IN THE COURT OF APPEALS OF IOWA

No. 14-0230

Filed March 25, 2015

A. ANDREW MARTIN,

Plaintiff-Appellee,

vs.

CHEMTECH, INC. and 

DALE EASTMAN,

Defendants-Appellants.

________________________________________________________________

Appeal from the Iowa District Court for Dallas County, Randy V. Hefner, 

Judge.

The defendants appeal from the district court’s judgment and award of 

damages in favor of the plaintiff in a fraudulent misrepresentation action. 

AFFIRMED.

Thomas M. Boes and Todd A. Strother of Bradshaw, Fowler, Proctor & 

Fairgrave, P.C., Des Moines, for appellants.

Mitchell R. Kunert and Ryan W. Leemkuil of Nyemaster Goode, P.C., Des 

Moines, for appellee.

Heard by Danilson, C.J., and Potterfield and Bower, JJ.
2

DANILSON, C.J.

Chemtech, Inc., and Dale Eastman, the defendants, appeal from the 

district court’s judgment and award of damages for Andrew Martin in a fraudulent 

misrepresentation action. The defendants maintain that non-reliance provisions 

in agreements signed by Martin bar his claim of fraud. Alternatively, they 

maintain that Martin waived his right to avail himself of legal remedies for fraud. 

Because neither of these claims is preserved for our review, we do not consider 

them. The defendants also maintain the factual record does not support a finding 

of fraud as a matter of law. Because we find substantial evidence in the record 

supports the district court’s finding of facts, and the facts support the district 

court’s judgment in favor of Martin in the fraud action, we affirm the judgment and 

award of damages.

I. Background Facts and Proceedings.

In late 2010 and early 2011, Chemtech, Inc., was in need of new 

leadership and a cash infusion. Martin had lost his job due to corporate 

reorganization and was looking for the right employment and opportunity. 

Unfortunately, after much negotiation on the contract terms, a short-lived 

arrangement resulted in the parties subsequently parting ways, and Martin 

instigated this action.

Dale Eastman was a certified public accountant with his own CPA firm. 

The business and its difficulties were aptly recited by the district court:

Chemtech, Inc., was established in 2003 by Eastman and 

Stan Harlan, owner of Summit Structured Settlements which, as its 

name suggests, brokers structured settlements. Chemtech sells 

chemical detergents designed for use in various businesses and 

industries, including carwashes and commercial poultry operations. 
3

As of January 2011, Eastman and Harlan each owned 50% of the 

outstanding stock in Chemtech. As of that time, the financial 

statements indicate that Chemtech’s paid-in capital was 

approximately $1.8 million. 

Eastman has served as Chemtech’s chief executive officer 

since its inception. During early 2011, Tim Johnson was 

Chemtech’s president, Teri Dean was chief financial officer, and 

David McGregor was vice president of sales. Though Harlan was 

on the board of directors and carried the title of chief information 

officer, he was not involved in Chemtech’s day-to-day business 

operations.

As CEO and in actual practice, Eastman was primarily 

responsible for corporate operations. He maintained close control 

over all aspects of corporate activities and directly supervised 

Johnson, Dean, and McGregor. He approved all financial 

statements prepared by Dean and held periodic meetings with the 

sales staff. Eastman regularly monitored the company’s finances, 

customer base, and products.

Chemtech was experiencing serious operational and 

financial problems in late 2010 and early 2011. It had shown 

operating losses for every year since its inception. Its net operating 

loss in 2009 was approximately $409,000. As of April 2011, before 

the final 2010 financials were complete, Eastman was estimating a 

2010 operating loss of approximately $73,000.

According to Eastman’s estimates, prospects for 2011 were 

substantially better than past years, and he projected that 

Chemtech would or could generate $4 million in revenue and a 

$500,000 profit that year. The 2011 estimates were, however, 

based on several problematic assumptions. One assumption 

related to a product known as Nutrient Management Plus, or NMP, 

a chemical used to spray manure in commercial poultry operations 

to control odor and pests. Eastman estimated that revenue 

generated from the sale of NMP would be approximately $672,000 

in 2011. Another assumption was that Chemtech would be 

successful in expanding its customer base and increasing the sale 

of other chemicals by approximately $1.9 million, a projection 

described as “very conservative.”

