## F I L E D United States Court of Appeals Tenth Circuit 

### MAR 10 1999 

### PATRICK FISHER Clerk 

### PUBLISH UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

WOODWORKER’S SUPPLY, INC., Plaintiff-Appellee/ Cross-Appellant,

v. PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, Defendant-Appellant/ Cross-Appellee, Nos. 97-2226 97-2232

Appeal from the United States District Court for the District of New Mexico (D.C. No. CIV 95-1583 BB/DJS)
Doug K. Butler (Bill E. Davidoff with him on the br iefs) of Figari & Davenport, L.L.P., Dallas, Texas, for Defendant-Appellant/Cros s-Appellee. William C. Madison and Gregory D. Steinman of Madis on, Harbour, Mroz & Brennan, P.A., Albuquerque, New Mexico, for Plainti ff-Appellee/CrossAppellant.

Before SEYMOUR , Chief Judge, BALDOCKand BRORBY , Circuit Judges.

SEYMOUR , Chief Judge.-2-

In this diversity action, Woodworker’s Supply, Inc. (Woodworker) sued its former insurer, Principal Mutual Life Insurance Company, for unfair trade practices and fraud. The district court held that the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001 et. seq. , bars claims arising after March 1, 1994, the effective date of the part ies’ agreement, but sent to the jury the claims arising prior to that date. The ju ry awarded Woodworker $221,000 based on Principal Mutual’s violations of the New Mexico Unfair Insurance Practices Act, N.M. S TAT
. ANN
. §§ 59A-16-1 et. seq. , the New Mexico Unfair Practices Act, N.M. S TAT
. ANN
. §§57-12-1 et. seq. , and fraud in the inducement. Principal Mutual appeals, arguing that 1) ERISA preempts all of Woodworker’s claims; 2) Woodworker improperly faile d to disclose its damage theory prior to trial; 3) the evidence was insuffic ient to support the jury’s findings of fraud, violations of the New Mexico statutes, an d damages; and 4) Principal Mutual is entitled to contract damages resulting fr om Woodworker’s failure to pay certain premiums. Woodworker cross-appeals, cl aiming that 1) the district court erred by not sending the issue of punitive da mages to the jury; and 2) in refusing to award treble damages under the state st atutes; 3) we should award Woodworker attorney’s fees and costs on appeal; 4) and if we order a new trial, the jury should be permitted to consider conduct oc curring after March 1, 1994. We affirm in part and reverse in part.-3- I.
We review the evidence in the light most favorable to Woodworker because the jury found in its favor. See Webb v. ABF Freight Sys. Inc. , 155 F.3d 1230, 1234 n.1 (10th Cir. 1998). “[W]e accept the jury’s factual determinations as long as they are reasonably based on some eviden ce or the inferences that may reasonably be drawn from such evidence.” Id. Under this standard of review, the record establishes the following facts. At the end of 1993, Woodworker, a manufacturer and supplier of woodworking tools and equipment, was shopping for i nsurance coverage for its employees. It was dissatisfied with its previous i nsurer, Washington National, for processing claims inefficiently and inaccurately. W oodworker received bids from several insurance companies, including Principal Mu tual, through its insurance broker, Nadyne Shimada. Woodworker had previous experience with different types of insurance contracts. Washington National had provided Woodwor ker with a contingent premium contract, also known as a retrospective pre mium agreement. Under such an agreement, the insurer sets two rates, the preli minary premium and the contract premium. During the course of the year, the insure d pays the preliminary premium which is the lower of the two rates. At th e end of the year, the insurer-4-

calculates the claims paid as well as certain other charges. If this calculation is lower than the preliminary premium, the insured pay s nothing further. If it is higher, the insured pays the difference but never m ore than the contract rate. In exchange for this flexibility, the maximum liability is somewhat higher than it would be were only one rate set. Woodworker’s expe rience with this arrangement had been positive. Its claims had been 60-70% of t he preliminary premium, and it never had to make an additional payment at the end of the year. When Ms. Shimada solicited bids for a new insurer o n behalf of Woodworker, she looked for a plan structured simila rly to Washington National’s. Principal Mutual submitted a low bid, so low in fac t that Ms. Shimada sent it back for the company to revise its rates upwards. Rates that are too low may harm the insured in several ways. They may indicate insuffi cient coverage. Or, in a contingent funding agreement, inadequate preliminary premiums may subject the insured to unexpected collections at the end of the year or significant rate increases for the next year. Principal Mutual resubmitted an increased bid and s et the preliminary rates 25% below the contract rate. According to Ms . Shimada’s analysis, the rates seemed reasonable and she recommended Principal Mut ual’s plan to Woodworker. Principal Mutual began insuring Woodworker on March 1, 1994, although the parties did not sign the retrospective premium agre ement until late July 1994.-5-

