indiana – Paul Porvaznik – Business Litigator

Statement Assailing Lawyer’s Appearance and Competence Not Factual Enough to Sustain Defamation Claim – Ind. Appeals Court

In Sasser v. State Farm Insurance Co., the Indiana appeals court addressed the contours of defamation law in the context of two statements that variously impugned an attorney’s physical appearance and professional abilities.

The plaintiff, an in-house lawyer for the insurance giant defendant, had a years’ long personality clash with a non-attorney claims adjuster. The plaintiff alleged the adjuster made many disrespectful comments about the plaintiff including the two statements that drove plaintiff’s defamation suit.

The challenged statements consisted of one concerning the plaintiff’s appearance; the other, her competence as a lawyer. The Court focused mainly on the latter claims agent’s assertion that “any competent attorney could get a defense verdict” after the plaintiff advised against taking a case to trial to company brass. The plaintiff argued that the adjuster’s statement was per se defamation since it imputed the plaintiff’s ability to perform as a lawyer.

The trial court disagreed and entered summary judgment for the defendants. Plaintiff appealed.

Affirming, the court first set forth the general principles of Indiana defamation law.

Defamation requires proof of a factually false statement about the plaintiff, published to a third party that tends to lower one’s reputation in the community or that deters others from associating with the person.

Defamation includes written (libel) and oral (slander) statements. Two species of defamation law include per se defamation and per quod defamation. The former applies to statements that are naturally harmful on their face and don’t require a plaintiff to prove special damages.

The four categories of per se defamation are statements that a plaintiff (1) committed a crime, (2) has a communicable disease, (3) is incompetent in trade or profession, and (4) exhibits a lack of integrity in performing employment duties.

Defamation per quod involves a statement that isn’t obviously defamatory but requires extrinsic evidence to establish its defamatory meaning. To succeed on a defamation per quod claim, the plaintiff must prove actual monetary harm attributable to the challenged statement.

For a statement to be actionable as defamation, it must contain objectively verifiable facts about the plaintiff. But where the speaker is merely expressing his/her subjective view, interpretation, or theory, the statement is not actionable. In addition, “[j]ust because words may be insulting, vulgar or abusive words does not make them defamatory.” [22]

Here, the appeals court agreed with the trial court that the two statements under attack did not directly convey a per se defamatory statement about the plaintiff. While allowing that individual defendant’s comment concerning the plaintiff’s appearance may be offensive, it wasn’t verifiably true or false and so didn’t rise to suable slander.

And while the adjuster defendant’s “any competent attorney” statement arguably implicated per se category (3) – by attributing an inability to perform employment duties – the court found the statement too nebulous to be verified as either true or false. The Court viewed this statement as the claims agent’s subjective opinion that a competent attorney could secure a certain result after a hypothetical trial.

Rhetorically, the Court asked how would one demonstrate the truth or falsity of such a statement? It then cited to a late-90s Seventh Circuit decision (Sullivan v. Conway, 157 F.3d 1092 (7th Cir. 1998)) where the Court opined that “to say [plaintiff] is a very poor lawyer is to express an opinion that is so difficult to verify or refute that it cannot feasibly be made a subject of inquiry by a jury.”

The Sullivan case relied on by the Indiana appeals court noted that the caliber of legal representation is inherently uncertain: it noted that excellent lawyers may lose most cases because they take on only challenging ones. Conversely, according to Sullivan, poor lawyers could win all their cases by only taking easy cases. [25].

What’s more: lawyers have strengths and weaknesses: some are good at some things, while poor at others. There simply isn’t a way to factually test an opinion concerning a lawyer’s aptitude. Here, since there was no way to corroborate the statement’s truth or falsity, it wasn’t factual enough to support a defamation claim.

The court also rejected plaintiff’s attempt to bootstrap the “any competent attorney’ statement into a claim that the plaintiff violated Indiana Rule of Professional Conduct 1.1 which specifically speaks to lawyer competence in representation. The Court found that since the plaintiff didn’t allege either the individual or corporate defendant didn’t say the plaintiff acted unprofessionally or improperly with respect to a specific, discrete legal matter, the plaintiff’s reliance on Indiana’s professional conduct rules fell short.

The court also rejected plaintiff’s per quod argument: that the statement’s defamatory content was established when the court considered extrinsic evidence. Because the statement did not impute anything false about the plaintiff that would tend to harm the plaintiff’s reputation, the statement was not defamatory per quod.

