                                                                 FILED
                                                            Jun 01 2018, 7:39 am

                                                                 CLERK
                                                             Indiana Supreme Court
                                                                Court of Appeals
                                                                  and Tax Court




ATTORNEYS FOR APPELLANTS                                   ATTORNEYS FOR APPELLEE
Robert L. Burkart                                          Darren A. Craig
Jean M. Blanton                                            Michele Lorbieski Anderson
Ziemer Stayman Weitzel & Shoulders,                        Frost Brown Todd LLC
LLP                                                        Indianapolis, Indiana
Evansville, Indiana



                                            IN THE
    COURT OF APPEALS OF INDIANA

BioConvergence, LLC, and                                   June 1, 2018
Alisa K. Wright,                                           Court of Appeals Case No.
Appellants-Defendants,                                     53A04-1708-PL-1810
                                                           Appeal from the Monroe Circuit
        v.                                                 Court
                                                           The Honorable Judith A. Stewart,
Julie Menefee,                                             Special Judge
Appellee-Plaintiff.                                        Trial Court Cause No.
                                                           53C01-1309-PL-1742



Brown, Judge.




Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018                 Page 1 of 54
[1]   BioConvergence, LLC (“BioConvergence”) and Alisa K. Wright (“Alisa”)

      appeal the trial court’s January 12, 2017 order addressing summary judgment

      and denying their request for attorney fees and the trial court’s July 14, 2017

      order denying their claim for attorney fees. BioConvergence and Alisa raise

      two issues which we consolidate and restate as whether the trial court clearly

      erred or abused its discretion in denying their request for attorney fees. We

      affirm.1


                                       Facts and Procedural History

[2]   Julie and Greg Menefee met Alisa and her husband, Lance, in 1992 and

      became friends. BioConvergence, a service provider to the life sciences

      industry, was organized in 2004 by Alisa, Lance, John Brooks, and Jeff

      Schwegman, had its grand opening in April 2006, and had its first full year of

      doing work in 2007. Since its inception, Alisa was a majority member of

      BioConvergence. In October 2005, Greg accepted Alisa’s invitation to join

      BioConvergence’s Board of Advisors. After joining the Board of Advisors,

      Greg signed a confidentiality agreement on October 18, 2005.


[3]   In late 2007, Alisa contacted Greg and asked if he and Julie would be able to

      loan BioConvergence $400,000. Alisa told Greg and Julie that she had an

      agreement with “Chase for a line of credit that they backed off of and so she

      needed the money to be able to have operating capital for BioConvergence.”



      1
       On April 18, 2018, we held oral argument in Indianapolis. We thank counsel for their well-prepared
      advocacy. We also compliment Judge Stewart on her thorough orders.

      Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018                       Page 2 of 54
      Transcript Volume 4 at 96-97. On November 21, 2007, Alisa sent Greg an

      email message, which stated in part: “As you and Lance are meeting later this

      morning, you’ll want to take a look at this when you talk. This is a draft

      valuation and Blue & Co is doing a review on it. Based on the discussion I had

      with Blue, the valuation is in the ballpark.” Plaintiff’s Exhibit 60.


[4]   On December 19, 2007, Alisa sent an email to Greg, which was addressed to

      “Greg and Julie” and stated in part:


              On behalf of the [BioConvergence] owners, we welcome you to
              our group and appreciate your contributions as we go about
              making [BioConvergence] a successful business venture!

              The plans are for the Menefees to become owners in Jan 2008.
              Until that time, they will help us meet short term cashflow needs
              by loans under promissory notes. Some additional details and
              action items are:

                                                     *****

              3. Other

              a. Greg and Julie to decide who will make the capital
              contribution (Greg & Julie, Greg, Julie, Julie’s trust, etc.)

              b. Current valuation of the company confirmed by Blue & Co,
              BioC’s accounting firm, in December 2007 at $9,267,841 –
              setting the new value per unit at $131.05.

              c. $400,000 + $131.05/unit = 3052.39 B1 units or approximately
              4% of the company (total could vary based on interest accrued
              and how it is handled)




      Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 3 of 54
      Plaintiff’s Exhibit 68. In December 2007 and February 2008, Julie and Greg

      loaned BioConvergence $400,000 evidenced by promissory notes which were

      unsecured.


[5]   On November 17, 2008, Julie, as the individual “in which Subscription is

      made,” and Alisa, CEO of BioConvergence, entered into a

      “BIOCONVERGENCE LLC CLASS B-1 UNIT SUBSCRIPTION

      AGREEMENT” (the “Subscription Agreement”). Plaintiff’s Exhibit 9. The

      agreement provided in part that Julie “subscribes for and agrees to purchase

      3,333 Class B-1 Units of membership interest (the ‘Units’) of BioConvergence

      LLC, an Indiana limited liability company (the ‘Company’), at a price of

      $120.00 per Unit, for a total purchase price of $400,000.00 (the ‘Purchase

      Price’).” Id.


[6]   The Subscription Agreement states:


              2. Representation and Warranties of Undersigned. The
              undersigned hereby represents and warrants as follows:

              (a) All information provided to the Company by the undersigned
              is true and correct in all respects as of the date hereof.

              (b) The undersigned has sufficient knowledge and experience in
              business and financial matters to evaluate the merits and risks of
              an investment in the Company.

              (c) The undersigned has been afforded access to all material
              books, records and contracts of the Company, and the
              undersigned has had an opportunity to ask questions of and
              receive answers from the Company, or a person or persons acting
              on its behalf, concerning the terms and conditions of this

      Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018      Page 4 of 54
        investment; and all such questions have been answered to the full
        satisfaction of the undersigned.

                                               *****

        (e) The undersigned understands that the sale of the Units has
        not been registered under the Securities Act of 1933, as amended
        (the “Securities Act”), or any state securities law in reliance on
        an exemption therefrom for non-public offerings and further
        understands that the sale of the Units has not been approved or
        disapproved by the United States Securities and Exchange
        Commission, or any other federal or state agency.

        (f) The undersigned is acquiring the Units for the undersigned’s
        own account, for investment purposes only, and not with a view
        to the sale or other distribution thereof, in whole or in part, and is
        aware that there are substantial restrictions on the transferability
        of the Units. The undersigned must bear the economic risk of an
        investment in the Units for an indefinite period of time because
        the sale of the Units has not been registered under the Securities
        Act, and therefore, the Units cannot be sold unless such sale is
        subsequently registered under the Securities Act or an exemption
        from such registration is available. The undersigned has no right
        to require the Company to (i) register the Units under federal or
        state securities law at any time, or join in any future registration,
        or (ii) take the action required to make Rule 144 under the
        Securities Act available for resale of the Units.

        (g) The undersigned agrees that the Units purchased will not be
        sold, transferred, pledged or hypothecated without registration
        under the Securities Act and any applicable state securities laws,
        or until the undersigned has obtained an opinion of counsel
        satisfactory to the Company that such registration is not required
        in connection with such transaction.

        (h) The undersigned agrees that any certificate representing the
        Units may contain the following legend:



Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018      Page 5 of 54
                 “THE SECURITIES REPRESENTED HEREBY
                 WERE ACQUIRED FOR INVESTMENT ONLY
                 AND NOT FOR RESALE, SUCH SECURITIES
                 HAVE NOT BEEN REGISTERED UNDER THE
                 SECURITIES ACT OF 1933, AS AMENDED, OR
                 ANY STATE SECURITIES LAW
                 (COLLECTIVELY, THE “SECURITIES LAWS”).

                 SUCH SECURITIES MAY NOT BE SOLD,
                 ASSIGNED, TRANSFERRED, PLEDGED OR
                 HYPOTHECATED UNLESS (1) THE SALE OF
                 SECURITIES IS FIRST REGISTERED UNDER
                 THE SECURITIES LAWS, OR (2) THE
                 COMPANY SHALL HAVE RECEIVED AN
                 OPINION OF COUNSEL SATISFACTORY TO
                 THE COMPANY THAT REGISTRATION
                 UNDER THE SECURITIES LAWS IS NOT
                 REQUIRED.”

        The undersigned further agrees that the Company may issue stop
        transfer instructions to its transfer agent (if any) or make a
        notation to such effect on its appropriate records.

        (i) The undersigned agrees that no commission or other
        remuneration shall be paid to any person in connection with the
        offer or sale of the Units.

        (j) The undersigned falls within one or more of the categories
        indicated below by the Subscriber’s initials next to each
        applicable category (INITIAL ALL THAT ARE
        APPLICABLE):

        __√__             Individual $1,000,000 Net Worth Test. Any natural
                          person whose net worth, or joint net worth with that
                          person’s spouse, at the time of the Subscriber’s
                          purchase exceeds $1,000,000.

        __√__             Individual $200,000 Income Test. Any natural
                          person who had an individual income in excess of
Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018      Page 6 of 54
                          $200,000 in each of the two most recent years or a
                          joint income with that person’s spouse in excess of
                          $300,000 in each of those years and who has a
                          reasonable expectation of reaching the same income
                          level in the current year.

        _____             Other Persons. Persons not meeting any of the
                          above, but otherwise acceptable to the Company.
                          Not more than 35 such other persons may be
                          accepted.

        The foregoing representations and warranties shall be true and
        accurate as of the date hereof, and as of the date of delivery of the
        Purchase Price to the Company and shall survive such delivery.

        3. Representations and Warranties of the Company.

                                               *****

        5. Indemnification.

        (a) The undersigned acknowledges that the undersigned
        understands the meaning and legal consequences of the
        representations and warranties contained in paragraph 2 hereof,
        and he hereby agrees to indemnify and hold harmless the
        Company and each director, officer, employee and agent thereof
        from and against any and all loss, damage or liability due to or
        arising out of breach of any representation or warranty of the
        undersigned contained in this Subscription Agreement.

        (b) The Company acknowledges that the Company understands
        the meaning and legal consequences of the representations and
        warranties contained in paragraph 3 hereof, and hereby agrees to
        indemnify and hold harmless the undersigned and his heirs,
        personal representatives and assigns from and against any and all
        loss, damage or liability due to or arising out of breach of any
        representation or warranty of the Company contained in this
        Subscription Agreement.


Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018     Page 7 of 54
      Id.


[7]   In July 2012, Alisa called Greg and asked for Julie, but she was not there, and

      Alisa told Greg that the unit value for BioConvergence had dropped to $15.50.

      Greg received a power of attorney and requested documents from

      BioConvergence.


[8]   On August 12, 2013, Julie filed a complaint against BioConvergence and Alisa

      asserting: Count I, injunction to compel production of corporate books and

      records; Count II, securities fraud; Count III, fraud; and Count IV, breach of

      fiduciary duty. Julie’s complaint alleged that facts common to all counts

      included in part that Alisa, on behalf of BioConvergence, represented that the

      value of the class B units was $120 per unit pursuant to a valuation prepared by

      Blue & Company, LLC, but “[o]n information and belief, Blue & Company did

      not prepare a valuation of [Julie’s] Class B Units.” Appellants’ Appendix

      Volume 2 at 64.


