Articles Posted in Appeals

In a recently concluded case, Parr Richey attorneys representing Clark County REMC, a southern Indiana rural electric utility, were successful in persuading the Indiana Supreme Court to reverse earlier decisions of the trial court and Court of Appeals.  The case involved four former REMC directors who claimed the REMC breached a contractual obligation to provide them with free, lifetime health insurance benefits after their board service ended. Their claim was based on a longstanding company policy that obligated the company to provide free health insurance benefits to former directors who met certain age and years of service requirements before leaving the board.

After the company ended that policy in 2018, the affected former directors sued. Both the trial judge and intermediate appellate court held that that the policy constituted a contractual obligation of the REMC which had been breached.  But in an issue of first impression, the Indiana Supreme Court unanimously held the policy did not form an enforceable contract and, as with other policies of the company, it was subject to change or termination at the will of the board.  Hence, no benefits were due after the policy’s termination.

The Parr Richey team who worked on the case included Kent Frandsen, Katie Moore, Erin Borissov, and John Kinney. Click here to read the Court’s opinion.

On July 30, 2020, the Indiana Court of Appeals concluded that a county’s refusal to issue a document indicating that no rezoning or variance would be necessary for an applicant’s operation of a proposed waste transfer station was “arbitrary, capricious, and an abuse of discretion.” Monster Trash, Inc. v. Owen County Council, Owen County Commissioners, and Owen County Board of Zoning Appeals. In the case, Monster Trash, Inc. applied to Indiana Department of Environmental Management for a license to operate a solid waste transfer station in Owen County. As a condition of approval, applicants are required to provide a “document from a county official confirming zoning requirements are not needed for the location of the proposed facility.” Owen County’s Board of Zoning Appeals refused to provide this document to Monster Trash, Inc., thus resulting in litigation.

Owen County had an ordinance in place that prohibited waste transfer stations, which did not allow appeals for a use variance to the Owen County Board of Zoning Appeals, however, the ordinance specifically stated that waste transfer stations are not prohibited if licensed and approved by the State of Indiana. Thus, the Court of Appeals then addressed Owen County’s refusal to provide the requested document to Monster Trash. The Court concluded “zoning requirements” were not a requirement to operate this solid waste transfer station, which resulted in its conclusion that the County’s refusal to provide the document went against its own ordinance and qualified as “arbitrary, capricious, and an abuse of discretion,” pursuant to Indiana statute. Therefore, the Court determined that there was no legally justifiable reason for the County to refuse the document and its refusal prejudiced Monster Trash from obtaining a State-issued license.

James A.L. Buddenbaum is a partner of the law firm of Parr Richey Frandsen Patterson Kruse LLP with offices in Indianapolis and Lebanon, Indiana. He advises business, utility and municipal and hospital clients in the areas of corporate compliance, corporate governance, employment, real estate, commercial transactions and regulatory law as well as representing policyholders in insurance disputes. He has 30 years of experience representing rural electric and telephone cooperatives.

The Indiana Court of Appeals recently upheld the finding of a de facto merger in successor companies when allowing the enforcement of a judgment against the predecessor company. New Nello Operating Co., LLC v. CompressAir. The Court noted four exceptions to the general rule that when one corporation purchased the assets of another the buyer does not assume the debts and liabilities of the seller.

According to the Court, those four exceptions which allow for successor liability are:

(1) an implied or express agreement to assume liability;

On February 5, 2020, the Indiana Court of Appeals handed down an opinion that will have landowners thinking twice before interfering with easement owners’ rights. In Duke Energy Indiana v. J & J Development Company, J & J bought a piece of land with the intent of developing a residential subdivision. Duke Energy Indiana v. J & J Development Company, 19A-PL-735, 1 (Ind. Ct. App. 2020). Moving forward with their intent, J & J Development Company (“J & J”) constructed improvements within an electric-transmission line easement owned by Duke Energy (“Duke”). Id. at 1-2.

Duke and its predecessors have owned the electric-transmission line easement in question since 1956 through an instrument that granted Duke, among other rights, the right to “erect, construct, and maintain the necessary substructures for said towers and poles.” Id. at 3. Without contacting Duke, J & J went ahead and had a surveyor prepare a plat for the subdivision, received plat approval, and then purchased the land. Id. at 5. J & J then began to construct the “improvements” to the easement, or in other words, they started to build the subdivision which fell within the easement. Id. at 5. The improvements J & J constructed within the easement included: an entrance, a road running through much of the easement, detention basins, a fire hydrant, and buried utility lines. Id. at 5.

Duke was not contacted by J & J until they wanted to discuss the sewer work they wanted done. Id. at 8. This led to Duke inspecting the improvements made by J & J and concluding that J & J impermissibly encroached upon the easement. Id. at 8. As a result, J & J filed suit against Duke, seeking a declaration that the improvements did not unreasonably interfere with Duke’s use of the easement. Id. at 8. Duke counterclaimed, requesting a declaration that J & J’s improvements were impermissible and asked for an injunction to have J & J remove the improvements. Id. at 8. The trial court ruled that the improvements were permissible, which resulted in an appeal by Duke. Id. at 8.

