Court Opinion

ID: 3205777
Source: CourtListenerOpinion
Date Created: 2016-05-23 15:04:42.497239+00
Date Added: 2024-06-11T14:29:13.617434
License: Public Domain

FILED
                                                                         May 23 2016, 8:37 am

                                                                              CLERK
                                                                          Indiana Supreme Court
                                                                             Court of Appeals
                                                                               and Tax Court

ATTORNEY FOR APPELLANT                                    APPELLEE PRO SE
Chad D. Wuertz                                            Gersh Zavodnik
Wuertz Law Office, LLC                                    Indianapolis, Indiana
Indianapolis, Indiana

                                            IN THE
    COURT OF APPEALS OF INDIANA

Douglas Costello and Profit                               May 23, 2016
Search, Inc.,                                             Court of Appeals Case No.
Appellants-Defendants,                                    49A04-1504-PL-163
                                                          Appeal from the Marion Superior
        v.                                                Court
                                                          The Honorable J. Jeffrey Edens,
Gersh Zavodnik,                                           Special Judge
Appellee-Plaintiff.                                       Trial Court Cause No.
                                                          49D10-1011-PL-49972

Vaidik, Chief Judge.

Court of Appeals of Indiana | Opinion 49A04-1504-PL-163 | May 23, 2016                            Page 1 of 13
                                           Case Summary
[1]   When Massachusetts resident Douglas Costello posted a used printer on

      Craigslist in 2009, he could not have predicted that he would spend much of the

      next seven years locked in a legal battle in Indiana. But he sold the printer—for

      less than $75—to Gersh Zavodnik, who has a penchant for suing after entering

      into online transactions. Zavodnik, claiming the printer was defective, sued

      Costello in small-claims court. He asked for the small-claims maximum of

      $6000, but Costello defended the case and prevailed, based on the fact that

      Zavodnik had prematurely disposed of the printer. Unfazed, Zavodnik

      appealed the matter to superior court, where he was allowed to conduct

      discovery. Zavodnik sent Costello requests for discovery pursuant to Indiana

      Trial Rule 36(A), asking Costello to admit, among other things, that he is liable

      for $30,044.07. Costello, who remained unrepresented following his victory in

      small-claims court, failed to respond (he later said he never received the

      requests). When Costello learned that his failure to respond rendered the

      matters admitted under Rule 36(A), he hired an attorney and moved to

      withdraw the admissions under subsection (B) of the rule. The trial court,

      believing itself constrained by our Supreme Court’s interpretation of Rule 36,

      denied Costello’s motion and awarded Zavodnik a judgment of $30,044.07. In

      light of Zavodnik’s abuse of Rule 36, we conclude that the trial court should

      have granted Costello’s motion.

      Court of Appeals of Indiana | Opinion 49A04-1504-PL-163 | May 23, 2016   Page 2 of 13
                             Facts and Procedural History
[2]   As our Supreme Court has recognized, Zavodnik is a “prolific, abusive

      litigant.” Zavodnik v. Harper, 17 N.E.3d 259, 261 (Ind. 2012). He spends much

      of his life prosecuting lawsuits against individuals and businesses with whom he

      has entered into online transactions. See Zavodnik v. Richards, 984 N.E.2d 699,

      701 n.2 (Ind. Ct. App. 2013), aff’d on reh’g, 988 N.E.2d 806 (Ind. Ct. App.

      2013). This is the second time this particular case has been before us. The first

      time, it had been dismissed, along with twenty-six other cases Zavodnik had

      filed, pursuant to Indiana Trial Rule 41(E), which provides for dismissal when a

      plaintiff fails to diligently prosecute the case or comply with court rules.

      Zavodnik v. Gehrt, No. 49A02–1105–CT–393, slip op. at 10-11 (Ind. Ct. App.

      Mar. 1, 2012) (memorandum decision). We affirmed the dismissal of most of

      the cases but reversed the dismissal of this case because there was no indication

      in the record that the trial court had held the formal hearing required by Rule

      41(E). Id. at 21-22.