Unbeknownst to Woodworker, the underwriter of the p lan, Melissa Lorek, had serious doubts about the adequacy of the rates. On February 28, 1994, she e-mailed Laura Bullock, the Principal Mutual sales representative on the Woodworker contract: We don’t feel comfortable with increasing the retro differential past the 20%. We did, originally, look at this as an op tion. We decided against this because, upon closer examination, the contract rates are already inadequate. . . . We feel we have already b een very aggressive with this case and I don’t feel comforta ble with getting any more aggressive. Supp. App. at 64. Ms. Bullock responded the follow ing day, “This is completely unacceptable. . . . This is a done deal.” Id. at 66. Principal Mutual made no further changes to the rates. In a letter discussi ng contract renewal and rate increases for the following year, Ms. Lorek told Ms . Shimada, “When [Principal Mutual] sold this case last March, [it] knew the rates were inadequate.” Id. at 68; see also Aplt. App. at 766. Prior to that, no one from Pri ncipal Mutual had told Ms. Shimada that the rates charged to Woodworker we re inadequate. Principal Mutual also failed to fully disclose cert ain aspects of the method it used to calculate rates, increasing the likeliho od that Woodworker would experience large rate increases and charges in exce ss of the preliminary premiums. For example, Principal Mutual’s method f or determining reserves to cover “incurred but not reported” expenses deviated from the industry norm and significantly impacted Woodworker’s renewal program . Principal Mutual did not1 Woodworker does not contend that Principal Mutual ’s counter-claim (continued...) -6- disclose this to Woodworker until February 1995. I n addition, while the contract mentioned pooling charges, it did not indicate that such charges could equal up to 15% of the contract premium. Even though Woodworke r paid $178,000 in premiums in 1994, its claims would have to have bee n less than $50,000 to avoid an end of the year surcharge. Had Woodworker known this prior to March 1, 1994, it would not have contracted with Principal M utual. As would be expected, Principal Mutual’s omissions resulted in a significant charge at the end of 1994 as well as a large rate increase for the following year. Severe disagreements ensued betwee n Principal Mutual and Woodworker. Woodworker refused to pay the increase in the rates, as well as the 1994 surcharge. Principal Mutual demanded payments and unilaterally increased the 1995 rates. Finally, Principal Mutual terminat ed Woodworker’s coverage effective midnight, August 31, 1995.

II.
A. ERISA Preemption
The primary legal question in this case is whether, and to what extent, ERISA preempts Woodworker’s claims against Principa l Mutual. 1 The trial court1 (...continued)

against it is preempted, and we do not consider that issue. -7- originally dismissed as preempted only those claims arising “out of Principal’s alleged failure to provide coverage in September 19 95,” Aplt. App. at 153, but modified its ruling at trial by holding preempted a ll claims arising after March 1, 1994, the date the insurance plan commenced. We re view the trial court’s ruling on ERISA preemption de novo as it involves a questi on of law. See Airparts Co. v. Custom Benefits Serv. of Austin , 28 F.3d 1062, 1064 (10th Cir. 1994). The plain language of ERISA provides that it shall preempt state laws that “relate to any employment benefit plan,” subject to enumerated exceptions. See 29 U.S.C. § 1144(a). The Supreme Court has frequen tly acknowledged the expansive scope of ERISA preemption, see, e.g. , Ingersoll-Rand Co. v. McClendon , 498 U.S. 133, 138-39 (1990); Pilot Life Ins. Co. v. Dedeaux , 481 U.S. 41, 47 (1987); Shaw v. Delta Air Lines, Inc. , 463 U.S. 85, 98-99 (1983), yet the Court has also noted that this observation prov ides little aid in actually determining whether ERISA supersedes state law, see, e.g. , New York State Conference of Blue Cross & Blue Shield v. Travelers Ins. Co. , 514 U.S. 645, 655 (1995); California Div. of Labor Stand. v. Dillingham , 519 U.S. 316, 335-36 (1997) (Scalia, J., concurring). As the Court note d in Travelers : [O]ne might be excused for wondering, at first blus h, whether the words of limitation . . . do much limiting. If “r elate to” were taken-8-

