A TTORNEYS FOR A PPE LLANT A TTORNEY S FOR A PPELLEE

Stephen M. Maish Anthony W. Overholt Patrick A. Mysliwy Maggie L. Smith Maish & Mysliwy Frost Brown Todd LLC Hammond, Indiana Indianapolis, Indiana

_____________________________________ _________________________________________ 

# In the 

# Indiana Supreme Court

_________________________________ No. 37S03

- 0904

- CV

- 192

L AKE C OUNTY T RUST C OMPANY , Trustee under Trust Agreement dated November 1, 2002 and known as the DSK Family T rust No. 5400 ; L AKE C OUNTY T RUST C OMPANY , Trustee U n der Trust Agreement dated December 18, 2002 and known as Trust No. 5390 ; L AKE C OUNTY T RUST C OMPANY , Trustee under Trust Agre e ment dated February 18, 2003 and known as P & M L AND T RUST N O

. 5444; T HOMAS N. S IMSTAD ; M ARLA K. S IM S TAD ; AND K ENNETH B ACHORSKI , Petitio n ers/ Appellant s ,

v.

A DVISORY P LAN C OMMISSION OF L AKE C OUNTY , Respond e nt/ Appel lee

.

_________________________________ Interlocutory Appeal from the Jasper Circuit Court , No. 37C01

- 060 3

- PL

- 074

The Honorable John D. Potter , Judge

_________________________________ On Transfer from the Indiana Court of Appeals, No. 37A03

- 0705

- CV

- 230

_________________________________

April 2 8 , 2009
Dickson, Justice.

This appeal challenges the trial court's use of sanctions in the course of its enforce ment of a mediated settlement in a dispute arising from the denial of an applic a tion for subdivision plat approval. We hold that government entities are subject to sanctions under the Indiana Altern ative Dispute Resol ution Rule s , but that in this case the A dvisory Plan Commission did not act in2

bad faith for failing to approve the mediation agreement because it remained subject to the Adv isory Plan Commission ' s final approval at a public mee t ing

.

After the respond ent Advisory Plan Commission of Lake County, Indiana ("Plan Co mmission") denied a request for primary plat approval for the Deer Ridge South Subdivision l ocated in unincorporated Lake County, the appellants (hereinafter " D evelopers") sought judicial
review of the decision. T he trial court ordered medi a tion , which resulted in a written settlement agreement that purported to approve a "revised primary and sketch plan" attached to the agre ement, and also included the following prov i sion:
That the Petitioner s hall submit a clean revised primary and sketch plan encompassing all of the agreements set forth herein and the Advisory Plan Commission of Lake County shall at its next regular meeting, August 16, 2006, or a special meeting to be called

soo n er and before August 4, 2006, shall approve this agreement and its engineering. Appellant's App'x at A66. T he Plan Commission then met as scheduled but voted to defer a d ecision on the subdivision for thirty days. The Developers filed a motion to enforce the agre emen t, and the Plan Commission the n voted to reject it , after which the trial court on Septe m ber 25, 2006, ordered that the settlement agreement be enforced and specifically o r dered the Plan
Commission to approve the plat and to issue any necessary permits. T h e Plan Commi s sion then complied and approved the primary plat and engineering. After a hearing , the trial court on April 18, 2007, found that the Plan Commission had acted in bad faith in failing to approve the subd ivision after having granted its attorn eys full settlement authority

. The trial court held that g overnment al entities were not subject to sanctions under the Indiana Alternative Dispute Resol ution Rules, but that, pursuant to statutory authority, the Plan Commission must reimburse the Develop ers their costs of mediation, $1,578.55. The Developers and the Plan Commi s sion each filed a notice of appeal , 1 and the trial court stayed further pr o ceedings

.

