Indiana Court Decisions – May 3-16, 2012

7th Circuit Court of Appeals

May 8

Civil – Employment/Overtime

Susan Schaefer-LaRose v. Eli Lilly & Co.

10-3855

Pharmaceutical sales representatives from Eli Lilly & Co. and Abbott Laboratories were properly classified by their employers under the administrative exemption to the overtime requirements of the Fair Labor Standards Act, the 7th Circuit Court of Appeals ruled. The lawsuit brought by employees of both companies raised an issue of first impression for the Circuit Court.

The 7th Circuit combined this Indiana case with two from Illinois involving Abbott Laboratories Inc., in which current and former sales employees sued, claiming that they were misclassified as exempt employees and denied overtime pay in violation of the FLSA. Lilly and Abbott argued that the administrative exemption and the outside sales exemption, 29 U.S.C. Section 213(a)(1), remove the sales reps from the overtime protections of the FLSA.

U.S. Judge Sarah Evans Barker in the Southern District of Indiana ruled in favor of Lilly; the Illinois cases favored the plaintiffs. The Department of Labor filed an amicus curiae brief in the Indiana case, requesting the court find the plaintiffs are not administrative employees nor outside sales persons under the statute and the DOL’s regulations.

The 7th Circuit focused on just the administrative exemption, noting that the outside sales person exemption issue is before the U.S. Supreme Court from the 9th Circuit Court of Appeals. The plaintiffs believe that they don’t fall within the exemptions because they don’t actually sell the drugs to the physicians, but merely engage in promotional work that results in sales by third parties.

The judges relied on their caselaw, including Haywood v. North American Vans Lines Inc., 121 F.3d 1066 (7th Cir. 1997), and a decision from the 1st Circuit Court of Appeals to find the work done by pharmaceutical sales reps is characterized properly as administrative.

“ … the sales representatives’ primary duty is the performance of work directly related to the general business operations of the employers, which satisfies the second prong of the administrative exemption,” wrote Judge Kenneth Ripple.

The issue of whether pharmaceutical sales employees’ primary duty includes “the exercise of discretion and independent judgment with respect to matters of significance” is one of first impression for the 7th Circuit. But other Circuits have considered this issue with regard to pharmaceutical sales reps, and the judges focused on the 2nd Circuit’s decision in In re Novartis Wage & Hour Litigation, 611 F.3d 141 (2nd. Cir. 2010), and the 3rd Circuit’s Smith v. Johnson & Johnson, 593 F.3d 280 (3d Cir. 2010), which are conflicting decisions.

The 7th Circuit concluded that the sales reps were required to exercise a significant measure of discretion and independent judgment despite the constraints instituted by the regulatory environment of the pharmaceutical industry. Although they must deliver specific messages to the doctors, the sales reps must tailor their messages to respond to the circumstances, noted Ripple.

“The particular discretion exercised by the representatives before us is within the range of cases in which the exemption has been applied,” he wrote.

The 7th Circuit affirmed the decision by Barker in the Lilly case and ordered the Illinois court to enter judgment in favor of Abbott.

Civil – Employment/Compensation

Clifton Sandifer, et al. v. United States Steel Corporation

10-1821, 10-1866

The 7th Circuit Court of Appeals has ruled that employees asking to be compensated for changing into safety clothing and walking to their work stations are undermining the efforts of the union that represents them.

Clifton Sandifer and other workers claimed that United States Steel Corp. was in violation of the Fair Labor Standards Act by not compensating them for the time they spend changing into safety gear and walking to their work stations. A District judge held that changing clothes is excluded from the FLSA, as outlined in Section 203(o), but he certified for interlocutory appeal the question of whether “travel time” was compensable. The plaintiffs cross-appealed the District Court’s decision about whether changing clothes is compensable.

The plaintiffs argue that the term “clothes” does not apply to the present case, because the garments that they change into and out of before and after their shift are safety gear. On behalf of the 7th Circuit panel, Judge Richard Posner wrote that clothing is by nature protective.

