Bradley K. Buchanan, et al. v. Consolidated Brokers Corp. LLC (NFP)

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Pursuant to Ind. Appellate Rule 65(D), this Memorandum Decision shall not be regarded as precedent or cited before any court except for the purpose of establishing the defense of res judicata, collateral estoppel, or the law of the case. ATTORNEY FOR APPELLANT: ATTORNEYS FOR APPELLEE: GREGORY W. BLACK The Black Law Office Plainfield, Indiana PETER L. OBREMSKEY JEREMY L. FETTY TIMOTHY L. KARNS Parr Richey Obremskey Frandsen & Patterson LLP Lebanon, Indiana IN THE COURT OF APPEALS OF INDIANA BRADLEY K. BUCHANAN and BRIGHT & WILLIAMSON INSURANCE SERVICES II, INC., d/b/a BUCK INSURANCE SERVICES, Appellants/Defendants, vs. CONSOLIDATED BROKERS CORPORATION, LLC, Appellee/Plaintiff. ) ) ) ) ) ) ) ) ) ) ) ) ) FILED Oct 30 2009, 9:47 am No. 32A01-0902-CV-86 APPEAL FROM THE HENDRICKS SUPERIOR COURT The Honorable David H. Coleman, Judge Cause No. 32D02-0607-CT-21 October 30, 2009 MEMORANDUM DECISION - NOT FOR PUBLICATION CRONE, Judge CLERK of the supreme court, court of appeals and tax court Case Summary Bradley K. Buchanan and Bright & Williamson Insurance Services II, Inc., d/b/a Buck Insurance Services ( B&W II ) appeal the trial court s order of default judgment against them, as well as its award of damages to Consolidated Brokers Corporation, LLC ( CBC ). We affirm. Issues Buchanan and B&W II raise seven issues, which we consolidate and restate as the following four: I. Did the trial court abuse its discretion by entering default judgment against Buchanan and B&W II? II. Did the trial court err by ordering disclosure of the settlement agreement and garnishing settlement funds owed to Buchanan and B&W II following the mediation of a legal malpractice dispute? III. Did the trial court err in releasing CBC s surety bond? IV. Is there sufficient evidence to support the trial court s damages award? Facts and Procedural History CBC is an Indiana limited liability company which maintains its principal place of business in Avon, Indiana. John Scott is CBC s sole member. On May 19, 2004, CBC entered into a limited liability company partnership agreement ( the Partnership Agreement ) with Bright & Williamson Insurance Agencies, Inc. ( B&W I ), an Indiana corporation based in Nashville, Indiana. Robert A. Gredy is the president of B&W I. Pursuant to the Partnership Agreement, B&W I agreed to allow CBC to serve as an agent representing several insurers, including Pekin Insurance, Safeco, Progressive Insurance, and Allstate. 2 According to the terms of the Partnership Agreement, the relationship would continue for fifty years from the date of execution unless terminated by either partner. Beginning on May 19, 2004, Gredy s cousin Buchanan became an agent of CBC. In this capacity, in February 2006, Buchanan collected and deposited in CBC s bank account a check from Braco, LLC, in the amount of $200. Buchanan neglected to bind coverage for Braco, and when Braco later submitted a claim, CBC suffered an uninsured loss under its errors and omissions policy. CBC s insurer had to pay Braco $1,200 to settle the claim. In February 2006, Buchanan collected and deposited premium payments from Robert Siebert, Hamid Hamrah, and Mohammad Hamrah and then failed to bind coverage for these three individuals. When each of them later suffered a property loss, CBC was again subjected to errors and omissions liability. CBC s errors and omissions insurer paid a monetary settlement to each of these persons to obtain releases from liability. CBC paid a $5,000 deductible to its E&O insurer, as required pursuant to its policy, and CBC remains liable for an additional $10,000, which is payable upon the demand of any of the four claimants mentioned above. While acting as CBC s agent, Buchanan collected many more premium checks made payable to B&W I and deposited them into his personal bank account. On two occasions in February 2006, Buchanan also withdrew funds from CBC s checking account for his personal use. On April 28, 2006, Scott discovered that Buchanan had taken, without permission, certain client files from CBC s office. CBC then terminated the Partnership Agreement, and Scott began to devote considerable time to determining the extent of 3 damages caused by Buchanan. CBC also hired Becky Bristol to assist Scott in remedying the problems created by Buchanan. Between May 14, 2006, and February 23, 2007, CBC paid $21,346 to Bristol. CBC discovered that Buchanan had also sabotaged its phone system and damaged its computer network. CBC paid $305 to repair the phones and $2,918 to fix the computers. On April 13, 2006, the insurance agency of B&W II was formed, with Buchanan as its registered agent. On July 21, 2006, CBC filed a complaint naming as defendants, among others, Buchanan and B&W II. CBC alleged that (1) Buchanan had breached the fiduciary duty he owed to CBC, (2) Buchanan and B&W II had tortiously interfered with CBC s contractual and business relationships; (3) Buchanan