.3d 296 (Ind. Ct. App.), trans. denied, 34 N.E.3d 684 (Ind. 2015). 349. See generally Pearman, 25 N.E.3d 772; Norris Ave., 28 N.E.3d 296. 2017] BANKING, BUSINESS, AND CONTRACT LAW 1211 accepting rent. In Pearman, the court held the tenants’ rent payments and350 continued occupation standing alone was insufficient to establish waiver. But351 in Norris, the court held the landlord had waived the tenant’s obligation to give notice by accepting tenant’s increased rent payments— the fact that tenant paid increased rent being a critical distinction between the two cases. 352 Randy Faulkner & Associates, Inc. v. Restoration Church, Inc., presented353 the same facts but opposite contentions. The tenant, a church, had held over from year to year without ever providing the landlord with the renewal notice required by the lease. W hen the landlord ousted the tenants, the tenant sued for breach354 of contract on the theory that the landlord had waived the renewal notice requirement when the landlord accepted the church’s untimely notices of the church’s intent to renew and the church’s annual rent payments.355 The Court of Appeals held for the landlord. It found that the church failed356 to notify the landlord that it intended to renew the lease. Instead, the church357 merely held over and paid the sam e rent it had been paying. “As a matter of358 law, the trial court erred when it concluded that that evidence demonstrated [landlord’s] waiver of the condition precedent.” The court’s decision lines up359 nicely with Pearman and Norris. 4. Closing Requirements.— Two cases provide reminders of the importance of contract terms as to the closing of deals. The closing requirements of a stock purchase agreement were at issue in Raheem v. Pinnacle Healthcare, LLC. After agreeing to two extensions of the360 closing, the parties were unable to reach agreement on a third and the closing did not take place. The seller sued for breach of contract but the trial court granted361 summary judgment in favor of the buyer, finding the seller “did not perform the conditions that had to be fulfilled” before the buyer was required to close.362 In a muscular opinion, the Court of Appeals not only reversed but ordered363 350. See generally Pearman, 25 N.E.3d 772; Norris Ave., 28 N.E.3d 296. 351. 25 N.E.3d at 779. 352. 28 N.E.3d at 303. 353. 60 N.E.3d 274 (Ind. Ct. App.), reaff’d and reh’g granted, 62 N.E.3d 1204 (Ind. Ct. App. 2016). 354. Id. at 279. 355. Id. at 280. 356. Id. at 283-84. 357. Id. at 281. 358. Id. 359. Id. (citing Carsten v. Eickhoff, 323 N.E.2d 664, 667 (1975)). 360. No. 45A04-1508-PL-1080, 2016 WL 614634 (Ind. Ct. App. Feb. 16, 2016) (unpublished disposition). 361. Id. at *1. 362. Id. at *2. 363. Before ordering summary judgment for the appellant, the court quoted Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014), discussed supra in Part II.D. Id. 1212 INDIANA LAW REVIEW [Vol. 50:1179 summary judgment in favor of the seller on the issue of breach. “The closing364 did not happen,” the court said as a matter of law, because the buyer “was not prepared to close.” The case was remanded for a determination of seller’s365 damages.366 Perhaps a little practice pointer here. The closing was scheduled for December 31, 2012. The C ourt of Appeals opinion recites, complete with367 pinpoint citations to the record: No closing occurred on Decem ber 31, 2012, though Dr. Raheem made “multiple efforts” to track down Pinnacle employees on and before that date. [Record] at 573-74. He sat in his office for four hours on December 31 trying to find a Pinnacle principal to “ask him why we are not closing.” Id. at 574.368 If your client is ready and willing to close and may want to treat the other side’s failure to close as a breach, go ahead and show up at the place designated for closing with all of the closing and other documents in hand, notwithstanding the fact that the other side is not at all likely to attend. A little more complicated is 2007 E. M eadows, LP v. RCM Phoenix Partners, LLC. The closing of an agreement to sell a housing complex in Indianapolis369 required that the owner-seller’s lender approve the buyer’s assumption of the owner’s mortgage. This was not thought to be a problem because the loan was370 secured by both the property and housing assistance payments from the U.S. Department of Housing and Urban Development (“HUD”). In addition, various371 representations, warranties, and covenants made by the seller were required to be true.372 The closing was delayed several times by the failure of the lender to approve the mortgage assumption and during this period of delay, the Indianapolis Housing Authority began an enforcement action against the owner arising out of an incident in the complex in which a child was killed. On the scheduled373 closing date, the buyer asked the owner for another extension of the closing date. The owner declined. Later that day, the buyer announced that although374 375 it was “ready, willing, and able” to close, it was not going to do so, giving the 364. Id. at *3. 