Contempt ruling involving adult theater in Clarksville overturned

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A trial court must consider the discovery objections lodged by a company that leases space to an adult theater in Clarksville after the Court of Appeals of Indiana overturned a contempt ruling against the company.

AMW Investments owns real estate in Clarksville, and it leases the property to Midwest Entertainment Ventures, or Theatre X, an adult entertainment venue.

In May 2019, the town of Clarksville revoked Theatre X’s adult business license due to zoning ordinance violations.

MEV appealed the revocation in Clark Circuit Court, while the town sought a preliminary injunction enjoining MEW and AMW from operating Theatre X.

In November 2019, the trial court granted the town’s motion for preliminary injunction. AMW and MEV appealed.

While the appeal was pending, AMW submitted its responses to discovery, replying to each discovery request, “AMW objects on the basis that discovery is premature and inappropriate during the pendency of appeal. … This discovery request was issued after the divesture of jurisdiction and during the period jurisdiction was divested by way of appeal.”

Then, after informal resolution of the discovery dispute failed, the town moved to compel discovery responses.

In October 2020, the appellate court affirmed the preliminary injunction in the town’s favor, and in March 2021, the Indiana Supreme Court denied transfer.

The town filed a reply brief arguing that the interlocutory appeal had not stayed discovery, and that AMW waived all other objections to the discovery requests by failing to raise them in its discovery responses.

A hearing on the motion to compel was scheduled for July 2021.

That June, AMW tendered its first supplemental responses, which raised multiple objections.

Then in August 2021, the trial court granted the town’s motion to compel discovery. The court ruled that the interlocutory appeal had not stayed discovery, and that AMW waived its objections that were not raised in the original responses.

AMW then tendered its second supplemental discovery responses, but the town moved to hold AMW in contempt.

The trial court granted that motion in February 2023, finding AMW’s first supplemental responses, tendered in June 2021, were belated. It also found that AMW continued to object and withhold documents based on relevance and privilege objections that had been waived.

The trial court imposed a $30,000 civil sanction, but noted the fine could be avoided by complying with the discovery order.

AMW appealed, and the Court of Appeals reversed.

“Here, AMW’s timely discovery responses in its July 15, 2020, initial response addressed only the alleged lack of jurisdiction while the interlocutory appeal was pending and did not raise other objections,” Judge L. Mark Bailey wrote. “When the parties received the new information that the appeal had ended, it became clear that the objections based on jurisdiction, even if they had been correct when made (which they were not), were moot. Therefore, AMW supplemented its discovery responses with its additional responses, including new objections.

“Trial Rule 26(E) allows such supplementation of discovery responses, and there was no deadline imposed in this case, either by the court or agreement of the parties, for supplementing discovery responses,” Bailey continued. “Therefore, AMW’s supplemental responses, filed before the hearing and the decision on Town’s motion to compel, were ‘seasonable’ and permissible.

“The trial court abused its discretion when it refused to consider AMW’s supplemental discovery responses,” Bailey concluded. “And AMW was prejudiced by that error; not only was it limited to objections that had become moot, but it was required to provide full responses to discovery without the court’s consideration of any of its supplemental objections.”

The appellate court thus reversed and remanded to the trial court with instructions to consider the objections contained in AMW’s first supplemental discovery requests.

Judges Melissa May concurred in AMW Investments, Inc. et al. v. The Town of Clarksville, et al., 23A-PL-508, while Judge Paul Felix concurred in result.

Felix wrote separately that he disagreed with the majority’s analysis for three reasons.

First, Felix wrote that AMW’s objections were late and untimely.

“However, and secondly, I believe that a late-raised objection does not necessarily result in a waiver of that objection,” he continued.

Lastly, Felix wrote that Marshall v. Woodruff, 631 N.E.2d 3(Ind. Ct. App. 1994), provided the outer boundaries for when a late objection can be deemed waived.

“In sum, Marshall tells us that an untimely objection is waived when it is asserted for the first time in a motion to correct error or later,” Felix wrote.

He said the courts should consider five factors in determining whether an untimely discovery objection is waived: the obstreperousness of the party; the complexity of the issues; the amount of time that has passed between a motion to compel and a hearing on that motion; the amount of time, effort and/or expense the requesting party put into resolving the issue; and good cause.

“Applying such an analysis to this case, I believe that AMW’s supplemental responses (the late-raised objections) were late … but I would hold that those objections are not waived given: (1) the rare and unusual circumstances of this case, namely, the confusion created by the interlocutory appeal as to whether the trial court retained authority over the matter; (2) the lack of evidence that either party was being obstreperous; (3) the lack of any real effort by Town to resolve the issue, given that Town only sent a single letter to AMW pursuant to T.R. 26(F); (4) the fact that Town’s Motion to Compel was filed on August 28, 2020, and the hearing on that motion did not occur until July 9, 2021; and (5) the fact that the amended/supplemented objections were filed prior to the hearing on the motion to compel,” he concluded. “For these reasons, I concur and would also reverse the trial court’s decision.”

In a footnote, the majority opinion rejected Felix’s test.

“The concurrence would hold that the rule regarding supplementation of discovery is not even applicable to AMW’s June 18, 2021, supplemental answers because there was no ‘new information’ that would allow or require supplementation. However, as we note above, the relevant new information in this case was the final denial of AMW’s interlocutory appeal. That new information made it clear that AMW’s initial discovery responses based on the alleged ‘divestment’ of jurisdiction pending the interlocutory appeal was no longer applicable and that supplemental responses were required. Thus, we analyze the timeliness of AMW’s June 18, 2021, supplemental responses under Trial Rule 26 rather (than) attempting to create a new balancing test for ‘untimely’ responses under Rules 33, 34, and 37, as the concurrence suggests.”