The actual facts belie the accuracy and reasonableness of 

these estimates. In 2010 NMP sales generated over 35% of 

Chemtech’s revenue. Historically NMP’s performance had been 

inconsistent and erratic, a problem which plagued the product since 

Chemtech began to sell it in 2007-2008. NMP’s inconsistent 

performance was attributed to environmental variables, such as 

temperature and humidity, and the condition of the manure. These 

performance issues resulted in customer dissatisfaction and a rapid 

decline in NMP sales. Complicating matters further, in early 2011 

Chemtech’s cost to purchase NMP increased three-fold. Chemtech 
4

did not increase its price for NMP commensurately, perhaps for 

competitive reasons, but the result was a significant decline in the 

profit margin generated from NMP sales.

All of these facts relating to NMP were known to Eastman 

and Chemtech management team members in late 2010 and early 

2011. All of the known facts pointed to a very likely decline in sales 

and profit from NMP sales in 2011 and future years.

In 2010 three customers, SunRise Farms, Sunbest Foods, 

and Southwest Iowa Egg, the customers responsible for purchasing 

most of the NMP sold by Chemtech, generated approximately 

$980,000 of Chemtech’s total sales revenue of $2.2 million, or 44% 

of total revenue. Southwest Iowa Egg had stopped purchasing 

substantial product from Chemtech in August of 2010, a decision 

attributed to the NMP performance problems.

Additionally, commissions had not been paid to two salespersons for several 

years to the tune of $110,000.

The parties first began conversations which led to Martin retaining the 

services of an attorney and an accountant to review financial statements and 

documents. As the district court observed, Martin was responsible for his own 

“on-the-ground” due diligence. Eastman or Dean supplied 2010 financials and 

2011 projections. Both Eastman and Dean indicated the 2011 projections were 

“conservative” or “ultraconservative.” Martin requested 2011 projections at a 

higher sales level. As observed by the district court:

Martin viewed the 2011 projections as “attainable,” relying 

upon Eastman’s “conservative” projections as well as the 

somewhat less bleak 2010 financial statements compared to 2009. 

He did not rely upon the 2012 projections, which painted an even 

rosier picture, because, in his view, these appeared to be 

“futuristic.” Martin prepared his own spreadsheet in order to assess 

the financial package, and used even more conservative 

projections, but still based upon the information Eastman had 

provided.

Martin also talked to Harlan about the company, and Harlan 

conveyed dissatisfaction with Chemtech’s past performance. Thus 

Harlan and Eastman both told Martin that Chemtech had not been 

profitable in the past, a fact that was substantiated by financial 

statements. But Harlan did not disclose to Martin problems with 
5

Chemtech products, employees, or customers, possibly because 

Harlan himself was unaware of these issues. Nor did Harlan make 

any representations to Martin regarding Chemtech’s future revenue 

or provide Martin with financial projections that were “conservative” 

and “attainable,” as Eastman did.

Without any commitment and with full disclosure, Martin also considered an 

opportunity to work with Kerry Ingredients and Flavours, a company in Janesville, 

Wisconsin. The position with Kerry would have paid $165,000 annually with a 

$10,000 signing bonus. 

As Martin investigated the Kerry position, he continued meeting with 

Eastman and discussing contract terms. Although he requested permission to do 

so and was granted it, Martin did not meet with Dean and sales personnel during 

this period. At one point Marin accepted the Kerry position, but willingly worked 

to iron out the contract regarding the opportunity with Chemtech. After much 

negotiation, including Martin’s insistence on various revisions to the seller’s 

representations and warranty clauses of the contract, the contracts were signed 

on June 9, 2011.1 A stock purchase agreement provided Martin would purchase 

twenty-five percent of Chemtech’s class A common stock for $150,000. The 

employment agreement was summarized by the district court, stating:

Employment Agreement provided that Martin would serve as 

Chemtech’s president and chief operating officer for an initial term 

of 24 months. The contract term would automatically renew for 

succeeding 24 month terms unless terminated by one of the 

parties. The contract could only be terminated for “good cause” 

during the initial term. Martin’s salary was $50,000 annually, 

substantially less than he had made with his previous employer and 

substantially less than the Kerry offer. But Martin believed the 

Chemtech offer was the superior offer, both because he would not 

 

1 The parties signed the documents on May 23, 2011, with some handwritten changes 

and agreed the attorneys would provide clean copies of the documents, which were 

subsequently signed on June 9, 2011.
6

have to relocate his family and because he was entitled to a bonus 

if gross revenues reached certain levels. The first bonus, in the 

amount of $100,000, would have been due when annual gross 

revenues exceeded $5 million, which was approximately $1 million 

more than Eastman projected as gross revenues for 2011. In 

accepting the Chemtech position, Martin was clearly relying upon 

the company’s potential as Eastman represented.