[9]   On December 8, 2014, Julie filed an amended complaint alleging: Count I,

      securities fraud; Count II, fraud; and Count III, breach of fiduciary duty. With

      respect to Count I, securities fraud, Julie cited Ind. Code § 23-19-5-1 and

      alleged that BioConvergence and Alisa omitted to state a material fact

      necessary in order to make the statements not misleading, Alisa knew the

      valuation was not prepared by Blue & Company when she made the statement

      to her, Alisa knew that Julie’s units were not worth $120 a unit when she sold

      her 3,333.33 units for $400,000, and Julie relied on Alisa’s false statements


      Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 8 of 54
       when she purchased the class B units. With respect to Count III, breach of

       fiduciary duty, Julie alleged that Alisa, as an officer and majority member in

       BioConvergence, owed fiduciary duties to Julie, a minority member in

       BioConvergence, and that Alisa breached her fiduciary duties by intentionally

       misrepresenting the value of Julie’s units, intentionally misrepresenting that

       Julie’s units were valued at $120 a unit by Blue & Company, and “willfully

       mismanaging BioConvergence, among other breaches.” Id. at 73.


[10]   On January 30, 2015, BioConvergence and Alisa filed an answer to Julie’s

       amended complaint and a counterclaim which alleged that Julie breached the

       Subscription Agreement. BioConvergence and Alisa denied that Alisa told

       Julie that a valuation was prepared by Blue & Company. They asserted twenty-

       one affirmative defenses. They also asserted a counterclaim alleging that the

       Subscription Agreement included representations by Julie that she had access to

       all BioConvergence records and the opportunity to ask questions concerning the

       investment which were answered to her satisfaction and that she agreed to

       indemnify BioConvergence and its officers, directors, agents, and employees

       due to any breach of representation in the Subscription Agreement. They

       asserted that on November 4, 2014, Julie testified in a deposition that her

       “claims relating to her purchase of the [BioConvergence] B-1 Units in

       November 2008 and her ownership thereof are based on information lacking

       from [BioConvergence] in November 2008, that [BioConvergence] documents

       available to her in November 2008 which she chose not to review were not

       accurate and an alleged diminution of value of her [BioConvergence] B-1


       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 9 of 54
       units.” Id. at 83. They asserted that, “[a]s a result of her actions and omissions,

       Julie [] has breached the Subscription Agreement” and that they were “entitled

       to relief under the Subscription Agreement including indemnity by Julie [] and

       to recover their damages, including attorneys’ fees and expenses, incurred in

       defending Julie[’s] Complaint as a result of Julie[’s] breach of the Subscription

       Agreement.” Id.


[11]   In her Supplemental Answers to Defendants’ Third Set of Interrogatories dated

       June 1, 2015, Julie was asked to “[s]pecify in detail each fact upon which [she]

       base[d] the allegation in Count III of [her] Amended Complaint that Alisa []

       willfully mismanaged [BioConvergence], the person from whom [she] obtained

       information concerning the same, and the date of each act or omission [she]

       claimed constitutes willful mismanagement.” Id. at 189. Julie answered:


               Answer:

               [Julie] objects to this interrogatory as duplicative of questions
               that were asked and answered by Julie Menefee and Greg
               Menefee (in his capacity as Power of Attorney for Julie Menefee)
               at their depositions in this matter. [Julie] further objects to this
               interrogatory as seeking premature disclosure of expert opinions
               from [Julie].

               Supplemental Answer:

               Subject to, and without waiving her objections, [Julie] states that
               Alisa [] willfully mismanaged [BioConvergence] by
               misrepresenting that [BioConvergence’s] accounting firm, Blue &
               Co., performed valuations of [BioConvergence] that Blue & Co.
               did not perform; setting the price of [BioConvergence] units
               without a rational basis (For example, Alisa [] approved

       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 10 of 54
               [BioConvergence’s] purchase of units from her husband, Lance
               Wright in 2010 and 2011 for $140 per unit and sold the same
               units to Kathy Eddy in 2010 and 2011 for $140 per unit, but only
               paid Kathy Eddy $15.50 per unit when [BioConvergence] bought
               back those same units from Kathy Eddy in 2012.); manipulating
               [BioConvergence’s] financials to make it appear that
               [BioConvergence] was profitable when it was not; failing to be
               present at [BioConvergence’s] offices; failing to stay informed
               about [BioConvergence’s] operations; failure to make decisions
               regarding the direction of [BioConvergence]; paying above-
               market rent to Great Oak Tree (a company that is partially
               owned by Alisa []); withholding information from members of
               [BioConvergence] about [BioConvergence’s] financial condition;
               not holding annual member meetings; misrepresenting the
               valuation of [BioConvergence] during member meetings; firing
               key [BioConvergence] staff members without cause; filling all of
               the positions on [BioConvergence’s] board of directors beyond
               her own position with paid consultants; taking actions to alienate
               [BioConvergence’s] major client Eli Lilly; and spending excessive
               [BioConvergence] funds on attorneys’ fees.

       Id. at 189-190.


[12]   On July 17, 2015, BioConvergence and Alisa filed a motion for summary

       judgment. On September 18, 2015, Julie filed a response in opposition to the

       motion.


[13]   On April 6, 2016, the trial court entered an order which states:


               Plaintiff’s Motion for Summary Judgment on the Amended
               Counterclaim for Breach of Contract and Defendants’ Cross
               Motion for Summary Judgment on the Amended Counterclaim
               as to Liability




       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 11 of 54
        [I]n her complaint, Julie Menefee does not claim that prior to her
        purchase of the units the Defendant failed to provide her with the
        valuation or that Julie Menefee otherwise did not have access to
        the records. In the Subscription Agreement, she does not
        represent that she reviewed all of the available records. Her
        claim that the valuation was fraudulent is not a breach of the
        representations she made in Section 2(c) of the Subscription
        Agreement.

        Defendants also assert Julie Menefee breached her
        representations in Section 2(c) of the Subscription Agreement by
        claiming in her Amended Complaint that she relied on an alleged
        representation that BioConvergence, LLC’s accounting firm
        “prepared” the $120 valuation. Defendants argue Julie Menefee
        had access to all BioConvergence, LLC records; through her
        power of attorney she had received the $120 valuation; and she
        was advised BioConvergence, LLC prepared the valuation and
        the accountant only reviewed it. Consequently, Defendants
        argue her claim that she relied on who prepared the valuation
        rather than the valuation itself breaches Section 2(c) where she
        represented she had access to the valuation and the opportunity
        to review it and ask questions of BioConvergence, LLC or the
        accountant.

        Again, the court finds no genuine issue of material fact with
        respect to this claim. In her complaint, Julie Menefee does not
        claim that prior to her purchase of the units she did not have
        access to the valuation nor that she did not have the opportunity
        to review it or ask questions regarding the valuation. In the
        Subscription Agreement she does not represent that she relied
        only on the records she reviewed and/or were available to her.
        Her claim that Alisa Wright represented to her that the
        accountant prepared the valuation and that she relied on this
        verbal representation does not constitute a breach of Section 2(c)
        of the Subscription Agreement.

        Defendants’ Motion for Summary Judgment on the Amended
        Complaint
Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 12 of 54
        Defendants assert Plaintiff’s fraud claims and breach of fiduciary
        duty claim are not actionable as Plaintiff cannot rely on
        expressions of opinion and because Plaintiff had access to all
        information necessary to review the valuation methodology.
        Defendants claim Plaintiff’s willful mismanagement claim fails
        because Plaintiff is attempting to assert a derivative claim
        without requisite authority and because she lacks evidence to
        support the claim.

        1. Count I Securities Fraud

        In Count I of her complaint, Plaintiff alleges the Defendants
        violated the Indiana Securities Act, I.C. 23-19-5-1 by informing
        Plaintiff before her purchase of the units of BioConvergence,
        LLC that the units were valued at $120 per unit by Blue & Co.,
        LLC. Defendants first assert that because valuations and
        opinions of value are not actionable, a representation as to who
        prepared the valuation is not material and cannot form the basis
        for a securities fraud claim. “Expressions of opinion cannot be
        the basis for an action in fraud.” Wheatcraft v. Wheatcraft, 825
        N.E.2d 23, 30-31 (Ind. Ct. App. 2005) (internal citation omitted).
        Because statements of value are regarded as mere expressions of
        opinion, Plaintiff cannot state a claim for actionable fraud based
        upon Defendants’ representation regarding the units’ valuation.
        Id. The court does not read Count I of the Amended Complaint
        to assert a claim for securities fraud based on the Defendants’
        alleged misrepresentation of the value of the BioConvergence,
        LLC units, rather on the alleged misrepresentation that the
        valuation was prepared by Blue & Co., LLC. However, to the
        extent Count I may be read to assert a claim for securities fraud
        based on the Defendants’ alleged misrepresentation of the value
        of the BioConvergence, LLC units, Defendants are entitled to
        summary judgment.

        The court further finds, however, that Defendants are not entitled
        to summary judgment on Count I to the extent it asserts a claim
        for securities fraud based on the alleged misrepresentation that
        the $120 valuation was prepared by Blue & Co., LLC. The court
Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 13 of 54
        finds the Defendants have not met their burden on summary
        judgment of establishing that this factual issue is not material
        under the summary judgment standard or under the standard
        applied to securities fraud claims.

        Defendants also assert Plaintiff could not reasonably rely on any
        representations because she had access to all BioConvergence,
        LLC information and failed to conduct any due diligence in
        assessing her investment in BioConvergence, LLC. Defendants
        assert that liability under the securities laws exists only when
        there is a substantial likelihood that the misrepresentation
        significantly altered the total mix of information that the investor
        possessed.

        In general, a person relying on a representation, “is bound to use
        ordinary care and diligence to guard against fraud; however, the
        requirement of reasonable prudence in business transactions is
        not carried to the extent that the law will ignore an intentional
        fraud practice(sic) on the unwary.” Soft Water Utilities, Inc. v.
        LeFevre, 308 N.E.2d 395, 398 (Ind. App. 1974). See also,
        Teamsters Local 282 Pension Trust Fund v. Angelos, 762 F.2d 522 (7th
        Cir. 1985). The Plaintiff claims such an intentional fraud,
        claiming that Defendant Wright represented Blue & Co, LLC
        had prepared the valuation when Ms. Wright knew the
        representation to be false.

        However, the courts in both LeFevre and Angelos recognized that
        liability is not absolute even with an intentional
        misrepresentation. The Seventh Circuit in Angelos recognized
        three circumstances under which even lies are not actionable.
        However, none of those circumstances have been shown to exist
        in this case so as to warrant summary judgment. Defendants’
        designated materials do not establish that any lie was
        contradicted by written truthful information; that the alleged lie
        or omission did not significantly affect the total mix of Plaintiff’s
        information; or that the missing information was more readily
        accessible to Plaintiff than to Defendant. See, Angelos, 762 F.2d
        at 530. In LeFevre, the court noted that “[a] person has a right to
Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018     Page 14 of 54
        rely upon representations where the exercise of reasonable prudence
        does not dictate otherwise.” Soft Water Utilities, Inc. v. LeFevre, supra,
        at 398, citing, Voorhees v. Cragun, 112 N.E. 826 (Ind. App. 1916)
        (emphasis added.) The court finds that a genuine issue of
        material fact exists as to whether Plaintiff’s asserted reliance on
        Defendant Wright’s alleged intentional misrepresentation
        occurred “where the exercise of reasonable prudence does not
        dictate otherwise.” Id. Consequently, Defendants have not met
        their burden on summary judgment.