had criminally converted CBC s funds; and (4) Buchanan had acted in bad faith. On October 13, 2006, CBC served Buchanan and B&W II with a request for production of documents. Buchanan failed to respond in a timely manner to this request and follow-up requests. On March 30, 2007, CBC filed a motion to compel discovery and request for sanctions. On April 9, 2007, the trial court entered an order granting Buchanan and B&W II fifteen additional days to respond to CBC s motion to compel discovery and request for sanctions. On April 27, 2007, having received no response from Buchanan or B&W II, the trial court ordered a default judgment against Buchanan on CBC s claims of tortious interference with a contract, tortious interference with the business and contractual relationships between CBC and its clients, and bad faith. The trial court ordered default judgment against B&W II on the counts of breach of fiduciary duty, tortious interference 4 with a contract, CVRA, tortious interference with the business relationship and contractual relationship between CBC and its clients, and bad faith. The court also ordered that Buchanan and B&W II pay CBC s attorney fees. As a result of the default judgment, Buchanan and B&W II filed a legal malpractice suit in Marion Superior Court against their former attorney, Chris Worden. On June 12, 2008, Worden, Buchanan, and B&W II participated in mediation and agreed to settle the malpractice claim for an undisclosed amount. CBC had no knowledge of the terms of the settlement agreement. On June 13, 2008, CBC filed a verified motion for an order of prejudgment garnishment and request for an emergency hearing in the trial court. On June 20, 2008, the trial court held an emergency hearing on the motion. During the hearing, the trial court ordered Buchanan to disclose the terms of the malpractice settlement agreement. Attorney Scott Weathers (who represented Buchanan in his malpractice action against Worden) disclosed that the total settlement amount was $85,000, with $21,000 designated to pay Weather s fees and expenses (less $1,000 in fees to be paid to Worden for a prior case in which Worden represented Buchanan), $30,000 designated to pay the fees of attorney Gregory Black (who represented Buchanan in the instant case following Worden s dismissal), and $34,000 designated for Buchanan. The trial court ordered that $33,000 be held in trust until the resolution of CBC s claims against Buchanan and B&W I.1 The trial 1 It appears that the trial court may have miscalculated the amount due to Buchanan when reviewing the terms of the settlement agreement. 5 court also ordered CBC to post a surety bond in the sum of $33,000 with the Clerk of the Hendricks County Courts, which CBC did on June 30, 2008. The trial court held a damages hearing on February 22, May 16, and October 16, 2008. On November 21, 2008, the trial court issued findings of fact and conclusions thereon. The court determined that Buchanan and B&W II had damaged CBC in the sum of $509,229.18. On December 5, 2008, pursuant to Indiana Trial Rule 54(B), the trial court entered final judgment against Buchanan and B&W II. This appeal ensued. Discussion and Decision I. Default Judgment Buchanan and B&W II contend that the trial court erred by rendering default judgment against them because they did not disobey a court order; they received no warning from the court as to an impending default judgment; and the trial court did not hold a hearing. Our standard of review2 is well settled: [T]rial courts are vested with broad discretion with respect to discovery disputes. Decisions regarding discovery matters will be reversed only if there has been an abuse of that discretion. An abuse of discretion occurs when a trial court reaches a conclusion which is against logic and the natural inferences which can be drawn from the facts and circumstances before the trial court. Moreover, we note that there must be a rational basis for the trial court's decision. Fifth Third Bank v. PNC Bank, 885 N.E.2d 52, 54 (Ind. Ct. App. 2008) (quoting Hartford 2 We remind Appellants of Indiana Appellate Rule 46(A)(8)(b), which states in part that the argument portion of the brief must include for each issue a concise statement of the applicable standard of review[.] Appellants failed to include this information in their initial brief; thus, Appellee presented the proper standards of review in its own brief. Moreover, we note that Appellants brief barely complies with Indiana Appellate Rule 46(A)(8)(a), which requires the Appellant to support each issue with cogent reasoning. 