source: Caselaw Access Project

author: NAJAM, Judge.

license: Public Domain

text:
    William T. CARTER, derivatively on behalf of CNO FINANCIAL GROUP, INC., Appellant-Plaintiff, v. R. Glenn HILLIARD, et al., Appellees-Defendants.
    No. 49A02-1106-PL-582.
    Court of Appeals of Indiana.
    June 22, 2012.

      Richard E. Shevitz, Scott D. Gilchrist, Cohen & Malad LLP, Indianapolis, IN, Attorneys for Appellant.
    Joseph H. Yeager, Jr., Matthew T. Al-baugh, Baker & Daniels LLP, Indianapolis, IN, Walter C. Carlson, Kristen R. Seeger, Sidley Austin LLP, Chicago, IL, Attorneys for Appellees.
   OPINION

NAJAM, Judge.

STATEMENT OF THE CASE

William T. Carter, derivatively on behalf of CNO Financial Group, Inc. (“CNO” or “the Company”), formerly known as Con-seco, Inc. (“Conseco,” where applicable), filed a complaint and later an amended complaint (“Amended Complaint”) against R. Glenn Hilliard, Donna A. James, R. Keith Long, Debra J. Perry, C. James Prieur, Neal C. Schneider, Michael T. To-karz, John G. Turner, William Kirsch, Eugene Bullís, Michael Dubes, James Hoh-mann, Edward Bonach, Ali Inanilan, and John Wells (collectively “the Defendants”) alleging breach of Defendants’ fiduciary and good faith duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. The Defendants filed a motion to dismiss the Amended Complaint on the ground that Carter had failed to allege claims showing that pre-suit demand on CNO’s Board of Directors was futile, as required by Delaware Chancery Court Rule 23.1. Following a hearing, the trial court granted the motion and dismissed the Amended Complaint. Carter presents several issues for review, which we consolidate and restate as:

1. Whether Carter has alleged particularized facts to show that pre-suit demand was excused under Delaware law.
2. Whether Carter has alleged particularized facts to show bad faith by the Director Defendants so as to excuse pre-suit demand pursuant to the standard set by the exculpatory clause in the corporate charter.

We conclude that Carter has not alleged particularized facts to show that the Director Defendants face a substantial likelihood of liability for the conduct described in the Amended Complaint, nor has he alleged particularized facts to show that the Director Defendants breached their duties of good faith and loyalty. Therefore, Carter has not shown under Delaware law that pre-suit demand on the Board would have been futile. As such, we conclude that the trial court did not err when it granted CNO’s motion to dismiss for failure to make pre-suit demand on the board of directors. We affirm.

FACTS AND PROCEDURAL HISTORY

The facts in this case are not contested. The trial court’s Order Granting Defendants’ Motion to Dismiss describes the parties:

Plaintiff Carter is a shareholder of CNO. CNO is a publicly[ Jtraded insurance holding company headquartered in Carmel, Indiana, and is a Delaware corporation. At the time this suit was filed, CNO’s Board of Directors consisted of ten individuals, nine of whom were independent, outside Board members. Eight of those ten Board members were named as defendants: Hilliard, James, Long, Perry, Prieur, Schneider, Tokarz, and Turner. Of those eight, Hilliard, James, Long, Perry, Schneider, Tokarz, and Turner are non-employee, outside directors (collectively, the “Outside Directors”). In addition to serving as a director, Prieur is CNO’s Chief Executive Officer. Defendant Bonach is a current officer of CNO.[] The remaining defendants are former officers of CNO.

Appellant’s App. at 14.

On June 2, 2010, Carter filed a purported shareholder derivative action against the Defendants, current and former CNO directors and officers. Hilliard, James, Long, Perry, Prieur, Schneider, Tokarz, and Turner are currently CNO directors (“Director Defendants”), and Kirsch, Bul-lis, Dubes, Hohmann, Bonach, Inanilan, and Wells are former or present CNO officers (“Officer Defendants”). Carter had not made a demand on CNO’s board of directors (“the Board”) before filing the complaint. On July 26, Defendants filed a motion to dismiss for failure to make pre-suit demand on the Board. On November 1, Carter filed the Amended Complaint. Regarding Defendants, the Amended Complaint alleges, in relevant part:

57. By reason of their positions as officers, directors, and/or fiduciaries of CNO and because of their ability to control the business and corporate affairs of CNO, Defendants owed CNO and its shareholders fiduciary obligations of good faith, loyalty, and candor, and were and are required to use their utmost ability to control and manage CNO in a fair, just, honest, and equitable manner. Defendants were and are required to act in furtherance of the best interests of CNO and its shareholders so as to benefit all shareholders equally and not in furtherance of their personal interest or benefit. Each director and officer of the Company owes to CNO and its shareholders a fiduciary duty to exercise good faith and diligence in the administration of the affairs of the Company and in the use and preservation of its property and assets, and the highest obligation of fair dealing.
58. Defendants, because of their positions of control and authority as directors and/or officers of CNO, were able to and did, directly and/or indirectly, exercise control over the wrongful acts complained of herein. Because of their advisory, executive, managerial, and directorial positions with CNO, each of the Defendants had knowledge of material non-public information regarding the Company.
59. To discharge their duties, the officers and directors of CNO were required to exercise reasonable and prudent supervision over the management, policies, practices and controls of the Company. By virtue of such duties, the officers and directors of CNO were required to, among other things:
a. Exercise good faith to ensure that the affairs of the Company were conducted in an efficient, business-like manner so as to make it possible to provide the highest quality performance of their business;
b. Exercise good faith to ensure that the Company was operated in a diligent, honest and prudent manner and complied with all applicable federal and state laws, rules, regulations and requirements, and all contractual obligations including acting only within the scope of its legal authority;
c. When put on notice of problems ■with the Company’s business practices and operations, exercise good faith in taking appropriate action to correct the misconduct and prevent its recurrence; and
d. Assure that a corporate information and reporting system was in place, which the Board concluded is adequate and is designed to provide senior management and the Board with timely, accurate information sufficient to allow management and the Board to reach informed judgments concerning the Company’s compliance with applicable laws and its business performance.
60.Pursuant to the Company’s Corporate Governance Guidelines (the “Governance Guidelines”), each member of the Board is specifically responsible for “monitoring management’s performance and adherence to corporate standards.” Further, according to the Governance Guidelines, each member of the Board is responsible for understanding, reviewing, and monitoring implementation of the Company’s strategic plans, capital plans, operating plans, and budgets to assure effective:
⅜ Capital allocation
* Debt levels and structure
* Investment policies and practices
* Risk and vulnerability assessment and management
* Growth opportunities
* Engagement on central issues facing company
* Grasp of tradeoffs at the heart of the company
61. Moreover, pursuant to the Governance Guidelines, each member of the Board is specifically responsible for “focusing on the integrity, quality and clarity of the corporation’s financial reports and public disclosures and the processes that produce them” and is also duty-bound to “review the adequacy of the corporation’s compliance and reporting systems.” Once again, in order to adequately fulfill these duties (and their duties under Delaware law), the Board was required to ensure that sufficient information reporting systems were designed and implemented such that they could adequately fulfill their oversight responsibilities.
62. Pursuant to the Audit Committee’s Charter, the members of the Audit Committee are specifically required, inter alia, to:
a. Review the adequacy of the Company’s internal controls that could materially affect the Company’s financial statements;
b. Review and discuss, prior to public dissemination, the annual audited and quarterly unaudited financial statements with management;
c. Review and discuss earnings releases;
d. Review the results of internal audits and discuss related significant internal control matters with the internal auditors and management, including significant reports to management prepared by the internal auditors and management’s responses;
e. Review significant accounting and reporting issues and discuss with management and the independent auditor their impact on the Company financial statements; and
f. Review the adequacy and effectiveness of the Company’s procedures to ensure compliance with legal and regulatory requirements.
63. Pursuant to the Governance Committee’s Charter, the members of the Governance Committee are specifically required, inter alia, to:
a. Consider matters of corporate governance and to create, maintain and periodically review the Company’s corporate governance principles and code of ethics;
b. Adopt policies designed to encourage the highest levels of corporate conduct by the Board, the Company and its officers, employees, and agents; and
c. Consider the Company’s corporate strategy, including the evaluation of any significant acquisitions or divestitures or other material transactions involving the Company.
64. Pursuant to the Compensation Committee’s Charter, the members of the Compensation Committee are specifically required, inter alia, to:
a. Establish annual and long-term corporate and individual performance goals and objectives for the Company’s executive officers and key senior officers;
b. Recommend to the Board the compensation of the CEO;
c. Approve the compensation for other executive officers and key senior officers; and
d. Approve the overall compensation policy including cash-based incentive compensation plans and equity-based compensation plans.