“It would be absurd to exclude all work clothes that have a protective function from section 203(o), and thus limit the exclusion largely to actors’ costumes and waiters’ and doormen’s uniforms,” Posner wrote. He also stated that putting on a hard hat and safety glasses and inserting earplugs was non-compensable, as all of those actions combined lasted only seconds.

U.S. Steel’s collective bargaining agreement does not require it to pay workers for walking to their work stations or changing clothes. And Posner wrote that if workers have a legal right to be paid for that time, “the company will be less willing to pay them a high wage for the time during which they are making steel; it will push hard to reduce the hourly wage so that its overall labor costs do not rise.”

Posner also wrote that not all requirements of employees constitute employment, using as an example that when a person calls in sick to work, unless he is on paid sick leave, he is not paid for the time it takes to place that call.

“The plaintiffs are adverse to their union, to the interests of other steelworkers, and to their own long-term interests,” Posner wrote.

The 7th Circuit affirmed the District Court’s finding that the act of changing clothes is non-compensable. It also ruled in favor of U.S. Steel on interlocutory appeal and found the case has no merit and should be dismissed by the District Court.
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May 11

Civil – Construction/Subcontractor Contract

BMD Contractors Inc. v. Fidelity and Deposit Company of Maryland

11-1345

A company that was subcontracted by another subcontractor for work on a plant construction project won’t be paid from a bond the subcontractor obtained because of a pay-if-paid clause in the subcontractors’ contract.

The 7th Circuit Court of Appeals had to figure out if the District Court was correct in finding that the language contained in the contract subcontractor Industrial Power Systems entered into with BMD Contractors contained a pay-if-paid clause instead of a pay-when-paid clause. Industrial Power was hired by Walbridge Aldinger, the general contractor on a manufacturing plant project. Industrial Power in turn hired BMD. Industrial Power also executed a payment bond with Fidelity and Deposit Company of Maryland, making Fidelity a surety for Industrial Power’s payment obligations to BMD.

The manufacturer eventually went bankrupt and was unable to pay Walbridge, which in turn was unable to pay Industrial Power, leaving it unable to pay BMD. BMD and Ferguson Enterprises, which provided supplies to BMD, tried to recover the rest of what they were owed from the bond. Fidelity refused payment and BMD filed suit.

The 7th Circuit affirmed, finding the contract between Industrial Power and BMD expressly provides that Industrial Power’s receipt of payment is a condition precedent to its obligation to pay BMD. This issue raised in the instant case hasn’t expressly been ruled on by Indiana’s Supreme Court.

Judge Diane Sykes pointed out that Indiana surety law is quite clear on two points: sureties are generally liable only where the principal itself is liable; and concurrently executed bonds and the contracts they secure are construed together.

“These surety-law principles firmly support Fidelity’s position that it cannot be liable under the payment bond if Industrial Power is not liable under the subcontract. Although there are no Indiana cases applying these general principles in this particular context, courts in other jurisdictions have done so,” she wrote.

The trend of recent caselaw supports the basic principle of Indiana law that a surety may assert all the defenses of its principal. Fidelity, no less than Industrial Power, may rely on the pay-if-paid clause in the Industrial Power/BMD subcontract to defend against this suit on the payment bond, Sykes wrote.

Indiana Court of Appeals

May 3

Civil Plenary – Indiana Patient Compensation Fund/Interest

M.O. v. Indiana Dept. of Insurance, Indiana Patient’s Compensation Fund

53A05-1112-PL-682

The Indiana Court of Appeals affirmed the trial court ruling in a dispute over what interest rate is charged and when it begins to accrue on payments due from the Indiana Patient’s Compensation Fund to successful medical malpractice claimants.

