Hess v. Biomet, Inc.

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF INDIANA

SOUTH BEND DIVISION

CHARLES HESS, et al.,

Plaintiffs,

v. Case No. 3:16-CV-208 JD

BIOMET, INC., et al.,

Defendants.

OPINION AND ORDER

The Court now considers whether sanctions shall issue for certain arguments defense

counsel have advanced. Given that defense counsel have asserted multiple arguments predicated

on unreasonable interpretations of case law, the Court finds that sanctions are warranted.

Accordingly, the Court will impose a monetary fine in the amount of $1,000 against Defendants’

lead trial counsel, since he was the one who signed the briefs and bears responsibility for the

filings.

A. Factual Background

In its prior order, the Court reviewed the extensive factual and procedural history of this

case. (DE 404 at 1–4.) The Court now only reviews the facts pertinent to whether sanctions shall

issue.

On August 9, 2021, after a six-day jury trial, a verdict was entered in favor of Plaintiffs

Charles Hess, Marty Higgins, Robert “Glen” McCormick, Ronald Papa, Al Tornquist, and Frank

Shera (collectively, the “Plaintiffs”). (DE 379.) After the verdict was entered, Defendants Biomet

Inc. and Zimmer Biomet Holdings Inc. (collectively, the “Defendants”) renewed their motion for

a judgment as a matter of law. (DE 381.) The Court denied this motion and advised Defendants

that if they intended “to move on their remaining equitable affirmative defenses, they had 14

days to do so.” (DE 389 at 18.) In line with this order, the Defendants then filed a motion seeking

judgment in their favor on the remaining affirmative defenses, which included waiver, estoppel,

laches, unjust enrichment, and acquiescence. (DE 391.) Because the sanctions issue primarily

concerns defense counsel’s arguments regarding waiver, the Court will review the arguments

regarding waiver in some depth.

In their opening brief, defense counsel argued that Plaintiffs waived their right to dispute

their long-term commissions. In support of their affirmative defense of waiver, defense counsel

cited the case Pierce v. Goldsberry (“Pierce II”), 35 Ind. 317, 321 (1871) for the proposition that

“waiver may . . . apply where a statement was made in a party’s presence which he did not deny,

if the circumstances would have, as here, called for a denial.” (DE 392 at 4.) Defense counsel

went on to argue that each of the Plaintiffs had “actual and constructive knowledge that Biomet

was not paying long term commissions on its subsidiaries’ products.” (Id.) Finally, defense

counsel argued that because Plaintiffs had “admitted in writing that Biomet had met its

obligations” the “Plaintiffs waived the opportunity to claim otherwise” (Id. at 11–13.)

In Plaintiffs’ response to defense counsel’s opening brief, they pointed to clear, black

letter Indiana law holding that “waiver is an affirmative act and mere silence, acquiescence or

inactivity does not constitute waiver unless there was a duty to speak or act.” (DE 393 at 2.)

Plaintiffs explained that defense counsel, in their opening brief, “did not identify any ‘duty to

speak or act’ on the part of [the Plaintiff] Distributors . . . .” (Id. at 3.) Proceeding on the

assumption that defense counsel were not arguing there was a duty to speak, Plaintiffs only

analyzed whether Plaintiffs (i) “knew Biomet was withholding retirement commissions and (ii)

performed affirmative acts that ‘unequivocally and decisively’ conveyed Distributors’ surrender

of those retirement commissions.” (Id. at 4.)

In their reply, defense counsel then, for the first time, argued that Plaintiffs had a duty to

speak. Defense counsel explained that Indiana law holds there is a duty to speak where

“Plaintiffs had access to all the information” or “even the means of knowledge.” (DE 397 at 2,

4.) Defense counsel further claimed that “silence and inaction [is] the hallmark[] of the defense[]

of . . . waiver.” (Id. at 6.) Counsel also go on to draw an analogy between the instant case, where

defendants had the means to “ascertain what the[ir] commissions were” and the case Hellyer

Communications, Inc. v. WRC Properties, Inc., which defense counsel claims holds that laches

applied because “[the tenant] had possession of the space it was leasing at all relevant times and

that it was always within [the tenant’s] means to measure the space.” (Id. at 7.)

Defense counsel’s new argument concerning duty to speak prompted Plaintiffs to file a

surresponse. (DE 399) In this surresponse, Plaintiffs argued that defense counsel had waived

their argument concerning “duty to speak” by not raising it in their opening brief and by failing

to even cite the black-letter law which holds that “waiver is an affirmative act and mere silence,

acquiescence or inactivity does not constitute waiver unless there was a duty to speak or act.”

(DE 399 at 2.) In this surresponse, Plaintiffs also explained that multiple cases defense counsel

cite in their reply were actually inapplicable. (Id. at 8–11.) For example, Plaintiffs explain

Hellyer was “factually inapposite” because the court had found there was a duty to speak “under

the plain terms of the lease.” (Id.)

Defense counsel then filed a surreply. In this surreply, defense counsel disagreed that

they were raising a new argument in their reply. Rather, they asserted that they had always

claimed that “where a plaintiff has actual knowledge or even the means of knowledge, he has a

duty to speak up.” (DE 401 ¶ 3.) Afterwards, they cited to six bullets of their initial brief that

were ostensibly “replete with this theme.” (Id. ¶ 4.) One of these bullets was to a quotation citing

Pierce v. Goldsberry, five were to bullets which concerned the law of laches, and the final bullet

point was to the conclusory statement that “Plaintiffs’ willful ignorance and silence until 2016

was an inexcusable failure to speak up.” (DE 401 ¶ 4.) Defendants finally explained that they

have “provided an example of Hellyer . . . to illustrate that [there is an obligation to speak]

where a plaintiff is charged with knowledge and stays silent.” (Id. ¶ 5.)

The Court issued an order which held, among other things, that defense counsel had

waived their arguments concerning duty to speak up by not raising it in their opening brief. (DE

404 at 19.) In a separate section, the Court also explained that in making these arguments

concerning waiver, defense counsel had advanced multiple “legally unreasonable” arguments

which indicated “a failure to do even basic legal research before filing papers with this Court.”

(Id. at 40.) The Court explained that it believed that “[d]efense counsel’s failure to argue that

there was a duty to speak in their opening brief waived that issue and undermined multiple of

their affirmative defenses from the outset.” (Id.) The Court further explained that the cases

defense counsel had cited in support of its “duty to speak” argument (i.e., Pierce and Hellyer)

were being used to demonstrate propositions they did not support. (Id.) The Court then ordered

counsel to show cause as to why they should not be sanctioned under Rule 11 for making out

arguments which “wast[ed] the time of the Court, burden[ed] the opposing party, and “divert[ed]

resources from more pressing matters.” (Id. at 43.)

Defense counsel have now filed their response to the show cause order, making this issue

ripe for review.

B. Standard of Review

Federal Rule of Civil Procedure 11 serves an important role for civil cases in the federal

court’s jurisdiction, ensuring that the “powers and machinery [of the federal courts] are engaged

only to address claims and defenses that have a reasonable basis in fact and law and that are

asserted only for a proper purpose.” N. Illinois Telecom, Inc. v. PNC Bank, N.A., 850 F.3d 880,

884 (7th Cir. 2017). When an attorney presents any “pleading, written motion, or other paper” to

the court, Rule 11 holds them to have “certifie[d] that to the best of the persons knowledge,

information, and belief . . . the claims, defenses, and other legal contentions are warranted by

existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law

or for establishing new law; [and] the factual contentions have evidentiary support.” Fed. R. Civ.

P. 11(b)(2)–(3).

A court may impose sanctions under Rule 11 “if a lawsuit is ‘not well grounded in fact

and is not warranted by existing law or a good faith argument for the extension, modification, or

reversal of existing law.’” Cuna Mut. Ins. Soc’y v. Office & Prof’l Emps. Int’l Union, Local 39,

443 F.3d 556, 560 (7th Cir. 2006) (quoting Nat’l Wrecking Co. v. Int’l Bhd. of Teamsters, Local

731, 990 F.2d 957, 963 (7th Cir. 1993). When an attorney fails to make an “objectively

reasonable investigation of the facts underlying a claim or the applicable law,” Rule 11 sanctions

are justified. Gottlieb v. Westin Hotel Co., 990 F.2d 323, 327 (7th Cir. 1993). In other words,

“Rule 11 requires counsel to study the law before representing its contents to a federal court.”

Thornton v. Wahl, 787 F.2d 1151, 1154 (7th Cir. 1986). “An empty head but a pure heart is no

defense.” Id. Therefore, when determining if Rule 11 sanctions should issue, the Court must

“undertake an objective inquiry into whether the party or his counsel should have known that his

position is groundless.” Cuna Mut. Ins. Soc’y v. Office & Prof’l Emps. Int’l Union, 443 F.3d 556,

560 (7th Cir. 2006). If an attorney’s inquiry is “objectively reasonable under the circumstances

of the case,” then Rule 11 sanctions are not warranted. Gottlieb, 990 F.2d at 327.

