Opinion ID: 6319569
Heading Depth: 3
Heading Rank: 2

Heading: Indiana Frivolous Litigation Statute

Text: Regent Bank seeks to collect attorney’s fees under the Indiana frivolous litigation statute. A federal court sitting in diversity applies state substantive law and federal procedural law. See DiPerna v. Chi. Sch. Pro. Psych., 893 F.3d 1001, 1006 (7th Cir. 2018) (citing Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996)). When a federal rule conﬂicts with a state law though, the federal rule governs. See Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 398–400 (2010). Courts are divided as to whether state frivolous litigation statutes conﬂict with Federal Rule of Civil Procedure 11. Compare First Bank of Marietta v. Hartford Underwriters Ins. Co., 307 F.3d 501, 529 (6th Cir. 2002) (holding that the Ohio frivolous litigation statute “conﬂicts with Fed. R. Civ. P. Rule 11’s safe harbor provision and, therefore, should not be applied in federal Nos. 21-2118 & 21-2307 9 court”), with Showan v. Pressdee, 922 F.3d 1211, 1226–27 (11th Cir. 2019) (holding that Rule 11 does not conﬂict with the Georgia frivolous litigation statute and applying the law). We need not decide whether Rule 11 conﬂicts with the Indiana frivolous litigation statute because Birch|Rea’s maliciousprosecution claim is not frivolous in the ﬁrst instance. See O’Brien v. Caterpillar Inc., 900 F.3d 923, 928 (7th Cir. 2018) (“[An appellate court] may aﬃrm on any ground supported in the record so long as it was adequately addressed below and the plaintiﬀs had an opportunity to contest the issue.”). Indiana law provides that “[i]n any civil action, the court may award attorney’s fees … to the prevailing party” based on (1) a claim or defense “that is frivolous, unreasonable, or groundless”; (2) continued litigation after a claim or defense “clearly became frivolous, unreasonable, or groundless”; (3) or litigation “in bad faith.” Ind. Code § 34-52-1-1; see generally River Ridge Dev. Auth. v. Outfront Media, LLC, 146 N.E.3d 906 (Ind. 2020). Regent Bank asserts both that Birch|Rea’s malicious-prosecution claim was frivolous, unreasonable, or groundless at its ﬁling and that it engaged in bad-faith litigation. See Ind. Code § 34-52-1-1(b)(1), (3). “A claim is ‘frivolous’ if it is made primarily to harass or maliciously injure another; if counsel is unable to make a good faith and rational argument on the merits of the action; or if counsel is unable to support the action by a good faith and rational argument for extension, modiﬁcation, or reversal of existing law.” Staﬀ Source, LLC v. Wallace, 143 N.E.3d 996, 1008 (Ind. Ct. App. 2020) (quoting Kitchell v. Franklin, 26 N.E.3d 1050, 1057 (Ind. Ct. App. 2015)). An unreasonable claim is one that, “based on the totality of the circumstances … no reasonable attorney would consider the claim justiﬁed 10 Nos. 21-2118 & 21-2307 or worthy of litigation.” Id. (quoting Kitchell, 26 N.E.3d at 1057). And a claim is “groundless if no facts exist which support the legal claim relied on and presented by the losing party.” Id. (quoting Purcell v. Old Nat. Bank, 972 N.E.2d 835, 843 (Ind. 2012)). Birch|Rea did not ﬁle a frivolous, unreasonable, or groundless lawsuit against Regent Bank. There is no evidence that the malicious-prosecution claim was brought to injure Regent Bank. Indeed, Birch|Rea made a rational argument on the merits, albeit an unconvincing one. See Kitchell, 26 N.E.3d at 1057 (“[T]he law is settled that a claim is … [not] frivolous merely because a party loses on the merits.”). The Potter report potentially contained deﬁciencies of its own, and Regent Bank may have had a tenuous argument for reliance on the original Birch report. The fact that Regent Bank quickly dropped its underlying claim suggests that it may have lacked merit. Moreover, Birch|Rea supported its action with a colorable claim that Indiana case law applied to these facts. See, e.g., Ingram, 118 N.E.3d at 8; Reichhart, 748 N.E.2d at 379; Satz, 397 N.E.2d at 1085; Wong, 422 N.E.2d at 1283. Bad-faith litigation occurs where the party commits more than “bad judgment or negligence.” Staﬀ Source, 143 N.E.3d at 1008 (quoting Mitchell v. Mitchell, 695 N.E.2d 920, 924 (Ind. 1998)). Instead, it “implies the conscious doing of a wrong because of dishonest purpose or moral obliquity”—in other words, “a state of mind aﬃrmatively operating with furtive design or ill will.” Id. (quoting Mitchell, 695 N.E.2d at 924). Like above, Regent Bank has produced no evidence that Birch|Rea engaged in bad-faith litigation—that is, there is no support for the notion that Birch|Rea acted with a “dishonest purpose or moral obliquity.” Id. (quoting Mitchell, 695 N.E.2d Nos. 21-2118 & 21-2307 11 at 924). Both parties seem to acknowledge the “acrimonious history” of this litigation, but bitter litigation is not enough by itself. While Birch|Rea ultimately cannot prevail, its actions do not rise to bad-faith litigation.