River Ridge Dev. Auth. v. Outfront Media, LLC

146 N.E.3d 906

RIVER RIDGE DEVELOPMENT AUTHORITY, Appellant (Plaintiff)

v.OUTFRONT MEDIA, LLC, David Watkins, No Moore, Inc., the Schlosser Family Limited Partnership, the Town of Utica, and the Utica Board of Zoning Appeals, Appellees (Defendants)

Supreme Court Case No. 19S-PL-645

Supreme Court of Indiana.

Argued: January 30, 2020

Filed May 29, 2020

ATTORNEYS FOR APPELLANT: Anne K. Ricchiuto, Brian J. Paul, Matthew C. Olsen, Emily A. Kile-Maxwell, Faegre Drinker Biddle & Reath LLP, Indianapolis, Indiana, David A. Lewis, Jeffersonville, Indiana

ATTORNEYS FOR APPELLEES OUTFRONT MEDIA, LLC AND DAVID WATKINS: Bryan H. Babb, Alan S. Townsend, Bradley M. Dick, Bose McKinney & Evans LLP, Indianapolis, Indiana

ATTORNEY FOR APPELLEES NO MOORE, INC. AND THE SCHLOSSER FAMILY LIMITED PARTNERSHIP: Michael M. Maschmeyer, Jeffersonville, Indiana

ATTORNEYS FOR APPELLEE TOWN OF UTICA: Daniel E. Moore, Matthew K. Duncan, Jeffersonville, Indiana

ATTORNEY FOR APPELLEE UTICA BOARD OF ZONING APPEALS: Rebecca L. Lockard, Jeffersonville, Indiana

ATTORNEYS FOR AMICUS CURIAE DEFENSE TRIAL COUNSEL OF INDIANA: Peter H. Pogue, Beth A. Behrens, Schultz & Pogue LLP, Indianapolis, Indiana, Lucy R. Dollens, Quarles & Brady LLP, Indianapolis, Indiana

Justices David, Massa, Slaughter, and Goff concur.

On Petition to Transfer from the Indiana Court of Appeals, No. 18A-PL-2347

Rush, Chief Justice.

The guardrails of zealous advocacy must leave ample room for a party to make its case. But when a party veers off course by intentionally introducing groundless arguments, harassing other parties, or acting in bad faith, courts can punish the behavior.

Generally, the American Rule requires each party to pay its own attorney's fees. While this rule has narrow exceptions that allow a court to order one party to pay another's fees, it is a hefty burden to demonstrate that such an award is warranted.

Today we discuss three grounds that permit a court to shift attorney's fees under Indiana law and find that, on this record, the parties seeking fees failed to show that any exception applied. We thus find that the trial court's decision to award attorney's fees was an abuse of discretion and reverse.

Facts and Procedural History

River Ridge Development Authority (RRDA) oversees the construction and development of the River Ridge Commerce Center. The Commerce Center is a business and manufacturing park located along State Road 265 near the Ohio River and the Town of Utica.

In 2017, RRDA was in the midst of planning a $25 million expansion to the Commerce Center, including a new entrance off the state road. During this time, RRDA discovered that Outfront Media, LLC—an outdoor advertising company—and its employee David Watkins had obtained permits from both the Utica Town Council and the Indiana Department of Transportation (INDOT) to construct seven billboards along State Road 265. The billboards would be built on parcels of land that were owned by No Moore, Inc. and the Schlosser Family Limited Partnership. Because each parcel was located near the Commerce Center's planned entrance, RRDA was concerned that the proposed billboards would harm its investment.

Hoping to prevent their construction, RRDA sued Outfront Media, Watkins, No Moore, the Schlosser Family Limited Partnership, the Town of Utica, INDOT, and the INDOT commissioner. RRDA sought, in part, a declaration that the billboards violated Utica's zoning ordinance. RRDA later amended its complaint—dismissing several claims, including those against the INDOT defendants, and adding a claim against the Utica Board of Zoning Appeals (BZA).

During this litigation, Outfront Media completed three of its seven proposed billboards. Before their construction, however, the Louisville–Jefferson County KY–IN Metropolitan Planning Organization had contacted INDOT to nominate the relevant portion of State Road 265 for scenic-byway status. This designation would prevent Outfront from building the four remaining billboards. Eight months later, INDOT recommended approval for that stretch of the state road to become a scenic byway; and RRDA voluntarily dismissed its complaint with prejudice the same day.

Outfront Media, Watkins, No Moore, the Schlosser Family Limited Partnership, the Town of Utica, and the Utica BZA (Defendants) all filed motions to recover attorney's fees, claiming RRDA's behavior during the lawsuit justified such an award. After a hearing, the trial court granted the motions in full. The court concluded that three "independent bases" permitted its $237,440.63 award: the common-law obdurate behavior exception to the American Rule, Indiana's statutory General Recovery Rule, and the court's inherent authority to sanction parties.