If the court determines that Rule 11(b) has been violated, then “the court may impose an

appropriate sanction on any attorney, law firm, or party that violated the rule or is responsible for

the violation.” Fed. R. Civ. P. 11(c). When a sanction “is imposed on the court’s own motion,

attorney fees cannot be awarded.” Methode Elecs., Inc. v. Adam Techs., Inc., 371 F.3d 923, 926

(7th Cir. 2004). However, even when ordered sua sponte, a “fine paid into the court can be an

appropriate sanction.” Powers v. Duckworth, 64 F.3d 665 (7th Cir. 1995); Advisory Committee

Notes (1993) (“[A] monetary sanction imposed after a court-initiated show cause order [is]

limited to a penalty payable to the court.”).

C. Discussion

(1) Defense Counsel’s Continued Reliance on Pierce II is Objectively Unreasonable.

In their briefings, defense counsel repeatedly cite a case, Pierce v. Goldsberry (Pierce II),

35 Ind. 317, 321 (Ind. 1871), for the rule that the waiver occurs “where a statement was made in

a party’s presence which he did not deny, if the circumstances would have, as here, called for a

denial.” (DE 392 at 4; DE 397 at 2; DE 401 ¶ 4(a)). Defense counsel cite to Pierce II as putting

forth the applicable standard regarding waiver in in their opening brief (DE 392 at 4), in their

reply brief (DE 397 at 2), and in their surreply (DE 401 ¶ 4(a)).

In its prior order, the Court described how Pierce II was concerned with the issue of

whether “silence of an opposing party is admissible evidence to show adoption of a statement”

and that it “does not concern waiver of a legal right [and] does not discuss a duty to speak up.”

(DE 404 at 21.) The Court also explained that defense counsels’ repeated citations to Pierce II

“leaves the reader befuddled, asking themselves why Defendants would repeatedly cite a case

which has absolutely nothing to do with the doctrine of waiver.” (Id. at 20.) Finally, when

discussing potential sanctions, the Court noted that “Counsel’s repeated reliance on Pierce for a

proposition it does not support indicates to the Court that they have deliberately misconstrued or

ignored Indiana’s case law regarding waiver of a legal right.” (Id. at 41.)

If defense counsel’s prior briefing left the Court befuddled, then their current assertions

responding to the Court’s show cause order leave the Court completely perplexed. Rather than

accept that they incorrectly read Pierce II, defense counsel continue to assert that Pierce II stands

for the proposition that waiver and acquiescence “may both apply where a statement was made

in a party’s presence which he did not deny, if the circumstances would have, as here, called for

a denial.” (DE 405 at 3–4.) They claim that they were just “interpre[ting] Pierce to support the

proposition that in an action on a contract, silence can be an admission when the circumstances

require a contracting party to speak up.” (Id. at 3.) They also assert that the “concept expressed

over 150 years ago in Pierce would likely be recognized as waiver in current Indiana

jurisprudence . . . .” (Id. at 4.)

As will become clear from the discussion below, defense counsel’s position is nonsense.

There is a difference between reasonable interpretation and inventing doctrine which does not

exist. With its discussion of Pierce II, defense counsel have drifted firmly into the latter camp.

For example, defense counsel claims that the following quotation from Pierce II addresses the

substantive requirements for a defense of waiver: “if [Plaintiff] remained silent under such

circumstances as made it his duty to speak, then such silence would have been an implied

admission of the truth of the statement made by [Defendant].” (DE 405 at 4); Pierce II, 35 Ind. at

321. However, this quotation from Pierce II does not, in any way, address the requirements for

the affirmative defense of waiver. Instead, the quote above relates to the evidentiary doctrine of

when a statement is admissible as adopted by another party. This is not a matter of debate

between reasonable minds. It is readily apparent from reading the case.

In order to assist defense counsel in understanding why their reading is unreasonable, the

Court’s discussion below will review Pierce II in substantial detail, analyzing its factual and

procedural history, before discussing its holding and rationale. Prior to discussing Pierce II,

however, the Court discusses another case which further illuminates the unreasonable flaws in

defense counsel’s assertions: Pierce v. Goldsberry (“Pierce I”), 31 Ind. 52 (Ind. 1869). Pierce I

is not discussed by defense counsel, but it provides informative background as to Pierce II. A

review of the facts of Pierce I, as well as the court’s holding in that case, make it clear that the

affirmative defense of waiver was never an issue in that case. Instead, as Pierce I clearly shows

and Pierce II confirms, the defendant there relied solely on the affirmative defense of discharge

of a surety. Finally, after discussing Pierce I and Pierce II, the Court will elaborate on why it

believes defense counsel’s assertions regarding Pierce II are not only unreasonable, but are being

made in bad faith.

(a) Pierce I related to the discharge of sureties, not the affirmative defense of waiver

or acquiescence.

The Court begins with the facts. In Pierce I, a Plaintiff, Goldsberry, had brought an

action to recover on a note against Defendants Pierce and Loyed. Pierce v. Goldsberry (Pierce I),

31 Ind. 52, 52 (Ind. 1869). Pierce had executed a note as surety for his co-defendant, Loyed. Id.

The payee on the note was Goldsberry. Id. As a defense to Goldsberry’s claim, Pierce argued

that Loyed, without the knowledge and consent of Pierce, made an oral contract with Goldsberry

after the maturity of the note, where Loyed reaffirmed that he would pay the ten percent interest

on the said note in exchange for an extension of time to pay off the note, where the extension of

time was for a definite period. Id.

The Supreme Court of Indiana faced the question of whether the extension of time by

Loyed, without the knowledge and consent of Pierce, discharged Pierce as a surety. Id. The

Supreme Court of Indiana first noted that, as a general rule of contract law, it was well settled

that such an extension would, “if valid, discharge the surety.” Id. at 52. Because of the extra

definite period, “it increase[d] [the surety’s] hazard, in view of the fact that the principal may

become insolvent before the lapse of the additional time given for payment.” Id. at 52–53. The

court went on to further detail the doctrine “as to the discharge of sureties” and explained that

such a doctrine went back “as early as the reign of Edward IV, that when the creditor, without

the consent of the surety, gave time to the principal debtor, by agreement, the surety was

discharged[.]” Id. at 54. The court further explained that the rule “in England for ages” included

no requirement “that such agreement should be supported by a consideration[.]” Id. However, by

the time the Supreme Court of Indiana was hearing the case in 1869, there was a general

consensus that, in order for a discharge to result, the agreement had to be supported by

consideration. Id.

In Pierce I, the Supreme Court of Indiana had to consider whether the agreement by

Loyed to pay the interest rate on the loan he already owed in exchange for a further fixed

extension to the loan’s maturity date was adequate consideration so as to justify the discharge of

Pierce’s surety. Id. The Supreme Court of Indiana held that it was adequate, since the fixed

extension of the contract benefitted Goldsberry by allowing interest to accrue for an additional

period, while depriving Pierce the ability to pay off the loan early (and potentially limit the

amount he owed). Id. at 55. The Supreme Court of Indiana then reversed and remanded the case

with directions to the lower Court to now consider this affirmative defense. Id. at 56.

Pierce I bears no resemblance to the case at hand. It has to do with an affirmative defense

related to the discharge of sureties: that a new contract made by the principal Loyed discharged

the obligation of Pierce as a surety. Such an affirmative defense bears little, if any, relation to the

affirmative defense of waiver. For example, a waiver is an “intentional relinquishment” of a

known right, which is “made by the person whose rights or remedies are to be affected.” Matter

of S.L., 599 N.E.2d 227, 229 (Ind. Ct. App. 1992) (citation omitted). The affirmative defense in

Pierce I was that someone else (Loyed) took an action, extending the time to repay, which

discharged Pierce’s obligation as a surety.1

Other cases which cite Pierce I have only done so to articulate the law regarding

discharge of sureties or to explain the law regarding sureties generally, but none of these cases

have expounded in any depth on the law of waiver. See Post v. Losey, 111 Ind. 74, 12 N.E. 121,

125 (Ind. 1887) (citing Pierce I in support of the position that “the general doctrine . . . is that, in

order to release the surety, there must be a new contract between the creditor and the principal

debtor, fixing the time of payment at a different date from that fixed in the original contract; that

the contract for extension must be based upon a new and sufficient consideration, and that the

extension must be to a fixed time, so that the contract may embody the necessary elements of

certainty . . . .”); Menifee v. Clark, 35 Ind. 304, 307 (Ind. 1871) (citing Pierce I for the same

proposition); Jaqua v. Montgomery, 33 Ind. 36, 45 (Ind. 1870) (same); Lorimer v. Fairchild, 68

Kan. 328, 75 P. 124, 126 (Kan. 1904) (same); McCormick Harvesting Mach. Co. v. Rae, 9 N.D.

1 The modern rule regarding discharge is somewhat similar to that described in Pierce I: “a surety . . . would be

discharged from her obligation by a material alteration or change in or departure from the principal obligation

without her knowledge or consent.” Reeder v. Ramsey, 458 N.E.2d 682, 684 (Ind. Ct. App. 1984). It is possible that

an individual might waive their defense of discharge. Id. But whether an individual waives a defense is a separate

question from what is required to prove the defense of discharge. Pierce I addresses the defense of discharge, but it

does not address the distinct question of what would be required to show that such a defense was waived.

