Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-88-02045/USCOURTS-ca10-88-02045-0/pdf.json

Parties Involved:
Hartford Accident & Indemnity Company
Appellant
Research Products Company
Appellant
The Dow Chemical Corporation
Appellee
Weevil-Cide Company, Inc.
Appellant

Document Text:

I 

PUBLISH 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

THE DOW CHEMICAL CORPORATION, 

Plaintiff-Appellee, 

) 

) 

) 

) 

FILED 

Uflired States CO!-}rt ~f Appeals 

T€ntl,l ( 1t•··•I'• ,; .4 ,. ~ •• t.•, i. .. 

FEB 2 B 1990 

ROBERT L. I-IOECKER 

Clerk 

v. ) No. 88-2045 

WEEVIL-CIDE COMPANY, INC.; 

RESEARCH PRODUCTS COMPANY; 

HARTFORD ACCIDENT & INDEMNITY 

COMPANY, 

) 

) 

) 

) 

) 

) 

Defendants-Appellants. ) 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF KANSAS 

(D.C. NO. 85-2214) 

William H. Sanders, Sr., Blackwell Sanders Matheny Weary & 

Lombardi, Kansas City, Missouri (James D. Griffin, Blackwell 

Sanders Matheny Weary & Lombardi, Kansas City, Missouri, Keith 

Martin and Bruce Keplinger, Payne & Jones, Overland Park, Kansas, 

with him on the briefs), Attorneys for Defendants-Appellants. 

Kevin T. Van Wart, Kirkland & Ellis, Chicago, Illinois (David M. 

Bernick, Michael R. Powers, Kirkland & Ellis, Chicago, Illinois, 

Roger Stanton and Steven Leben, Stinson, Mag & Fizzell, Overland 

Park, Kansas, with him on the briefs), Attorneys for PlaintiffAppellee. 

Before MOORE, MCWILLIAMS, and ANDERSON, Circuit Judges. 

ANDERSON, Circuit Judge. 

Plaintiff-appellee Dow Chemical Corporation ("Dow") prevailed 

in the United States District Court for the District of Kansas on 

its claim against defendant-appellants Weevil-Cide Company and 

Appellate Case: 88-2045 Document: 010110191830 Date Filed: 02/28/1990 Page: 1 
Research Products Company (collectively "Research Products 111 ) for 

equitable subrogation, and on its claim against defendant-

~ppellant Hartford Accident and Indemnity Company ("Hartford") for 

tortious interference with a prospective contractual relation. We 

reverse both judgments. 

BACKGROUND 

For many years, Research Products marketed a grain fumigant 

containing carbon tetrachloride and carbon disulfide known as 

Weevil-Cide, which was manufactured for it by Dow. R. Vol. III at 

132; R. Vol.Vat 424-25. Dow also produced and distributed its 

own brands of carbon tetrachloride-carbon disulfide fumigant. R. 

Vol. III at 96. 

Robert Kauther and Ardell Nordrum were exposed to carbon 

tetrachloride-carbon disulfide fumigants when they worked at a 

Wisconsin grain elevator. R. Vol.Vat 536-37; R. Vol. VI at 720. 

Both came to suffer severe neurological disorders which forced 

them to retire. R. Vol. IV at 287-88. In October 1978, Kauther 

and Nordrum each filed suit against Dow and Research Products 

alleging inadequate warnings about the effects of exposure to 

Weevil-Cide. 

Research Products' insurer, Hartford, assumed its defense and 

retained Harry Sauthoff, with whom Hartford had a longstanding 

1 Research Products Company acquired Weevil-Cide Company iμ 

1967. Addendum to Brief of Appellants at Tab 1. Because some of 

the events underlying this litigation occurred before 1967, they 

involved Weevil-Cide Company rather than Research Products. This 

distinction is not important to either party's liability, though, 

so it will be disregarded herein. 

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Appellate Case: 88-2045 Document: 010110191830 Date Filed: 02/28/1990 Page: 2 
relationship. R. Vol. IV at 272-77. Soon after discovery began, 

Sauthoff advised Hartford that the plaintiffs had a strong case, 

and that the best course would be for Research Products and Dow to 

contribute equally to a settlement. See Addendum to Brief of 

Appellee at Tab 8, p. 5. As discovery progressed, Sauthoff 

emphatically advised Hartford to settle rather than go to trial. 

