State of Indiana, Appellant-Defendant v. Scott Sparks and West Bend Mutual Insurance Company, Appellees-Plaintiffs (2025)

MEMORANDUM DECISION

Case Summary

[1] Scott Sparks and the State of Indiana entered into a mediated settlement agreement (“Settlement Agreement”) to settle Sparks’ claims against the State for $25,000. The Settlement Agreement was expressly conditioned on the approval of the Governor and the Attorney General. When the Governor did not approve the Settlement Agreement, Sparks filed a motion to enforce the agreement. The trial court granted Sparks’ motion and ordered the State to pay Sparks $25,000 despite the Governor's failure to approve the Settlement Agreement. The State appeals and claims that: (1) the trial court erred as a matter of law by ordering the State to pay Sparks $25,000; and (2) the trial court's order violates the separation-of-powers provisions of the Indiana Constitution. Finding the first issue to be dispositive, we reverse and remand.

Issue

[2] The State presents two issues, one of which we find dispositive and restate as whether the trial court erred as a matter of law by ordering the State to pay Sparks $25,000 pursuant to the Settlement Agreement.

Facts

[3] On August 3, 2023, Sparks filed a complaint against the State, Thurman Baker, and West Bend Mutual Insurance Company. The complaint alleged that the State negligently failed to repair a downed stop sign at an intersection and that Sparks was injured as a result of a motor vehicle accident at that intersection. On May 21, 2024, the parties began mediation. At the conclusion of the mediation, the parties entered into the Settlement Agreement. The Settlement Agreement stipulated to the dismissal of Baker and West Bend Mutual Insurance Company and also provided that “the State of Indiana, upon approval of the Attorney General of the State of Indiana and the Governor of the State of Indiana, agree[s] to pay Plaintiff the sum of $25,000.” Tr. Vol. I p. 8 (emphasis added); see also id. at 4; Appellant's App. Vol. II p. 48.¹ The Governor, however, did not approve the Settlement Agreement, and the State informed Sparks’ counsel of this fact.

[4] On October 22, 2024, Sparks filed a motion to enforce the Settlement Agreement, and the State filed a response in opposition to this motion. The trial court held a hearing on the motion on December 4, 2024. Five days later, the trial court entered an order granting Sparks’ motion. This order provides:

The Court finds that it is not whether the attorney general and the governor are the only ones authorized to settle a lawsuit but whether an authorized settlement range has been set prior to mediation.

The Court finds that a critical component for mediation to be effective is that the agents of the parties participating in the mediation have at least an informal authorized amount to settle the disputes. If the [S]tate of Indiana cannot set an informal authorized amount for its agents prior to mediation, then the [S]tate cannot in good faith participate in mediation.

The negative ramifications for civil litigation and specifically the state of Indiana will be far greater if the Court does not enforce the mediated settlement, i.e. trials, inability to settle claims.

No evidence has been presented to establish that the State of Indiana gave its representative any range of settlement authority or that the representative violated its instructions.

IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED: That Plaintiff's Motion to Enforce Mediated Settlement Agreement is Granted, the mediated settlement shall be enforced, the State of Indiana is ordered to pay the Plaintiff the amount of $25,000 in accordance with the mediated settlement, and there is no award of attorney's fees and costs to the Plaintiff.

Appellant's App. Vol. II p. 13 (emphasis added). The State now appeals.

Discussion and Decision

[5] The State claims that the trial court erred as a matter of law by ordering the State to pay $25,000 to Sparks pursuant to the Settlement Agreement.² The State argues that the trial court's order is contrary to both the plain language of the Settlement Agreement and the statutory provision that the Governor's approval is required to settle tort claims against the State. We agree.

