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by: Colin E. Flora
For the third time since April, we look at preferred venue in Indiana. As we previously discussed, in American Family Insurance Co. v. Ford Motor Co., the Indiana Supreme Court interpreted Trial Rule 75(A)(4) to allow preferred venue in the county where a defendant business’s registered agent resides. At the start of this year, however, Indiana overhauled its business laws by adopting the Uniform Business Organizations Code. With that adoption came Indiana Code § 23–0.5–4–12, which states, “The designation or maintenance in Indiana of a registered agent does not by itself create the basis for personal jurisdiction over the represented entity in Indiana. The address of the agent does not determine venue in an action or a proceeding involving the entity.” Upon enactment of Section 12, the question became whether it overruled American Family Insurance. In Morrison v. Vasquez, the Court of Appeals of Indiana sought to provide an answer.
Before getting into how the court reached its conclusion, we should start with a simple overview of Indiana venue procedure and the American Family Insurance decision.
As we discussed in a previous post, in Indiana, venue is governed by Trial Rule 75. According to that rule, all Indiana circuit and superior courts have venue in civil cases. But not all courts have preferred venue. Instead, preferred venue exists in the counties designated by subdivision (A) of the rule. “Trial Rule 75(A) does not create a priority among the subsections establishing preferred venue, and there may be multiple preferred venues in a given case. ‘A motion to transfer venue cannot be granted when an action has been filed in a preferred venue, but if the complaint is not filed in a preferred venue, the court is required to transfer the case to a preferred venue upon a proper request from a party.’”
Under Trial Rule 75(A)(4), “[p]referred venue lies in: (4) the county where either the principal office of a defendant organization is located or the office or agency of a defendant organization or individual to which the claim relates or out of which the claim arose is located, if one or more such organizations or individuals are included as defendants in the complaint[.]” What exactly constitutes “the principal office of a defendant organization” was an issue resolved by the Indiana Supreme Court in American Family Insurance:
The term “principal office” as used in Trial Rule 75(A) has never been addressed by this Court. However, two opinions of the Court of Appeals have interpreted the term “principal office” as used in subsection (4) of the rule. In Western Sales the Court of Appeals rejected the argument that the content of the phrase “principal office” in the venue rule was supplied by the definition of that term in Indiana Code section 23-1-20-19 (1998) for purposes of the Business Corporation Act. That section defines “principal office” as “the office (in or out of Indiana) so designated in the annual or biennial report where the principal executive offices of a domestic or foreign corporation are located.”
We agree that this definition from the Business Corporation Act is not what the venue rules had in mind. Indiana Code section 23-1-20-19 was enacted over fifteen years after the adoption of Trial Rule 75 as a part of the overhaul of the Business Corporation Act. The currently effective Rules of Trial Procedure, including Trial Rule 75, were adopted in 1970. At that time Indiana’s corporation law required that both foreign and domestic corporations maintain a “principal office in this state” where a designated resident agent for service of process could be found. It is that office to which Trial Rule 75 referred by using the same phrase to provide in subsection (4) that preferred venue lies in “the county where . . . the principal office of a defendant organization is located.” When the Business Corporation Act was adopted in 1986, what had formerly been called the “principal office in this state” was designated the “registered office.” This avoided the confusion between “principal place of business,” which means the corporate headquarters for purposes of federal diversity jurisdiction under 28 U.S.C. section 1332, and “principal office,” which means the place in Indiana where one serves the corporate registered agent. By adopting the term “registered office,” the Business Corporation Act did not intend to change the venue rules for foreign corporations. Indeed, foreign corporations qualified to do business under other laws, for example, the Financial Institutions Act, to this day are required to have a “principal office in this state.” In short, at the time the current Rules of Trial Procedure were proposed, the phrase “principal office” referred to what is currently known as the “registered office” of a foreign corporation qualified to do business in Indiana. Thus, if a foreign corporation is qualified to do business in Indiana under the Business Corporation Act, it will necessarily have a “principal office in the state”—now called a “registered office”—irrespective of where its corporate headquarters may be. Accordingly, subsection (4) of Trial Rule 75 establishes preferred venue in the county of the defendant organization’s registered office.
One final point, which we have not previously mentioned, merits consideration before we delve into the ruling in Morrison. Subdivision (D) adds, “Any provision of these rules and any special or general statute relating to venue, the place of trial or the authority of the court to hear the case shall be subject to this rule, and the provisions of any statute fixing more stringent rules thereon shall be ineffective. No statute or rule fixing the place of trial shall be deemed a requirement of jurisdiction.”
