Indiana Supreme Court to decide whether adult entertainment theater must pay hefty fine • Indiana Capital Chronicle

Five years after the city of Clarksville revoked an adult entertainment business license, the Indiana Supreme Court intervened in the dispute Thursday by hearing oral arguments on discovery issues.

At stake is a contempt penalty of $30,000 and untold expenses.

Judges are trying to determine whether AMW Investments, which leased space from Midwest Entertainment Ventures (MEV) to operate Theatair trial court disclosure order.

At the center of Thursday's hearing was a lower court ruling that AMW waived any future objections to discovery when it failed to provide requested information within 30 days .

Scott Bergthold, attorney for the city of Clarksville, said AMW tried to stall the proceedings and failed in its mandatory duty to respond to the requests. Bergthold also said AMW had time to file its objections but deliberately waited until after the deadline.

If you can take a position that is directly contrary to the black letter as outlined in the rule and delay a case for four years as is currently the case, then discovery no longer makes sense, Bergthold said.

However, Matthew Hoffer, an attorney for AMW Investments, argued that the company never intentionally intended to waive its objections.

AMW followed the trial courts every step of the way, Hoffer said.

Background of the case

AMW Investments leased property in Clarksville, Indiana, to MEV to operate an adult entertainment business, Theatair X. The City of Clarksville revoked the business license in May 2019, citing zoning violations.

When AMW Investments and MEV appealed the revocation of its license, the city asked the court to issue a preliminary injunction to prohibit the company from operating.

In November 2019, a trial court granted the city a preliminary injunction limiting Theatair X’s operating hours. Less than a month later, AMW Investments and MEV filed an interlocutory appeal, asking the court to reconsider the preliminary injunction order, but not the final revocation.

The next few years were spent in legal wrangling until 2021, when the trial court ruled that the company had waived its objections to discovery. The city then asked the court to find AMW in contempt of court for failing to respond to discovery requests. On the same day, AMW then filed its first, first and second supplements to the responses to the prior communication.

In February 2023, nearly four years after the case began, the trial court ruled that AMW was in contempt of the first order requiring discovery responses and imposed a $30,000 civil penalty. The court also found AMW liable for Clarksville’s attorneys’ fees and expenses incurred as a result of AMW’s failure to comply. It said AMW continued to object and withhold documents, based on relevance and privilege objections that the discovery order said had been waived.

But in January 2024, a Court of Appeal annulled the lower courts' decision, indicating that trial rules allow AMW to respond with new objections to discovery.

Attorney-client privilege

Indiana Supreme Court Justice Christopher Goff questioned the ethical implications of waiving AMW's objections based on attorney-client privilege.

The only reason we want attorney-client privilege is so people can have open, frank conversations with their attorneys, Goff said. If we allow the attorney-client privilege to be waived here for each violation, doesn't that blow up the attorney-client privilege?

However, Bergthold, who represented the city of Clarksville, argued that AMW could have filed an objection earlier within the required time period. Additionally, he said AMW could have submitted a privilege log describing the documents containing privileged information.

If it's that important, then they should raise the objection, not obstruct it by raising the objection five months later, Bergthold said.

Hoffer, an attorney for AMW Investments, acknowledged that his clients had not requested other available protections, but that his client still suffered harm because of the waiver.

The idea that all relevance objections and all attorney-client privilege objections are abandoned is a penalty worse than the impracticality suggested by the tone of the Court of Appeals' majority opinion, Hoffer said. .

Hoffer also said the $30,000 fine was huge and unworkable.

The court will make its decision in the coming months.