Deceptive Consumer Sales ActIn a recent post, we discussed Rainbow Realty Group Inc., v. Carter, in which the Indiana Supreme Court considered whether a particular “rent-to-buy contract” was a land contract or a rental agreement. The court held that the transaction was a rental agreement, notwithstanding language in the contract that the transaction was a purchase and not a lease. Accordingly, the property was subject to the statutory requirement that a dwelling unit subject to a rental agreement must be in clean, safe, habitable condition. Because the house was clearly uninhabitable, Rainbow Realty violated that requirement.

Next, the Court considered the claim of the Carters that Rainbow Realty’s unsuccessful attempt to disclaim the statutory warranty of a safe, clean, habitable dwelling violated the Indiana Deceptive Consumer Sales Act (or “DCSA”), Ind. Code ch. 24‑5‑0.5. In particular, the Carters relied on Ind. Code § 24‑5‑0.5‑3(a)(8)*, which (at the time the rent-to-buy contract was signed) provided that a supplier’s representation that a “consumer transaction involves or does not involve a warranty, a disclaimer of warranties, or other rights, remedies, or obligations, if the representation is false and if the supplier knows or should reasonably know that the representation is false” is a deceptive act actionable under Ind. Code § 24‑5‑0.5‑4(a), which provides a private cause of action for consumers who are the victims of deceptive acts.  The court held that the tenants had no DCSA claim, for no less than three distinct reasons.

First, a false representation that Subsection 3(b)(8) defines a deceptive act as including a false representation that a transaction does or does not involve a warranty only if the supplier (i.e., Rainbow Realty) knows that its representation is false. In this case, the Supreme Court held that Rainbow Realty did not know its representation was false and, therefore, did not commit a deceptive act. Indeed the Supreme Court pointed to the fact that three members of the Court of Appeals agreed that the transaction was a land contract and, therefore, that Rainbow Realty’s representation of the absence of a warranty of habitability was, in fact, true. In essence, the Supreme Court held that no one could have known whether the representation was false until the court held that it was false.

If you’re as old as I am, you might remember the television commercial in which twin sisters argued about the nature of Certs.  One said, “Certs is a candy mint,” iStock-947147792-300x200and her sister countered, “Certs is a breath mint.”  A booming male voice over said, “Stop. You’re both right. Certs is a candy mint and a breath mint. Certs is two, two, two mints in one.”*

In Rainbow Realty Group, Inc. v. Carter, the Indiana Supreme Court  encountered a real estate transaction in which one litigant said, “It’s a land contract,” and the other countered, “It’s a rental agreement.” Unlike the twins in the Certs commercial, only one was right.

Rainbow was a property manager for a trust that owned multiple houses for sale or rent in Marion County, Indiana. It offered four different types of transactions to its customers.  The first three were fairly standard:

Suppose you sue a corporation or a limited liability company and win, but the defendant has no money to pay your award and no other assets you can execute against. Is that a factor that justifies piercing the veil to make the owners of the company pay your award?  The Indiana Court of Appeals answered that question, and a couple of others related to veil piercing, in Country Contractors, Inc. v. A Westside Storage of Indianapolis, Inc.

Country Contractors was incorporated in 1983 as a seller of ready-mix concrete under the name Country Concrete, Inc.  In the 1990’s the company expanded its business to include construction work and excavation. Over the years, Country Contractors owned a substantial amount of assets in the form of construction equipment that it leased to other contractors.  In 2007 the corporation changed its name to Country Contractors, Inc. and amended its articles of incorporation to better reflect its expanded line of business.  Its two shareholders served as the board of directors, but three other people were responsible for running the company from day to day — preparing bids, executing contracts, and supervising the work.

In 2007, Westside engaged Country Contractors to perform excavation and construction services for the price of $235,000.  Country Contractors subcontracted much of the work, which began in 2008.  The two owners were not involved in the negotiation or execution of the contract, nor did they supervise the work.

A few weeks ago, we hired a contractor to do some painting at our house.  As many contractors do, he put a sign in our yard while he was there. He didn’t ask us for permission, but if he had we would have given it to him.  A few days later, in fact after the painter and his sign were gone, we received a nastygram from our homeowner’s association informing us that our covenants prohibit any signs in the yard other than a sign advertising the property for sale. I noticed that there is no exception for political signs, and I wondered why we had not received a nastygram a few years ago when we put a candidate’s sign in our yard before an election.

I now know the answer to that, thanks to a recent Face Book post from my friend, Greg Purvis, an attorney at Spangler, Jennings, & Dougherty, P.C.