482, 84 N.W. 346, 346 (N.D. 1900) (same); Miller v. Arnold, 65 Ind. 488, 491 (Ind. 1879) (citing

Pierce I for the proposition that “[a]t law the surety could not take any steps to compel the

creditor to proceed or collect or secure his claim against the principal”).

Secondary sources confirm that this line of cases, starting with Pierce I, has to do with

the affirmative defense of discharge of surety, not waiver. For example, Pierce I’s holding that a

fixed extension of time was sufficient consideration to discharge a surety was ultimately

overruled by Abel v. Alexander, 45 Ind. 523, 531 (Ind. 1874). In a publication entitled

“Suretyship — Extension of Time — Discharge of Sureties,” the Harvard Law Review disagreed

with Abel’s holding, finding that the extension of time itself was sufficient consideration, in line

with the holding of Pierce I. See Suretyship - Extension of Time - Discharge of Sureties, 13 Harv.

L. Rev. 63 (1899). The case Post v. Losey is cited by more modern sources, none of which opine

on the law of waiver. For example, in a section of the Fourth Edition of Williston on Contracts

entitled “Discharge by extending principal’s time to perform, generally,” which is within a

chapter entitled “Contracts of Suretyship and Guaranty,” the well-known treatise cites Post for

the general rule that “[a] binding agreement by which the creditor gives the principal an

extension of time for performance discharges the surety.” 23 Williston on Contracts § 61:16 (4th

ed.); see also 26 Ind. Law Encyc. Suretyship § 39 (citing Post for “[t]he general rule . . . that a

surety is discharged by an unauthorized extension of time irrespective of whether or not the

surety suffered prejudice in fact”).

The above demonstrates that the defense raised by Pierce was not one of waiver. Nor was

this simply one defense among many raised by Pierce. As the Supreme Court of Indiana notes in

Pierce II, “[t]he sole controversy in the case was whether Goldsberry had extended the time of

payment, upon a sufficient consideration, and without the knowledge or consent of the appellant,

the surety.” Pierce II, 35 Ind. at 320. In other words, the sole issue regarding the merits of

plaintiff’s contract claim was whether Pierce’s obligation as surety had been discharged.

Therefore, the first flaw with defense counsel’s invocation of Pierce II is that the

defendant there was advancing a completely different affirmative defense, related to discharge of

sureties, which does not have any applicability in this setting. But this is not the only reason

defense counsel’s reliance on Pierce II is misplaced. Even a cursory reading of Pierce II should

have put counsel on notice that it was not discussing the affirmative defense of waiver, but rather

was opining on the evidentiary issue of adoption of a statement by silence.

(b) Pierce II was evidentiary in nature and does not, in any manner, discuss the

affirmative defense of waiver.

After Pierce I, the case was remanded and retried. Pierce v. Goldsberry (Pierce II), 35

Ind. 317, 317 (Ind. 1871). At trial, Pierce testified that he had been a surety on the note between

Loyed and Goldsberry. Id. at 319. Roughly two years after the maturation of the original note,

Loyed informed him of a new agreement that had been made where Loyed would pay

Goldsberry the same interest rate and get an extension of time for a definite period in order to

pay back the loan. Id. Pierce then testified that he had recounted these same facts in front of

Goldsberry and a lawyer. Id. Pierce’s attorney attempted to ask him what Goldsberry’s response

had been, to which Goldsberry objected. Id. at 320. The district judge sustained this objection

and did not allow Pierce to testify as to what Goldsberry said in response to those facts, or

whether Goldsberry had objected to those factual statements. Id. A jury then found for

Goldsberry. Id. at 318.

Pierce appealed and argued that the trial court had erred concerning “the admission of

incompetent and the exclusion of competent evidence.” Id. The Supreme Court of Indiana held

for Pierce and found that the exclusion of the evidence concerning what Goldsberry had said was

improper. Id. at 322. The court started off by noting that “[t]he sole controversy in the case was

whether Goldsberry had extended the time of payment, upon a sufficient consideration, and

without the knowledge or consent of the appellant, the surety.” Id. at 320. As mentioned above,

this confirmed that the sole issue regarding the merits of the case was whether the surety had

been discharged. The court then explained that the response by Goldsberry, whether he admitted,

denied, or stayed silent in the face of Pierce’s account, was relevant to this defense:

If [Goldsberry] admitted that the statement of facts made by Pierce was correct,

such admission would be evidence against him, though not conclusive; if

[Goldsberry] denied the truth of the statement made by Pierce, such denial would

be evidence in his favor and would tend to weaken the statement made by Pierce;

if he made a statement of facts, such statement would have been admissible, and it

would have been for the jury to determine which was true; or if he remained silent

under such circumstances as made it his duty to speak, then such silence would

have been an implied admission of the truth of the statement made by Pierce.

Id. at 320–321 (emphasis added). The court opined on the general rule that “[t]he declarations of

one party and the replies of the other, in a conversation had between the two, are evidence when

provided in a cause[.]” Id. at 321 (quoting Ball v. Clark, 15 Ind. 370 (Ind. 1860)). The court also

explained, in further detail, why even Goldsberry’s silence was relevant to the affirmative

defense of discharge of surety. The court started by quoting a paragraph from Simon Greenleaf’s

A Treatise on the Law of Evidence:

Admissions may also be implied from the acquiescence of the party. But

acquiescence, to have the effect of an admission, must exhibit some act of the mind,

and amount to voluntary demeanor or conduct of the party. And whether it is

acquiescence in the conduct or in the language of others, it must plainly appear that

such conduct was fully known, or the language fully understood by the party, before

any inference can be drawn from his passiveness or silence. The circumstances, too,

must be not only such as afforded him an opportunity to act or to speak, but such

also as would properly and naturally call for some action or reply from men

similarly situated.”

Id. (quoting Simon Greenleaf, A Treatise on the Law of Evidence 237–238, § 197). After quoting

Greenleaf’s evidentiary treatise, the Court then cites to the case Commonwealth v. Kenney, 12

Met. 235, 236 (Mass. 1847). In Kenney, a criminal defendant had been “indicted for stealing

money and a bag . . . .” Id. At trial, evidence was introduced that “declarations were made” by

the victim “in the presence and hearing of the defendant, in regard to the theft, to which the

defendant made no reply.” Id. The court in Kenny found that the admission of defendant failing

to respond in that circumstance was improper, because under the circumstances the defendant

“had certainly no occasion to reply” and the defendant “might well suppose that he had no right

to say anything until regularly called upon to answer.” Id. at 238. The court in Pierce II cites

Kenney in support of the assertion that “[t]o affect a party by evidence that a statement was made

in his presence which he did not deny, the circumstances must appear to be such as called on him

for a denial, if the statement was untrue.” Pierce II, 35 Ind. at 321 (citing Kenney, 12 Met. at

236.)

After discussing Kenney, Greenleaf’s Evidentiary Treatise, and several other cases, the

Court concluded that “evidence [of what Goldsberry said, or didn’t say,] should have gone to the

jury[.]” Id. at 322. The Court reasoned that “no one [could] doubt that Goldsberry heard and

understood what was said by Pierce, or that he was properly and naturally and by the highest

considerations called upon and required to speak.” Id. After making this determination, the court

then reversed and remanded the case.2

As evident from the above, there was no discussion of a defense of waiver in Pierce II.

Nor would such a discussion have made any sense: as Pierce I showed, the sole affirmative

defense raised by Pierce was the discharge of a surety interest. The admission of Goldsberry’s

silence, as explained by the court in Pierce II, was relevant because it related to the question of

2 There was also a brief, one paragraph discussion of whether the court erred in admitting a letter that was

purportedly written by Loyed. Pierce II, 35 Ind. at 322. The court found the letter inadmissible because the letter

was never authenticated. Id.

discharge of Pierce’s surety: “[t]he sole controversy in the case was whether Goldsberry had

extended the time of payment, upon a sufficient consideration, and without the knowledge or

consent of [Pierce], the surety.” Id. Therefore, after examining the text of the Pierce II, the

citations used in Pierce II, and the procedural history of Pierce II, it is clear that defense

counsel’s interpretation is incorrect.

(c) The unreasonableness of defense counsel’s interpretation.

The above demonstrates that defense counsel’s interpretation is unreasonable. It ignores

not only the fact that the case it was citing was not discussing, in any manner, the affirmative

defense of waiver (as shown by the discussion of Pierce I), but also that the language it was

quoting clearly concerned the evidentiary issue of adoption of statements (as shown by the

discussion of Pierce II).

And yet, despite all of the above, defense counsel, in their response to the Court’s show

cause order, persists in claiming that Pierce II articulates the applicable rule regarding waiver.

Given such a bold claim, one would expect defense counsel to point to something compelling in

support. Instead, defense counsel’s arguments amount to throwing multiple, paltry red herrings at

the court, hoping one of their arguments will stick.

