K.R. Calvert Co. v. Sandys, Court of Appeals Case No. 19A-PL-443

Docket NºCourt of Appeals Case No. 19A-PL-443
Citation141 N.E.3d 811
Case DateJanuary 14, 2020
CourtCourt of Appeals of Indiana

141 N.E.3d 811

K.R. CALVERT CO., LLC , Appellant-Defendant,
and
Philip Davis, Appellant,
v.
Brian SANDYS and Jennifer Sandys, Appellees-Plaintiffs.

Court of Appeals Case No. 19A-PL-443

Court of Appeals of Indiana.

FILED January 14, 2020
Publication Ordered February 27, 2020


Attorney for Appellants: P. Adam Davis, Davis & Sarbinoff, LLC, Carmel, Indiana

Attorneys for Appellees: Josh Brown, Stephanie Maris, Cohen Garelick & Glazier, Indianapolis, Indiana

Bradford, Chief Judge.

Case Summary

[1] In 2014, Medex Patient Transport, LLC, sold a franchise to JBS Transport, which was co-owned by Brian and Jennifer Sandys. After a few months, the parties terminated the franchise agreement, and, shortly thereafter, one of the owners of Medex sent an email to Medex's other franchisees that contained allegedly defamatory statements about the Sandyses. The Sandyses sued Medex, Medex's owners, and two affiliated companies (including K.R. Calvert Co., LLC) for breach of contract and defamation.

2] Eventually, a discovery dispute developed, which resulted in the trial court issuing an order to compel discovery to K.R. Calvert. After several months, the Sandyses notified K.R. Calvert that it still had not complied with the trial court's order to compel, nor had it answered their amended complaint. The email, to which K.R. Calvert's attorney responded, indicated that the Sandyses would seek default judgment against K.R. Calvert if it did not answer its amended complaint within approximately a week.

[3] Approximately one month later, the Sandyses moved for default judgment against K.R. Calvert, which had not answered the amended complaint, and the trial court granted the motion. K.R. Calvert moved to vacate the default judgment, which motion the trial court denied on the basis that K.R. Calvert had not timely answered the Sandyses amended complaint and could not establish excusable neglect.

[4] In May of 2018, the Sandyses moved to voluntarily dismiss all parties except K.R. Calvert because they had negotiated a settlement with them, which motion the trial court granted. K.R. Calvert moved to strike the voluntary dismissal of the other defendants, which motion the trial court denied. In addition, the trial court ordered K.R. Calvert's counsel Philip Davis to personally pay $630.00 in attorney's fees for filing what it determined to be an improper motion to strike. Davis did not pay, and this award of fees was eventually increased to $1260.00 and reduced to a civil judgment

[141 N.E.3d 816

against him in favor of the Sandyses. In January of 2019, the trial court entered its final judgment against K.R. Calvert in favor of the Sandyses, awarding them damages of $10,000.00 for breach of contract, damages of $40,000.00 for defamation per se , and $106,676.40 in attorney's fees. K.R. Calvert contends that the trial court abused its discretion in denying its request for relief from the default judgment, erred in awarding damages for breach of contract and defamation per se , and improperly awarded attorney's fees. Because we disagree with all of K.R. Calvert's contentions, we affirm.

Facts and Procedural History

5] Medex is owned and operated by Klein and Kyle Calvert and offers franchises for the operation of a business that provides non-emergency medical transportation services. K.R. Calvert is an affiliate of Medex that is also owned and operated by Klein and Kyle and acts as the operations arm of the Medex franchise. The Sandyses are co-owners of JBS. Through JBS, the Sandyses entered into a franchise agreement with Medex on or about March 3, 2014.

[6] Things did not go well for long, and the Sandyses' franchise agreement was mutually terminated by way of a settlement agreement dated December 19, 2014 (the "Settlement Agreement"), executed by Medex, JBS, and the Sandyses. The Settlement Agreement contains a non-disparagement clause which states, in part, that

[t]he Parties agree that they shall not disparage, demean, or make complaints against, either formally or informally, or assist in communicating any information damaging or potentially damaging to the business or reputation of the Parties, to any third party, including but not limited to, the media, the business community, the general public, employees, agents, or customers of the Parties.

Appellant's App. Vol. II p. 73.

