FILED Jun 25 2024, 9:05 am
CLERK Indiana Supreme Court Court of Appeals and Tax Court
IN THE
Court of Appeals of Indiana Shorewood Forest Utilities, Inc., Appellant
v.
Robert A. Welsh and Harris Welsh & Lukmann, Appellees
June 25, 2024 Court of Appeals Case No. 23A-PL-2342 Appeal from the Porter Superior Court The Honorable Jeffrey W. Clymer, Judge Trial Court Cause No. 64D02-1907-PL-6963
Opinion by Judge Brown Judges Riley and Foley concur.
Court of Appeals of Indiana | Opinion 23A-PL-2342 | June 25, 2024 Page 1 of 16 Brown, Judge.
[1] Shorewood Forest Utilities, Inc., (“Shorewood”) appeals the trial court’s entry
of summary judgment in favor of attorney Robert A. Welsh and his law firm,
Harris Welsh and Lukmann (collectively “the Welsh Defendants”), on
Shorewood’s legal malpractice claim. Shorewood contends the trial court erred
in determining that the Welsh Defendants negated an element of its malpractice
claim and in applying that ruling to the case in its entirety when an additional
claim of breach of a fiduciary duty was unaddressed by the summary judgment
motion. We affirm.
Facts and Procedural History
[2] The undisputed material facts follow. Shorewood is a nonprofit corporation
that provides sewer service to certain residents in Porter County, specifically
those residing in the Shorewood Forest Subdivision and surrounding areas.
Welsh (“Attorney Welsh”) is an attorney practicing in Chesterton, Indiana, and
is a partner in the law firm Harris Welsh and Lukmann. In October 2008, the
Welsh Defendants and Shorewood entered into a legal services agreement
which memorialized their attorney-client relationship. Under the terms of the
representation agreement, Attorney Welsh was to provide legal services to
Shorewood, including but not limited to: assisting in reviewing and drafting By-
Laws, representing Shorewood in any litigation which contests Shorewood’s
ability to amend its By-Laws, attending meetings or conferences with the
Shorewood Board of Directors or designated representatives, and assisting
Shorewood with other legal matters as requested by the Shorewood Board of Court of Appeals of Indiana | Opinion 23A-PL-2342 | June 25, 2024 Page 2 of 16 Directors. Although Attorney Welsh initially attended all meetings with the
Shorewood Board of Directors, the parties later developed the practice of
having Attorney Welsh attend meetings and provide legal services solely on an
“as requested” basis. Appellant’s Appendix Volume II at 122.
[3] In 2016, Rex Properties, LLC, a property developer, approached Shorewood
about accessing its sanitary sewer system for a new subdivision called Arbor
Lakes South that Rex Properties was planning to develop. Shorewood’s Board
of Directors, which was comprised of Greg Colton and four others, 1 held a
meeting on November 17, 2016, during which it approved a preliminary
proposed resolution to expand Shorewood’s certificate of territorial authority
(“CTA”) to allow for the provision of utility services to Arbor Lakes South. A
meeting of Shorewood’s members was held on December 15, 2016, to discuss
the proposed resolution for CTA expansion. Attorney Welsh was not invited to
or present at this meeting, and he was not aware of the proposed expansion at
the time.
[4] Thereafter, a meeting was held in April 2017 between Shorewood’s Board of
Directors and a small group of attorneys who represented some Shorewood
members who were opposed to the proposed expansion. At Colton’s request,
Attorney Welsh attended that meeting on behalf of Shorewood. During the
1 The record indicates that Colton was an attorney with nineteen years of utility law experience and he had worked at the Indiana Utility Regulatory Commission as an administrative law judge for twelve years. Other board members included a professional engineer and former Director of Utilities for the City of Fort Wayne, as well as a licensed engineer with thirty-five years of experience in the utility business.