Id. at 38^44. After detailing certain aspects of Defendants’ conduct beginning in 2008, Carter made the following allegations to show that demand is excused in this case:

227.a. A majority of the members of the Board were aware of, or should have been aware of, numerous red flags regarding the Company’s serious problems with its LTC [Long Term Care] business segment, including claims documentation issues, the failure to adequately set reserves, data integrity issues, budget problems, and market conduct violations. As such, a majority of the current Board knew[ ] or was recklessly indifferent to the facts that, among other things: (i) multiple internal control failures caused claim loss/reserve data to be inherently unreliable; and (ii) Defendants were systematically understating reserves; which (iii) caused the Company’s financial statements to be artificially and materially overstated. Notably, half of the Company’s current directors (defendants Hilliard, Schneider, Tokarz, Turner, and Perry) have served as directors of the Company since 2004 or prior to 2004. In particular, as alleged herein, by 2003, the Board was meeting on a quarterly basis in the “War Room,” to specifically discuss issues with LTC with the Company’s senior officers, and these meetings began to occur with increasing frequency in 2005. DW1 [confidential Defense Witness 1] has also stated that LTC Reports prepared by LTC personnel regarding the LTC business containing a range of information including claims issues, reserve issues, budget problems, and market conduct violations were regularly provided to the Board in connection with the War Room meetings, along with comprehensive compliance reports personally prepared by DW1 (which “often” dealt, at least in part, with the Company’s ongoing LTC issues). Moreover, as discussed above, during a nine[-]month period spanning between [sic] 2004 and 2005, a comprehensive internal audit of the LTC segment was performed, and after the audit was concluded sometime in 2005, as Audit Committee members, defendants Schneider, Perry, and Turner received detailed results of this audit. Despite clearly being placed on notice of serious issues regarding LTC which were causing the Company’s reserves to be inadequately set, defendants Hilliard, Schneider, Tokarz, Perry, and Turner consciously disregarded their fiduciary duties to CNO when, under their direction, the Company’s ongoing LTC issues were not addressed and the Company continued to inadequately set reserves over a multi-year period. Thus, demand was not required upon Hilliard, Schneider, Tokarz, Perry, and Turner. Because Hilliard, Schneider, Perry and Turner comprise a majority of the directors on the Board (for demand futility purposes), demand is excused;
227.b. Defendants Hilliard, Schneider, Tokarz, Turner, and Perry are also interested in a demand because they engaged in conduct which is not protected by the business judgment rule in connection with their decision to not remedy the serious problems known to them through the various “red flags” described above. These directors were clearly placed on notice for years of the Company’s problems, yet chose to do nothing to remedy them. Thus, demand is excused as to Hilliard, Schneider, To-karz, Turner, and Perry, and because they comprise a majority of the Board, demand is excused;
227.c. Demand is further excused because the Board failed to exercise its good faith judgment to ensure that the Company’s information and reporting system was in concept and design adequate to assure the Board that appropriate information will come to its attention in a timely manner as a matter of ordinary operations. In particular, it is unquestioned that the Board had actual knowledge of the Company’s LTC problems and failed to do anything to prevent and/or remedy them[;] however[,] this knowledge did not come as a result of an adequate system of information[-]reporting during the ordinary course of operations. Rather[,] this information came to the Board’s attention as a result of various audits, special meetings, and government investigations. Had the Board properly ensured that an adequate information[-]reporting system was in place from the beginning, as they were required to do under Delaware law, the serious problems with the Company’s LTC segment could have been remedied before the Company suffered the substantial harm alleged herein. Thus, demand is futile;
227.d. Demand is also excused because, as detailed herein, the Board intentionally misled the Multistate Examiners or permitted others to do so, thus clearly illustrating their hostility to the relief sought in this action. Accordingly, a reasonable stockholder would not believe, based on the confidential, witness testimony detailed above, that the Board would have been able to properly and impartially consider a demand in good faith. Thus, demand is futile;
227.e. Every member of the Board is required to comply with the Company’s Corporate Governance Guidelines. The Corporate Governance Guidelines require each of the Company’s directors to monitor “management’s performance and adherence to corporate standards.” Further, the Corporate Governance Guidelines requires [sic] directors to focus “on the integrity, quality and clarity of the corporation’s financial reports and public disclosures and the processes that produce them.” Therefore, defendants Hilliard, James, Long, Perry, Prier, Schneider, Tokarz, and Turner face a substantial likelihood of liability for their breaches of fiduciary duties and any demand upon them is futile;
227.f. At times relevant hereto, defendants Long, Schneider, and Turner served as members of the Audit Committee. Pursuant to the Audit Committee Charter, members of the Audit Committee are charged with oversight of the integrity of the Company’s financial statements, public disclosures and financial reporting process. Defendants Long, Schneider, and Turner breached their fiduciary duties of due care, loyalty, and good faith, because the Audit Committee permitted the above false and misleading statements to be made, which eventually led to a restatement. Therefore, defendants Long, Schneider, and Turner face a substantial likelihood of liability for their breach of fiduciary duties and any demand upon them is futile;
227.g. At times relevant hereto, defendants Perry and Tokarz served as members of the Governance Committee. Pursuant to the Governance Committee Charter, members of the Governance Committee are charged with adopting policies designed to encourage the highest levels of corporate conduct by the Board, the Company and its officers, employees and agents. Defendants Perry and Tokarz breached their fiduciary duties of due care, loyalty, and good faith because the Governance Committee permitted the pervasive misconduct described above to go undisclosed. Therefore, defendants Perry and Tokarz face a substantial likelihood of liability for their breach of fiduciary duties and any demand upon them is futile;
227.h. Defendants Tokarz, Perry, and James are interested as a result of their conduct on the Compensation Committee. Pursuant to the Company’s Compensation Committee Charter, directors on the Compensation Committee are responsible for, inter alia, reviewing and approving the compensation of the Company’s senior officers in conduction with previously established performance metrics. Defendants Tokarz, Perry, and James breached their fiduciary duties of due care, loyalty, and good faith, because the Compensation Committee, inter alia, awarded the above-discussed compensation based on admittedly false financial results as evidenced by the Company’s need for a restatement. Further, the Compensation Committee has done nothing to rectify its above failures. Therefore, defendants Tokarz, Perry, and James (if not the entire Board) each face a substantial likelihood of liability for their breach of fiduciary duties and any demand upon them is futile; and
227.i. The principal professional occupation of defendant Prieur is his employment with CNO as its CEO, pursuant to which he has received and continues to receive substantial monetary compensation and other valuable benefits. As a result, in the Company’s most recent annual proxy statement filed in April 2010, the Board has conceded that Prieur is a non-independent director. Thus, defendant Prieur lacks independence, rendering him incapable of impartially considering a demand to commence and vigorously prosecute this action.

Id. at 103-08.

On December 17, Defendants filed a motion to dismiss the Amended Complaint under Delaware and Indiana law, alleging that Carter had not shown that pre-suit demand was excused. On April 21, 2011, the trial court held oral argument on the motion to dismiss. And on June 2, the trial court entered its order granting that motion and dismissing the Amended Complaint (“the Order”). The Order provides, in relevant part:

B. The Allegations
CNO, through its subsidiaries, engages in the development, marketing, and administration of supplemental health insurance, annuity, individual life insurance, and other insurance products for senior and middle-income markets in the United States. Carter’s Amended Complaint focuses principally on the Company’s Long Term Care run-off business (“LTC”) during the period from August 2005 through March 2008. Among other things, Carter claims that Defendants concealed problems with the Company’s claims handling process[ ] and that those problems impacted CNO’s ability to accurately determine its liabilities and establish reserves. Carter alleges that numerous improper claims practices occurred in the LTC business, which in turn distorted and understated the Company’s true claims exposure. Carter further alleges that the [D]efendants issued a series of false and misleading statements.
* ⅜ *
On February 25, 2008, CNO announced that it would delay the filing of its Form 10-K for the year ended December 31, 2007, and restate its financial results for 2005 and 2006. On March 28, 2008[,] CNO finalized its restatement. Thereafter, CNO announced on August 11, 2008[,] its plan to transfer LTC to an independent trust and contributed capital to the trust when LTC was transferred.
Carter alleges that the Company was harmed by these events. He further alleges that he did not make a demand on CNO’s Board before filing suit because it would have been futile to do so,
C. The Related Federal Securities Litigation
Carter based this shareholder derivative litigation largely on prior pending federal securities litigation filed in the United States District Court for the Southern District of New York. That litigation is styled Plumbers & Pipefit-ters Local Union No. 719 Pension Trust Fund v. Conseco, Inc., No. 09-CV-6966 (S.D.N.Y.). The majority of Carter’s confidential witness allegations are taken from the Plumbers complaint.... Plumbers names only the officer defendants from this litigation. It does not name any of the Outside Directors as defendants or direct any of its confidential witness allegations at those individuals.[fn]
[Footnote: Defendants point out that Carter modified all but one of the confidential witness allegations from Plumbers when he incorporated them into the complaints he has filed here, changing the subject of the allegations to include the Outside Director defendants.]
The Plumbers matter was dismissed March 30, 2011. In dismissing that litigation, United States District Court Judge John G. Koetl held that the information that the CNO officer defendants allegedly possessed relating to LTC’s prospects, reserves, and record keeping did not “support[ ] a strong and plausible inference that the [defendants] made any of the challenged public statements with knowledge that they were false or with reckless indifference[.] ... To the contrary, nearly all of this information was addressed in some form in the company’s lengthy and thorough public disclosures.” Plumbers & Pipefitters Local Union No. 719 Pension Trust Fund v. Conseco, Inc., 09 Civ. 6966(JGK) [2011 WL 1198712, at *20], 2011 U.S. Dist. LEXIS 34241, at *57 (S.D.N.Y. Mar. 30, 2011). Judge Koetl further held that the Plumbers complaint was “wholly devoid of any particularized allegation connecting the individual defendants to information suggesting unlawful activity within the company[,]” (id. at [*23, 2011 U.S. Dist. LEXIS 34241 at] *62-*63), and did not support the inference that anyone knowingly made material misstatements[,] (id. at [*23-24, 2011 U.S. Dist. LEXIS 34241 at] *64-*65). Judge Koetl also detailed inadequacies of the confidential witness allegations on which Carter heavily relies here.

Appellant’s App. at 14-17 (some alterations in original). In sum, the trial court granted the motion to dismiss, finding that Carter had not shown that demand was futile as required by Delaware law. Carter now appeals.

DISCUSSION AND DECISION

Derivative actions are suits “ ‘asserted by a shareholder on the corporation’s behalf against a third party ... because of the corporation’s failure to take some action against the third party.’ ” G & N Aircraft, Inc. v. Boehm, 743 N.E.2d 227, 234 (Ind.2001) (quoting Black’s Law Dictionary 455 (7th Ed. 1999)). They are brought “to redress an injury sustained by, or enforce a duty owed to, a corporation.” Id. (citation and internal quotation marks omitted). Derivative actions are brought in the name of the corporation and are usually governed by Trial Rule 23.1 and Indiana Code Section 23-1-82-1.