First, defense counsel assert that the rule articulated in Pierce II is the same as that

articulated in Hamlin v. Steward, 622 N.E2d 535, 538 (Ind. Ct. App. 1993). As defense counsel

note, Hamlin explicitly addresses waiver, writing that “[t]he existence of waiver may be implied

from the acts, omissions or conduct of one of the parties to the contract.” Id. Defense counsel

assert that this sentence is “similar” to the quote from Pierce II that “if [Goldsberry] remained

silent under such circumstances as made it his duty to speak, then such silence would have been

an implied admission of the truth of the statement made by Pierce.” (DE 405 at 3–4.) However,

these two quotes are not similar in any relevant sense.

To start, the quotes are drastically different on their face. The rule articulated in Hamlin

explicitly addresses “waiver.” It does this by first explicitly including the word “waiver” and

then describing what is necessary to constitute that “waiver.” The quote from Pierce II,

meanwhile, does not explicitly include the word “waiver,” any synonym of “waiver,” or any

definition of “waiver.” Rather, it explicitly notes that it is considering under what circumstances

silence would be an “implied admission of the truth of the statement . . . . ” While the Federal

Rules of Evidence were not around at the time of Pierce II, the court in Pierce II was describing

what is now often described as a hearsay exception under both Indiana and Federal law. Under

both Indiana law and Federal law, an opposing party statement offered against that party is not

hearsay if it is “one the party manifested that it adopted or believed to be true.” Fed. R. Evid.

801(d)(2)(b); Ind. R. Evid. 801 (d)(b). The quote in Pierce II was addressing the well-known

principle that when the circumstances are such that one who disagrees would speak up and object

(i.e., the individual “remained silent under such circumstances as made it his duty to speak”), and

the individual does not speak up, then the silence is relevant to the truth of the other individual’s

statements (i.e., the “silence would . . . impl[y] admission of the truth of the statement”). The

quote is largely consistent with modern day explanations of Federal Rule of Evidence

801(d)(2)(B). See United States v. Ward, 377 F.3d 671, 675 (7th Cir. 2004) (finding that

defendant’s “silence qualifies as an admission because his sister’s accusation is the type of

statement that a party normally would respond to if innocent”); Tober v. Graco Children’s

Prod., Inc., 431 F.3d 572, 576 (7th Cir. 2005) (explaining that a “failure to reply to a letter may

be introduced as an admission of the statements contained in the letter when the receiver of the

letter remains silent in a situation where a response would seem natural or expected”); Williams

v. Michigan City Police Dep’t, No. S92-488M, 1993 WL 592725, at *1 (N.D. Ind. July 6, 1993)

(“Fed. R. Evid. 801(d)(2)(B) requires that the circumstances surrounding the accusation and

silence be such that the accused naturally would be expected to deny the accusation if he

believed it to be untrue.”). After analyzing the language in Hamlin and Pierce II, it becomes

evident that the two quotes are not remotely similar when it comes to describing the current rule

regarding the affirmative defense of waiver — which is all that matters for the purposes of this

discussion. 3

In addition to the clear differences in language which distinguish the two quotations,

multiple secondary sources in Indiana also cite to Pierce II as one of the first authorities

discussing the evidentiary rule of adoptive admission prior to the enactment of the Federal Rules

of Evidence. See 12 Ind. Law Encyc. Evidence § 67 (citing Pierce II for the proposition that “the

silence of a party is only admissible as being in the nature of an admission when the character or

extent of the communications or conversations is shown to be of such a nature as to actually

require a reply, and when the statements made are of such a nature as to for a denial”); see also

Bret Ruber, Adoptive Admissions and the Duty to Speak: A Proposal for an Appropriate Test for

the Admissibility of Silence in the Face of an Accusation, 36 Cardozo L. Rev. 299, 306 (2014)

(citing Pierce II when discussing the requirements for adoptive admissions in the nineteenth

3 It is true that the quotes are similar in that they both contain words and that these words are in the English

language, but the quotes are not similar as it relates to waiver. As way of an analogy, imagine an individual who has

just woken up from a coma and has a severe case of aphasia. Now imagine attempting to explain to that individual

what a “tangible object” is. In such a scenario, one could say an “orange” is similar to a “semi-truck.” After all, both

are “tangible objects.” However, now imagine trying to explain what “fruit” is. Now it would be utterly absurd to

point to the “orange” and the “semi-truck” and claim they are both “similar.” Such a claim entirely forgets that

“similarity” between two words hinges on the context of the discussion at hand. Here, defense counsel have

forgotten the context of this discussion. Their argument essentially amounts to trying to say an “orange” and a

“semi-truck” are “similar” when trying to define the category of “fruit.”

century before the enactment of the Federal Rules of Evidence). In fact, the Court is aware of no

case law or secondary sources which cite to Pierce II as an authority on waiver.4

Furthermore, there are numerous places in Pierce II which clearly demonstrate that the

court was referring to the admission of adopted statements. The order is replete with quotations

explaining that the court is discussing an evidentiary rule regarding the admissibility of adopted

statements. For example, when quoting Greenleaf’s treatise, the Supreme Court of Indiana

writes:

Greenleaf [in his evidentiary treatise] states the rule thus: Admissions may also be

implied from the acquiescence of the party. But acquiescence, to have the effect of

an admission, must exhibit some act of the mind, and amount to voluntary

demeanor or conduct of the party. And whether it is acquiescence in the conduct or

in the language of others, it must plainly appear that such conduct was fully known,

or the language understood by the party, before any inference can be drawn from

his passiveness or silence. . . .

Pierce II, 35 Ind. at 321 (emphasis added). On its face, this quote is explaining a rule regarding

the circumstances where an admission may be implied from silence or inaction. The Court notes

that defense counsel, in their brief, claim that the section mentioning “acquiescence” in

Greenleaf’s evidentiary treatise was really opining on elements of the affirmative defense of

4 The court notes that there are numerous criminal cases, not having anything to do with the affirmative defense of

waiver of a contractual claim, which cite to Pierce II. See Kern v. State, 144 N.E.2d 705, 706 n.1 (Ind. 1957) (cites

to Pierce II for the hearsay rule regarding adoptive statements); Fausett v. State, 39 N.E.2d 728, 733 (Ind. 1942)

(same); Surber v. State, 99 Ind. 71, 73 (Ind. 1884) (same); Broyles v. State, 47 Ind. 251, 253 (Ind. 1874) (same);

State v. Hill, 36 S.W. 223, 225 (Mo. 1896) (same); Green v. State, 36 S.W. 700, 704 (Tenn. 1896) (same); State v.

Mortensen, 73 P. 562, 568 (Utah 1903) (same); Conway v. State, 21 N.E. 285, 286 (Ind. 1889) (same). The fact that

cases having to do with criminal charges of murder, robbery, rape, and “bastardy” were citing to Pierce II, should

have signaled to counsel, in addition to the explicit text of Pierce II, that Pierce II was not addressing the

substantive requirements for the affirmative defense of waiver. There are also numerous civil cases which cite

Pierce II, but fail to discuss the requirement for the affirmative defense of contractual waiver. See Springer v.

Byram, 36 N.E. 361, 364 (Ind. 1894) (cites to Pierce II for the hearsay rule regarding adoptive statements); Puett v.

Beard, 86 Ind. 104, 106 (Ind. 1882) (same); Johnson v. Holliday, 79 Ind. 151, 156 (Ind. 1881) (same); Howard v.

Howard, 69 Ind. 592, 601 (Ind. 1880) (same); Gerulis v. Viens, 156 A. 378, 379 (Me. 1931) (same); Masons’ Union

Life Ins. Ass’n v. Brockman, 59 N.E. 401, 403 (Ind. Ct. App. 1901) (same). None of these cases claim that Pierce II

set forth the substantive requirements of the affirmative defense of waiver, and the Court is aware of no such case.

waiver. (DE 405 (“Acquiescence” [in Pierce] and what Hamlin called “waiver” do not appear to

be meaningfully different.”) As can be seen by the text above, this is clearly not what Greenleaf

was discussing. Rather, he was discussing when it is permissible to draw inferences from silence

or inaction in response to another party’s statement or conduct. (i.e., “acquiescence” as used in

this context). A quick Google search also dispels the notion that Greenleaf, in his evidentiary

treatise, was discussing substantive contract defenses in this passage. The first edition of

Greenleaf’s evidentiary treatise is available for free online. In a footnote to the quotation above,

Greenleaf writes the following:

To affect a party with the statements of others, on the grounds of his implied

admission of their truth by silent acquiescence, it is not enough that they were made

in his presence; for if they were given in evidence, in a judicial proceeding, he is

not at liberty to interpose when and how he pleases, though a party; and therefore

is not concluded.

Simon Greenleaf, A Treatise on the Law of Evidence § 197 n.1 (1st ed. 1842).5 If Greenleaf had

been describing what had to be proved in order to make out the affirmative defense of waiver, it

would be unusual that he would claim, in a footnote, that the evidence was going towards

“affect[ing] a party with the statements of others, on the grounds of his implied admission of

their truth by silent acquiescence[.]”6 Rather, the footnote demonstrates that Greenleaf’s quote

was addressing when a party’s silence in the face of a statement can be used against that person.