So how do we meld Amerian Family Insurance, Trial Rule 75(D), and Section 12’s black-letter assertion that “[t]he address of the agent does not determine venue in an action or a proceeding involving the entity”? The court of appeals thought it a fairly simple matter to conclude that the statute supplants American Family Insurance. The plaintiff asserted that Trial Rule 75(D) dictated that the statute, Section 12, could not alter the Trial Rule. But the court of appeals disagreed:
Further, we do not find Morrison’s argument that [Section 12] is ineffective under Trial Rule 75(D) to be persuasive. Trial Rule 75(D) provides in part: “Any provision of these rules and any special or general statute relating to venue, the place of trial or the authority of the court to hear the case shall be subject to this rule, and the provisions of any statute fixing more stringent rules thereon shall be ineffective.” As explained above, Trial Rule 75(A)(4) provides that preferred venue lies in the county where “the principal office of a defendant organization” is located, and [Section 12] provides that the address of the registered agent does not determine venue. Thus, [Section 12] does not, by its express terms, fix more stringent rules related to venue than the terms of Trial Rule 75(A)(4).
To the extent Am. Family Ins. Co. may have determined that the term “principal office” in subsection (4) of the rule referred to a domestic corporation’s “registered office,” that determination was premised on Indiana corporation law which has since been considerably amended. Specifically, the Court in Am. Family Ins. Co. observed that, at the time Rule 75 was adopted in 1970, Indiana’s corporation law required that corporations maintain a “principal office in this state” where an agent for service of process could be found and that, “[w]hen the Business Corporation Act was adopted in 1986, what had formerly been called the ‘principal office in this state’ was designated the ‘registered office.’” The Court expressly found that, “[b]y adopting the term ‘registered office,’ the Business Corporation Act did not intend to change the venue rules for foreign corporations.” Thus Am. Family Ins. Co.was based on the corporation law adopted in 1986 and the fact the statutory provisions added by the legislature at that time did not intend to change the venue rules. However, Indiana’s corporation law was significantly amended by Pub. Law No. 118-2017 (eff. Jan. 1, 2018). . . . Thus the Indiana corporation law upon which Am. Family Ins. Co.was centered has been extensively amended, and the specific statutory provision relied upon in that case has been repealed and [Section 12] has been added. We decline to find that [Section 12]’s provision that the address of a registered agent does not determine venue fixes a more stringent rule related to venue than Trial Rule 75 or is ineffective pursuant to Trial Rule 75(D).
Do I agree with the court of appeals? I do not. Under 75(A)(4), venue is proper in “the county where either the principal office of a defendant organization is located or the office or agency of a defendant organization or individual[.]” That appears to say that the “principal office” is distinct from “the office . . . of a defendant organization.” But Section 12 renders “principal office” void. That is necessarily a statute that fixes a more stringent rule—it has cut out half of subdivision (4).
But I have an even more fundamental disagreement. I disagree in the assertion that American Family Insurance “was based on the corporation law adopted in 1986.” First, the meaning of a Trial Rule, like a statute or contract, is the meaning ascribed to it at the time it was enacted. To hold otherwise is to force amendment without going through the rigors of the amendment process. Trial Rule 75(A)(4) has not been changed since it was adopted. Second, American Family Insurance did not base its conclusion on the 1986 corporation law; it based its conclusion on the corporation law at the time Rule 75 was enacted. Had it done so upon 1986, there would not have been a corresponding term. That is, the court ruled that the new statute’s “registered agent” was the same as the old statutes “principal office” such that the location of the registered agent is the location of the “principal office.”
I think it odd that the court of appeals focused on the sentence in American Family Insurance that the 1986 business code “did not intend to change the venue rules for foreign corporations” without resolving the issue of how American Family Insurance would have been decided if the 1986 business code had so intended. The court appears to take it for granted that if there had been such an intent that it would have necessarily altered the venue requirements of Trial Rule 75. But that is definitely not a sure bet. The Indiana Supreme Court has reminded time and time again that it, not the General Assembly, has sole control over trial procedure in this state. As the Indiana Supreme Court recently wrote:
Our “rules of procedure prevail over any statute or statutory construction.” The General Assembly itself has recognized that we have sole authority over “practice and procedure in all the courts of Indiana,” and that “all laws in conflict with the supreme court’s rules have no further force or effect.” Thus, in this conflict between Indiana Code § 35–38–4–2 and our Appellate Rule 9, the former must give way to the latter.
Accordingly, if Section 12 is purporting to overrule Trial Rule 75, then Section 12 must give way. And that looks to be exactly what Section 12 is purporting to do.
