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April 19, 2006

INDIANA CASELAW UPDATE: Judicial Estoppel

INDIANA CASELAW UPDATE
Stephen E. Arthur

Judicial Estoppel

Judicial estoppel is a judicially created doctrine that prevents a litigant, in certain circumstances, from asserting a position or theory in one action that is inconsistent with a position or theory asserted in the same or a previous action. The requirements for invoking this doctrine were discussed recently in Robson v. Texas Eastern Corp., 833 N.E.2d 461 (Ind. Ct. App. 2005). In Robson, the defendant in a personal injury action argued that the plaintiffs should be judicially estopped from maintaining personal injury claims in a civil action, in part, because those claims had not been properly disclosed on the plaintiffs’ Chapter 13 bankruptcy schedules. In reversing the trial court decision to dismiss the action based on judicial estoppel, the Court of Appeals noted that judicial estoppel should be applied to protect the integrity of the judiciary, and not as a “technical defense for litigants seeking to derail potentially meritorious claims.” Id. at 467. The key to applying judicial estoppel is proof that the party asserting inconsistent positions or theories has done so in bad faith and that the misrepresentations to the court were made intentionally. On this point the court stated that “[j]udicial estoppel only applies to intentional misrepresentation, so the dispositive issue supporting the application of judicial estoppel is the bad faith intent of the litigant subject to estoppel.” Id. at 466.

The Court also discussed the order of proof that a court should use in deciding whether to invoke judicial estoppel. Where a party allegedly has failed to disclose a claim in one action that it intends to assert in a second action, the party asserting judicial estoppel must establish that the non-disclosing party had knowledge of the claim and a motive to conceal it. Once established, the party against whom estoppel is sought must come forward with evidence that the non-disclosure occurred in good faith. The ultimate goal of the court in deciding whether to apply judicial estoppel is to determine whether there is the actual presence of bad faith. In the absence of bad faith, judicial estoppel should not be applied to deny a party’s claim.


Dismissal of Complaint for Failure to Mediate

A trial court may dismiss an action in accordance with Trial Rule 41(E) if the plaintiff refuses to mediate the case pursuant to a local rule that mandates mediation. In Office Environments v. Lake States Ins. Co., 833 N.E.2d 489 (Ind. Ct. App. 2005), the parties, through counsel, attempted for over two years to find a mutually acceptable mediation date in response to a court order mandating mediation. During that time, plaintiff obtained new counsel. The new attorney advised the mediator that his office would not pay the mediation expenses in the event mediation was unsuccessful; instead, the plaintiff would be responsible to pay all mediation expenses. In response, the mediator requested that both parties pay a retainer before mediation. When the plaintiff refused, the mediator cancelled the scheduled mediation. The defendant then moved to dismiss the action. However, both in written response to the motion and at the Rule 41(E) dismissal hearing, the plaintiff failed to provide evidence that it could not pay the requested retainer.

In affirming the dismissal of plaintiff’s action, the Court of Appeals discussed the importance of court-mandated mediation through local court rules. The court noted that mediation is contemplated by Trial Rule 16(A). Further, Marion County Local Rule 16.3(C)(1) mandates mediation in jury trial cases. The failure of a plaintiff to comply with an order issued in accordance with a local rule may subject the complaint to a Trial Rule 41(E) dismissal. Trial Rule 41(E) provides “[w]henever there has been a failure to comply with these rules . . . [t]he court shall enter an order of dismissal at plaintiff’s costs if the plaintiff shall not show sufficient cause at or before [the Rule 41(E) hearing]. . . .” The court observed that the plaintiff had never requested relief from the court’s mediation order, had failed to object to the mediator’s demand for a retainer, and had not presented any evidence that it could not pay the retainer. Moreover, the court suggested that a party who believes that mediation will not be productive, should challenge the mediation order in a prompt manner.

An excellent dissent was delivered by Judge May. She stated that sanctions for failure to mediate must flow from the A.D.R. Rules and not Trial Rule 41(E). Specifically, she argued that because the mediation process commences when the trial court enters the mediation order, sanctions for failure to mediate should be limited to mediation costs and attorney fees as allowed by A.D.R. Rule 2.10. Further, she stated that the phrase “these rules” under Trial Rule 41(E) refers to the Indiana Rules of Trial Procedure and not the A.D.R. Rules. Finally, Judge May questioned the propriety of mandatory mediation rules in all civil cases, especially in cases where the parties know mediation will be futile or one party does not have the resources to pay for mediation.


Nunc Pro Tunc Orders

A nunc pro tunc order is “an entry made now of something which was actually previously done, to have effect as of the former date.” Cotton v. State, 658 N.E.2d 898, 900 (Ind. 1995). The purpose of a nunc pro tunc order is to correct an omission in the record that actually occurred but was omitted because of inadvertence or mistake. To correct an error by a nunc pro tunc order, the trial court’s record must show that the unrecorded act or event actually occurred. A written memorial must form the basis for establishing the error or omission. This supporting material must be “found in the records of the case, must be required by law to be kept, must show action taken . . . by the court, and must exist in the records of the court contemporaneous with or preceding the date of the action described.” Id. at 900. Importantly, a court may not use a nunc pro tunc entry to materially change a prior ruling even though the court believes the prior ruling was incorrect.

The application of the rules governing a proper nunc pro tunc order were discussed in Brimhall v. Brewster, 835 N.E.2d 593 (Ind. Ct. App. 2005). In that case, the trial court attempted to change a dismissal entered in accordance with Trial Rule 41(E) to a dismissal “without prejudice.” The nunc pro tunc entry stated that the court’s initial order of dismissal had inadvertently omitted language that would allow the action to “be reinstated on condition that diligent prosecution will be had.” Apparently, this language was omitted due to a court computer error. As a result of several procedural steps that followed entry of the nunc pro tunc order, the trial court vacated the motion to dismiss and eventually entered a default judgment for the plaintiffs.

The defendants appealed and argued that the initial order of dismissal was “with prejudice” and that the trial court had no jurisdiction to resurrect the action by nunc pro tunc order. The Court of Appeals agreed, noting that Trial Rule 41(F) limits the ability of the trial court to grant reinstatement of a dismissed complaint. A dismissal without prejudice may be set aside for good cause shown and within a reasonable time, whereas a dismissal with prejudice may be set aside only in accordance with Trial Rule 60(B).

Because the trial court’s order of dismissal did not expressly provide for reinstatement or provide that it was “without prejudice,” it operated as a dismissal with prejudice. Further, there was no written memorial in the trial court’s records entered contemporaneous with the court’s dismissal indicating that dismissal was without prejudice. Consequently, it was error for the court to use a nunc pro tunc order for the purpose of establishing court jurisdiction and to validate court proceedings taken some two years after the initial order of dismissal.


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Stephen Arthur (sarthur@h-mlaw.com) is a partner with Harrison & Moberly, LLP, in Indianapolis, concentrating his practice in federal and state complex commercial litigation. Mr. Arthur is the author of the Civil Trial Practice and Indiana Procedural Forms volumes in West Publishing’s Indiana Practice series. The opinions and analysis expressed in this column are those of the author.

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