[6] “Construction of settlement agreements is governed by contract law.” Ind. State Highway Comm'n v. Curtis, 704 N.E.2d 1015, 1018 (Ind. 1998) (citing 5 IND. LAW ENCYCLOPEDIA, Compromise & Settlement § 21 (1958)). The interpretation of contracts “is particularly well-suited for de novo appellate review, because it generally presents questions purely of law.” WellPoint, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 29 N.E.3d 716, 721 (Ind. 2015), modified on reh'g, 38 N.E.3d 981. Our goal in contract interpretation is “to determine the intent of the parties at the time that they made the agreement.” Care Grp. Heart Hosp., LLC v. Sawyer, 93 N.E.3d 745, 752 (Ind. 2018). “We start with the contract language to determine whether it is ambiguous.” Id. “If the language is unambiguous, we give it its plain and ordinary meaning in view of the whole contract, without substitution or addition.” Id. When reading the plain language of the contract, we “read[ ] it in context and, whenever possible, constru[e] it so as to render each word, phrase, and term meaningful, unambiguous, and harmonious with the whole.” Citimortgage, Inc. v. Barabas, 975 N.E.2d 805, 813 (Ind. 2012) (citing Trustcorp Mortg. Co. v. Metro Mortg. Co., Inc., 867 N.E.2d 203, 213 (Ind. Ct. App. 2007)).

[7] At issue here is the provision of the Settlement Agreement that states: “the State of Indiana, upon approval of the Attorney General of the State of Indiana and the Governor of the State of Indiana, agree[s] to pay Plaintiff the sum of $25,000.” Tr. p. 8.³ The State claims that this provision is a condition precedent. “A condition precedent is a condition that must be performed before the agreement of the parties becomes binding, or a condition that must be fulfilled before the duty to perform a specific obligation arises.” Town of Plainfield v. Paden Eng'g Co., 943 N.E.2d 904, 909 (Ind. Ct. App. 2011), trans. denied.

[8] This condition precedent of the Settlement Agreement is based upon statutory requirements. Indiana Code Section 34-13-3-14 provides: “Except as provided in section 20[⁴ ] of this chapter, the [G]overnor may compromise or settle a claim or suit brought against the state or its employees.” Further, Indiana Code Section 34-13-3-15 provides:

Except as provided in section 20 of this chapter, the attorney general:

(1) shall advise the governor concerning the desirability of compromising or settling a claim or suit brought against the state or its employees;

(2) shall perfect a compromise or settlement which is made by the governor;

(3) shall submit to the governor on or before January 31 of each year a report concerning the status of each claim or suit pending against the state as of January 1 of that year; and

(4) shall defend, as chief counsel, the state and state employees as required under IC 4-6-2. However, the attorney general may employ other counsel to aid in defending or settling those claims or suits.

[9] Last year, a panel of this Court addressed an almost identical settlement agreement. In Kelly v. State, 234 N.E.3d 926 (Ind. Ct. App. 2024), trans. denied, the plaintiffs prepared a complaint against the Department of Child Services (“DCS”) alleging that their children had been wrongfully removed from their custody based on the misdeeds of a DCS caseworker. The plaintiffs first presented their proposed complaint to the Indiana Attorney General, and the State agreed to mediate the claim. After an all-day mediation session, the parties entered into a settlement agreement, in which the State agreed to pay the Kellys $2,750,000 “in full satisfaction of any and all claims against [the State] that [the Kellys] brought or could have brought related to the events alleged in this Matter.” Id. at 929. The settlement agreement also contained the following language: “This Release and Settlement Agreement is contingent on approval by the Indiana Attorney General and the Indiana Governor.” Id.

[10] A deputy attorney general later informed the Kellys that the Governor did not approve the settlement agreement. The Kellys then filed an action claiming, among other things, that the State had breached the settlement agreement. The State filed a motion to dismiss, which the trial court granted. On appeal, the Kellys argued that the trial court erred in determining that the State did not breach the settlement agreement. The State argued that there was no legally binding agreement because the Governor and Attorney General did not approve of the settlement agreement. We agreed with the State, writing:

Here, our review of the record reveals that both the Governor's approval and the Attorney General's approval of the settlement provisions were conditions to the Agreement. These conditions precedent were supplied by the parties when they agreed explicitly in the Agreement that the settlement provisions required both the Governor's approval and the Attorney General's approval. Further, the Kellys have not alleged and there is no evidence in the record that the State engaged in acts of contractual sabotage or bad faith. Because the approval of the Governor ․ and the approval of the Attorney General were not obtained, and, where there is no evidence in the record that the State engaged in acts of contractual sabotage or bad faith, the Agreement is not enforceable.