        Defendants also assert that Plaintiff’s securities fraud claim is
        time barred. Pursuant to I.C. 23-19-5-9(g), Plaintiff was required
        to bring her action for securities fraud within three years of
        Plaintiff’s discovery of the violation. Defendants’ designated
        materials do not establish that Plaintiff should have known of the
        injury prior to July 2012 when Plaintiff was informed the value of
        her units had dropped from $140 to $15.50. The action was
        commenced within three years of July 2012. Defendants’ motion
        for summary judgment on this issue is denied.

        2. Count II Common Law Fraud

        Count II of Plaintiffs’ [sic] Amended Complaint asserts common
        law fraud based on the alleged intentional misrepresentation by
        Defendant Wright that Blue & Co., LLC had prepared the $120
        valuation. Count II also asserts that Defendant Wright knew the
        units were not worth $120 when she sold them to Julie Menefee.
        Similar to the securities fraud claim, the court finds that to the
        extent Count II may be read to assert a claim for fraud based on
        the alleged misrepresentation of the value of the
        BioConvergence, LLC units, Defendants are entitled to summary
        judgment, but that Defendants are not entitled to summary
        judgment to the extent Count II asserts a claim for fraud based
        on the alleged misrepresentation that the $120 valuation was
        prepared by Blue & Co., LLC. Defendants have failed to
        establish as a matter of law that the alleged misrepresentation by
        Alisa Wright is not actionable nor that as a matter of law Plaintiff
        was not entitled to rely on that representation.
Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018         Page 15 of 54
        3. Breach of Fiduciary Duty

        Count III of Plaintiffs’ Amended Complaint claims that Alisa
        Wright, as an officer and majority member of BioConvergence,
        LLC, owed fiduciary duties to Plaintiff as a minority member,
        and that Defendant Wright breached this duty by intentionally
        misrepresenting the value of the units, intentionally
        misrepresenting that the units were valued at $120 by Blue &
        Co., LLC, and willfully mismanaging BioConvergence, LLC. In
        seeking summary judgment, Defendants assert that Defendant
        Wright owed no fiduciary duty to Plaintiff prior to Plaintiff
        becoming a minority member of BioConvergence, LLC.
        Defendants also assert that as a matter of law, Alisa Wright did
        not have the authority to act on behalf of BioConvergence, LLC
        in her capacity as a member.

        Plaintiff relies on the case of Fiederlein v. Boutselis, 952 N.E.2d 847
        (Ind. Ct. App. 2011) to assert that Defendant Wright owed Julie
        Menefee fiduciary duties as a potential member of a closely-held
        limited liability company during negotiation of their
        membership. However, in Fiederlein, the aggrieved party already
        was a member of the LLC when negotiations in question were
        conducted. Nothing in Fiederlein establishes a fiduciary duty to
        potential members of a limited liability company. The court
        finds as a matter of law that Defendant Wright owed no fiduciary
        duty to Julie Menefee prior to Julie Menefee’s membership in
        BioConvergence, LLC. Consequently, Defendant is entitled to
        summary judgment on the breach of fiduciary duty claim to the
        extent it is based on an alleged misrepresentation of the value of
        units or who prepared the valuation prior to Julie Menefee
        purchasing her Class B units on November 17, 2008.

        Once Plaintiff became a member of BioConvergence, LLC, the
        members were in a fiduciary relationship to each other and were
        required to deal fairly, honestly, and openly with the company
        and the other members. See, Riggin v. Rea Riggin & Sons, Inc., 738
        N.E.2d 292, 307 (Ind. Ct. App. 2000); Barth v. Barth, 659 N.E.2d
        559, 561 (Ind. 1995); Purcell v. Southern Hills Investment, LLC, 847
Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018     Page 16 of 54
        N.E.2d 991, 997 (Ind. Ct. App. 2006) (holding “common law
        fiduciary duties, similar to the ones imposed on partnerships and
        closely-held corporations, are applicable to Indiana LLCs.”)
        “This duty attaches to acts done in the capacity of a director,
        officer, or shareholder.” Riggin, 738 N.E.2d at 307.
        Consequently, Defendant Wright owed a fiduciary duty to
        Plaintiff regardless of whether Defendant Wright was acting as
        CEO or a member of BioConvergence, LLC.

        Defendant Wright asserts Julie’s claim for breach of fiduciary
        duty by willful mismanaging BioConvergence, LLC constitutes,
        or can only be brought as, a derivative action, not a direct action.
        However, the court finds Plaintiff’s claim states a direct action
        and may be permissible. Our Indiana Supreme Court has
        adopted the American Law Institute rule as follows:

                 In the case of a closely held corporation, the court in
                 its discretion may treat an action raising derivative
                 claims as a direct action, exempt it from those
                 restrictions and defenses applicable only to derivative
                 actions, and order an individual recovery, if it finds
                 that to do so will not (i) unfairly expose the
                 corporation or the defendants to a multiplicity of
                 actions, (ii) materially prejudice the interests of
                 creditors of the corporation, or (iii) interfere with a
                 fair distribution of the recovery among all interested
                 persons. A.L.I., Principles of Corporate Governance §
                 7.01(d).

        Barth, supra, 659 N.E.2d at 562. Defendants have failed to show
        as a matter of law that Plaintiff’s direct action is not permissible
        in this case.

        The court finds the Defendant has failed to establish an absence
        of genuine issues of material fact regarding whether Defendant
        Wright willfully mismanaged BioConvergence, LLC and that
        summary judgment is not appropriate on the breach of fiduciary
        duty claim regarding alleged willful mismanagement.

Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018    Page 17 of 54
        IT IS THEREFORE ORDERED that Plaintiff’s Motion for
        Summary Judgment on the Amended Counterclaim for Breach
        of Contract is granted, and Defendants’ Cross Motion for
        Summary Judgment on the Amended Counterclaim as to
        Liability is denied.

        IT IS FURTHER ORDERED that Defendants’ Motion for
        Summary Judgment on Plaintiff’s Amended Complaint is
        granted in part and denied in part. Defendants’ motion is
        granted to the extent that Count I and Count II assert claims for
        securities and common law fraud based on the Defendants’
        alleged misrepresentation of the value of the BioConvergence,
        LLC units. Defendants’ motion for summary judgment on
        Counts I and II is denied in all other regards, including with
        respect to claims for securities and common law fraud based on
        Defendant Wright’s alleged misrepresentation that the $120
        valuation was prepared by Blue & Co., LLC. Defendants’
        motion for summary judgment on Count III is granted as to the
        claim that Defendant Wright owed and breached any duty to
        Plaintiff prior to Plaintiff’s membership in BioConvergence,
        LLC, including any representation prior to such membership that
        the units were valued at $120 per unit and that the valuation was
        prepared by Blue & Co., LLC. Defendants’ motion for summary
        judgment as to Count III is otherwise denied.

        IT IS FURTHER ORDERED the court finds there is no just
        reason for delay and hereby directs entry of judgment in favor of
        the Plaintiff, Julie Menefee, and against the Defendants, Alisa
        Wright and BioConvergence, LLC on Defendants’ Alisa Wright
        and BioConvergence, LLC Counterclaim. Judgment is entered
        in favor of Defendants, BioConvergence, LLC and Alisa Wright
        on Plaintiff’s claims in Count I and Count II for fraud based on
        the Defendants’ alleged misrepresentation of the value of the
        BioConvergence, LLC units. Judgment is entered in favor of the
        Defendant, Alisa Wright, and against the Plaintiff, Julie
        Menefee, on the claim included in Count III that Defendant
        Wright owed and breached any duty to Plaintiff prior to

Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 18 of 54
               Plaintiff’s membership that the Class B units were valued at $120
               per unit and that the valuation was prepared by Blue & Co.,
               LLC.

       Appellants’ Appendix Volume 2 at 93-99.


[14]   On October 12, 2016, Alisa filed a motion for summary judgment on Count III

       of Julie’s amended complaint. Alisa pointed to a transcript of a July 8, 2016

       hearing, a deposition of Julie dated August 25, 2016, and other evidence. On

       December 21, 2016, Julie filed a response in opposition to Alisa’s motion. On

       January 3, 2017, Alisa filed a brief in reply to Julie’s response.


[15]   On January 12, 2017, the court entered an order which states:


               The court, having conducted a hearing on January 10, 2017 on
               Defendant Alisa Wright’s Motion for Summary Judgment on
               Count III of Plaintiff’s Amended Complaint, and having taken
               the motion under advisement, now finds the motion should be
               granted in part and denied in part.

               Count III of Plaintiff’s Amended Complaint states a claim for
               breach of fiduciary duty including willful mismanagement of
               BioConvergence, LLC. The claim is asserted against Defendant
               Wright as a member, director, and officer of the limited liability
               company. The court now finds that Article 4, section 4.1 of the
               applicable Operating Agreement of BioConvergence LLC, places
               responsibility for the management of BioConvergence LLC
               business with its Board of Directors. Section 4.5 grants specific
               powers to the Chief Executive Officer, including executing leases
               on behalf of the limited liability company. Consequently, while
               Defendant Wright owed a fiduciary duty to other members
               whether she was acting in her capacity as a member, officer, or
               director, Defendant Wright’s liability for alleged mismanagement
               of BioConvergence lies only in her capacity as director or officer.

       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 19 of 54
        Consequently, the court now grants summary judgment in favor
        of the Defendant, Alisa Wright on the portion of the breach of
        fiduciary duty claim that asserts willful mismanagement against
        her as a member and will proceed to address the claim as asserted
        against Mr. [sic] Wright as a director and officer.

        Plaintiff has identified fifteen bases for her claim of willful
        mismanagement. At the hearing, it was discussed that it would
        be beneficial to the efficient preparation for, and trial of, this case
        if the court addressed each basis for the claim.

        The court now grants summary judgment in favor of Defendant
        Alisa Wright and against the Plaintiff, Julie Menefee, on Count
        III of the Amended Complaint on each of the following bases for
        breach of fiduciary claim:

             • Manipulating BioConvergence LLC’s financials to make it
               appear that the company was profitable when it was not;
             • Failing to be present a [sic] BioConvergence LLC’s office’
               [sic][;]
             • Failing to make decisions regarding the direction of
               BioConvergence LLC[;]
             • Withholding information from members of
               BioConvergence LLC about BioConvergence LLC’s
               financial condition;
             • Not holding annual member meetings;
             • Firing key BioConvergence LLC staff members without
               cause;
             • Filling all of the positions on BioConvergence LLC’s
               Board of Directors with paid consultants;
             • Taking actions to alienate BioConvergence LLC’s major
               client;
             • Spending excessive BioConvergence LLC funds on
               attorney fees; and
             • Having Alisa Wright as the only Board member from
               2008-2013.


Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018      Page 20 of 54
        For each of these bases, even if the breaches were proven,
        Plaintiff has failed to come forward with any designated
        materials raising a genuine issue of material fact as to whether
        she suffered damages as a result of these alleged breaches. There
        has been no evidence indicating these actions caused Ms. Wright
        [sic] damages.