Before filing a derivative action, a plaintiff must make a demand on the board of directors to take action against the third party on behalf of the corporation as sought in the complaint. Indiana Trial Rule 23.1 provides: “[T]he complaint shall also allege with particularity the efforts, if any, made by the plaintiff, to obtain the action he desires from the directors or comparable authority and the reasons for his failure to obtain the action or for not making the effort.” The issues presented in this case turn on whether the plaintiff in a shareholder derivative action has pleaded facts sufficient to avoid the requirement that he make a demand on the board before filing suit.

The substantive law on demand is the law of the state of incorporation. Piven v. ITT Corp. (In re ITT Derivative Litig.), 932 N.E.2d 664, 667 (Ind.2010) (citing Kamen v. Kemper Fin. Servs. Inc., 500 U.S. 90, 111 S.Ct. 1711, 114 L.Ed.2d 152 (1991)). CNO Financial is incorporated in Delaware. Therefore, while we apply the procedural rules of Indiana, we must consider Delaware substantive law to determine whether demand is excused in this case. See id. Delaware Court of Chancery Rule 23.1 is almost identical to Indiana Trial Rule 23.1 and also requires the shareholder in a derivative action to make a demand on the board before filing suit. That rule, which is part of the substantive law of Delaware on demand futility, provides in relevant part:

In a derivative action brought by one or more shareholders or members to enforce a right of a corporation ..., the corporation ... having failed to enforce a right which may properly be asserted by it, the complaint ... shall also allege with particularity the efforts, if any, made by the plaintiff to obtain the action the plaintiff desires from the directors or comparable authority and the reasons for his failure to obtain the action or for not making the effort.

Del. Ch. Ct. R. 23.1. The Delaware Supreme Court has explained the reason for that rule:

It is a fundamental principle of the Delaware General Corporation Law that “[t]he business and affairs of every corporation organized under this chapter shall be managed by or under the direction of a board of directors.... ” Thus, “by its very nature [a] derivative action impinges on the managerial freedom of directors.” Therefore, the right of a stockholder to prosecute a derivative suit is limited to situations where either the stockholder has demanded the directors pursue a corporate claim and the directors have wrongfully refused to do so, or where demand is excused because the directors are incapable of making an impartial decision regarding whether to institute such litigation.

Stone v. Ritter, 911 A.2d 362, 366-67 (Del. 2006) (alterations in original) (citations omitted).

Appellate review of decisions applying Delaware Chancery Court Rule 23.1 is de novo. Brehm v. Eisner, 746 A.2d 244, 254 (Del.2000). Here, the Defendants used a Rule 12(b)(6) motion to dismiss as the vehicle for alleging Carter’s failure to meet the pleading requirements discussed below. Our review of a trial court’s grant or denial of a motion to dismiss for failure to state a claim is similarly de novo. PricewaterhouseCoopers, LLP v. Massey, 860 N.E.2d 1252, 1256 (Ind.Ct.App.2007), trans. denied.

Pleading Burden

A plaintiff seeking to avoid the demand requirement of Delaware Chancery Court Rule 23.1 faces a high pleading burden. That burden has been described as follows:

The demand requirement is not a mere procedural formality, but rather an important stricture of substantive law. Court of Chancery Rule 23.1 requires that the complaint allege “with particularity” the reasons for the plaintiffs failure to make a demand on the board. This standard is more stringent than the pleading standard under Court of Chancery Rule 12(b)(6). Thus, it is plaintiffs burden to plead, with allegations of particularized facts, why making a demand would have been futile.

Edward P. Welch et al., Folk on the Delaware General Corporation Law § 327.4.2.2, at GCL-XIII-8S to -84 (5th ed. 2012) (footnotes omitted). Conclusory allegations of fact or law that are not supported by allegations of specific fact may not be taken as true. Brehm, 746 A.2d at 254.

Rule 23.1 is not satisfied by conclusory statements or mere notice pleading. On the other hand, the pleader is not required to plead evidence. What the pleader must set forth are particularized factual statements that are essential to the claim. Such facts are sometimes referred to as “ultimate facts,” “principal facts” or “elemental facts.” Nevertheless, the particularized factual statements that are required to comply with the Rule 23.1 pleading rules must also comply with the mandate of Chancery Rule 8(e) that they be “simple, concise and direct.” A prolix complaint larded with conclusory language ... does not comply with these fundamental pleading mandates.

Id. (footnotes omitted).

Nevertheless, the “reasonable doubt” standard of Aronson [v. Lewis, 473 A.2d 805 (Del.1984), discussed below,] unavoidably calls upon the trial court to make a decision that is highly particular and involves informed judgment. That judgment will be factual in nature and will determine whether the accumulation of all relevant factors pleaded creates a reasonable doubt as to the availability of business judgment protection. Delaware courts have refused to establish a particular “reasonable doubt” standard, but instead employ an objective analysis to determine whether a plaintiffs complaint contains the facts necessary to support a finding of reasonable doubt.

Welch, supra, § 327.4.2.2, at GCL-XIII-84 (footnotes omitted). “The pre-suit demand futility analysis must be conducted for each claim in a stockholder derivative action.” Id. at GCL-XIII-85.

Aronson Test

In cases based on a particular decision or transaction of a board of directors, the test for determining whether demand is excused is set out in Aronson v. Lewis. Under that test, demand will be excused only if the plaintiff alleges in the complaint particularized facts creating a reasonable doubt that “(1) the directors are disinterested and independent [or that] (2) the challenged transaction was otherwise the product of a valid exercise of business judgment.” 473 A.2d at 814. Under the first prong of Aronson, a director is “ ‘interested if he will be materially affected, either to his benefit or detriment, by a decision of the board, in a manner not shared by the corporation and the stockholders.’ ” Welch, supra, § 327.4.2.4.1., at GCL-XIII-S9 (quoting Seminaris v. Landa, 662 A.2d 1350, 1354 (Del.Ch.1995)). Under the second prong of the Aronson test, the shareholder plaintiff must demonstrate a reasonable doubt that the challenged transaction was otherwise the product of a valid exercise of business judgment. Aronson, 473 A.2d at 814.

Rales Test

In some cases, the conduct complained of in the derivative action may not be based on a particular business decision or transaction. For example, the shareholder plaintiff may allege that the corporation has been damaged by the board’s failure to act. “Where there is no conscious decision by directors to act or refrain from acting, the business judgment rule has no application.” Rales v. Blasband, 634 A.2d 927, 934 (Del.1993), abrogated on other grounds by Hamilton Partners, L.P. v. Englard, 11 A.3d 1180, 1207 (Del.Ch.2010), (citing Aronson, 473 A.2d at 813). “Instead, it is appropriate in these situations to examine whether the board that would be addressing the demand can impartially consider its merits without being influenced by improper considerations.” Rales, 634 A.2d at 934. In such cases, the court

must determine whether or not the particularized factual allegations of a derivative stockholder complaint create a reasonable doubt that, as of the time the complaint is filed, the board of directors could have properly exercised its independent and disinterested business judgment in responding to a demand. If the derivative plaintiff satisfies this burden, then demand will be excused as futile.

Id. at 935. The parties agree that the Rales test applies in this case.

Issue One: Demand Futility

In paragraph 227 of the Amended Complaint, Carter sets out nine reasons that demand on the board was not required before filing his complaint. We consider each of the demand futility allegations in turn under the Rales test. Again, under that test we must determine whether Carter’s Amended Complaint alleges particularized factual allegations creating a reasonable doubt that, as of the time the Amended Complaint was filed, a majority of the Director Defendants could have properly exercised their independent and disinterested business judgment in responding to a demand. See id. at 935. In other words, here we must review the Amended Complaint to determine whether Carter has made particularized factual allegations to show a reasonable doubt that a majority of the ten-member Board, at least six of them, could have impartially considered the merits of demand without being influenced by improper considerations. See id. at 934.

“A director is considered interested where he or she will receive a personal financial benefit from a transaction that is not equally shared by the stockholders.” Rales, 634 A.2d at 936. “Directorial interest also exists where a corporate decision will have a materially detrimental impact on a director, but not on the corporation and the stockholders.” Id. Additionally, the mere threat of personal liability is insufficient to show that a director is interested. See id. But a director’s interest may be demonstrated by showing that that director faces a substantial likelihood of liability. See id.

Carter first contends that demand on the board was excused because:

227.a. A majority of the members of the Board were aware of, or should have been aware of, numerous red flags regarding the Company’s serious problems with its LTC business segment, including claims documentation issues, the failure to adequately set reserves, data integrity issues, budget problems, and market conduct violations. As such, a majority of the current Board knew[ ] or was recklessly indifferent to facts that, among other things: (i) multiple internal control failures caused claim loss/reserve data to be inherently unreliable; and (ii) Defendants were systematically understating reserves; which (iii) caused the Company’s financial statements to be artificially and materially overstated. Notably, half of the Company’s current directors (defendants Hilliard, Schneider, Tokarz, Turner, and Perry) have served as directors of the Company since 2004 or prior to 2004. In particular, as alleged herein, by 2003, the Board was meeting on a quarterly basis in the “War Room,” to specifically discuss issues with LTC with the Company’s senior officers, and these meetings began to occur with increasing frequency in 2005. [Confidential Defense Witness 1 (“DW1”) ] has also stated that LTC Reports prepared by LTC personnel regarding the LTC business containing a range of information including claims issues, reserve issues, budget problems, and market conduct violations were regularly provided to the Board in connection with the War Room meetings, along with comprehensive compliance reports personally prepared by DW1 (which “often” dealt, at least in part, with the Company’s ongoing LTC issues). Moreover, as discussed above, during the nine[-]month period spanning between [sic] 2004 and 2005, a comprehensive internal audit of the LTC segment was performed, and after the audit was concluded sometime in 2005, as Audit Committee members, defendants Schneider, Perry, and Turner received detailed results of this audit. Despite clearly being placed on notice of serious issues regarding LTC which were causing the Company’s reserves to be inadequately set, defendants Hilliard, Schneider, To-karz, Perry, and Turner consciously disregarded their fiduciary duties to CNO when, under their direction, the Company’s ongoing LTC issues were not addressed and the Company continued to inadequately set reserves over a multi-year period. Thus, demand was not required upon Hilliard, Schneider, Tokarz, Perry and Turner. Because Hilliard, Schneider, Tokarz, Perry and Turner comprise a majority of the directors on the Board (for demand futility purposes), demand is excused[.]
227.b. Defendants Hilliard, Schneider, Tokarz, Perry and Turner are also interested in demand because they engaged in conduct which is not protected by the business judgment rule in connection with their decision not to remedy the serious problems known to them through the various “red flags” described above. These directors were clearly placed on notice for years of the Company’s problems, yet chose to do nothing to remedy them. This decision is not a protected business judgment. Thus, demand is excused as to Hilliard, Schneider, Tokarz, Turner, and Perry, and because they comprise a majority of the Board, demand is excused[.]

