27 F.4th 1245
7th Cir.2022Background:
- In 2007 Birch|Rea prepared an appraisal valuing an Indiana property at $3.23 million; the loan later came into Regent Bank’s possession.
- In 2016 Regent questioned the valuation, retained counsel and independent appraisers, and hired certified appraiser John Potter to evaluate the 2007 Birch|Rea report.
- Potter issued a report identifying nine deficiencies and concluded Birch|Rea’s report violated USPAP and breached the duty of care.
- Regent sued Birch|Rea for professional negligence, negligent misrepresentation, constructive/common-law fraud, and breach of contract relying on the Potter report, then voluntarily dismissed the suit with prejudice.
- Birch|Rea sued Regent for malicious prosecution; Regent counterclaimed for attorney’s fees under Indiana’s frivolous-litigation statute. The district court granted summary judgment for Regent on malicious prosecution and for Birch|Rea on the fee claim; both parties appealed. Discovery produced a dispute over two undisclosed witnesses (Green and Wyman) whose affidavits Regent later used.
Issues:
| Issue | Plaintiff's Argument (Birch | Rea) | Defendant's Argument (Regent) | Held | |
|---|---|---|---|---|---|
| Whether Regent’s underlying suit amounted to malicious prosecution | Regent lacked probable cause and acted with malice in filing the underlying suit | Regent had probable cause based on outside counsel and Potter’s detailed appraisal; no malice | Court: Regent had probable cause and no actionable malice; summary judgment for Regent affirmed | ||
| Whether affidavits from undisclosed witnesses (Green, Wyman) should be stricken | Failure to disclose under Rule 26 requires exclusion of their affidavits | Affidavits were harmless and not dispositive; Potter report and other evidence stand independently | Court: Denial of motion to strike not an abuse of discretion; decision ultimately moot because Potter report and other undisputed evidence control | ||
| Whether Birch | Rea’s malicious-prosecution suit was frivolous under Indiana law (fees) | The malicious-prosecution claim was colorable and supported by Indiana precedent; not filed in bad faith | The claim was frivolous/unreasonable and merits fee recovery | Court: Claim was not frivolous or brought in bad faith; summary judgment for Birch | Rea on fees affirmed |
Key Cases Cited
- Ingram v. Diamond Equip., Inc., 118 N.E.3d 1 (Ind. Ct. App. 2018) (sets out Indiana elements and standards for malicious-prosecution claims)
- City of New Haven v. Reichhart, 748 N.E.2d 374 (Ind. 2001) (discusses the essence and strict construction of malicious-prosecution tort)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (defines summary-judgment standard for genuine dispute of material fact)
- David v. Caterpillar, Inc., 324 F.3d 851 (7th Cir. 2003) (Rule 26/37 disclosure and exclusion principles)
- River Ridge Dev. Auth. v. Outfront Media, LLC, 146 N.E.3d 906 (Ind. 2020) (framework for Indiana frivolous-litigation fee awards)
- Staff Source, LLC v. Wallace, 143 N.E.3d 996 (Ind. Ct. App. 2020) (definitions of frivolous, unreasonable, and groundless claims under Indiana law)
- Cont. W. Ins. Co. v. Cnty. Mut. Ins. Co., 3 F.4th 308 (7th Cir. 2021) (abuse-of-discretion standard for exclusion decisions on appeal)
- O'Brien v. Caterpillar Inc., 900 F.3d 923 (7th Cir. 2018) (appellate principle that courts may affirm on any adequately addressed ground)