NICKLOY ALBRIGHT GORDON LLP v. INDY CIGS LLC (2025)

MEMORANDUM DECISION

Case Summary

[1] Scott Bender and his then-wife Jamie Bender (the “Benders”) hired Nickloy, Albright & Gordon LLP (the “Firm”) to bring a products liability action against Indy E Cigs, LLC (“IEC”), among other defendants. The trial court entered default judgment against IEC and awarded the Benders approximately $1.3 million in damages and attorney fees. But after the Benders collected the judgment, the trial court partially set aside the award and ordered the Benders and the Firm to repay most of it.

[2] In this interlocutory appeal, the Firm appeals the trial court's restitution order, raising one dispositive issue: Did the trial court abuse its discretion by ordering the Firm to repay most of the judgment it collected on its clients’ behalf? Because the trial court abused its discretion in partially setting aside the default judgment, the trial court also abused its discretion by ordering the Firm to make restitution. Accordingly, we reverse the trial court's restitution order. IEC also asks us to award it appellate attorney fees, which we decline to do.

Facts and Procedural History

[3] In 2018, Scott Bender was seriously injured when an e-cigarette he placed in his pants pocket either exploded or caught fire. In a lawsuit seeking damages for the injury, the Benders alleged four counts against IEC, which had sold a component part of the e-cigarette to Scott.¹

[4] In 2022, the trial court granted default judgment for the Benders and against IEC as a sanction for the litigation conduct of IEC's attorney, Patrick C. Badell (the “Default/Sanctions Order”). The trial court struck IEC's affirmative defenses; entered default judgment for the Benders on two claims;² found IEC was 100% at fault for purposes of comparative fault; awarded the Benders $201,159.77 in compensatory damages and $1,005,798.85 in pain and suffering; awarded the Benders $95,460.94 in attorney fees against IEC and Badell (jointly and severally); assessed jury costs of $594.50 against IEC and Badell; and assessed court costs against IEC. In all, the judgment for the Benders was just over $1.3 million.

[5] IEC appealed the Default/Sanction Order (among others). IEC and Badell also moved for a stay of enforcement of the judgment pending appeal. To secure the stay, they jointly tendered an irrevocable letter of credit for $1,323,829 (the judgment plus accrued interest) issued by Old National Bank.³ On August 2, the trial court granted the stay “during the pendency of the appeal[.]” Appellant's App. Vol. 4 at 99.

[6] In a memorandum decision issued April 27, 2023, a panel of this Court dismissed the appeal on procedural grounds. Indy E Cigs LLC v. Bender, No. 22A-PL-1567 (Ind. Ct. App. Apr. 27, 2023) (mem.) (“Indy E Cigs 1”). And because IEC made numerous misrepresentations in its brief, the panel awarded the Benders reasonable appellate attorney fees and remanded for a determination of those fees.⁴ IEC did not seek rehearing or transfer, and Indy E Cigs 1 was certified on June 28, ending the appeal.

[7] The Firm, on behalf of the Benders, then presented the letter of credit to Old National Bank in early July. The bank honored the letter and wired the funds to the Firm's client trust account, resulting in partial satisfaction of the judgment on July 11.⁵ The Firm disbursed some of the funds—including about $530,000 to the Firm for legal fees—under the Benders’ contingency fee agreement with the Firm and the Benders’ written instructions. The parties also negotiated a settlement for appellate attorney fees.

[8] At a July 20 hearing, IEC asked the trial court to stay the collection of the remaining balance because IEC had asked this Court to reassume appellate jurisdiction.⁶ On July 27, IEC moved for a stay so it could pursue a Trial Rule 60(B) motion to set aside the default judgment. As security for the stay, IEC deposited a cashier's check for the balance with the Marion County Clerk.

[9] The trial court initially granted the stay on August 2.⁷ But after it reviewed the parties’ filings and the appellate record, the trial court vacated the stay on August 21, writing the Benders are “no longer restricted from taking further action to enforce [their] judgment.” Appellant's App. Vol. 4 at 197. Yet in the same order, the trial court acknowledged IEC intended to file a Trial Rule 60(B) motion and the court set a briefing schedule and hearing date.

