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by: Colin E. Flora
This week we turn our attention to a decision from the Indiana Supreme Court that addresses two important issues of law. The first issue is when may a dismissal for failure to state a claim under Indiana Trial Rule 12(B)(6) be granted on the basis of an affirmative defense. And the second is whether incorporation of a copyrighted standard into government regulation by reference acts as a sufficient bar to access so as to relieve a party from the presumption of knowledge of the law. Providing insight on both issues is the Indiana Supreme Court decision Bellwether Properties, LLC v. Duke Energy Indiana, from earlier this week.
As we have briefly discussed before, “A 12(B)(6) motion essentially says that even if the court assumes everything that the plaintiff says is true in the complaint – the document that initiates a case – the plaintiff still cannot succeed on any legal theory.” Under Indiana-state-court practice, which differs substantially from federal-court practice, a party seeking to end the case on such a motion must show that there is “no set of facts” that can be shown wherein the plaintiff could succeed on the claim. As Justice Slaughter wrote for the Indiana Supreme Court in Bellwether Properties, “A motion to dismiss under Rule 12(B)(6) ‘tests the legal sufficiency of the [plaintif’s] claim, not the facts supporting it.’ Dismissals are improper under 12(B)(6) ‘unless it appears to a certainty on the face of the complaint that the complaining party is not entitled to any relief.’”
The facts of the decision are important to our analysis, so let us briefly look at what happened. Bellwether owned property in Bloomington, IN upon which an easement had been granted back in 1957. The easement was a utility easement to allow powerlines to run across the land. In 2002, the Indiana Utility Regulatory Commission adopted new regulations which changed the requirements for the width of the easement to twenty-three feet. The existing easement was only ten feet. As a result, Bellwether eventually argued that the powerlines now effectuated a taking of their property for public use that necessitated compensation. But, the apparent problem is that the claim was not brought until 2015, a full thirteen years after implementation of the regulation, well in excess of the applicable six-year statute of limitations.
The trial court dismissed the claim pursuant to Rule 12(B)(6) and a divided Court of Appeals reversed. The Indiana Supreme Court granted transfer and also reversed the trial court but further issued an explanation that differs from the Court of Appeals’ majority decision.
Explaining the interplay of a 12(B)(6) motion to dismiss and affirmative defenses, the Indiana Supreme Court wrote:
A 12(B)(6) motion to dismiss tests the complaint’s legal sufficiency. A complaint states a claim on which relief can be granted when it recounts sufficient facts that, if proved, would entitle the plaintiff to obtain relief from the defendant. The plaintiff “need not anticipate a statute of limitations defense and plead matter[s] in avoidance in the complaint.” Thus, a complaint does not fail to state a claim merely because a meritorious defense may be available. But a plaintiff may plead itself out of court if its complaint alleges, and thus admits, the essential elements of a defense. An example is where the “complaint shows on its face that the statute of limitations has run”.
Although the expansion of the easement appears to be the clear result of the 2002 change in regulations, the Court held that it was not apparent from the face of the complaint that the claim was necessarily untimely:
Bellwether’s claim accrued, conceptually, when the regulatory burden on its property exceeded the ten-foot clearance permitted by the original easement. At this stage, all we know factually is what the complaint alleges, which is that Duke Energy’s maintenance of the electrical lines “currently” imposes a total burden of 23 feet—thirteen feet more than the easement authorized. The complaint does not recite when the additional burden first occurred, only that it was in effect when Bellwether filed its complaint in August 2015. Given the limited factual allegations, we cannot discern whether (or when) any additional burden on Bellwether, beyond the 1957 easement restriction, occurred by operation of law. Because the complaint does not establish that the statute of limitations had already run when Bellwether sued, Duke Energy jumped the gun by arguing the claim's untimeliness in a motion to dismiss. Based on the current record, we are unable to conclude that Bellwether’s allegations would not entitle it to relief against Duke Energy under any circumstances.
Perhaps even more informative was the opening paragraph of the decision, which succinctly summarized the standard for succeeding on an affirmative defense at the motion to dismiss stage:
Dismissal under Trial Rule 12(B)(6) is rarely appropriate when the asserted ground for dismissal is an affirmative defense. To withstand a 12(B)(6) dismissal, the complaint need only allege such facts that, if proved, would entitle the plaintiff to obtain relief from the defendant. A complaint that survives that limited scrutiny states a claim for relief, even if there may lurk on the horizon an unassailable defense. Only where a plaintiff has pleaded itself out of court by alleging, and thus admitting, the essential elements of a defense does its complaint fail to state a claim on which relief can be granted.