Court of Appeals of Indiana | Opinion 23A-PL-2342 | June 25, 2024 Page 3 of 16 meeting, the opposing members expressed concerns regarding Shorewood’s
capacity to handle the proposed service expansion as well as the procedure
followed and the information provided to members who had recently been
asked to vote in a referendum conducted to determine if a majority of the
members approved of the proposed expansion. The opposing members
requested that the Board of Directors delay counting the referendum votes for
thirty days and threatened to initiate litigation if the Board of Directors did not
comply with the request. The Board of Directors did not agree with the delay,
the votes from the referendum were tallied, and the expansion was approved.
As a result, in May 2017, the opposing members filed a class action lawsuit to
obtain an injunction against Shorewood from proceeding with the expansion.
[5] On July 20, 2017, while the class action was still pending, the Shorewood
Board of Directors met and signed an agreement (the “Sewer Agreement”) with
Rex Properties which provided for Shorewood to expand into the new
development and service the homes there according to certain terms, rates, and
fees. The Sewer Agreement contained a provision that provided a contingency
for regulatory approval of the expansion through the Indiana Utility Regulatory
Commission (“IURC”), and Rex Properties was responsible to pay all costs for
seeking such approval, whether the expansion was ultimately granted or denied
by the IURC. 2 The Sewer Agreement was not drafted by Attorney Welsh;
2 In its Appellant’s Brief, Shorewood refers to this provision as an “escape” or “exit” clause in the contract. Appellant’s Brief at 10. The Welsh Defendants refer to this provision as “a cost-free mechanism for resolving any and all expansion issues through the IURC.” Appellees’ Brief at 28.
Court of Appeals of Indiana | Opinion 23A-PL-2342 | June 25, 2024 Page 4 of 16 however, he did review it and provide proposed revisions prior to it being
approved by the membership referendum.
[6] That same date and during the same meeting, a new Board of Directors was
elected, which included the election of one of the class action representatives,
and the newly-elected Board immediately voted to rescind and terminate the
Sewer Agreement. 3 Attorney Welsh was not asked to attend, and he was not in
attendance for this meeting. Attorney Welsh did not participate in the decision
by the newly-elected Board to rescind the Sewer Agreement, and no member of
the newly-elected Board consulted or requested to consult with Attorney Welsh
about that decision prior to or after rescinding the Sewer Agreement. The
newly-elected Board suspended Attorney Welsh’s services as of August 18,
2017, and Attorney Welsh tendered his resignation to Shorewood in September
2017.
[7] Following Shorewood’s rescission of the Sewer Agreement, “[a] number of
lawsuits ensued” including a sixteen-million-dollar claim brought by Rex
Properties against Shorewood for breach of contract that was ultimately
resolved by a judgment in favor of Rex Properties enforcing a settlement
agreement drafted and approved by Shorewood’s new counsel and
Shorewood’s insurance carrier. See Shorewood Forest Utilities, Inc. v. Rex Props.
LLC, No. 22A-PL-2345, 2023 WL 5164020, at *1 (Ind. Ct. App. Aug. 11, 2023)
3 Colton was the only member of the old Board of Directors that remained on the new Board and was the only member to vote against rescission of the Sewer Agreement.
Court of Appeals of Indiana | Opinion 23A-PL-2342 | June 25, 2024 Page 5 of 16 (affirming trial court’s judgment granting motion to enforce settlement
agreement between Shorewood and Rex Properties whereby Shorewood’s
insurance carrier would pay Rex Properties $950,000; Shorewood itself would
pay no money to Rex Properties; and, in exchange Shorewood and Rex
Properties would dismiss all claims in the instant cause with prejudice”), trans.
denied.
[8] On July 19, 2019, Shorewood filed a complaint against the Welsh Defendants,
and an amended complaint on December 23, 2019. The nineteen-page,
seventy-seven-paragraph complaint contained a general statement alleging
claims for breach of fiduciary duty, professional negligence, and “other
misconduct” regarding Attorney Welsh’s legal representation of Shorewood.
Appellant’s Appendix Volume II at 43. After extensive discovery had taken
place, on June 15, 2023, the Welsh Defendants filed a motion for summary
judgment on Shorewood’s claims, which they argued all “constitute claims for
legal malpractice.” Id. at 30. They designated numerous affidavits and
deposition testimony in support of summary judgment. Shorewood responded
with its designation of evidence in opposition to summary judgment.