On January 11, 2019, the Indiana Court of Appeals held that the trial court properly denied appellant RCM Phoenix Partners LLC’s (“Phoenix”) slander of title claim, even though the appellee 2007 East Meadows, LP (“Meadows”) failed to raise a claim of absolute privilege at the trial court level and raised it for the first time on appeal.

Due to complications surrounding an assignment of a purchase agreement and assumption of an existing mortgage of an apartment community (“Property”) to Meadows, the parties were unable to close on the Property. Meadows sued Phoenix in Texas, alleging that Phoenix breached the purchase agreement and committed fraud. Meadows filed a lis pendens notice against the property of the pending Texas lawsuit. The trial court in Texas dismissed the lawsuit for lack of personal jurisdiction, but a second suit in Indiana, where Phoenix countersued and added a slander of title claim to its complaint continued. In Meadows’ answer, it did not assert that the lis pendens notice was privileged. Meadows first raised the claim of absolute privilege upon Phoenix’s appeal of a trial court decision that found in favor of Phoenix’s claim for retention of the earnest money but found in favor of Meadows for the slander of title claim.

The Court of Appeals noted that while the general rule is that an argument or issue raised for the first time on appeal is waived and thus ineligible for appellate review, the trend in recent Indiana Supreme Court cases is to allow an appellee seeking affirmance of a trial court’s judgment to defend the trial court’s ruling on any basis, including with arguments not raised at trial. Here, because Meadows was the appellee and sought an affirmance of the trial court’s decision to deny the slander of title claim, the Court of Appeals held that Meadows had not waived the right to argue that it had absolute privilege from a slander of title claim.

On June 1, 2018, the U.S. Court of Appeals for the D.C. Circuit declined to review an order issued by the Federal Energy Regulatory Commission (“FERC”) holding that an operating company that withdrew from a “multi-state energy system” had to continue sharing benefits from a settlement with the other system members, even after it withdrew from the system.

In 1951, six companies from Arkansas, Louisiana, Texas, and Mississippi formed the Entergy Corporation, a publicly held utility company intended to share the costs and benefits of generating and transmitting power. The system agreement provided members the option to withdraw so long as the member gave an eight-year notice. Entergy Arkansas announced on December 19, 2005 that it intended to withdraw on December 18, 2013. In 2008, Entergy Arkansas settled state litigation against Union Pacific, which included a below-market rate for coal delivery as part of the settlement. Under the system agreement, all members realized some of the increased costs as a result of Union Pacific’s breach of contract, and they also realized the benefits of the reduced rate following the settlement.

In 2009, FERC approved both withdrawal notices, and held that neither Entergy Arkansas nor Entergy Mississippi should have to pay an exit fee to the other members. FERC held in subsequent proceedings that the settlement benefits should be allocated among the members and adopted a methodology for doing so.

On June 27, 2018, the Indiana Supreme Court issued an opinion establishing that the Indiana Utility Regulatory Commission (“Commission”) is a proper party to an appeal of a Commission order. Hamilton Se. Utils., Inc. v. Indiana Util. Reg. Comm’n, No. 93A02-1612-EX-2742, 2018 Ind. LEXIS 496, at *1-12 (Ind. June 27, 2018).  Interestingly, the Commission had participated as a party in appeals of its orders without controversy until relatively recently, when parties began to challenge its standing to be a party in several appellate proceedings

This matter began in September 2015 when Hamilton Southeastern Utilities, Inc. (“HSE”) requested a rate increase from the Commission. HSE sought an 8.42% increase in rates, but the Commission only authorized a rate increase of 1.17%, partially because the Commission said that HSE should eliminate outsourcing expenses. Id. at *3-4. HSE appealed the order, initially naming the Commission as a party. HSE then moved to dismiss the Commission, claiming “it had mistakenly identified the Commission as a party” and that the Commission should not be a party because it had “acted as a fact-finding administrative tribunal.” Hamilton Se. Utils., Inc. v. Indiana Util. Reg. Comm’n., 85 N.E.3d 612, 617 (Ind. Ct. App. 2017).  The Court of Appeals granted the motion, reasoning that the Commission had adjudicated a rate case where the parties appearing before the Commission advocated for competing interests, and the Commission’s order “should speak for itself, without the need to further rationalize its decision.” Id. at 619. The Court of Appeals went on to affirm a number of the Commission’s decisions in calculating the 1.17% increase, but it held that the Commission arbitrarily excluded outsourcing expenses from that rate calculation. Id. at 626.