Id. at 933 (footnote omitted).

[11] In support of its holding, the Kelly Court relied on the opinion of our Supreme Court in Curtis, 704 N.E.2d 1015. In Curtis, the plaintiffs and the State entered into a settlement agreement, but the agreement was subject to the approval of both the Governor and the Indiana Department of Transportation (“INDOT”). When the State did not pay the plaintiffs under the agreement, the plaintiffs filed a motion to enforce the agreement, which the trial court granted despite the fact that neither the Governor nor INDOT had approved of the settlement.

[12] On transfer, our Supreme Court held that the approvals required by the agreement were conditions precedent and that, absent those approvals, the agreement was unenforceable. Curtis, 704 N.E.2d at 1018-19. The Curtis Court noted that “a party may not rely on a failure of a condition precedent where that party's inaction caused the failure,” but also noted that not “every failure of a condition results in an estoppel against asserting the condition as a proper reason to avoid the contract.” Id. at 1019. Instead, “the parties ‘have an implied obligation to make a reasonable and good faith effort to satisfy the condition.’ ” Id. (quoting Hamlin v. Steward, 622 N.E.2d 535 540 (Ind. Ct. App. 1993)). And, in this context, “ ‘[c]ausing’ the failure of a condition means more than the mere rejection of the contract for sound reason or for newly discovered information, if the right to do that is preserved in the contract.” Id.

[13] The Curtis Court also observed that:

[I]t is not uncommon for a settlement agreement to require approval by some agency or organization such as a party's board of directors or to require study that cannot be accomplished in the time frame available on the courthouse steps. This may be because the agreement calls for an authority not previously given to the negotiator, because some aspect of the proposed settlement involves technical or other expertise not immediately available, or for other good reasons․

Id. at 1019-20 (emphasis added). Because the approval of INDOT and the Governor were not obtained, the Curtis Court held that the settlement agreement was not enforceable. Id. at 1020.

[14] Moreover, in Curtis, our Supreme Court noted that, pursuant to Indiana Code Section 34-13-3-14, “only the Governor has ultimate authority to compromise a claim․” 704 N.E.2d at 1020. Accordingly, “the Governor's approval is required before the State can compromise a tort claim.” Id.; see also Kelly, 234 N.E.3d at 933 (holding that settlement agreement between plaintiff and State was unenforceable because the Governor's approval is statutorily required and the Governor did not approve the settlement agreement).

[15] The present case is indistinguishable from Kelly and Curtis. Here, as in those cases, the parties entered into a Settlement Agreement, and the Settlement Agreement contained language conditioning the settlement on the approval of the Governor. This condition precedent was not satisfied because the Governor did not approve the agreement. Thus, the Settlement Agreement is not enforceable due to the failure of a condition precedent. See Curtis, 704 N.E.2d at 1019-20; Kelly, 234 N.E.3d at 933; see also City of Plymouth v. Michael Kinder & Sons, Inc., 137 N.E.3d 312, 317 (Ind. Ct. App. 2019) (holding that mediated settlement agreement between president of city redevelopment commission and plaintiff was unenforceable because the agreement was conditioned on the approval of the commission, and the commission's approval was not obtained).

II. There is no evidence that the State mediated in bad faith.

[16] Sparks does not attempt to distinguish either Kelly or Curtis; in fact, he does not even cite them. Instead, he argues that the Alternative Dispute Resolution Rules (“A.D.R. Rules”) apply to the State and that the State failed to comply with these Rules and, thereby, negotiated in bad faith. It is true that the A.D.R. Rules apply to the State. See Lake Cnty. Tr. Co. v. Advisory Plan Comm'n of Lake Cnty., 904 N.E.2d 1274, 1278 (Ind. 2009) (“Like other parties to litigation who may be involved in a mediation proceeding, governmental entities are equally obligated to comply with the applicable rules ․”). But we disagree with Sparks’ claims that the State failed to comply with the Rules and negotiated in bad faith.