Martin began working at Chemtech on May 23 while Eastman had left on 

vacation. Soon thereafter, the relationship unraveled.

The unraveling of the relationship is pertinently described by the district 

court, stating:

Very quickly [Martin] began to question the Eastman 

projections. On May 26 he requested sales reports organized by 

salesperson and customer, monthly sales by product, and 2011 

year to date financial statements. Dean provided these 

spreadsheets on May 31, noting that Eastman had not approved 

the actual first-quarter reports and that she had not yet completed 

the April reports. The reports she did provide showed that actual 

revenue was not matching the projections. Actual revenue was 

approximately $193,000 less than the projections for the first 

quarter alone.

Martin testified that the information provided by Dean 

created a “sense of urgency.” Martin contacted David McGregor 

and Tim Johnson to discuss the declining revenue. At this meeting 

McGregor and Johnson told Martin that “three or four customers 

had left,” a fact not previously disclosed to Martin. Martin’s 

concerns intensified when he received the final first quarter 2011 

reports along with the April sales figures from Dean.

Despite these concerns, Martin signed the revised contract 

documents on June 9. He testified that he viewed these revised 

documents as a formality because he had signed the earlier 

contract documents with the agreed upon handwritten changes. He 

did not pay the $150,000 purchase price for the stock, presumably 

because of his growing concern over the sales numbers.

Martin also began to question Chemtech’s accounts 

payable, including commissions owed to its own sales personnel. 

Dean sent an email to Martin on June 16 with a “discussion draft” of 

the May numbers, noting that her staff was compiling more 

accurate figures. The January to May financials revealed revenue 

which was two-thirds less than projections and a $70,000 operating 

loss.
7

Martin informed Dean on June 16 that he needed to discuss 

loss of the Sunbest, Southwest Iowa Egg, and SunRise Farms 

business and the NMP product price increase. He questioned 

whether that price change had been “reflected in the 2011 budget.” 

Dean responded on that same day advising Martin that Sunbest 

had moved its business to one vendor by the end of March, and 

that sales to Southwest Iowa Egg had ended in August or 

September of 2010. SunRise distribution “changed April 2011.” 

Chemtech had changed vendors for NMP in January of 2011 

resulting in an almost $10 per gallon increase in the price of that 

product. Dean claimed that the NMP price change was reflected in 

the 2011 projections.

Tim Johnson forwarded an earlier email thread to Martin on 

June 22 which confirmed what Martin by then suspected. That 

email thread, dating back to February, included communication 

between McGregor and Eastman concerning the loss of the 

Sunbest business and discussion of the problems with NMP.

. . . .

A meeting was held on June 17 involving Eastman, Johnson, 

Martin, and Harlan. According to Martin, Harlan was “agitated” and 

“frustrated” when he learned of the actual state of affairs. 

Subsequently Eastman bought Harlan’s stock, largely by absolving 

him of liability for corporate debt Harlan had personally guaranteed.

Martin’s employment with Chemtech ended sometime during the 

week of June 19. . . .

Subsequently, Martin reinitiated his search for employment 

including the position at Kerry, but it had been filled and no position 

existed for him. At the time of trial, Martin had only earned “a 

couple thousand dollars” since June of 2011 in a joint venture. 

The district court also described the essence of the parties’ dispute in 

respect to the contract terms:

The Stock Purchase Agreement included representations 

and warranties for both sellers and buyer. As pertinent to this 

action, Eastman focuses on the contract provisions in which Martin 

acknowledged that investing “in the Class A capital stock [of 

Chemtech] involve[d] significant risk,” that he had “been afforded 

[the opportunity] to conduct any and all due diligence he has 

requested and is familiar with the financial records and business 

operations of the Company,” and that Martin “is making this 

investment based solely on his own analysis and investigation and 

not upon any representation, warranty or guarantee of the 

Company or its current shareholders.”

