Court Opinion

ID: 4209025
Source: CourtListenerOpinion
Date Created: 2017-10-04 15:08:47.236088+00
Date Added: 2024-06-11T07:47:40.198539
License: Public Domain

FILED
                                                                      Oct 04 2017, 10:50 am

                                                                            CLERK
                                                                       Indiana Supreme Court
                                                                          Court of Appeals
                                                                            and Tax Court

ATTORNEY FOR APPELLANT                                     ATTORNEYS FOR APPELLEES
Kevin M. Quinn                                             Donald K. McClellan
Bose McKinney & Evans LLP                                  McClellan & McClellan
Indianapolis, Indiana                                      Muncie, Indiana

                                                           Peter H. Drumm
                                                           Benadum, Cecil & Drumm
                                                           Muncie, Indiana

                                            IN THE
    COURT OF APPEALS OF INDIANA

Cardinal Health Ventures, Inc.,                            October 4, 2017
Appellant-Defendant,                                       Court of Appeals Case No.
                                                           18A02-1703-CT-487
        v.                                                 Interlocutory Appeal from the
                                                           Delaware Circuit Court
Michael Scanameo, M.D., Carol                              The Honorable John M. Feick,
Scanameo, and Michael                                      Judge
Scanameo, M.D., Inc.,                                      Trial Court Cause No.
Appellees-Plaintiffs.                                      18C04-1308-CT-16

Bradford, Judge.

Court of Appeals of Indiana | Opinion 18A02-1703-CT-487 | October 4, 2017                      Page 1 of 9
                                           Case Summary
[1]   On August 5, 2013, Appellees-Plaintiffs Michael Scanameo, M.D., Carol

      Scanameo, Michael Scanameo, M.D., Inc. (collectively, “the Scanameos”),

      filed suit against Appellant-Defendant Cardinal Health Ventures, Inc.

      (“Cardinal Health”), alleging that Cardinal Health committed securities fraud.

      Specifically, the Scanameos alleged that Cardinal Health sold shares in two

      medical clinics to the Scanameos knowing that the shares were “worthless.” In

      suing Cardinal Health, the Scanameos sought to recover the sum paid for the

      shares plus interest and reasonable attorney’s fees. Also on August 5, 2013, the

      Scanameos made a timely request for a jury trial. The Scanameos later filed a

      motion asking the trial court to strike their request for a jury trial. Cardinal

      Health did not consent to the Scanameos’ request. This interlocutory appeal

      follows the issuance of the trial court’s order granting the Scanameos’ motion.

      Concluding that the trial court erred in granting the Scanameos’ motion, we

      reverse and remand the matter to the trial court with the instruction that the

      case be re-set on the jury trial calendar.

                             Facts and Procedural History
[2]   According to the factual allegations levied by the Scanameos, in September of

      2007 and on June 30, 2008, Cardinal Health sold shares of two medical clinics

      to the Scanameos for the collective sum of $542,453.88. On August 5, 2013,

      the Scanameos filed suit against Cardinal Health alleging that Cardinal Health

      committed securities fraud. Specifically, the Scanameos alleged that Cardinal

      Court of Appeals of Indiana | Opinion 18A02-1703-CT-487 | October 4, 2017   Page 2 of 9
      Health sold shares in two medical clinics to the Scanameos, knowing that the

      shares were “worthless.” Appellant’s App. Vol. II, p. 17. In suing Cardinal

      Health, the Scanameos sought to recover the sum paid for the shares plus

      interest and reasonable attorney’s fees. Also on August 5, 2013, the Scanameos

      made a timely request for a jury trial. The Scanameos filed an amended

      complaint on November 12, 2013. The amended complaint did not include any

      substantive changes.

[3]   On August 31, 2016, the Scanameos filed a motion to strike their request for a

      jury trial. Cardinal Health filed a response in opposition to the Scanameos’

      motion on September 14, 2016. At the conclusion of a September 22, 2016

      hearing on the motion, the trial court took the matter under advisement. On

      February 1, 2017, the trial court issued an order granting the Scanameos’

      motion. This interlocutory appeal follows.

                                  Discussion and Decision
[4]   Cardinal Health contends on appeal that the trial court erred in granting the

      Scanameos’ motion to strike their prior request for a jury trial. We agree.

                                I. The Right to Trial By Jury
[5]   Section 20 of Article I of the Indiana Constitution provides that “[i]n all civil

      cases, the right of trial by jury shall remain inviolate.” However, “[t]he right to

      a jury trial in civil cases is guaranteed only in those actions which were triable

      by jury at common law prior to June 18, 1852.” Midwest Fertilizer Co. v. Ag-

      Court of Appeals of Indiana | Opinion 18A02-1703-CT-487 | October 4, 2017   Page 3 of 9
      Chem Equip. Co., 510 N.E.2d 232, 233 (Ind. Ct. App. 1987) (citing Ind. Tr. Rules

      38(A); Estate of Ballard v. Ballard, 434 N.E.2d 136, 140 (Ind. Ct. App. 1982)).