Furthermore, the chapter this section of Greenleaf appears in is entitled “Of Admissions” and the

5 A free copy of the treatise is available at: https://www.google.com/books/edition/A_Treatise_on_the_ Law_of_

Evidence/_fI1AQAAMAAJ?hl=en&gbpv=1&dq=Greenleaf+A+Treatise+on+the+Law+of+

Evidence&printsec=frontcover (last viewed 11/10/2022).

6 The Court also notes that in Howard v. Howard, 69 Ind. 592, 600 (1880), the Supreme Court of Indiana again

quotes this portion of Greenleaf’s evidentiary treatise when determining that the “court erred in allowing the

appellees’ witnesses to give in evidence to the jury this statement[.]” They also describe it explicitly as a “rule of

evidence” that was approved in Pierce v. Goldsberry, 35 Ind. 317[.]”

first introductory sentence reads as follows: “Under the head of exceptions to the rule rejecting

hearsay evidence, it has been usual to treat of admissions and confessions by the party;

considering them as declarations against his interest and therefore probably true.” Id. § 169.

Again, it would be quite odd for Greenleaf, in his evidentiary treatise, in a chapter explicitly

discussing admissions as an “exception to the rule rejecting hearsay evidence,” to then transition

into a discussion of the substantive elements of the affirmative defense of waiver.

Other citations should have also alerted counsel to the fact that they were dealing with an

evidentiary rule, rather than a rule regarding waiver of a contractual right. For example, the court

in Pierce II, at some length, quotes from Kenney, 12 Met. 235. The quote itself is, again, clearly

discussing an evidentiary rule.7 But beyond that, if counsel had read the case, they would have

discovered this is a criminal case dealing with theft, which does not discuss contractual rights or

waiver of those rights. The entire opinion in that case is only three paragraphs long and the first

paragraph makes it clear that it is not addressing waiver of a contractual right:

The defendant was indicted for stealing money and a bag . . . [E]vidence was offered

to show that declarations were made at the watch house, by [the victim] in the

presence and hearing of the defendant, in regard to the theft, to which the defendant

made no reply. This evidence was objected to by the defendant, but was admitted

by the court; and this is the ground of exception.

7 The court in Pierce II quotes Kenney as follows: “If a statement is made in the hearing of another, in regard to facts

affecting his rights, and he makes a reply, wholly or partially admitting their truth, then the declaration and the reply

are both admissible; the reply, because it is the act of the party, who will not be presumed to admit anything

affecting his own interest or his own rights, unless compelled to it by the force of truth; and the declaration, because

it may give meaning and effect to the reply. In some cases where a similar declaration is made in one's hearing, and

he makes no reply, it may be a tacit admission of the facts. But this depends on two facts; first, whether he hears and

understands the statement and comprehends its bearing; and secondly, whether the truth of the facts embraced in the

statement is within his own knowledge or not; whether he is in such a situation that he is at liberty to make any

reply; and whether the statement is made under such circumstances, and by such persons, as naturally to call for a

reply, if he did not intend to admit it.” Pierce II, 35 Ind. at 321–22.

Id. at 236. From that paragraph, it is apparent that Kenney is a criminal case regarding theft,

which considered the admissibility of an adopted statement, but does not set forth the standard

regarding waiver of a contractual right.

In their response to the Court’s show cause order, defense counsel also cite to the case

Kern v. State, 144 N.E2d 705, 706 n.1 (Ind. 1957), ostensibly to show that more modern cases

have cited Pierce II. (DE 405 at 3 (citing Kern in support of the proposition that “[w]e

interpreted Pierce to support the proposition that in an action on a contract, silence can be an

admission when the circumstances require a contracting party to speak up”).) However, such a

citation is bizarre and leaves the Court further convinced that counsel is engaging in arguments

that reek of bad faith.

Kern was a case in which the Supreme Court of Indiana considered an appeal by a

defendant in a criminal case. Kern, 144 N.E.2d at 705. This appeal was from a judgment of

guilty as to one count of robbery. Id. The defendant there and another man had been driven to a

house by two female accomplices. Id. at 706. The two men then broke into the house, hit the

victim over the head with a “tire wrench,” and robbed the victim. Id. While at the station house,

the defendant’s accomplices made statements in front of the defendant in which they described

their part in the robbery. Id. Defendant responded at the police station by saying that they were

“lying,” which was later admitted into evidence at trial. Id. The court found that testimony of the

defendant’s response was inadmissible. Id. This was because the rule in criminal cases was that

“if an accused be in custody when such accusations of guilt are made in his presence, he is under

no duty to deny them and his silence is not to be taken as an admission against him . . . .” Id. The

court then, in a footnote, cites Pierce II and describes how the rule is different in civil cases:

In civil causes the rule is, ‘if statements are made in the presence and hearing of a

person, affecting his rights, and under such circumstances as call for a reply, what

he said, or if he failed to say anything may be proven as in the nature of an

admission. Pierce v. Goldsberry, 35 Ind. 317 . . . .

Id. at 706 n.1. After noting that his response was inadmissible hearsay, the court found that it

was “introduced without objection” and so could be considered on appeal when determining if a

new trial should result. Ultimately, the court found the trial court did not err in denying

appellant’s motion for a new trial. Id. at 707.

The citation to Kern by defense counsel indicates that they likely know that Pierce II

does not stand for the proposition they keep asserting. Kern is a criminal case with absolutely no

mention of contract or contractual waiver. Instead, the defendant robbed a victim after hitting

him over the head with a wrench and then made certain statements at a police station which had

been admitted at trial. The court was considering whether those hearsay statements, admitted at

trial without objection, warranted a new trial. Since counsel cited this case, they should have also

understood that it had nothing to do with waiver and been aware that Pierce II was also not

discussing the affirmative defense of waiver.

Finally, defense counsel includes the meager argument that Pierce II is not merely an

“evidentiary ruling” because evidence “is not admissible unless it is relevant, so there would

have been no reason for the Indiana Supreme Court to order evidence of Goldsberry’s silence to

be admitted unless that silence, under the circumstances was relevant to Pierce’s liability on the

contract.” (DE 405 at 4.) This argument misses the point. Counsel is correct that evidence is only

admissible if it is relevant. See Fed. R. Evid. 402. It is also true that the evidence of Goldsberry’s

silence was relevant to Pierce’s contractual liability. However, defense counsel has never

previously asserted that Pierce II is only broadly relevant to contractual liability.

Instead, defense counsel have consistently asserted that Pierce II sets forth the

requirements for the affirmative defense of waiver. Counsel explicitly cite to Pierce II in their

opening brief for the rule that waiver “appl[es] where a statement was made in a party’s presence

which he did not deny, if the circumstances would have, as here called for a denial.” (DE 392 at

4.) In their response, Plaintiffs then correctly noted that this was the incorrect standard, explained

that under Indiana law “waiver is an affirmative act and mere silence, acquiescence or inactivity

does not constitute waiver unless there was a duty to speak or act, and then asserted that

defendants had failed to identify any “duty to speak or act” in their opening brief. (DE 393 at 2–

3.) In their reply, defense counsel, for the first time, raised the argument that Plaintiffs did have a

duty to speak up.8 (DE 397 at 6–8.) Plaintiff’s new argument concerning duty prompted

Plaintiffs to file a surresponse in which they argued, correctly, that this new argument was

waived for failure to include it in defense counsel’s opening brief. (DE 399.) In their surreply,

defense counsel again cited Pierce II as setting forth the standard regarding waiver. (DE 401 ¶

4(a).) Finally, in their response to the order to show cause, after this court put them on notice that

their interpretation of Pierce II lacked support, defense counsel persisted with their claim that

Pierce II stands for the proposition that waiver may apply “where a statement was made in a

party’s presence which he did not deny, if the circumstances would have, as here, called for a

denial.” (DE 405 at 4.)

As the above demonstrates, it has never been defense counsel’s claim that Pierce II is

relevant merely because it relates to contractual liability. Rather, it has been defense counsel’s

position that Pierce II is relevant because it lays out the applicable rule regarding the affirmative

defense of waiver. The court cannot emphasize this enough: Pierce II does not, in any manner,

lay out the standard that must be met to show the affirmative defense of waiver.

8 In this reply brief, defense cite Pierce II again for the proposition that waiver applies “where a party did not speak

out when he should have, where circumstances called for a denial.” (DE 397 at 2.)

It is completely unreasonable to claim that Pierce II stands for what defense counsel

asserts. As shown above, Pierce II is a 150-year-old case that explicitly addresses the evidentiary

rule regarding adoption of statements. The case at absolutely no point addresses the affirmative

defense of waiver. This commonsense interpretation is readily apparent: it is clear not only

through the language of the case, but by the citations included in the case, and is confirmed by

the fact that Pierce II has been interpreted uniformly by other cases and secondary sources as

addressing the evidentiary rule regarding adoption of statements. Defense counsel’s continued

insistence to the contrary is bewildering.