The Supreme Court granted transfer to review the question of whether the Commission was a proper party to the appeal of its order. The Court held that it was a proper party because it is a “long-standing custom and practice” to treat the Commission as a proper party to appeals of its orders, and the legislature had acquiesced to that practice. Hamilton Se. Utils., Inc, 2018 Ind. LEXIS 496, at *6.The Court noted that other “similarly situated executive branch agencies enjoy the ability to defend their decisions on appeal, both through explicit legislative directive” and through “legislative acquiescence to custom and practice.” Id. at *8. Furthermore, the Court said that public policy supports allowing the Commission to defend its orders on appeal in the interests of not disturbing a long-standing custom, promoting efficiency in the appeals process, and allowing the Commission to adequately represent its interests since opposing parties in a ratemaking case do not necessarily represent all of the Commission’s interests in defending its order. Id. at *10. Finally, the Court noted that the Commission’s role in the ratemaking case is administrative, not adjudicative, and therefore HSE’s argument that the Commission could not be a party because it adjudicated the proceedings failed. Id. at *11.

On December 16, 2016, the Court of Appeals found that “the reasonable necessity of an intersection expansion outweighed whatever injurious effect that expansion would have on an electric utility’s enjoyment of its easement.” Duke Energy Indiana, LLC v. City of Franklin, 41A01-1607-CT-1549, at 23. Duke Energy Indiana, LLC (“Duke”) had an easement for the transmission of electrical energy in the area of the City of Franklin’s proposed traffic plan, which would connect a four-lane state road to two city streets. Duke, believing that the plan would unreasonably interfere with its easement rights, filed for a preliminary injunction. The trial court denied the request, finding that Duke failed to establish unreasonable interference, and therefore, failed to show a reasonable likelihood of success at trial. Duke asserted that the increased volume and speed of traffic proceeding past the utility pole, located adjacent to and just northwest of the proposed intersection, would increase the hazard to maintenance and repair crews. The trial court found that Duke did not show material impairment, unreasonable interference, or irreconcilable conflict. Instead, the trial court found that Duke essentially argued that to repair and maintain the utility pole and transmission lines, Duke’s crews would interfere with the public’s use of the road. While the court found this concern valid, it did not address the issue of Duke’s use, and the need for additional traffic measures was not found to equate unreasonable interference with Duke’s easement. Duke appealed.

The Court of Appeals addressed Duke’s two claims related to its contention of a reasonable likelihood of success on the merits at trial: (1) the City should not be able to expand the intersection because it does not have adequate property interests in portions of the land and (2) the proposed expansion of the intersection unreasonably burdens its rights pursuant to the easement. The Court of Appeals found that the first claim was essentially a trespass action. However, as an easement holder, Duke lacked standing to maintain an action for trespass for invasion of a right of way or easement. As for the second claim, the Court found that the proposed intersection was a reasonably necessary use of the City’s right-of-way, as it will beautify the corridor, enhance safety, and spur growth. Duke would still be able to repair and maintain the transmission lines and utility poles by simply using additional traffic measures. Ultimately, the Court of Appeals affirmed the trial court’s decision, finding that the reasonable necessity of the expansion outweighed the injury to Duke’s enjoyment of its easement.

Jeremy Fetty is a partner in the law firm of Parr Richey Frandsen Patterson Kruse with offices in Lebanon and Indianapolis. He often advises businesses and utilities (for profit, non-profit and cooperative) on organizational, human resources, and transactional matters and drafts and reviews commercial contracts.

In a March 2014 decision, the Indiana Court of Appeals found an individual complied with Indiana’s statutory notice requirements to properly obtain a tax deed by sending notices by certified mail1, even though signature upon delivery was not requested, return receipt was not requested, and there was no evidence that delivery of the notice was tracked or verified. Gupta v. Busan, No. 87A01-1307-MI-340, 2014 WL 880697, at *4 (Ind. Ct. App. March 6, 2014). The Court also determined that the notice provided had been reasonably calculated to inform the property owner of the tax sale and petition for tax deed. Id.
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In Dep’t of Waterworks v. Community School Corp. of Southern Hancock County, the Indiana Court of Appeals recently affirmed the trial court’s holding that a school may connect a new facility to an existing water main through the use of a service pipe instead of using a water main extension. Dep’t of Waterworks for Consol. City of Indianapolis v. Cmty. Sch. Corp. of S. Hancock County, 933 N.E.2d 880 (Ind. Ct. App. 2010). The Court of Appeals relied on the Indiana Utility Regulatory Commission’s (IURC) determination that the “the [Water Company’s departmental] rules do not preclude the School from connecting a service pipe to its new facility from an existing main.”

The Indianapolis Department of Waterworks unsuccessfully argued that the IURC’s decision was contrary to law because the School’s new facility “does not abut an existing main as required…by the rules.” The Department of Waterworks also argued against the IURC’s factual determinations concerning the economical decision by the school. According to the estimates for the project, it would have cost the School approximately $412,000 if a new main was constructed. In contract, connection of a service pipe to an existing water main would only cost the School approximately $168,000.
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