Budden v. Board of School Com'rs of City of Indianapolis

• Decision Date: 20 August 1998
• Docket Number: No. 49S05-9804-CV-220,49S05-9804-CV-220
• Citation: 698 N.E.2d 1157
• Parties: Herb BUDDEN, Bonnie Budden and Christine Muller, Individually, and as Representatives of a class of teachers, Appellants (Plaintiffs below), v. The BOARD OF SCHOOL COMMISSIONERS OF the CITY OF INDIANAPOLIS, Ash Financial Group, Inc., Shirl Gilbert, Individually, and Brent W. Ash, Individually, Appellees (Defendants below).
• Court: Indiana Supreme Court

Page 1157

698 N.E.2d 1157

Herb BUDDEN, Bonnie Budden and Christine Muller,

Individually, and as Representatives of a class of

teachers, Appellants (Plaintiffs below), v. The BOARD OF SCHOOL COMMISSIONERS OF the CITY OF

INDIANAPOLIS, Ash Financial Group, Inc., Shirl

Gilbert, Individually, and Brent W. Ash,

Individually, Appellees

(Defendants below).

No. 49S05-9804-CV-220.

Supreme Court of Indiana.

Aug. 20, 1998.

Michael K. Sutherlin, Patricia Orloff Grow, Kevin W. Betz, Indianapolis, for Appellants.

Donald L. Dawson, John B. Drummy, Indianapolis, for Appellees.

ON PETITION TO TRANSFER

BOEHM, Justice.

The Indiana Tort Claims Act requires a person suing a "political subdivision" of the State in tort to give written notice describing the claim before filing suit. This interlocutory appeal deals with the scope of the notice required under the Act to preserve claims of a prospective class with unnamed members. The trial court concluded that it was bound by a recent Court of Appeals decision and ruled that this case could not proceed as a class action because the unnamed members were not identified in the notice and had not authorized the three putative class representatives, who had given notice, to act on their behalf. The broad question presented is one of first impression in this Court:

Does a Tort Claims Act notice by a putative class representative that fairly signals an intent to assert a class claim, but does not list all potential plaintiffs, comply with the notice requirement to preserve claims of class members if a class is subsequently certified under Trial Rule 23?

Because we hold that it does, we reverse the grant of partial summary judgment for the defendants on this issue, vacate the order denying class certification, and remand for further proceedings consistent with this opinion.

Factual and Procedural History

In July 1991, the Board of School Commissioners of Indianapolis ("IPS") entered into a contract with Ash Financial Group, Inc. ("AFG") providing that AFG would administer a retirement plan under which individual accounts were established for the benefit of IPS employees. ¹ Pursuant to the agreement, IPS deducted money from participating employees' paychecks and disbursed the funds to AFG for investment with insurance companies or mutual funds selected by the participants. At some point IPS became aware that AFG might be embezzling the funds, as in fact was occurring. In March 1994, IPS terminated its contract with AFG effective June 30, 1994. In a letter dated September 21, 1994, IPS Interim Superintendent Duncan N.P. Pritchett Jr. informed potentially affected IPS employees of these developments:

We have reason to believe that [AFG] which administered tax sheltered annuities ("TSA") accounts for approximately 941 IPS employees from July, 1991 through June 30, 1994, failed to distribute approximately $350,000 in funds deducted from employees' salaries to the insurance/annuity companies selected by the employees.

The letter asserted that IPS was trying to determine the number of employees affected and "the total amount of money involved." The letter assured employees that IPS would "continue to explore all means for the recovery of the funds and restitution of the TSA accounts of the affected IPS employees."

Herb Budden, Bonnie Budden, and Christine Muller (collectively "the plaintiffs")--all IPS teachers for many years and participants in the investment plans--eventually retained counsel to consider pursuing claims based on these events. In January 1995, counsel sent a three-page letter to IPS that began as follows:

This is to advise you that our office has been retained by [the plaintiffs] and potentially all teachers who had 403 funds embezzled by [AFG] to represent their interests in any claims they may have against [IPS] and [AFG]. The purpose of this correspondence is to officially serve you with a Tort Claim Notice....

The letter outlined the facts underlying the claim--IPS's decision to retain AFG, the nature of the agreement, and the apparent theft of the funds. The participating teachers' losses were described as "individually various funds from their pension plan and collectively approximately $400,000.00." A theory of liability was also offered: "Because of the wrongful conduct of [IPS] and its then Superintendent Shirl Gilbert the negligent hiring and supervision of Brent W. Ash and [AFG] contributed to and resulted in the fraudulent and unlawful acts previously described." The letter, which included the plaintiffs' addresses, concluded with the following:

Herb Budden, Bonnie Budden, and Christine Muller, teachers of the Indianapolis Public School system, and potentially all teachers who had 403 funds embezzled by Ash Financial Group, Inc .... are holding Indianapolis Public School Corp. liable for the loss and seek to recover all such funds plus reasonable attorney fees.... [The plaintiffs] and potentially all teachers who had 403(b) funds embezzled by Ash Financial Group, Inc .... seek a total of $500,000.00 in damages under the Tort Claims Act.