The Court also finds that defense counsel’s insistence to the contrary has resulted in

substantial delay to the resolution of this case. As the Court explained in detail in its last order,

defense counsel’s failure to properly include the proper standard regarding waiver in their

opening brief caused them to neglect to address the element of duty to speak (which was likely

necessary if they hoped to succeed). (DE 404 at 43.) After Plaintiffs pointed out this failure,

defense counsel maintained that they did, in fact, argue duty to speak, pointing to Pierce II, five

quotations from cases addressing laches, and a throwaway, conclusory line in their opening brief.

(DE 401 ¶ 4.) Even after the Court called out defense counsel’s questionable use of Pierce II in

its prior order, defense counsel have still persisted in their claim that Pierce II lays out the

applicable standard of waiver.

The upfront failure to reasonably interpret Pierce II likely led to the counsel’s omission

of an argument regarding duty to speak in their opening brief, which led to them raising this

issue for the first time in their reply. Raising this belatedly required Plaintiffs to expend

resources writing a surresponse about why such a claim was waived. In addition to the omission

prompting further briefing, the Court, as well as Plaintiffs’ counsel, have wasted valuable

resources addressing arguments which were largely undermined from the outset due to defense

counsel’s failure to correctly identify the black letter law regarding waiver. (DE 404 at 41.)

Finally, the Court has expended resources in this order addressing an interpretation that is

unequivocally wrong. Given defense counsel’s repeated invocation of Pierce II for a proposition

it does not remotely support, the Court finds that defense counsel have been making

unreasonable arguments in bad faith for the purpose of dragging out this lawsuit. As explained

above, the unreasonable interpretation of Pierce II has likely caused delay in the resolution of

this case. It has also caused the opposing party, as well as this court, to expend resources

addressing multiple arguments based on a flagrant misinterpretation of the law which were

doomed to fail at the outset.

Worse yet, defense counsel’s misinterpretation of Pierce II is not a singular event.

Rather, defense counsel made a similar misinterpretation of another case: Hellyer Commc’ns,

Inc. v. WRC Properties, Inc., 969 F. Supp. 1150, 1159 (S.D. Ind. 1997).

(2) Defense Counsel’s Interpretation of Hellyer was also Objectively Unreasonable.

In its prior order, the Court put defense counsel on notice that it believed that defense

counsel had also misinterpreted the case law in its discussion of Hellyer Communications, Inc. v.

WRC Properties, Inc., 969 F. Supp. 1150, 1159 (S.D. Ind. 1997). In their reply, defense counsel

asserted that Hellyer supported the rule that there is a duty to speak when “Plaintiffs [have]

access to all of the information.” (DE 397 at 2.) In support of this, defense counsel then include

the following quote taken from Hellyer: “Hellyer had a duty to inspect the premises to ensure

that they conformed with the Lease and to notify [Landlord] with any problems.” (Id.)

As the Court explained in its prior order, defense counsel is wrong. (DE 404 at 41–42.)

The court in Hellyer was clearly writing that the duty to speak came from an explicit term in the

lease. (Id.) Furthermore, the quotation that defense counsel includes in support of their standard

omits clear portions which identify that the court was discussing how the duty arose from the

explicit terms of the lease. The Court explained much of this in its prior order. (Id.) However,

like with Pierce II, the Court again will review Hellyer in order to show why defense counsel

have reached an unreasonable interpretation.

In Hellyer, the court faced the question of whether laches barred the plaintiff’s claim that

the defendant had been charging him rent based on the wrong square footage. Hellyer

Commc’ns, Inc. 969 F. Supp. at 1158. The court first explained that there were three elements

necessary for a claim to be barred under the doctrine of laches: “(1) plaintiff’s inexcusable delay

in asserting his or her rights, (2) plaintiff’s implied waiver arising from knowing acquiescence in

existing conditions, and (3) prejudice to the defendant due to the delay.” Id.

The court examined the element of inexcusable delay first. The court began by noting

that the plaintiff, once he came in possession of the space leased, had the ability to “measure its

space at any time.” Id. at 1159. This gave the plaintiff constructive knowledge of the square

footage of his leased space. Id. However, the court then explained that constructive knowledge

alone “will not suffice as a predicate for laches.” Id. Instead, there had to be “means of

knowledge combined with a duty to exercise those means [in order to have] an adequate basis for

finding inexcusable delay.” Id (emphasis added). The court went on to conduct a thorough

analysis of how the plaintiff’s duty arose from the explicit terms of the lease:

Hellyer had a duty to inspect its premises to ensure that they conformed with the

Lease and to notify WRC of any problems. Initial Lease Section 2.03. Hellyer

maintains that Section 2.03 only pertained to the Initial Lease and the tenant

improvements made to the leased space, but was not generally in effect as a term

of the Lease. This argument fails in the face of the Integration Clause—the same

reason WRC's prior argument about Lease Exhibit A–3 was unavailing: the

Amendments specifically provide that “all provisions of the Lease not modified or

amended hereby shall remain in full force and effect.” Exs. 6, 7, 17, 22. Section

2.03 was not deleted and thus remained in effect, obligating Hellyer to inspect its

leased space within thirty days after executing the Lease documents. In addition,

Hellyer’s attempt to avoid the waiver provision by claiming that the square footage

discrepancy was not a “condition” under the leasehold, is similarly unavailing,

given that Section 2.03, by its very terms, states that, unless Hellyer notified WRC

it would be deemed to have found the leased space “satisfactory and in conformity

with the provisions of this Lease in all respects ....” Ex. 3 (Initial Lease, Section

2.03)

Id (emphasis added). It is this passage that counsel only quotes the first line from, even though

the rest of the passage, in explicit terms, makes it clear that it is analysis of a contractual duty.

After this passage, the court in Hellyer found that the first element of laches had been satisfied

because there was both constructive knowledge and a duty to speak. Hellyer Commc’ns, Inc. 969

F. Supp. at 1159. Immediately after finding the first element of laches, the Court found that the

second element of laches, acquiescence, had been satisfied: “Hellyer must be deemed to have

acquiesced in the conditions as they existed at the 8500 Building, thus satisfying the second

laches requirement.” Id. The court then explains that “the terms of its Lease imposed on Hellyer

an obligation to verify the lease terms if it wanted to be compensated for any possible

discrepancies.” Id. Finally, the court found that the delay had prejudiced the defendant, resulting

in the claim being barred. Id.

The Court is at a loss for where in the above analysis defense counsel can find support for

the rule that plaintiffs have a general duty to speak when “plaintiffs have access to all of the

information,” are “charged with knowledge,” or when “a plaintiff has . . . even the means of

knowledge.” If anything, Hellyer indicates the exact opposite. If there is always a duty to speak up

when someone has merely the means of knowledge, then why is the court so concerned with the

explicit terms of the lease after it has already found that there the plaintiff had means of

knowledge? If defense counsel’s rule were correct, there would have simply been no need for the

court in Hellyer to examine duty at all. At that point, after determining means of knowledge, the

first prong of the laches analysis would have been complete.

Instead, in both its analysis and the rule it articulates, the court in Hellyer examines

knowledge and duty separately. It first says that constructive knowledge alone “will not suffice

as a predicate for laches” and that it is only “means of knowledge combined with a duty to

exercise those means are an adequate basis for finding inexcusable delay.” Id. at 1159 (emphasis

added). Such a rule accords exactly with the analysis then conducted by the court. First, the court

determined that Hellyer had the means of knowledge, since he was in possession of the leased

property. Defense counsel appears to think that the court could have stopped here because

“means of knowledge” causes an individual to have a “duty to speak up.” However, the court in

Hellyer does not stop there. Rather, in line with the rule the court provides, the court proceeds to

explicitly analyze the terms of the lease in order to conclude that Hellyer had a duty to speak up.

Therefore, in both the explicit rule it puts forth, as well as the analysis it proceeds with, Hellyer

does not support that an individual has a duty to speak when they have the “means of

knowledge” or are simply “charged with knowledge.”

In another portion of their response to the court’s show cause order, defense counsel

claims that they were citing Hellyer alongside another string of cases in support of the

proposition that individuals have a “duty to speak up when confronted with, or charged with

knowledge of a mistake in a contract.” (DE 405 at 5.) With this string cite, defense counsel

asserts that they were trying to draw “an analogy” between Hellyer, the other cases in the string

cite, and the facts before the Court. The Court disagrees.

First, defense counsel never asserted that there was a duty to speak up when “confronted

with, or charged with knowledge of a mistake in a contract” in any of their briefs. Rather, in their

reply brief, they claimed that waiver occurs “where a party did not speak out when he should

have, where the circumstances called for a denial” and that “Indiana law supports that there was

a duty to speak, because the Plaintiffs had access to all of the information.” (DE 397 at 2.)

Elsewhere, they claimed that “[w]here a plaintiff has actual knowledge or even the means of

knowledge, he has a duty to speak up.” (DE 397 at 6.) In their surreply, they also claim that there

is an obligation to speak when one is “charged with knowledge.” (DE 401 ¶ 5.) The only cases

they cite for these propositions are Pierce II and Hellyer, not the string cite. As the Court has

explained above, neither of these cases support the murky proposition that a plaintiff has a duty

to speak when he has “access to all of the information,” “means of knowledge,” or is “charged

with knowledge.” In fact, Hellyer indicates the exact opposite.