6 Fin. Servs. Group, Inc. v. Lake County Park & Recreation Bd., 717 N.E.2d 1232, 1234 (Ind. Ct. App. 1999)) (citations omitted). Indiana Trial Rule 37 governs the consequences of a party s failure to cooperate in discovery. Pursuant to Rule 37(A)(2), if a party fails to respond to a request for production of documents, the discovering party may move for an order compelling a response. Pursuant to Rule 37(B)(2), if a party fails to obey an order to provide discovery, the court may make such orders in regard to the failure as are just, including but not limited to an order rendering default judgment against the disobedient party. We no longer require strict compliance with the hearing requirement of Indiana Trial Rule 55. Mallard s Pointe Condo. Ass n v. L&L Investors Group, LLC, 859 N.E.2d 360, 364 (Ind. Ct. App. 2006), trans. denied (2007). Instead, we evaluate whether the sanction of default judgment is just, as Rule 37(B)(2) requires. In the instant case, CBC served a request for production of documents to Buchanan and B&W II on October 13, 2006. CBC requested that Buchanan and B&W II make the documents available within thirty days. Over the next several months, CBC made several phone calls to opposing counsel to inquire about Buchanan s and B&W II s failure to respond to the request for production. On March 7, 2007, CBC sent a letter to opposing counsel advising that he would file a motion to compel if he did not receive a response to the request for production within ten days. On March 30, 2007, CBC filed a motion to compel with the trial court. On April 9, 2007, the trial court ordered Buchanan and B&W II to respond to the motion to compel and request for sanctions, which they failed to do. On April 7 27, 2007, the trial court issued an order defaulting Buchanan and B&W II and ordering them to provide the requested documents to CBC within ten days of the date of the order. Buchanan and B&W II argue that we should reverse the trial court s order because they were not expressly warn[ed] by the trial court that default judgment was a possibility for their failure to respond to CBC s request for production of documents. Appellants Br. at 23. In support of this argument, Buchanan and B&W II cite Prime Mortgage USA, Inc. v. Nichols, 885 N.E.2d 628 (Ind. Ct. App. 2008). In fact, in Nichols, we upheld a default judgment even though we determined that the trial court did not explicitly warn the Defendants that failure to comply with its [discovery] order would result in default judgment. Id. at 650. We determined that it was enough that the trial court made clear that it was not pleased with the Defendants discovery conduct by describing the responses as duplicitous and vague and downright annoying[,] and by stating that while the responses are not well taken in terms of final result, [they] are well taken enough to avoid the issuance of sanctions. Id. This language, we noted, was sufficient to make the defendants aware that the trial court was considering sanctions. Similarly, in the instant case, the trial court ordered Buchanan and B&W II to produce the documents requested by CBC within fifteen days. This order was made in direct response to CBC s motion to compel and request for sanctions, in which CBC included a specific request for default judgment against Buchanan and B&W II. Clearly, then, as in Nichols, the appellants were aware that the trial court was considering sanctions against them. They had ignored several requests from CBC and two trial court orders regarding their failure to 8 complete discovery. Therefore, we cannot say that the trial court s decision was against the logic and effect of the facts and circumstances before it, and we hereby affirm the trial court s default judgment against Buchanan and B&W II. II. Disclosure of Settlement Amount and Garnishment As noted above, Buchanan and B&W II attended mediation with their former attorney, Chris Worden, for purposes of settling a legal malpractice dispute. The parties reached an agreement at mediation that Worden would pay Buchanan and B&W II $34,000 to settle the malpractice claim. Before Buchanan and B&W II collected the money, however, the trial court ordered the parties to disclose the terms of the settlement agreement and then ordered Buchanan s portion be held in trust until further order. Buchanan and B&W II claim that by ordering the disclosure of this amount, the trial court violated the confidentiality of mediation. Typically, we review a trial court s decision to admit or exclude evidence for an abuse of discretion. Gast v. Hall, 858 N.E.2d 154, 160-61 (Ind. Ct. App. 2006), trans. denied (2007). In this case, the trial court s ruling to admit the amount of the settlement reached in mediation rested on its interpretation of Indiana Alternative Dispute Resolution Rule 2.11, which incorporates Indiana Evidence Rule 408. When a decision turns on the interpretation of a rule of evidence, we review that decision de novo. Id. Indiana Alternative Dispute Resolution Rule 2.11states in pertinent part: Mediation shall be regarded as settlement negotiations as governed by Ind. Evidence Rule 408. For purposes of reference, Evid. R. 408 provides as follows: 9 Evidence of (1) furnishing or offering or promising to accept a valuable consideration in compromising or attempting to compromise a claim, which was disputed as to either validity or amount, is not admissible to prove liability for or invalidity of the claim or its amount. Evidence