ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
RANDAL J. KALTENMARK CURTIS T. HILL, JR.
ZIAADDIN MOLLABASHY ATTORNEY GENERAL OF INDIANA
BARNES & THORNBURG LLP JESSICA R. GASTINEAU
Indianapolis, IN WINSTON LIN
PARVINDER K. NIJJAR
THEODORE R. BOTS DEPUTY ATTORNEYS GENERAL
JENNY A. AUSTIN Indianapolis, IN
BAKER & MCKENZIE LLP
Chicago, IL
FILED
SCOTT L. BRANDMAN Feb 16 2017, 11:38 am
BAKER & MCKENZIE LLP CLERK
Indiana Supreme Court
New York, NY Court of Appeals
and Tax Court
IN THE
INDIANA TAX COURT
THE UNIVERSITY OF PHOENIX, INC., )
)
Petitioner, )
)
v. ) Cause No. 49T10-1411-TA-00065
)
INDIANA DEPARTMENT OF )
STATE REVENUE, )
)
Respondent. )
ORDER ON PETITIONER AND RESPONDENT’S REQUESTS
FOR EXPENSES PURSUANT TO INDIANA TRIAL RULE 37(A)(4)
FOR PUBLICATION
February 16, 2017
WENTWORTH, J.
After having successfully defended against and prosecuted discovery
enforcement motions either in whole or in part, both the University of Phoenix, Inc. and
the Indiana Department of State Revenue claim that an award of expenses pursuant to
Indiana Trial Rule 37(A)(4) is warranted. The Court agrees.
BACKGROUND1
The events giving rise to the filing of the Department’s first discovery
enforcement motion may be traced back to October 13, 2016: the day the University
issued a non-party subpoena to the former Commissioner of the Indiana Department of
State Revenue directing him to appear for a deposition. Shortly thereafter, the
Department moved for a protective order explaining that information on Section 14 of
House Bill 1349, the September 2014 Tax Competitiveness and Simplification Report,
and a presentation on the Report (collectively, the “deposition topics”) was not relevant
and was most likely obtainable from “lesser-ranking officials[.]” (See Pet’r Br. Supp.
Award Expenses Pursuant To Ind. Trial Rule 37(A)(4) For Its Resp. To Resp’t Mots. For
Protective Order & Mot. To Compel (“Pet’r Br.”), Ex. E at 2-5 ¶¶ 3-21.) On October 27,
2016, the Court denied the Department’s motion for protective order, quashed the
subpoena, and advised the parties that the University could depose the former
Commissioner at a later date. (See Pet’r Br., Ex. A.)
In the meantime, the University deposed the Department’s three Trial Rule
30(B)(6) witnesses who provided scant information on the deposition topics. As a
result, the University issued a second subpoena to the former Commissioner on
November 1, 2016. Just over a week later, the Department filed its second motion for a
protective order that, in addition to restating its prior arguments, explained that the
1
The Court has discussed the facts and procedural history regarding the parties’ discovery
disputes on two other occasions. See University of Phoenix, Inc. v. Indiana Dep’t of State
Revenue, 64 N.E.3d 1271, 1272 (Ind. Tax Ct. 2016); University of Phoenix, Inc. v. Indiana Dep’t
of State Revenue, Cause No. 49T10-1411-TA-00065, 2017 WL 475839, at *1-3 (Ind. Tax Ct.
Feb. 6, 2017). Consequently, it will only provide an abbreviated version of both for purposes of
this matter.
2
University “had unfettered access to [the Department’s] three extremely qualified
[30(B)(6)] witnesses” to discuss the “irrelevant” deposition topics, and therefore, the
Court should end the University’s “fishing expedition.” (See Pet’r Br., Ex. D ¶ 7.) On
November 28, 2016, the Court denied the Department’s second motion for protective
order. University of Phoenix, Inc. v. Indiana Dep’t of State Revenue, 64 N.E.3d 1271,
1274 (Ind. Tax Ct. 2016).
By that time, however, the University had filed its own discovery enforcement
motion that sought to compel the Department to produce documents regarding the
deposition topics and to designate a proper 30(B)(6) witness. The Court subsequently
granted in part and denied in part the University’s motion to compel. University of
Phoenix, Inc. v. Indiana Dep’t of State Revenue, Cause No. 49T10-1411-TA-00065,
2017 WL 475839, at *6 (Ind. Tax Ct. Feb. 6, 2017).
On January 17, 2017, the Court conducted an evidentiary hearing on the parties’
requests for expenses as required by Trial Rule 37(A)(4). The University submitted two
affidavits that provided its expenses totaled $159,446.40. (See generally Pet’r Br., Exs.
C, F.) In turn, the Department’s affidavit stated that its expenses totaled $12,900.00.