to extend to the furthest stretch of its indetermin acy, then for all practical purposes pre-emption would never run its course, for “[r]eally, universally, relations stop nowhere,” H. James Roderick Hudson xli (New York ed., World Classic’s 1980). . . . That said, we have to recognize that our prior attempt to constru e “relate to” does not give us much help in drawing the line here. Travelers Ins. Co. , 514 U.S. at 655. The Court then offered another way of analyzing ERISA pre-emption: “We simply must go be yond the unhelpful text and the frustrating difficulty of defining its key term, and look instead to the objectives of ERISA as a guide to the scope of stat e law that Congress understood would survive.” Id. at 656. In enacting ERISA, Congress intended to “protect . . . the interests of participants in employee benefits plans and their b eneficiaries . . . by establishing standards of conduct, responsibility, and obligatio n for fiduciaries of employee benefit plans, and by providing for appropriate rem edies.” 29 U.S.C. § 1001(b). Preemption of state law works toward that end by su bjecting plans and plan sponsors to a uniform body of law and minimizing th e administrative and financial burdens of complying with conflicting dir ectives among states or between states and the federal government. See Travelers Ins. Co. , 514 U.S. at 656-57 (quoting Ingersoll-Rand Co. , 498 U.S. at 142). Congress defined a plan fiduciary as a person (i) [who] exercises any discretionary authority or discretionary control respecting management of such plan or exerc ises any authority or control respecting management or dispo sition of its-9-

assets, (ii) [who] renders investment advice for a fee or other compensation, direct or indirect, with respect to a ny moneys or other property of such plan, or has any authority or resp onsibility to do so, or (iii) [who] has any discretionary authority or d iscretionary responsibility in the administration of such plan. 29 U.S.C. § 1002 (21)(A). This court has identified four causes of action tha t “relate to” a benefit plan for purposes of ERISA preemption. They involv e 1) laws regulating the type of benefits or terms of ERISA plans; 2) laws creati ng reporting, disclosure, funding or vesting requirements for such plans; 3) laws providing rules for calculating the amount of benefits to be paid under such plans; and 4) laws and common-law rules providing remedies for misconduct growing out of the administration of such plans. Airparts Co ., 28 F.3d at 1064-65 (quoting National Elevator Indus. v. Calhoon , 957 F.2d 1555, 1558-59 (10th Cir. 1992)). At the same time, this circuit recognizes that ERI SA does not preempt all state law claims. It has no bearing on those “whi ch do[] not affect the ‘relations among the principal ERISA entities, the employer, t he plan, the plan fiduciaries and the beneficiaries’ as such.” Hospice of Metro Denver, Inc. v. Group Health Ins. of Okla. Inc. , 944 F.2d 752, 756 (10th Cir. 1991) (quoting Memorial Hosp. Sys. v. Northbrook Life Ins. Co. , 904 F.2d 236, 249 (5th Cir. 1990)). “As a corollary, actions that affect the relations betwee n one or more of these plan entities and an outside party similarly escape pree mption.” Airparts Co. , 28 F.3d-10-

at 1065. While the scope of ERISA preemption may b e broad, it is certainly not boundless. See Monarch Cement Co. v. Lone Star Indus. Inc. , 982 F.2d 1448, 1452 (10th Cir. 1992). With these principles in mind we turn to the partie s’ claims. Essentially Principal Mutual argues that many courts, including this one, have held ERISA preempts fraudulent inducement claims and we should follow that precedent here. Principal Mutual concedes that courts have allowed employers’ fraudulent inducement claims against insurance professionals, but contends those cases are inapposite because Principal Mutual is an insurance company, not an insurance professional. We disagree on both counts. In the cases upon which Principal Mutual relies, th e fraudulent inducement claims arise in a context factually dist inguishable from the instant case. For example, several of the cases involve fr audulent inducement claims affecting relations between primary ERISA entities. See, e.g. , Dedeaux , 481 U.S. 41, 43-44 (1987) (employee sued plan fiduciary for failing to pay benefits); DeBruyne v. Equitable Life Assurance Soc. of the Un ited States , 920 F.2d 457, 460-62 (7th Cir. 1990) (beneficiaries sued plan fid uciary). Principal Mutual’s heavy reliance on Maez v. Mountain States Tel. & Tel. , 54 F.3d 1488 (10th Cir. 1995), is also misplaced. In Maez , plan beneficiaries sued the employer to recover benefits under the plan. Id. at 1492. As noted above, the allocation of-11-