of conduct or statements made in compromise negotiations is likewise not admissible. This rule does not require exclusion when the evidence is offered for another purpose, such as proving bias or prejudice of a witness, negating a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution. Compromise negotiations encompass alternative dispute resolution. As we have noted in the past, the rationale for this rule is that the law favors out of court compromises and that a party who yields certain points in an effort to effectuate such a compromise should not be prejudiced if those efforts fail. Gast, 858 N.E.2d at 161 (quoting Bridges v. Metromedia Steakhouse Co., 807 N.E.2d 162, 166 (Ind. Ct. App. 2004)). In Gast, the plaintiffs contested a will, claiming in part that the testator, referred to as Uncle Joe, was not of sound mind when he executed the will. In support of this claim, the plaintiffs offered into evidence the affidavit of a man who had been present at a mediation involving a prior contest to the will of Uncle Joe s brother. The affidavit included the witness s observations at the mediation, including his impression that Uncle Joe was not able to understand the ramifications of the will contest, that he was having difficulty understanding the options presented, that Uncle Joe had not recognized his nephew (with whom he apparently spent a lot of time), and that he repeatedly described an incident that had occurred approximately twenty years earlier as though it were a recent incident. The trial court granted the defendant s motion to strike several paragraphs of the affidavit, finding that they either violate the privilege and confidentiality of mediation or are merely conclusory and should not be considered[.] Gast, 858 N.E.2d at 154, 159. On 10 appeal, we noted that the affidavit was not offered to prove liability for or invalidity of the claim or its amount regarding the first will contest. See Ind. ADR Rule 2.11. Rather, it was offered for the purpose of proving Uncle Joe s testamentary capacity, or lack thereof, in the case involving the second will contest. Thus, we determined that the paragraphs describing Uncle Joe s demeanor during the mediation of the first will contest were admissible in the second will contest pursuant to Indiana ADR Rule 2.11. Id. at 162. Similarly, in the instant case, the evidence at issue the amount of the settlement reached between Buchanan and B&W II and attorney Worden was requested by the trial court for a purpose other than to prove liability for or invalidity of the claims being litigated in this case. Rather, the information was used by the trial court to determine the amount it could garnish in the instant case. There was no violation of Indiana ADR Rule 2.11, and therefore, the trial court did not err in requesting this information. Buchanan and B&W II also challenge the propriety of the garnishment order itself, claiming that the trial court erred by garnishing the $33,000 prior to a final judgment in this case. Pursuant to Indiana Trial Rule 64(A), At the commencement of and during the course of an action, all remedies providing for seizure of person or property for the purpose of securing satisfaction of the judgment ultimately to be entered in the action are available under the circumstances and in the manner provided by law and existing at the time the remedy is sought. The remedies thus available include, without limitation, ¦ attachment and garnishment ¦. (Emphasis added.) Clearly, the rule contemplates seizure of property to secure satisfaction of a judgment even before that judgment is entered. Here, the trial court had entered default judgment against Buchanan and B&W II prior to ordering the garnishee defendants to pay 11 $33,000 from the malpractice mediation settlement to the clerk of courts. The trial court also ordered CBC to post a bond, thus ensuring that if the funds had been improperly attached, there would have been no harm to Buchanan and B&W II as a result. In sum, there was no error here. III. Release of Surety Bond Buchanan and B&W II also claim that the trial court erred by entering a final judgment as to both of them and releasing the bond protecting Buchanan s interest in the funds garnished from mediation. Indiana Trial Rule 54(B) states in pertinent part: When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In its order of December 5, 2008, the trial court made the referenced express determinations and also ordered that the mediation funds and surety bond be released. At the time of this order, CBC had prosecuted the proceedings in garnishment to effect as required by Indiana Code Section 34-25-3-2(b), and thus the trial court did not err in releasing CBC from its requirement to maintain the bond. Buchanan and B&W II say that the trial court s entry of final judgment against them is the antonym of judicial economy. Appellants Br. at 38. As CBC points out, however, all of its claims against Buchanan and B&W II have been adjudicated, and any future proceedings involving the remaining