Martin naturally focuses upon other contract terms. The 

terms Martin relies upon, in summary, required Chemtech, 
8

Eastman and Harlan to fully disclose liabilities and obligations and 

provide accurate company financial statements. The Stock 

Purchase Agreement in part provided:

No representation or warranty of Company in this 

Agreement and no statement in any instrument, 

certificate or other document Company or either of 

Shareholders delivers to Purchaser in connection with 

the transactions contemplated by this Agreement 

does or will omit to state a material fact necessary to 

make the statements herein or therein, in light of the 

circumstances in which they were made, misleading. 

There is no fact known to Company or either of 

Shareholders that has specific application to either 

Company or its business [other than general 

economic or industry conditions] and that has a 

material adverse effect on the assets, business, 

prospects, financial condition, or results of operations 

of Company that has not been set forth in the 

Agreement or disclosed in writing to Purchaser. 

Martin also negotiated for specific representations and 

warranties that covered the time from the date of the financial 

statements to the date of closing. These terms included 

representations and warranties that there had been no “material 

adverse change in the business, operations, properties, prospects, 

assets, or condition of [Chemtech], and no event has occurred or 

circumstance exists that may result in such a material adverse 

change.” The Stock Purchase Agreement also stated that the 

representations and warranties would be “true at the time of the 

Closing as though such representations and warranties were made 

at the Closing.” That agreement further stated that there “shall not 

have occurred any material adverse change in [Chemtech’s] 

business or the value of the Shares as of the time of the Closing.”

Martin insisted upon these comprehensive representations 

and warranties prior to signing the contracts. The transaction 

teetered on the brink when Eastman and Harlan hesitated to 

include the language requested by Martin, and Martin in fact 

accepted the Kerry position in part because of this reluctance.

Martin filed a petition alleging fraud on December 1, 2011. The case 

proceeded to a bench trial November 4–6, 2013. Both parties submitted posttrial briefing to the district court.

On January 17, 2014, the district court issued its findings of fact, 

conclusions of law, and judgment entry. The court found the defendants had 
9

committed fraud and entered judgment for Martin in the amount of $212,340. 

Chemtech and Eastman appeal.

II. Standard of Review.

“We review the judgment of the district court following a bench trial in a 

law action for correction of errors at law.” Chrysler Fin. Co. v. Bergstrom, 703 

N.W.2d 415, 418 (Iowa 2005). The district court’s findings of fact have the force 

of a special verdict and are binding on us if they are supported by substantial 

evidence. Id. “Evidence is not insubstantial merely because we may draw 

different conclusions from it; the ultimate question is whether it supports the 

finding actually made, not whether the evidence would support a different 

finding.” Id. 

III. Discussion.

A. Preservation of Error.

The defendants contend the non-reliance provisions contained in three 

separate agreements signed by Martin bar his claim of fraud. Alternatively, the 

defendants contend that if we find the defendants committed fraud, the fact that 

Martin was aware of the issues when he entered into the second purchase 

agreement precludes him from availing himself of remedies for fraud. In 

response, Martin maintains that neither of these claims is preserved for our 

review.

In their January 6, 2012 answer, the defendants pled affirmative defenses 

of failure to state a claim upon which relief may be granted and waiver. 

However, the defendants failed to argue these defenses in their post-trial 
10

briefing.2 In its January 17, 2014 ruling, the district court explicitly found the 

failure to argue or brief the defenses constituted waiver of the defenses. The 

defendants did not file a rule 1.904 motion to amend or enlarge. Thus, we will 

not consider either claim on appeal. See Meier v. Senecaut, 641 N.W.2d 532, 

537 (Iowa 2002) (“It is a fundamental doctrine of appellate review that issues 

must ordinarily be both raised and decided by the district court before we will 

decide them on appeal . . . . When a district court fails to rule on an issue 

properly raised by a party, the party who raised the issue must file a motion 

requesting a ruling in order to preserve error for appeal.”).3

Additionally, even if the defendants’ claim regarding the non-reliance 

provision was preserved, “[u]nder Iowa law, contractual disclaimers are 

ineffective to bar a plaintiff from asserting a claim for fraudulent inducement.” 