benefits under an employee benefits plan goes to th e core of ERISA, and so such claims are usually preempted. See Airparts Co. , 28 F.3d at 1064-65. We find instructive those cases in which an employe r sued an insurance professional for misrepresentations that induced pl an participation. At least four circuits have held that ERISA does not preempt such claims. See Wilson v. Zoellner , 114 F.3d 713, 721 (8th Cir. 1997) (“[W]e hold that ERISA does not preempt [plaintiff’s] suit against [an insurance ag ent] for the Missouri state common-law tort of negligent misrepresentation.”); Coyne & Delaney Co. v. Selman , 98 F.3d 1457, 1467 (4th Cir. 1996) (“We hold that[plaintiff’s] malpractice claim [against the insurance profession als] is not preempted because it does not ‘relate to’ an employee benefit plan wi thin the meaning of ERISA’s preemption provision”); Morstein v. National Ins. Serv., Inc. , 93 F.3d 715, 723 (11th Cir. 1996) (en banc) (“When a state law claim involves the reliance on an insurer’s promise that a particular treatment is fu lly covered under a policy, . . . a claim of promissory estoppel is not ‘related to’ th e benefits plan.”); Perkins v.
Time Ins. Co. , 898 F.2d 470, 473 (5th Cir. 1990) (“[W]e conclude that a claim that an insurance agent fraudulently induced an ins ured to surrender coverage under an existing policy, to participate in an ERIS A plan which did not provide2 Two cases to the contrary relied on by Principal Mutual have

subsequently been disavowed in their respective cir cuits. Thus, in Wilson v. Zoellner , 114 F.3d 713, 721 n.4 (8th Cir. 1997), the Eighth Circuit declined to follow the dicta in Consolidated Beef Indus., Inc. v. New York Life Ins . Co. , 949 F.2d 960, 964 (8th Cir. 1991). And in Morstein v. National Ins. Servs., Inc. , 93 F.3d 715, 717-18, 722 (11th Cir. 1996), the Elevent h Circuit en banc court overruled Farlow v. Union Cent. Life Ins. Co. , 874 F.2d 791 (11th Cir. 1989). -12- the promised coverage, ‘relates to’ that plan only indirectly.”). 2 The reasoning is two-fold: first, by definition, the insurance prof essional cannot act as a plan fiduciary before the plan exists; and second, allow ing preemption would not further Congress’ purpose in passing ERISA. See Coyne & Delaney Co. , 98 F.3d
at 1466-71. Coyne & Delaney Co. is particularly apposite to the instant case. The re, an employer sued insurance professionals under Virg inia’s malpractice law. See id. at 1464. The insurance professionals had misadvis ed the employer about employee benefit plans and had designed an inadequate plan for it. See id. at 1461. Once the plan went into effect, the insuranc e professionals served as the Plan Administrator and Plan Supervisor. See id. The Fourth Circuit rejected the defendants’ claims that ERISA preempted the employe r’s claims, noting: Quite simply, Delany’s claim is not aimed at a plan administrator at all since the defendants are sued in their capaciti es as insurance professionals for actions taken in that capacity. Indeed, defendants’ malpractice, if any, took place before they began t o act in their capacities as Plan Administrator and Plan Superviso r. Id. at 1471.-13-

Similarly, Woodworker is suing Principal Mutual wit h respect to its preplan activity in its role as a seller of insurance, not as an administrator of an employee benefits plan. Principal Mutual does not, and cannot, claim that it was a principal ERISA entity before March 1, 1994. Of the four principal ERISA entities, the employer, the plan, the beneficiaries , and the plan fiduciaries, Principal Mutual could only claim to be the last. However, Congress quite logically defined a plan fiduciary in relation to a plan. If no plan exists, by definition plan fiduciaries cannot exist. Conseque ntly, Woodworker’s pre-March 1, 1994 claim is best characterized as a claim betw een an employer and an outside party not affecting relations between ERISA entitie s, as such. See Airparts Co ., 28 F.3d at 1065. That Principal Mutual may have la ter acted as a plan fiduciary does not alter its pre-plan status. Cf. Coyne & Delaney , 98 F.3d at 1471. Allowing Woodworker’s claims to proceed is consiste nt with Congress’ purpose in enacting ERISA, that is, to protect the interests of employees and other beneficiaries of benefit plans and establish unifor m standards regulating such plans. Holding insurers accountable for pre-plan f raud does not affect the administration or calculation of benefits, nor does it alter the required duties of plan fiduciaries. See Wilson , 114 F.3d at 719; Coyne & Delaney Co. , 98 F.3d at
1471. Conversely, were ERISA to preempt such claims, “employees, whom Congress sought to protect, [would] find themselves unable to make informed3 Principal Mutual argues that because claims again st insurance