[9] The trial court held a summary judgment hearing on August 10, 2023. Prior to
and during the hearing, the Welsh Defendants moved to strike newly-elected
Board member Tom Szefc’s affidavit designated by Shorewood to the extent
that it directly conflicted with his prior sworn deposition testimony, but the
matter was never ruled on by the trial court. Following the hearing, on
September 5, 2023, the trial court entered its order granting summary judgment
Court of Appeals of Indiana | Opinion 23A-PL-2342 | June 25, 2024 Page 6 of 16 in favor of the Welsh Defendants on Shorewood’s “legal malpractice claim.”
Id. at 15. Specifically, the trial court concluded that the Welsh Defendants had
negated multiple elements of Shorewood’s claim and that no genuine issues of
material fact remained for trial.
Discussion
[10] Shorewood contends the trial court erred in entering summary judgment on its
legal malpractice claim and in applying that ruling to the case in its entirety
because the Welsh Defendants did not address Shorewood’s separate breach of
fiduciary duty claim in their summary judgment motion. We begin by
observing that the party moving for summary judgment bears the initial burden
of making a prima facie showing that there are no genuine issues of material
fact and that it is entitled to judgment as a matter of law. Manley v. Sherer, 992
N.E.2d 670, 673 (Ind. 2013). Summary judgment is improper if the moving
party fails to carry its burden, but if it succeeds, then the nonmoving party must
come forward with evidence establishing the existence of a genuine issue of
material fact. Id. The Indiana Supreme Court has explained,
To obtain summary judgment [in Indiana], a moving party must affirmatively dispel all determinative genuine issues of material fact. It is not enough to cite the absence of evidence and claim that the non-moving party is thereby unable to prove an element of its case. Rather, the moving party must demonstrate that the undisputed facts conclusively establish the absence of a required element of the non-moving party’s case.
Court of Appeals of Indiana | Opinion 23A-PL-2342 | June 25, 2024 Page 7 of 16 Id. at 676. “[W]hile federal practice permits the moving party to merely show
that the party carrying the burden of proof lacks evidence on a necessary
element, we impose a more onerous burden: to affirmatively ‘negate an
opponent’s claim.’” Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014) (quoting
Jarboe v. Landmark Cmty. Newspapers of Ind., Inc., 644 N.E.2d 118, 123 (Ind.
1994)).
[11] Appellate courts review a trial court’s summary judgment ruling de novo.
Griffin v. Menard, Inc., 175 N.E.3d 811, 812 (Ind. 2021). Any doubts as to any
facts or inferences to be drawn therefrom must be resolved in the non-moving
party’s favor. Id. at 813. We are not bound by the trial court’s findings of fact
and conclusions thereon, but they aid our review by providing the reasons for
the trial court’s decision. Rice v. Strunk, 670 N.E.2d 1280, 1283 (Ind. 1996).
The party that lost in the trial court bears the burden of persuading us that the
trial court erred. Hughley, 15 N.E.3d at 1003.
A. Legal Malpractice Claim
[12] The elements of an action for legal malpractice include: (1) employment of an
attorney, which creates a duty to the client; (2) failure of the attorney to exercise
ordinary skill and knowledge (breach of the duty); and (3) that such negligence
was the proximate cause of (4) damage to the plaintiff. Reiswerg v. Statom, 926
N.E.2d 26, 30 (Ind. 2010). A defendant is entitled to summary judgment when
the undisputed material facts negate at least one element of the plaintiff’s
malpractice claim. Clary v. Lite Machs. Corp., 850 N.E.2d 423, 432 (Ind. Ct.
App. 2006), trans. denied. Court of Appeals of Indiana | Opinion 23A-PL-2342 | June 25, 2024 Page 8 of 16 [13] The Welsh Defendants contend, and the trial court agreed, that their designated
evidence negated the breach of duty, proximate cause, and damages elements of
Shorewood’s legal malpractice claim. We find the element of proximate cause
dispositive here. “To establish causation and the extent of harm in a legal
malpractice case, the client must show that the outcome of the underlying
litigation would have been more favorable but for the attorney’s negligence.”