Appellant’s App. at 103-05. Details supporting these allegations are found earlier in the Amended Complaint. But Carter has not stated anywhere in the Amended Complaint particularized facts on which we could conclude that a majority of the Board members, or any of them, received a personal financial benefit or detriment not shared by the stockholders. Nor does the Amended Complaint allege facts to show that the named directors face a substantial likelihood of liability arising from their alleged failure to “remedy serious problems known to them through the various ‘red flags’ described above.” Id.

In sum, the conclusory allegations in these sub-paragraphs are insufficient to satisfy the Rales test. To the extent Carter contends that the business judgment rule offers no protection, that rule has no application under the Rales test in any event. Rales, 634 A.2d at 934. Sub-paragraphs 227.a. and 227.b. do not contain particularized allegations of fact to show that the Director Defendants were not disinterested or faced a substantial risk of liability for their performance as directors. Therefore, Carter has not shown in sub-paragraphs 227.a. or 227.b. that demand was futile.

Carter next contends:

227.c. Demand is further excused because the Board failed to exercise its good faith judgment to ensure that the Company’s information and reporting system was in concept and design adequate to assure the Board that appropriate information will come to its attention in a timely manner as a matter of ordinary operations. In particular, it is unquestioned that the Board had actual knowledge of the Company’s LTC problems and failed to do anything to prevent and/or remedy them[;] however[,] this knowledge did not come as a result of an adequate system of information[-]reporting during the ordinary course of operations. Ratherf,] this information came to the Board’s attention as a result of various audits, special meetings, and government investigations. Had the Board properly ensured that an adequate information[-]reporting system was in place from the beginning, as they were required to do under Delaware law, the serious problems with the Company’s LTC segment could have been remedied before the Company suffered the substantial harm alleged herein. Thus, demand is futile[.]

Appellant’s App. at 105-06. Again, Carter has not alleged, here or elsewhere in the Amended Complaint, that a majority of the Directors were interested or faced a substantial likelihood of liability for the conduct described in sub-paragraph 227.C. Nor does this sub-paragraph summarize conduct that is detailed elsewhere in the Amended Complaint for which we could conclude that the Directors were interested or faced a substantial likelihood of liability. Thus, the demand futility allegations in sub-paragraph 227.C. also fail the Rales test.

Carter further contends that:

227.d. Demand is also excused because, as detailed herein, the Board intentionally misled the Multistate Examiners or permitted others to do so, thus clearly illustrating their hostility to the relief sought in this action. Accordingly, a reasonable stockholder would not believe, based on the confidential witness testimony detailed above, that the Board would have been able to properly and impartially consider a demand in good faith. Thus, demand is futile[.]

Appellant’s App. at 106. With regard to the Multistate Examination, Carter alleges that “false and misleading information was provided to the Multistate Examiners,” and he details the nature of the misinformation in paragraphs 165 through 170 of the Amended Complaint. Id. at 75. There Carter alleges that “Defendants falsely reported” information to the Multi-state Examiners and “misrepresented ... that the inappropriate use of [a certain claims processing method, the No Letter Close,] was discontinued by May 2007[.]” Id. at 78. But the complaint does not allege that the Board’s duties included providing information to or in any way interacting with the Multistate Examiners. Such work was likely the responsibility of the Company’s senior officers and their subordinates. And the Complaint does not allege with particularity facts to show that the Board was aware and “permitted others” to mislead or misinform the Multi-state Examiners. Id. at 106.

The allegations in sub-paragraph 227.d. are conclusory and do not show that the Director Defendants were interested or faced a substantial risk of liability with regard to the Multistate Examination. And the Multistate Examiners did not find any particular person or persons liable for the problems they found at Conseco. As such, Carter has not shown that demand is excused as to the Board’s conduct regarding the Multistate Examination.

With regard to the Board’s duties under the corporate Governance Guidelines, Carter alleges:

227.e. Every member of the Board is required to comply with the Company’s Corporate Governance Guidelines. The Corporate Governance Guidelines require each of the Company’s directors to monitor “management’s performance and adherence to corporate standards.” Further, the Corporate Governance Guidelines requires [sic] directors to focus “on the integrity, quality and clarity of the corporation’s financial reports and public disclosures and the processes that produce them.” Therefore, defendants Hilliard, James, Long, Perry, Prier, Schneider, Tokarz, and Turner face a substantial likelihood of liability for their breaches of fiduciary duties and any demand upon them is futile[.]

Appellant’s App. at 106. In sum, Carter alleges that the named Director Defendants faced a substantial risk of liability because they did not perform their duties on the board in compliance with the Corporate Governance Guidelines. But elsewhere the Amended Complaint alleges that the Board was aware of and met to find solutions for the problems plaguing the LTC segment. Specifically, beginning in 2003 the Director Defendants met quarterly “to address[] multiple and serious problems with LTC[.]” Id. at 63. Those meetings increased in frequency beginning in 2005. The meetings to address the problems in the LTC segment demonstrate that the Board was attempting to monitor “management’s performance and adherence to corporate standards.” Id. Moreover, following the Multistate Examination, the company agreed to a settlement under which it agreed to pay more than $32 million in fines and costs, $30 million of which was dedicated to claims-handling improvements and restitution. Again, Carter has not alleged with particularity facts to show that the Director Defendants did not perform their duties in compliance with the Corporate Governance Guidelines. As such, Carter has not shown that the Director Defendants are subject to a substantial likelihood of liability for the conduct described in sub-paragraph 227.3 and, therefore, that sub-paragraph does not show that demand was excused.

Finally, Carter asserts the following three claims based on the named Directors’ memberships on the Governance Committee, the Audit Committee, and the Compensation Committee respectively as bases for excusing demand:

227.f. At times relevant hereto, defendants Long, Schneider, and Turner served as members of the Audit Committee. Pursuant to the Audit Committee Charter, members of the Audit Committee are charged with oversight of the integrity of the Company’s financial statements, public disclosures and financial reporting process. Defendants Long, Schneider, and Turner breached their fiduciary duties of due care, loyalty, and good faith, because the Audit Committee permitted the above false and misleading statements to be made, which eventually led to a restatement. Therefore, defendants Long, Schneider, and Turner face a substantial likelihood of liability for their breach of fiduciary duties and any demand upon them is futile[.]
227.g. At times relevant hereto, defendants Perry and Tokarz served as members of the Governance Committee. Pursuant to the Governance Committee Charter, members of the Governance Committee are charged with adopting policies designed to encourage the highest levels of corporate conduct by the Board, the Company and its officers, employees and agents. Defendants Perry and Tokarz breached their fiduciary duties of due care, loyalty, and good faith because the Governance Committee permitted the pervasive misconduct described above to go undisclosed. Therefore, defendants Perry and Tokarz face a substantial likelihood of liability for their breach of fiduciary duties and any demand upon them is futile;
227.h. Defendants Tokarz, Perry, and James are interested as a result of their conduct on the Compensation Committee. Pursuant to the Company’s Compensation Committee Charter, directors on the Compensation Committee are responsible for, inter alia, reviewing and approving the compensation of the Company’s senior officers in conduction with previously established performance metrics. Defendants Tokarz, Perry, and James breached their fiduciary duties of due care, loyalty, and good faith, because the Compensation Committee, inter alia, awarded the above-discussed compensation based on admittedly false financial results as evidenced by the Company’s need for a restatement. Further, the Compensation Committee has done nothing to rectify its above failures.
Therefore, defendants Tokarz, Perry, and James (if not the entire Board) each face a substantial likelihood of liability for their breach of fiduciary duties and any demand upon them is futile[.]

Id. at 106-08. Even if we were to conclude that the detailed factual allegations preceding paragraph 227 in the Amended Complaint support Carter’s contention that the named Directors breached then-respective Committee duties, Carter has not alleged with particularity facts to show that the named Directors faced a substantial likelihood of liability as a result of such breaches. Therefore, Carter has failed in these sub-paragraphs to show that demand is excused under Rales.

In sum, the Amended Complaint does not include particularized factual allegations that would create a reasonable doubt as to whether a majority of the Director Defendants could have properly exercised their disinterested business judgment in responding to a demand. See Rales, 684 A.2d at 935. Nor do the allegations show that the Director Defendants face a substantial likelihood of liability for the inadequate conduct set out in the Amended Complaint. See id. As such, Carter has not shown that demand was excused under Rales.

Issue Two: Exculpatory Provision

Carter also contends that the trial court erred “by even considering, much less relying on, CNO’s exculpatory provision in granting the motion” to dismiss. Appellant’s Brief at 39. As discussed below, where a corporate charter contains an exculpatory provision, a derivative action plaintiff faces a higher and slightly different burden to avoid demand than under the Rales test. Carter argues that the burden imposed by the inclusion of an exculpatory provision in a corporate charter does not apply at the motion to dismiss stage and, even if that higher burden may be considered, that he has met that burden. Assuming for the sake of argument that the exculpatory provision applies to the claims in the Amended Complaint, we consider whether the Amended Complaint alleges particularized facts to show that demand would have been futile under the higher and slightly different standard that arises under CNO’s exculpatory clause.