professionals are permitted, Woodworker could sue M s. Shimada for fraud. That suggestion ignores Woodworker’s theory of the case: that Principal Mutual, not Ms. Shimada, concealed material facts. -14- choices regarding available benefit plans.” Morstein , 93 F.3d at 723-24. We agree with the Eighth Circuit’s assertion that a st ate’s “efforts to prevent sellers of goods and services, including benefit plans, fro m misrepresenting . . . the scope of their services is ‘quite remote from the a rea with which ERISA is expressly concerned–reporting, disclosure, fiduciary responsibility and the like.’” Wilson , 114 F.3d at 720 (quoting Dillingham , 117 S. Ct. at 840). Finally, we are not persuaded that Principal Mutual ’s status as an insurance company mandates preemption. 3 We acknowledge that in the abovecited cases plaintiffs were suing insurance profess ionals, as opposed to insurance companies, but we fail to see how this makes a mate rial difference. See Camp v. Pacific Fin. Group , 956 F. Supp. 1541, 1546-47 n.4 (C.D. Cal. 1997). In enacting ERISA, Congress intended to protect the integrity o f employment benefit plans, not insurance companies. It explicitly defined a p lan fiduciary in terms of the function it performed for the plan, not whether it was an insurance company. Courts have repeatedly held that insurers are not n ecessarily ERISA entities. See Harris Trust & Sav. Bank v. Provident Life & Accide nt Ins. Co. , 57 F.3d 608, 613-14 (7th Cir. 1995) (holding that insurance comp any was not a fiduciary as-15-

defined by ERISA and citing cases). Moreover, one circuit has indicated that an insurance company may suffer liability in a misrepr esentation suit. See Wilson , 114 F.3d at 718 (“If Prudential incurs any liability as a result of this suit, it will do so only as the employer of a tortfeasor, and notas a plan fiduciary.”). Quite simply, we see no principled basis for distinguishi ng insurance companies from insurance professionals in this type of action. We hold that ERISA does not preempt Woodworker’s pre-plan fraud claims against its insurer, and affirm the district court on this point.
B. Admission of Woodworker’s Damage Theory
Principal Mutual contends that Woodworker failed to properly disclose its damage theory prior to trial and that the district court should have excluded its evidence of damages. Principal Mutual raises this claim under two theories: arguing first, that Fed.R.Civ.P. 37(c) mandated exc lusion, and second, the court should have granted a new trial under Fed.R.Civ.P. 60(b)(3). We review evidentiary rulings and the disposition of Rule 60( b) motions for an abuse of discretion. See Howard v. Mail-Well Envelope Co. , 150 F.3d 1227, 1231 (10th Cir. 1998 ) (60(b) motions); Orjias v. Stevenson , 31 F.3d 995, 1005 (10th Cir. 1994) (evidentiary rulings under 37(c)). Under thi s standard, we will not reverse unless the trial court has made “an arbitrary, capr icious, whimsical, or manifestly-16-

unreasonable judgment.” FDIC v. Oldenburg , 34 F.3d 1529, 1555 (10th Cir. 1994) (further quotations omitted). In its complaint, Woodworker asked for “compensatory damages” for various offenses “in an amount to be proven at tria l.” Aplt. App. at 30-31. At trial, it asked for contract damages based on recis sion, the difference between the value it had received for the insurance and the pur chase price. During its opening statement, Woodworker explained, “[w]e want that . . . difference between the amount we paid in premiums and the amount they paid in claims refunded to us.” Id. at 442. Woodworker’s pre-trial disclosures had be en somewhat vague, however, and during a deposition Mr. John Wirth, pr esident of Woodworker, did not fully explain that he would request such damage s. At trial, Principal Mutual objected when the attorn ey for Woodworker asked Mr. Wirth on direct examination about the amo unt his company had paid in premiums, but Principal Mutual did not request a co ntinuance. The trial court overruled the objection without explanation, but of fered Principal Mutual the right to question Mr. Wirth outside the presence ofthe jury prior to his crossexamination. Id. at 887-88. Principal Mutual apparently failed to take advantage of this opportunity. See id. at 891. Nevertheless, during cross-examination, Principal Mutual elicited from Mr. Wirth that his c alculation of damages did not account for the administrative and other costs incu rred by the insurance company.-17-

