Indiana Supreme Court to decide if adult entertainment theater has to pay stiff fine

Indiana Supreme Court Justices, left to right, Geoffrey Slaughter, Mark Massa, Loretta Rush, Derek Molter, Christopher Goff

Five years after the town of Clarksville revoked an adult entertainment business’ license, the Indiana Supreme Court stepped into the dispute Thursday — hearing oral arguments on discovery issues.  

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

The justices are trying to discern if the company AMW Investments, which leased space to Midwest Entertainment Ventures (MEV) to operate Theatair X in Clarksville, failed to comply with a trial court’s discovery order. 

At the center of Thursday’s hearing was a lower trial court decision that AMW had waived any future objections to discovery when it failed to provide the requested information within a 30 day deadline.

Scott Bergthold, an attorney for the town of Clarksville, said AMW attempted to stall the proceedings and failed a “mandatory duty” to respond to the requests. Bergthold also said AMW had time to pose their objections, but purposely waited until after the deadline.

“If you can take a position that’s directly contrary to black letter law as stated in the rule and delay a case for four years like we are right now, then discovery becomes meaningless,” Bergthold said. 

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

“AMW followed the trial court’s lead every step of the way,” Hoffer said. 

Background of the case

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

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

A trial court granted the town’s preliminary injunction in November 2019, limiting Theatair X’s hours of operation. Less than a month later, AMW Investments and MEV filed an interlocutory appeal, asking the court to review the preliminary injunction order, but not the final revocation.

The next several years were spent in legal wrangling until 2021 when the trial court ruled the business had waived its discovery objections. Then the town asked the court to hold AMW in contempt for not responding to discovery requests. On that same day, AMW then filed its initial, first and second supplementals to the discovery responses. 

In February 2023 — almost four years after the case started — the trial court decided to hold AMW in contempt of the first order compelling discovery responses and imposed a $30,000 civil sanction. The court also found AMW liable for Clarksville’s attorney fees and the expenses it incurred due to AMW’s failure to comply. It stated that AMW “continued to object, and withhold documents, based on relevance and privilege objections that the Discovery Order held were waived.” 

But in January 2024, an appeals court reversed the lower court’s decision, stating trial rules allow AMW to respond with new discovery objections. 

Attorney client privilege

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

“The whole reason we want attorney client privilege is so people can have frank, candid conversations with their attorneys,” Goff said. “If we allow waiver of attorney client privilege for every violation here … doesn’t that just blow up the attorney client privilege?” 

However Bergthold, who represented the town of Clarksville, argued AMW could have objected earlier within the required timeframe. Additionally, he said AMW could have submitted a privilege log — a log describing the documents that contain privileged information — instead. 

“If it’s that important then they ought to raise the objection, not sandbag by raising the objection five months later,” Bergthold said. 

Hoffer, an attorney for AMW Investments, acknowledged that his clients had not sought other available protections, but that his client was still prejudiced by the waiver. 

“The idea that all of the relevance objections and all of the attorney client privilege objections here are out the door is a worse sanction than the unworkability that the tone suggests from the majority opinion in the Court of Appeals,” Hoffer said. 

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

The court will issue a decision in the coming months. 

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