[3]   The transaction underlying this case occurred in late 2009, when Zavodnik

      purchased a used printer from Costello, a resident of Massachusetts, on

      Craigslist. The exact price is not clear from the record, but it is undisputed that

      Zavodnik paid Costello less than $75. A few months after Zavodnik received

      the printer, he sued Costello in small-claims court, alleging that it was defective

      and seeking $6000 in damages (at the time, the maximum recovery in Marion

      County small-claims courts). After holding a hearing at which both parties

      appeared without counsel, the small-claims court entered judgment in favor of

      Court of Appeals of Indiana | Opinion 49A04-1504-PL-163 | May 23, 2016     Page 3 of 13
      Costello, having found that Zavodnik had disposed of the printer with an

      “intent to suppress evidence.” Appellee’s App. p. 240-42.

[4]   In November 2010, Zavodnik appealed the matter to the superior court to be

      tried de novo. On December 14, 2010, he sent Costello a set of requests for

      admission pursuant to Indiana Trial Rule 36. Among other things, Zavodnik

      asked Costello to admit that “you” and “your Corporation” (presumably a

      reference to Profit Search Inc., which Zavodnik later added as a defendant) (1)

      entered into a contract with Zavodnik, (2) breached the contract, and (3) are

      liable to Zavodnik for $30,044.07 “for breaching the legally binding contract[.]”

      Appellants’ App. p. 63-68. In accordance with Rule 36, Zavodnik instructed

      Costello to respond to the requests within thirty days.

[5]   As of March 2, 2011, Costello, who was still proceeding without counsel after

      prevailing in small-claims court, had not responded to Zavodnik’s requests.

      That was the day, however, that the trial court dismissed this case and twenty-

      six others pursuant to Rule 41(E). As indicated above, Zavodnik appealed all

      of those dismissals, and it was not until a year later, on March 1, 2012, that we

      revived his action against Costello and remanded the case to the trial court for

      further proceedings. Gehrt, slip op. at 21-22.

[6]   On remand, the case lingered for nine months with no substantive action until a

      pre-trial conference on December 13, 2012. A few days later, Zavodnik sent

      Costello a second set of requests for admission, asking Costello to admit that he

      and the judge “conspir[ed]” and “plotted” against Zavodnik and that he is liable

      Court of Appeals of Indiana | Opinion 49A04-1504-PL-163 | May 23, 2016   Page 4 of 13
      to Zavodnik for more than $300,000. Appellants’ App. p. 72, 77. The next

      month, Zavodnik sent a third set of requests, this time asking Costello to admit,

      among other things, that he is liable to Zavodnik for more than $600,000. Id. at

      83. Costello did not respond to Zavodnik’s second and third sets of requests.

[7]   In early 2013, Zavodnik also started filing requests to have the judge removed

      from the case. The Indiana Supreme Court eventually appointed a different

      judge. In May 2013, after the case had been transferred to the new judge,

      Zavodnik filed a motion to have all of the matters set forth in his three sets of

      requests for admission deemed admitted, based on Costello’s failure to respond.

      While Rule 36 does not require either a motion or a hearing—matters set forth

      in requests that are not responded to are deemed admitted by the rule itself—the

      trial court held a hearing on Zavodnik’s motion on July 5, 2013. Zavodnik

      appeared but Costello did not. On July 10, 2013, the trial court issued an order

      acknowledging that all of the matters set forth in Zavodnik’s requests were

      admitted by operation of Rule 36.

[8]   After receiving the court’s order, Costello contacted the court and was told to

      file any response to the order in writing. Costello then filed a motion to have

      the order vacated, claiming that he had never received (1) Zavodnik’s requests

      for admission or (2) notice that a hearing would be held on July 5, 2013.1

      Meanwhile, Zavodnik, armed with Costello’s admissions, filed a motion for

      1
       Costello’s claims in this regard may have merit, but our resolution of this matter in his favor makes it
      unnecessary for us to address them.

      Court of Appeals of Indiana | Opinion 49A04-1504-PL-163 | May 23, 2016                             Page 5 of 13
       summary judgment and a 75-page memorandum in support. On November 15,

       2013—the trial court having made no decision on Costello’s motion to vacate—

       an attorney entered an appearance on behalf of Costello and filed a motion

       under Rule 36(B) formally seeking permission to withdraw the admissions.