CNO’s certifícate of incorporation contains an exculpatory provision provided for in Delaware Code title 8, section 102(b)(7). In such cases, director defendants are “exculpate[d] from personal liability for violations of fiduciary duty, except for, among other things, breaches of the duty of loyalty or actions or omissions not in good faith or that involve intentional misconduct or a knowing violation of the law.” In re Citigroup Inc. S’holder Derivative Litig., 964 A.2d 106, 124 (Del.Ch.2009). “Such a provision can exculpate directors from monetary liability for a breach of the duty of care, but not for conduct that is not in good faith or a breach of the duty of loyalty.” Stone, 911 A.2d at 367. Where, as here, a corporation has included a § 102(b)(7) exculpatory clause in the certificate of incorporation, “a serious threat of liability may only be found to exist if the plaintiff pleads a non-exculpated claim against the directors based on particularized facts.” In re Citigroup, 964 A.2d at 124. “[T]he risk of liability does not disable [directors] from considering a demand unless particularized pleading permits the court to conclude that there is a substantial likelihood that the directors’ conduct falls outside the liability exemption.” Welch, supra. § 327.4.2.4.2, at GCL-XIII-94.

The standard for assessing oversight liability under Caremark and the standard for assessing a disinterested director’s decision under the duty of care when the company has adopted a § 102(b)(7) exculpatory provision are similar. Id. at 125.

In either case, a plaintiff can show that the director defendants will be liable if their acts or omissions constitute bad faith. A plaintiff can show bad faith conduct by, for example, properly alleging particularized facts that show that a director consciously disregarded an obligation to be reasonably informed about the business and its risks or consciously disregarded the duty to monitor and oversee the business.”

Id. That is to say, if, after applying the Rales test a court determines that “ ‘a majority of the board is impartial ...,’ the court must then ‘consider whether the complaint sets forth particularized facts that plead a non-exculpated claim of breach of fiduciary duty against a majority of the board, thereby stripping away their first-blush veneer of impartiality.’ ” King v. Baldino, 648 F.Supp.2d 609, 617 (citing Guttman v. Huang, 823 A.2d 492, 501 (Del.Ch.2003)) (footnote omitted). In Issue One above, we applied the Rales test and determined that Carter has not shown a reasonable likelihood that the Director Defendants were interested. Next we must consider whether Carter has shown the lack of impartiality by demonstrating that the Director Defendants’ conduct constituted a breach of the duty of good faith or loyalty.

We first observe that Carter’s entire analysis regarding his burden in light of the exculpatory clause is found in only two paragraphs of his Appellant’s Brief. And those paragraphs contain absolutely no citations to the record to point out which claims support the argument. We remind counsel that analysis of an issue on appeal must be supported in relevant part by citations to the Appendix or parts of the Record on Appeal relied on, and failure to do so can result in waiver. Ind. Appellate Rule 46(A)(8)(a). And we will not search the record to find a basis for a party’s argument. Nealy v. Am. Family Mut. Ins., 910 N.E.2d 842, 845 n. 2 (Ind.Ct.App.2009), trans. denied. Waiver notwithstanding, we exercise our discretion to consider the merits of Carter’s Section 102(b)(7) claim.

Carter contends that “Section 102(b)(7) does not shield Defendants from liability where, as here, there are allegations of a conscious disregard of one’s responsibilities and other serious internal control deficiencies.” Appellant’s Brief at 42. Paragraphs 224 through 227 of the Amended Complaint pertain to Carter’s demand allegations, although the detailed supporting factual allegations is found elsewhere in the complaint. In the demand allegations Carter alleges the following breaches of duty relevant to his claim that demand was excused notwithstanding the exculpatory provision:

1. “Despite clearly being placed on notice of serious issues regarding LTC which were causing the Company’s reserves to be inadequately set, defendants Hilliard, Schneider, Tokarz, Perry, and Turner consciously disregarded their fiduciary duties to CNO when, under their direction, the Company’s ongoing LTC issues were not addressed and the Company continued to inadequately set reserves over a multi-year period.” (¶ 227.a.)
2. “[T]he Board failed to exercise its good faith judgment to ensure that the Company’s information and reporting system was in concept and design adequate to assure the Board that appropriate information will come to its attention in a timely manner and as a matter of ordinary operations.” (¶ 227.C.)
3. “[T]he Board intentionally misled the Multistate Examiners or permitted others to do so, thus clearly illustrating their hostility to the relief sought in this action.” (¶ 227.d.)
4. Members of the Audit Committee “breached their fiduciary duties of due care, loyalty, and good faith, because the Audit Committee permitted the above false and misleading statements to be made, which eventually led to a [financial] restatement.” (¶ 227.f.)
5. Members of the Governance Committee “breached their fiduciary duties of due care, loyalty, and good faith, because the Governance Committee permitted the pervasive misconduct described above to go undisclosed.” (¶ 227.g.)
6. Members of the Compensation Committee “breached their fiduciary duties of due care, loyalty, and good faith, because the Compensation Committee, inter alia, awarded ... compensation based on admittedly false financial results as evidenced by the Company’s need for a restatement” and “has done nothing to rectify its [stated] failures.” (¶ 227.L)

Appellant’s App. at 104-08.

We assume without holding that the paragraphs quoted immediately above allege bad faith by the conscious disregard of duties, the failure to exercise good faith, the intentional misleading of the Multistate Examiners, and the breach of the duty of good faith constitutes bad faith. But, as we determined in Issue One above, Carter has not alleged with particularity facts to show that the Directors consciously disregarded or breached their duties to the corporation, failed to exercise good faith judgment, or misled the Multistate Examiners. Indeed, Carter acknowledges in the Amended Complaint that the Director Defendants were aware of the problems in the LTC segment, including the reserves inadequacies, data integrity problems, and lack of policy records. He also acknowledges that the Director Defendants met quarterly in “War Room” meetings to address those issues from 2003, increased the frequency of those meetings in 2005, and attempted to remedy some of the problems by hiring consultants and implementing various new internal procedures. And in 2005 CNO’s quarterly financial filing with the Securities and Exchange Commission disclosed that the LTC segment’s losses had been larger than expected. Starting in 2006, CNO issued press releases disclosing problems in the LTC segment and that those problems had affected the company’s overall financial performance.

Carter has not made particularized factual allegations to support his conclusion that Director Defendants knew or should have known the exact extent of the problems in the LTC segment. Nor has he made particularized factual allegations to show that they hid the fact or extent of those problems from the internal auditors, the Multistate Examiners, or the public. The facts as alleged in the Amended Complaint point in the opposite direction. Therefore, we conclude that Carter’s Amended Complaint does not include particularized facts to support his allegations that the Director Defendants acted in bad faith in their capacity as members of CNO’s board of directors.

Conclusion

Pre-suit demand on a board of directors is a prerequisite to filing a derivative action. Here, to show that demand on the Director Defendants would have been futile, the Amended Complaint must allege with particularity facts to show either that the directors could not have made a disinterested decision upon demand or that they faced a substantial likelihood of liability for their conduct as board members. The Amended Complaint contains only conclusory allegations on these points. Carter also could have avoided demand by showing that the Director Defendants had breached their duties of good faith or loyalty. Again, the Amended Complaint falls short, failing to allege with particularity facts to show such breaches. Therefore, again, Carter has not shown that demand would have been futile. As such, the trial court did not err when it granted Defendants’ motion to dismiss for failure to make pre-suit demand.

Affirmed.

BAKER, and VAIDIK, JJ., concur.

      . We heard oral argument in this case on April 19, 2012.

      . Since the Amended Complaint was filed, Bonach has become the CEO of the Company.

      . Carter does not point to one or more particular transactions as the basis for his claims. Therefore, the Aronson test does not apply. However, it is described here because it is the foundation for the evolution of the pleading standard tests that followed.

      . With the exception of Prieur, Carter does not contend that the Director Defendants were not independent, only that they are interested.

      . Carter makes a final allegation regarding demand, namely that demand is excused as to Prieur because Prieur, as a CEO of the Company, is not independent. Defendants concede that Prieur is not independent. We con-elude that Carter has not shown that any other Directors are interested or not independent, and demand could not be excused based solely on Prieur not being an independent director.

      .In their briefs and at oral argument, the parties also debated whether the Amended Complaint states oversight claims under In re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del.Ch.1996). Oversight or Caremark claims arise where a claim is not based on a particular transaction or decision but, instead, on an "unconsidered failure of the board to act in circumstances in which due attention would, arguably, have prevented the loss.” Caremark, 698 A.2d at 967. Caremark claims must satisfy an even higher burden for demand to be excused, namely, that "(1) that the directors knew or (2) should have known that violations of law were occurring and, in either event, (3) that the directors took no steps in a good faith effort to prevent or remedy that situation, and (4) that such failure proximately resulted in the losses complained of[.]" Id. at 971. But the Rales test also applies to Caremark claims. Wood v. Baum, 953 A.2d 136, 140 (Del.2008). Because we conclude that Carter’s Amended Complaint has not satisfied the Rales test for excusing demand, we need not consider whether the allegations in the Amended Complaint satisfy the even higher demand futility burden imposed on oversight claims.

      . If we were to conclude that Carter’s Amended Complaint asserts claims that are not subject to the higher pleading burden under the exculpatory clause, we would be left to evaluate his claims under Rales. We have already determined that Carter has not shown that demand was futile under Rales.

      . Delaware Code title 8, section 102(b)(7) provides, in relevant part, that a certificate of incorporation may include
      [a] provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director: (i) For any breach of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; ... or (iv) for any transaction from which the director derived an improper personal benefit.