Greg pointed out that Indiana law, specifically Ind. Code § 32‑21‑13‑4,* prohibits homeowners’ associations from adopting or enforcing rules prohibiting certain types of signs on a homeowner’s property from thirty days before an election until five days after an election. It applies only to signs that meet one or more of the following descriptions:

The Johnson Amendment, which has been in the news from time to time for the last couple of years, is sometimes described as prohibiting tax exempt churches from campaigning for candidates for elected office.  That is accurate, but it applies more broadly than to churches. No organization is eligible for tax exempt status under Section 501(c)(3) of the Internal Revenue Code if it

participate[s] in, or intervene[s] in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.

Last year, the President signed Executive Order 13798 that directed the Secretary of the Treasury to:

Until recently, almost all trade secret law was furnished by state law, not federal law. Absent federal diversity jurisdiction, lawsuits for misappropriation of trade secrets had to be brought in state court. Even though the vast majority of states (including Indiana) have adopted the Uniform Trade Secrets Act (“UTSA”), there are nonetheless variations in trade secret law from one state to another. However, in May 2016 President Obama signed the Defend Trade Secrets Act (or “DTSA”), creating at 18 U.S.C. § 1836 a new federal civil cause of action for misappropriation of trade secrets.  Even so, the federal statute does not pre-empt state law, and state causes of action under the UTSA remain viable.

Definitions of Trade Secret and Misappropriation

Two crucial components of trade secret law are the definitions of trade secret and misappropriation.  The DTSA definitions, found at 18 U.S.C. § 1839, are not identical to the familiar UTSA definitions, but there are no major surprises. At least for the most part, information that is a trade secret under the UTSA is also a trade secret under the DTSA, and vice versa.  Similarly, there are likely very few acts that qualify as misappropriation under one statute but not the other.

We previously discussed whether nonprofit organizations and for-profit businesses can use unpaid interns without violating the Fair Labor Standards Act (or FLSA).  We also discussed allegations of violations of the FLSA related to unpaid interns in the fashion industry.

Earlier this year, the Department of Labor revised its policy, known as Fact Sheet #71, for determining whether businesses may use unpaid interns. The old 2010 policy used a six-factor test, with the presence of all six factors required in order for businesses to use unpaid interns without violating the FLSA. The new 2018 policy considers the following seven factors to determine whether the business or the intern is the primary beneficiary of the internship.

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.

This begins an occasional series of posts on basics of business contracts, principles that apply broadly to most types of business and commercial contracts, regardless of the subject — merger agreements, stock purchase agreements, asset purchase agreements, construction contracts, professional service contracts, generic independent contractor agreements, advertising agency agreements, software and other intellectual property licenses, publishing contracts, equipment leases, office and retail property leases, procurement contracts (both master agreements and single-purchase agreements), employment contracts, and others. Although there can be a subtle legal distinction between a “contract” and an “agreement,” I will use terms interchangeably.

Let’s start at the beginning, with the preamble clause, the first paragraph that appears after the title of most business and commercial contract. There is no universally recognized name for that part of a contract, but preamble is a good descriptive name. Here’s an example:

This Consulting Agreement (“Agreement”), dated March 22, 2018, is between John J. Doe, an individual with a place of business located at 1512 N Delaware St Indianapolis, IN 46202 (dba J.J. Doe Consulting) (“Consultant”) and Jane Roe & Associates, LLC, an Indiana limited liability company (“Client”).

We previously discussed the Business Entity Harmonization Bill (Senate Enrolled Act 443 or P.L. 118-2017) passed last year by the General Assembly in the following posts:

“In that remote and despotic period, when the sovereign king chartered rights and liberties to his subjects – the people – all governmental powers were assumed to be his by divine right. In him were combined the legislative, executive and judicial powers of government. He was the lawgiver, interpreter and enforcer. When the powers were executed by agents, the agents were his, and responsible to him alone. On this continent we came to the time when the people, by revolution, took to themselves sovereignty, and in exercising supreme political power chartered governments by written constitutions. These organic instruments declared and guaranteed the rights and liberties of the individual, which had come to the people through centuries of struggle against absolutism in government. The majority was to rule, but under restraints and limitations which preserved to the minority its rights. ‘By the constitution which they establish, they not only tie up the hands of their official agencies, but their own hands as well; and neither the officers of the State, nor the whole people as an aggregate body, are at liberty to take action in opposition to this fundamental law.’ Cooley, Const. Lim. (7th ed.) 56.”

Ellingham v. Dye, 178 Ind. 336, 342; 99 N.E. 1, 3 (1912).

When I was in law school more than 25 years ago, I ran across the 1912 decision of the Indiana Supreme Court quoted above. It fascinated me because, at least as I understood the context, it decided a question that brought Indiana to the brink of a constitutional crisis. The case involves an attempt by the Indiana Governor and the General Assembly to amend the Indiana Constitution without complying with the procedures prescribed by the Constitution itself. At the time I thought I might return to the case some day and write an article about it, but I never got around to it.