[17] A.D.R. Rule 2.7(B)(2) provides: “All parties, attorneys with settlement authority, representatives with settlement authority, and other necessary individuals shall be present at each mediation conference to facilitate settlement of a dispute unless excused by the court.” Sparks, therefore, argues that, pursuant to this rule, the deputy attorney general who attended the mediation was required to have the Governor's pre-approval to settle Sparks’ claim for a specific amount or range. Otherwise, he claims, the State did not negotiate in good faith.

[18] This Court rejected a similar argument in State v. Carter, 658 N.E.2d 618 (Ind. Ct. App. 1995). In that case, the plaintiff and the State entered into settlement negotiations. The deputy attorney general representing the State at the negotiations had approval from her supervisor to settle the claim for no more than $3,000. The plaintiff rejected this offer and moved to sanction the State for failing to mediate in good faith. The trial court granted the motion, and the State filed an interlocutory appeal. On appeal, the plaintiff argued that the State failed to negotiate in good faith because the A.D.R. Rules require a person with “settlement authority” to be present during mediation. Id. at 622 (quoting A.D.R. Rule 2.7(B)(2)). We noted:

By statute, the [G]overnor is the sole authority to bind the State in a legal settlement. Ind. Code § 34-4-16.5-13.[5] He is, therefore, the only State official having any settlement authority. Both parties agree, however, that it would be impracticable to expect the [G]overnor to appear in person at all of the State's mediation sessions. As a result, a substitute representative for the State is acceptable during most sessions.

Id.⁶ Although the deputy attorney general in Carter had pre-approval from her supervisor to settle the claim for $3,000, nothing suggests that she also had the pre-approval of the Governor, whose approval is statutorily required when settling a claim against the State. Id.; Curtis, 704 N.E.2d at 1019-20.

[19] Here, the State participated in the mediation by a deputy attorney general. Although this deputy attorney general did not have the pre-approval of the Governor to settle Sparks’ claim for a certain amount, we cannot say that this constitutes a violation of the A.D.R. Rules. Nor can we say that this means that the State participated in the mediation in bad faith.⁷ The Settlement Agreement reached by the parties clearly and unambiguously conditioned the settlement reached on the approval of the Attorney General and Governor. As noted by our Supreme Court in Curtis, this is not an uncommon practice, and it “ultimately facilitates settlement by permitting an agreement to be made with an enforceable condition[.]” 704 N.E.2d at 1019-20.

III. Equitable estoppel does not apply.

[20] Sparks also claims that the State should be equitably estopped from claiming that the Settlement Agreement is not enforceable. “The party claiming equitable estoppel must show its (1) lack of knowledge and of the means of knowledge as to the facts in question, (2) reliance upon the conduct of the party estopped, and (3) action based thereon of such a character as to change his position prejudicially.” Schoettmer v. Wright, 992 N.E.2d 702, 709 (Ind. 2013) (quoted in Murphy v. Ind. State Univ., 153 N.E.3d 311, 320 (Ind. Ct. App. 2020)). “As a general rule, equitable estoppel will not be applied against governmental authorities.” Story Bed & Breakfast, LLP v. Brown Cnty. Area Plan Comm'n, 819 N.E.2d 55, 67 (Ind. 2004). Indeed, “[e]quitable estoppel will not apply against the State unless there is ‘clear evidence that its agents made representations upon which the party asserting estoppel relied.’ ” Murphy, 152 N.E.2d at 320 (quoting Schoettmer, 992 N.E.2d at 709). The burden to produce that evidence rests on the party claiming estoppel. Id.

[21] Sparks claims that he relied on the State's conduct during mediation. Sparks argues that his counsel, knowing that only the Governor had authority to settle claims against the State, logically inferred that the deputy attorney general had pre-authorization to settle Sparks’ claim for at least $25,000. But this is belied by the clear and unambiguous language of the Settlement Agreement itself, which conditioned the settlement on the approval of the Attorney General and Governor. If the deputy attorney general who participated in the mediation already had pre-approval from the Governor, no such conditional language would have been necessary. See Citimortgage, 975 N.E.2d at 813 (noting that courts construe a contract to render each term meaningful).