        The court also grants summary judgment in favor of Defendant
        Alisa Wright and against the Plaintiff, Julie Menefee, on
        Plaintiff’s claim for breach of fiduciary duty and willful
        mismanagement for allegedly spending excessive
        BioConvergence LLC funds on attorney fees. The claim for
        excessive attorney fees relates to attorney fees spent by Defendant
        Wright in defense of the very claim filed by Plaintiff and in
        defense of a related action filed by the former CFO of
        BioConvergence LLC. Plaintiff asserts Defendant Wright should
        have settled these cases. Both cases remain pending, and any
        claim for excessive attorney fees is premature as it is unknown at
        this time who will prevail in the actions. On the claim for breach
        of fiduciary duty for expending excessive attorney fees, proof of
        damages and excessive attorney fees is an element of a claim that
        must be proven before Plaintiff can prevail. Plaintiff has failed to
        designate any materials showing potential entitlement to attorney
        fees based on any conduct other than failing to settle the cases.
        Such damages cannot be proved while the cases remain pending,
        and summary judgment in favor of Defendant Wright is
        appropriate. The court has bifurcated the remaining claims for
        attorney fees on the Plaintiff’s fraud claims and Defendants’
        breach of contract claim, and those will be heard if appropriate
        following the jury trial.

        Summary judgment also is granted in favor of Defendant Alisa
        Wright and against Plaintiff Julie Menefee on Count III of the
        Amended Complaint on the basis that Defendant Wright
        misrepresented that BioConvergence LLC’s accounting firm,
        Blue & Co., performed the $120 valuation prior to Plaintiff’s
        purchase of BioConvergence LLC units in November 2008. As

Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 21 of 54
        previously found by the court, Defendant Wright did not owe a
        fiduciary duty to Plaintiff Menefee until Ms. Menefee became a
        member of BioConvergence LLC. Consequently, any alleged
        misrepresentation prior to Ms. Menefee’s purchase of the units is
        not actionable as a breach of fiduciary duty. As to any such
        alleged misrepresentation made or continuing after Plaintiff
        became a member, the Plaintiff has failed to come forward with
        any indication of damages she may have incurred by such
        misrepresentation.

        Summary judgment also is granted in favor of Defendant Alisa
        Wright and against Plaintiff Julie Menefee on Count III of the
        Amended Complaint on the basis that Defendant Wright set the
        price of BioConvergence LLC units without a rational basis. In
        many ways, this is the heart of the matter between these parties.
        For a director or officer knowingly to set values on a company’s
        units without any rational basis could well form the basis for a
        claim of willful mismanagement and breach of fiduciary duty.
        However, in this case, as the court understand [sic] the Plaintiff’s
        claim, summary judgment is appropriate. There are three
        primary valuations at issue: the $120 valuation set when Ms.
        Menefee purchases her units; a subsequent $140 valuation; and
        the later valuation of Plaintiff’s units at $15.50. It is the court’s
        understanding that Plaintiff is not asserting the $15.50 price was
        set without a rational basis as that price was based on the
        analysis of Blue & Co. Rather, the court understands Plaintiff to
        challenge the values of $120 and $140 as being without rational
        basis. Again, because the $120 value was set prior to Defendant
        Wright owing Plaintiff a fiduciary duty, any lack of rational basis
        for that price cannot form the basis for a breach of fiduciary duty
        claim. With respect to the $140 price, Plaintiff has failed to come
        forward with any indication of how she may have been damaged
        by this valuation. If the court has misunderstood the Plaintiff’s
        claim, and her claim does include an assertion that the price of
        $15.50 was set without a rational basis, counsel are respectfully
        requested to notify the court and this portion of the summary
        judgment order may be reconsidered.

Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018    Page 22 of 54
        The court denies summary judgment on Count III of the
        Amended Complaint on the basis that Defendant Wright
        allegedly paid excessive rent to Great Oak Tree. First, the court
        finds summary judgment is not appropriate based on the claim
        being a derivative rather than direct action. The court agrees any
        harm from this action generally would constitute injury to
        BioConvergence LLC, not Plaintiff Menefee individually.
        However, at this summary judgment stage, Defendant Wright
        has failed to establish the inapplicability of the exception created
        in Barth v. Barth, 659 N.E.2d 559 (Ind. 1995) allowing a member
        of a limited liability company to pursue a direct action for harm
        to the company under certain circumstances.

        The closer question for the court is whether summary judgment
        is appropriate on the excessive rent claim because Plaintiff
        cannot prove damages or breach. Plaintiff has designated
        materials that reflect varying amounts of rent were paid by
        BioConvergence LLC to Great Oak Tree while [Alisa] was the
        CEO, and at times only director, of BioConvergence LLC and
        while Great Oak Tree was owned by Defendant Wright, her
        parents, her sister and a trust. Between 2008 and 2014, annual
        rent paid to Great Oak Tree varied from a low of $425,000 to a
        high of $650,000. As noted by Plaintiff, when an owner, director
        or officer of a company places her own interests in company
        leases above the interests of the company, such action may
        constitute a breach of fiduciary duty. However, Defendant
        Wright came forward with deposition testimony from Plaintiff’s
        husband taken in July 17, 2015, that he had not done an
        assessment of BioConvergence LLC rent and the claim was
        speculative. Plaintiff, however, has designated materials showing
        what was paid in rent to Great Oak Tree. Neither Plaintiff nor
        Defendant Wright have designated evidence establishing what
        reasonable rent may have been. The court finds a genuine issue
        of material fact exists as to whether the rent was reasonable.

        As summary judgment was denied in part as to Count III,
        Defendant Wright’s request for attorney fees is denied.

Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 23 of 54
       Id. at 50-53.


[16]   On January 23rd through the 26th of 2017, the court held a jury trial. The jury

       found that BioConvergence and Alisa did not commit securities fraud, did not

       commit fraud, and did not commit fraud that constituted criminal deception,

       that Alisa did not breach the fiduciary duties she owed to Julie, and that Julie

       breached the representation in section 2(b) of the Subscription Agreement that

       she had sufficient knowledge and experience in business and financial matters

       to evaluate the merits and risks of an investment in the company.


[17]   On January 29, 2017, the court entered an order stating that the jury returned a

       verdict in favor of the Defendants on all remaining claims in Julie’s amended

       complaint and returned a verdict in favor of the Defendants and against Julie

       on the Defendants’ counterclaim. The court accepted the jury’s verdict and

       entered judgment in favor of the Defendants and against Julie on Julie’s

       amended complaint. Appellants’ Appendix Volume 3 at 34. The court entered

       judgment on the issue of liability in favor of the Defendants and against Julie on

       the Defendants’ counterclaim for breach of contract, specifically, breach of

       Section 2(b) of the Subscription Agreement. The order states: “The issues of

       damages, indemnity and attorney fees relative to the Counterclaim are

       bifurcated to be heard by the court, and a separate hearing date will be set.” Id.


[18]   On February 28, 2017, Julie filed a motion to correct error. On March 27,

       2017, BioConvergence and Alisa filed a brief in opposition to Julie’s motion.

       That same day, the Defendants filed a Motion for Assessment of Damages on


       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 24 of 54
       Counterclaim and for Entry of Judgment and a brief in support of the motion.

       BioConvergence and Alisa also filed a Consolidated Motion for Attorneys’ Fees

       Under Ind. Code § 34-52-1-1 and for Revision of Summary Judgment Order

       under Trial Rule 54 as to Attorneys’ Fees. They requested that the court enter

       an order awarding attorney fees and expenses in their favor in the amount of

       $732,018.39.


[19]   On May 19, 2017, Julie filed a Consolidated Reply in Support of Motion to

       Correct Errors and for Judgment on the Evidence and Response to Motion for

       Assessment of Damages. On May 31, 2017, Defendants filed a Reply Brief to

       Plaintiff’s Consolidated Reply in Support of Motion to Correct Errors and for

       Judgment on the Evidence and Response to Motion for Assessment of

       Damages. That same day, Defendants also filed a Brief in Reply to Plaintiff’s

       Opposition to Defendants’ Consolidated Motion for Attorneys’ Fees under Ind.

       Code § 34-52-1-1 and for Revision of Summary Judgment under Trial Rule 54

       as to Attorneys’ Fees.


[20]   On June 16, 2017, the court held a hearing on the motions. On July 14, 2017,

       the court entered an order which states:


               The court conducted a hearing on June 16, 2017 on
               Counterclaim Defendant Julie Menefee’s Motion to Correct
               Errors and for Judgment on the Evidence; on Defendants’
               Consolidated Motion for Attorneys’ Fees under I.C. 34-52-1-1
               and for Revision of Summary Judgment Order Under Trial Rule
               54 as to Attorneys’ Fees; and on Defendants/Counterclaimants’
               Motion for Assessment of Damages on Counterclaim and for


       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 25 of 54
        Entry of Judgment. Having taken the motions under
        advisement, the court now finds as follows:

        Counterclaim Defendant Julie Menefee’s Motion to Correct
        Errors and for Judgment on the Evidence is denied.

        With respect to Defendants/Counterclaimants’ Motion for
        Assessment of Damages on Counterclaim and for Entry of
        Judgment, the court finds the Defendants are not entitled to an
        award of damages on the jury’s verdict in favor of defendants and
        against the plaintiff on defendants’ counterclaim. The only
        damages sought by defendants for breach of the subscription
        agreement are attorney fees and costs incurred in defending
        plaintiff’s complaint and in pursuing the counterclaim. Although
        the elements of damage are limited, the amount of damages
        sought is substantial, totaling $732,018.39. Of this figure, over
        $686,000 is sought for attorney fees, and the balance for other
        litigation expenses[.]

        Under the “American Rule” each party generally is responsible
        for her own attorney fees, and attorney fees are not recoverable
        as damages in a breach of contract action absent a statute, rule or
        agreement to the contrary. Flaherty & Collins v. BBR-Vision I, L.P.,
        990 N.E.2d 958, 966 (Ind. Ct. App. 2013), citing, L.H. Controls,
        Inc. v. Custom Conveyor, Inc. 974 N.E.2d 1031, 1046 (Ind. Ct. App.
        2012[])[, trans. denied.] Under the American Rule, attorney fees
        cannot be characterized as consequential damages in a breach of
        contract action. [Dale] Bland Trucking, Inc. v. Kiger, 598 N.E.2d
        1103, 1105 (Ind. Ct. App. Sept. 15, 1992), citing, Indiana Insurance
        Co. v. Plummer Power Mower & Tool Rental, Inc., 590 N.E.2d 1085,
        1093 (Ind. Ct. App. 1992). Indiana courts have recognized that
        when a breach of contract causes the other party to “engage in
        litigation with a third party and such action would not have been
        necessary but for the breach, attorney fees and litigation expenses
        may be awarded as breach of contract damages.” Flaherty, supra,
        at 966. However, this exception is not available in a first party
        action. Id.


Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 26 of 54
        Counterclaimants rely on the indemnity provision in the
        subscription agreement to provide the basis for recovery of fees.
        That provision provides for the recovery of costs, but does not
        specify attorney fees. Indemnity provisions are strictly construed.
        Fresh Cut, Inc. v. Fazli, 650 N.E.2d 1126, 1132 (Ind. 1995).
        Although the counterclaimants cite cases in which attorney fees
        were recoverable without a specific provision for recovery of
        attorney fees, those cases initially involved third party claims for
        which the indemnitor failed to indemnify the indemnitee. See,
        Fort Wayne Lodge, L.L.C. v. EBH Corp., 805 N.E.2d 876 (Ind. Ct.
        App. Apr. 6, 2004); Bethlehem Steel Corp. v. Sercon Corp., 654
        N.E.2d 1163 (Ind. Ct. App. 1995)[, reh’g denied, trans. denied].
        These cases are consistent with the rule in Flaherty, supra. The
        action here, however, was a first party claim.