defendants will have no effect on Buchanan and B&W II. The trial court did not err by entering a final judgment as 12 to Buchanan and B&W II. IV. Damages Finally, Buchanan and B&W II contend that the trial court s damages award is not supported by the evidence. The total amount of damages awarded was $509,229.28, which included $45,893.22 for CBC s claim pursuant to the Crime Victims Relief Act ( CVRA ), $365,532.60 for breach of fiduciary duty, and $97,903.36 for attorney fees. We review a trial court s award of damages under an abuse of discretion standard. BMV v. Ash, Inc., 895 N.E.2d 359, 368 (Ind. Ct. App. 2008). We will not reweigh the evidence or judge the credibility of witnesses. Id. We will reverse an award only when it is not within the scope of the evidence before the finder of fact. Id. When reviewing a damage award, this Court considers only the evidence that supports the award along with the reasonable inferences therefrom. Ritter v. Stanton, 745 N.E.2d 828, 843 (Ind. Ct. App. 2001), trans. denied (2002), cert. denied (2002). Buchanan and B&W II do not contest the CVRA damages or the attorney fees amount. As for the damages awarded for breach of fiduciary duty, they claim that Buchanan and CBC were partners and thus owed no fiduciary duty to each other.3 As noted by the trial court, the default judgment against Buchanan and B&W II serves as an admission of the complaint, which includes the allegation that Buchanan was an agent of CBC. See Nichols, 885 N.E.2d at 660 ( Following the entry of default judgment, the defendant may no longer Actually, partners are held accountable as fiduciaries pursuant to Indiana s Uniform Partnership Act. See Ind. Code § 23-4-1-21. 3 13 avail himself of substantive defenses. ). Regardless, there is ample evidence in the record to support the conclusion that Buchanan acted as an agent of CBC. The Partnership Agreement did not identify Buchanan as a partner. Rather, it stated that B&W I and CBC were entering into a limited liability partnership agreement for the purpose of engaging in the business of brokering insurance. Appellants App. at 34. It appears that Buchanan signed the agreement as a representative of CBC, underneath John Scott s signature. During the course of his relationship with CBC, Buchanan interacted with CBC s clients and accepted insurance premium payments on CBC s behalf. The primary legal definition of agent is a person authorized by another (principal) to act for or in place of him; one intrusted with another s business. BLACK S LAW DICTIONARY 63 (6th ed. 1990). This appears to be an accurate description of Buchanan s relationship with CBC. An agent is subject to the duty to act solely for the benefit of the principal. N. Elec. Co. v. Torma, 819 N.E.2d 417, 430 (Ind. Ct. App. 2004), trans. denied (2005). An agent may not place himself in a position wherein his own interests are potentially antagonistic to those of his principal. Id. In this case, there was evidence that Buchanan used his position vis-Ã -vis CBC: (1) to access and remove CBC s client information for his own gain, (2) to deposit checks intended for CBC and converting the funds for his own use, (3) to subject CBC to errors and omissions liability by failing to bind insurance coverage for clients, (4) to sabotage CBC s phone and computer system, and to solicit CBC s clients, and (5) to interfere with CBC s relationship with its clients and insurers. 14 Clearly, Buchanan s actions demonstrate a breach of his fiduciary duty to CBC as its agent. To recover damages for a claim of breach of fiduciary duty, the plaintiff must present evidence of damages arising from the breach. Mercho-Roushdi-Shoemaker-Dilley ThoracoVascular Corp. v. Blatchford, 900 N.E.2d 786, 800 (Ind. Ct. App. 2009). At the damages hearing, CBC presented evidence of the commissions and clients CBC lost as a direct and proximate result of Buchanan s breach of fiduciary duty. CBC provided documents it received from various insurance companies and clients terminating their contracts with CBC. Scott also testified that the reason for these terminations was CBC s inability to properly service insureds following Buchanan s removal of client files and sabotage of CBC s computer system. There was no evidence to contradict this testimony. Scott testified that the industry standard for determining the fair market value of an insurance broker s book of business for each client is to multiply the annual commission earned for that client by a factor of two. Scott further testified that for long-term clients, the industry standard allows for the annual commission to be multiplied by a factor of five. The trial court utilized these formulas to determine the market value of each book of business CBC lost as a result of Buchanan s breach of fiduciary duty. In sum, the damages award is certainly within the scope of the evidence most favorable to CBC. Thus, we find no abuse of discretion. Affirmed. MAY, J., and BROWN, J., concur. 15

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