# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

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No. 1 1- 15 22

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Ro na ld Tim

Baco n

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el la nt

v.

Lib ert y Mu tu al Ins ur an ce Co m

pa ny

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t - Ap pe ll ee

__ __ __ __ __ __
App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e So ut he rn Dis tri ct of I owa - Co un ci l Bl uf fs

__ __ __ __ __ __

Su bm it te d: Marc h 1 3, 2 01 2
Fil ed : Au gu st 6, 2 01 2 [Pu bl is he d]

__ __ __ __ __ __

Befo re MELLOY, SMITH, an d S HEPHERD, Circ ui t J ud ge s.

__ __ __ __ __ __

PER CURI AM.

Ro na ld "Tim " Ba co n a pp eal s t he di st ric t co ur t's gra nt of s um m ary jud gm en t 1

to Lib ert y Mu tu al In su ran ce Co m pa ny ( " Li be rty Mu tu al ") on Bac on 's frau du le nt

m is rep res en ta ti on an d b reac h- of -co nt ract cla im s. We affi rm

.

The Hon or ab le Jo hn A. Ja rv ey , Uni te d St at es Dis tri ct Ju dg e fo r th e So ut he rn 1

Dis tri ct of I owa

.I. Bac kg ro un d

"Ba co n's su it ag ai ns t Lib ert y Mu tu al ari se s ou t of th e se tt le m en t of a pe rs on al

in jury la wsu it ag ai ns t Ri dg et op Hol di ng s, In c. ('Ri dg et op '), th e pa ren t co m pa ny of

Ba co n' s em

pl oyer, Dav is Erect io n Co m pa ny, In c. ('Dav is Erecti on' ). " B ac on v. Li be rty

Mut . Ins . Co. , 57 5 F .3d 78 1, 7 82 (8t h C ir. 2 00 9)

.

On J ul y 28 , 20 03 , Baco n, a Neb ras ka res id en t, work ed fo r Dav is Erect io n o n

a co ns tru ct io n pr ojec t in Om ah a, Neb ras ka

. Bac on su ffer ed se ve re in juri es in a wor krel at ed acci de nt at t he co ns tru ct io n s it e.

Lib ert y Mu tu al

, a na ti on wid e in su ran ce co m pa ny do in g bu si ne ss in Io wa an d

Neb ras ka

, pr ov id ed Dav i s Erect io n wit h co m m erci al li ab il it y an d wor ke rs '

co m pe ns at io n in su ran ce un de r an Owner Co nt ro ll ed In su ran ce Pro gr am (OCIP) —o r

"wra p aro un d" in su ran ce po li cy —fo r al l pa rti ci pa ti ng co nt ract or s at th e co ns tru ct io n
si te

. Thi s in su ran ce co ve red Bac on 's wor ke rs ' co m pe ns at io n be ne fit s, w h i c h w e re
ad m in is te red un de r Neb ras ka la w. In 20 06

, Bac on fil ed a pe rs on al -in jury co m pl ai nt

in Neb ras ka st at e co ur t ag ai ns t se ve ral en ti ti es , in cl ud in g Ri dg et op ; Kiewi t

Co ns tru ct io n Co m

pa ny, th e ge ne ral co nt ract or at th e co ns tru ct io n si te ; an d DBI-Sa la

, a/ k/ a DB In du st rie s, In c., th e m an uf act ur er of th e sa fet y ha rn es s th a t Bac on was
weari ng at th e ti m e of th e acci de nt

. The co m pl ai nt ad di ti on al ly na m ed Dav is Erect io n

an d Lib ert y Mu tu al as de fen da nt s fo r th e so le pu rp os e of su br og at io n o f B a co n's

wor ke rs ' co m

pe ns at io n b en efi ts

.

In Ju ne 20 06

, Bac on m ov ed to Io wa. Lib ert y Mu tu al co nt rib ut ed $1 00 ,00 0 to

th e pu rch as e o f h i s h o m e. Si nc e May 20 06

, Lib ert y Mu tu al ha s m ad e week ly

di sa bi li ty pay m en ts to Baco n.