The Developers ' appeal primarily contends that the Plan Commission is not immune from

san ctions under Indiana Alternative Dispute Resolution Rules 2.7 and 2.10. The Plan Commi s-

1 In their separate notices of appeal, Appe l lant's App'x at A43

- A44, A46

- A47, the Developers and the Plan Commission each sought an appeal from the trial court's interlocutory order of April 18, 2007, pu rsuant to Indiana Appellate Rule 14(A)(1), which authorizes appeals from specified types of interlocut o ry orders as a matter of right, without requiring certification from the trial court or acceptance by the Court of Appeals.3

sion 's cross

- appeal primarily urges that because its attorneys in the mediation process could not
bind the Plan Commission to a settlement in violation of Indiana's Ope n Door Laws , the trial court incorrectly foun d it to have acted in bad faith for failing to promptly a p prove the mediation
settlement

. T he Court of Appeals consolidated the appeals and ultimately held that the Plan
Commission is immune from any sanctions under the A.D.R. Rules and that the Plan Commi ssion did not act in bad faith in failing to promptly approve the plat

. Lake Cou n ty Trust Co. v. Advisory Plan Comm'n of Lake County , 8 8 3 N.E.2d 124 (Ind. Ct. App. 2008). We grant tran sfer.

1. Application o f A

. D

. R

. S anctions to G overnmental E ntities

The Developers challenge the trial court's conclusion that the Plan Commission, as a g overnment al entity, is immune from the imposition of sanctions under Alternative Dispute Resol ution Rules 2.7(E)(3) and 2.10 , which apply to mediation and which state, in r e levant part:

In the event of any breach or failure to perform under the agreement, upon m otion, and after hearing, the court may impose sanctions, including entry of judgment on the agre e ment. A.D.R. 2.7 (E)(3).

Upon motion by either party and hearing, the court may impose sanctions against any attorney, or party representative who fails to comply with these mediation rules, l i mited to assessment of mediation costs and/or attorney fees relevant to the process. A.D.R. 2.10. Our A

. D

. R

. Rules do not contain any provisions expressly granting i m munity from sanctions to governmental entities participating in mediation.

Supporting the trial court's decision on this issue, the Plan Commission urges that g overnmental entities should not be subject to costs or attorney fees under the A

. D

. R

. Rules, even if the governmental entity mediates in bad faith, emphasizing State v. Carter , 658 N.E.2d 618 (Ind. Ct. App. 1995) , trans. not sought , and arguing that the A

. D

. R

. Rules do not expressly permit

costs or a t torney fees to be assessed against a governmental entity.

Carter involved an interlocutory appeal in a negligence action arising from injuries at a
branch of the Indiana Bureau of Motor Vehicles. Follo wing an unsuccessful court

- ordered me d-4

iation, the plaintiff sought, and the trial court granted, sanctions against the State for failing to act in good faith by making a reasonable attempt to resolve the case. The Court of Appeals r eversed, finding no evi dence of bad faith , i d. at 622

- 23 , and, in addition, opined that, even if there had been bad faith, the "the trial court should not have sanctioned the State because it is immune from punitive awards," id. at 6 2 3

.

The Developers argue that this lat ter conclusion in Carter was impliedly ove rruled by this
Court in Noble County v. Rogers , 745 N.E.2d 194 (Ind. 2001). There , Rogers sought dama g es under Indiana Trial Rule 65(C) after being "wrongfully enjoined or restrained" by Noble Cou n ty government fr om adding a second story to her home. Id. at 196. This Court found that the pro per construction of the word "wrongfully" involved the interaction between the governmental i mmunity provisions of the Indiana Tort Claims Act and "our inherent power to sanct ion litigants
for i m proper or untoward behavior in judicial proceedings." Id. at 197. And we balanced the statutory limitations and the "judiciary's inherent power to sanction" to conclude that "a restrai ning order or an injunction obtained by the gover nment is wrongful only when the government acts in bad faith or with malice so as to threaten the proper functioning of the court." Id. at 199. Applying this distinction, we found no bad faith by Noble County presented in the record. Si gnificantly, how ever, we emphasized that the "power to sanction is a necessary precondition to the exercise of our independent judicial power," and that "[t]o protect the proper functioning of jud icial proceedings, we also have imbedded [the sanctioning] power in nume r ous court rules." Id

. at 198.

In Brownsburg Community School Corp oration v. Natare Corp oration , 824 N.E.2d 336 (Ind. 2005), which did not involve the A.D.R. Rules, we held that a governmental entity cannot be held liable for treble damages because they are punitive in nature, and we refer enced Carter only as an example of the reluctance of courts to impose punitive damages on government ent ities. Id. at 345

- 46. And in Noble County , we similarly acknow l edged that Carter had "refused to award attorney s fees and costs against the government on the grounds that it is immune from 'punitive' awards." Noble County , 745 N.E.2d at 199 n.6. But this exa m ple w as presented as an incidental contrast to our recognition that inherent judicial power includes the aut hority to i mpose sanctions on gover n mental entities:5 It is beyond question that this power extends to governmental attorneys and pa rties. "When the State enters the court as a litigant, it places itself on the same basis as any other litigant; subjecti ng itself to the inherent authority of the court to control actions b e fore it, just as any other litigant." State v. Blenden , 748 So.2d 77, 88

- 89 (Miss. 1999), reh'g denied.
Id. at 199.