Afterwords:

This case illustrates in sharp relief the challenges a defamation plaintiff faces in a culture that vaunts freedom of expression and gives latitude for citizens to “blow off steam” in the private, employment setting.

Sasser also demonstrates that while a statement may be mean, offensive, and vulgar, it still will not rise to the level of actionable defamation if it cannot be objectively tested as true or false.

Qualitative, subjective statements about a lawyer’s abilities do not lend themselves to objective testing. As a result, in Indiana at least, such statements generally cannot support a defamation claim.

Embattled Ex-Congressman Wins Law Firm’s Fee Spat [Ind. Appeals Court]

Perhaps known as much for his chiseled physique, burnished Instagram presence and garish office furnishings as his political acumen, former wunderkind congressman Aaron Schock resigned in 2015 after dual Federal probes unearthed wide-ranging campaign finance infractions.

The twin Federal investigations – a Department of Justice (DOJ) subpoena followed by an FBI lighting raid on Schock’s Peoria IL office – culminated in a grand jury indictment involving some 24 criminal charges most of which centered around Schock using taxpayer money to fund his lavish lifestyle. While Schock pleaded not guilty and was never convicted, his once surging political career cratered in the prosecution’s wake and to date has not recovered.

It is the DOJ’s and FBI’s tandem probes against Schock and his erstwhile campaign committee, Schock for Congress [SFC] that form the backdrop for Bopp Law Firm, P.C. v. Schock, et al., 2020 Ind.App.LEXIS 287 (July 6, 2020). The case illustrates in sharp relief the proof problems a law firm suing a former client for unpaid fees faces when it skimps on engagement letter and billing details.

The Plaintiff law firm [the “Law Firm” or “Firm”] sued Schock and SFC in 2016 to recover nearly $160,000 in unpaid legal bills. After a four-day bench trial, the trial court entered judgment for Schock and SFC. The Law Firm appealed.

Affirming, the Indiana appeals court first dispensed with the Law Firm’s argument that it stated a viable account stated claim. In Indiana, as in other states, a party waives a claim by not presenting it in its operative pleadings. Here, the Plaintiff waited until its post-trial brief to first raise the account stated issue. It was too late. Since account stated was never pled in the complaint or litigated at trial, the Defendants were unable to defend against it. As a result, the trial court correctly found that the Law Firm waived its account stated claim.

The Court then held that even if the Law Firm did timely raise an account stated claim, it still would have lost. In Indiana, a monetary amount on a bill or statement is prima facie evidence of the amount claimed which can be disproved by a defendant. Here, the Defendants disproved the invoice amounts by pointing to the Firm’s multiple block-billing entries where it failed to separate work done for individual clients vs. services provided to related entity clients.

The Court then rejected the Law Firm’s other arguments on appeal.

The Court first noted the Law Firm’s tardy subpoena response led to a subsequent search warrant and raid on SFC’s campaign office. The Court then pointed to the Law Firm’s failure to separate legal work it performed for SFC from the work it did for related individuals and entities. The Court chided this “block-billing” as potentially violative of Rule 1.8(f) of the Indiana Rules of Professional Conduct – the ethics rule that provides that a lawyer can only accept compensation from someone other than the client upon client’s informed consent, and where there is no interference with the lawyer’s independent professional judgment.

While the Court stopped short of finding a Rule 1.8 violation, it used the Rule as a guidepost when assessing the Firm’s billing practices.

Questionable optics was another basis for the appeals court’s ruling. It noted the Firm assumed role of trustee responsible for reviewing and approving all bills, including legal bills, issued to SFC. This put the Firm in the impossible situation of self-policing its own legal bills. [18]

Still another ground on which the Court relied in upholding the trial court was the time entries attributed to attorney Randy Elf – a lawyer who resigned from the Firm after Defendants challenged several of his time entries. The Court agreed with the trial judge that the Firm had an obligation to review all of Elf’s bills. And since the Firm did not, the trial court properly struck all of Elf’s time entries from the universe of recoverable fees.

The Court also credited the testimony of the Defendants’ discovery expert who testified that $30,000 [and not the $90,000-plus charged by the Firm] was reasonable fee for document review and production. The Court conversely discounted the Firm’s rebuttal witness – a Firm lawyer – who testified that the bills were reasonable. The Court noted the Firm’s witness admitted that document review and production did not comprise a large percentage of his practice.