In Aug us t 20 07

, Lib ert y Mu tu al an d Bac on 's at to r ne y , Ji m Harri s, be ga n

ne go ti at in g a se tt le m en t of Lib ert y Mu tu al 's wor kers ' co m pe nsa tio n rig ht s. On Aug us t
1, 20 07

, Harri s wro te to Lib ert y Mu tu al 's at to rn ey s i n th e Neb ras ka act io n, st at in g,

-2

-"Th ere is no su br og at io n cl ai m ag ai ns t Kiewi t or Ri dge top

. The waiv er of su br og at io n

cl au se in th e co nt ract al on g wit h th e fact th at Lib ert y can no t su br og at e ag ai ns t a pa rty

to who [m ] th ey owe a du ty are di sp os it iv e of th is m at te r." On Aug us t 27

, 20 07

, Lin da

W ard , Lib ert y

Mu tu al Sen io r Tech ni cal Cla im s Sp eci al is t, re sp on de d:

W e are in ag reem en t th a t w e h a ve no "re co ve ry " rig ht s as to an y

se tt le m en t m on ie s fro m Kiewi t or Ri dg et op

. Howev er, al th ou gh we can

no t reco ve r fro m th os e en ti ti es , we wou ld st il l ha ve a cl ai m to St at ut or y Cred it /o ffs et ag ai ns t an y ne t to Mr. Bac on fro m th os e en ti ti es

. It go es to th e " no do ub le reco ve ry ru le [,"] an d to th e St at e's St at ut es as to ou r fu tu re ob li ga ti on s to Mr. Bac on po st hi s reco ve ry fro m 3r d pa rty m on ie s.

B a c o n an d Lib ert y Mu tu al ne ve r reac he d ag reem en t on se tt le m en t of li e n

reco ve ry am ou nt s an d l it ig at io n i n p rep arat io n fo r tr ia l co nt in ue d.

Im m ed ia te ly pr io r to tri al

, on Ja nu ary 1 3

, 2 0 0 8, Ri dg et op ag reed to se tt le it s

po rti on of Bac on 's su it

. Harri s se nt Ri dg et op 's co un se l an em ai l cl ari fy in g, in te r al ia

, th at "i na sm

uc h as Ri dget op an d Dav is Erect io n are in te rrel at ed co rp or at io ns , th ey wil l

each waiv e an y an d al l cl ai m s, cros s- cl ai m s, su br og at io n, rei m bu rs em en t or ot he rwis e

ag ai ns t each ot he r an d th ei r in su rers ." On Ja nu ary 29

, 20 08

, Ri dg et op 's co un se l

rep li ed th at "[t ]his lan gu ag e wil l n ot work ."

In a se rie s o f em ai ls fro m Ja nu ary 29

, 20 08 to Feb ru ary 22

, 20 08

, Lib ert y

Mu tu al 's c ou ns el so ug ht Bac on 's an d Ri dg et op 's se tt le m en t am ou nt , so th at Lib ert y

Mu tu al co ul d de ci de whe th er to as se rt a li en , se t-o ff, or cred it

. Bac on 's an d Ri dg et op 's

co un se l refu se d to di sc lo se th e s e t t l e ment am ou nt

, ci ti ng to a co nf id en ti al it y

ag reem en t. Add it io na ll y , t he y as se rte d th at th e se tt le m en t am ou nt was irr el ev an t to

whe th er Lib ert y M u t u a l h a d a li en

. Bac on 's co un se l rel ie d up on W ard 's pr io r le tt er

an d to ok th e po si ti on th at Lib ert y Mu tu al ha d al read y co nf irmed th at it ha d no in te res t

in th e se tt le m en t p r o ceed s. Lib ert y Mu tu al arg ue d th at refu sa l to di vu lg e th e

se tt le m en t am ou nt m ad e it im po ss ib le fo r Lib ert y Mu tu al to cal cu la te it s ri gh ts to a

-3

-st at ut or y cred it /o ffs et on fu tu re ob li ga ti on s. Dur in g th is ex ch an ge of em ai ls

, Bac on 's

co un se l sh ared W ard 's Aug us t 27

, 20 07 le t t e r w it h Ri dg et op 's co un se l. Ri dg et op 's

co un se l th en a s ke d Lib ert y Mu tu al to co nf irm th e rep res en ta ti on m ad e in W ard 's
Aug us t 27

, 20 07 le tt er th at "Li be rty Mu tu al

. . . as se rts n o s u b r o g a t i on li en or an y

o t h e r fo rm of cl ai m ov er th e se tt le m en t pr oc eed s to be pa id by Zuri ch an d A I G o n
be ha lf of R i d g e to p Hol di ng s." Lib ert y Mu tu al m ai nt ai ne d th at kn owl ed ge of th e

se tt le m en t am ou nt was re le va nt to it s " cl ai m of a cred it ."