[10] The Firm then presented the trial court's order vacating the stay to the Clerk, which declined to release the funds because the order referenced the Trial Rule 60(B) briefing schedule. On August 23, the trial court ordered the Clerk to release the funds. The Firm, on behalf of the Benders, collected the remaining balance and notified the trial court on August 30 the judgment had been fully satisfied.⁸

[11] On September 5, IEC then moved for partial relief from the default judgment under Trial Rule 60(B), requesting the trial court set aside the default judgment and all damages, fees, and costs, except attorney fees.⁹ In an order issued October 30, later clarified on November 20, the trial court partially set aside the Default/Sanctions Order under Trial Rule 60(B)(8) (collectively, the “Partial Relief Order”). The trial court set aside the $1,005,798.85 damages awarded for pain and suffering, but otherwise affirmed all other damages, fees, and costs.¹⁰ IEC and the Benders each appealed the Partial Relief Order, and this Court consolidated the appeals.¹¹

[12] On November 8, IEC moved the trial court to order the Benders to return the vacated judgment amount and interest accrued. The Benders objected, and the Firm, by counsel, intervened in the action, asserting “[a]ll sums paid to [the Benders’] counsel have been distributed through [the Benders’] trust account and pursuant to the contingency fee contract.” Appellant's App. Vol. 5 at 147. After a hearing, the trial court on December 8 ordered the Benders “and their counsel” to repay the vacated judgment plus the statutory accrued interest to the Marion County Clerk by December 15 (the “Payment Order”).¹² Appellant's App. Vol. 2 at 65. The parties later agreed to extend the deadline to December 22.¹³

[13] The Firm withdrew from representing the Benders. It then moved for reconsideration of the Payment Order. IEC in turn moved for possessory interest in the funds. The Firm then appealed the Payment Order and requested a stay pending appeal. The trial court granted the stay but did not rule on the other pending motions; by then, jurisdiction had vested in this Court.

The trial court abused its discretion in ordering the Firm to make restitution.

[14] The Firm argues the trial court abused its discretion in entering the Partial Relief Order for several reasons, including that the trial court had no basis to grant IEC relief under Trial Rule 60(B). And because the Payment Order instructing the Benders and the Firm to repay most of the money judgment flowed directly from the Partial Relief Order, the Firm contends we should reverse the Payment Order.

[15] A person who is unjustly enriched at another's expense is subject to liability in restitution. Minott v. Lee Alan Bryant Health Care Facilities, Inc., 998 N.E.2d 273, 276–77 (Ind. Ct. App. 2013), trans. denied. The equitable principle of restitution applies when a party confers a benefit on another in compliance with a judgment and the judgment is reversed on appeal or subsequently set aside. Id. at 277. A restitution order is within the trial court's discretion, and we will review it only for abuse of that discretion. Id. at 275. “An abuse of discretion occurs when the trial court's decision is clearly against the logic and effect of the facts and circumstances or if the decision is contrary to law.” Id.

[16] After a panel of this Court dismissed IEC's appeal in Indy E Cigs 1, the Firm, on behalf of the Benders, collected the full money judgment awarded in the Default/Sanctions Order. The Firm presented the letter of credit to the bank after our opinion was certified; it collected the remaining balance after the trial court ordered the Clerk to release those funds. No stay was in effect at the time the Firm collected and disbursed the judgment on the Benders’ behalf.

[17] On IEC's Trial Rule 60(B) motion, the trial court then entered the Partial Relief Order, setting aside approximately $1 million in pain and suffering damages previously awarded to—and collected by—the Benders. The trial court also ordered the Benders and the Firm to repay those funds. Both the Benders and IEC appealed the Partial Relief Order, raising many of the same issues and arguments the Firm now raises in this appeal. See Appellee's Br. at 6 (“The same issue squarely presented in both appeals is whether IEC had a right to return to the trial court and file a Trial Rule 60(B) motion – challenging the [Default]/Sanctions Order – after this Court had procedurally dismissed IEC's first appeal on April 27, 2023.”) In a memorandum decision issued today, we hold the trial court abused its discretion in entering the Partial Relief Order and remand with instructions for the trial court to reinstate the Default/Sanctions Order. See Indy E Cigs, LLC v. Bender, No. 23A-PL-2814 (Ind. Ct. App. Feb 6, 2025) (mem.). Because the trial court abused its discretion by partially setting aside the collected judgment, the trial court had no basis to order the Benders and the Firm to repay any part of it. Leaving the Payment Order in place would confer on IEC the benefit of the Partial Relief Order even though we have reversed that order on appeal. See Minott, 998 N.E.2d at 277. We therefore also reverse the trial court's Payment Order.

IEC is not entitled to appellate attorney fees.

[18] IEC also requests we award it appellate attorney fees, alleging the Firm's “stubborn refusal” to accept IEC's interpretation of certain case law constitutes substantive bad faith. Appellee's Br. at 42.