        The indemnity provision in the subscription agreement does not
        include language clearly stating the provision applies to first party
        claims. “The general legal understanding of indemnity clauses is
        that they cover ‘“the risk of harm sustained by third persons that
        might be caused by either the indemnitor or the indemnitee. It
        shifts the financial burden for the ultimate payment of damages
        from the indemnitee to the indemnitor.’” L.H. at 1047 (quoting
        Indianapolis City Market Corp. v. MAV, Inc., 915 N.E.2d 1013, 1023
        (Ind. Ct. App. 2009)).” Flaherty, supra, at 967. “There is no
        absolute prohibition against one party agreeing to indemnify the
        other party for first-party claims arising between those parties. . .
        . Where the plain language of the provision requires first-party
        indemnification, then such indemnification is permitted. Sequa
        Coatings Corp. v. N. Ind. Commuter Transp. Dist., 796 N.E.2d 1216,
        1229 (Ind. Ct. App. 2003) (noting that [‘]the plain language[’]
        expressly stated, among other things, [‘“]any and all Causes of
        Action, as defined above, asserted by any parties and non-parties
        to this Agreement[”’]), trans. denied.” Id. (other internal citations
        omitted.)

        The court recognizes that the applicability of an indemnity clause
        to first party claims can be found, even without specific language

Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 27 of 54
        encompassing first party claims, when the context of the
        agreement makes it apparent such was the parties’ intent. See,
        Fackler v. Powell, 891 N.E.2d 1091 (Ind. Ct. App. 2008)
        (indemnity and hold harmless provision specifically providing for
        recovery of attorney fees for breach of terms of dissolution
        decree). However, the court does not find the language of the
        subscription agreement to be such a clear case of the parties’
        intent to cover first party claims. Although counterclaimants
        may not have drafted the subscription agreement, they presented
        it to the plaintiff and counterclaimants clearly were the parties
        requiring execution of the agreement. As such, and construing
        the agreement strictly, the court finds any ambiguity in the
        agreement regarding whether it would apply to first party claims
        must be construed against the counterclaimants. See, L.H., supra.

        The court finds the subscription agreement, which document
        contained neither a specific provision for recovery of attorney
        fees nor clear language that it applied to first party claims, does
        not permit counterclaimants to recover their attorney fees and
        expenses incurred in defending the plaintiff’s action or incurred
        in pursuing their counterclaim. Moreover, the court finds that
        defendants/counterclaimants have failed to prove that the
        attorney fees they incurred in defending the action and pursuing
        their counterclaim were caused by plaintiff’s breach of section
        2(b) of the subscription agreement.

        The court denies the defendants’ Motion for Revision of
        Summary Judgment Order Under Trial Rule 54 as to Attorney
        Fees, which motion was consolidated with defendants’ Motion
        for Attorneys’ Fees Under I.C. 34-52-1-1. The court further
        denies defendants’ motion for Attorneys’ Fees Under I.C. 34-52-
        1-1 with respect to all claims except plaintiff’s claim for treble
        damages and attorney fees under I.C. 34-24-3-1.

        Plaintiff argues the court’s denial of defendants’ motion for
        summary judgment on Count II precludes a finding that pursuit
        of the claim under the Crime Victims’ Act was frivolous or
        groundless. However, neither the motion for summary judgment
Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 28 of 54
        on Count II nor the court’s ruling on the motion addressed the
        specific claim for damages under I.C. 34-24-3 nor any defense
        that the misrepresentation had to be in writing. The court finds
        its order denying defendants’ request for summary judgment on
        Count II does not preclude a finding that pursuit of the claim for
        damages under the Crime Victims’ Act was groundless.

        In her amended complaint, plaintiff asserted a claim for securities
        fraud, a claim for common law fraud, and a claim for breach of
        fiduciary duty. In Count II, her claim for common law fraud,
        plaintiff claimed she purchased her units in BioConvergence
        based on defendant Wright’s intentional, false statement that the
        units were valued at $120 a unit by Blue and Company; that
        when defendant Wright made the representation, she knew the
        valuation was not prepared by Blue and Company and knew the
        units were not worth $120 a unit; and that plaintiff relied on the
        false statements when she purchased her units. In her prayer for
        damages for fraud, plaintiff sought compensatory damages,
        attorney fees, punitive damages “along with treble damages and
        attorneys’ fees pursuant [to] Indiana Code Sec. 34-24-3 et seq.”
        Indiana Code Sec. 34-24-3-1 et seq., commonly referred to as the
        Crime Victims’ Relief Act, permits recovery of treble damages,
        costs and attorney fees when liability is established as a result of a
        violation of I.C. 35-43; I.C. 35-42-3-3; I.C. 35-42-3-4; or I.C. 35-
        45-9.4 [sic]. The only provision argued to be applicable in this
        case was criminal deception a violation of I.C. 35-43-5-3(a)(2).

        Criminal deception under I.C. 35-43-5-3(a)(2) requires proof that
        a person knowingly or intentionally made a false or misleading
        written statement with intent to obtain property, employment, or
        an educational opportunity. Plaintiff consistently asserted that
        the alleged misrepresentation she relied on prior to purchasing
        her units was defendant Wright’s oral representation that Blue &
        Co. prepared the $120 per unit valuation. Plaintiff never asserted
        she relied on a written statement of any kind. At trial, plaintiff
        did present evidence of written e-mails sent by [Alisa] to Greg
        Menefee. Plaintiff’s Exhibit 60 was an e-mail sent by [Alisa] to

Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018     Page 29 of 54
           Greg Menefee on November 21, 2007 attaching a draft valuation
           of BioConvergence. The e-mail stated “Blue & Co is doing a
           review on it. Based on the discussion I had with Blue, the
           valuation is in the ballpark.” Plaintiff’s Exhibit 68 was an e-mail
           sent by Ms. Wright to Greg Menefee’s e-mail address on
           December 19, 2007. The e-mail was addressed to both Greg
           Menefee and Julie Menefee. The e-mail welcomed Greg and
           Julie Menefee to the Bio[C]onvergence group, noted the plan was
           for the Menefees to become members in January 2008 and,
           among other items, stated, “Current valuation of the company
           confirmed by Blue & Co, BioC’s accounting firm, in December
           2007 at [$XXX][2]:, setting the new value per unit at $131.05.” At
           trial, the representative from Blue & Co. testified the firm worked
           with Ms. Wright in reviewing certain figures and procedures
           related to the valuation, but did not perform a “review” or
           “valuation,” or “confirm” defendant’s valuation of
           BioConvergence LLC as those terms are used in the accounting
           profession.

           Reliance is not an element of criminal deception, but it is for
           common law fraud. Neither of these e-mails was ever presented
           to or shared with Julie Menefee by Greg Menefee or otherwise.
           Neither of the e-mails state that Blue & Co valued the units at
           $120.00. Julie Menefee was not aware of these e-mails when she
           purchased the units in BioConvergence, LLC, and Julie Menefee
           did not directly rely on the written statements. However, Greg
           Menefee had seen the e-mails, one of which was addressed to
           Julie Menefee as well as Greg Menefee; the e-mails were sent
           within months of Plaintiff’s purchase of the units and related to
           the Plaintiff’s and Greg Menefee’s decision to become owners in
           BioConvergence LLC; Greg Menefee did tell Julie Menefee that
           he thought the purchase of the units at $120.00 would be a good
           investment; and Greg Menefee testified that his opinion was




2
    Bracketed text appears in trial court’s order.


Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018     Page 30 of 54
               based in part on his trust of Alisa Wright, but also on his trust of
               Blue & Co. Reasonable argument could be made that Julie
               Menefee relied in part on Greg Menefee’s opinion of the
               investment.

               The question for the court is not whether these emails do in fact
               constitute the “written statement” required for criminal
               deception, but whether an argument that they do is frivolous,
               unreasonable or groundless. It is a very close question for the
               court, but the court concludes it cannot say the claim was
               frivolous, unreasonable or groundless. Defendants’ claim for
               attorney fees on this claim is denied as well.

       Appellants’ Appendix Volume 2 at 55-59.


                                                     Discussion

[21]   The issue is whether the trial court clearly erred or abused its discretion in

       denying the request of BioConvergence and Alisa for attorney fees. Generally,

       Indiana has consistently followed the American Rule in which both parties

       generally pay their own fees. Loparex, LLC v. MPI Release Techs., LLC, 964

       N.E.2d 806, 815-816 (Ind. 2012). In the absence of statutory authority or an

       agreement between the parties to the contrary – or an equitable exception – a

       prevailing party has no right to recover attorney fees from the opposition. 3 Id.

       at 816. This case requires us to examine: (A) statutory authority; and (B) the

       Subscription Agreement.




       3
         There are three well-established common-law exceptions to the American Rule: the “obdurate behavior”
       exception, the “common fund” exception, and the “private attorney general” exception. Indiana embraces
       the first two of these and not the third. Loparex, LLC, 964 N.E.2d at 816 n.5.

       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018                    Page 31 of 54
       A.         Statutory Authority


[22]   The Indiana General Assembly and the Indiana Supreme Court “have given the

       courts of this state tools to deal with abusive litigation practices.” Zavodnik v.

       Harper, 17 N.E.3d 259, 264 (Ind. 2014). Ind. Code § 34-52-1-1 is titled

       “General recovery rule” and provides in part:


                  (b) In any civil action, the court may award attorney’s fees as part
                  of the cost to the prevailing party, if the court finds that either
                  party:

                          (1) brought the action or defense on a claim or defense that
                          is frivolous, unreasonable, or groundless;

                          (2) continued to litigate the action or defense after the
                          party’s claim or defense clearly became frivolous,
                          unreasonable, or groundless; or

                          (3) litigated the action in bad faith.

[23]   In discussing a prior version of the statute, the Indiana Supreme Court stated

       that the statute “strikes a balance between respect for an attorney’s duty of

       zealous advocacy and ‘the important policy of discouraging unnecessary and

       unwarranted litigation.’”4 Mitchell v. Mitchell, 695 N.E.2d 920, 924 (Ind. 1998)




       4
           The Court was examining Ind. Code § 34-1-32-1, which similarly provided:

                  (b)     In any civil action, the court may award attorney’s fees as part of the cost to the
                          prevailing party, if it finds that either party:

                          (1)      brought the action or defense on a claim or defense that is frivolous,
                                   unreasonable, or groundless;
                          (2)      continued to litigate the action or defense after the party’s claim or
                                   defense clearly became frivolous, unreasonable, or groundless; or
                          (3)      litigated the action in bad faith.

       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018                              Page 32 of 54
(quoting Kahn v. Cundiff, 533 N.E.2d 164, 170 (Ind. Ct. App. 1989)).

“Subsections (b)(1) and (b)(2) of the statute focus on the legal and factual basis

of the claim or defense and the arguments supporting the claim or defense.” Id.