On Feb ru ary 28

, 20 08

, Bac on fil ed a de cl arat or y -jud gm en t act io n in Dou gl as

Co un ty, Neb ras ka

, as ki ng th e co ur t to de cl are th at Lib ert y Mu tu al waiv ed it s rig ht to

su br og at io n ag ai ns t th e se tt le m en t pr oc eed s fro m Ri dg et op

. Bac on req ue st ed th at th e

co ur t de cl are th at no su br og at i o n rig ht ex is ts ag ai ns t th e pa ren t co m pa ny of an

in su red

, ei th er pa st or fu tu re. On Mar ch 14

, 20 08

, Lib ert y Mu tu al an swe red th at it ha d

a "b on a fid e wor ke rs ' co m pe ns at io n li en en ti tl in g [it ] to st at ut or y cred it fo r th e fu nd s

ne tt ed b y [ B a c o n] th ro ug h th e se tt le m en t ag reem en t by an d be twee n [Bac on ] an d

Ri dg et op Hol di ng s, In c." Bac on di d no t se ek da m ag es

. The la wsu it was di sm is se d

wit ho ut be in g s et tl ed or a dju di cat ed

.

W hi le th e de cl arat or y

-

ju d g men t act io n was st il l pe nd in g, bu t aft er Lib ert y

Mu tu al ha d an swe red th e co m pl ai nt in th at act io n, Bac on fil ed th e in st an t cas e ag ai ns t

Lib ert y Mu tu al in fed eral di st ric t co ur t in Io wa, "as se r t i n g a c la im of frau du le nt

m is rep res en ta ti on , f

or whi ch he so ug ht pu n i t i v e d a mages , a nd a cl ai m of br each of

co nt ract ." Bac on , 57 5 F .3d at 7 82 . Baco n a rg ue d t ha t

Lib ert y Mu tu al 's an swe r to hi s co m pl ai nt i n t h e Neb ras ka de cl arat or y jud gm en t act io n co ns ti tu te d a kn owi ng m is rep res en ta ti on m ad e wit h th e in te nt to de cei ve

. His br each -o f-co nt ract cla im res te d o n h is all eg at io n th at Lib ert y Mu tu al 's cl ai m rep res en ta ti ve crea te d a bi nd in g co nt ract no t

to pu rs ue an y cl ai m to th e se tt le m en t pr oc eed s whe n sh e mad e th e al le ge d re pr es en ta ti on th at Lib ert y Mu tu al waiv ed an y

su ch cla im

.

Id . at 7 82 –8 3.

-4

-Lib ert y Mu tu al m ov ed to di sm is s th e co m pl ai nt "o n th e gr ou nd s of fo ru m no n

co nv en ie ns an d th at Neb ras ka la w, whi c h d o es no t pe rm it pu ni ti ve da m ag es fo r

frau du le nt m is rep res en ta ti on , sh ou ld ap ply unde r the ap pl ic ab le ch oi ce-o f-l aw ru le s."

Id

. at 78 3. The di st ric t co ur t co nc lu de d th at Neb ras ka ha d a gr e at er in te res t in

de ci di ng th e su it th an Io wa an d gr an te d th e m ot io n to di sm is s on th e gr ou nd of fo ru m

no n c on ve ni en s. Id . The co ur t d id no t ad dr es s t he ch oi ce-o f-l aw is su e. Id

.

Bac on ap pe al ed , a nd we rev ers ed th e di st ric t c o u r t , h ol di ng th at th e do ct rin e

of fo r u m no n co nv en ie ns di d no t ap pl y to pe rm it th e di st ric t co ur t to di sm is s th e

act io n, rat he r th an tra ns fer ve nu e, an d, ev en if tra ns fer to an ot he r fed eral fo ru m were

un av ai la bl e, th e di st ric t co ur t ab us ed it s di sc ret io n in di sm is si ng Bac on 's cl ai m s. Id

.
at 78 3– 85

.

Bac on ha d al so as ke d th is co u r t t o de te rm in e whe th er Io wa or Neb ras ka la w

go ve rn ed th e su it in Io wa be cau se "[o ]nly un de r Io wa la w wil l he be ab le to reco ve r

pu ni ti ve da m ag es fo r hi s frau du le nt m is rep res en ta ti on cl ai m ." Id

. at 78 5. Bec au se th e
di st ric t co ur t di sm is se d th e su it an d ne ve r reac he d th e ch oi ce

- o f

- l aw qu es ti on , "we

de cl in e[d ] to de ci de whi ch st at e's la w ap pl ie s to th is su it ." Id

. W e di rect ed th e di st ric t

co ur t th at

, up on rem an d, it "s ho ul d us e Io w a ' s ch oi ce-o f-l aw ru le s to de te rm in e
whe th er Io wa or Nebr as ka law wi ll go ve rn th is su it ." Id

.