Finally, the Court rejected the Firm’s attempt to recover interest of 1.5% on the unpaid invoices. It upheld the trial court’s determination that the reasonable value of the Firm’s services were $30,000 and that it had already been paid more triple that amount. As a result, the trial court properly found the Defendants did not owe any additional amounts to the Firm.

Afterwords:

Law firms should be sedulous in its engagement letters and billing records and make it clear who is and who is not their client;

Firms should guard against block-billing and take pains to separate work done for individuals versus services provided to related entities;

A claim not pled or litigated at trial will be deemed waived on appeal; and

Law firm should consider hiring an outside auditor to vet legal bills in situations where a firm’s impartiality could be questioned.

Don’t Confuse Joint Tenancy with Tenancy-By-Entirety Ownership – Indiana Court Cautions

Title to real estate is typically held in one of three ways: tenancy in common, joint tenancy and tenancy by the entirety.

The salient characteristic of tenancy in common is that each owner holds a ½ interest in the property and that upon an owner’s death, his/her share passes to his/her heir.

Joint tenancy’s hallmark is its survivorship feature: when a joint tenant dies, his/her share passes to the surviving joint tenant. The deceased’s interest will not pass to an heir.

With tenancy by entirety (“TBE”) ownership, sometimes described as “joint tenancy with marriage,” the property is immune from one spouse’s creditor’s judgment lien. This means the creditor of one spouse cannot foreclose on the TBE property. However, to qualify for TBE protection, the parties must be married and live in the property as a primary residence. If the property owners are married but do not use the home as the marital homestead, TBE won’t shield the property from creditor collection efforts.

In Flatrock River Lodge v. Stout, 130 N.E.2d 96 (Ind. Ct. App. 2019), an Indiana appeals court delved into the joint tenancy vs. TBE dichotomy and how the difference between the two realty title vehicles dramatically impacts a judgment lien’s enforceability. The trial court denied the creditor’s motion to foreclose a judgment lien because the subject real estate was held in joint tenancy. On appeal, the Court considered whether a judgment creditor could foreclose on joint tenancy property, force its sale, and apply the proceeds against the judgment.

The judgment debtor owned real estate in joint tenancy with his daughter. The debtor died during pendency of the lawsuit and by operation of law, the title to the property vested in the daughter. Before the debtor died, however, the plaintiff/creditor recorded its judgment lien against the property.

The creditor moved to foreclose its judgment lien against the property. The debtor’s daughter argued the property was exempt from execution by Indiana’s tenancy-by-entirety statute (the TBE statute). Indiana Code Section 34-55-10-2(c)(5). The trial court agreed with debtor’s daughter and denied the creditor’s motion.

Reversing, the Indiana appeals court first rejected the defendants’ argument that since the debtor died, the property escaped plaintiff’s lien. The court noted that the plaintiff’s judgment lien attached from the moment it recorded its judgment against the property – some two years before debtor’s death. As a result, the debtor’s daughter took the property subject to the plaintiff’s lien.

Next, the appeals court rejected the trial court’s finding that the property was immune from the plaintiff’s judgment lien.

In a joint tenancy, each tenant acquires an equal right to share in the enjoyment of the land during their lives. A joint tenant is severed where one joint tenant conveys his/her interest to another and destroys the right to survivorship in the other joint tenant(s). Once a joint tenancy conveys his/her share to another, he/she becomes a tenant in common with the other co-tenant.

Each joint tenant can sell or mortgage his/her interest in property to a third party and most importantly (for this case at least), each joint tenant is subject to a judgment creditor’s execution. [8]

TBE ownership only exists between spouses and is grounded in legal fiction that husband and wife a single unit. A TBE cannot be severed by the unilateral action of one tenant. An attempted transfer of a TBE ownership interest by only one spouse is a legal nullity. The key difference between joint tenancy and TBE is that with the latter, a creditor of only one spouse cannot execute on the jointly owned property

The Court noted that under Indiana Code 34-55-10-2(c)(5), property held in TBE is exempt from execution of a judgment lien. However, this statute applies uniquely to TBE ownership; not to joint tenancy. According to the court, “[h]ad the Indiana legislature intended to exempt from execution real estate owned as joint tenants, it would have done so.” [14]

Take-away:

This case shows in stark relief the perils of conflating joint tenancy and tenants-by-entirety ownership. If a property deed does not specifically state tenancy by the entirety, the property will not be exempt from attachment by only one spouse’s creditor.

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