M.O. won a medical malpractice lawsuit and was awarded $1.25 million by the jury. The health care provider paid $250,000, so M.O. added the Indiana Patient’s Compensation Fund as a party to recover the remaining judgment. In June 2011, the trial court ordered the fund to pay M.O. $1 million, which it did in September 2011. Then M.O. filed a motion for postjudgment interest; the trial court held M.O. is entitled to interest at an 8 percent rate to be paid by the fund, and it began accruing as of Jan. 15, 2011.

M.O. and the fund believe different statutes apply regarding the correct postjudgment interest rate. M.O. argued that Indiana Code 34-13-3-18 (1998) is appropriate; the fund claimed that I.C. 24-4.6-1-101 (1993), the statute the trial court relied on, is the correct statute.

The COA relied on Poehlman v. Feferman, 717 N.E.2d 578 (Ind. 1999), to affirm the trial court ruling. I.C. 24-4.6-1-101 applies to M.O.’s case, Senior Judge John Sharpnack wrote, and that statute dictates that 8 percent is the correct postjudgment interest. The judges also cited Poehlman to support the trial court’s finding that Jan. 15, 2011, is the correct date for interest to begin accruing. In Poehlman, the Supreme Court concluded that postjudgment interest accrues upon the fund’s liability for damages “beginning on the first biannual payment date applicable to the claim.”

A patient who seeks payment from the fund must send a certified copy of the final judgment to the fund. Once the fund agrees to or is ordered to pay a patient’s claims for damages, the commissioner of the Department of Insurance submits a voucher to the auditor of the state, who issues payments from the fund biannually.

M.O. submitted a certified copy of the jury verdict against the health care provider to the fund on Oct. 12, 2010. The next payment date under Indiana Code 34-18-6-4 was Jan. 15, 2011.

Criminal – Fourth Amendment/Evidence

Meschach Berry v. State of Indiana

49A04-1109-CR-474

The search of the car driven by a defendant violated the Fourth Amendment, the Indiana Court of Appeals ruled, so the trial court abused its discretion in admitting evidence obtained through an inventory search.

Meschach Berry drove a relative’s car to a car wash to pick up his last paycheck from the company. When he learned the paycheck wasn’t available, he parked his car at the company’s entrance and blocked traffic. Indianapolis Metropolitan Police responded to a call and told Berry to move the car. He moved it to the self-service vacuum bay area.

After discovering Berry had a suspended license, police asked if the car was insured so someone could drive it home. Berry was unsure, so police decided to tow the car and proceeded to conduct an inventory search of the car. Police found marijuana and a digital scale inside. The police did not create formal inventory sheets detailing Berry’s personal effects. He was charged with and convicted of possession of marijuana as a Class A misdemeanor.

Berry made several arguments on appeal as to why the trial court abused its discretion in denying his motion to suppress and admitting the evidence, but the COA only agreed with his argument that the state didn’t prove that the decision to impound the car was consistent with standard procedures followed by the IMPD. The record lacks any evidence of IMPD policy on impoundment, so the judges were unable to say whether the decision to impound the car was in keeping with such policy.

The judges reversed Berry’s drug conviction.  
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May 9

Post Conviction – Ineffective Counsel

Ashanti Clemons v. State of Indiana

49A02-1108-PC-737

The Indiana Court of Appeals affirmed the denial of a man’s petition for post-conviction relief, finding neither his trial nor appellate counsel were ineffective in his case involving a voluntary manslaughter conviction.

Ashanti Clemons was questioned by police for the 2005 shooting of Prentice Webster. Clemons signed the advice of rights/waiver of rights form and claimed he understood the statements on the form. Clemons admitted to carrying a gun without a license and that he fired the gun. The state charged him with Class A felony voluntary manslaughter and Class C felony carrying a handgun without a license. At his first trial, he was convicted of the handgun charge, which he appealed, arguing the trial court shouldn’t have admitted his statements to the police. Clemons claimed police didn’t stop the interview when he requested counsel. The trial court held Clemons’ comments didn’t constitute an unequivocal request for an attorney.