[9]    The parties’ motions remained pending for the next fifteen months, during

       which Zavodnik made multiple requests to have the new judge removed from

       the case and filed numerous lengthy motions. One motion Zavodnik filed had

       a caption that was more than a page long and accused Costello of perpetrating

       “wishy-washy wiggly deceptions.” Appellants’ App. p. 422-23. Zavodnik also

       filed a federal lawsuit against the judge, which was immediately dismissed.

[10]   On September 30, 2014, our Supreme Court issued an opinion in another of

       Zavodnik’s cases. See Zavodnik v. Harper, 17 N.E.3d 259. The Court actually

       denied Zavodnik’s petition to transfer in that case, but it issued an opinion that

       “gives guidance to this state’s courts on some options when confronted with

       abusive and vexatious litigation practices.” Id. at 261-62. The Court noted:

               Nothing Mr. Zavodnik has filed or done in this case shows any
               desire to litigate this case expeditiously to resolution on the
               merits. Rather, he has burdened the opposing party and the
               courts of this state at every level with massive, confusing,
               disorganized, defective, repetitive, and often meritless filings.
               And this Court has previously warned Mr. Zavodnik against
               continuing such abusive and burdensome litigation tactics.

       Id. at 263. The Court identified several measures that judges can take in dealing

       with abusive litigants, such as putting limits on the nature and size of future

       Court of Appeals of Indiana | Opinion 49A04-1504-PL-163 | May 23, 2016      Page 6 of 13
       filings. Id. at 268-269. Finally, while the Court refrained from imposing any

       specific sanctions or restrictions on Zavodnik, it warned him that he “can

       expect any further abusive litigation practices in any judicial forum in this state

       to be met with appropriate sanctions and restrictions.” Id. at 270. Taking

       notice, the trial court in this case quickly issued an order subjecting Zavodnik to

       many of the filing restrictions that the Supreme Court had identified in its

       Zavodnik v. Harper opinion.

[11]   Zavodnik laid low for the next few months. However, on February 19, 2015,

       the day the trial court was finally able to hold a hearing on Zavodnik’s motion

       for summary judgment and Costello’s motion to withdraw admissions,

       Zavodnik came prepared with a new 53-page motion to disqualify the judge. In

       the motion, which began with a seven-line, 65-word title, Zavodnik

       characterized the Supreme Court’s opinion as follows: “Zavodnik-character-

       assassinating-September 30th, 2014-biased-and-prejudiced-based-on-falsified-

       and-fabricated-capricious opinion issued by the Indiana Supreme Court, who

       will be held responsible for the said lies, the very same Supreme Court, which

       had no jurisdiction to issue that opinion[.]” Appellants’ App. p. 443. The trial

       court forged ahead with the scheduled hearing.

[12]   In a written order issued a month later, the trial court granted Costello

       permission to withdraw some of the admissions but not others. Most relevant

       to our decision, Costello was permitted to withdraw his admissions that he is

       liable to Zavodnik for more than $300,000 and $600,000, but not the admission

       that he is liable for $30,044.07. In explaining this result, the trial court noted

       Court of Appeals of Indiana | Opinion 49A04-1504-PL-163 | May 23, 2016      Page 7 of 13
       that Zavodnik asserted damages of $30,044.07 in relation to “a specific liability

       for breach of contract” (Zavodnik’s request said “$30,044.07 for breaching the

       legally binding contract” (emphasis added)) but asserted the higher amounts

       “without specifically identifying the basis for the damages.” Appellants’ App.

       p. 37, 43-44.

[13]   Based on the surviving admissions, the trial court granted summary judgment

       in favor of Zavodnik in the amount of $30,044.07. The court acknowledged

       that this amount is “seemingly high” and that the judgment “may seem extreme

       for the breach of contract for the purchase of a printer,” but it concluded that

       the judgment “reflects the limited discretion the Court feels that it has in the

       matter pursuant to Trial Rule 36(B) and the Indiana Supreme Court’s

       interpretation of Trial Rule 36(B) pursuant to General Motors Corp., Chevrolet

       Motor Div. v. Aetna Casualty & Surety Co.[, 573 N.E.2d 885 (Ind. 1991), reh’g

       denied].” Appellants’ App. p. 43, 55.

[14]   Costello now appeals, and Zavodnik cross-appeals. The CCS for this matter

       indicates that since the trial court entered its judgment, Zavodnik has obtained

       yet another change of judge and has made many additional filings.