Rule 37(c)(1) provides: [a] party that without substantial justification f ails to disclose information required by Rule 26(a) or 26(e)(1) [whi ch govern initial disclosures and required supplements thereof] shall not, unless such failure is harmless, be permitted to use as evidenc e at a trial, at a hearing, or on a motion any witness or information not so disclosed. “The determination of whether a Rule 26(a) violatio n is justified or harmless is entrusted to the broad discretion of the district c ourt.” Mid-America Tablewares, Inc. v. Mogi Trading Co. , 100 F.3d 1353, 1363 (7th Cir. 1996). A district court need not make explicit findings concerning the exis tence of a substantial justification or the harmlessness of a failure to d isclose. United States v. $9,041,598.68 , 163 F.3d 238, 252 (5th Cir. 1998). Nevertheless, the following factors should guide its discretion: 1) the prejudi ce or surprise to the party against whom the testimony is offered; 2) the ability of th e party to cure the prejudice; 3) the extent to which introducing such testimony woul d disrupt the trial; and 4) the moving party’s bad faith or willfulness. See Newman v. GHS Osteopathic Inc. , 60 F.3d 153 (3d Cir. 1995) (quoting Bronk v. Ineichen , 54 F.3d 425, 418 (7th Cir.1995)); Cf. $9,041,598.68 , 163 F.3d at 252 (enumerating a similar list of factors to determine whether inclusion of last-minu te evidence is harmless); Smith v. Ford Motor Co. , 626 F.2d 784, 797 (10th Cir. 1980) (applying thes e four factors to determine whether the district court abu sed its discretion in allowing testimony not specified in the pretrial order).-18-

We assume arguendo that Woodworker improperly faile d to disclose its damage theory. Even so, we are persuaded the admis sion of Woodworker’s damage theory was harmless under the factors we mus t consider. First, Principal Mutual knew the numbers on which Mr. Wirth based hi s calculation; indeed, it provided the calculation for the amount it paid in premiums. Moreover, the district court gave Principal Mutual a significant opportunity to cure any resulting prejudice by cross-examining Mr. Wirth outside the presence of the jury. Principal Mutual failed to do so. After Mr. Wirth testified, Principal Mutual also called as a witness Ms. Lorek, an underwriter who w as familiar with the administrative costs Principal Mutual incurred proc essing claims. Yet, it elicited no testimony on this subject matter. Nor did it ar gue to the district court that it needed more time to make this calculation. Finally , Woodworker’s initial disclosures and Mr. Wirth’s deposition occurred bef ore the district court ruled that ERISA preempted a number of its claims. Those rulings no doubt prompted Woodworker to modify its damage theory. While this certainly does not excuse Woodworker from supplementing its disclosures, it r educes the likelihood that Woodworker acted in “bad faith” in varying its tria l testimony from its deposition testimony. Under these circumstances, we hold the district court did not abuse its discretion under Rule 37 in permitting evidence of Woodworker’s damage theory. We now turn to Principal Mutual’s Fed.R.Civ.P. 60(b )(3) claim based on-19-

the same facts, and again assume arguendo that Wood worker’s failure to disclose was improper. “[B]efore retrial is mandated under Rule 60(b)(3) in consequence of discovery misconduct, the challenged behavior mu st substantiallyhave interfered with the aggrieved party’s ability fully and fairly to prepare for and proceed at trial.” Anderson v. Cryovac, Inc. , 862 F.2d 910, 924 (1st Cir. 1988) (emphasis in original). Given Principal Mutual’s o pportunities to cure any prejudice flowing from Mr. Wirth’s testimony, we ca nnot say with any certainty that Woodworker’s failure to disclose substantially interfered with Principal Mutual’s ability to proceed at trial. Accordingly, we hold that the district court was within its discretion in denying Principal Mutu al’s Rule 60(b)(3) motion, and we decline to grant a new trial on this basis.
C. Sufficiency of the evidence
Principal Mutual contends that Woodworker presented insufficient evidence to support the jury’s finding on the claim s for violations of the New Mexico Unfair Practices Act, the Unfair Insurance P ractices Act, fraudulent inducement, and damages. We view the evidence in t he light most favorable to Woodworker, upholding the verdict if the record rev eals sufficient evidence to support it. See Acrey v. American Sheep Indus. Ass’n , 981 F.2d 1569, 1572 (10th Cir. 1992). We discuss each claim in turn.-20-