See id. at Tab 9, p. 5, at Tab 12, p. 6. 

When the settlement negotiations began, however, Hartford 

directed Sauthoff not to participate, purportedly because of uncertainty as to whether or not Hartford had a policy in effect 

when Kauther and Nordrum were harmed. Dow contends that this 

coverage question was a sham designed to make Dow pay the entire 

settlement. In any event, Dow settled with Kauther and Nordrum in 

April 1984 for more than four million dollars, R. Vol. IV at 347; 

R. Vol.Vat 450-51, which Kauther and Nordrum's attorney 

considered sufficient to cover the claims against both Dow and 

Research Products, .R. Vol.Vat 504, 507. While the settlement 

was "with Dow Chemical Company, but not with the Research Products 

or Weevil-Cide defendants," Addendum to Brief of Appellee at Tab 

25, p. 2, the suits were dismissed as to both Dow and Research 

Products. Stipulation and Order for Dismissal, May 2, 1984, 

Addendum to Brief of Appellee at Tab 17, p. 4. 

In April 1985, Dow sued Research Products for equitable 

subrogation of the amount paid to the grain workers. The 

complaint was amended to allege that Hartford tortiously 

interfered with Dow's prospective economic advantage when it 

instructed Sauthoff not to settle. The jury awarded Dow $2.334 

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Appellate Case: 88-2045 Document: 010110191830 Date Filed: 02/28/1990 Page: 3 
million on its subrogation claim, and seven hundred seventy-eight 

thousand dollars in actual damages and $2.25 million in punitive 

damages on the tortious interference claim. 

DISCUSSION 

I. EQUITABLE SUBROGATION 

A. Statute of Limitations 

A federal court hearing a diversity action applies the 

statute of limitations which would be applied by a court of the 

forum state, Kitchens v. Bryan County Nat'l Bank, 825 F.2d 248, 

254-55 (10th Cir. 1987), even when the action is brought under the 

law of a different state. Warner v. Auberge Gray Rocks Inn, 827 

F.2d 938, 939-40 (3d Cir. 1987); Crosson v. Conlee, 745 F.2d 896, 

902 (4th Cir. 1984), cert. denied, 470 U.S. 1054 (1985). Kansas 

courts apply the limitations period of the state where the claim 

arose, so this action is controlled by the Wisconsin statute of 

limitations, as interpreted by the courts of Wisconsin. Kan. 

Stat. Ann. § 60-516 (1983); see Green v. Kensinger, 429 P.2d 95, 

98-99 (Kan. 1967). 

The trial court analogized subrogation to contribution and 

equitable indemnification, and held that Dow's complaint was 

timely because the claim did not accrue until the payment was 

made. Memorandum and Order, Dec. 1, 1987, R. Vol. I at Tab 122, 

pp. 7-8; Memorandum and Order, June 2, 1988, R. Vol. II at Tab 

184, pp. 8-9. Unlike these causes of action, however, the claim 

of a subrogation plaintiff, or subrogee, "is not a separate cause 

of action from the right held by the subrogor," Wilmot v. Racine 

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County, 400 N.W.2d 917, 919 (Wis. 1987), but is derivative of the 

underlying claim which the subrogor held against the subrogation 

defendant. "[A] subrogee is one who steps into the shoes of the 

subrogor to the extent it has made payment as a result of the 

actionable event." Id. "The extent of the new right created in 

favor of the subrogee is measured by the original right in the 

subrogor." Waukesha County v. Johnson, 320 N.W.2d 1, 3 (Wis. Ct. 

App. 1982). 

Because the subrogee's rights against the subrogation defendant are only as great as the subrogor's rights against that 

defendant, an equitable subrogation claim must be brought within 

the time the subrogor would have been required to bring its claim. 

In effect, then, the subrogation cause of action arises at the 

same time, and is governed by the same statute of limitations, as 

the underlying claim. See,~' Fidelity & Deposit Co. v. Smith, 

730 F.2d 1026, 1034 (5th Cir. 1984); United States v. Bureau of 

Rev., 217 F. Supp. 849, 852-53 (D.N.M. 1963); Bickerstaff v. 

