954 N.E.2d 1017
Ind. Ct. App.2011Background
- NWS hired EY in 1998 to audit fiscal years ending 1998–2001 under an arbitration clause for disputes arising from EY's audits.
- Dianne Woodrum, an NWS employee in receivables, committed fraud causing about $4.2 million in losses to NWS.
- EY produced ~40,000 audit documents, including the Sems Memo, after Woodrum's fraud was discovered.
- Ten days before arbitration, EY provided “cell notes” claiming discussions with NWS staff about suspicious receivables; NWS contested these notes at arbitration.
- Arbitration panel found EY negligent but allocated 40% of losses to NWS and 60% to EY, awarding EY to pay ~2.25 million to NWS.
- NWS sued EY in June 2006 for fraud/deception, alleging cell notes were altered or used to mislead arbitrators and improperly shift liability.
- EY moved for summary judgment twice on deception; the second motion was supported by a computer-expert affidavit that the cell notes had not been altered.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether EY's second summary judgment motion was proper | NWS asserts the motion repeated identical arguments with new evidence; EY failed to show no genuine fact. | EY contends the second motion relied on new expert evidence, making it proper. | Properly denied to the extent material facts remained in dispute. |
| Whether the deception claim is barred by res judicata or collateral estoppel | NWS argues the deception claim was decided or necessarily litigated at arbitration. | EY contends claim and issue preclusion apply. | Res judicata does not bar; collateral estoppel does not apply. |
| Whether genuine issues of material fact exist regarding NWS's deception claim | NWS presents multiple theories of deception involving cell notes and Sems Memo. | EY argues theories lack basis for deception and that evidence refutes alteration. | Genuine issues of material fact remain; summary judgment inappropriate. |
Key Cases Cited
- Rotec, Div. of Orbitron, Inc. v. Murray Equip., Inc., 626 N.E.2d 537 (Ind. Ct. App. 1993) (support for successive-summary-judgment considerations (improperity may depend on facts))
- Dawson v. Estate of Ott, 796 N.E.2d 1190 (Ind. Ct. App. 2003) (four-factor test for claim/issue preclusion (res judicata))
- Miller Brewing Co. v. Indiana Dep't of State Revenue, 903 N.E.2d 64 (Ind. 2009) (collateral estoppel/issue preclusion limitations)
- Flatow v. Ingalls, 932 N.E.2d 726 (Ind. Ct. App. 2010) (standard for summary-judgment review; construction of designated evidence)