1. New Mexico Trade Practices Statutes
Both the New Mexico Unfair Practices Act (UPA), N.M

. S TAT
. ANN
. §§
57-12-1 et. seq. , and the New Mexico Unfair Insurance Practices Act(UIPA),
N.M. S TAT
. ANN
. §§ 59A-16-1 et. seq. , prohibit misleading or deceptive communications to consumers. “[U]sing exaggeration , innuendo or ambiguity as to a material fact or failing to state a material f act if doing so deceives or tends to deceive” is unlawful under the UPA. N.M. S TAT
. ANN .§ 57-12-2 (D) (14). The UPA “applies to all misleading or deceptive stateme nts, whether intentionally or unintentionally made.” Ashlock v. Sunwest Bank of Roswell , 753 P.2d 346, 348 (N.M. 1988), overruled on other grounds by Gonzales v. Surgidev Corp. , 899 P.2d 576, 583 (N.M. 1995). The UIPA places similar restrictions on trade pract ices within the insurance business. No person may “misrepresent[] the benefits, advantages, conditions or term of any policy,” N.M. S TAT
. ANN .§ 59A-16-4 (A) or “fail[] to disclose material facts reasonably necessary to pre vent other statements made from being misleading.” N.M. S TAT
. ANN .§ 59A-16-4 (G). Woodworker presented evidence that Principal Mutual knew that the rates were inadequate prior to the time the agreement wen t into effect, and that Principal Mutual did not disclose its method for de ciding whether to add a-21-

surcharge to the preliminary premium or increase an nual rates. Evidence in the record shows that had Woodworker had access to thatinformation, it would not have contracted with Principal Mutual. We therefor e hold sufficient evidence supports the UPA and UIPA claims.

2. Fraudulent Inducement
Under New Mexico law, the elements for fraudulent i nducement are 1) a misrepresentation of fact or failure to disclose a material fact; where 2) the falsity was known to the maker or where the representation or concealment was reckless; 3) the maker acted with the intent to deceive and t o induce the other party to act in reliance; and 4) the other party actually relied on the representation or concealment. See Lotspeich v. Golden Oil Co. , 961 P.2d 790, 792 (N.M. Ct. App. 1998); see also Krupiak v. Payton , 561 P.2d 1345, 1346 (N.M. 1977). A party has the duty to disclose if he knows that the otherparty to a contemplated transaction is acting under a mistaken belief, or i f he has superior knowledge not within the reach of the other party. Krupiak, 561 P.2d at 1346. Woodworker presented evidence that supported its fr audulent inducement claim. First, as discussed above, Principal Mutual had superior knowledge about its calculation methods for the underrated premiums it had offered Woodworker. Principal Mutual contends it failed to disclose opi nions, not facts. However, its4 Because we uphold the jury’s finding that the con tract at issue was

procured by fraud, Principal Mutual has no right to collect under it. See Rodriguez v. Horton , 622 P.2d 261, 265 (N.M. Ct. App. 1980). Conseque ntly, we deny Principal Mutual’s counterclaim for $56,320, t he surcharge on the 1994 preliminary premium.

-22- unusual calculation methods and the resultant hidde n charges presumably led Ms. Lorek to conclude the rates were inadequate. These underlying facts serve as the basis for a fraud claim. In addition, a reasonable juror could infer that Principal Mutual intentionally chose not to disclose the inad equacy of the proposed rates in order to ensure it received Woodworker’s business. Finally, Woodworker presented evidence that it relied on Principal Mutu al’s concealment. We therefore affirm the jury’s finding of fraud. 4
3. Damages
Principal Mutual contends that Woodworker did not s uffer any damages because, at worst, Woodworker paid less in premiums than it should have. We disagree. Woodworker presented considerable eviden ce that underrating premiums and failing to disclose calculation method s can, and did, result in unexpected retrospective collections and rate incre ases. Woodworker then presented evidence of recission damages, an appropr iate remedy for fraud. See Snell v. Cornehl , 466 P.2d 94, 95-96 (N.M. 1970); Montoya v. Moore , 422 P.2d5 Later, the district court noted the compensatory damage award alone was

sufficient to achieve the underlying policy rationa le of awarding punitive damages, that is, to encourage private citizens to undertake this type of litigation. Aplt. App. at 201. -23- 363, 365 (N.M. 1967); F OWLER V. H ARPER ET AL ., 2 T HE L AW OF T ORTS § 7.15 (2d ed. 1986); see also 37 A M
. J UR
. 2 D
. Fraud and Deceit§ 338 (1968). Because sufficient evidence existed to support the damage a ward, we uphold it.