On retrial, he was convicted of the manslaughter charge, which the COA later affirmed. His appellate counsel did not seek transfer.

Clemons claims that Brian Lamar, his trial attorney, was ineffective because he conceded that Clemons’ request for counsel during the interrogation was equivocal and because he didn’t get school records before the first trial to prove Clemons has a low IQ. The COA agreed with the decision by another panel of the court on Clemons’ direct appeal that his statements weren’t an unequivocal request for counsel, so he can’t prove that Lamar performed deficiently on this point. The appellate court also found that Lamar attempted to obtain the school records before the first trial but was unable to secure them through no fault of his own. Clemons also didn’t prove that his appellate attorney, Julie Slaughter, was ineffective for not filing a petition to transfer from his voluntary manslaughter conviction. Clemons may seek review by the Indiana Supreme Court by appealing the instant decision, so he has not been procedurally defaulted, the judges ruled.

Criminal – Witness Testimony/Right to Confront

Halston Thomas v. State of Indiana

49A02-1109-CR-830

The Indiana Court of Appeals found the trial court did not err in admitting the deposition testimony of a witness in a murder case who refused to testify at trial and whom the defendant had a chance to examine at the deposition.

Channing Gordon was in an apartment building when he saw Halston Thomas enter with a gun. Gordon ran into an apartment and heard multiple gunshots. Andre Drake died from his injuries. Gordon was called to testify but refused to do so. The trial court then granted the state’s request to read Gordon’s deposition testimony into evidence. Thomas was convicted of murder.

Thomas argued that this deprived him of his constitutional right to confront Gordon because he didn’t have an adequate opportunity to confront and cross-examine him. He claimed the deposition was discovery and not testimonial. The appellate judges cited Howard v. State, 853 N.E.2d 461 (Ind. 2006), in their decision to uphold the murder conviction.

Thomas claimed he didn’t have the ability to confront Gordon at his deposition because the scope of the defense counsel’s questioning of Gordon was strictly limited by Gordon’s counsel. His attorney clearly intended to not question Gordon in-depth at the time, but he did have the opportunity to do so, wrote Judge Ezra Friedlander.

The state established that Gordon was unavailable to testify at trial and that Thomas had an opportunity to cross-examine Gordon at the deposition, which was testimonial in nature, the judges ruled. Even if the judges were to assume that the requirements of Crawford v. Washington, 541 U.S. 36, 68 (2004), weren’t met, any error in admitting the deposition was harmless.

Criminal – Fourth Amendment/Traffic Stop

Douglas P. Wilson Jr. v. State of Indiana

79A05-1107-CR-350

A defendant’s argument that his Fourth Amendment rights were violated when police searched his vehicle and found pills failed because the man abandoned his vehicle after the traffic stop. By fleeing, he relinquished any reasonable expectation of privacy in the car, the Indiana Court of Appeals held.

A police officer initiated a traffic stop of Douglas Wilson Jr.’s car after the officer saw Wilson’s car parked in a handicapped spot without a proper plate or permit. After running the vehicle plate, the officer found that Wilson’s license was suspended and he had outstanding arrest warrants. While the officer was radioing about the traffic stop, Wilson got out of his car, locked the doors and fled.

Police decided to tow the car and found hydromorphone and morphine sulfate pills and cellophane wrappers in the car that were prescribed to Wilson’s girlfriend. Police later found Wilson, and he was convicted of Class B felony dealing in a narcotic drug, Class D felony possession of a narcotic drug, Class A misdemeanor resisting law enforcement, and Class A misdemeanor operating a vehicle while suspended.

His motion to suppress the drugs found in the car was denied at trial. Wilson claimed that admitting the evidence violated the Fourth Amendment because the officer’s search was unreasonable because it was an improper inventory search. Wilson abandoned his vehicle after the officer initiated a traffic stop, and the judges found his argument that he locked his car and took the keys with him unpersuasive.