But the Court did not end its analysis there. Foreseeing a future issue of deciding precisely when the statute should begin, recognizing that the taking clearly appears to have happened in 2002, the Court continued to determine at what point Bellwether knew or in the exercise of ordinary care should have known of the taking. The Court of Appeals majority had determined the matter was subject to the discovery rule, which dictates that the statute of limitations does not begin to accrue until the plaintiff knew or should have known of the requisite bases to assert a claim.
The fundamental problem for Bellwether in asserting the discovery rule is that the actions were not merely the hidden efforts of private persons, but the direct result of a change in law. One of the core dictates of all law is the assertion that all persons are held to know the law. Were it otherwise, then there would be a decided incentive toward ignorance in our society. But there is, however, a limitation on that foundational concept:
A longstanding legal principle presumes that citizens know the law and must obey it—on pain of losing their lives, liberty, or property for noncompliance. “[B]ecause we assume that man is free to steer between lawful and unlawful conduct, we insist that laws give the person of ordinary intelligence a reasonable opportunity to know what is prohibited, so that he may act accordingly.” An ancient legal maxim, phrased in the obligatory Latin (ignorantia juris non excusat), admonishes that ignorance of the law is no excuse. But central to the presumption that persons know the law is that the law is accessible.
It is a maxim of universal application that every man is presumed to know the law, and it would seem inherent that freedom of access to the laws, or the official interpretations of those laws, should be coextensive with the sweep of the maxim. Knowledge is the only just condition of obedience. The laws of Rome were written on tablets and posted, that all might read, and all were bound to obedience.
If the rule of law means anything, it is that persons have meaningful access to the laws they are obliged to follow, so they can conform their conduct accordingly.
At issue in the case was a particularly invidious, albeit common, type of municipal or state regulation. You see, it was not that the IURC promulgated new regulations of its own drafting. Rather, the IURC adopted and incorporated by reference standards promulgated by a private entity. One problem with doing so is that the private entity is permitted to hold a copyright over those standards and may make them available for purchase, but not always freely accessible:
Over the last fifty years, a trend has emerged nationally allowing extrinsic materials to be included in statutory and administrative codes. These materials are often incorporated by reference, meaning they are not reproduced within the codes themselves. Indiana has authorized this practice since 1985. The incorporated materials usually include not only state and federal statutes and regulations, but also privately developed standards, written by various industry and professional groups, that are often beyond the technical expertise of government officials. “Contemporary production of legal materials relies significantly and increasingly on private-sector standard setters, whose products are embodied in law by legislatures, regulators, courts, and other governmental authorities.”
This kind of rulemaking by proxy has undeniable advantages. It saves governments from having to hire policy experts to craft these standards. The process of developing these standards is often more streamlined because private actors are not subject to the same regulatory hurdles, such as a notice-and-comment rulemaking process. And before widespread use of the internet, incorporation by reference allowed rulemaking bodies to save significant printing costs, as they made their codes shorter by not having to reprint the full text of the incorporated standard.
But the practice of incorporating private standards by reference comes at a cost. The cost may be negligible for regulations that incorporate federal statutes, regulations, and other open-source materials, much of which can now be viewed online for free with just a few extra mouse clicks. But regulations incorporating copyrighted materials are often practically unavailable without the accompanying text, which can be difficult and expensive to obtain.
So that left the question of whether such copyrighted materials act as a sufficient bar to access so as to discharge one from the presumption of knowledge. But the Court did not make a specific conclusion in this case. The Court did, however, recognize that it was able to track down a copy of what appears possibly to have been the specific documents at issue, and did so for free. Nevertheless, the Court could not even verify that it had the specific standards. And so it left the question to be eventually decided by the trial court.
I have encountered this precise issue before and been utterly incensed by the requirement to purchase the applicable standards from a private entity just to have the privilege of knowing what the applicable law was on the issue–there it was the regulations governing fire hydrants in Noblesville, Indiana. From that vantage point, I commend the Indiana Supreme Court for providing guidance on the issue and cracking the door for future litigants who otherwise may have been held to a wholly unreasonable presumption under the circumstances. I think it fair to say that no just society can hold its citizens to legal standards for which they must compensate another private citizen just for the right of learning what those standards are.
Join us again next time for further discussion of developments in the law.
- Bellwether Props., LLC v. Duke Energy Ind., ---N.E.3d---, No. 53S04-1703-CT-121, 2017 Ind. LEXIS 931 (Ind. Dec. 20, 2017) (Slaughter, J.).
- Ind. Trial Rule 12(B)(6).
- Colin E. Flora, Indiana Court Explains Meaningful Difference Between State & Federal Summary Judgment Standard, Hoosier Litig. Blog (Dec. 13, 2013).
- See also Nina A Mendelson, Private Control over Access to Public Law: The Perplexing Federal Regulatory Use of Private Standards, 112 Mich. L. Rev. 737 (2014).
*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.