      . In Plumbers & Pipefitters Local Union No. 719 Pension Trust Fund v. Conseco, Inc., 2011 WL 1198712, at *60-*61 (S.D.N.Y.), the district court found that Conseco had made “extensive disclosures” from which the most compelling inference is that the [Con-seco officers] actively and diligently sought to apprise the market of information relevant to Conseco’s corporate prospects, and the risks and prospects of the LTC business and the challenges it faced, particularly with respect to reserves. The most compelling inference, in the face of the extensive negative information that was disclosed, is that the defendants were unaware of anymore severe material adverse information[ ] and that much of what the plaintiff calls inadequate disclosures are simply pejorative characterizations of what was disclosed.


author: BARNES, Judge.

text:
    CITY OF INDIANAPOLIS, Appellant-Defendant, v. Rachael BUSCHMAN, Appellee-Plaintiff.
    No. 49A02-1108-CT-782.
    Court of Appeals of Indiana.
    June 26, 2012.

      Justin F. Roebel, Office of Corporation Counsel, Indianapolis, IN, Attorney for Appellant.
    James H. Young, Young & Young, Indianapolis, IN, Attorney for Appellee.
   OPINION

BARNES, Judge.

Case Summary

The City of Indianapolis (“the City”) appeals the trial court’s entry of summary judgment in favor of Rachael Buschman on the issue of the sufficiency of her tort claim notice. We reverse and remand.

Issue

The City raises one issue, which we restate as whether Buschman’s tort claim notice was sufficient to notify the City of her personal injury claims.

Facts

On July 25, 2008, Buschman was rear-ended by an Indianapolis police officer on 86th Street in Indianapolis. On August 1, 2008, Buschman submitted a tort claim notice to the City. Buschman’s notice included her name, address, and phone number; the time and place of the accident; the police officer’s name, date of birth, and driver’s license number; the accident report number; and the investigating officer’s identification number. The notice also provided:

Damage: Rear Bumper and side panels damaged, see estimate from Sam Swope. No injuries.
Claim: $960.99

App. p. 19. Buschman enclosed photos, the accident report, and a damage repair estimate with her notice.

On July 9, 2010, Buschman filed a complaint against the City, alleging that as a result of the City’s negligence she “suffered personal injuries, including left hip pain, right leg pain, lower back pain and herniation of her lumbar discs at L4-5.” App. p. 8. Buschman also alleged that she had incurred medical expenses, had lost time and earnings from work, and had endured great pain, suffering, and mental anguish.

On October 28, 2010, the City filed its answer. As an affirmative defense, the City asserted that Buschman’s claims were barred because her tort claim notice was insufficient. That same day, the City moved for judgment on the pleadings based on Buschman’s tort claim notice. Buschman responded, relying in part on her affidavit explaining that she mailed her tort claim notice four days after the accident and that at that time she “only had soreness” and did not believe she had an injury. App. p. 52. According to the affidavit, only later did Buschman realize she had injuries from the accident and seek medical treatment. Buschman later moved for summary judgment, as opposed to judgment on the pleadings, based on the parties’ references to matters outside the pleadings. Following a hearing, the trial court concluded that Buschman’s tort claim notice was sufficient as a matter of law and granted summary judgment on this issue in Buschman’s favor. The order was certified for interlocutory appeal, and we accepted jurisdiction over the City’s appeal.

Analysis

The City argues that Buschman was not entitled to summary judgment because her tort claim notice did not substantially comply with the notice requirements of the Indiana Tort Claims Act (the “Act”). We review a trial court’s ruling on a motion for summary judgment using the same standard applicable to the trial court. Perdue v. Gargano, 964 N.E.2d 825, 881 (Ind.2012). “Summary judgment is appropriate only if the designated evidence reveals ‘no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ ” Id. (quoting Ind. Trial Rule 56(C)). All facts and reasonable inferences drawn from the evidence designated by the parties are construed in the light most favorable to the non-moving party. Id. “We do not defer to the trial court’s determination of the law.” Id.

According to the Act, for a party to bring a tort claim against a political subdivision, the political subdivision must receive notice within 180 days after a loss occurs. Howard County Bd. of Comm’rs v. Lukowiak, 810 N.E.2d 379, 881 (Ind.Ct.App.2004) (citing Ind.Code § 34-13-3-8), clarified on reh’g, 813 N.E.2d 391. The notice:

must describe in a short and plain statement the facts on which the claim is based. The statement must include the circumstances which brought about the loss, the extent of the loss, the time and place the loss occurred, the names of all persons involved if known, the amount of the damages sought, and the residence of the person making the claim at the time of the loss and at the time of filing the notice.

I.C. § 34-13-3-10.

Our supreme court has explained:

a notice is sufficient if it substantially complies with the content requirements of the statute. What constitutes substantial compliance, while not a question of fact but one of law, is a fact-sensitive determination. In general, a notice that is filed within the 180 day period, informs the municipality of the claimant’s intent to make a claim and contains sufficient information which reasonably affords the municipality an opportunity to promptly investigate the claim satisfies the purpose of the statute and will be held to substantially comply with it.

Collier v. Prater, 544 N.E.2d 497, 499 (Ind.1989). The Collier court rejected a formalistic approach and stated that the crucial consideration is whether the notice supplied by the claimant of his or her intent to take legal action contains sufficient information for a political subdivision to ascertain the full nature of the claim against it so that it can determine its liability and prepare a defense. Id. at 500. According to Collier, “[w]hat information is sufficient will vary depending on the facts of each case.” Id.

In Collier, our supreme court analyzed whether a notice that identified Collier as the claimant, stated an intent to seek damages, noted that the damages were for injuries received during an arrest, identified the persons involved in that arrest, and explained that the full extent of his damages could not be ascertained at that time was sufficient. Id. The court held that the failure to include the place or the date of the event producing the injury was of no great moment because the city needed only to contact the officers involved or the police department to obtain that information. Id. The court observed:

Just as the notice statute should not become a trap for the unwary, ... neither should it become a refuge for the unconscientious. The appellees had all the information before them necessary to make an adequate investigation to determine their liability and prepare a defense. They failed to do so and sought protection in the formalities of the notice requirements. Allowing them protection under the circumstances here would thwart the purpose behind the notice provisions of the tort claims statute.

Id.

The City asserts that Collier is distinguishable. According to the City, Busch-man’s explicit denial of injuries in her notice gave the City no reason to investigate a personal injury claim or to anticipate a claim for medical expenses, lost earnings, and pain and suffering. Buschman responds by asserting that she was not required to specify the type of claim she might bring or specify the damages she might seek. She contends that the purpose of the statute was fulfilled because the City knew of her intent to make a claim and the specifics of the accident such that it could investigate, determine its possible liability, and prepare a defense.

Even if Buschman was not required to specify the claims she might bring or the amount of damages she might seek in her notice, the question before us is not whether the notice is improperly vague or open-ended regarding “the extent of the loss” or “the amount of the damages sought.” I.C. § 34-13-3-10. To the contrary, Busch-man’s notice specifically informed the City of rear bumper and side panel damage in the amount of $960.99 and expressly stated, “No injuries.” App. p. 19. Even the most liberal construction of Buschman’s notice would not have put the City on notice of a potential personal injury claim.

In this regard, this case is similar to Lukowiak, which involved a notice informing the Board of claims for damages to an automobile and for medical costs. Lukowiak, 810 N.E.2d at 383. We determined that such a notice did not encompass a loss of consortium claim or a claim for lost wages. Id. We reasoned that the Board was made aware that it needed to defend itself against a claim only for damages to an automobile and for medical costs and that to hold otherwise would effectively eliminate the safeguard that political subdivisions be able to ascertain the full nature of the claim against it based upon the notice. Id. at 383-84.

Although Buschman’s notice indicated an intent to take legal action, it did not contain sufficient information for the City to anticipate a potential personal injury claim so that it could assess the full extent of its liability and prepare a defense. Even if, as Buschman contends, the City could not have further investigated the extent of her injuries or her injuries could have changed over time, the City might have approached its investigation of the accident or its assessment of liability differently had known it faced a potential personal injury claim in addition to the claim for damage to the vehicle.

We also disagree with Buschman’s suggestion that the City had all the information it needed to investigate the claim, to determine its liability, and to prepare a defense. Unlike in Collier, there is no indication that the City had information in its own files from which it could determine that Buschman was injured in the accident. In fact, according to her affidavit, Busch-man herself did not even realize the she was injured until sometime after she submitted her notice. This is not circumstance in which the City used the Act as “a refuge for the unconscientious.” Collier, 544 N.E.2d at 500.

Buschman also argues that she was not statutorily required to submit a second notice or amend her notice once she became aware of her physical injuries. We are not persuaded that by merely submitting a tort claim notice Buschman preserved all claims and the ability to recover all damages that arose out of the accident. Such a holding would effectively eliminate “the extent of the loss” and “the amount of the damages sought” provisions from the notice requirement. I.C. § 34-13-3-10. Instead, we hold that, when a claimant’s notice contains a specific and definitive assessment of loss, his or her recovery is limited to the loss described in the original notice. Alternatively, if, as is the case here, additional losses are discovered after the notice has been submitted, we see no reason why the claimant could not amend the original notice or submit another notice in a timely manner. See Lukowiak, 810 N.E.2d at 384 (observing that, although no provision of the Act authorizes a claimant to file an amended notice, had a timely amended notice been filed “we perceive of no problem with allowing the amendments to be applicable to the claim.”).

Buschman also argues that, because the statute does not expressly require claimants to amend a notice or submit another notice upon learning of additional losses, it “is just another trap for unwary, unsophisticated or untrained citizens.” Appellee’s Br. p. 17. We appreciate Buschman’s concerns and steadfastly favor broad access to the courts; however, this is an issue for the Legislature to resolve. Buschman’s notice contained a definitive statement of her damages and an express denial of injuries. Under these circumstances, the notice was insufficient to inform the City of any potential liability for a personal injury claim regardless of the extensive details concerning the accident itself. Thus, Buschman’s notice did not substantially comply with the requirements of the Act for purposes of her personal injury claim, and summary judgment in her favor on this issue was improper.

Conclusion

The trial court improperly granted summary judgment in Buschman’s favor on the issue of whether her notice was sufficient to inform the City of a potential personal injury claim. We reverse and remand for further proceedings.

Reversed and remanded.

FRIEDLANDER, J., and MAY, J„ concur.