                                  Discussion and Decision
[15]   Costello contends that the trial court should have (1) allowed him to withdraw

       all—not just some—of his Rule 36 admissions and (2) denied Zavodnik’s

       motion for summary judgment, which was based on the admissions. Zavodnik

       Court of Appeals of Indiana | Opinion 49A04-1504-PL-163 | May 23, 2016    Page 8 of 13
       makes the converse arguments in his cross-appeal: that the trial court should

       have (1) denied Costello’s motion to withdraw in its entirety and (2) awarded

       Zavodnik a much higher judgment. Because both appeals turn on the propriety

       of the trial court’s decision on Costello’s motion to withdraw admissions, we

       need not address the two appeals separately.

[16]   The withdrawal of admissions is governed by Indiana Trial Rule 36(B), which

       provides, in part:

               Any matter admitted under this rule is conclusively established
               unless the court on motion permits withdrawal or amendment of
               the admission. Subject to the provisions of Rule 16 governing
               amendment of a pre-trial order, the court may permit withdrawal
               or amendment when the presentation of the merits of the action
               will be subserved thereby and the party who obtained the
               admission fails to satisfy the court that withdrawal or
               amendment will prejudice him in maintaining his action or
               defense on the merits.

       This provision grants our trial courts discretion in deciding whether to allow the

       withdrawal of admissions, and we will reverse only for an abuse of that

       discretion. City of Muncie v. Peters, 709 N.E.2d 50, 54 (Ind. Ct. App. 1999), reh’g

       denied, trans. denied.

[17]   Here, we must conclude that the trial court abused its discretion when it denied

       part of Costello’s motion to withdraw his admissions. There is no question that

       presentation of the merits of the action will be subserved by allowing the

       withdrawal. As demonstrated by the trial court’s grant of summary judgment

       in favor of Zavodnik, Costello’s admissions, if allowed to stand, would bring

       Court of Appeals of Indiana | Opinion 49A04-1504-PL-163 | May 23, 2016    Page 9 of 13
       this litigation to an end without any presentation of the merits. Requiring

       Zavodnik to prove the merits of his case is particularly appropriate in light of

       the fact that he already lost on the merits in the small-claims court based on his

       decision to dispose of the printer not long after he purchased it. With regard to

       damages, Zavodnik did not ask Costello to admit any facts that would justify an

       award of damages in excess of the purchase price. His failure in this regard

       strongly indicates that his requests asserting more than $30,000 in damages (at

       least 400 times more than the purchase price) had no basis in reality.

[18]   Furthermore, allowing Costello to withdraw his admissions would not

       prejudice Zavodnik in maintaining his action on the merits. As used in Rule

       36(B), the word “‘prejudice’ does not mean that the party who has obtained the

       admissions will lose the benefit of the admissions; rather, it means that the party

       has suffered a detriment in the preparation of his case.” Corby v. Swank, 670

       N.E.2d 1322, 1326 (Ind. Ct. App. 1996). Here, Zavodnik would suffer no such

       detriment. The matter has not yet been set for trial, Zavodnik still has time to

       prepare his case, and there is no evidence that he has relied on Costello’s

       admissions in a way that would impair his ability to prepare his case. The fact

       that Zavodnik would have to spend time and money preparing his case does not

       constitute “prejudice”; he would simply be in the same position as most other

       civil plaintiffs in Indiana, having to marshal the evidence in his favor and prove

       his case in court.

[19]   As the trial court noted, our Supreme Court held in General Motors Corp. that

       even if both of the conditions stated in Rule 36(B) are satisfied, the rule’s use of

       Court of Appeals of Indiana | Opinion 49A04-1504-PL-163 | May 23, 2016    Page 10 of 13
       the word “may” means that the trial court retains discretion to deny a motion to

       withdraw. 573 N.E.2d at 889. But that discretion should be reserved for close

       calls like that presented in General Motors Corp. There, the requests for

       admission that were at issue were narrowly tailored to the actual facts and law

       of the case, id. at 886 n.1, the motion to withdraw was not filed until two

       months before the scheduled trial, id. at 889, and there had been no prior

       indication that the moving party intended to contest the admitted matters, id.