[7] Shortly after the Settlement Agreement was executed, Kyle sent the following email to the entire Medex franchise system (the "December 19th Email"):

As of today Brian Sandys' Indianapolis location will be closing. While this closure has no impact on your day-to-day we wanted to make you aware. In the healthcare franchise industry there is a 9% failure rate. For us, even one is too many, and our goal is to achieve a 0% failure rate. I think with renewed effort on our part and yours we can minimize issues and continue growth.
Here are things we're learning and things you should pay close attention to:
Our most successful stores are the ones where owners are active daily. No second jobs, no part time attention; full time work day in and day out.
Up to date on receivables with their client base. Aging accounts cripples cash flow and will cause issues with your payroll and payables.
Behind or in default of royalties or operations fees. This one is being addressed on a case-by-case basis. But if your location is behind with any payment you're in breach of your contract and may be terminated with cause. Make sure you stay current on payables.
Rejecting or refusing work. We have sent opportunities out to help with growth. New contracts and contacts to get you business. Some have refused to grow, add vans, or even connect with the potential work. If this continues you'll be found in breach of your contract as well for rejecting business that results in over 2% of your trip volume.
And last but not least... sell sell sell. Those of you who stay behind a desk or

[141 N.E.3d 817

steering wheel and don't network or sell are going to lose tremendous business and the possibility of new business. If you're not growing, you're dying.
I know this a hard email on Friday afternoon before Christmas, but these are the realities of business. If you don't vigilantly work, fail to take ownership and responsibility, and refuse to grow then the outcome may be bleak.
However, I know each of you are going to take this letter and let it charge you to improve, it did us. With the New Year let's resolve to better everyone, everything, everywhere. Let's make 2015 a positive one and let's end with that.

Appellant's App. Vol. II pp. 112–13.

8] Prior to receiving the December 19th Email, none of the other franchisees had been aware that the Sandyses were closing their Indianapolis franchise. Two franchisees, Wayne and Anabella Zeitler, later indicated that the statements in the December 19th Email had negatively impacted their opinion of the Sandyses and had made them think that their franchise was a failure, they were not active owners, they were behind on payments and in breach of their franchise agreement, they were behind on payables, their franchise failed as a result of their failure to grow, they did not work hard, and they did not take ownership and responsibility and refused to grow. Wayne, who also happens to work as a FedEx pilot with Brian, further testified that after receiving the December 19th Email, his personal opinion of Brian as a pilot was negatively affected.

[9] On January 6, 2015, the Sandyses filed suit against Medex; K.R. Calvert; Caliber Patient Care, LLC; Kyle; and Klein, alleging breach of contract and defamation. On February 4, 2015, attorney Phillip Davis appeared on behalf of Medex, Caliber, and Klein. Other attorneys eventually also entered appearances for Medex, Kyle, and Klein, but no attorney entered an appearance on behalf of K.R. Calvert.

[10] On March 29, 2016, the Sandyses wrote to Attorney Davis and counsel for Medex and the Calverts regarding a discovery dispute, which letter took issue with "the responses of your clients, Medex Patient Transport LLC ("Medex"), Caliber Patient Care, LLC ("Caliber"), Kyle Calvert ("Kyle"), Klein Calvert ("Klein"), and K.R. Calvert Co., LLC ("K.R. Calvert") (collectively, "Defendants") to Plaintiffs Brian and Jennifer Sandys's First set of Interrogatories and First Request for Production of Documents[.]" Appellant's App. Vol. III p. 22. On June 27, 2016, the Sandyses moved to compel the defendants, including K.R. Calvert, to respond to interrogatories and produce certain documents. On November 17, 2016, the trial court granted the Sandyses' motion to compel discovery. K.R. Calvert, however, did not respond to the interrogatories or produce the documents requested.

[11] Meanwhile, on August 26, 2016, the Sandyses moved for leave to file an amended complaint. On November 17, 2016, the Sandyses amended their complaint to add three counts, namely fraud, negligent misrepresentation, and violation of the Indiana Franchise Act, all based on Kyle's alleged failure to disclose a bankruptcy in Medex's franchise disclosure document. On April 7, 2017, Attorney Davis answered the Sandyses' amended complaint on behalf of Caliber, but no answer was filed on behalf of K.R. Calvert.

[12] On May 9, 2017, the Sandyses' counsel provided written notice to K.R. Calvert in an email that it had neither provided responsive documents pursuant to the order to compel discovery nor answered the amended complaint. The body of the email reads, in full, as follows:

[141 N.E.3d 818

K.R. Calvert has failed to provide document responses to the Sandys Parties Requests For Production, which were served on November 23, 2015. Moreover, the Court granted the Sandys Parties Motion to Compel the production of documents on November 17, 2016. We still have NO documents from K.R. Calvert. That is what we see as wrong. K.R. Calvert's disregard of the Court's Order compelling the production of documents is troubling, and I don't believe the Court is going to
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