      Claims which historically arose in equity “are to be tried to the court.” Id.

      (citing Lewandowski v. Beverly, 420 N.E.2d 1278, 1282 (Ind. Ct. App. 1981)).

      Thus, “the key determination to be made is whether the claim involved is legal

      or equitable in character.” Id. (citing Ballard, 434 N.E.2d at 140; Winney v. Bd.

      of Comm’rs of Vigo Cty., 174 Ind. App. 624, 369 N.E.2d 661, 664 (1977)).

[6]   “Indiana recognizes that ‘[t]he character of an action is determined by its

      substance, not its caption or formal denomination.’” Id. (quoting English Coal

      Co. v. Durcholz, 422 N.E.2d 302, 308 (Ind. Ct. App. 1981)). In determining

      whether a claim is legal or equitable in nature, “we must examine the totality of

      the pleadings and relief sought.” Id. (citing Hiatt v. Yergin, 152 Ind. App. 497,

      520, 284 N.E.2d 834, 846-47 (1972) (overruled on other grounds)).

              The test, then, for deciding the right to a jury in a civil action
              requires a classification of the claim or cause of action as either
              sounding in equity or at law. When this process of classification
              and analysis leads to the determination that the claim or cause of
              action, or any essential part thereof, is of equitable jurisdiction,
              the entire action is drawn into equity and the right to a jury is
              extinguished. Conversely, where the claim or cause of action is
              not such as to invoke equity jurisdiction, it is to be considered to
              be an action at law where the right to trial by jury must be
              provided after a timely demand.… Certainly, if a claim presents
              only questions of law and presents no question of fact, there will
              be no function for a jury. But issues of law which are properly
              left only to the court may be contained within a particular claim
              which also presents issues of fact, and the critical distinction to be
              made … is the character of the claim itself that being either

      Court of Appeals of Indiana | Opinion 18A02-1703-CT-487 | October 4, 2017    Page 4 of 9
              equitable or legal. In either case, issues of law within a claim for
              relief will be determined by the court, either by a separate
              decision or by instructions to the jury. However, where there are
              material issues of fact in an action which was a legal action at
              common law and not an equitable action, the right to trial by jury
              is preserved.

      Winney, 174 Ind. App. at 628-29, 369 N.E.2d at 663-64.

[7]   In requesting that the trial court strike their request for a jury trial, the

      Scanameos argued that while a prior version of Indiana Code section 23-19-5-9

      explicitly stated that claims brought under the statute could be decided by either

      a jury or the trial court, the amended version of the statute was not clear as to

      whether claims could still be determined by a jury or should only be tried by the

      court. The Scanameos point to the phrase “determined by the court or

      arbitrator,” arguing that the phrase indicates that claims should only be decided

      by the trial court. We disagree.

[8]   The relevant portion of the amended version of Indiana Code section 23-19-5-9

      provides, in relevant part, as follows:

              (a) Except as provided in section 11 of this chapter, a person is
              liable to the purchaser if the person sells a security in violation of
              this article, including a violation of IC 23-19-4-12(d)(9) or IC 23-
              19-4-12(d)(13). It is a defense if the person selling the security
              sustains the burden of proof that either the person did not know,
              and in the exercise of reasonable care could not have known, of
              the violation or the purchaser knowingly participated in the
              violation. An action under this subsection is governed by the
              following:

      Court of Appeals of Indiana | Opinion 18A02-1703-CT-487 | October 4, 2017        Page 5 of 9
                       (1) The purchaser may maintain an action to recover
                       the consideration paid for the security, less the
                       amount of any income received on the security, and
                       interest at the greater of eight percent (8%) per
                       annum or the rate provided for in the security from
                       the date of the purchase, costs, and reasonable
                       attorney’s fees determined by the court or arbitrator, upon
                       the tender of the security, or for actual damages as
                       provided in subdivision (3).

      (Emphasis added). The phrase “and reasonable attorney’s fees determined by

      the court or arbitrator” is set off from the rest of the statutory language by a set

      of commas. As such, in interpreting the language of the statute, we conclude

      that the phrase “determined by the court or arbitrator” applies to any award of

      the attorney’s fees and not the statute as a whole.