[22] Sparks also argues that he believed that the conditional language in the Settlement Agreement merely meant that:

the settlement initiated a bureaucratic procedure within the Attorney General's and the Governor's offices to double check the State's pre-mediation valuation and confirm that the authorized amount was not presently in conflict with the funds appropriated from the [S]tate general fund to settle claims and satisfy tort judgments obtained against the [S]tate.

Appellee's Br. p. 15. We disagree. Again, the language in the Settlement Agreement clearly and unambiguously conditions the agreement on the approval of the Governor and Attorney General; the language does not merely trigger a bureaucratic process. Sparks’ alternate reading of these conditions precedent is simply untenable given the plain language of the Settlement Agreement and the statute that requires the approval of the governor in order to settle a claim against the State.

[23] As noted by the State, Sparks presented no evidence that the deputy attorney general—or any other agent of the State—made statements indicating that the approval of the Governor had already been obtained. To the contrary, the deputy attorney general who participated in the mediation testified that he offered a settlement conditioned upon the Governor's approval, which is reflected in the language of the Settlement Agreement. And the trial court found that there was no evidence that “the State of Indiana gave its representative any range of settlement authority or that the representative violated its instructions.” Appellant's App. Vol. II p. 13. Because there is no clear evidence that the State or its agents made representations upon which Sparks reasonably relied, equitable estoppel does not apply. Murphy, 152 N.E.2d at 320 (quoting Schoettmer, 992 N.E.2d at 709).

Conclusion

[24] The plain and unambiguous language of the Settlement Agreement conditioned the mediated settlement on the approval of the Attorney General and the Governor. These conditions precedent were not met because the Governor— whose approval is statutorily required—did not approve the Settlement Agreement. Thus, the Settlement Agreement never became a binding contract between the parties, and the trial court erred by granting the motion to enforce the Settlement Agreement. To the extent that the trial court found that the State negotiated in bad faith because the deputy attorney general did not have pre-approval, we disagree. Conditioning settlement agreements on the approval of a higher authority is a common practice that has been sanctioned by our Supreme Court. Lastly, equitable estoppel does not apply to the State. For all of these reasons, we reverse the trial court's grant of Sparks’ motion to enforce the Settlement Agreement and remand for proceedings consistent with this opinion.

[25] Reversed and remanded.

FOOTNOTES

1.   For reasons unknown, a copy of the Settlement Agreement was never submitted to the trial court and is, therefore, not in the record on appeal. However, both parties quoted the relevant portion of the Agreement in their submissions to the trial court, and they appear to agree on the wording of the provision at issue.

2.   As noted above, the State also argues that the trial court's order violates the separation-of-powers provisions of the Indiana Constitution. Because we find the first issue to be dispositive, we will not address the State's constitutional argument. See Girl Scouts of So. Ill. v. Vincennes Ind. Girls, Inc., 988 N.E.2d 250, 254 (Ind. 2013) (noting that courts “generally avoid addressing constitutional questions if a case can be resolved on other grounds”).

3.   As explained in detail below, the Governor's approval is statutorily required.

4.   This section governs the conditions under which a political subdivision may purchase liability insurance.

5.   This statute has since been recodified at Indiana Code Section 34-13-3-14, which was cited in Curtis.

6.   Carter was disapproved of by Lake County Trust Co., 904 N.E.2d at 1278, but only to the extent Carter held that governmental entities are not subject to sanctions for violations of the A.D.R. Rules.

7.   We reject Sparks’ argument that the trial court had authority to enforce the Settlement Agreement as a sanction for the State's alleged bad faith. First, there was no evidence that the State entered into the Settlement Agreement in bad faith. Moreover, the trial court's order made no mention of sanctioning the State; it simply ordered the Settlement Agreement to be enforced.

Tavitas, Judge.

Chief Judge Altice and Judge Brown concur. Altice, C.J., and Brown, J., concur.