       Under those circumstances, it made sense for our Supreme Court to yield to the

       discretion of the trial court.

[20]   This case is nothing like General Motors Corp. Far from crafting narrow requests

       aimed at the actual merits of the case, Zavodnik asked Costello to admit that he

       was liable for $30,000, $300,000, or even $600,000 without also asking him to

       admit facts that would justify such an extraordinary award in a case involving a

       used printer sold for less than $75. Furthermore, as already mentioned, there

       was no trial date set, let alone a date that was just two months away. And

       Zavodnik certainly knew that Costello contested the matters at issue: Costello

       had already defended the case on the merits—and won—at the small-claims

       level.

[21]   More fundamentally, the plaintiff in General Motors Corp. did not ask the

       defendant to admit liability 400, 4000, or 8000 times greater than the amount

       originally in dispute, as Zavodnik did here. Zavodnik’s misuse of Rule 36 is

       plain. He did not send requests claiming $30,000 and $300,000 and $600,000 in

       damages because he believes those figures are legally justified and thought

       Court of Appeals of Indiana | Opinion 49A04-1504-PL-163 | May 23, 2016      Page 11 of 13
       Costello might agree; he sent them because he hoped Costello would not

       respond, rendering the matters admitted by operation of Rule 36. An important

       purpose of the rule is to more quickly and efficiently reach a resolution based on

       the actual facts; Zavodnik used the rule as a way to avoid such a resolution. The

       trial court’s partial denial of Costello’s motion to withdraw served to ratify

       Zavodnik’s blatant abuse of the rule. See, e.g., Wilcox v. Birtwhistle, 987 P.2d

       727, 733 (Cal. 1999) (explaining that permitting withdrawal of admissions

       eliminates “undeserved windfalls and the resulting subversion of the policy

       favoring the resolution of lawsuits on the merits”); St. Mary v. Superior Court,

       223 Cal. App. 4th 762, 783 (2014) (“The purpose of the RFA procedure is to

       expedite trials and to eliminate the need for proof when matters are not

       legitimately contested. The RFA device is not intended to provide a windfall to

       litigants. Nor is the RFA procedure a ‘gotcha’ device[.]”); Lucas v. Clark, 347

       S.W.3d 800, 803 (Tex. Ct. App. 2011) (“The rule regarding requests for

       admissions was designed, not as a trap to prevent the presentation of the truth

       in a full hearing but as a tool for the fair disposition of litigation with a

       minimum of delay.”), reh’g overruled, rev. denied.

[22]   And things could have been worse. As noted above, the trial court reaffirmed

       Costello’s admission to $30,044.07 in damages because Zavodnik’s assertion of

       that amount “relates directly to a specific liability for breach of contract,” that

       is, his assertion of $30,044.07 included the phrase “for breaching the legally

       binding contract.” Appellants’ App. p. 37, 43. However, the trial court

       allowed Costello to withdraw his admissions that he owes $300,000 and

       Court of Appeals of Indiana | Opinion 49A04-1504-PL-163 | May 23, 2016      Page 12 of 13
       $600,000 because the underlying requests did not “specifically identify[] the

       basis for the damages.” Id. at 38, 44. Following this logic, the trial court would

       have granted Zavodnik a judgment for $600,000, or $6,000,000, or $60,000,000,

       if Zavodnik had simply linked such an amount to the phrase “for breaching the

       legally binding contract.” We believe the withdrawal provisions of Rule 36(B)

       require a more probing inquiry than that.

[23]   The trial court abused its discretion by partially denying Costello’s motion to

       withdraw admissions; it should have granted the motion in full. Because the

       trial court granted summary judgment in favor of Zavodnik based on the

       unwithdrawn admissions, we reverse the judgment and remand this matter to

       the trial court. Before conducting any further proceedings, the trial court shall

       hold a hearing for purposes of determining whether this case should be

       dismissed pursuant to Trial Rule 41(E), based on Zavodnik’s repeated, flagrant,

       and continuing failure to comply with Indiana’s rules of procedure.

[24]   Reversed and remanded.

       Barnes, J., and Mathias, J., concur.

       Court of Appeals of Indiana | Opinion 49A04-1504-PL-163 | May 23, 2016   Page 13 of 13