On rem an d, th e di st ric t co ur t co nc lu de d th at Neb ras ka la w ap pl ie d. The co ur t

ch arac te riz ed Bac on 's frau du le nt -m is rep res en ta ti on cl ai m as ba se d " on Lib ert y

Mu tu al 's refu sa l to reco nf irm it s a g r e e ment th at it ha d no reco ve ry rig ht s as to an y

se tt le m en t m on ie s fro m R i d g e t o p an d on it s Ans wer in th e Decl arat or y Ju dg m en t

act io n, in whi ch Lib ert y Mu tu al as s e r t ed th at it ha d 'a bo na fid e wor ke rs '

co m pe ns at io n li en .'" The co ur t co nc lu de d th at m ere si le nc e can n o t co ns ti tu te a

m is rep res en ta t i o n i n th e ab se nc e of a du ty to di sc lo se in fo rm at io n an d fo un d th at

Bac on fai le d to ci te an y "au th or it y de m on st rat in g th e ex is te nc e of su ch a du ty." The

co ur t fai le d "t o se e ho w a pa rty's fa i l u r e to reco nf irm a co nt ract

, th e im

po rt an d

-5

-m ean in g of whi ch it di sp ut es , c a n s erv e as a ba si s fo r a frau d cl ai m ." The co ur t

ex pl ai ne d th at Bac on 's fr au d c la im was ba se d on "Li be rty M ut ua l's refu sa l to ag ree
wit h h is in te rp ret at io n o f an ag reem en t p ur po rte dl y en te red in to by t he pa rti es " an d

th at "[s ]uch refu sa l do es no t, as a m at te r of la w, am ou nt to frau d." The co ur t fu rth er

fo un d no ev id en ce "d em on st rat in g [th at ] a m at eri al fact di sp ut e [ex is ts ] wit h res pe ct

to th e fal si ty of th e 'rep res en ta ti on ,' or t ha t i t was kn own to be fal se when 'm ad e.'"

Obs erv in g th at ev en if it res ol ve d th e ch oi ce-o f-l aw is su e in Bac on 's fav or an d

ap pl ie d Io wa la w, th e co ur t fo un d th at Bac on 's pu ni ti ve da m ag e cl ai m wou ld fai l

be cau se it s frau du le nt -m is rep res en ta ti on cl ai m fai le d. In th e al te rn at iv e, th e c o u rt

de te rm in ed th at Bac on "d id no t pr od uc e cl ear, co nv in ci ng an d sa ti sf act or y ev id en ce

su pp or ti ng a fin di ng th at Lib er t y Mu tu al wil lfu ll y an d wan to nl y di sr eg ard ed hi s rig ht s."

As to Bac on 's br each -o f-co nt ract cl ai m , th e co ur t as su med t h a t a co nt ract

ex is te d an d co nc lu de d th at Lib ert y Mu tu al di d no t br each it be cau se , "[u ]pon Bac on 's

se tt li ng of hi s la wsu it ag ai ns t Ri dg et op , Lib ert y Mu tu al pe rfo rm ed ex act ly as it sa id

it wou ld

, i.e., it di d no t as se rt a li en ag ai ns t th e se tt le m en t m on ie s, fro m Ri dg et op , bu t

rat he r cl ai m ed an of

fs et ag ai ns t th os e m on ie s to it s fu tu re wor ke rs ' co m pe ns at io n
ob li ga ti on s."

II. Dis cu ss io n

On ap pe al

, Bac on arg ue s th at th e di s t r ic t co ur t erre d in gr an ti ng su m m ary jud gm en t to Lib ert y Mu tu al on hi s frau du le nt -m is rep res en ta ti on an d br each -o fco nt ract cl ai m s. Acco rd in g to Bac on , Lib ert y Mu tu al il le ga ll y de la y ed th e
di sb ur se m en t of se tt le m en t pr oc eed s by frau du le nt ly as se rti ng a su br og at io n in te res t

in th os e se tt le m en t p ro ceed s an d b reac hi ng it s ea rli er ag reem en t t ha t it ha d n o s uc h
rig ht t o s ub ro ga ti on fro m th os e se tt le m en t pr oc eed s. Bac on al so as se rts th at th e
di st ric t co ur t erred in ap pl y in g Nebra sk a la w to co nc lu de th at pu ni ti ve da m ag es are

no t av ai la bl e.

-6

-"We rev ie w de no vo th e di st ric t co ur t's gr an t of su m m ary jud gm en t to [Lib ert y

Mu tu al ] on th e b reac h[ -]of[-]co nt ract [an d fr au du le nt -m is rep res en ta ti on ] cl ai m [s ]. "
Myer s v. Ri ch la nd

Cn ty , 42 9 F .3d 74 0, 7 50 (8t h C ir. 2 00 5)

.