Ellis, 51 S.E.2d 821, 824 (Ga. 1949); Federal Kemper Ins. Co. v. 

Isaacson, 377 N.W.2d 379, 381 (Mich. Ct. App. 1985); Sheppard v. 

State Farm Mut. Auto. Ins. Co., 496 S.W.2d 216, 218 (Tex. Civ. 

App. 1973). But see Penwalt Corp. v. Metropolitan Sanitary Dist., 

368 F. Supp. 972, 980 (N.D. Ill. 1973). Subrogation must be 

distinguished in this respect from contribution and equitable 

indemnification. Commercial Union Assur. Co. v. City of San Jose, 

179 Cal. Rptr. 814, 817 (Ct. App. 1982); Aetna Cas. & Sur. Co. v. 

Windsor, 353 A.2d 684, 686 (D.C. Ct. App. 1976); Fishel's Fine 

Furniture v. Rice Food Market, 474 S.W.2d 539, 541 (Tex. Civ. App. 

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Appellate Case: 88-2045 Document: 010110191830 Date Filed: 02/28/1990 Page: 5 
1971). Therefore, the trial court misapplied the statute of 

limitations. 

Research Products, which was entitled to assert "such 

defenses as were available against the subrogors," Employers Ins. 

Co. v. Sheedy, 166 N.W.2d 220, 222 (Wis. 1969); accord American 

Standard Ins. Co. v. Cleveland, 369 N.W.2d 168, 171 (Wis. Ct. App. 

1985), also argued at trial that Kauther and Nordrum's claims were 

not timely filed, but the trial court refused to instruct the jury 

on the issue. This decision had the effect of withdrawlng the 

question from the jury, so the standard of review is the same as 

that used to review a directed verdict or a judgment notwithstanding the verdict: "'"whether there [was] evidence upon which the 

jury could properly [have found] a verdict for [Research 

Products].""' Mackey v. Burke, 751 F.2d 322, 325 (10th Cir. 1984) 

(quoting Hurd v. American Hoist & Derrick Co., 734 F.2d 495, 499 

(10th Cir. 1984) (quoting 9 c. Wright & A. Miller, Federal 

Practice and Procedure§ 2524, at 543 (1971))) •. 

Under Wisconsin law, a tort claim arises when "the plaintiff 

discovers, or in the exercise of reasonable diligence should have 

discovered, not only the fact of injury but also that the injury 

was probably caused by defendant's conduct or product." Borello 

v. United States Oil Co., 388 N.W.2d 140, 146 (Wis. 1986). 

Kauther and Nordrum's claims, which were governed by a three-year 

limitations period, Wis. Stat. Ann. § 893.54 (West 1983), were 

filed in October 1978, so the question is whether or not the jury 

could have found that the grain workers knew or should have known 

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Appellate Case: 88-2045 Document: 010110191830 Date Filed: 02/28/1990 Page: 6 
of a cause-and-effect relationship between Weevil-Cide and their 

neurological problems before October 1975. 

Ardell Nordrum testified to the following conversation he had 

with his family physician no later than 1972: 

"A •••• I did realize [Weevil-Cide] was dangerous 

because ••. when my hands sleep feeling [sic] ••• I 

took the contents on the side of that pail up to him, 

and •.. I showed him that card and I said what does 

that stuff do to a person's body. And he turned around 

to a little desk there about four inches wide, ten 

inches long and puttered a little bit and he turned 

around, where did you use that stuff. I said we put it 

in the grain to kill weevils. And he says well, don't 

ever breathe it." 

R. Vol. VI at 712-13. 

In addition, two of Research Products' medical experts testified that carbon disulfide poisoning would have been diagnosable 

by a reasonably competent physician before October 1975. R. Vol. 

VI at 667-68; R. Vol. VII at 844-45. 

Dow presented evidence that the condition was not discoverable before October 1975. For example, the twelve local doctors 

who examined the grain workers could not diagnose their illness. 

R. Vol.Vat 470. The first doctor to identify carbon disulfide 

as the cause was a specialist from the University of Wisconsin who 

examined Kauther and Nordrum in 1978. R. Vol. IV at 352. 

The trial court did not see ''any evidence to support" 

Research Products' proposed instruction on the issue. R. Vol. VII 

at 1017. We disagree. The jury reasonably could have concluded 

that carbon disulfide poisoning was (depending upon the weight 

given Nordrum's testimony) or should have been (if Research 

Products' experts were believed) identified as the cause of 

Kauther and Nordrum's ailments before October 1975. 

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On remand, both the timeliness of Kauther and Nordrum's 

actions and the timeliness of Dow's action will be at issue. The 

two questions are related, but not necessarily identical. If 

Kauther and Nordrum's claims were time barred, then Dow's claim 

also was time barred, because Dow stands in the position of the 

grain workers and the running of the statute of limitations would 

permanently extinguish the claims against Research Products. See 

In re Estate of Fessler, 302 N.W.2d 414, 420 (Wis. 1981); Schafer 

v. Wegner, 254 N.W.2d 193, 197 (Wis. 1977). The converse of this~ 

-that if Kauther and Nordrum's claims were timely, then Dow's 

claim was timely--is not necessarily true. Even if the statute 

did not run while the underlying litigation was pending, it is 

possible that the limitations period expired sometime between the 

dismissal of the grain workers' suits and the institution of this 

action, unless some additional tolling measure operated. 2 

B. Release or Assignment 

When it settled the underlying action, Dow did not obtain any 

release or assignment of the grain workers' claims against 

Research Products. For this reason, Research Products contends 

that Dow merely settled the claims against itself, and did not 

acquire any subrogation rights. 

Equ~table subrogation "'depend[s] upon no contract or 

·privity. 1113 Kennedy-Ingalls Corp. v. Meissner, 92 N.W.2d 247, 250 

2 We express no opinion on these questions. 

3 It may be contrasted with conventional subrogation, which 

"arise[s] by contract of the parties." Cunningham v. Metropolitan 

Life Ins. Co., 360 N.W.2d 33, 37 (Wis. 1985). 

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Appellate Case: 88-2045 Document: 010110191830 Date Filed: 02/28/1990 Page: 8 
(Wis. 1958) (quoting Stroh v. O'Hearn, 142 N.W. 865, 869 (Mich. 

1913)). The right to equitable subrogation arises from the payment of another's debt, whether or not the claim has been assigned 

or released. "[T]here is 'no distinction in principle between the 

case of where a third party discharges the liability of another by 

payment and one where such liability is discharged through a 

release of a valid claim.'" D'Angelo v. Cornell Paperboard Prods. 

Co. 1 120 N.W.2d 70, 76 (Wis. 1963) (quoting Kennedy-Ingalls Corp. 

v. Meissner, 92 N.W.2d at 250). The trial court correctly 

determined that a claim for equitable subrogation does not require 

an assignment or release of the underlying obligation. See 

Perkins v. Utnehmer, 361 N.W.2d 739, 740-41 (Wis. Ct. App. 1984). 

C. Lack of Fault 

Research Products argues that the judgment against it must be 

reversed because a subrogation plaintiff must show that it was 

free from fault for the underlying claim, and that Dow failed to 

do so. This issue was not preserved for appeal, however, because 

Research Products did not raise it until its motion for judgment 

notwithstanding the verdict. Only questions raised in a prior 

motion for directed verdict may be pursued in a motion for judgment notwithstanding the verdict. Karns v. Emerson Elec. Co., 817 

F.2d 1452, 1455 n.2 (10th Cir. 1987). 

Research Products argues that it could not have raised the 

issue in its directed verdict motion because Dow at that time 

sought both subrogation and contribution. The contention is that, 

because Dow would not have had to show a lack of fault in order to 

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Appellate Case: 88-2045 Document: 010110191830 Date Filed: 02/28/1990 Page: 9 
collect on its contribution claim, the issue did not exist until 

the contribution claim was dropped. We reject this argument. 

While the issue was not as important until Dow dropped the 

contribution claim, nothing ever prevented Research Products from 

seeking a directed verdict on the subrogation claim on this 

ground. See Eli Lilly & Co. v. Home Ins. Co., 794 F.2d 710, 717 

(D.C. Cir. 1986). 

Because the issue was not properly raised below, this court 

shall not consider it. Farmers Ins. Co. v. Hubbard, 869 F.2d 565, 

570 (10th Cir. 1989); Stephens Indus., Inc. v. Haskins & Sells, 

438 F.2d 357, 361 (10th Cir. 1971). 4 

4 As this case is being remanded for other reasons, the 

question of whether or not Research Products may raise this issue 

upon remand will arise. In Ramey Constr. Co. v. Apache Tribe, 673 

F.2d 315, 318 (10th Cir. 1982), this court allowed a party to 

raise upon remand an issue it had not raised on the prior appeal,· 

but only because the issue was jurisdictional (and therefore nonwaivable). Accord Commodities Export Co. v. United States Customs 

Serv., 888 F.2d 431, 438 (6th Cir. 1989). It follows that nonjurisdictional issues waived earlier in the proceedings may not be 

asserted upon r~mand. See,~' Washington Post Co. v. United 

States Dep't of HHS, 865 F.2d 320, 327 & n.9 (D.C. Cir. 1989); 

National Farmers Org. v. Associated Milk Producers, Inc., 850 F.2d 

1286, 1311 (8th Cir. 1988); Nissho-Iwai Co. v. Occidental Crude 

Sales, Inc., 848 F.2d 613, 618 (5th Cir. 1988); Bratt v. IBM, 785 

F.2d 352, 364 (1st Cir. 1986); Ralston Oil & Gas Co. v. Gensco, 

Inc., 706 F.2d 685, 692 (5th Cir. 1983); Kilbarr Corp. v. Business 

s"ys:° Inc., B.V., 679 F. Supp. 422, 427-28 (D.N.J. 1988), aff'd 

without opinion, 869 F.2d 589 (3d Cir. 1989); Millhollin v. Ford 

Motor Credit Co., 531 F. Supp. 379, 382-83 (D. Or. 1981). But see 

United States v. Sanchez-Lopez, 879 F.2d 541, 556 (9th Cir.1989); 

Riley v. MEBA Pension Trust, 452 F. Supp. 117, 120 (S.D.N.Y.), 

aff'd, 586 F.2d 968 (2d Cir. 1978). A question not timely raised 

at a first trial may not be raised at a second trial of the same 

action. The fortuity that other grounds for reversal and remand 

exist should not revive an otherwise extinct issue. 

A related question is whether or not, upon remand, Dow should 

be permitted to reinstate its claims against Research Products for 

contribution and indemnification. Dow's original complaint sought 

subrogation, contribution, and indemnification, but (apparently as 

[footnote continued •.. ] 

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Appellate Case: 88-2045 Document: 010110191830 Date Filed: 02/28/1990 Page: 10 
D. Evidentiary Rulings 

Research Products challenges the decisions of the trial court 

to exclude certain evidence and to admit other evidence without a 

limiting instruction. Only for an abuse of discretion will we 

disturb a trial court's determination that proffered evidence was 

or was not relevant, or that its probative value did or did not 

outweigh its prejudicial effect. Durflinger v. Artiles, 727 F.2d 

888, 890 (10th Cir. 1984); Beacham v. Lee-Norse, 714 F.2d 1010, 

1014 (10th Cir. 1983). 

The first issue is the exclusion of evidence offered to show 

that Kauther and Nordrum were exposed not only to Weevil-Cide, but 

also to carbon tetrachloride-carbon disulfide fumigants marketed 

by Dow. The court denied the proffer on the grounds that Research 

Products had made no effort to establish a causal connection 

between Dow fumigants and Kauther and Nordrum's conditions, but 

instead had argued that Kauther and Nordrum were not suffering 

from carbon disulfide poisoning at all. Memorandum and Order, 

June 2, 1988, R. Vol. II at Tab 184, p. 18. The fact of the matter, however, is that the proffered evidence was Research 

Products' effort to establish such a causal connection. Even 

though the contentions were contradictory, Research Products 

should have been allowed to argue both that the grain workers did 

not have carbon disulfide poisoning and that if they did have it, 

[ ••• footnote continued] 

a result of the trial court's legal conclusions regarding 

subrogation) the latter two claims were dropped. Unlike the 

subrogation claim, these claims are not before us. Therefore, we 

express no opinion on their availability upon remand. 

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Dow products were to blame. See Brownlow v. Aman, 740 F.2d 1476, 

1490-91 (10th Cir. 1984); Little v. Texaco, Inc., 456 F.2d 219, 

220 (10th Cir. 1972). 

The jury had to decide how much of the settlement should have 

been paid by Research Products. 5 Without complete evidence of 

both parties' possible responsibility for the harm to the grain 

workers, however, determining Research Products' fair share of the 

settlement would be difficult, if not impossible. The amount by 

which Research Products was unjustly enriched was a function of 

the amount of damage it caused, and the amount of damage Research 

Products caused could not be determined effectively without reference to how much, if any, of the damage was caused by Dow 

instead. 6 Exclusion of this evidence was an abuse of discretion. 

The trial court also excluded two internal Dow memoranda. 

One of the documents discusses carbon tetrachloride-carbon 

disulfide fumigants, but the subject of the report is the risk 

posed by carbon tetrachloride. Carbon disulfide is mentioned only 

5 The jury was instructed, in part, as follows: 

"[Y]ou should find, as damages against Weevil-Cide/ 

Research, what amount of the settlement paid by Dow 

that, in equity and good conscience, should have been 

paid by Weevil-Cide/Research. 

In your deliberations on Dow's subrogation claim, 

you may consider, among other things, ••• the degree 

of fault of all persons or entities involved in the 

occurrence." 

Instructions to the Jury, R. Vol. II at Tab 169, p. 10. 

6 This evidence was 

a lack of fault. Even 

not have resulted in a 

the jury to reduce the 

Products. 

relevant even· if Dow did not have to prove 

if a showing of Dow's blameworthiness would 

judgment against Dow, it would have allowed 

amount of its verdict against Research 

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in passing. See Addendum to Brief of Appellants at Tab 24. We 

agree with the trial court's determination that this memorandum 

was irrelevant because it concerns a chemical other than the one 

at issue. See,~, Hale v. Firestone Tire & Rubber Co., 820 

F.2d 928, 935-36 (8th Cir. 1987). The same document was excluded 

for the same reason from the trial of a suit against Dow and 

Research Products brought by another grain worker complaining of 

carbon disulfide poisoning. Nigh v. Dow Chemical Co., 634 F. 

Supp. 1513, 1518-19 (W.D. Wis. 1986). 

The other document is a 1982 report on the question of 

whether or not Dow should withdraw from the liquid grain fumigant 

market. The trial court gave two reasons for excluding this 

memorandum: that it relates to subsequent remedial measures, 

Memorandum and Order, June 2, 1988, R. Vol. II at Tab 184, p. 19, 

and that it was more prejudicial than probative, R. Vol.Vat 456. 

The memorandum should not have been excluded as evidence of 

subsequent remedial measures. See Fed. R. Evid. 407. There is 

nothing remedial about the report's recommendation that Dow remain 

in the grain fumigant business without conducting any further 

medical research. "Remedial measures are those actions taken to 

remedy any flaws or failures." Rocky Mountain Helicopters, Inc. 

v. Bell Helicopters Textron, 805 F.2d 907, 918 (10th Cir. 1986). 

Acts which do nothing to make the harm less likely to occur should 

not be excluded under Rule 407. 23 C. Wright & K. Graham, Federal 

Practice and Procedure§ 5284, at 106-07 (1980 & Supp. 1989); see, 

~, Patrick v. South Cent. Bell Tel. Co., 641 F.2d 1192, 1195-96 

(6th Cir. 1980). 

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Nor should the document have been excluded for insufficient 

relevancy. Research Products sought to introduce it only as 

evidence that the settlement Dow reached was unreasonably high. 

Some of the language in the report (e.g., "we should continue to 

milk the grain fumigants business," Addendum to Brief of Appellants at Tab 25, p. 2} might have tarnished Dow before the jury, 

but that would not have been "unfair," Fed. R. Evid. 403. 

Research Products' argument is that Dow's fear of the effect on a 

jury of this report, were it used in the Kauther and Nordrum 

litigation, was one reason why Dow was so anxious to avoid a trial 

that it paid an exorbitant settlement. The reasonableness of the 

settlement is relevant to the question of how much of it should 

have been paid by Research Products. 

This document was excluded from the Nigh trial, but only 

because it did not relate to Dow's fault. The court in that case 

noted that the report might well have been relevant in determining 

how much Dow would have had to pay in punitive damages, had it 

been found liable. Nigh v. Dow Chemical Co., ,634 F. Supp. at 

1519. The trial court abused its discretion by excluding this 

memorandum. 

An important part of Dow's evidence in this case consisted 0£ 

litigation reports sent to Hartford by Harry Sauthoff, the 

attorney Hartford retained to represent Research Products in the 

Kauther and Nordrum litigation. These letters contained 

Sauthoff's opinions regarding Research Produ9ts' liability and 

chances for success if the claims went to trial. Research 

Products requested that admissibility of the Sauthoff letters be 

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limited to the tortious interference claim only, but the trial 

court admitted them as to both the tortious interference claim and 

the subrogation claim. The trial court considered the letters 

relevant to the subrogation claim b~cause they were evidence of 

"both the state of Weevil-Cide's defense at the time of settlement, which was shortly before trial, and the issue of whether 

Weevil-Cide was actually negligent." Memorandum Opinion and 

Order, June 2, 1988, R. Vol. II at Tab 184, p. 20. The court also 

rejected the argument that even if the letters were relevant, 

their probative value was outweighed by their prejudicial effect. 

R. Vol. VII at 1014-15. 

Clearly, the letters were logically relevant. They were 

perhaps the best evidence of how much Research Products could have 

expected to lose if the Kauther and Nordrum actions went to trial, 

which is evidence of the extent to which Research Products was 

unjustly enriched when Dow settled those actions. Nor can it be 

said that the trial court abused its discretion because the letters' probative value was substantially outweighed by the danger 

of unfair prejudice. See Fed. R. Evid. 403. "The exclusion of 

relevant evidence under Rule 403 is 'an extraordinary remedy to be 

used sparingly.'" K-B Trucking Co. v. Riss Int1~ Corp., 763 F.2d 

1148, 1155 (10th Cir. 1985) (quoting United States v. Plotke, 725 

F.2d 1303, 1308 (11th Cir.), cert. denied, 469 U.S. 843 (1984)). 

Research Products has not shown how any information contained in 

the letters could have hindered the jury's search for truth. See 

1 J. Weinstein & M. Berger, Weinstein's Evidence ,1 403(01], at 

403-13 to -16 (1989). 

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II. INTERFERENCE WITH A PROSPECTIVE CONTRACTUAL RELATION 

An obvious element of the tort of intentional interference 

with a prospective contractual relation7 is a relation with which 

the defendant has interfered. It is well-established that the 

relation must be one to which the defendant is an outsider, see, 

~, Ellis v. City of Valdez, 686 P.2d 700, 708 (Alaska 1984); 

Glenn v. Point Park College, 272 A.2d 895, 897 (Pa. 1971); 

Gonzalez v. Gutierrez, 694 S.W.2d 384, 388 (Tex. Ct. App. 1985); 

Board of Trustees v. Holso, 584 P.2d 1009, 1017 (Wyo. 1978); see 

also Restatement (Second) of Torts§ 766B (1979); Annotation, 

Liability of Third Party for Interference with Prospective 

Contractual Relationship Between Two Other Parties, 6 A.L.R.4th 

195, 201-03 (1981), for one cannot "interfere" 8 with its own 

affairs. 

Dow neither pleaded nor proved the existence of any prospective relation between Dow and anyone other than Hartford. The 

testimony of the president of Research Products that his company 

7 The tort in question has been called business interference, 

intentional interference with a prospective contractual relation, 

intentional interference with business advantage, and intentional 

interference with a prospective economic advantage. While the 

different labels all describe the exact same tort, PPX Enterp., 

Inc. v. Audiofidelity Enterp., Inc., 818 F.2d 266, 269 (2d Cir. 

1987); 3 J. Dooley, Modern Tort Law§ 44.01, at 415, § 44.02, at 

418 (rev. ed. 1984), we shall use "intentional interference with a 

prospective contractual relation" because that is the appellation 

chosen by Restatement (Second) of Torts§ 766B (1979), and adopted 

in Wisconsin. See Cudd v. Crownhart, 364 N.W.2d 158, 160 (Wis. 

Ct. App. 1985). 

8 To interfere is ''to enter into -0r take part in the concerns 

of others." Webster's Third New International Dictionary 1178 

(1981) (emphasis added). 

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would not have contributed to the settlement, R. Vol. VII at 989, 

went uncontradicted. Clearly, Dow expected any contribution to 

come directly from Hartford. 9 In fact, Dow's complaint in this 

action does not allege any interference by Hartford between Dow 

and Research Products; instead, it charges Hartford with disrupting "the arrangement previously reached by Dow and The Hartford's 

representatives." R. Vol. I at Tab 85, p. 14 (emphasis added). 

Generally, an insured defendant and its insurer have a common, interrelated interest in defending and/or settling the suit. 

lA R. Long, The Law of Liability Insurance§ 5A.0l, at 5A-8 

(1989); A. Windt, Insurance Claims and Disputes§ 4.18, at 171 (2d 

ed. 1988); cf. Gonzalez v. City of Franklin, 403 N.W.2d 747, 754 

(Wis. 1987); Hilker v. western Auto. Ins. Co., 231 N.W. 257, 259 

(Wis. 1930), aff'd on reh'g, 235 N.W. 413 (Wis. 1931). In 

Wisconsin, a tortfeasor's insurer is liable to the victim, and may 

be sued directly. Wis. St~t. Ann. §§ 632.24, 803.04(2) (West 

1980). This direct liability "'place[s] the burden upon the 

insurance carrier, who has been compensated in advance for its 

liability, to pay the damage assessed for such injuries to person 

and damage to property as have been caused by'" the insured. FDIC 

v. MGIC Indem. Corp., 462 F. Supp. 759, 761 (E.D. Wis. 1978) 

(quoting Ducommun v. Strong, 212 N.W. 289, 292 (Wis. 1927)); see 

also Loy v. Bunderson, 320 N.W.2d 175, 187 (Wis. 1982). Thus, 

when a tortfeasor and its insurer are sued in Wisconsin, "the 

insurer is the real party in interest." Sayre v. Townsend, 106 

9 Dow's counsel admitted as much at trial. 

1009. 

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Appellate Case: 88-2045 Document: 010110191830 Date Filed: 02/28/1990 Page: 17 
F.R.D. 544, 545 (E.D. Wis. 1985); see also Padden v. Gallaher, 513 

F. Supp. 770, 772 (E.D. Wis. 1981); 3 G. Couch, Cyclopedia of 

Insurance Law§ 45:930, at 586 (rev. 2d ed. 1984). 

As it happens, Hartford was not a named defendant in the 

Kauther and Nordrum actions against Dow and Research Products. 

This is not important to the present case, though, because nothing 

would have occurred any differently had Hartford been named: 

Hartford "conduct[ed] the defense, employ[ed] its own attorney[], 

decide(d] if and when to settle, and [was] in full control of the 

entire litigation." Kirchen v. Orth, 390 F. Supp. 313, 318 (E.D. 

Wis. 1975). Also, the fact that Hartford was not named did not 

affect Hartford's direct liability to the grain workers if 

Research Products was culpable. Wis. Stat. Ann. § 632.24 (West 

1980); see Loy v. Bunderson, 320 N.W.2d at 189; Kranzush v. Badger 

State Mut. Cas. Co., 307 N.W.2d 256, 266 (Wis. 1981); A. Windt, 

supra, at 463. 

Hartford, not Research Products, was Dow's only prospective 

source of contribution to the settlement. Hartford cannot be held 

liable for interfering with its own prospective contractual relation, so the judgment against it must be reversed. 

CONCLUSION 

The verdict against Research Products cannot stand because of 

the misapplication of the statute of limitations, the failure of 

the trial court to instruct the jury on the timeliness vel non of 

Kauther and Nordrum's claims, and the exclusion of certain 

evidence. The decision against Hartford is deficient because 

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Hartford did not interfere with any prospective contractual 

relation. 

The judgment against Research Products is REVERSED and 

REMANDED for further proceedings consistent with this opinion. 

The judgment against Hartford is REVERSED. 

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