III.
Woodworker raises several issues in its cross-appea l which we address in
turn.

A. Punitive damages

Woodworker contends the district court erred in ref using to submit the issue of punitive damages to the jury. After both parties rested, Woodworker requested that evidence pertaining to punitive dama ges be admitted. The district court denied the request, finding insufficient evid ence to submit punitive damages to the jury. Aplt. App. at 1144-1145. 5 We review this question of law de novo, viewing the evidence in the light most favorable to Woodworker. See Oja v. Howmedica, Inc. , 111 F.3d 782, 792 (10th Cir. 1997). Under New Mexico law, punitive damages may be award ed for conduct-24-

that is malicious, willful, reckless, wanton, fraud ulent, or in bad faith. See Gonzales v. Surgidev Corp. , 899 P.2d 594, 597 (N.M. 1995); Golden Cone Concepts v. Villa Linda Mall , 820 P.2d 1323, 1328-29 (N.M. 1991); Sanchez v. Wiley , 946 P.2d 650, 655 (N.M. Ct. App. 1997). If suffi cient evidence exists to prove any one of the enumerated mental states, the trial court is required to instruct the jury on punitive damages. See Gilmore v. Duderstadt , 961 P.2d 175, 184 (N.M. Ct. App. 1998). In Flores v. Baca , 871 P.2d 962, 964 (N.M. 1994), for example, the trial court refused to instruct the ju ry on punitive damages. On appeal, the New Mexico Supreme Court ordered a new trial on that issue because the jury could have inferred from the evidence that the defendant acted fraudulently. Id . at 968. Once a plaintiff presents sufficient evi dence of a requisite mental state, the question of punitive da mages belongs to the jury. Punitive damages are an appropriate sanction for co mmon-law fraud. Naranjo v. Paull , 803 P.2d 254, 261-62 (N.M. 1991). Here, the jury specifically found Principal acted w illfully and committed fraud and therefore possessed the mental state requ ired for a punitive damage award. We are sympathetic to the policy justificat ions the district court gave in explaining why it did not award punitive damages an d would not award treble damages. However, the district court did instruct the jury on fraudulent inducement, and we have held that Woodworker presen ted sufficient evidence to-25-

support such a finding. Under these circumstances , New Mexico law requires an instruction on punitive damages, if requested. See , e.g. , Gilmore , 961 P.2d at 184. Because substantial evidence supports the jury’s finding of fraudulent inducement, we have no choice but to order a new tr ial on punitive damages.
B. Treble damages
Woodworker argues that the district court also erre d in refusing to treble its damage award. The New Mexico Unfair Trade Prac tices Act provides that “[w]here the trier of fact finds that the party cha rged with an unfair or deceptive trade practice . . . has willfully engaged in the t rade practice, the court mayaward up to three times actual damages.” N.M. S TAT
. ANN
. § 57-12-10 (B) (emphasis added). The statute specifically makes the awardin g of treble damages a discretionary act. We therefore review the court’s decision not to award treble damages under an abuse of discretion standard. Cf. Lam, Inc. v. Johns-Manville Corp ., 668 F.2d 462, 476 (10th Cir. 1982) (reviewing fo r abuse of discretion an award of treble damages and attorney’s fees granted under statute providing the court “may” award successful party such fees). Here, the jury expressly found that Principal Mutua l’s conduct was willful, so the district court had the option to gr ant treble damages. However, “[g]iven the record in the case and other remedies awarded,” it declined to do so.-26-

Aplt. App. at 202. We are not persuaded the distri ct court abused its discretion in denying Woodworker treble damages.
C. Liability for post-March 1, 1994 Conduct

Woodworker contends the district court erred in ins tructing the jury that it could only find liability for Principal Mutual’s co nduct occurring before the commencement of the insurance plan on March 1, 1994 , with respect to the fraudulent inducement, the UPA, and the UIPA claims . On cross-appeal, Woodworker asks us to reverse this decision in the event we order a new trial on liability or damages. Woodworker provides no separ ate argument on this issue, however, and we are at a loss to determine either f rom its briefs on appeal or from the record below what alleged post-plan conduct of Principal Mutual’s relates to these three claims. Woodworker specifically discla ims any intent to appeal the district court’s dismissal of its claims for breach of contract, defamation, bad faith, and prima facie tort, which claims primarily were based on conduct occurring after March 1, 1994. See Br. of Aplee./Cross-Aplt. at 2. Under these circumstances, we decline to address this argument.-27-

D. Attorney’s Fees and Costs on Appeal.
Woodworker also argues that it is entitled to attor ney’s fees and costs on appeal. The New Mexico Unfair Trade Practices Act mandates an award of costs and attorney’s fees to prevailing plaintiffs. N.M. S TAT
. ANN
. § 57-12-10 (C). The New Mexico Supreme Court has ruled that this pr ovision applies to costs and fees incurred on appeal as well as at trial. See Hale v. Basin Motor Co. , 795 P.2d 1006, 1013-1014 (N.M. 1990). Woodworker is therefo re entitled to such fees. On remand, the district court should award Woodwork er attorney’s fees for litigating this appeal.

IV.

We REVERSE the district court’s denial of punitive damages an d
REMAND this case for a new trial on that issue. We AFFIRM on all other issues.