(See generally Resp’t Aff. Supp. Award Expenses.) Additional facts will be supplied as
necessary.
LAW
Indiana Trial Rule 37(A)(4) states that when a court grants or denies a discovery
enforcement motion, it shall require the party whose conduct necessitated the motion
or the party or attorney advising such conduct or both of them to
pay to the moving party the reasonable expenses incurred in
obtaining the order, including attorney’s fees, unless the court finds
that the opposition to[ or the making of] the motion was
3
substantially justified or that other circumstances make an award of
expenses unjust.
Ind. Trial Rule 37(A)(4). Accordingly, when discovery enforcement motions, like those
at issue here, are granted or denied, a presumption arises that the Court will order the
reimbursement of the prevailing party’s reasonable expenses. Popovich v. Indiana
Dep’t of State Revenue, 50 N.E.3d 407, 411 (Ind. Tax Ct. 2016). “The award of
expenses is mandatory unless the losing party either demonstrates that he was
substantially justified in making or opposing the motion or shows that other
circumstances make an award of expenses unjust.” Id. (citation omitted). “A person is
‘substantially justified’ in seeking to compel or in resisting discovery, for purposes of
avoiding the sanctions provided by Trial Rule 37(A)(4), if reasonable persons could
conclude that a genuine issue existed as to whether a person was bound to comply with
or entitled to the requested discovery.” Ledden v. Kuzma, 858 N.E.2d 186, 189 (Ind. Ct.
App. 2006) (citation omitted).
ANALYSIS AND DISCUSSION
The issue before the Court is whether the University and the Department are
entitled to reimbursements of expenses for successfully resisting their opponent’s, or
prosecuting their own, discovery enforcement motions either in whole or in part. As the
plain language of Trial Rule 37(A)(4) indicates, questions regarding the substantial
justification of parties, circumstances attendant to the discovery dispute, or the
reasonableness of an expense request may effect a party’s entitlement to a
reimbursement of expenses. See T.R. 37(A)(4). The parties’ arguments in this case,
however, only require the Court to examine the following: 1) whether the Department
was substantially justified in filing its two motions for protective order; 2) whether the
4
University was substantially justified in filing its motion to compel; and 3) whether the
University’s request for $159,446.40 in expenses is reasonable.
(1)
The Department argues that any reasonable person could determine that it was
substantially justified in filing its motions for protective order by “[l]ooking at the results
obtained[.]” (See Hr’g Tr. at 91.) More specifically, the Department explains that
because the Court granted the alternative request for relief in its first motion for
protective order by quashing the subpoena and rescheduling the deposition, the Court
implicitly approved of its plan to resolve the matter informally. (See Hr’g Tr. at 92, 98.)
The Department, therefore, claims that the filing of its second motion to compel naturally
resulted from the failure of its attempt at informal resolution. (See Hr’g Tr. at 98.)
The Department’s first motion for protective order challenged the University’s
request to depose a non-party based on theories of relevance and the deponent’s
status as a former commissioner. (See generally Pet’r Br., Ex. E.) The Department’s
motion cites persuasive authority and provides its own reasoning as support for its
position. (See generally Pet’r Br., Ex. E.) This Court previously explained that “‘the
presence of a general dispute over a legal issue ordinarily indicates that the losing party
on the motion is ‘substantially justified’ in [its] opposition[.]’” Popovich, 50 N.E.3d at 412
(citation omitted). Thus, a reasonable person could have concluded that a genuine
issue existed regarding whether the Department was bound to comply with the
University’s request to depose the former Commissioner. Consequently, the Court finds
that the Department was substantially justified in filing its first motion for protective
order.
5
This finding, however, does not carry forward to the Department’s filing of its
second motion for protective order given the proffered rationale. More specifically, in
attempting to preclude the former Commissioner’s deposition a second time, the
Department simply restated the legal arguments in its first motion and referenced three
tangential 30(B)(6) depositions. (See generally Pet’r Br., Ex. D.) By that point, the
infirmity of the Department’s original arguments should have been apparent because
the Court had denied the first motion for protective order motion less than two weeks
before and established a period for the former Commissioner’s deposition. A
reasonable person, therefore, could not conclude that a genuine issue regarding the
need to comply with the deposition existed when the Department filed its second motion
for protective order given these particular circumstances. Accordingly, the Court finds
that the Department was not substantially justified in filing its second motion for
protective order.
(2)
The University contends that it was substantially justified in filing its motion to
compel the Department to produce documentation regarding the deposition topics and
to designate a proper 30(B)(6) witness because the Court had already determined that
information on those subjects was relevant to the issues in the case. (See, e.g., Hr’g Tr.
at 85-86; Pet’r Br. ¶¶ 56-59.) The Court disagrees.