There are two more statutes we should also consider. The first is Indiana Code § 34–8–1–3, to which the Indiana Supreme Court referred in the excerpt above. It states, “The supreme court has authority to adopt, amend, and rescind rules of court that govern and control practice and procedure in all the courts of Indiana. These rules must be promulgated and take effect under the rules adopted by the supreme court, and thereafter all laws in conflict with the supreme court’s rules have no further force or effect.” That statute really does not add much, except to confirm the General Assembly’s agreement with the Indiana Supreme Court as to the court’s own power.
The second statute is one that has never been substantively addressed by an Indiana Appellate Court. Indiana Code § 34–8–2–1 reads, “The general assembly of the state of Indiana affirms the inherent power of the supreme court of Indiana to adopt, amend, and rescind rules of court affecting matters of procedure, and the general assembly reaffirms the power given to the supreme court to adopt, amend, and rescind rules of court, including the rules of court adopted in this chapter, as set forth by IC 34–8–1–1. However, the power of the supreme court to adopt, amend, and rescind rules of court does not preclude the creation, by statute, of alternatives to the change of venue.” The last sentence is the one of note. Even if the General Assembly could reserve any such control over procedures for change of venue, this is not a matter of change of venue, but of affixing venue in the first place.
But even were it to be deemed a matter impacting change of venue—arguably, because it would determine whether a change could occur, it might be a change of venue—the General Assembly cannot retain such control. That the Indiana Supreme Court controls trial procedures is not a matter of legislative grace. As the Indiana Supreme Court found more than a century ago—almost seven decades before the Indiana Trial Rules were adopted, “[The General Assembly] can not, under the Constitution, encroach on judicial domain by prescribing the manner and mode in which the courts shall discharge their judicial duties. The legislature has no more right to break down the rules prescribed by this court for conducting its official business than the court has to prescribe the mode and manner in which the legislature shall perform its legislative duties.”
I think Section 12 is an overreach by the General Assembly and cannot form a basis for changing course from American Family Insurance. Only a properly enacted amendment to Trial Rule 75(A)(4) can do what the Indiana Court of Appeals asserts Section 12 has done.
That said, I think transfer may be sought to the Indiana Supreme Court but doubt that the issue will be taken up by the court any time soon. Although the result is one that appears to offend the separation of powers and proper amendment to the Trial Rules, it is likely to be viewed as a triviality and not a battle worth picking for the state’s highest court. Still, were I on the court, I would vote to grant transfer.
Before closing, one other decision from this week merits note. In Holland v. Indiana Farm Bureau Insurance, it was held that the statute of limitations on a claim by an insurer for subrogation funds held by an attorney on behalf of the insured is two years and begins to run at the time the insurance company knows (or, presumably, should have known) the attorney (or, presumably, the client) refuses to pay.
Join us again next time for further discussion of developments in the law.
On November 7, 2018, a separate panel of the Court of Appeals of Indiana issued a decision directly contrary to Morrison, finding Morrison wrongly decided. It now looks like transfer will be sought in Morrison and a near certainty that the Indiana Supreme Court will grant transfer to resolve the split.
Morrison v. Vasquez, —N.E.3d—, No. 18A-CT-376, 2018 Ind. App. LEXIS 305 (Ind. Ct. App. Aug. 28, 2018) (Brown, J.).
Am. Family Ins. Co. v. Ford Motor Co., 857 N.E.2d 971 (Ind. 2006) (Boehm, J.).
Pratt v. Pierce, 713 N.E.2d 312, 315 (Ind. Ct. App. 1999) (Riley, J.).
Western Sales & Serv. v. Ford Motor Co.,576 N.E.2d 631, 632 (Ind. Ct. App. 1991) (Shields, J.).
State v. Holtsclaw, 977 N.E.2d 348, 350 (Ind. 2012) (Massa, J.).
Parkison v. Thompson, 164 Ind. 609, 626–27, 73 N.E. 109, 115 (1905) (Jordan, J.).
Holland v. Ind. Farm Bureau Ins., No. 18A-PL-792, 2018 Ind. App. LEXIS 303 (Ind. Ct. App. Aug. 28, 2018) (Baker, J.).
Colin E. Flora, Indiana: Preferred Venue Rests with Registered Agent Designated to the Secretary of State, Not with Process Agents Registered for Other Purposes, Hoosier Litig. Blog (Apr. 20, 2018).
Colin E. Flora, Did the Indiana Court of Appeals Just Rewrite Trial Rule 75(A)?, Hoosier Litig. Blog (Apr. 28, 2018).
*Disclaimer: The author is licensed to practice in the state of Indiana. The information contained above is provided for informational purposes only and should not be construed as legal advice on any subject matter. Laws vary by state and region. Furthermore, the law is constantly changing. Thus, the information above may no longer be accurate at this time. No reader of this content, clients or otherwise, should act or refrain from acting on the basis of any content included herein without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue.