Case Title: Investor Recovery Fund v. Hopkins

Citation: 

Docket Number: 

State: idaho

Court: Idaho Supreme Court (civil)

Date: 2020-07-02T00:00:00Z

Document:
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IN THE SUPREME COURT OF THE STATE OF IDAHO 
 
Docket Nos. 46247 
 
 
INVESTOR RECOVERY FUND, LLC, 
 
     Plaintiff-Appellant-Cross Respondent, 
 
v. 
 
RANDALL H. HOPKINS, an individual; 
BRIAN MURPHY, an individual; HOPKINS 
FINANCIAL SERVICES, INC., an Idaho 
corporation, 
 
     Defendants-Respondents-Cross  
     Appellants, 
 
and 
 
DOES I-V, whose true names are unknown, 
 
     Defendants. 
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Boise, February 2020 Term 
 
Opinion Filed: July 2, 2020 
 
Melanie Gagnepain, Clerk 
 
SUBSTITUTE OPINION. THE 
COURT’S 
PRIOR 
OPINION 
DATED APRIL 20, 2020, IS 
HEREBY WTHDRAWN. 
 
Appeal from the District Court of the Fourth Judicial District of the State of 
Idaho, Ada County. Richard D. Greenwood, District Judge. 
 
The district court’s rulings are affirmed in part and reversed in part, the district 
court’s amended judgment is vacated, and the case is remanded. 
 
Angstman Johnson, Boise, for appellant. Wyatt B. Johnson argued.  
 
Holland & Hart, PLLC, Boise, for respondents. Robert Faucher argued.  
_____________________ 
 
 
BRODY, Justice. 
 
This case addresses the applicable standard of review when considering a directed verdict 
in a fraud by nondisclosure case. Investor Recovery Fund, LLC is the assignee of six claims held 
by individual investors who lost their investments in the Hopkins Northwest Fund, LLC (the 
fund). Randall Hopkins and Brian Murphy were the principals of the fund, and together they 
owned and managed Hopkins Financial Services, Inc. (Hopkins Financial). The individual 
 
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investors formed Investor Recovery for the purposes of asserting a collective claim against 
Hopkins Financial and the fund’s principals individually (collectively, Hopkins Associates). The 
fund declared a moratorium on redemptions in 2008, preventing investors from taking their 
money out of the fund. The individual investors lost their investments when the fund declared 
bankruptcy six years later. Investor Recovery sued Hopkins Associates, asserting claims of fraud 
by nondisclosure. The district court granted the principals’ motion for a directed verdict after 
seven days of trial, concluding that Investor Recovery did not prove that the individual investors’ 
losses were causally connected to the principals’ alleged nondisclosures. We reverse the district 
court’s directed verdict, vacate the judgment, and remand the case for further proceedings. 
I. 
FACTUAL AND PROCEDURAL BACKGROUND 
A. Factual background.  
1. Investor Recovery, the individual investors, and the fund  
 
Investor Recovery is the assignee of six claims from debenture holders who lost all or 
part of their investments in the fund: Carol Snyder, Carol Snyder as trustee for the Van Hees 
Family Trust, Kellie Pugh (Carol Snyder’s daughter), Bill Pugh (Kellie Pugh’s husband), Larry 
Erickson, and Elizabeth Erickson (collectively, the “individual investors”). 
Randall Hopkins and Brian Murphy (together, “Hopkins and Murphy”) own and operate 
Hopkins Financial. Hopkins is the president and majority owner. Murphy, a CPA, is the 
controller and a minority owner. In 2007, Hopkins Financial acted as an affiliate and contract 
placement manager for a number of investment funds, including the Hopkins Northwest Fund, 
LLC, the fund at issue in this case. In addition to their roles at Hopkins Financial, Hopkins and 
Murphy served as the fund’s principals. 
 
The fund operated by raising capital from investors, most of whom were individuals. The 
fund pooled its capital, investing in loans secured by real estate to high-risk borrowers who were 
not eligible to receive loans from banks. Because of the risky nature of the loans, the fund 
charged borrowers high interest rates, which in turn produced high yield returns. The fund 
distributed the resulting earned interest in profits to its investors monthly.  
 
Individuals investing in the fund received “debentures.” Holding a debenture entitled an 
investor to a pro-rata share of the fund’s operating profit. The debentures were not publicly 
traded, and there was no private market for their sale. Further, the debentures were not registered 
with the Securities and Exchange Commission or the Idaho Department of Finance. The only 
 
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way investors could leave the fund with all or a portion of their debenture investment was 
through a “redemption” process. 
 
The fund was governed by a private placement memorandum (PPM). Each investor was 
issued the PPM prior to investing in the fund. The PPM detailed investors’ redemption rights. 
The crux of the redemption policy allowed debenture holders to redeem their debentures within 
121 days, or earlier, upon providing written notice to the fund. Debenture holders’ redemption 
rights, however, were subject to the fund’s right to declare a “moratorium” on redemption 
requests to preserve the fund’s liquidity. According to the PPM, the fund was entitled to declare 
a moratorium if the number of redemptions gave management concerns about the fund’s 
liquidity or if management determined it needed to issue a new series of debentures. The relevant 
portion of the PPM in this case allowed management to declare a moratorium if: 
Sufficient debenture holders give notice of redemption under [the PPM] to 
cause Management of the [fund] to have concern for the liquidity of the [fund] 
and parity treatment among all debenture holders[.]  
2. 2008 Moratorium 
 
From the fund’s inception in 2000 through the middle of 2007, the fund produced 
consistent high-yield returns. The fund’s returns started to decline towards the end of 2007. 
Hopkins attributed the drop in yield to a default in one of the fund’s largest loans (the “Hunter’s 
Point loan”). The fund also experienced a general increase in loan delinquency at the end of 
2007. The fund’s financial troubles in late 2007 and 2008 coincided with a larger, national 
economic downturn. The “Great Recession” impacted real estate in the Treasure Valley and 
across the country. As a result, real estate prices in Idaho plummeted in 2008.  
 
In February 2008, lower yields and recent developments in the Hunter’s Point loan 
spurred Hopkins and Murphy to call a special meeting for all debenture holders. On February 25, 
2008, Hopkins sent a letter to all debenture holders, requesting their presence at an “urgent, 
important[,] and special meeting that could directly affect [their] investment in [the fund].”  
 
On February 26, 2008, Charley Williams—an investor who is not a party to this 
lawsuit—sent an email to Murphy inquiring about the status of a pending redemption. In 
response, Murphy wrote that, “I believe that all redemptions will be suspended in [the fund] on 
02-28-08.” This information was not shared with any other investors, and Williams submitted a 
redemption request withdrawing all of his money the following day. The fund paid Williams in 
full. 
 
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The special meeting occurred on February 29, 2008 (the “Leap Day meeting”). Carol 
Snyder, Kellie Pugh, and Betsy Erickson attended the meeting. Betsy Erickson and Kellie Pugh 
updated their spouses on the meeting later that evening. Hopkins and Murphy presided over the 
meeting, walking through a PowerPoint presentation with investors in attendance. Hopkins and 
Murphy also distributed a thirty-five page copy of the PowerPoint presentation for investors to 
take home. Hopkins and Murphy’s presentation disclosed that the Hunter’s Point loan—which 
constituted 72 percent of the fund’s delinquent loans—was in judicial foreclosure. Further, the 
PowerPoint disclosed that one-third of the fund’s current loans were not performing, meaning 
that they were more than thirty days past due.  
 
During the Leap Day meeting, Hopkins and Murphy also discussed the potential for a 
moratorium. 
The 
PowerPoint 
presentation 
included 
a 
full 
slide 
titled, 
“Investor 
Redemptions/Potential Moratorium,” and stated that, “should desired redemption requests 
exceed [the fund]’s available cash flow to pay those requests, this may cause [the fund] to 
declare a moratorium.” This information essentially restated the fund’s moratorium policy 
contained in the PPM. 
 
Immediately following the Leap Day meeting, redemption requests spiked. Throughout 
the spring and summer of 2008, the fund’s economic condition continued to decline. The fund 
eventually declared a moratorium on September 8, 2008. For those redemption requests 
submitted after the Leap Day meeting, only two redemption requests received their full 
investment back. The fund never recovered from the moratorium, and failed to honor any 
redemption requests after calling the September 2008 moratorium.  
 
In 2014, the fund declared bankruptcy. The fund’s approved bankruptcy plan left 
debenture holders with nothing. The individual investors were among the fund’s investors who 
lost the remaining balance of their debenture investments. The individual investors testified that 
their collective losses totaled $1.4 million. 
3. The alleged nondisclosures 
 
At trial, Carol Snyder, Larry Erickson, and Bill Pugh testified that they met with Murphy, 
in person or over the phone, between August and December of 2007. These individual investors 
testified that Murphy failed to disclose that the fund was in a position to declare a moratorium. 
Crucially, each of these three individual investors also testified that, had Murphy raised the 
possibility that the fund’s dwindling liquidity allowed the fund to call a moratorium at any time, 
 
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they would have redeemed their debentures immediately. 
B. Procedural background.  
 
 
In August 2014, Investor Recovery was organized for the purpose of pursuing a claim 
against Hopkins Associates. Investor Recovery subsequently filed a complaint against Hopkins 
Associates, alleging fraud upon each of the individual investors, fraudulent transfers by Hopkins 
and Murphy, vicarious liability for Hopkins Financial, and civil conspiracy. Investor Recovery 
later amended its complaint, adding a claim for punitive damages.  
After three years of litigation, the district court granted partial summary judgment, 
dismissing Hopkins Financial as a defendant. The district court concluded that, outside of 
allegations that Hopkins and Murphy aided and assisted Hopkins Financial and other affiliated 
entities in soliciting investment, Investor Recovery failed to produce specific evidence making 
Hopkins Financial liable for the alleged torts of Hopkins and Murphy. 
 
Before trial, Hopkins and Murphy filed a motion to exclude Investor Recovery’s expert 
witness, R. Wayne Klein. The district court held a hearing on the matter, and granted Hopkins 
and Murphy’s motion to exclude Klein. The district court concluded that Klein’s opinions were 
not relevant and would not aid the jury at trial. 
 
The jury trial began on June 4, 2018. The only remaining issues at trial were fraud by 
nondisclosure and civil conspiracy. Investor Recovery completed its case-in-chief in seven days 
of trial, after which, Hopkins and Murphy moved for a directed verdict pursuant to I.R.C.P. 
50(a). The district court granted the motion and entered a directed verdict for Hopkins and 
Murphy. The district court held that Investor Recovery failed to prove that the alleged 
nondisclosures caused the individual investors’ injury—that is, caused them not to submit 
redemption requests. The district court reasoned that, even if Hopkins and Murphy failed to 
disclose that conditions for a moratorium existed in the individual meetings with investors, the 
managers disclosed the possibility of a moratorium in the Leap Day meeting. The district court 
further concluded that when the individual investors failed to submit redemption requests, even 
after Hopkins and Murphy disclosed the alleged nondisclosed fact, the causal connection 
between the alleged fraud and injury was severed. The district court subsequently entered a final 
judgment on July 2, 2018. Investor Recovery appealed.  
 
On July 16, 2018, Hopkins Associates filed a motion for attorney fees and costs pursuant 
to Idaho Code sections 12-120(3) and 12-121. Investor Recovery opposed awarding any attorney 
 
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fees, arguing that neither section 12-120(3) nor 12-121 apply. The district court issued a 
memorandum decision and order awarding Hopkins Associates a fraction of the fees sought. The 
district court held that the reduced award was appropriate given duplicative efforts in the 
litigation, and found that only one third of the claims constituted commercial transactions under 
Idaho Code section 12-120(3). The district court entered an amended judgment on September 27, 
2018. Hopkins Associates cross-appealed the district court’s order and award of attorney fees, 
and Investor Recovery also challenged the district court’s attorney fee award in an amended 
appeal. 
II. 
ANALYSIS 
A. The district court erred in entering a directed verdict for Hopkins and Murphy. 
1. Standard of Review  
 
“When reviewing the grant or denial of a motion for a directed verdict, we conduct an 
independent review of the evidence and do not defer to the findings of the trial court.” Sallaz v. 
Rice, 161 Idaho 223, 226, 384 P.3d 987, 990 (2016) (citing Gillingham Constr., Inc. v. Newby-
Wiggins Constr., Inc., 136 Idaho 887, 891, 42 P.3d 680, 684 (2002)). Admitting the truth of the 
adverse evidence and drawing every reasonable inference most favorably to the opposing party, 
we must determine whether there exists substantial evidence to justify submitting the case to the 
jury. Id. A finding of substantial evidence does not require that the evidence be uncontradicted, 
or even that we find it persuasive. Id. Further, it does not require that we reweigh the evidence or 
consider the credibility of witnesses. Id. Rather, a finding of substantial evidence “only requires 
that the evidence be of sufficient quality and probative value that reasonable minds could 
conclude that a verdict in favor of the party against whom the motion is made is proper.” Id. 
(quoting Gillingham, 136 Idaho at 892; 42 P.3d at 685). A directed verdict is only proper where 
the evidence is so clear that all reasonable minds could only reach one conclusion—that the 
moving party should prevail. Id. 
 
Investor Recovery asserted a fraud by nondisclosure claim at trial. To prevail, it needed 
to prove, by clear and convincing evidence, that: (1) there was a nondisclosure; (2) the individual 
investors relied upon Hopkins Associates’ nondisclosure; (3) the individual investors’ reliance 
was material to the transaction; and (4) the individual investors were damaged as a proximate 
result of the nondisclosure. Watts v. Krebs, 131 Idaho 616, 619, 962 P.2d 387, 390 (1998); see 
also Frontier Dev. Grp., LLC, v. Caravella, 157 Idaho 589, 594, 338 P.3d 1193, 1198 (2014) 
 
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(“Each of the elements of fraud must be established by clear and convincing evidence.”). To 
establish a nondisclosure, there must be a duty to disclose. Wash. Fed. Sav. v. Van Engelen, 153 
Idaho 648, 657, 289 P.3d 50, 59 (2012). A duty to disclose may arise if: (1) there is a fiduciary or 
similar relation of trust and confidence between the two parties; (2) it is necessary to prevent a 
partial statement of the facts from being misleading; or (3) a fact known by one party and not the 
other is so vital to the outcome that if the mistake were mutual the contract would be voidable, 
and, further, that the defendant knows that the plaintiff does not know the fact. Printcraft Press, 
Inc. v. Sunnyside Park Utils., Inc., 153 Idaho 440, 453, 283 P.3d 757, 770 (2012). Whether there 
is a duty to disclose is a mixed question of law and fact. Id. Whether the circumstances, if 
proved, would be sufficient to give rise to a duty to disclose is a matter of law. Id. But once the 
court makes that determination, whether those circumstances were proved is a question of fact. 
Id.        
2. The district court used the wrong standard in entering a directed verdict.  
Before addressing the merits of the district court’s directed verdict decision, we clarify 
the appropriate standard of review. The standard of review is more than just boilerplate taking up 
space in appellate briefs. The standard of review is critical because it, in effect, operates as the 
microscope through which an appellate court examines whether there was error in a proceeding. 
In this case, we are examining whether the district court correctly entered a directed verdict in 
favor of Hopkins and Murphy. Our case law makes it clear that we conduct our own independent 
analysis of the evidence. Before we can do that, however, it is important to articulate the correct 
evidentiary standard to be applied. This Court exercises free review over questions of evidentiary 
standards. Turner v. Turner, 155 Idaho 819, 823, 317 P.3d 716, 720 (2013). While we recognize 
that neither party raised this as an issue on appeal, “litigants’ failure to address the legal question 
from the right perspective does not render us powerless to work the problem out properly.” 
Williams-Guice v. Bd. of Educ. of City of Chicago, 45 F.3d 161, 164 (7th Cir. 1995). “Appellate 
review does not consist of supine submission to erroneous legal concepts even though none of 
the parties declaimed the applicable law below.” Empire Life Ins. Co. of Am. v. Valdak Corp., 
468 F.2d 330, 334 (5th Cir. 1972). In this case, where we are called upon to conduct our own 
independent analysis of the evidence, we address the standard applied by the district court and 
apply the correct standard. See id. 
To prevail at trial, Investor Recovery needed to prove all elements of its fraud claim by 
 
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clear and convincing evidence. Watts, 131 Idaho at 619, 962 P.2d at 390. However, to survive a 
motion for a directed verdict, Investor Recovery needed to produce substantial evidence of the 
elements in dispute. Jordan v. Hunter, 124 Idaho 899, 907, 865 P.2d 990, 998 (Ct. App. 1993); 
see also April Beguesse, Inc. v. Rammell, 156 Idaho 500, 509–10, 328 P.3d 480, 489–90 (2014) 
(holding that when reviewing a directed verdict decision in a fraud claim, this Court determines 
whether there was sufficient evidence to submit the claim to the jury). When the district court 
entered the directed verdict, it concluded that no jury could conclude by clear and convincing 
evidence that the alleged nondisclosures caused the investors’ losses: 
The essential element of the claim is that the nondisclosure be the cause of the 
loss, and here it is my finding that a jury could not conclude by clear and 
convincing evidence that the nondisclosure of the management’s ability to call a 
moratorium during the fall and winter of 2007 up through February of 2008 
caused the loss. 
It is evident from this statement that the district court erroneously employed the clear and 
convincing evidence standard rather than the substantial evidence standard that is used to 
evaluate a motion for directed verdict. See Jordan, 124 Idaho at 907, 865 P.2d at 998; see also 
Bolt v. Influence, Inc., 43 P.3d 425, 427–29 (Or. 2002) (holding that the trial court erred using a 
clear and convincing evidentiary standard to review the sufficiency of the evidence). 
Notwithstanding this error, we conduct an independent review of the district court’s directed 
verdict decision to determine whether Investor Recovery presented substantial evidence to 
submit the case to the jury. Sallaz, 161 Idaho at 226, 384 P.3 at 990.  
3. Investor Recovery produced substantial evidence of causation. 
The causation element is the only element of fraud at issue in this appeal. In its analysis 
announcing the directed verdict, the district court concluded that Investor Recovery established, 
for the purposes of the motion, that Hopkins and Murphy had a duty to disclose, and that there 
were material nondisclosures. In addressing the nondisclosure element, the district concluded 
that the fund failed to disclose liquidity problems that stretched from the middle of 2007 through 
September 2008—meaning that the fund had a right to declare a moratorium starting in the 
middle of 2007. The district court further concluded that the individual investors failed to make 
redemption requests after the fund disclosed the possibility of a moratorium in the Leap Day 
meeting. The district court held that, because the individual investors had the opportunity to 
redeem based on the Leap Day meeting information, and did not, a jury could not conclude that 
 
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the nondisclosures caused their loss, breaking the chain of causal connection. To be clear, the 
district court based its directed verdict decision on the element of causation alone. The Leap Day 
meeting was critical to its analysis. 
 
On appeal, Investor Recovery asserts that although some disclosures were made during 
the Leap Day meeting and the materials provided, these were not sufficient to break the causal 
chain of connection. Rather, Investor Recovery argues that these disclosures were further 
fraudulent nondisclosures. We agree that a reasonable mind could conclude that a verdict in 
favor of Investor Recovery on the causation element would be proper.   
 
We begin by examining the evidence of nondisclosure produced at trial. Investor 
Recovery produced evidence that the fund experienced liquidity concerns starting in the middle 
of 2007 and continuing into February 2008. Specifically, Investor Recovery introduced Hopkins’ 
testimony from a prior bankruptcy proceeding, in which he testified: “There was a period of time 
mid [sic] of [2007] to when we declared the moratorium [in 2008] of navigating a restriction on 
cash flow and just working with people on an individual basis, as we felt we could, to navigate 
the storm up until we declared a moratorium[.]” Further, Investor Recovery produced evidence 
that the start of these cash flow problems coincided with delinquency in the Hunter’s Point 
loan—the fund’s largest loan. Thus, Investor Recovery produced evidence that the fund 
experienced cash flow problems in 2007, causing Hopkins and Murphy to work with investors 
on an individual basis to mitigate the number of redemption requests to protect cash flow, or 
liquidity. Under the PPM, individual investors had a right to redeem their debentures subject to 
management’s right to call a moratorium. One of the conditions under which management could 
call a moratorium was “concern for the liquidity of the [fund].” Accordingly, Investor Recovery 
produced evidence that, starting in the middle of 2007, the fund had concerns about its liquidity, 
giving management the right to declare a moratorium at any time.  
The fund’s early liquidity concerns directly relate to the individual investors’ 
nondisclosure claims. The individual investors, who met with Murphy individually at different 
times during this critical time period, testified that Murphy did not disclose that the fund’s 
liquidity had reached a point where management could call a moratorium under the PPM. 
Further, the individual investors testified that, had they known that the fund was in a position to 
call a moratorium earlier, they would have redeemed immediately. The Leap Day meeting did 
not sever the chain of causation.  
 
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Charley Williams’ testimony is critical to our analysis. At trial, Williams—a former 
debenture holder who is not a party to this case—testified about an email exchange between 
himself and Murphy that took place three days before the Leap Day meeting. Williams emailed 
Murphy to inquire about a pending redemption request that was coming due in early March. 
Murphy replied: “I believe that all redemptions will be suspended in [the fund] on 02-28-08. The 
size of the redemption is not the issue it is the cumulative amount of redemptions and cash 
availability.”   
 
The information in the Williams email is not the same as the information included in the 
Leap Day PowerPoint. In the Williams email, Murphy, who was the fund’s controller, estimated 
that the fund would declare a moratorium in two days, meaning that conditions for a moratorium 
presently existed. Conversely, the information in the PowerPoint offered nothing more than a 
restatement of the moratorium policy outlined in the PPM. The urgency and imminence of the 
Williams email contrasts starkly with one line in a thirty-five slide PowerPoint stating that, 
“should desired redemption requests exceed [the fund]’s available cash flow to pay those 
requests, this may cause [the fund] to declare a moratorium.” Put differently, projecting that a 
moratorium will occur in two days is a different message in substance and scope than the mere 
possibility a moratorium could occur should the conditions arise. Thus, we reject the district 
court’s conclusion that the information in the Leap Day meeting and PowerPoint sufficiently 
revealed the alleged nondisclosures to break the chain of causation.  
A reasonable mind could conclude that Hopkins and Murphy’s nondisclosures were the 
proximate cause of the losses claimed by Investor Recovery. Williams’ actions the day after 
receiving the email demonstrate this connection. Although Williams is not a plaintiff to this 
lawsuit, he held the same debentures as the individual investors in the fund. The day after he 
received the email from Murphy projecting that the fund was going to suspend redemptions in 
two days—or declare a moratorium—Williams submitted a redemption request in full. Williams 
received all of his money back from the fund, and was one of the last investors to receive full 
payment on a redemption request before the September 2008 moratorium.  
In sum, the Williams email is evidence that disclosing the mere possibility of a 
moratorium during the Leap Day meeting was not an accurate picture of the fund’s stark 
financial outlook, and did not sufficiently reveal the alleged nondisclosure to sever the causal 
connection. A reasonable mind could have concluded that the fund’s failure to disclose an 
 
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imminent moratorium—like the disclosure in the Williams email—caused the individual 
investors’ losses. Thus, we hold that Investor Recovery demonstrated substantial evidence of 
causation to survive a directed verdict. Sallaz, 161 Idaho at 226, 384 P.3 at 990.  
 
Hopkins Associates argues that a Court of Appeals decision, Bryant Motors, Inc. v. Am. 
States Ins. Co., 118 Idaho 796, 800 P.2d 683 (Ct. App. 1990), and a line of “holder” cases 
support the district court’s causation conclusion. Hopkins Associates argues that the alleged 
harm is too speculative to the alleged nondisclosure to amount to substantial evidence of 
causation. We disagree. Both Bryant Motors and the line of holder cases cited by Hopkins 
Associates were missing a key piece of evidence: proof that had an alleged nondisclosure been 
disclosed, the plaintiff’s harm could have been avoided. Here, the Williams email is that proof. 
   
In Bryant Motors, the plaintiff Bryant Motors alleged that Noram American Diesel, Inc. 
failed to disclose that it had received payment from a school district. 118 Idaho at 797, 800 P.2d 
at 684. Together, the two entities built a school bus for the school district. Id. In its fraud claim, 
Bryant Motors alleged that, as a consequence of Noram’s nondisclosure, it was delayed in 
asserting its legal rights. Id. at 800, 800 P.2d at 687. Bryant Motors argued that it would have 
taken action to protect its legal rights to avoid damages had it know that Noram received a check 
from the school district. Id. The jury returned a verdict for Bryant Motors, but the district court 
granted the defendant’s motion notwithstanding the verdict. Id. at 798, 800 P.2d at 685. The 
Idaho Court of Appeals affirmed the district court, holding that when a plaintiff cannot prove that 
his inaction was causally connected to the nondisclosure, the plaintiff’s claim fails. Id. at 800, 
800 P.2d at 687. In its analysis, the Court of Appeals noted that had Noram instantaneously 
informed Bryant Motors of its conduct, Bryant Motors could have taken action sooner. Id. 
However, the court found that “there is no indication as to what [Bryant Motors’] endeavors 
would have been or what they would have yielded[.]” Id. The Court of Appeals further held that 
the record on appeal did not contain substantial evidence, other than conjecture and speculation, 
from which a jury could properly support a verdict for Bryant Motors. Id. 
 
Here, the record on appeal does contain substantial evidence from which a reasonable 
mind could conclude that the fund’s nondisclosures caused the losses. The Williams email 
demonstrates what a similarly situated investor did in the wake of receiving information that was 
not disclosed to the rest of the investors in the fund. Further, the evidence indicates that such a 
disclosure allowed at least one investor, Williams, to avoid losses. Thus, the Williams email is 
 
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the type of evidence that the Court of Appeals concluded was missing in Bryant Motors. As 
such, we do not find Bryant Motors persuasive in this case. 
 
 Hopkins Associates also argues that federal and sister state jurisdictions’ analyses of 
“holder claims” support the district court’s directed verdict on causation. Hopkins Associates 
equate Investor Recovery’s fraud by nondisclosure claims to holder claims. A holder claim is an 
action in which the plaintiff investor alleges that after he retained, rather than sold, his security 
because of material misinformation the defendant provided or neglected to reveal about the 
issuer, the price of his securities substantially dropped. Edward T. McDermott, Holder Claims–
Potential Causes of Action in Delaware and Beyond?, 41 Del. J. Corp. L. 933, 934 (2017); see 
AHW Inv. P’ship v. Citigroup Inc., 980 F. Supp. 2d 510, 514 (S.D.N.Y. 2013). Holder claims are 
asserted as common law fraud or negligent misrepresentation claims. McDermott, supra, at 934; 
see also Citigroup, 980 F. Supp. 2d at 514 (“Plaintiffs raise common law claims of negligent 
misrepresentation and fraud that take the form or what are referred to as ‘holder’ claims[.]”). 
Critics argue that holder claims “lack essential elements of fraudulent and negligent 
misrepresentation claims and thus are categorically without merit.” McDermott, supra, at 948. In 
particular, holder claims are attacked for their incomplete account of the causal relationship 
between the defendant’s misconduct and the allegedly resultant damages. McDermott, supra, at 
942.   
 
Hopkins Associates argues that many courts dismiss holder claims when the plaintiff’s 
claims are too speculative or fail to prove causation. See Arent v. Distrib. Sci., Inc., 975 F.2d 
1370, 1372 (8th Cir. 1992) (affirming the dismissal of a holder claim because the plaintiff’s harm 
was caused by a valueless company rather than the defendant’s nondisclosure); WM High Yield 
Fund v. O’Hanlon, No. 04-3423, 2005 WL 6788466, at *2, *13 (E.D. Pa. May 13, 2015) 
(holding that the plaintiff’s damages resulted from disclosures of accurate information and its 
effect on the market rather than the alleged nondisclosure). While Investor Recovery’s claims are 
akin to holder claims, the facts supporting Investor Recovery’s claims are not speculative like 
those exhibited in the holder claim cases cited by Hopkins Associates. As noted above, the 
Williams email is concrete evidence that a similarly situated investor avoided the harm alleged 
by the individual investors when given nondisclosed information. Thus, this case does not suffer 
the same speculation malady exhibited in holder claims. As such, we reverse the district court’s 
directed verdict and vacate the district court’s judgment.  
 
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B. The district court did not abuse its discretion in excluding R. Wayne Klein’s 
testimony. 
1. Standard of Review 
 
We review the district court’s decision to exclude expert testimony for abuse of 
discretion. Thurston Enters., Inc. v. Safeguard Bus. Sys. Inc., 164 Idaho 709, 716, 435 P.3d 489, 
496 (2019). Error is “disregarded unless the ruling is a manifest abuse of the trial court’s 
discretion and affects a substantial right of the party.” Id. (quoting Perry v. Magic Valley Reg’l 
Med. Ctr., 134 Idaho 46, 50–51, 995 P.2d 816, 820–21 (2000)). When reviewing for abuse of 
discretion, this Court considers whether the trial court (1) perceived the issue as one of 
discretion, (2) acted within the outer boundaries of that discretion, (3) acted consistently with the 
legal standards applicable to the specific choices available to it, and (4) reached its decision by 
an exercise of reason. Lunneborg v. My Fun Life, 163 Idaho 856, 863, 421 P.3d 187, 195 (2018). 
 
The admissibility of expert testimony is governed by Idaho Rule of Evidence 702, which 
provides: 
A witness who is qualified as an expert by knowledge, skill, experience, training, 
or education may testify in the form of an opinion or otherwise if the expert’s 
scientific, technical, or other specialized knowledge will help the trier of fact to 
understand the evidence or to determine a fact in issue. 
I.R.E. 702. 
2. The district court did not err in ruling that Klein’s testimony would not assist 
the jury.  
Investor Recovery contends that the district court abused its discretion in excluding 
Klein’s expert testimony from trial. From the record, it is undisputed that Klein is a securities 
expert. Notwithstanding his securities expertise, Investor Recovery sought to introduce his 
testimony for a broader range of topics, including Hopkins and Murphy’s duty to disclose, the 
materiality of their alleged nondisclosures, and extreme deviations under securities laws to 
justify an award of punitive damages. In granting Hopkins and Murphy’s motion to exclude 
Klein, the district court precluded Klein from testifying in four areas: (1) securities law and the 
securities industry’s duty to disclose; (2) materiality; (3) reliance; and (4) punitive damages. The 
district court held that, because Klein’s testimony would not bear on the elements of common 
law fraud, his testimony would not aid the jury in reaching its decision on the issues before them.  
 
Crucially, on appeal, Investor Recovery limits its challenge to the issue of materiality. 
Investor Recovery argues that the district court “exceeded the outer boundaries of its discretion” 
 
14 
 
because it deemed Klein’s securities expertise irrelevant to issues of common law fraud. 
Additionally, Investor Recovery argues that the trial court’s analysis was not consistent with the 
legal standards applicable because Klein’s testimony is relevant to the materiality of the alleged 
nondisclosures. 
 
As a preliminary matter, we note that Investor Recovery misconstrues the district court’s 
holding on materiality. Investor Recovery contends that Klein’s testimony on the securities 
industry is relevant to the issue of materiality because Hopkins and Murphy operate in the 
securities industry. However, the district court did not preclude Klein from testifying on 
materiality on relevance grounds, rather the district court held that Klein would not help the trier 
of fact in determining materiality. The district court concluded that “a jury is completely capable 
of reaching their own conclusions about what was going on and what was material” without 
Klein’s testimony. Thus, the district court precluded Klein’s testimony on materiality under 
I.R.E. 702 rather than I.R.E. 401. Accordingly, we review the district court’s I.R.E. 702 ruling 
for an abuse of discretion. Thurston Enters., 164 Idaho at 716, 435 P.3d at 496.  
Pursuant to the Idaho Rules of Evidence, an expert witnesses may testify in the form of 
an opinion or otherwise if his specialized knowledge will help the trier of fact understand the 
evidence or to determine a fact in issue. I.R.E. 702. Idaho’s common law, rather than federal or 
state securities law, controls whether an alleged nondisclosure is material. See Watts, 131 Idaho 
at 619–20, 962 P.2d at 390–91. The test for materiality is both objective and subjective. Id. at 
620, 962 P.2d at 391. A nondisclosure is objectively material if “a reasonable man would attach 
importance to its existence or nonexistence in deterring his choice of action in the transaction in 
question,” and subjectively material if “the maker of the representation knows or has reason to 
know that its recipient regards or is likely to regard the matter as important in determining his 
choice of action.” Id.  
 
The district court did not abuse its discretion in excluding Klein’s testimony. The trial 
court determines whether to admit or refuse an expert’s testimony. Perry, 139 Idaho at 523, 81 
P.3d at 1233. Thus, the district court acted within the boundaries of its discretion in determining 
that the proposed testimony would not help the jury determine the issue of materiality. Further, 
the district court acted within the applicable legal standards. Idaho’s common law fraud defines 
materiality without any reference to securities laws. See Watts, 131 Idaho at 619–20, 962 P.2d at 
390–91. The district court appropriately concluded that the jury could determine the issue of 
 
15 
 
materiality without an opinion on securities law and the expectations of the securities industry. 
Klein’s testimony would not bear on the objective value that an investor would place on the 
disclosures because the objective standard uses a reasonable person standard. See id. at 620, 962 
P.2d at 391. Analyzing whether a reasonable person would find the information material to their 
investment does not require a securities industry perspective. Further, the expert testimony does 
not bear on the subjective materiality of the disclosures either. While the debentures themselves 
are likely a form of a security, the PPM expressly states that the fund is not registered with state 
or federal securities agencies. Thus, the district court’s conclusion that the jury did not need the 
aid of a securities expert to understand common law materiality was within its discretion. 
Accordingly, the district court did not abuse its discretion in excluding Klein’s testimony. 
C. The district court did not err in granting Hopkins Financial summary judgment. 
1. Standard of Review  
 
We apply the same standard of review used by the trial court in ruling on a motion for 
summary judgment. Thurston, 164 Idaho at 716, 435 P.3d at 496. Summary judgment is proper if 
there is “no genuine dispute as to any material fact and the movant is entitled to judgment as a 
matter of law.” I.R.C.P. 56(a). In making this determination, we construe all disputed facts and 
make all reasonable inferences that can be drawn from the record in favor of the non-moving 
party. Thurston, 164 Idaho at 716, 435 P.3d at 496. A “mere scintilla of evidence or only a slight 
doubt as to the facts is insufficient to withstand summary judgment.” Franklin Bldg. Supply Co. 
v. Hymas, 157 Idaho 632, 637, 339 P.3d 357, 362 (2014) (quoting Corbridge v. Clark Equip. 
Co., 112 Idaho 85, 87, 730 P.2d 1005, 1007 (1986)). 
2. Investor Recovery failed to show a genuine dispute of material fact regarding 
Hopkins Financial. 
 
Investor Recovery contends that the district court erred in entering summary judgment for 
Hopkins Financial. The district court granted summary judgment for Hopkins Financial, 
concluding that Investor Recovery failed to produce any evidence that Hopkins Financial 
participated in the allegations beyond their role defined in the PPM.  
On appeal, Investor Recovery argues that the district court erred in failing to construe 
disputed facts in its favor. Specifically, Investor Recovery asserts that whether communications 
sent to investors were on behalf of the fund or Hopkins Financial was a disputed fact. In support 
of this argument, Investor Recovery cites to multiple communications pertaining to the fund sent 
 
16 
 
to the individual investors on Hopkins Financial’s letterhead. Further, Investors Recovery bases 
its claim of vicarious liability on an agency theory. Investor Recovery asserts that Hopkins and 
Murphy were Hopkins Financial’s agents, acting with apparent authority to bind Hopkins 
Financial. We disagree. 
 
Investor Recovery’s argument and the facts supporting it do not raise a genuine issue of 
material fact. Investor Recovery directs this Court to several pages of alleged undisputed facts in 
the record that it argues create an issue of material fact regarding Hopkins and Murphy’s work in 
both the fund and Hopkins Financial. However, Investor Recovery’s opposition to Hopkins 
Associates’ motion for summary judgment on this issue did not cite to any of the deposition 
testimony or evidence presented on appeal. Instead, Investor Recovery relies on its briefing to 
this Court, and portions of Hopkins and Murphy’s depositions without specific record citations.  
 
The “trial court is not required to search the record looking for evidence that may create a 
genuine issue of material fact; the party opposing the summary judgment is required to bring that 
evidence to the court’s attention.” Valiant Idaho, LLC v. VP Inc., 164 Idaho 314, 328, 429 P.3d 
855, 869 (2018) (quoting Esser Elec. v. Lost River Ballistics Techs., Inc., 145 Idaho 912, 919, 
188 P.3d 854, 861 (2008)). Here, Investor Recovery failed to bring the evidence that it now relies 
upon on appeal to the district court’s attention in its opposition to Hopkins Associates’ summary 
judgment motion. Accordingly, the district court did not err in failing to construe disputed facts 
in Investor Recovery’s favor. 
 
Investor Recovery’s vicarious liability argument based on agency also fails. In opposition 
to summary judgment below, and in this appeal, Investor Recovery seeks to hold Hopkins 
Financial liable through the acts of its agents—Hopkins and Murphy—based on apparent 
authority. Investor Recovery argues that Hopkins and Murphy “were agents with apparent 
authority to bind [Hopkins Financial]. This arises from the fact that they were the owners and 
controlling employees of Hopkins Financial.” Even accepting that Hopkins and Murphy were 
Hopkins Financial’s agents, Investor Recovery’s argument is still meritless. 
 
Apparent authority is “the power held by an agent or other actor to affect a principal’s 
legal relationship with third parties when a third party reasonably believes the actor has the 
authority to act on behalf of the principal and that belief is traceable to the principal’s 
manifestations.” Jones v. HealthSouth Treasure Valley Hosp., 147 Idaho 109, 113–14, 206 P.3d 
473, 477–78 (2009) (quoting Restatement (Third) of Agency, § 2.03 (2006)). In opposition below 
 
17 
 
and on appeal, Investor Recovery failed to produce any evidence that the individual investors 
reasonably believed that their interactions with Hopkins and Murphy were on behalf of Hopkins 
Financial instead of the fund. Instead, Investor Recovery’s arguments focus exclusively on 
Hopkins and Murphy’s alleged actions and their respective roles within both entities. Investor 
Recovery included one line in its Amended Complaint, stating that “[t]he assignors of claims to 
Investor Recovery reasonably believed that the acts and omissions of [Hopkins and Murphy] 
referenced in this complaint were on behalf of Hopkins Financial.” Despite this conclusory 
allegation, Investor Recovery failed to allege any facts, evidence, or argument regarding the 
individual investors’ reasonable belief about their interactions with Hopkins and Murphy in its 
opposition to summary judgment. Rather, Investor Recovery cites to documents in the record 
that were sent to the individual investors regarding their debentures in the fund on Hopkins 
Financial’s letterhead. As noted above, however, these facts were not provided to the district 
court to consider in ruling on summary judgment. In fact, the documents that Investor Recovery 
cites to are mostly trial exhibits, which the district court could not have considered at the time it 
ruled on this summary judgment motion. In its reply brief, Investor Recovery admitted that “not 
all of the trial exhibits were before the trial court on summary judgment.” Further, other than 
stating that these documents exist in the record, Investor Recovery failed to connect them to any 
evidence of their impact on the individual investors’ reasonable beliefs. Thus, Investor Recovery 
failed to demonstrate a genuine dispute of material fact. Accordingly, the district court did not 
err in granting Hopkins Financial summary judgment.  
D. We vacate the district court’s attorney fee award.  
 
After Hopkins and Murphy received a directed verdict, Hopkins Associates filed a 
motion for $948,932.83 in attorney fees and costs. The district court ultimately awarded Hopkins 
Associates $160,211 in attorney fees and costs. In reaching this total, the district court first held 
that Hopkins Associates was entitled to an award of attorney fees under Idaho Code section 12-
120(3). Pursuant to its discretion under Idaho Rule of Civil Procedure 54(e), the district court 
concluded that the total fee requested was not reasonable and awarded Hopkins Associates 
approximately half of the attorney fees requested, $450,000. The district court then determined 
that of that $450,000, only one-third of it was attributable to commercial transactions under 
Idaho Code section 12-120(3). 
 
Hopkins Associates filed a cross-appeal, challenging the district court’s conclusions 
 
18 
 
under Idaho Code 12-120(3) and I.R.C.P. 54(e). Investor Recovery amended its initial notice of 
appeal, arguing that Idaho Code section 12-120(3) does not apply to any of Investor Recovery’s 
claims.  
 
Idaho Code section 12-120(3) only provides an award of attorney fees for a prevailing 
party. Howard v. Perry, 141 Idaho 139, 143, 106 P.3d 465, 469 (2005). Because we vacate the 
district court’s judgment, we also vacate the district court’s attorney fee award. At present, there 
is no prevailing party. Id. This Court has refused to address an attorney fee award under Idaho 
Code section 12-120(3) when there is no prevailing party. Id. Thus, we will not address the 
district court’s conclusions under Idaho Code section 12-120(3) and I.R.C.P. 54(e) in this appeal. 
On remand, the district court will determine: (1) the prevailing party; and (2) whether the 
gravamen of the lawsuit involved a commercial transaction pursuant to Idaho Code section 12-
120(3). First Bank of Lincoln v. Land Title of Nez Perce Cnty., Inc., 165 Idaho 813,___, 452 P.3d 
835, 846 (2019); Portfolio Recovery Assocs., LLC v. MacDonald, 162 Idaho 228, 236, 395 P.3d 
1261, 1269 (2017). 
E. Attorney fees for this appeal  
Both parties seek attorney fees for this appeal. As stated above, there is no present 
prevailing party in this case. If either party prevails upon remand and the district court 
determines that the gravamen of this suit constitutes a commercial transaction, the district court 
may award attorney fees for this appeal. See Portfolio Recovery Assocs., 162 Idaho at 236, 395 
P.3d at 1269. 
III. 
CONCLUSION 
 
In light of the foregoing, we reverse the district court’s directed verdict for Hopkins and 
Murphy. We vacate the district court’s amended judgment dismissing Investor Recovery’s 
claims and awarding attorney fees and remand the case for further proceedings consistent with 
this opinion. Further, we hold that the district court did not err in excluding Investor Recovery’s 
expert witness at trial, nor did it err in granting Hopkins Financial summary judgment. Attorney 
fees for this appeal may be awarded by the district court as set forth above. No costs are awarded 
on appeal.  
 
 
Chief Justice BURDICK, and Justices BEVAN, STEGNER, and MOELLER CONCUR.