As explained in its February 6, 2017 order that primarily denied the University’s
motion to compel, the University’s attempt to give universal effect to a discovery ruling
on a distinct issue was flawed, and its failure to reassess its discovery requests in the
face of the changed circumstances (i.e., the results obtained by deposing the former
6
Commissioner) was fatal. Accordingly, a reasonable person could not conclude that a
genuine issue existed regarding whether the University was entitled to its requested
discovery given all the circumstances related to the filing of the University’s motion to
compel. Consequently, the Court finds that the University was not substantially justified
in filing its motion to compel despite its partial victory (i.e., the Court having compelled
the production of an admittedly withheld document).
(3)
The University’s request for a reimbursement of expenses totaling $159,446.40
consists of three components: 1) $8,780.85 for successfully resisting the Department’s
first motion for protective order, 2) $15,631.35 for successfully defending against the
Department’s second motion for protective order, and 3) $135,034.20 for successfully
prosecuting its motion to compel in part.2 (See Pet’r Br. ¶¶ 26, 31, 40.) The University
claims that its total request for expenses is reasonable given: 1) the Department’s lack
of substantial justification; 2) the skill levels of its attorneys; 3) the “great” amount of
time devoted to the discovery disputes; 4) the “magnitude” of the main issue (i.e., the
method for sourcing online tuition revenue); and 5) its own overall successes. (See
Pet’r Br. ¶¶ 25-30, 35-39, 49-55.) (See also Pet’r Resp. Resp’t Fee Pet. & Reply Supp.
Pet’r Fee Pet. ¶¶12-13, 19-25, 48-51.)
The Department, on the other hand, asserts that its own successes and the
University’s statement regarding the similarity of the Department’s first and second
motions for protective order illustrate that the University’s total request for
reimbursement is unreasonable. (See Hr’g Tr. at 92-94.) (See also, e.g., Hr’g Tr. at 81-
2
The third component of the University’s request for reimbursement was presented to the Court
before it ruled on the University’s motion to compel.
7
83.) The Department also claims that because the Court formerly limited reasonable
attorney’s fees to $200.00 per hour in litigating comparable matters, the University’s
unsupported request for attorney’s fees for more than that rate leaves little doubt that
the amount the University seeks is excessive, unjust, and unsupported. (See Hr’g Tr. at
94-96; Resp’t Resp. Br. Pet’r Req. Award Fees at 5-6.) (See also Resp’t Aff. Supp.
Award Expenses ¶ 4 (citing Popovich v. Indiana Dep’t of State Revenue, 50 N.E.3d 415,
418 (Ind. Tax Ct. 2016)).)
Although the Court previously limited attorney’s fees incurred in litigating similar
discovery matters, the Court did not hold that limitation was to be a universally
reasonable amount. Here, the University is not entitled to a reimbursement of expenses
for resisting the Department’s first motion for protective order because the Department
was substantially justified in filing the motion. The University also failed to qualify to be
reimbursed for its expenses with respect to its motion to compel because it did not show
substantial justification for filing that motion despite its minor victory. In addition, the
Court finds the University’s request for an award of $15,631.35 for resisting the
Department’s second motion for protective order is not reasonable for three reasons.
First, much of University’s preparation in responding to the second motion should
already have been done in responding to the first motion because the University
expressly acknowledged the similarity between the Department’s two motions for
protective order. Second, the time expended in reviewing the testimony of the 30(B)(6)
witnesses and preparing a response to the second motion’s one new argument should
have been minimal given that the 30(B)(6) depositions occurred less than two-weeks
before the filing of the motion. Lastly, the particular discovery issues presented in the
8
second motion should not have required additional preparation time because they were
not complex.
CONCLUSION
The Court, having considered the requirements of Trial Rule 37(A)(4) and the
parties’ evidence, arguments, and levels of non-cooperation, awards the University a
reimbursement for its expenses in the amount of $9,850.50 for successfully resisting the
Department’s second motion for protective order. See Shelby’s Landing-II, Inc. v. PNC
Multifamily Capital Institutional Fund XXVI Ltd. P’ship, 65 N.E.3d 1103, 1112 (Ind. Ct.
App. 2016) (indicating that the Court may consider several factors in assessing a
reasonable fee, including the judge’s own personal expertise, the responsibility of the
parties in incurring the fees, and the hours worked or rates charged). In addition, the
Court awards the Department $12,900.00 to reimburse its expenses for successfully
resisting the University’s motion to compel.
SO ORDERED this 16th day of February 2017.
Martha Blood Wentworth
Judge, Indiana Tax Court
Distribution: Randal J. Kaltenmark, Ziaaddin Mollabashy, Theodore R. Bots, Jenny A.
Austin, Scott L. Brandman, Jessica R. Gastineau, Winston Lin, Parvinder K. Nijjar.
9