      . The complaint initially named Buschman’s husband, Jeffry, as a plaintiff and the Indianapolis Metropolitan Police Department as a defendant. Stipulations of dismissal relating to these parties were filed, leaving Buschman and the City as the only remaining parties.

      . Buschman makes much of the fact that a previous version of the Act required a description of, among other'things, " ‘the nature and extent of the injury to person and loss, injury or damage, if any, to property, ... and the nature of the damages arising to anyone therefrom...” City of Evansville v. Rieber, 179 Ind.App. 256, 258, 385 N.E.2d 217, 220 (1979) (quoting Ind. Ann. Stat. § 48-8001). She asserts that the City should not attempt to write back into the statute what the Legislature deleted. We agree with the City, however, that the current version’s reference to “the extent of the loss,” and "the amount of the damages sought,” is another, less redundant way of saying the same thing as the previous statute. I.C. § 34-13-3-10.


author: BRADFORD, Judge. VAIDIK, Judge,

text:
    Ronald B. HAWKINS, Appellant-Defendant, v. STATE of Indiana, Appellee-Plaintiff.
    No. 20A03-1112-CR-579.
    Court of Appeals of Indiana.
    July 3, 2012.

      Nancy A. McCaslin, McCaslin & McCas-lin, Elkhart, IN, Attorney for Appellant.
    Gregory F. Zoeller, Attorney General of Indiana, Ellen H. Meilaender, Deputy Attorney General, Indianapolis, IN, Attorneys for Appellee.
   OPINION

BRADFORD, Judge.

Appellant-Defendant Ronald Hawkins appeals from his convictions of and sentences for two counts of Class C felony Non-Support of a Dependent Child. Hawkins contends that he was denied due process when he was tried in absentia and without trial counsel, that his presence at sentencing by video only was erroneous, that the trial court improperly entered judgment on both counts as Class C felonies, and that the trial court abused its discretion in imposing consecutive sentences. We affirm in part, reverse in part, and remand.

FACTS AND PROCEDURAL HISTORY

On January 14, 2011, the State charged Hawkins, who at the time resided in North Carolina, with two counts of Class C felony non-support of a dependent child. On April 28, 2011, the trial court appointed a public defender for Hawkins. At a hearing on July 27, 2011, at which Hawkins was present, the trial court set a trial date of November 7, 2011, and advised Hawkins that he would be tried “in [his] absence” if he failed to appear. Tr. p. 10.

On October 10, 2011, Hawkins’s attorney filed a motion to withdraw, a motion of which the chronological case summary (“CCS”) indicates Hawkins received notice. The CCS entry also indicates that Hawkins was notified that a hearing had been set for October 19, 2011, and that failure to appear at the hearing would “result in warrant for the Defendant’s arrest and withdrawal of Public Defender.” Appellant’s App. p. 4. On October 19, 2011, a hearing at which Hawkins participated by telephone was held on his attorney’s motion to withdraw. Hawkins’s attorney indicated that Hawkins had failed to participate in a telephonic trial preparation meeting on October 7, 2011, did not call to reschedule or cancel the meeting, had not provided her with a contact number, and had not provided her with any information regarding a possible disability defense. Apparently due to difficulty in conducting the hearing telephonically, the trial court adjourned the hearing and reset it for October 26, 2011. The trial court ordered Hawkins to appear personally at the reset hearing. On October 26, 2011, the trial court held a second hearing on Hawkins’s attorney’s motion to withdraw. Hawkins did not appear at the hearing, after which the trial court granted his attorney’s motion to withdraw and issued a warrant for his arrest. The CCS indicates that Hawkins was not sent notice that his attorney’s motion to withdraw had been granted.

On November 7, 2011, a jury trial was held on the charges against Hawkins, a trial at which neither he nor any trial counsel appeared. Following trial, the jury found Hawkins guilty as charged. The trial court entered judgment of conviction on both counts as Class C felonies. On November 28, 2011, the trial court received a letter from Hawkins purporting to explain why he had not appeared at the October 26, 2011, hearing or the trial. On December 7, 2011, the trial court held a sentencing hearing at which Hawkins appeared by video. The trial court sentenced Hawkins to four years of incarceration for each count of non-support of a dependent child, to be served consecutively, but all suspended and to be administered through the Elkhart County Community Corrections Program.

DISCUSSION AND DECISION

I. Whether Hawkins was Properly Tried in Absentia and Without Counsel

Hawkins does not contend that he was improperly tried in absentia but argues that to try him without representation violated his due process rights. Specifically, Hawkins contends that the record indicates that he was never put on notice that his trial counsel had withdrawn; he was never advised of his right to an attorney; and he did not voluntarily, knowingly, and intelligently waive that right.

A.Notice of Withdrawal

“An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 (1950). Hawkins contends that his due process rights were violated because he was not sent specific notice that his trial counsel’s motion to withdraw was granted following the October 26, 2011, hearing. The record clearly indicates, and Hawkins does not dispute, however, that he was on notice that his attorney’s motion to withdraw would be granted if he did not appear at the hearing on the motion, which, of course, he did not. On October 11, 2011, according to the CCS, Hawkins was notified that his “[fjailure to appear [at the hearing on his attorney’s motion to withdrawal] will result in warrant for the Defendant’s arrest and withdrawal of the Public Defender.” Appellant’s App. p. 4 (emphasis added). Although Hawkins did appear telephonically at the October 19, 2011, hearing on the motion, the hearing was reset to October 26, a hearing at which he failed to appear. There is no indication in the record that the trial court ever rescinded its warning about what would occur if Hawkins failed to appear, and Hawkins does not claim that he was unaware of the consequences of his failure to appear. Under the circumstances, we conclude that Hawkins’s due process rights were not violated in this regard.

B.Advisement of Right to Counsel

Hawkins notes that nothing in the record indicates that the trial court advised him of his right to counsel following his attorney’s withdrawal. Hawkins, however, cites to no authority, and we are aware of none, that requires such a read-visement. The record indicates, and Hawkins does not dispute, that Hawkins was adequately advised of his right to an attorney and that one would be appointed at public expense if necessary. First, the CCS indicates that a public defender was, in fact, appointed at Hawkins’s initial hearing. Moreover, on July 13, 2011, Hawkins signed a later-withdrawn guilty plea agreement that provided, inter alia, that “[t]he defendant understands that he has the right to have counsel represent him at all stages of this lawsuit, and if he cannot afford counsel, counsel will be appointed for him at public expense[.]” Appellant’s App. p. 33. Hawkins does not claim that he did not understand this advisement or how it somehow would have lost effect. We conclude that Hawkins was adequately advised of his right to counsel.

C.Waiver of Right to Counsel

“The right to be represented by counsel is also protected by both the Federal and Indiana Constitutions.” Jackson v. State, 868 N.E.2d 494, 499 (Ind.2007) (citing U.S. Const. amend. VI; Ind. Const, art. 1, § 13). “The right to counsel can be waived only by a knowing, voluntary, and intelligent waiver.” Id. (citing Jones v. State, 783 N.E.2d 1132, 1138 n. 2 (2003)). While we acknowledge that “a defendant’s absence from trial does not constitute a waiver of the right to counsel in every case[,]” id., this is one of those cases.

We find that the facts addressed by the Indiana Supreme Court in Jackson, in which waiver of the right to counsel was found, are close enough to dictate the same result here. In Jackson, the defendant had retained counsel but, at some point, decided to discharge him and retain new counsel. Id. at 497. At a status confer-enee on October 15, 2002, Jackson informed the trial court that he wished to discharge his present counsel and requested additional time to retain new counsel. Id.

The trial court granted Jackson’s request for additional time and rescheduled the jury trial for January 27, 2003 with two pretrial hearings on November 21, 2002 and December 26, 2002. Jackson was ordered to hire counsel by the November 21 pretrial conference. Neither Jackson, [Jackson’s former trial counsel], nor anyone else suggested that Jackson might proceed pro se. The trial court entered a written order setting the dates of the new pretrial hearings and the jury trial, granting Jackson’s request for additional time, noting that Jackson discharged his attorneys, and directing Jackson to retain substitute counsel by the next hearing. This order was handed to Jackson at the hearing.

Id. Neither Jackson nor any attorney appeared for either pretrial conference or the jury trial, after which Jackson was convicted. Id.

Under the circumstances, the Jackson court concluded that Jackson had knowingly, intelligently, and voluntarily waived counsel:

The record in Jackson’s case establishes that he repeatedly disregarded scheduled events. His last pretrial appearance in court ended with his counsel of record being discharged and an order setting a third and final trial date and directing Jackson to retain new counsel as he had said he would. He then failed to appear, failed to notify the court of his inability to retain counsel, and failed to request a continuance. We hold that this unexplained disregard of specific directions by the court and his own undertakings was sufficient to establish an intentional and inexcusable absence from trial and serves as a knowing, intelligent, and voluntary waiver of counsel.

Id. at 499. Additionally, the Jackson court held that the trial court was not required to readvise Jackson regarding his right to counsel or, in the absence of any indication that he wished to proceed pro se, the perils of self-representation. Id. at 499-500.

Here, we have already concluded that Hawkins was on notice that his attorney was going to be allowed to withdraw and that he was adequately advised of his right to counsel. Despite knowing the consequences of his failure to appear at the October 26, 2011, hearing, Hawkins did, in fact, fail to appear at the hearing and the November 7 trial. At no point prior to trial is there any indication that Hawkins attempted to contact the court to request a new attorney, ask for a continuance, inform the court of transportation issues, express a desire to proceed pro se, or for any other reason. As in Jackson, we conclude that Hawkins’s unexplained disregard for trial court directions, absence from trial, and apparent failure to even attempt communication serve as a knowing, intelligent, and voluntary waiver of counsel. We also conclude, as did the Jackson court, that the trial court was under no obligation to advise Hawkins of the perils of self-representation, as there is no indication that he ever intended to proceed pro se. See id. at 500. Hawkins has failed to establish that his trial in absentia and without counsel violated his due process rights.