There was sufficient evidence to support his drug convictions as Wilson had constructive possession over the pills and a witness saw Wilson trying to sell some of the pills the day before he was pulled over by police. The judges also upheld his 13-year sentence.
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May 10

Criminal – Validity of Traffic Stop

Allison Riggle v. State of Indiana

49A05-1109-CR-472

On the appeal of a woman’s conviction of possession of marijuana, the state conceded that the traffic stop that led to the discovery of the drug was invalid. The Indiana Court of Appeals accordingly reversed the conviction.

Allison Riggle was driving in Indianapolis when a police officer pulled her over. He saw her turn left from the eastbound lane of a street to the outer northbound lane of a four-lane road. The officer believed this was a traffic violation because Riggle didn’t turn in to the lane closest to the center line.

The officer smelled marijuana and Riggle eventually admitted she had hidden some of the drug in her boot. She was charged with and convicted of Class A misdemeanor possession of marijuana.

Riggle cited Gunn v. State, 956 N.E.2d 136, 139 (Ind. Ct. App. 2011), to support her argument that the traffic stop was invalid because she didn’t commit a traffic violation. The state agreed with her argument. The appellate court agreed too, and it ordered the conviction be vacated.

Criminal – Murder/Insanity

Latisha Lawson v. State of Indiana

02A03-1107-CR-350

A woman convicted of murdering her young son lost her appeal, in which she claimed the jury didn’t have sufficient evidence to reject her insanity defense.

Latisha Lawson appealed her convictions of murder, Class C felony neglect of a dependent, and Class D felonies neglect of a dependent and battery. The convictions stem from an incident where she forced her two children to drink mixtures of oil and vinegar to exercise demons. In order to get her toddler son to drink the mixture, Lawson held her hand over his mouth, which suffocated J.K.

She kept J.K.’s body in a bin and told her daughter not to tell anyone what had happened. She told people who asked where J.K. was that he was living with another relative or had been adopted. Eventually, police learned about J.K.’s death and found his body inside the plastic tub where Lawson was living.

Lawson wanted to rely on the insanity defense, so she was examined by a psychologist and a psychiatrist. The psychologist believed she was sane at the time of the incident; the psychiatrist felt she wasn’t sane at the time. The jury was instructed that it could find Lawson not guilty, not responsible by reason of insanity, guilty, or guilty but mentally ill. The jury found her guilty and she was sentenced to 61 years.

The Indiana Court of Appeals rejected Lawson’s claim that the psychologist’s testimony rendered an opinion lacking in probative value so only the psychiatrist’s opinion should have been considered. This case differs from Galloway v. State, 938 N.E.2d 699, 708 (Ind. 2010), in which the expert in that case originally testified that he thought the defendant was sane but later said on cross-examination that he was unable to offer a definite opinion on sanity. In the instant case, the psychologist never changed his opinion that Lawson was sane.

In addition, independent lay witness testimony corroborated the psychologist’s opinion she was sane.

“Lawson’s behavior in this case admittedly was highly bizarre; her actions concerning the ‘exorcism’ and retention of J.K.’s body thereafter were confirmed by three independent eyewitnesses. Still, as we recently noted, our supreme court has affirmed the rejection of an insanity defense even ‘where the crimes appear to have been completely irrational,’” wrote Judge Michael Barnes.

Mortgage Foreclosure – Bad Faith

Thomas A. Neu and Elizabeth A. Neu, and Wells Fargo Bank, N.A. v. Brett Gibson

49A02-1109-MF-842

The Indiana Court of Appeals reversed the denial of a couple’s motion for relief from judgment and request for attorney fees in a foreclosure dispute, finding the couple established the party seeking to foreclose on their property acted in bad faith.