As th e di st ric t co ur t po in te d ou t— a n d a s B aco n co nf irms on ap pe al —t he 2

pa rti es ag ree th at no tru e co nf li c t e x i st s be twee n Io wa an d Neb ras ka la w r eg ard in g

Bac on 's co nt ract an d frau d cl ai m s. As a res ul t, no ch oi ce-o f-l aw an al y si s is req ui red

. Se e Mod er n Equ ip

. Co

. v. Co nt 'l W

. In s. Co

. , 35 5 F.3 d 11 25

, 11 28 n.7 (8 th Ci r. 20 04 )
("I f th ere is no t a tru e co nf li ct be tw e e n t h e l a w s

. . . on th e pe rti ne nt is su e, th en no
ch oi ce-o f-l aw is req ui red ."). "Th eref or e, reg ard le ss of whi ch st at e's la w ap pl ie s, ou r

in te rp ret at io n an d ap pl ic at io n of th e [fra ud ul en t-misre pr es en ta ti on an d br each -o fco nt ract cl ai m s] wil l be th e sa m e." W ei tz Co

, LLC v. Ll oy d's of

Lo nd on , 57 4 F.3 d 88 5,

8 9 0 ( 8 th Ci r. 20 09 ). Onl y if we co nc lu de th at th e di st ric t co ur t erre d in gr an ti ng

su m m ary jud gm en t to Bac on on h i s c l a i ms ne ed we en ga ge in a ch oi ce-o f-l aw

an al y si s to de te rm in e whe th er pu ni ti ve da m ag es are av ai la bl e. Se e Bac on , 57 5 F.3d

at 78 5.

A. Fra ud ul en t Mi sr ep re se nt at io n

Acco rd in g to Bac on , hi s frau du le nt -m is rep res en ta ti on cl ai m is ba se d up on

Li be rty Mu tu al 's affi rm at iv e as se rti on in it s writ te n an swe r to th e Neb ras k a
de cl arat or y -jud gm en t act io n. Bac on al le ge s th at Lib ert y M u t u al rep res en te d th at it

ha d a vi ab le su br og at io n i nt eres t in th e Ri dg et op se tt le m en t p ro ceed s wh en it kn ew

th at it lac ke d s uc h a rig ht . B aco n m ai nt ai ns th at Lib ert y Mu tu al kn ew th at it lac ke d

su ch a rig ht be cau se Lib ert y Mu tu al kn ew in ad va nc e of th e Ri dg et op se tt le m en t th at

Ri dg et op was t he pa ren t co m pa ny o f Bac on 's e m

pl oyer—Dav is Erect io n— an d t ha t

no su br og at io n co ul d ex is t by vi rtu e of th at rel at io ns hi p. He fu rth er as se rts th at

In hi s op en in g br ie f, Bac on st at es th at "t he re is no co nf li ct wit h reg ard to th e 2

la ws of Io wa an d Neb ras ka wi t h reg ard to Pl ai nt iff 's br each [-]of[- ]con tra ct an d
frau du le nt [-]m is rep res en ta ti on cl ai m s. As such, th is Co ur t do es no t ne ed to de te rm in e whi ch st at e's laws wil l ap pl y to th os e cl ai m s u nd er t he Res ta te m en t."

-7

-Lib ert y Mu tu al kn ew th at it la ck ed a su br og at i o n rig ht be cau se it s own wor ke rs '

co m pe ns at io n po li cy co nt ai ne d a waiv er-o f

- s u br og at io n en do rs em en t, whi ch

pr ecl ud ed su br og at io n ag ai ns t al l who pe rfo rm ed wor k o r p r o v id ed se rv ic es on th e

co ns tru ct io n pr ojec t. Fi na ll y , h e co nt en ds th at Lib ert y Mu tu al kn ew th at it la ck ed a

su br og at io n rig ht be cau se th e po li cy la ng ua ge in th e OCIP in sura nc e pol ic y pr ecl ud ed

su br og at io n. As a res ul t, Bac on arg ue s th at he reas on ab ly rel ie d on Lib ert y Mu tu al 's

earl ie r as se rti on th at it ha d no vi ab le su br og at io n in te res t in th e Ri dg et op se tt le m en t.

Acco rd in g to Bac on , Lib ert y 's a fte r-t he -fac t as se rti on th at it di d h av e a su br og at io n

in te res t am ou nt ed to a frau du le nt m is rep res en ta ti on

.

In res po ns e, Lib ert y Mu tu al arg ue s th at th e di st ric t cou rt cor rect ly co nc lu de d

th at a pa rty's fai lu re to reco nf i r m a c on tra ct

—t he im po rt an d m ean in g of whi ch it

di sp ut es —ca nn ot se rv e as a ba si s fo r a frau d cl ai m , es pe ci al ly co ns id eri ng th at Bac on
di d no t rel y up on th e rep res en ta ti on th at he as se rts fo rm s th e ba si s of th e frau d cl ai m

.