[9]   In order to determine whether the parties have a constitutional right to a jury

      trial in this case, we must look to the character of the Scanameos’ action. See

      Midwest Fertilizer, 510 N.E.2d at 233. In bringing the underlying action, the

      Scanameos alleged that Cardinal Health committed securities fraud. The

      United States District Court of Delaware and the United States District Court

      of Colorado have concluded that parties are entitled to a jury trial in cases

      alleging securities fraud. See Serv. Grp. Inc. v. Essex Intern, Inc., 74 F.R.D. 379

      (D. Del. 1977); Kline Hotel Partners v. Aircoa Equity Interest, Inc., 729 F. Supp. 740

      (D. Colo. 1990). The Scanameos neither explain nor point to any authority

      suggesting a reason why we should not find the holdings of these cases to be

      persuasive. In addition, we have previously concluded that jury trials are

      appropriate in cases alleging fraud. See generally Plymale v. Upright, 419 N.E.2d
      Court of Appeals of Indiana | Opinion 18A02-1703-CT-487 | October 4, 2017      Page 6 of 9
       756, 761, 763 (Ind. Ct. App. 1981) (providing that reliance upon a

       misrepresentation is a material element of a cause of action in fraud and a

       determination of whether such reliance was justified is a matter for the jury to

       determine).

[10]   Further, the Scanameos request a monetary judgment and do not request

       equitable relief. The United States Supreme Court has previously determined

       that “insofar as [a] complaint requests a money judgment it presents a claim

       which is unquestionably legal.” Dairy Queen, Inc. v. Wood, 369 U.S. 469, 476

       (1962). Likewise, this court long ago held that where a complaint seeks only to

       recover compensation by way of monetary damages, “[t]here was no available

       error in submitting the trial of the cause to a jury.” Robertson v. McPherson, 4
Ind. App. 595, 597, 31 N.E. 478, 478 (1892). Given the persuasive decisions of

       two different United States District courts coupled with the fact that the

       Scanameos do not request equitable relief but rather only monetary damages,

       we conclude that the character of the Scanameos’ action is such that would

       entitle the parties to a jury trial.

                                     II. Indiana Trial Rule 38
[11]   With respect to a litigant’s right to a jury trial, Trial Rule 38 provides as follows:

               (A) Causes triable by court and by jury. Issues of law and issues
               of fact in causes that prior to the eighteenth day of June, 1852,
               were of exclusive equitable jurisdiction shall be tried by the court;
               issues of fact in all other causes shall be triable as the same are
               now triable. In case of the joinder of causes of action or defenses
               which, prior to said date, were of exclusive equitable jurisdiction

       Court of Appeals of Indiana | Opinion 18A02-1703-CT-487 | October 4, 2017    Page 7 of 9
                with causes of action or defenses which, prior to said date, were
                designated as actions at law and triable by jury--the former shall
                be triable by the court, and the latter by a jury, unless waived; the
                trial of both may be at the same time or at different times, as the
                court may direct.

                (B) Demand. Any party may demand a trial by jury of any issue
                triable of right by a jury by filing with the court and serving upon
                the other parties a demand therefor in writing at any time after
                the commencement of the action and not later than ten (10) days
                after the first responsive pleading to the complaint, or to a
                counterclaim, crossclaim or other claim if one properly is
                pleaded; and if no responsive pleading is filed or required, within
                ten (10) days after the time such pleading otherwise would have
                been required. Such demand is sufficient if indorsed upon a
                pleading of a party filed within such time.

       T.R. 38. Trial Rule 38(D) further provides that once a demand for trial by jury

       has been made, it “may not be withdrawn without the consent of the other

       party or parties.” In addition, “a jury trial demand is not a pleading” but rather

       “is the invocation of a constitutional right which, once timely invoked, survives

       and need not be refiled” if a party amends its complaint or answer after the

       demand is made. Hamlin v. Sourwine, 666 N.E.2d 404, 408 (Ind. Ct. App.

       1996).

[12]   In this case, it is undisputed that the Scanameos filed a timely demand for a jury

       trial. It is also undisputed that Cardinal Health did not consent to the

       subsequent withdrawal of the demand for a jury trial. As such, pursuant to the

       clear language of Trial Rule 38(D), the demand for a jury trial may not be

       Court of Appeals of Indiana | Opinion 18A02-1703-CT-487 | October 4, 2017        Page 8 of 9
       withdrawn. The trial court, therefore, erred in granting the Scanameos’ motion

       to strike the previously submitted demand for a jury trial.

[13]   The judgment of the trial court is reversed and the matter remanded to the trial

       court with the instruction that the case be re-set on the jury trial calendar.

       May, J., and Barnes, J., concur.

       Court of Appeals of Indiana | Opinion 18A02-1703-CT-487 | October 4, 2017   Page 9 of 9