Mediation proceedings pursuant to our A.D.R. Rules are deemed to be "in court," and "in a court sanctioned environment," irrespective of whether they actually occur inside a cou r troom. Koval v. Simon Telelect, Inc. , 693 N.E.2d 1299, 1307 (Ind. 1998). And, as we observed in
Fuchs v. Martin , "[a]n order to mediate is n ot unlike the requirements imposed by our rules g overning discovery and other pre

- trial procedure." 845 N.E.2d 1028, 1041 (Ind. 2006). Indiana Trial Rule 37(B)(2) specifically permits discovery sanctions to be imposed upon a gover n mental organization. E ven without explicitly relying upon such authorization, we have reco g nized that a trial court, in the exercise of its inherent power, has wide discretion to impose sanctions to rem edy a discovery violation by the State in criminal cases. Carson v. State , 271 Ind. 203, 206, 391 N.E.2d 600, 602 (1979); Reid v. State , 267 Ind. 555 , 565 , 372 N.E.2d 1149, 11 54

- 55 (1978).
The A

. D

. R

. Rules do not exempt governmental entities

. They apply in all civil and domestic r elations litigation in Indiana courts. A.D.R. 1 .4. Furthermore, A.D.R. 2.7(E)(3) authorizes the impos i tion of sanctions for " any " breach or failure to perform under an agreement resulting from
medi a tion, and A.D.R. 2.10 authorizes sanctions against "any " attorney or party representative
who fails to c omply with the medi a tion rules. No exception is granted to governmental entities
or their atto r neys

.

Until now, this Court has not had occasion to review the proposition espoused in Carter
that a trial court may not impose A.D.R. Rule sanctions agains t a governmental entity . In co ntrast to the punitive damage rationale employed in Carter , w e find that the sanctions authorized by the A.D.R. Rules are more analogous to the exercise of inherent judicial authority than to the imposition of punitive damage awards in civil law suits. Like other parties to litigation who may be involved in a mediation proceeding, governmental entities are equally obligated to com p ly with the applicable rules and thus should be equally subject to the sanctions authorized to e ncourage co m pliance. We therefore disapprove of the portion of Carter that expresses a contrary6

view, and we now hold that governmental entities are not immune from the power of courts to impose sanctions under the A .D.R. Rules , particularly Rules 2.7(E)( 3) and 2.10.

2 . Mediation Agreement Subject to Open Door Laws

Upon finding that the Plan Commission acted "in bad faith in failing to approve the Su bdivision until October 25, 2007 after granting its attorneys full settlement authority," the trial

co urt concluded that the Plan Commission should reimburse the Developers $1,578.55 for their mediation costs. Appellant's App'x at A14

- A15

. On cross

- appeal, the Plan Commission cha llenges this conclusion and the finding of bad faith, arguing that its attor neys in the mediation
could not , as a matter of law, bind the Commission to a settlement in violation of Ind i ana's Open
Door Laws and that the agreement reached in mediation "could only be a prov i sional agreement

s ubject to a condition precedent and, there fore, was unenforce a ble until that condition precedent
was satisfied." Br. of Cross

- Appellant/Appellee at 15.

T he Developers assert that the settlement agreement was final and not required by the Open Door Law to be subsequently approved in a public m eeting and thus that the Plan Commi ssion's fai l ure to comply with the agreement supported the trial court's finding of bad faith. 2 The

2 The Developers also presen t procedural challenges to the Plan Commission's cross appeal. The Deve lopers argue that the Plan Commission failed to timely challenge the September 25, 2006 trial court ru l ing in accordance with the thirty