To es ta bl is h a cl ai m of f r a u d u l e nt m is rep res en ta ti on , a pl ai nt iff m us t

pr ov e (1 ) de fen da nt m ad e a rep res en ta ti on to th e pl ai nt iff

, (2 ) th e
rep res en ta ti on was fal se , (3 ) th e rep re s e n t a t i on was m at eri al

, (4 ) th e de fen da nt kn ew th e rep res en ta ti on was fal se , (5 ) th e de fen da nt in te nd ed

to de cei ve th e pl ai nt iff

, (6 ) th e pl ai nt iff act ed in rel ia nc e on th e tru th of
th e rep res en ta ti on an d was jus ti fie d in rel y in g on th e rep res en ta ti on , (7 )
th e rep res en ta ti on was a pr ox im at e cau se of pl ai nt iff 's da m ag es , an d (8 )
th e am ou nt of d am ag es

.

Gib so n v . ITT Ha rt

fo rd Ins . Co. , 62 1 N.W.2d 3 88 , 40 0 (I owa 20 01 ).

Acco rd in g to Bac on , Lib ert y Mu tu al 's an swe r in t h e Neb ras ka de cl arat or y

jud gm en t act io n co n st it ut es th e "fa ls e m is rep res en ta ti on ." In it s an swe r, Lib ert y

Mu tu al st at ed th at it ha d a "b on a fid e wor ke rs ' co mp e n s a t i on li en en ti tl in g [it ] to

st at ut or y cred it fo r th e fu nd s ne tt ed by [Bac on ] th ro ug h th e se tt le m en t ag reem en t by

an d be twee n [Bac on ] an d Ri dg et op Hol di ng s , I n c

. " Acco rd in g to Bac on , th is fal se

-8

-m is rep res en ta ti on was co nt rary to Lib ert y Mu tu al 's pri or po si ti on in W ard 's Aug us t

27 , 20 07 let te r to Baco n's co un se l.

W e affi rm th e di st ric t co ur t's co nc lu si on th at Bac on fai le d to pr ov e th at Lib ert y

Mu tu al m ad e a fal se rep res en ta ti on in it s de cl arat or y -jud gm en t an swe r by st at in g th at

it ha d a li en en ti tl in g it to a st at ut or y cred it

. Neit he r pa rty di sp ut es th at W ard 's Aug us t

27 , 20 07 let te r to Baco n's co un se l p ro vi de d, i n re le va nt pa rt:

W e are in ag reem en t th at we ha ve n o " r e co ve ry " rig ht s as to an y

se tt le m en t m on ie s fro m Kiewi t or Ri dg et op

. Howev er, al th ou gh we can

no t reco ve r fro m th os e en ti ti es , we wo ul d st il l ha ve a cl ai m to St at ut or y Cr ed it /o ff se t ag ai ns t an

y ne t to Mr. Bac on fr om th os e en ti ti es

. It go es to th e "n o do ub le reco ve ry ru le ," an d to th e St at e's St at ut es as to ou r fu tu re ob li ga ti on s t o M r. Baco n p os t h is reco ve ry fro m 3rd pa rty m on ie s.

(Em ph as is ad de d.)

Thu s, Lib ert y Mu tu al 's po si ti on in W ard 's Aug us t 27

, 20 07 le tt er m ay be read

co ns is t e n tl y wit h it s po si ti on in th e de cl arat or y -jud gm en t act io n. Lib ert y Mu tu al

co nt en de d th at it was en ti tl ed to a st at ut or y cred it fo r an y fu nd s th at Bac on rece iv es

fro m , in te r al ia

, Ri dg et op

. As Lib ert y Mu tu al po in ts ou t, in ne it he r W ard 's Aug us t 27

, 20 07 le tt er no r Lib ert y Mu tu al 's de cl arat or y -jud gm en t an swe r di d Lib er t y M u tu al

as se rt th at it ha d a rig ht of " s u b r o ga ti on ."As th e di st ric t co ur t co nc lu de d, Lib ert y

Mu tu al 's re fu sa l to ag ree with Bac on 's c on tra ry in te rp ret at io n o f W ard 's Au gu st 27

, 20 07 let te r "d oe s n ot , as a m at te r of law, am ou nt to frau d."

Mo reo ve r, ev en as su m in g th at Lib ert y Mu tu al 's de cl arat or y -jud gm en t an swe r

was "fa ls e," Bac o n mu s t st il l id en ti fy ev id en ce in th e reco rd sh owi ng th at Lib ert y

Mu tu al "k ne w " tha t the rep res en ta ti on was fal se

. As th e di st ric t co ur t co nc lu de d, th ere
is no ev id en ce in th e reco rd de m on st rat in g th at Lib ert y Mu tu al k n e w th e

-9

-rep res en ta ti on to be fal se , es pe ci al ly co ns id eri ng th at "t he im po r t a n d m ean in g" of

W ard 's Au gu st 27 , 20 07 let te r is di sp ut ed

.