The Court of Appeals reversed. River Ridge Dev. Auth. v. Outfront Media, LLC , 129 N.E.3d 239, 251 (Ind. Ct. App. 2019). We granted transfer, vacating the Court of Appeals opinion. Ind. Appellate Rule 58(A).

Standard of Review

We review a trial court's award of attorney's fees for an abuse of discretion. Purcell v. Old Nat'l Bank , 972 N.E.2d 835, 843 (Ind. 2012). An abuse of discretion occurs when the court's decision either clearly contravenes the logic and effect of the facts and circumstances or misinterprets the law. Id. To make this determination, we review any findings of fact for clear error and any legal conclusions de novo. Id.

Discussion and Decision

The general rule in Indiana, and across the country, is that each party pays its own attorney's fees; and a party has no right to recover them from the opposition unless it first shows they are authorized. Loparex, LLC v. MPI Release Techs., LLC , 964 N.E.2d 806, 815–16 (Ind. 2012). Known as the American Rule, this doctrine reflects a compromise between keeping courts open to all and allowing attorneys the freedom to contract with clients. See id. at 815.

But the rule is not without exceptions. Statutes can authorize courts to award attorney's fees, and courts have carved out exceptions to the American Rule using their inherent equitable powers. See Ind. Code § 34-52-1-1 (2019) ; State Bd. of Tax Comm'rs v. Town of St. John , 751 N.E.2d 657, 658 (Ind. 2001). Today, we discuss three grounds, under Indiana law, that enable a court to award a party attorney's fees.

First, the common-law "obdurate behavior" exception empowers a court to order a party, under certain circumstances, to pay the opposition's attorney's fees. See Kikkert v. Krumm , 474 N.E.2d 503, 505 (Ind. 1985). Second, the General Recovery Rule, Indiana Code section 34-52-1-1, similarly allows an award of attorney's fees "to the prevailing party" based on another party's actions during litigation. I.C. § 34-52-1-1(b). And finally, courts are inherently authorized to sanction parties by shifting fees, even if no other exception applies. See In re Estate of Kroslack , 570 N.E.2d 117, 121 (Ind. Ct. App. 1991).

Here, the trial court concluded that it could award attorney's fees to the Defendants under all three grounds. We hold, however, that the trial court's decision was an abuse of discretion. Neither the common-law obdurate behavior exception nor the General Recovery Rule—both of which require a "prevailing party"—allow an award of attorney's fees when a party voluntarily dismisses its complaint, as RRDA did here. And the court's inherent authority does not authorize the award because the record lacks evidence to show that RRDA litigated in bad faith and that its conduct was calculatedly oppressive, obdurate, or obstreperous. We thus reverse the trial court's order.

I. The common-law obdurate behavior exception and the General Recovery Rule do not allow an award of attorney's fees when a party voluntarily dismisses its complaint.

Both the common-law obdurate behavior exception and the statutory General Recovery Rule permit a court, in certain circumstances, to award attorney's fees—but only to a "prevailing party." We find that the Defendants are not prevailing parties and thus fail to meet this threshold requirement. And we further explain that the common-law obdurate behavior exception remains in force, despite incorporation into the General Recovery Rule.

A. The Defendants are not prevailing parties under either the common-law exception or the General Recovery Rule.

Our Court of Appeals first recognized the common-law "obdurate behavior" exception in 1973. Saint Joseph's Coll. v. Morrison, Inc. , 158 Ind. App. 272, 279–81, 302 N.E.2d 865, 870–71 (1973), trans. denied . And this Court embraced it twelve years later. Kikkert , 474 N.E.2d at 505 (citing Cox v. Ubik , 424 N.E.2d 127, 129 (Ind. Ct. App. 1981) ). This exception—which reimburses a "prevailing party"—applies when a party knowingly files or fails to dismiss a "baseless claim" and a trial court finds the conduct "vexatious and oppressive in the extreme and a blatant abuse of the judicial process." Id.

One year after we adopted the common-law exception, the General Assembly amended the General Recovery Rule. See Pub. L. No. 193-1986, 1986 Ind. Acts 1944 (pertinent section codified at I.C. § 34-52-1-1(b) ). It now allows a court "[i]n any civil action" to award attorney's fees "as part of the cost to the prevailing party" if another party "(1) brought the action or defense on a claim or defense that is frivolous, unreasonable, or groundless; (2) continued to litigate the action or defense after the party's claim or defense became frivolous, unreasonable, or groundless; or (3) litigated the action in bad faith." I.C. § 34-52-1-1(b). The statute balances an attorney's duty to zealously advocate with the goal of deterring unnecessary and unjustified litigation. Mitchell v. Mitchell , 695 N.E.2d 920, 924 (Ind. 1998). The General Recovery Rule is strictly construed because it "is in derogation of the American Rule observed under the common law." D.S.I. v. Natare Corp. , 742 N.E.2d 15, 22 (Ind. Ct. App. 2000), trans. denied .

Both exceptions include the same threshold requirement: a party must be a "prevailing party" before a court...