“In contrast, subsection (b)(3) – ‘litigated the action in bad faith’ – by its terms

requires scrutiny of the motive or purpose of the non-prevailing party.” Id. The

Indiana Supreme Court has held:


        More precisely,

                 bad faith is not simply bad judgment or negligence.
                 Rather, it implies the conscious doing of a wrong because
                 of dishonest purpose or moral obliquity. It is different
                 from the negative idea of negligence in that it contemplates
                 a state of mind affirmatively operating with furtive design
                 or ill will.

Id. (quoting Watson v. Thibodeau, 559 N.E.2d 1205, 1211 (Ind. Ct. App. 1990)

(quoting Young v. Williamson, 497 N.E.2d 612, 617 (Ind. Ct. App. 1986), reh’g

denied, trans. denied)). The Court also explained:


        This Court has observed in related contexts that the legal process
        “must invite, not inhibit, the presentation of new and creative
        argument” to enable the law to grow and evolve. Orr v. Turco
        Mfg. Co., 512 N.E.2d 151, 153 (Ind. 1987) (setting forth standard
        for punitive sanctions for frivolous appellate claims). To be sure,
        application of the statutory authorization for recovery of
        attorney’s fees . . . must leave breathing room for zealous
        advocacy and access to the courts to vindicate rights. Kahn, 533
        N.E.2d at 170. Courts must be sensitive to these considerations
        and view claims of “frivolous, unreasonable, or groundless”
        claims or defenses with suspicion.



Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018    Page 33 of 54
       Id. at 925.


[24]   Ind. Code § 34-52-1-1(b) “places an obligation on litigants to investigate the

       legal and factual basis of the claim when filing and to continuously evaluate the

       merits of claims and defenses asserted throughout litigation.” Landmark Legacy,

       LP v. Runkle, 81 N.E.3d 1107, 1116-1117 (Ind. Ct. App. 2017) (quoting Gen.

       Collections, Inc. v. Decker, 545 N.E.2d 18, 20 (Ind. Ct. App. 1989)). “A claim is

       ‘frivolous’ if it is made primarily to harass or maliciously injure another; if

       counsel is unable to make a good faith and rational argument on the merits of

       the action; or if counsel is unable to support the action by a good faith and

       rational argument for extension, modification, or reversal of existing law.”

       Kitchell v. Franklin, 26 N.E.3d 1050, 1057 (Ind. Ct. App. 2015) (citing Wagler v.

       W. Boggs Sewer Dist., Inc., 980 N.E.2d 363, 383 (Ind. Ct. App. 2012), reh’g denied,

       trans. denied, cert. denied, 134 S. Ct. 952 (2014)), trans. denied. “A claim is

       ‘unreasonable’ if, based on the totality of the circumstances, including the law

       and facts known at the time, no reasonable attorney would consider the claim

       justified or worthy of litigation.” Id. “A claim is groundless if no facts exist

       which support the legal claim relied on and presented by the losing party.”

       Purcell v. Old Nat. Bank, 972 N.E.2d 835, 843 (Ind. 2012). “However, the law is

       settled that a claim is neither groundless nor frivolous merely because a party

       loses on the merits.” Kitchell, 26 N.E.3d at 1057. “Bad faith is demonstrated

       where the party presenting the claim is affirmatively operating with furtive

       design or ill will.” Id.




       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018     Page 34 of 54
[25]   “The trial court’s decision to award attorney’s fees under § 34-52-1-1 is subject

       to a multi-level review: the trial court’s findings of facts are reviewed under the

       clearly erroneous standard and legal conclusions regarding whether the

       litigant’s claim was frivolous, unreasonable, or groundless are reviewed de

       novo.” Purcell, 972 N.E.2d at 843 (citing R.L. Turner Corp. v. Town of

       Brownsburg, 963 N.E.2d 453, 457 (Ind. 2012)). “[T]he trial court’s decision to

       award attorney’s fees and any amount thereof is reviewed for an abuse of

       discretion.” Id. “A trial court abuses its discretion if its decision clearly

       contravenes the logic and effect of the facts and circumstances or if the trial

       court has misinterpreted the law.” Id.


[26]   BioConvergence and Alisa appear to argue that: (1) Julie’s claims were

       frivolous because she abandoned most claims on summary judgment; (2) Julie’s

       claim of excessive payments by BioConvergence was not recoverable because

       such claim belonged to BioConvergence; (3) Julie’s claim related to criminal

       deception was frivolous because there was no written statement; and (4) Julie’s

       fraud and securities fraud claims were frivolous.


               1.       Julie’s Allegations


[27]   BioConvergence and Alisa assert that Julie abandoned fourteen claims under

       Count III after litigating them for three years and after Alisa designated

       evidence on summary judgment proving that the factual and legal bases were

       lacking.




       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018    Page 35 of 54
[28]   Julie argues that BioConvergence and Alisa contend that she asserted fifteen

       claims for breach of fiduciary duty and that the trial court entered summary

       judgment against her on fourteen out of those fifteen claims, but that their

       contention is false. She asserts that she alleged one claim for breach of

       fiduciary duty against Alisa in Count III of the amended complaint. She claims

       that BioConvergence and Alisa attempt to characterize that one claim as fifteen

       separate claims by citing her answer to an interrogatory and her deposition

       testimony about the interrogatory answer. She asserts that responses to

       interrogatories are not claims and that, “[w]ere the Court to decide that all

       statements in answers to interrogatories that a party did not pursue at trial were

       ‘frivolous claims,’ parties would be discouraged from ‘fully’ responding to

       interrogatories.” Appellee’s Brief at 15. She asserts that such a result would

       lead to violations of Ind. Trial Rules 265 and 336 and frustrate the discovery

       process. She contends that, when she was asked to list the grounds upon which

       she claimed a breach of fiduciary duty, she responded with all facts that she

       believed could possibly support her claim. With respect to whether she

       abandoned that claim, Julie argues that she filed an amended complaint

       sufficient to place BioConvergence and Alisa on notice of her claims and later

       determined that the best course was to pursue a claim against Alisa in her




       5
         Ind. Trial Rule 26 governs the scope of discovery and provides in part that “[p]arties may obtain discovery
       regarding any matter, not privileged, which is relevant to the subject-matter involved in the pending action,
       whether it relates to the claim or defense of the party seeking discovery or the claim or defense of any other
       party . . . .” (Emphasis added).
       6
           Ind. Trial Rule 33 provides in part: “Each interrogatory shall be answered separately and fully . . . .”


       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018                               Page 36 of 54
       capacity as an officer and accordingly did not oppose Alisa’s request to enter

       summary judgment with respect to Alisa’s role as a member.


[29]   To the extent Julie abandoned assertions made in her discovery response, we

       cannot say that such abandonment indicates that her claims were frivolous or

       that she continued to litigate the action after her claim clearly became frivolous,

       unreasonable, or groundless. We observe that, with respect to some of the

       examples addressed in the brief of BioConvergence and Alisa, they do not cite

       to the record for the argument that Julie abandoned claims. We also observe

       that BioConvergence and Alisa do not respond to Julie’s argument that limiting

       her discovery responses would have violated Ind. Trial Rules 26 and 33.


[30]   With respect to their assertion that the trial court’s April 6, 2016 order found

       that Alisa owed no fiduciary duty to Julie prior to her membership,

       BioConvergence and Alisa argue, without citation to the record, that Julie

       “continued to assert such claim in Count III, thereby, forcing Alisa to continue

       to defend a claim the trial court had already rejected.” Appellants’ Brief at 24.

       A review of the record reveals that Julie’s December 21, 2016 response in

       opposition to Alisa’s motion for summary judgment on Count III stated in part

       that “Alisa Wright made misrepresentations regarding who valued

       BioConvergence’s units after Julie became a member of BioConvergence.”

       Appellants’ Appendix Volume 2 at 222 (emphasis added).


[31]   The record suggests at least some evidence with respect to other allegations.

       With respect to manipulating financials, BioConvergence and Alisa cite to


       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 37 of 54
       Julie’s August 25, 2016 deposition and assert that she admitted she had no

       knowledge that any BioConvergence financial document was manipulated and

       that no person advised her that Alisa manipulated any BioConvergence

       financial document. The portion of Julie’s deposition cited by BioConvergence

       and Alisa reveals an exchange in which Julie mentions a 2011 tape on which

       Alisa and others discussed “maybe altering the rents or doing something to

       make [BioConvergence] more profitable so they could get a line of credit.” Id.

       at 137. She also mentioned that the “rents were certainly fluctuating,” that the

       “fluctuation of the rents would make [BioConvergence] appear more

       profitable,” and that “[w]hen the rents fluctuated, that’s a manipulation of the

       financials . . . .” Id.


[32]   As for Alisa’s alleged failure to be at BioConvergence’s offices, BioConvergence

       and Alisa argue that Julie admitted she had no personal knowledge of Alisa’s

       alleged failure to be present, claimed no specific damage relating to Alisa’s

       failure to be at BioConvergence’s offices, designated no evidence or argument,

       and abandoned this claim. The portion of Julie’s deposition cited by

       BioConvergence and Alisa reveals that, when asked about Alisa’s failure to be

       present, Julie mentioned “conversations with former employees saying she

       wasn’t there a lot of the time.” Id. at 140. She testified that, while she did not

       have personal knowledge that Alisa failed to be present at the offices, she would

       rely on the testimony of “Kathy Eddy. Could be Lance. And I know Janet

       and Kelly. Kelly Zaleski, Janet Carminati.” Id.




       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 38 of 54
[33]   Based upon our review of the record, we cannot say that BioConvergence and

       Alisa have demonstrated that there are no facts that support Julie’s allegations

       or that reversal is warranted. See Purcell, 972 N.E.2d at 843 (“Although the

       facts presented at trial were insufficient to survive judgment on the evidence, it

       remains true that some facts were presented in Purcell’s case-in-chief. As

       discussed above, it is likely that Purcell satisfied the quantitative aspect of the

       sufficiency analysis by presenting facts that potentially lend support to his

       conclusion. Thus, it cannot be said that ‘no facts’ existed in support of his legal

       claim at the time Purcell went to trial. Based on this conclusion and on the

       strong deference afforded to the trial court in these matters, we hold that the

       trial court did not abuse its discretion in denying Old National’s request for

       costs and attorney’s fees.”).


               2.       Claim of Excessive Payments as a Derivative Claim


[34]   BioConvergence and Alisa argue that Julie’s claimed damages of excessive

       payments were never recoverable because the claim belonged to

       BioConvergence as a derivative suit. They point to the trial court’s findings in

       its January 12, 2016 order that summary judgment was not appropriate based

       on the claim being a derivative rather than a direct action because “at this

       summary judgment stage, [Alisa] has failed to establish the inapplicability of the

       exception created in Barth v. Barth, 659 N.E.2d 559 (Ind. 1995) allowing a

       member of a limited liability company to pursue a direct action for harm to the

       company under certain circumstances.” Appellants’ Appendix Volume 2 at 53.

       BioConvergence and Alisa argue that this finding is clearly erroneous because

       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018    Page 39 of 54
       “Alisa designated evidence of [Julie’s] repeated admission that she did not

       assert a derivative claim but asserted only an individual claim for damages.”

       Appellants’ Brief at 33 (citing Appellants’ Appendix Volume 2 at 68, 73, 240).7

       They cite Purcell v. Southern Hills Investments, LLC, 847 N.E.2d 991 (Ind. Ct.