Fi na ll y , Bac on di d no t "re ly up on " th e rep res en ta ti on m ad e in th e de cl arat or y

jud gm en t an swe r. W he n Lib ert y Mu tu al an swe red th e co m pl ai nt

, Bac on ha d al read y

se tt le d h i s cas e wit h Ri dg et op . Th e st at em en t th at Bac on "re li ed up on ," if an y , wa s

W ard 's Aug us t 27

, 20 07 le tt er to Bac on 's co un se l. And

, Bac on on ly "re li es up on " th e

fir st se nt en ce of W ard 's le tt er, whi ch st at es , "We are in ag reem en t th at we ha ve no

'reco ve ry ' rig ht s as to an y set tl em en t m on ie s fr om

Kiewi t o r Ri dg et op ."

As a res ul t, we ho ld th at th e di st ric t co ur t di d no t err i n g r a n t in g su m m ary jud gm en t t o Li be rty Mut ua l o n B aco n's frau du le nt -m is rep res en ta ti on cla im

.

B. Brea ch of

Co nt ra ct

Bac on arg ue s th at Lib ert y Mu tu al br each ed it s earl ie r ag reem en t th at it ha d no

su br og at io n in te res t. Acco rd in g to Bac on , th e co ns id erat io n fo r th at earl ie r ag reem en t

was a pr om is e fo r a pr om is e—Li be rty Mu tu al ag reed no t to as se rt a su br og at io n cl ai m

fro m an y set tl em en t p ro ceed s re su lt in g fro m ei th er Ri dg et op or Kiewi t i n t he th ird

pa rty act io n. Bac on , in tu rn , ag reed to co nt in ue pu rs ui ng th os e th ird -p a r t y a c t i on s

ag ai ns t Ri dg et op an d ot he rs ev en th ou gh bo th fact ua l an d le ga l hu rd le s rem ai ne d in

hi s p at h. Bac on m ai nt ai ns th at Lib ert y Mu tu al 's br each of it s earl ie r ag reem en t th at

it ha d no su br og at io n rig ht ag ai ns t Ri dg et op 's se tt le m en t pr oc eed s un reas on ab ly an d

il le ga ll y de la y ed di sb ur se m en ts of n eed ed set tl em en t p ro ceed s t o B aco n.

In res po ns e, Li b e r ty Mu tu al co nt en ds th at Bac on 's br each -o f-co nt ract cl ai m

fai ls be c a u s e ( 1 ) Li b ert y Mu tu al pe rfo rm ed as pr om is ed an d (2 ) if a m eet in g of th e

m in ds ex is te d, it was si m pl y th at Lib ert y Mu tu al wou ld gi ve up it s li en rig ht s in

ex ch an g e f

o r f ut ur e cred it rig ht s. Lib ert y Mu tu al m ai nt ai ns th at Bac on 's co un se l

rep ud ia te d th is ag reem en t th ree ti m es fo ll owi ng th e p art ie s' ex ch an ge of

co rres po nd en ce by refu si ng to pr ov id e Lib ert y Mu tu al th e in fo rm at io n ne ces sa ry to

-1 0-cal cu la te it s fu tu re cred it am ou nt an d by at te m pt in g to ex ti ng ui s h Li b ert y Mu tu al 's
rig ht to a fu tu re cr ed it

.

In a br each -o f-co nt ract cl ai m , th e co m pl ai ni ng pa rty m

us t pr ov e: (1 ) th e

ex is te nc e of a co nt ract ; (2 ) th e te rm s an d co nd it io ns of th e co nt ract ; (3 )
th at it ha s pe rfo rm ed al l th e te rm s an d co nd it io ns r e q u i r e d un de r th e

co nt ract ; (4 ) th e de fen da nt 's br each of th e co nt r a c t in so m e pa rti cu la r
way ; an d (5 ) th at pl ai nt iff ha s su ffer ed da m ag es as a res ul t of th e br each

. Io wa -Il li no is Gas & Elec

. Co

. v. Bla ck & Vea tc h

, 49 7 N.W .2d 82 1, 82 5 (Io wa 19 93 ). A pa rty br each es a co nt ract whe n, wit ho ut le ga l ex cu se , it
fai ls to pe rfo rm an y pr om is e whi ch fo rm s a who le or a pa rt of th e

co nt ract

. Mag nu ss on Age nc y v. Pub li c Ent it

y Na t'l Co

. , 56 0 N.W .2d 20

, 27 (Io wa 19 97 ).

Mol o Oil Co

. v. Rive r Ci ty For d Tr uc k Sa le s, In c. , 57 8 N.W .2d 22 2, 22 4 (Io wa 19 98 ).