In June 1995, the plaintiffs filed a "class action complaint for damages" against IPS, Shirl Gilbert (IPS Superintendent in July 1991), AFG, and Brent W. Ash, the president of AFG. The plaintiffs purported to act on their own behalf and "as representatives of a class of teachers" who were defrauded by AFG. The complaint alleged several tort causes of action ² and requested $500,000 in damages under the Tort Claims Act, punitive damages, and reasonable costs including attorney fees. The defendants' answer denied the substance of the plaintiffs' allegations and raised a number of affirmative defenses, including inadequacy of the tort claim notice. ³

Asserting that an estimated 900 or more teachers might have an interest in the proceedings, in November 1995 the plaintiffs moved to certify the case as a class action under Trial Rule 23. The class was described as "all teachers employed by [IPS] who have an interest in the money embezzled, who participated in and were wrongly deprived of their own funds from a mutual funds pension plan under the Indianapolis Public Schools Teachers' Retirement Fund." The defendants opposed class certification. After a hearing on the motion, the trial court ruled that the plaintiffs "have complied with Trial Rule 23. The basic problem with Plaintiffs['] motion is the adequacy of notice under the Indiana Tort Claims Act." Although the court found that in "the present posture of the case, the Plaintiffs are entitled to proceed with the class action," a final ruling on class certification was postponed pending the outcome of a hearing on the defendants' motion for partial summary judgment on the notice issue. In seeking summary judgment on that point, the defendants argued that any claims by unnamed class members were barred because (1) the names and number of potential plaintiffs were not provided in the tort claim notice; and (2) the potential class plaintiffs did not authorize anyone to submit a notice for them. The defendants relied on Alonso v. City of Hammond, 648 N.E.2d 1221 (Ind.Ct.App.1995) for the proposition that these flaws were fatal to the notice and prevented the suit from proceeding as a class action. Alonso held that "all potential class plaintiffs must satisfy the notice requirement of the Tort Claims Act, either by submitting their own notices of claims or by authorizing someone to submit a notice for them." Id. at 1224 (footnote omitted).

In a July 1996 order, the trial court granted the defendants' motion for partial summary judgment, denied the plaintiffs' motion for class certification, and ruled that the case would go forward as a suit by the three named plaintiffs. In so ruling, the court remarked: "Perhaps, the stringent notice requirements as set out in [Alonso ] should be revisited by the Court of Appeals. However, this Court is bound to follow the ruling of the Court of Appeals." The order was certified for interlocutory appeal pursuant to Indiana Appellate Rule 4(B)(6). ⁴ The plaintiffs appealed and the Court of Appeals affirmed. Budden v. Board of Sch. Comm'rs, 680 N.E.2d 543 (Ind.Ct.App.1997), reh'g denied. We granted transfer on April 15, 1998.

Standard of Review

Summary judgment on a claim or issue is appropriate when the evidence shows that there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Ind. Trial Rule 56(C). The nonmoving party has the burden of demonstrating that the grant of summary judgment was error, but we nonetheless carefully assess the trial court's decision to ensure that the nonmovant was not improperly denied its day in court. Mullin v. Mun. City of South Bend, 639 N.E.2d 278, 280-81 (Ind.1994). Although a ruling on class certification is typically reviewed for an abuse of discretion, Hefty v. All Other Members of the Certified Settlement Class, 680 N.E.2d 843, 848 (Ind.1997), resolution of this appeal turns on interpretation of the notice provisions of the Tort Claims Act. Because this presents a question of law, we review application of the Act's notice requirements to the facts here de novo. Indiana State Highway Comm'n v. Morris, 528 N.E.2d 468, 471 (Ind.1988).

I. Tort Claim Notice in the Class Action Context

Before a tort lawsuit may be brought against a "political subdivision" of the State the Tort Claims Act, IND.CODE § 34-13-3-1 to -25 (1998), requires that written notice of the claim be given to the subdivision's "governing body" within 180 days after the loss occurred. ⁵ Id. § 34-13-3-8(a). IPS is a "political subdivision" within the meaning of the Act and thus both IPS and Gilbert are covered by the Act's notice provisions. IND.CODE §§ 34-6-2-38(a) & -110(9) (1998). There appears to be no dispute that the notice in this case was filed within the 180-day period. By not conceding liability within ninety days of the filing, IPS effectively denied the claim and cleared the...