In her dissent, Judge Vaidik contends that the facts here are distinguishable from those in Jackson and require a different result, but we respectfully disagree. We believe it is not significant, for example, that Hawkins was apparently not given specific notice that his attorney had withdrawn after the fact. Hawkins was on notice that his attorney’s motion to withdraw would be granted, not may be granted, if he failed to appear at the reset hearing, and he subsequently failed to appear. Moreover, we do not find it significant that Jackson retained counsel and told the trial court that he intended hire new counsel while Hawkins was represented by a public defender. Pursuant to Jackson, the need to advise regarding the pitfalls of proceeding pro se is triggered by an indication of a desire to proceed pro se, and Hawkins gave no such indication. While the facts here may not be quite as egregious as those in Jackson, this case still falls within Jackson’s holding. To hold otherwise would be to allow defendants like Hawkins to manipulate the system in an unacceptable fashion.

II. Whether the Trial Court Abused its Discretion in Sentencing Hawkins via Videoconference

Hawkins contends that the trial court abused its discretion in sentencing him via videoconference, arguing that Indiana Code section 35-38-l-4(a) requires that he be physically present in the courtroom during sentencing. Hawkins, however, failed to object below to being sentenced via videoconference and has therefore waived the argument for appellate consideration. The purpose of the contemporaneous objection rule is to promote a fair trial by preventing a party from sitting idly by and appearing to assent to an offer of evidence or ruling by the court only to cry foul when the outcome goes against him. Purifoy v. State, 821 N.E.2d 409, 412 (Ind.Ct.App.2005), trans. denied (citation omitted). Hawkins has waived this claim.

III. Whether the Trial Court Abused its Discretion in Ordering Consecutive Sentences

Under our current sentencing scheme, “the trial court must enter a statement including reasonably detailed reasons or circumstances for imposing a particular sentence.” Anglemyer v. State, 868 N.E.2d 482, 490 (Ind.2007), modified on other grounds on reh’g, 875 N.E.2d 218 (Ind.2007). The decision to impose consecutive or concurrent sentences is within the trial court’s sound discretion and is reviewed only for an abuse of discretion. Williams v. State, 891 N.E.2d 621, 630 (Ind.Ct.App.2008). An abuse of discretion occurs if “the decision is clearly against the logic and effect of the facts and circumstances.” Anglemyer, 868 N.E.2d at 490. A single aggravating circumstance may support the imposition of consecutive sentences. Hampton v. State, 873 N.E.2d 1074, 1082 (Ind.Ct.App.2007).

Hawkins contends only that the trial court failed to adequately discuss aggravating and mitigating circumstances at sentencing. In our view, the record indicates otherwise. The State mentioned that Hawkins’s arrearage, $21,219.10 at sentencing, was well over the statutory requirement, he had a “limited criminal historyf,]” and he had paid “little or no support for years on end.” Tr. p. 76. The trial court, in sentencing Hawkins, also specifically noted his large arrearage, “very spotty payment history!,]” and “some criminal history but not a terribly lengthy history[.]” Tr. p. 77. It is abundantly clear that the trial court considered these circumstances to be aggravating, despite not actually using the term. The trial court did not abuse its discretion in imposing consecutive sentences. Moreover, even though neither party argues the point, we conclude that imposition of advisory sentences was appropriate.

IV.Whether the Trial Court Erred in Entering Judgment for Two Class C Felonies

Hawkins contends, and the State concedes, that the Indiana Supreme Court’s decision in Sanjari v. State, 961 N.E.2d 1005 (2012), prevents the entry of two Class C felony convictions in this case. In SanjaH, the Court held that while an aggregate child support arrearage of $15,000 will serve to enhance a Class D felony non-support conviction to a Class C felony, it cannot be used to enhance convictions related to multiple children living in the same household. Id. at 1008-09. Accordingly, we remand with instructions to reduce one of Hawkins’s Class C felony convictions to a Class D felony.

CONCLUSION

Hawkins’s due process rights were not violated when he was tried in absentia and without counsel. Hawkins has waived for appellate review his argument that it was improper to sentence him via videoconference. The trial court did not abuse its discretion in imposing consecutive sentences. The trial court, however, erred in entering both convictions as Class C felonies. We remand with instructions to reduce one of Hawkins’s Class C felony nonsupport of a dependent child convictions to a Class D felony and impose the advisory sentence, to be served consecutive to the sentence for the remaining Class C felony, for an aggregate sentence of five and one-half years. See Ind.Code §§ 35-50-2-6(a); -7(a).

We affirm the judgment of the trial court in part, reverse in part, and remand with instructions.

CRONE, J., concurs.

VAIDIK, J., concurs in part and dissents in part with opinion.

VAIDIK, Judge,

concurring in part and dissenting in part.

I respectfully dissent from the majority’s conclusion that Hawkins knowingly, intelligently, and voluntarily waived his right to counsel. Because I believe that the facts in this case are readily distinguishable from the facts in Jackson and because of the importance of an attorney for a fair proceeding, I would reverse the trial court on this issue.

The right to be represented by counsel is protected by both the United States and Indiana Constitutions. U.S. Const, amend. VI; Ind. Const, art. 1, § 13. The right to counsel can be waived only by a knowing, voluntary, and intelligent waiver. Jackson v. State, 868 N.E.2d 494, 499 (Ind.2007). Because of the paramount importance of the right to counsel in criminal proceedings and in recognition that the average defendant does not have the professional legal skills to protect himself at trial, courts will indulge every reasonable presumption against waiver. Johnson v. Zerbst, 304 U.S. 458, 462-64, 58 S.Ct. 1019, 82 L.Ed. 1461 (1938); United States v. Best, 426 F.3d 937, 942 (7th Cir.2005); Poynter v. State, 749 N.E.2d 1122, 1126 (Ind.2001).

In Jackson, a closely divided Indiana Supreme Court recognized that a defendant’s absence from trial does not constitute a waiver of the right to counsel in every case, but in that case, “the record supported] the trial court’s specific finding that [the defendant’s] absence from trial was a ‘willful, knowing and voluntary act.’ ” 868 N.E.2d at 499. The defendant in Jackson at no time requested pauper counsel or indicated to the trial court that he could not afford an attorney. Instead, the defendant hired counsel from a prominent law firm, discharged counsel, and kept promising the trial court that he would hire new counsel. The defendant, however, neither hired new counsel nor appeared at his final two pretrial hearings or the trial. Our Supreme Court highlighted that the defendant “repeatedly disregarded scheduled events” and that the last time the defendant was before the trial court, his counsel was discharged, a new trial date was set, and he was ordered to find new counsel as he said he would. Id. The Court warned that a defendant “cannot manipulate a trial court to thinking that he or she will hire an attorney, fail to show up at trial or send an attorney, and then assert that the right to counsel was not waived because the trial court did not admonish the defendant about proceeding pro se.” Id. at 500; see also Poynter, 749 N.E.2d at 1127-28.

Here, however, the facts are much different. Hawkins, who lived in North Carolina, appeared before the trial court on July 27, 2011. At this hearing, the trial court set a trial date of November 7 and advised Hawkins that he would be tried in absentia if he did not appear. But on October 10, Hawkins’s public defender filed a motion to withdraw, and a hearing was set. Hawkins was notified of both the motion and the hearing and was told that his failure to appear at the hearing would result in a warrant for his arrest and the withdrawal of his public defender. The hearing was held on October 19, and Hawkins appeared by telephone. Because of apparent difficulties in conducting the hearing by telephone, the trial court adjourned the hearing, reset it for October 26, and ordered Hawkins to appear. Hawkins, however, did not appear at the October 26 hearing, following which the trial court granted his public defender’s motion to withdraw and issued a warrant for Hawkins’s arrest. Critically, Hawkins was not notified that his public defender’s motion to withdraw had in fact been granted.

On the morning of Hawkins’s November 7 trial, which was less than two weeks after his public defender’s withdrawal, neither Hawkins nor an attorney was present. The State told the trial court that it had learned that Hawkins was arriving around 1:80 p.m. because he had to take a bus to Indiana. Tr. p. 34. Although waiting thirty minutes, the trial court conducted the trial in Hawkins’s absence anyway. Hawkins arrived several hours after his trial was concluded. Appellant’s App. p. 97. Hawkins was told that his trial was over and was taken into custody. Id. Hawkins later sent a letter to the court explaining his absence.

Unlike in Jackson, Hawkins did not repeatedly ignore scheduled events. Instead, Hawkins (1) did not appear at the rescheduled October 26 hearing and (2) showed up several hours late to his trial, which had already been conducted in his absence. This does not amount to repeatedly ignoring scheduled events. Second, unlike in Jackson, where the defendant had the ability to and did hire an attorney, here Hawkins is indigent and depended on the court for pauper counsel. Third, unlike in Jackson, where the defendant discharged his counsel and told the trial court that he was going to hire new counsel, Hawkins did not discharge his counsel, did not indicate he could or would hire new counsel, and did not know with certainty that his public defender’s motion to withdraw had been granted. And while Hawkins may have been warned earlier that his failure to appear would result in the withdrawal of his public defender, notice was not sent to him that his public defender had in fact been removed. Fourth, here less than two weeks passed between the discharge of Hawkins’s public defender and his trial. Finally, and most importantly, there is no indication here that Hawkins was trying to “game” the system like the defendant in Jackson.

While I do not condone Hawkins’s failure to timely contact the trial court to say that he would be late for his November 7 trial, given these flimsy facts, there is no indication that Hawkins was trying to “game” the system, and the law indulges every reasonable presumption against a waiver of this fundamental right, Johnson, 304 U.S. at 464, 58 S.Ct. 1019, I do not believe that the record supports the conclusion that Hawkins knowingly, intelligently, and voluntarily waived his right to counsel. I would reverse the trial court and remand the case for a new trial.

      . Ind.Code § 35-46-l-5(a) (2010).

      . I agree with the majority that this case has nothing to do with advising Hawkins regarding the pitfalls of proceeding pro se. Rather, this case deals with the waiver of counsel.