In hi s co m

pl ai nt

, Bac on al le ge d th at Lib ert y Mu tu al br each ed it s co nt ract wit h

hi m by fai li ng to pe rfo rm it s writ te n pr om is e th at it was "'i n ag reem en t th at [it ] ha [s ]

no 'reco ve ry ' rig ht s as to se tt le m en t m on ie s fro m Ri dg et op or Ki e w i t

. ' " Befo re th e
di st ric t co ur t, Bac o n "i de nt ifi e[d ] th e co nt ract as Lib ert y Mu tu al 's pr om is e no t to

en fo rce an y su br og at io n in te res t in an y reco ve ry fro m Ri dg et op in ex ch an ge fo r Ji m

Harri s'[ s] pr om is e to pu rs ue th ird -p art y cl ai m s ag ai ns t ot he r de fen da nt s fro m who m
Lib ert y Mu tu al co ul d su br og at e." The di st ric t co ur t fo un d "n o cl ear pr om is e by Harri s

to pu rs ue th ird -p art y cl ai m s ag ai ns t ot he r de fen da nt s fro m who m Lib ert y Mu tu al

co ul d su br og at e, whi ch is th e pu rpor te d co ns id erat io n fo r th e co nt ract Bac on al le ge s."

Bu t th e di st ric t co ur t ci te d Lib ert y Mu tu al 's co nc e s s io n th at a co nt ract ex is ts an d

th eref or e co ns id ered Lib ert y

Mu tu al 's p ot en ti al bre ach of t ha t co nt ract

.

Fo r pu rp os es of th is a p p e a l

, we wil l, as th e di st ric t co ur t di d, as su m e th at a

co nt ract ex is ts

. W e co nc lu de th at Bac on ha s f a i l e d t o pr ov e th at Lib ert y Mu tu al 3

On ap pe al

, Lib ert y Mu tu al arg ue s th at in it s m ot io n fo r su m m ary jud gm en t it 3

arg ue d th at th ere was no c o n si de rat io n su pp or ti ng th e ex is te nc e of a co nt ract

. -1 1-"b reac he d" th at co nt ract

. Loo ki ng at W ard 's Aug us t 27

, 20 07 le tt er, L ib ert y Mu tu al

ag reed th at it ha d "n o 'reco ve ry ' rig ht s as to an y se tt le m en t m on ie s f r o m Kiewi t or

Ri dg et op ," bu t it arg ue d th at it ha d "a cl ai m to St at ut or y Cred it /o ffs et ag ai ns t an y ne t

to Mr. Bac on fro m th os e en ti ti es ." As ex pl ai ne d su pr a , Lib ert y Mu tu al 's de cl arat or y

jud gm en t an swe r read s co ns is te nt ly wit h W ard 's Aug us t 27

, 20 07 le tt er. In it s an swe r,
Lib ert y Mu tu al st at ed th at it ha d a "b on a fid e wor ke rs ' co m pe ns at io n li en en ti tl in g [it ]

to st at ut or y cred it fo r th e fu nd s ne tt ed by [Bac on ] th ro ug h th e se tt le m en t ag reem en t by an d be twee n [Bac on ] an d Ri dg et op Hol di ng s, In c." As th e di st ric t co ur t ob se rv ed

, "[u ]pon Bac on 's set tl in g of his la wsu it ag ai ns t Ri dg et op , Lib ert y Mu tu al pe rfo rm ed

ex act ly as it sa id it wou ld

, i.e., it di d no t as se rt a li en ag ai ns t t he set tl em en t m on ie s,

fro m Ri dg et op , bu t rat he r cl ai m ed an of fs et ag ai ns t th os e m on ie s to it s fu tu re wor ke rs '

co m pe ns at io n o bl ig at io ns ."

The refo re, th e di st ric t co ur t d i d n ot err in gr an ti ng su m m ary jud gm en t to

Lib ert y Mu tu al on Baco n's bre ach -o f-co nt ract cla im

.

III. Co nc lu si on

Acco rd in gl y , we affi rm

th e jud gm en t o f th e d is tri ct co ur t. 4

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __

Howev er, Lib ert y Mu tu al ha s fai le d to ex pl ai n why th e di st ric t co ur t st at ed th at "Li be rty Mut ua l co nc ed es th e ex is te nc e o f a co nt ract ."

Bec au se we ho ld th at th e di st ric t co ur t di d no t err in gr an ti ng su m m ary 4 jud gm en t to Lib ert y Mu tu al on Bac on ’s cl ai m s, we ne ed no t ad dr es s whe th er Io wa

or Nebr as ka law wo ul d h av e ap pl ie d t o B aco n’s cl ai m for pu ni ti ve da m ag es

. -1 2-