       App. 2006), for the idea that a court in such a case does not consider the Barth

       exception.


[35]   Julie alleges that owners of closely-held companies are not always required to

       bring claims of harm to the company as derivative actions. She argues that it

       would have been futile to require her to make a demand on BioConvergence or

       to attempt to convince BioConvergence to assert claims against Alisa because

       Alisa was the sole director of BioConvergence at the time of the events alleged

       in the lawsuit and when she filed the lawsuit.


[36]   In Barth, the Indiana Supreme Court stated:


                While we affirm the general rule requiring a shareholder to bring
                a derivative rather than direct action when seeking redress for
                injury to the corporation, we nevertheless observe two reasons
                why this rule will not always apply in the case of closely-held
                corporations. First, shareholders in a close corporation stand in a
                fiduciary relationship to each other, and as such, must deal fairly,
                honestly, and openly with the corporation and with their fellow



       7
        To the extent BioConvergence and Alisa assert Julie admitted that she did not assert a derivative claim, we
       observe that Julie alleged in her August 2013 complaint that Alisa, as a majority shareholder, owed fiduciary
       duties to her, a minority shareholder, and that she was damaged by Alisa’s breach of her fiduciary duties.
       Julie’s amended complaint again alleged that she was damaged by Alisa’s breach of her fiduciary duties. In
       her response in opposition to Alisa’s motion for summary judgment on Count III of her amended complaint,
       Julie stated that she “properly asserted her claims in a direct action.” Appellants’ Appendix Volume 2 at 240.



       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018                         Page 40 of 54
        shareholders. W & W Equipment Co.,[ Inc. v. Mink,] 568 N.E.2d
        [564, 570 (Ind. Ct. App. 1991), reh’g denied, trans. denied];
        Krukemeier v. Krukemeier Machine and Tool Co., Inc. (1990), Ind.
        App., 551 N.E.2d 885; Garbe v. Excel Mold, Inc. (1979), Ind. App.,
        397 N.E.2d 296. Second, shareholder litigation in the closely-
        held corporation context will often not implicate the policies that
        mandate requiring derivative litigation when more widely-held
        corporations are involved. W & W Equipment Co., Inc. v. Mink is a
        leading case in this regard. There our Court of Appeals was
        faced with a lawsuit filed by one of two 50% shareholders of a
        corporation after the other shareholder joined with
        nonshareholder directors to fire the plaintiff shareholder and
        arrange for the payment of certain corporate assets to the other
        shareholder. The court concluded that no useful purpose would
        be served by forcing the plaintiff to proceed derivatively where
        the policies favoring derivative actions were not implicated—
        direct corporate recovery was not necessary to protect absent
        shareholders or creditors as none existed. Id., 568 N.E.2d at 571.

        Because shareholders of closely-held corporations have very
        direct obligations to one another and because shareholder
        litigation in the closely-held corporation context will often not
        implicate the principles which gave rise to the rule requiring
        derivative litigation, courts in many cases are permitting direct
        suits by shareholders of closely-held corporations where the
        complaint is one that in a public corporation would have to be
        brought as a derivative action. See F. Hodge O’Neal & Robert B.
        Thompson, O’Neal’s Close Corporations § 8.16 n. 32 (3d ed. & 1995
        Cum. Supp.) (collecting cases); American Law Institute,
        Principles of Corporate Governance: Analysis and Recommendations §
        7.01, reporter’s n. 4 (1994) (collecting cases). However, it is
        important to keep in mind that the principles which gave rise to
        the rule requiring derivative actions will sometimes be present
        even in litigation involving closely-held corporations. For
        example, because a corporate recovery in a derivative action will
        benefit creditors while a direct recovery by a shareholder will not,


Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 41 of 54
        the protection of creditors principle could well be implicated in a
        shareholder suit against a closely-held corporation with debt.

                                               *****

        In its recently-completed corporate governance project, the
        American Law Institute proposed the following rule for
        determining when a shareholder of a closely-held corporation
        may proceed by direct or derivative action:

                 In the case of a closely held corporation, the court in its
                 discretion may treat an action raising derivative claims as
                 a direct action, exempt it from those restrictions and
                 defenses applicable only to derivative actions, and order an
                 individual recovery, if it finds that to do so will not (i)
                 unfairly expose the corporation or the defendants to a
                 multiplicity of actions, (ii) materially prejudice the
                 interests of creditors of the corporation, or (iii) interfere
                 with a fair distribution of the recovery among all interested
                 persons.

        A.L.I., Principles of Corporate Governance § 7.01(d). We have
        studied this rule and find that it is consistent with the approach
        taken by our Court of Appeals and by most other jurisdictions in
        similar cases and that it represents a fair and workable approach
        for balancing the relative interests in closely-held corporation
        shareholder litigation.

        In determining that a trial court has discretion to decide whether
        a plaintiff must proceed by direct or by derivative action, we
        make the following observations, drawn largely from the
        Comment to § 7.01(d). First, permitting such litigation to
        proceed as a direct action will exempt the plaintiff from the
        requirements of Ind. Code § 23-1-32-1 et seq., including the
        provisions that permit a special committee of the board of
        directors to recommend dismissal of the lawsuit. Ind. Code § 23-
        1-32-4. As such, the court in making its decision should consider
        whether the corporation has a disinterested board that should be

Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018     Page 42 of 54
               permitted to consider the lawsuit’s impact on the corporation.
               A.L.I., Corporate Governance Project § 7.01 comment e. Second, in
               some situations it may actually be to the benefit of the
               corporation to permit the plaintiff to proceed by direct action.
               This will permit the defendant to file a counterclaim against the
               plaintiff, whereas counterclaims are generally prohibited in
               derivative actions. Also, in a direct action each side will
               normally be responsible for its own legal expenses; the plaintiff,
               even if successful, cannot ordinarily look to the corporation for
               attorney’s fees. Id.

       659 N.E.2d at 561-563 (footnotes omitted).


[37]   In Purcell, which is cited by BioConvergence and Alisa, the Court discussed

       Barth and commented that the Indiana Supreme Court “acknowledged that the

       distinction between direct and derivative claims has been complicated in recent

       years by recognition in many jurisdictions, including Indiana, of direct actions

       by shareholders in closely-held corporations for derivative claims.” Purcell, 847

       N.E.2d at 1001 (footnote omitted). In part, the court held that “insofar as [the

       plaintiff] relies on the claim that [the defendant] violated his fiduciary duties to

       [the plaintiff] as a Member of [a limited liability company], this is properly

       asserted in a direct action because it is based upon rights and duties owed to

       [the plaintiff], not [the limited liability company].” Id. The Court also stated

       that “[b]ecause [the plaintiff was] asserting a direct claim addressing a harm in

       its own name and not a derivative claim of corporate harm in the name of [a

       limited liability company] under the guise of a direct claim, we do not need to

       investigate whether the Barth exception is applicable.” Id.




       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018    Page 43 of 54
[38]   Based upon the record, including that Alisa has been the majority member of

       BioConvergence, we cannot conclude that the trial court abused its discretion

       by declining to find that Julie’s claim regarding excessive payments was

       frivolous based on the idea that she may have been required to file a derivative

       claim and award attorney fees on that basis.


               3.       Criminal Deception


[39]   BioConvergence and Alisa argue that Julie sought damages under the Crime

       Victims Relief Act (“CVRA”) for criminal deception and assert that criminal

       deception requires a written statement and yet the trial court found no written

       statement that Julie relied upon, no written statement of which Julie was made

       aware, and no written statement that any person communicated to her. They

       assert that the Menefees each admitted that the only alleged representation

       relied upon was oral. BioConvergence and Alisa assert that this Court should

       reject the trial court’s reasoning that a plaintiff can reasonably assert a treble

       damages claim for criminal deception based on a written statement known only

       to a third party and which is not communicated to the plaintiff.


[40]   Julie asserts that she presented evidence that Alisa engaged in criminal

       deception. She argues that even if she did not rely directly upon the emails

       Alisa sent to Greg, she could still maintain a claim for damages based on those

       emails. In their reply brief, BioConvergence and Alisa argue that Julie confuses

       reliance for a criminal conviction with causation for a civil CVRA claim when




       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018    Page 44 of 54
       she argues that her civil CVRA claim cannot be frivolous because there is no

       proof of reliance required for a criminal deception conviction.


[41]   Ind. Code § 34-24-3-1 is referred to as the CVRA and is titled “Pecuniary loss as

       result of property offenses” and provides in part:


               If a person has an unpaid claim on a liability that is covered by
               IC 24-4.6-5 or suffers a pecuniary loss as a result of a violation of
               IC 35-43, IC 35-42-3-3, IC 35-42-3-4, or IC 35-45-9, the person
               may bring a civil action against the person who caused the loss
               for the following:

                        (1) An amount not to exceed three (3) times:

                                 (A) the actual damages of the person suffering the
                                 loss, in the case of a liability that is not covered by
                                 IC 24-4.6-5; or

                                 (B) the total pump price of the motor fuel received,
                                 in the case of a liability that is covered by IC 24-4.6-
                                 5.

                        (2) The costs of the action.

                        (3) A reasonable attorney’s fee.


[42]   Ind. Code § 35-43-5-3 governs criminal deception and provides in part that “[a]

       person who . . . knowingly or intentionally makes a false or misleading written

       statement with intent to obtain property, employment, or an educational

       opportunity . . . commits deception . . . .” The record reveals that Alisa sent

       Greg, Julie’s husband, an email message on November 21, 2007, referencing a

       “draft valuation” and stating that “[b]ased on the discussion [Alisa] had with

       Blue, the valuation is in the ballpark.” Plaintiff’s Exhibit 60. Alisa sent another

       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018             Page 45 of 54
       email message to Greg, which was addressed to “Greg and Julie” and provided

       a valuation for the company “confirmed” by Blue & Co. Plaintiff’s Exhibit 68.


[43]   The trial court’s order states:


               The question for the court is not whether these emails do in fact
               constitute the “written statement” required for criminal
               deception, but whether an argument that they do is frivolous,
               unreasonable or groundless. It is a very close question for the
               court, but the court concludes it cannot say the claim was
               frivolous, unreasonable or groundless.


       Appellants’ Appendix Volume 2 at 59. We cannot say that the trial court erred

       in concluding that Julie’s claim was not frivolous.


               4.       Fraud Claims


[44]   BioConvergence and Alisa argue that Julie’s fraud and securities fraud claims

       were based on the same alleged oral representation by Alisa that

       BioConvergence’s accounting firm “prepared” the valuation. Appellants’ Brief

       at 39. They assert that Julie knew when she filed her complaint that the alleged

       oral representation that Blue & Company prepared the valuation was a false

       allegation. Julie responds that she presented evidence that Alisa committed

       securities fraud and fraud.


[45]   Julie’s amended complaint cites Ind. Code § 23-19-5-1 under Count I, securities

       fraud. That statute provides:




       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018     Page 46 of 54
               It is unlawful for a person, in connection with the offer, sale, or
               purchase of a security, directly or indirectly:

                        (1) to employ a device, scheme, or artifice to defraud;

                        (2) to make an untrue statement of a material fact or to
                        omit to state a material fact necessary in order to make the
                        statement made, in the light of the circumstances under
                        which they were made, not misleading; or

                        (3) to engage in an act, practice, or course of business that
                        operates or would operate as a fraud or deceit upon
                        another person.