Beal v. Blinn, 9 N.E.3d 694, 700 (Ind. Ct. App. 2014), trans. denied. In other
words, the client must prove the lawyer’s negligence proximately caused its
injury. Roumbos v. Samuel G. Vazanellis & Thiros & Stracci, PC, 95 N.E.3d 63, 65
(Ind. 2018). This proof generally requires a trial within a trial. Id. Proximate
cause is primarily a question of fact for the jury, but it can be decided as a
matter of law if the relevant facts are undisputed and lead to only a single
inference or conclusion. Drendall L. Off., P.C. v. Mundia, 136 N.E.3d 293, 305
(Ind. Ct. App. 2019), trans. denied. The Welsh Defendants, as summary
judgment movants, had the burden to show that Attorney Welsh’s alleged
negligence was not the proximate cause of any damages suffered by
Shorewood.
[14] We agree with the trial court that Shorewood’s legal malpractice claim “arises
out of the creation and termination of” the Sewer Agreement between
Shorewood and Rex Properties. Appellant’s Appendix Volume II at 15.
Specifically, Shorewood claims that, but for Attorney Welsh’s alleged failure to
exercise ordinary skill and knowledge in representing Shorewood, namely his
“omi[ssion] [of] important information” regarding “capacity concerns” and the
Court of Appeals of Indiana | Opinion 23A-PL-2342 | June 25, 2024 Page 9 of 16 exit clause in the Sewer Agreement, Shorewood would not have rescinded the
Sewer Agreement and therefore would not have “incurred substantial
damages.” Appellant’s Brief at 11, 28. 4
[15] To negate the element of proximate cause, the Welsh Defendants designated,
among other evidence, the affidavit of a legal expert, attorney David
Hollenbeck. As noted by Hollenbeck, it is undisputed that Attorney Welsh was
not made aware of the decision to terminate the Sewer Agreement or asked to
provide a legal opinion on that decision either prior to or immediately after that
decision was made by the newly elected Board. Based upon those, and other
undisputed facts, Hollenbeck averred that there was “no action or inaction on
the part of [the Welsh Defendants] which is the proximate cause of or
contributed to any damage” to Shorewood. Appellant’s Appendix Volume II at
176. Hollenback stated that the designated evidence showed the Welsh
Defendants were “not aware of the new Board’s intentions, [were] not asked to
and did not provide any advice to [Shorewood] with regard to rescission and
termination of the [Sewer Agreement]; therefore, it is my opinion the proximate
cause of any adverse consequence of the rescission is not the result of any
action or inaction of [the Welsh Defendants].” Id. at 177. The evidence
designated by the Welsh Defendants coupled with Hollenbeck’s testimony
4 Shorewood claims its damages include, but are not limited to, “increased annual insurance rates, escalated costs for urgent improvements to the sewage treatment tanks, and additional costs related to retaining key [Shorewood] employees under increased scrutiny due to the lawsuits incurred.” Appellant’s Brief at 11 (citing Appellant’s Appendix Volume II at 239-240).
Court of Appeals of Indiana | Opinion 23A-PL-2342 | June 25, 2024 Page 10 of 16 constitute a prima facie showing negating the proximate cause element of
Shorewood’s legal malpractice claim.
[16] In response, Shorewood failed to come forward with evidence establishing the
existence of a genuine issue of material fact on the element of proximate cause.
Indeed, Shorewood’s only response on the issue of proximate cause is to point
to new board member Tom Szefc’s designated affidavit in which he averred that
he would not have voted to rescind the Sewer Agreement had he been advised
that the agreement had to be approved by the IURC, and that he would have
voted differently if he had been informed of the capacity issues. Shorewood
asserts that Szefc’s affidavit “unequivocally confirms that Attorney Welsh’s
failure to inform the Board of the IURC clause in the Sanitary Sewer
Agreement led to both his vote to rescind the Agreement, and his failure to
insist upon sending the matter to the IURC” and therefore Attorney Welsh’s
“failure to advise the New Board was the direct and proximate cause of the
damages associated with the failure to mitigate the rescission of the contract by
sending the matter to the IURC.” Appellant’s Brief at 28-29. Shorewood
further claims that Szefc’s affidavit “firmly establishes the case-within-a-case:
whether or not the outcomes would have been different absent the attorney’s
conduct.” Id.