Second, there is no indication that this string cite was being used in support of an

analogy. In defense counsel’s reply brief, they cite a string of cases in support of the proposition

that “[e]quity rewards those who are vigilant about their rights.” (DE 397 at 6.) Counsel now

asserts that this string cite was intended to support the legal proposition that an individual has a

“duty to speak up when confronted with, or charged with, knowledge of a mistake in a contract.”

(DE 405 at 5.) If counsel was intending to use a string cite to support this proposition, then they

hid the ball on this in multiple ways. First, as previously discussed, they fail to even mention

such a standard in their briefs, making it highly unlikely that the string cite was in support of it.

Second, the string cite was placed directly after the phrase “[e]quity rewards those who are

vigilant about their rights.” This makes it appear as if the string cite was in support of that

proposition. Finally, not a single one of the parentheticals included in that string cite directly

supports the proposition that there is a “duty to speak up when confronted with, or charged with,

knowledge of a mistake in contract.”9

Upon further review of this string cite, the Court believes that, rather than supporting

their case by way of analogy, counsel decided to copy a string cite, almost verbatim, from

Hellyer. The cases in the string cite appear in the exact same order, with almost the exact same

language, on page 1159 of Hellyer.10 See Hellyer Commc’ns, Inc., 969 F. Supp. at 1159.

Interestingly, though, in Hellyer, the court uses the string cite to support the proposition that

9 Defense counsel listed the following quotations in support of the phrase “equity rewards those who are vigilant

about their rights.” The Court has bulleted them for clarity:

• Hellyer Commc'ns Inc., 969 F. Supp. at 1159 (“Once in possession of the space leased, its reliance upon

[landlord’s] figures was no longer justifiable.”);

• Perry v. State of Indiana, 512 N.E.2d 841, 844 (Ind. 1987) (distinguishing the insufficient “notice which is

imputed from the mere passage of time in post-conviction proceedings” from the sufficient “[i]nquiry

notice which is imputed from objective facts, such as the open and notorious use of land by an adverse

claimant”);

• Mishawaka, St. Joseph Loan & Trust Co. v. Neu, 196 N.E. 85, 90 (Ind. 1935) (“[m]eans of knowledge with

the duty of using them are, in equity, equivalent to knowledge itself”);

• see also Fulani v. Hogsett, 917 F.2d 1028, 1031 (7th Cir. 1990), cert. denied, 501 U.S. 1206, 111 S.Ct.

2799, 115 L.Ed.2d 972 (1991) (concluding that laches barred claim challenging state election procedure

where plaintiff waited eleven weeks after ballots were public record and two weeks after it had actual

knowledge of alleged irregularity);

• Simon v. Auburn, Bd. of Zoning Appeals, 519 N.E.2d 205, 214 (Ind. Ct. App.1988) (determining that

doctrine of laches applies where plaintiffs “had knowledge or the means of acquiring knowledge of the

technical irregularities they now allege”).

(DE 397 at 6.)

10 The following string cite appears in Hellyer. The Court has put it in bullets for clarity. The Court has also

italicized the portions which appear directly copied:

• See e.g., Perry v. State of Indiana, 512 N.E.2d 841, 844 (Ind. 1987) (stating that laches cannot rest on

constructive knowledge, and distinguishing the insufficient “notice which is imputed from the mere

passage of time in post-conviction proceedings” from the sufficient “[i]nquiry notice which is imputed

from objective facts, such as the open and notorious use of land by an adverse claimant”);

• Mishawaka, St. Joseph Loan & Trust Co. v. Neu, 209 Ind. 433, 196 N.E. 85, 90 (Ind. 1935) (“[m]eans of

knowledge with the duty of using them are, in equity, equivalent to knowledge itself”) (quoting Cordova

v. Hood, 84 U.S. 1, 17 Wall. 1, 21 L.Ed. 587 (1872));

• see also Fulani v. Hogsett, 917 F.2d 1028, 1031 (7th Cir.1990), cert. denied, 501 U.S. 1206, 111 S.Ct.

2799, 115 L.Ed.2d 972 (1991) (concluding that laches barred claim challenging state election procedure

where nature of claim requires expeditious prosecution and before filing claim, plaintiff waited eleven

weeks after ballots were public record and two weeks after it had actual knowledge of alleged

irregularity);

• Simon v. Auburn, Bd. of Zoning Appeals, 519 N.E.2d 205, 214 (Ind. App.1988) (determining that doctrine

of laches applies where plaintiffs “had knowledge or the means of acquiring knowledge of the technical

irregularities they now allege”)

“[a]lthough constructive knowledge will not suffice as a predicate for laches, the means of

knowledge combined with a duty to exercise those means are an adequate basis for finding

inexcusable delay.” Id. In other words, defense counsel have copied, nearly verbatim, a string

cite that does not support what they are now claiming. Furthermore, defense counsel’s naked

claim that these cases support them by way of analogy does not make it so: in their reply brief,

they include no independent analysis explaining why these cases help show there is a duty to

speak up when “confronted with, or charged with knowledge of a mistake in a contract.” (DE

397 at 6.)

Even if defense counsel included a discussion of the so-called duty to speak when

“confronted with, or charged with knowledge of a mistake in a contract,” the cases cited in that

string cite don’t appear, on their face, to support such a standard. For example, defense counsel

cites to Fulani v. Hogsett, 917 F.2d 1028, 1031 (7th Cir. 1990). In Fulani, the Seventh Circuit

considered whether a claim that Indiana electoral officials had been denied equal protection of

the laws when state officials allowed both the Democratic and Republican presidential

candidates on the ballot after the Indiana Secretary of State failed to certify their electoral

candidates by the date set forth under Indiana law. Id. at 1029. However, the plaintiffs waited

until only three weeks before the election to file their claim. Id. at 1030. The court noted that “in

the context of elections, [laches] means that any claim against a state electoral procedure must be

expressed expeditiously.” Id. The Seventh Circuit ultimately held that the claim was barred by

laches given the eleven weeks they waited in pressing their claim and that they only raised it

three weeks before “the election, [which would have made it] extremely difficult, if not

impossible, for Indiana to provide another set of ballots.” Id. at 1031. It is unclear why defense

counsel believes this case, discussing the unique application of laches when it comes to claims

affecting elections, supports the rule that there is “a duty to speak up when confronted with, or

charged with, knowledge of a mistake in a contract.” (DE 405 at 5.) After all, the case does not

mention contracts and has to do with laches in the unique context of elections.

Other cases cited in this long string cite also do not, on their face, have to do with a duty

to speak up when “confronted with, or charged with knowledge of a mistake in contract.” See

Perry v. State, 512 N.E.2d 841, 844 (Ind. 1987) (considering laches in the context of a prisoner

seeking post-conviction relief and finding that both constructive knowledge and “inquiry notice

alone [are] not sufficient to support a finding of unreasonable delay under circumstances

permitting diligence”); Mishawaka, St. Joseph Loan & Trust Co. v. Neu, 196 N.E. 85, 90 (Ind.

1935) (considering a claim seeking specific-performance of real estate and noting that “[m]eans

of knowledge with the duty of using them are, in equity, equivalent to knowledge itself”); Simon

v. City of Auburn, Ind., Bd. of Zoning Appeals, 519 N.E.2d 205, 215 (Ind. Ct. App. 1988)

(explaining that the first element of laches was met because “persons are charged with

knowledge of the law . . . .”) The Court notes that even if an analogy could be drawn from these

cases to the instant one, defense counsel never developed one in any meaningful manner

throughout their briefs.

Finally, defense counsel, in their response to the show cause order, now claims that their

“intent was not to argue that Indiana law establishes an independent duty to speak based on mere

access to information[,]” but rather “under the ‘circumstances calling for a response’ framework

discussed above,11 our intent was to draw a factual analogy between what ought to be a tenant’s

11 The only section prior to defense counsel addressing Hellyer was the section addressing Pierce II. Therefore, it

appears that defense counsel here means the framework discussed in Pierce II. Of course, that framework, as

explained above, has nothing to do with the affirmative defense of waiver.

familiarity with the space she occupies and what ought to be a commission-earner’s familiarity

with the commissions he is owed.” (DE 405 at 6.) The Court again disagrees.

First, the Court finds that it was, in fact, their intent to argue that Indiana law establishes

an independent duty to speak based on “mere access to information” given the explicit words to

that effect in their brief: “Indiana law supports that there was a duty to speak because the

Plaintiffs had access to all of the information.” (DE 397 at 2.) Elsewhere in their reply, they put

forth a similarly flawed standard: “Where a plaintiff has actual knowledge or even the means of

knowledge, he has a duty to speak up.” (Id. at 6.) The Court emphasizes that the bold italics are

not the Court’s addition, they are defense counsels’ own stylization. In fact, again, in their

surreply, defense counsel assert that “its position had always been that “where a plaintiff has

actual knowledge or even the means of knowledge, he has a duty to speak up.” (DE 401 ¶ 3.)