[19] Under our appellate rules, this Court “may assess damages if an appeal, petition, or motion, or response, is frivolous or in bad faith. Damages shall be in the Court's discretion and may include attorneys’ fees.” Ind. Appellate Rule 66(E). Generally, “a discretionary award of damages has been recognized as proper when an appeal is permeated with meritlessness, bad faith, frivolity, harassment, vexatiousness, or purpose of delay.” Orr v. Turco Mfg. Co., 512 N.E.2d 151, 152 (Ind. 1987). When considering a request for appellate attorney fees, we use extreme restraint because of the potential chilling effect on the exercise of the right to appeal. Thacker v. Wentzel, 797 N.E.2d 342, 346 (Ind. Ct. App. 2003).

[20] IEC contends the case law on which the panel decided Indy E Cigs 1—including Siebert Oxidermo, Inc. v. Shields, 446 N.E.2d 332 (Ind. 1983) and Expert Pool Builders v. Vangundy, 203 N.E.3d 508 (Ind. Ct. App. 2023), vacated by 224 N.E.3d 309 (Ind. 2024)—is so clear, there is no room to disagree on its application. But that cannot be so, as demonstrated by the fact IEC repeatedly cites Judge Vaidik's dissent in Expert Pool Builders. That is, there was disagreement even in this Court about the application of Siebert Oxidermo and related case law. As such, there was plenty of room for the parties to disagree in good faith on how we should apply the law to the case before us. In addition, the Firm's appellant's brief presents cogent reasoning supported by citations to authorities, statutes, and the record, thus conforming to Appellate Rule 46(A)(8). We discern no substantive bad faith in the Firm's appellate arguments and accordingly decline IEC's request for appellate attorney fees.

Conclusion

[21] Because we have concluded in Indy E Cigs, LLC v. Bender, No. 23A-PL-2814 (Ind. Ct. App. Feb 6, 2025) (mem.), the trial court abused its discretion in issuing the order from which the restitution order flowed, the trial court abused its discretion in ordering the Firm to make restitution to IEC. IEC did not demonstrate entitlement to appellate attorney fees.

[22] Reversed.

FOOTNOTES

1.   The Benders brought Count 2 (negligent warning), Count 5 (negligence), Count 6 (breach of implied warranty of merchantability), and Count 10 (breach of implied warranty of fitness for a particular purpose) against IEC.

2.   The trial court had dismissed the other two claims on the Benders’ motion.

3.   Although IEC and Badell jointly presented the letter of credit to the trial court, IEC alone applied for and secured it from the bank.

4.   There were also some claims still pending in the trial court against another defendant.

5.   The letter of credit only partially satisfied the judgment because the judgment continued to accrue statutory interest at a rate of $285.46 per day during the appeal until the letter of credit was funded, for an additional interest amount of $99,340.08. Because IEC alone secured the letter of credit, the Benders applied the funds to those portions of the judgment owed solely by IEC before applying it to the parts entered jointly and severally against IEC and Badell.

6.   This Court had denied IEC's motion to reassume appellate jurisdiction on July 19.

7.   At some point, there was a discrepancy in the Chronological Case Summary regarding this order, but the trial court's August 21 order vacating the stay and the parties’ filings confirm this timeline.

8.   The Firm again disbursed funds from its client trust account. Under a subsequent court order, the Firm transferred the remaining trust account funds (around $850,000) to the Clerk of the Hamilton Circuit Court, where the Benders’ dissolution proceedings were pending.

9.   In sum, IEC and Badell were on the hook for $175,460.94 in attorney fees: $95,460.94 ordered in the Default/Sanctions Order and $80,000 in negotiated appellate attorney fees.

10.   In the original order, the trial court vacated the entire damages award of $1,207,553.12, but it later clarified it meant only to set aside the $1,005,798.85 awarded for pain and suffering.

11.   We issue our memorandum decision in that case concurrently with this decision. See Indy E Cigs, LLC v. Bender, No. 23A-PL-2814 (Ind. Ct. App. Feb 6, 2025) (mem.).

12.   The Payment Order was for a total of $1,318,979.19, based on the original vacated sanction amount of $1,207,553.12 plus $111,426.07 in accrued statutory interest. IEC later notified the trial court the calculations in the Payment Order were incorrect; under the clarified Partial Relief Order, IEC was only entitled to $1,005,798.85 plus accrued interest of $92,809.05 for a total of $1,098,607.90. But the trial court never issued an amended Payment Order.

13.   On that date, the parties agreed to transfer $752,000 of the Benders’ money from the Hamilton County Clerk to the Marion County Clerk pending appeal of the Payment Order, but neither the Benders nor the Firm repaid the balance. As of January 31, 2024, the funds were with the Marion County Clerk in an interest-bearing account.

Kenworthy, Judge.

Felix, J., and DeBoer, J., concur.