- day requirement for interlocutory appeals pursu ant to Indiana Appellate Rule 14 and that, by ultimately approving the subdivision plat on October 24, 2006, the Plan Commission has waived its right to challenge any alleged error in the trial court's order of September 25, 2006. We reject both claims. The Plan Commission was not required to institute an interlocutory appeal of the Se ptember 2006 ruling but instead was entitled to challenge it as part of its appeal from the court's final judgment. Bojrab v. Bojrab , 810 N.E.2d 1008, 1014 (Ind. 2004); Geo rgos v. Jac k son , 790 N.E.2d 448, 452 (Ind. 2003). While the Developers' notice of appeal indicated that they were challenging the trial court's entry of April 18, 2007 as an interlocutory order, the Developers subsequently clarified that they were appeali ng the April 18, 2007 order as a final appealable order. Plan Commission's Reply in Support of its Motion for Appellate Rule 19 Preappeal Conference at 2, 4. As to the claim of waiver, the Plan Commission's cross

- appeal is challenging only the trial cour t's findings related to its determination that the Plan Commission acted in bad faith, justifying imposition of sanctions. But the Plan Commission's cross appeal is not challenging the trial court's mandate requiring approval of the subdivision. Reply Br

. of Cross

- Appellant at 5

- 6. By voting to a p prove the subdivision plat, the Plan Commission did not waive its right to challenge on appeal the trial court's imposition of sanctions and the prerequisite factual fin dings regar d ing bad faith supporting the s anctions.7

Develo p ers argue that the discussions and resulting settlement agreement during the mediation
do not const i tute a "meeti ng" of the Plan Commission that must be open to the public under the Open Door Law because of the absence of a "majority of the governing body of a public age ncy," ci t ing Indiana Code § 5

- 14

- 1.5

- 2(c). According to the Developers , the Open Door Law was

sat isfied by the Plan Commission 's pre

- mediation public meeting in July 2006 which auth o rized its attorney and representative to participate in the mediation with full settlement autho r ity. Th e Plan Commission responds by arguing that a p lan c ommission's iss uance of a subdivision prim ary plat approval i s non

- delegable because of the absence of specific statutory delegation author ization, and that evidence was presented that demonstrated that the Commission did not delegate
its a p proval authority to its repres entatives in th is mediation.

The Indiana Open Door Law, Ind. Code § § 5

- 14

- 1.5

- 1 to

- 8 , seeks to assure that gover nment business "be conducted openly so that the general public may be fully informed." D il l man v. Tr s. of Ind

. Univ. , 848 N.E.2d 348, 351 (Ind. Ct. App. 2006) , trans. denied

. Administrative

a c tions taken by delegated representatives of governing bodies , however, are not subject to the Open Door L aw. Id. at 353. An a dvisory p lan c ommission is authorized by statute to del e gate authority to perform ministerial acts in all cases " except where final action of the commi s sion is necessary." Ind. Code § 36

- 7

- 4

- 402(a)

. As to plats involving land covered by a subdivision control ordinance, the exclusive control over the approval of plats is assi gned by st a tute to plan
commission s

. Id. § 36

- 7

- 4

- 701. And a plan commission ' s act is deemed "not official, unless it is

a u thorized, at a regular or special meeting, by a majority of the entire membership of the plan
commission." Id. § 36

- 7

- 4

- 302(a). W e conclude that this statutory scheme operates to preclude the delegation of plan commission authority for final approval of subdiv i sion plats, but instead requires final approval by a majority of the commission members at meetings subject to the Open Door Law. Because the settlement agreement resulting from the medi a tion was thus not
final until its approv al by a majority of the Plan Commission at a public meeting, the Commi ssion 's failure to promptly approve the subdivision did not constitute bad faith c onduct wa r ranting
sanctions

.

While we generally favor the amicable settlement of disputes and encourage the use of mediation to facilitate such agreements, these processes cannot substitute for legislatively ma n-8

dated official and public assent to the r esulting settlement agreements. Resort to mediation can
be extremely beneficial to all parties, but, as o b served by the Court of Appeals, it is wise practice "to include language in a se t tlement agreement that the agreement is contingent upon compliance

w ith the Open Door Law and that it must be approved at an open mee t ing." Lake County Trust
Co. , 883 N.E.2d at 136.

Because we conclude that the Plan Commission did not act in bad faith, we do not a ddress the parties' dispute regarding whether Indiana C ode § 36

- 7

- 4

- 1010(a) provides a basis to

recover a t torney fees in this case.

Conclusion

T he trial court's order that the Plan Commission shall reimburse the Develo p ers for their costs of mediation in the sum of $1,578.55 is vacated.

Shepard, C.J., and Sullivan, Boehm, and Rucker, JJ., concur.