For defense counsel to claim now that they were not arguing that there was a duty to speak based

on “mere access to information” is inconsistent with the explicit, bolded, italicized words they

used throughout their briefs. The Court is not willing to ignore the clear meaning of defense

counsel’s words in favor of a weakly supported after-the-fact justification.

Second, when defense counsel claims they were simply referencing Hellyer and the string

cite in support of the “circumstances calling for a response” framework, they appear to be

referencing the framework derived from Pierce II. As the Court explained above, this reliance on

Pierce II is misplaced considering that was a case addressing whether adopted statements could

be admitted into evidence.

Accordingly, the Court finds that counsel’s initial interpretation of Hellyer was

objectively unreasonable. The Court also finds that defense counsel’s justification for why they

used Hellyer, which relies on Pierce II and an irrelevant string cite, further demonstrates bad

faith. Like with Pierce II, defense counsel repeatedly relied on Hellyer to support their argument

concerning duty to speak and that there was a duty where a plaintiff had “even the means of

knowledge.” (DE 397 at 6; DE 401 ¶ 3) Counsel did this even though they should have been

aware Hellyer stood for the exact opposite. This approach, which attempted to belatedly address

duty after it had been waived by their failure to address it in their opening brief, prompted

plaintiffs to file a surresponse. It also required the Court to address meritless, unsupported

arguments which were waived by virtue of defense counsel’s failure to correctly cite the black

letter law in their initial brief.

(3) The Court’s Sanctions are Based on the Above.

The Court initially ordered defense to show cause on two other matters: (1) a quotation

that omitted the ending, which the Court found to be slightly misleading; and (2) an argument

that prejudgment interest was not warranted which appeared to ignore the distinction between

liability and damages. (DE 404 at 41–43.) While the Court still believes that these two arguments

are ultimately unpersuasive, the Court does not believe that they are sanctionable. Unlike defense

counsel’s interpretation of Pierce II and Hellyer, these arguments, while only lightly supported,

do not appear as unfounded. Accordingly, the Court only sanctions defense counsel for the

reasons previously discussed.

(4) Monetary Sanction is Warranted.

The Court finds that defense counsel have been advancing objectively unreasonable,

frivolous, and misleading arguments. As the Court explained above, there is no reasonable basis

to interpret Pierce II as setting the modern-day standard of waiver. It was not a case that set forth

the elements of waiver in 1870, and it is surely not a case setting forth the elements of waiver in

2022. And yet, defense counsel have stubbornly relied on Pierce II. They did so in their opening

brief, where they failed to address whether plaintiffs had a duty to speak. They then did so again

in their reply brief, their surreply, and their response to this Court’s order to show cause.

Defense counsel similarly rely on Hellyer. As explained above, Hellyer is not a case

which held that Plaintiffs have a general duty to speak when “Plaintiffs have access to all of the

information” or a duty to speak up when “a plaintiff has . . . even the means of knowledge.” In

fact, it indicates the opposite. And yet, in their reply brief, they claim that Hellyer supports the

proposition that a plaintiff has a duty to speak where they have “access to all of the information”

and elsewhere claim that a plaintiff has a duty to speak where they have the “means of

knowledge” or are “charged with knowledge.”

The Court finds that these unreasonable arguments deserve sanctions. They are the type

of “utterly implausible” arguments which are “characterized by abuse.” Lerch v. Boyer, 929 F.

Supp. 319, 324 (N.D. Ind. 1996). The black letter law regarding waiver in Indiana is not obscure,

but rather widely available. Hastetter v. Fetter Properties, LLC, 873 N.E.2d 679, 684 (Ind. Ct.

App. 2007) (“Waiver is an intentional relinquishment of a known right, and silence, inactivity, or

acquiescence is not waiver unless the party against whom waiver is claimed had a duty to act or

speak.”); Pohle v. Cheatham, 724 N.E.2d 655, 659 (Ind. Ct. App. 2000) (“[W]aiver is an

affirmative act and mere silence, acquiescence or inactivity does not constitute waiver unless

there was a duty to speak.”); Grenchik v. State ex rel. Pavlo, 373 N.E.2d 189, 193 (Ind. 1978)

(“Mere silence or acquiescence (or, in this case, inactivity) is not a waiver unless there was a

duty to speak”); Union Fed. Sav. Bank v. INB Banking Co. Sw., 582 N.E.2d 426, 432 (Ind. Ct.

App. 1991) (“Silence may constitute waiver, but only when there is a duty to speak or to

otherwise take action.”). Rather than citing to any one of these cases, defense counsel chose to

rely on a case from 1870, which does not address what is necessary to make out the defense of

waiver. They even went so far as to claim that “silence and inaction are the hallmarks of . . .

waiver.” (DE 397 at 6.) While the Court recognizes that counsel should have some latitude to

come up with creative arguments, they have never advanced the argument that Pierce II

somehow developed into the current law of waiver, acknowledged its limited holding, or

analogized the legal issues presented there to the instant case. Instead, they have repeatedly

claimed that Pierce II provides the substantive standard for what is required to show waiver.

Such a claim is flatly wrong. This disregard for Indiana law is not solely confined to Pierce II.

As explained above, defense counsel similarly ignored a case’s clear holding in Hellyer.

In sum: defense counsel have put forth baseless arguments in front of the Court, based on

unreasonable interpretations of case law, which have delayed resolution of this case. The

baseless filings contesting whether duty to speak was waived, relying on Pierce II, are precisely

the type of filings Rule 11 was meant to deter. Goldfinger v. J. Commc’s Inc., No. 15-C-12, 2015

WL 13034986, at *4 (E.D. Wis. Aug. 4, 2015) (Rule 11 is meant to deter baseless filings in

district court). Defense counsel’s theories regarding waiver, duty to speak, and whether their

duty to speak argument was forfeited were undermined by unreasonable interpretations of case

law and demonstrate that defense counsel either purposefully put incorrect interpretations of case

law in front of this Court, or failed to conduct a reasonable investigation of the law regarding

waiver before filing their briefs. Senese v. Chicago Area I.B. of T. Pension Fund, 237 F.3d 819,

823 (7th Cir. 2001) (“Rule 11 authorizes a district court to impose sanctions on lawyers or

parties (or both) for submissions that are filed for an improper purpose or without reasonable

investigation of the facts and law necessary to support their claims.”).

“The court may impose a penalty as light as a censure and as heavy as is justified—a fine

that may exceed the amount of fees incurred by the opposing party.” Frantz v. U.S. Powerlifting

Fed’n, 836 F.2d 1063, 1066 (7th Cir. 1987). The Seventh Circuit has previously approved of

sanctions in the amount of $1,000 where an attorney made unreasonable and frivolous

arguments. Burda v. M. Ecker Co., 2 F.3d 769, 776 (7th Cir. 1993) (finding a $1,000 sanction

was justifiable where the attorneys ignored dispositive federal statutes and case law). Similar to

Burda, defense counsel here utilized Pierce II and Hellyer to make an unreasonable argument

concerning whether they had raised a duty to speak in their opening brief and when a duty to

speak is present under Indiana law. Such an argument wasted the time of the opposing party

because they had to file a surresponse, but it also wasted the time of this Court. Accordingly, the

Court believes a monetary sanction of $1,000 is proper. The sanction shall be imposed against

the attorney who signed the briefs containing the sanctionable arguments: Joshua Fleming. See

Fed. R. Civ. P. 11 advisory committee note to 1993 amendment (“The sanction should be

imposed on the persons . . . who have violated the rule or who may be determined to be

responsible for the violation. The person signing, filing, submitting, or advocating a document

has a nondelegable responsibility to the court, and in most situations is the person to be

sanctioned for a violation.”).

The Court also notes that this sanction is less than those in other cases involving more

serious conduct. Fries v. Helsper, 146 F.3d 452, 459 (7th Cir. 1998) (ordering sanctions in the

amount of $5,779.64 where the plaintiff “entangled multiple defendants in duplicitous litigation

based on unfounded allegations [and] impugned the integrity of a state court judge as well as the

reputation of a federal district court judge with total disregard for the truth”); Schmude v.

Sheahan, 312 F. Supp. 2d 1047, 1097 (N.D. Ill. 2004) (ordering that a sanction of a fine in the

amount of $5,000 was justified where the attorneys obtained awards of attorneys’ fees in the

Circuit Court of Cook County even though the case had been removed to federal court, and

proceeded with doing so even after a motion to remand was denied and after being reminded that

further litigation in state court would be in contravention of the federal court’s jurisdiction)

D. Conclusion

The Court finds that Mr. Fleming’s baseless arguments warrant sanctions under Federal

Rule of Civil Procedure 11. Therefore, a fine in the amount of $1,000 is assessed against attorney

Joshua Fleming. Mr. Fleming is to pay this monetary sanction to the clerk of court within

fourteen days.

SO ORDERED.

ENTERED: November 30, 2022

/s/ JON E. DEGUILIO

Chief Judge

United States District Court