Through a business transaction, John Nowak gave Brett Gibson a promissory note in the amount of $350,000 for stock. To secure payment of the note, Nowak granted Gibson a second mortgage against his home in Indianapolis and against his vacation property in Michigan. Irwin Mortgage Corp. held a prior mortgage on the Indiana real estate. Nowak sold the Indiana property six months later to Thomas and Elizabeth Neu. A title search did not reveal Gibson’s mortgage on the property.

Nowak defaulted on the promissory note to Gibson, so Gibson sought to foreclose on the Indiana and Michigan properties. Gibson obtained a judgment foreclosure in the Michigan case and purchased the property at a public auction. When Gibson filed a motion in 2007 requesting the Indiana trial court grant him a foreclosure judgment against the Neus’ property, he mentioned the Michigan property but did not say that a sheriff’s sale had taken place and he was the winning bidder.

The Indiana trial court eventually entered a judgment of foreclosure against the Indiana property in favor of Gibson for more than $380,000 plus interest, attorney fees and costs. The trial court also denied the Neus’ request for a sheriff’s sale. The Indiana Supreme Court affirmed. The Neus then filed a motion for relief from judgment and for attorney fees, asking the court to deem Gibson’s foreclosure decree fully satisfied because Gibson had reduced his promissory note to judgment in Michigan and bid the full amount of that judgment to acquire his Michigan collateral at a sheriff’s sale.

After deducting the amount of Gibson’s bid to purchase the Michigan real estate, the trial court ordered the balance due on his judgment was $74,716.

The appellate court found that the proceedings dealing with the Indiana property became fully satisfied when Gibson got the foreclosure judgment on the Michigan property and submitted a full credit bid based on the same promissory note that was the basis of the Indiana foreclosure proceedings. The judges also found the Neus established bad faith when Gibson failed to disclose the Michigan foreclosure judgment and sheriff’s sale. They ordered the trial court determine reasonable attorney fees in favor of the Neus starting from Aug. 8, 2007, the date of the Michigan sheriff’s sale.
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May 14

Criminal – Fifth Amendment/Right to Counsel

Dana L. Lewis Jr. v. State of Indiana

40A01-1106-CR-276

The Indiana Court of Appeals found a man’s question, “Can I get a lawyer?” during police questioning unambiguously and unequivocally invoked his Fifth Amendment right to counsel, so the trial court erred in denying the man’s motion to suppress statements he made to police.

Dana Lewis was invited by Jennings County Sheriff’s Sgt. Karen McCoy for an interview regarding an alleged sex crime with a 13-year-old girl. McCoy told Lewis he was not under arrest and free to leave at any time, read him his Miranda rights, and then began asking Lewis about the crime. During questioning, Lewis asked, “Can I get a lawyer?” but police continued questioning Lewis. Lewis spoke about the alleged crime for a few more minutes until asking whether he was under arrest or would be under arrest. Lewis was arrested two days later and charged with Class A felony child molesting.

Lewis filed a motion to suppress his statements to McCoy, arguing they were obtained in violation of the Fifth Amendment right to counsel. At a hearing, both parties stipulated that Lewis reasonably believed he was in custody and not free to leave, but the judge ultimately denied the motion.

The Court of Appeals reversed, rejecting the state’s argument that the trial court stipulation that Lewis believed he was in custody shouldn’t have any bearing on the appeal. The stipulation binds the state on the question of whether Lewis was in custody, wrote Judge Cale Bradford.

The judges cited United States v. Lee, 413 F.3d 622, 626 (7th Cir. 2005), in which the 7th Circuit Court of Appeals deemed a suspect’s question “Can I have a lawyer?” to be similar to other statements recognized by the court as proper invocations of the right to an attorney.

“Much as the question, ‘Can I get the car tonight?’ would be universally understood as a request to borrow the car tonight, and not as a theoretical question regarding one’s ability to borrow the car tonight, we have little trouble concluding that Lewis’s question would be understood by any reasonable police officer as an unequivocal request for counsel,” Bradford wrote.

The appellate court remanded for further proceedings.•