[17] However, as emphasized by the Welsh Defendants, and as argued in their
motion to strike, Szefc’s affidavit conflicts with his prior deposition testimony
given in this case and designated by the Welsh Defendants. In his deposition,
Szefc testified that he knew about the capacity issues and the exit clause in the
Court of Appeals of Indiana | Opinion 23A-PL-2342 | June 25, 2024 Page 11 of 16 Sewer Agreement and that he had personally advocated to the newly elected
Board that, rather than rescind the Sewer Agreement, the Board should first
submit the agreement to the IURC. This testimony directly conflicts with the
affidavit statements upon which Shorewood relies to create a genuine issue of
material fact on the proximate cause issue.
[18] It has long been the law in Indiana and many other jurisdictions that
“contradictory testimony contained in an affidavit of the nonmovant may not
be used by him to defeat a summary judgment motion where the only issue of
fact raised by the affidavit is the credibility of the affiant.” Gaboury v. Ireland Rd.
Grace Brethren, Inc., 446 N.E.2d 1310, 1314 (Ind.1983) (citation omitted), reh’g
denied. In adopting this rule, the Gaboury Court noted that “‘[i]f a party who
has been examined at length on deposition could raise an issue of fact simply by
submitting an affidavit contradicting his own prior testimony, this would
greatly diminish the utility of summary judgment as a procedure for screening
out sham issues of fact.’” Id. (citation omitted). Accordingly, “[w]here
deposition and affidavit are in conflict, the affidavit is to be disregarded unless it
is demonstrable that the statement in the deposition was mistaken, perhaps
because the question was phrased in a confusing manner or because a lapse of
memory is in the circumstances a plausible explanation for the discrepancy.”
Crawfordsville Square, LLC. v. Monroe Guar. Ins. Co., 906 N.E.2d 934, 939 (Ind.
Ct. App. 2009) (quoting Russell v. Acme-Evans Co., 51 F.3d 64, 68 (7th Cir.
1995)), trans denied. Szefc’s deposition testimony is not mistaken and we
disregard his conflicting affidavit statements as they relate to proximate cause.
Court of Appeals of Indiana | Opinion 23A-PL-2342 | June 25, 2024 Page 12 of 16 [19] The Welsh Defendants’ undisputed designated evidence indicates that nothing
Attorney Welsh did or did not do led to the rescission of the Sewer Agreement
as Shorewood did not ask for Attorney Welsh’s legal advice prior to or after
rescinding the Sewer Agreement. Thus, we conclude that the designated
evidence establishes as a matter of law that any damages suffered by
Shorewood as a result of its decision to terminate the Sewer Agreement were
not proximately caused by any act or omission of Attorney Welsh. In sum,
Attorney Welsh cannot be liable for not doing something that his client did not
request of him or not giving advice that he was not asked for. 5 As there is no
proximate cause between Attorney Welsh’s alleged errors and Shorewood’s
alleged loss, we affirm the trial court’s entry of summary judgment in favor of
the Welsh Defendants on Shorewood’s legal malpractice claim. See Gates v.
O'Connor, 111 N.E.3d 215, 231 (Ind. Ct. App. 2018) (affirming trial court’s
entry of summary judgment on legal malpractice claim because designated
evidence negated element of proximate cause), trans. denied.
B. Breach of Fiduciary Duty Claim
[20] Shorewood maintains that “[c]omplete summary judgment is impermissible”
due to the Welsh Defendants’ failure “to include an essential piece” of
Shorewood’s complaint in their summary judgment motion. Appellant’s Brief
5 Shorewood suggests that “[i]t can be inferred that Attorney Welsh knew that the [new] Board would act swiftly to rescind the Sanitary Sewer Agreement, and yet he did not take any steps to forewarn them as to the consequences of such an action or to discuss how to mitigate the harm afterwards.” Appellant’s Brief at 29- 30. This is not a reasonable inference.