365. Id. 366. Id. 367. Id. 368. Id. at *1 (citations are to the record). 369. No. 49A05-1407-PL-300, 2016 WL 239040 (Ind. Ct. App. Jan. 20, 2016) (unpublished disposition), trans. denied, 57 N.E.3d 816 (Ind. 2016). 370. Id. at *1. 371. Id. 372. Id. at *4. 373. Id. at *2. 374. Id. 375. Id. 2017] BANKING, BUSINESS, AND CONTRACT LAW 1213 enforcement action as the reason.376 The trial court concluded the lender had not approved the assumption of the mortgage and, as a result, the buyer was unable to close. The Court of A ppeals377 affirmed, deeming the buyer’s “recitation of the facts . . . , at best, selective.”378 V. C ONCLUSION: W HEN C ONTRACT B REACHERS B ECOM E C RIM INALS In two cases during the survey period, victims of contract breaches persuaded the Court of Appeals that they were in fact the victims of crime. At issue here is the Crime Victims Relief Act (“CVRA”) — an act that provides treble damages379 to a person who “suffers a pecuniary loss as a result of a violation of [a criminal statute].”380 Cases dating back to the 1980s hold an actual criminal conviction is not required for recovery under this act and a claimant “merely must prove each381 element of the underlying crime by a preponderance of the evidence.” In two382 cases during the survey period, the Court of Appeals approved CVRA damages against defendants who look to me like ordinary contract breachers, not criminals. In Auto Liquidation Center, Inc. v. Chaca, an auto dealership repossessed383 a financed car when not entitled to do so due to a bookkeeping error. Such384 wrongful repossession entitles a debtor to damages under Article 9 of the UCC.385 The debtor, however, relied on the CVRA instead. A jury found the dealer was386 guilty of the crime of criminal conversion by a preponderance of the evidence, and the Court of Appeals affirmed.387 In Staggs v. Buxbaum, a widow did not disclose problems with her home’s388 sewage disposal system and basement water problems on her seller’s real estate disclosure form. The purchaser of the home— who had inspected the home389 inspected before purchasing it without discovering any sewage disposal or basem ent water problem— sued. The purchaser’s claim was not for breach of390 376. Id. 377. Id. at *3. 378. Id. at *4. 379. IND. CODE § 34-24-3-1 (2016). 380. Id. 381. See, e.g., Wysocki v. Johnson, 18 N.E.3d 600, 606 (Ind. 2014); Klinker v. First Merchants Bank, N.A., 964 N.E.2d 190, 193 (Ind. 2012); White v. Ind. Realty Assocs. II, 555 N.E.2d 454, 456 (Ind. 1990). 382. Wysocki, 18 N.E.3d at 606. 383. 47 N.E.3d 650 (Ind. Ct. App. 2015). 384. Id. at 652. 385. IND. CODE § 26-1-9.1-625 (2016). 386. Chaca, 47 N.E.3d at 656. 387. Id. 388. 60 N.E.2d 238 (Ind. Ct. App.), trans. denied, 62 N.E.3d 1201 (Ind. 2016). 389. Id. at 240. 390. Id. 1214 INDIANA LAW REVIEW [Vol. 50:1179 warranty in the sales contract. Rather, the purchaser sought treble damages under the CVRA on the theory that the seller had committed the crime of fraud in completing the real estate disclosure form. The trial court imposed CVRA391 liability and awarded treble damages. The Court of Appeals affirmed.392 393 Transfer was not sought in Auto Liquidation Center, Inc. and was denied in Staggs. In fact, the Indiana Supreme Court has addressed this general area at394 least three times in the last five years, so there is solid precedent that CVRA395 liability does not require a conviction and that preponderance of the evidence is the standard of proof. But I think it is worth examining whether this precedent is sound. The Legislature requires proof by “clear and convincing evidence,” rather than a preponderance of the evidence, before punitive damages are available.396 A nd, as noted, the Legislature has provided specified damages for violations of statutes like A rticle 9 of the UCC. Is it inconsistent with the policies those397 enactments reflect to impose treble damages on contract breachers who are shown by a mere preponderance of the evidence to have done no more than violate a criminal statute? 391. Id. 392. Id. at 241. 393. Id. at 249. 394. 62 N.E.3d 1201 (Ind. 2016). 395. Wysocki v. Johnson, 18 N.E.3d 600, 606 (Ind. 2014); Kesling v. Hubler Nissan, Inc., 997 N.E.2d 327, 334 (Ind. 2013); Klinker v. First Merchants Bank, N.A., 964 N.E.2d 190, 193 (Ind. 2012). I was the author of Klinker. 396. IND. CODE § 34-51-3-2 (2016). But see Andrews v. Mor/Ryde Int’l, Inc., 10 N.E.3d 502, 505 (Ind. 2014) (describing treble damages under CVRA not subject to proof by “clear and convincing evidence” as required by the Punitive Damages Act because recovery under the Punitive Damages Act “is regarded as distinct from recovery of common law punitive damages”). 397. IND. CODE § 26-1-9.1-625 (2016). I. Commercial Courts Update B. Interpreting and Enforcing Particular Types of Contracts