       Ind. Code § 23-19-5-1.

[46]   The record reveals that Alisa sent Greg an email message on November 21,

       2007, which stated in part: “As you and Lance are meeting later this morning,

       you’ll want to take a look at this when you talk. This is a draft valuation and

       Blue & Co is doing a review on it. Based on the discussion I had with Blue, the

       valuation is in the ballpark.” Plaintiff’s Exhibit 60. Alisa’s December 19, 2007

       email addressed to “Greg and Julie” stated in part: “Current valuation of the

       company confirmed by Blue & Co, BioC’s accounting firm, in December 2007

       at $9,267,841 – setting the new value per unit at $131.05.” Plaintiff’s Exhibit

       68.


[47]   The record further reveals a deposition of Brooks, which states in part that he

       saw the November 21, 2007 email and that he did not believe that a review had

       been done. Eddy testified that it had become fairly apparent that Blue &

       Company had not done a certain valuation, Alisa asked her to look at the

       valuation as the CFO of BioConvergence in October 2011, she found “there

       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018       Page 47 of 54
       were a lot of problems,” she went through the records to try to figure out where

       some of the numbers came from to try to justify the $140 value per unit “Alisa

       had claimed for the previous valuation because she had said that had come

       from Blue and Company,” but “[i]t was clear that it had not come from Blue

       and Company.”            Transcript Volume 5 at 131-132. We cannot say that the trial

       court’s conclusion that Julie’s claim was not frivolous is erroneous or that it

       abused its discretion.


       B.      Subscription Agreement


[48]   BioConvergence and Alisa assert that the trial court erred in holding that the

       Subscription Agreement did not allow indemnification for first party claims and

       that they did not prove that the attorney fees were caused by Julie’s breach.

       They argue that each party had first party indemnification relief against the

       other in the event of a breach. They assert that the attorney fees sought relate to

       the defense of Julie’s lawsuit and are recoverable for Julie’s breach under the

       indemnification provision, and that recovery of attorney fees is allowed

       regardless of whether the indemnity provision references attorney fees. They

       acknowledge that “Indiana law is unsettled with respect to the recovery of

       attorney fees in enforcing an indemnity provision which lacks specific attorney

       fee language.” Appellants’ Brief at 46.


[49]   BioConvergence and Alisa argue that this Court should hold that the

       indemnification provision applies to first party claims and allows for

       BioConvergence’s recovery of attorney fees in defending against Julie’s claims


       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018    Page 48 of 54
       and enforcing the indemnity provision. They assert that BioConvergence was

       damaged by Julie’s breach, and that BioConvergence could not have sold units

       to Julie in a private placement without her representation that she had the

       business acumen to evaluate the investment. They claim that “[b]ut for [Julie’s]

       representation, she would not have become a [BioConvergence] investor and

       would not have had an opportunity to file suit against [BioConvergence and

       Alisa] relating to her [BioConvergence] investment.” Id. at 48. They conclude

       that the trial court clearly erred in holding that they failed to prove that their

       attorney fees were caused by Julie’s breach of the Subscription Agreement.


[50]   Julie argues that the Subscription Agreement does not provide a basis for

       awarding attorney fees. She asserts that the indemnity agreement does not

       apply to first party claims. She argues that “[n]owhere does section 5(a), or any

       other provision of the Agreement, state that [Julie] shall pay attorneys’ fees

       incurred by [BioConvergence] or Alisa if [Julie] breaches the Agreement.”

       Appellee’s Brief at 27. She states that Indiana follows the general rule that each

       party must pay his or her own attorney fees. She also asserts that

       indemnification clauses are strictly construed and the terms are required to be

       clear and unequivocal.


[51]   The court found that the Subscription Agreement, which “contained neither a

       specific provision for recovery of attorney fees nor clear language that it applied

       to first party claims, does not permit [BioConvergence and Alisa] to recover

       their attorney fees and expenses incurred in defending the plaintiff’s action or

       incurred in pursuing their counterclaim.” Appellants’ Appendix Volume 2 at

       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018    Page 49 of 54
       57. The court also found that BioConvergence and Alisa “failed to prove that

       the attorney fees they incurred in defending the action and pursuing their

       counterclaim were caused by plaintiff’s breach of section 2(b) of the

       subscription agreement.” Id.


[52]   “[I]ndemnification clauses are strictly construed and the intent to indemnify

       must be stated in clear and unequivocal terms.” Fresh Cut, Inc. v. Fazli, 650

       N.E.2d 1126, 1132 (Ind. 1995). Indemnity agreements are subject to the

       standard rules and principles of contract construction. Flaherty & Collins, Inc. v.

       BBR-Vision I, L.P., 990 N.E.2d 958, 967 (Ind. Ct. App. 2013) (citing L.H.

       Controls, Inc. v. Custom Conveyor, Inc., 974 N.E.2d 1031, 1047 (Ind. Ct. App.

       2012)), trans. denied. Interpretation of a written contract, including an

       indemnity provision, is a question of law. Id. We review questions of law de

       novo and owe no deference to the trial court’s legal conclusions. Id.


[53]   “The general legal understanding of indemnity clauses is that they cover ‘“the

       risk of harm sustained by third persons that might be caused by either the

       indemnitor or the indemnitee. It shifts the financial burden for the ultimate

       payment of damages from the indemnitee to the indemnitor.”’” Id. (quoting

       L.H., 974 N.E.2d at 1047 (quoting Indianapolis City Market Corp. v. MAV, Inc.,

       915 N.E.2d 1013, 1023 (Ind. Ct. App. 2009))). The court in Flaherty stated:


               As we noted in L.H., other authorities recognize this general
               understanding. 974 N.E.2d at 1047-48 (citing Am. Jur. 2d 415,
               Indemnity § 1 (2005) (“In general, indemnity is a form of
               compensation in which a first party is liable to pay a second party
               for a loss or damage the second party incurs to a third party”);
       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018     Page 50 of 54
        C.J.S. 94, Indemnity § 1 (2007) (“In a contract of indemnity, the
        indemnitor, for a consideration, promises to indemnify and save
        harmless indemnitee against liability of indemnitee to a third
        person or against loss resulting from such liability”)).


Id. “There is no absolute prohibition against one party agreeing to indemnify

the other party for first-party claims arising between those parties.” Id. “Where

the plain language of the provision requires first-party indemnification, then

such indemnification is permitted.” Id. (citing Sequa Coatings Corp. v. N. Ind.

Commuter Transp. Dist., 796 N.E.2d 1216, 1229 (Ind. Ct. App. 2003) (noting that

“the plain language” expressly stated, among other things, “‘any and all Causes

of Action, as defined above, asserted by any parties and nonparties to this

Agreement’”), clarified on reh’g, 800 N.E.2d 926, trans. denied). See also L.H.

Controls, Inc., 974 N.E.2d at 1048 (discussing Fackler v. Powell, 891 N.E.2d 1091

(Ind. Ct. App. 2008), trans. denied, observing that Fackler held that a husband

was required to pay his ex-wife’s attorney fees after his breach of a dissolution

property settlement agreement, which stated that each party agreed “to

indemnify and save and hold the other harmless from all . . . expenses

(including attorney’s fees) . . . incurred by reason of the indemnitor’s violation

or breach of any of the terms and conditions hereof,” Fackler, 891 N.E.2d at

1098, stating that “[i]t is clear that a divorce decree indemnity provision such as

the one in Fackler would cover a first-party indemnity claim, i.e. where one

party successfully sues the other for breach of contract and requests attorney

fees,” and concluding, “[h]ere, by contrast, the [agreement] does not mention

first-party claims.”).

Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 51 of 54
[54]   In Zebrowski & Assocs., Inc. v. City of Indianapolis, By & Through its Bd. of Directors

       for Utilities of its Dep’t of Pub. Utilities, which is cited by BioConvergence and

       Alisa, the Court held: “An indemnitee, who incurs legal expenses through

       defending an action against him for which he is entitled to indemnification, is

       entitled to recover the expense of creating his defense, including reasonable

       attorney fees.” 457 N.E.2d 259, 264 (Ind. Ct. App. 1983) (citing Employers’

       Liability Assurance Corp. v. Citizens Nat’l Bank of Peru, 85 Ind. App. 169, 151 N.E.

       396 (1926)). The Court held that “[t]he indemnitee may recover attorney fees

       from the indemnitor incurred through an original action which is settled, and

       also for the cost of prosecuting the indemnity clause.” Id. (citing Price v. Amoco

       Oil Co., 524 F.Supp. 364 (S.D. Ind. 1981)). The Court also observed: “In the

       present case, a specific provision for attorney fees is included in the indemnity

       clause, and only recovery of fees concerning the original suit was requested.”

       Id.


[55]   In Dale Bland Trucking, Inc. v. Kiger, the Court commented on Zebrowski as

       follows:


               Bland argues that Zebrowski & Associates, Inc. v. City of Indianapolis
               (1983), Ind. App., 457 N.E.2d 259, 264, supports its contention
               that an indemnitee may recover attorney’s fees from the
               indemnitor incurred in prosecuting the indemnity clause. The
               Zebrowski court made such statement in dicta when citing a
               federal case and did not apply the language to the case. Id.
               Instead, the court stated that the indemnity clause for attorney’s
               fees referred to recovery of fees concerning the original lawsuit
               and not of the indemnity action. Id. Therefore, Zebrowski does
               not support Bland’s contention.

       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018       Page 52 of 54
       598 N.E.2d 1103, 1105 (Ind. Ct. App. 1992) (footnote omitted), trans. denied.

       The Court stated: “We note that the federal case cited in Zebrowski was Price v.

       Amoco Oil Co. (S.D. Ind. 1981), 524 F.Supp. 364. The Price court permitted an

       award of attorney’s fees incurred in prosecuting the indemnity agreement

       because the lease contained very specific language providing for such recovery.”

       Dale Bland Trucking, Inc., 598 N.E.2d at 1105. The Court also rejected Bland’s

       argument that the language “from any and all . . . suits, losses” included

       attorney fees incurred in the prosecution of the indemnity action. Id. at 1106.

       The Court held:


               The indemnity clause in Zebrowski provided, “Contractor shall
               defend, indemnify and hold harmless the Utility . . . from and
               against all claims, damages, losses and expenses, including
               attorney fees . . . .” Zebrowski, 457 N.E.2d at 262. The court
               determined that the clause referred only to attorney’s fees
               incurred in the underlying tort actions, and not the prosecution of
               the indemnity clause. Id. at 264. Likewise, the indemnity clause
               in the case at bar does not refer to the recovery of attorney’s fees
               in the indemnity action. The trial court was correct in denying
               an award for attorney’s fees incurred in the present litigation.


       Id.


[56]   We find the reasoning in Dale Bland Trucking instructive. Here, the indemnity

       provision did not explicitly permit an award of attorney fees nor refer to the

       recovery of attorney fees in an indemnity action. Accordingly, we cannot say

       that reversal is warranted.




       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 53 of 54
                                                     Conclusion

[57]   For the foregoing reasons, we affirm the trial court’s denial of attorney fees.


[58]   Affirmed.


       Baker, J., and Riley, J., concur.




       Court of Appeals of Indiana | Opinion 53A04-1708-PL-1810 | June 1, 2018   Page 54 of 54