Court of Appeals of Indiana | Opinion 23A-PL-2342 | June 25, 2024 Page 13 of 16 at 31. In its complaint, Shorewood also asserted a claim for breach of fiduciary
duty against Attorney Welsh. A claim for breach of fiduciary duty generally
requires proof of three elements: (1) the existence of a fiduciary relationship; (2)
a breach of the duty owed by the fiduciary to the beneficiary; and (3) harm to
the beneficiary. West v. J. Greg Allen Builder, Inc., 92 N.E.3d 634, 643 (Ind. Ct.
App. 2017), trans. denied. Shorewood argues that the Welsh Defendants neither
specifically mentioned nor specifically negated one of the elements of its claim
for breach of fiduciary duty in their motion for summary judgment, and
therefore the trial court erred in disposing of this case in its entirety by granting
summary judgment in favor of the Welsh Defendants.6
[21] The record reveals that the Welsh Defendants moved for summary judgment
“on all claims alleged in the Complaint in this cause[.]” Appellant’s Appendix
Volume II at 20. They further emphasized in their summary judgment brief
that all of Shorewood’s claims, which included Shorewood’s breach of fiduciary
duty claim, “are without merit” and “constitute claims for legal malpractice.”
Id. at 21, 30. The Welsh Defendants framed their argument by explaining that
all of Shorewood’s claims “arise from” alleged violations of the parties’ legal
services agreement “with regard to the Sewer Agreement; and therefore
constitute claims for legal malpractice. As a result, the Court need only
consider the elements for a legal malpractice claim to determine if the [Welsh
6 It is apparent from the chronological case summary that the trial court considered its summary judgment ruling to apply to the entirety of Shorewood’s case against the Welsh Defendants. See Appellant’s Appendix Volume II at 14 (entries canceling final pretrial conference and scheduled jury trial).
Court of Appeals of Indiana | Opinion 23A-PL-2342 | June 25, 2024 Page 14 of 16 Defendants] are entitled to Summary Judgment on [Shorewood’s] Complaint.”
Id. at 30-31. As noted by the Welsh Defendants, Shorewood did not respond or
object to this framing of the claims as encompassed by the legal malpractice
claim in its brief or designation of evidence. Indeed, Shorewood has not
identified a basis for a fiduciary relationship aside from the attorney-client
relationship as memorialized by the parties’ legal services agreement.
Accordingly, we view Shorewood’s breach of fiduciary duty claim as merely
derivative of its legal malpractice claim. See, e.g., Krieg DeVault LLP v. WGT V,
LLC, 206 N.E.3d 1171, 1181 (Ind. Ct. App. 2023) (holding that because law
firm did not demonstrate summary judgment was appropriate on the underlying
legal malpractice claim, it could not be entitled to summary judgment on
derivative breach of fiduciary duty claim), trans. denied.
[22] As we concluded above, the Welsh Defendants designated evidence
establishing as a matter of law that they were entitled to summary judgment on
Shorewood’s legal malpractice claim. As the claims were framed here, this
included Shorewood’s claim regarding breach of fiduciary duty stemming from
the same underlying attorney-client relationship and facts. Under the
circumstances, we cannot say that the trial court erred in disposing of this case
in its entirety by granting summary judgment in favor of the Welsh Defendants.
[23] For the foregoing reasons, we affirm the trial court’s entry of summary
judgment in favor of the Welsh Defendants.
Court of Appeals of Indiana | Opinion 23A-PL-2342 | June 25, 2024 Page 15 of 16 [24] Affirmed.
Riley, J., and Foley, J., concur.
ATTORNEYS FOR APPELLANT Scott A. Seville Robert J. Fox Robbins and Seville, LLC Crown Point, Indiana
ATTORNEYS FOR APPELLEES Crystal G. Rowe Jacob W. Zigenfus Kightlinger & Gray, LLP New Albany, Indiana
Michael E. Brown Kightlinger & Gray, LLP Indianapolis, Indiana
Connor H. Nolan Harris Welsh & Lukmann Chesterton, Indiana
Court of Appeals of Indiana | Opinion 23A-PL-2342 | June 25, 2024 Page 16 of 16