Northwest Bank & Trust Co. v. First Illinois Nat’l Bank, 354 F.3d 721, 726 (8th 

Cir. 2003) (citing Hall v. Crow, 34 N.W.2d 195, 199 (Iowa 1948) (“[W]here there 

is evidence of fraudulent misrepresentations in the inception of a contract[,] such 

misrepresentations can be the basis for either an action to rescind or for 

damages, despite the limiting provisions of a contract.”)).4 

 

2 The defendants did reference the non-reliance provision in their post-trial brief, but only 

in passing and only in the context of the justifiable reliance element of the fraud claim. 

3 At oral argument, the defendants maintained they have preserved these arguments 

because they raised them in a summary judgment motion and then expressly 

incorporated those arguments in their post-trial briefing. The record reflects the 

defendants raised the issue of whether the non-reliance provision barred Martin’s fraud 

claim as a matter of law in the motion for summary judgment and stated they were 

incorporating the argument in their post-trial brief. However, the district court ruled the 

argument was not preserved, and, as noted above, the defendants failed to file a 

rule 1.904 motion to amend or enlarge. 

4 The defendants urge us to rely on Delaware case law to enforce the non-reliance 

provision, but we are bound by the decisions of the Iowa Supreme Court. See State v. 
11

B. Fraud Claim.

The defendants maintain the evidence in the record does not support a 

finding of fraud as a matter of law. 

In order to prevail on a common law claim, the plaintiff must prove the 

following: (1) The defendant made a representation to the plaintiff, (2) the 

representation was false, (3) the representation was material, (4) the defendant 

knew the representation was false, (5) the defendant intended to deceive the 

plaintiff, (6) the plaintiff acted in justifiable reliance on the truth of the 

representation, (7) the representation was a proximate cause of the plaintiff’s 

damages, and (8) the amount of damages. Dier v. Peters, 815 N.W.2d 1, 7 

(Iowa 2012). All the elements must be established by a preponderance of the 

evidence that is “clear, satisfactory, and convincing.” Holliday v. Rain & Hail, 

L.L.C., 690 N.W.2d 59, 64 (Iowa 2004). “‘Clear and satisfactory’ refers to the 

character or nature of the evidence, whereas ‘preponderance’ of the evidence is 

a quantitative measure.” Id. 

1. Representations. The defendants maintain financial projections are 

“opinions of possible future performance and cannot constitute representations 

actionable as fraud.” However, “[w]hen the statements become representations 

of fact, or the expression of opinion is insincere and made to deceive or mislead 

they may be treated as fraudulent. Whether such is their quality and character is 

ordinarily a jury question.” Hoefer v. Wisconsin Educ. Ass’n Ins. Trust, 470

N.W.2d 336, 340 (Iowa 1991). This case was tried to the bench rather than a 

 

Hastings, 466 N.W.2d 697, 700 (Iowa Ct. App. 1990) (“We are not at liberty to overturn 

Iowa Supreme Court precedent.”).
12

jury, and the district court was responsible for all findings of credibility and fact. 

In its ruling, the court explicitly found:

Credibility assessments are implicit in these findings. Generally 

Martin was a more credible witness, particularly when describing 

his conversations with Eastman and the course of negotiations. At 

trial, Martin presented as thoughtful, honest, and responsive. 

Thought Eastman is likely a good accountant and businessman, at 

trial he tended to be less responsive and more evasive than Martin. 

In his dealings with Martin, Eastman was essentially a salesman 

trying to close the deal. And he seemed to assume a similar role at 

trial.

Additionally, the court found:

[T]he 2011 projections were conveyed by [the defendants] to Martin 

as conservative estimates of attainable financial goals based upon 

facts and circumstances then known to [the defendants]. 

Specifically, the representation that revenues from sales of NMP 

and other chemicals could, based upon existing circumstances and 

conservatively estimated, approach $4 million in 2011 was false.

The projections made by the defendants, even if opinions of future business, 

were based on representations concerning Chemtech’s current clients and the 

price being paid for NMP, neither of which were accurately conveyed. In 2010, 

the sale of NMP accounted for over thirty-five percent of Chemtech’s total 

revenue. The three largest customers, Southwest Iowa Egg, Sunbest, and 

SunRise, were responsible for most of Chemtech’s NMP sales, generating 

approximately $980,000 of Chemtech’s $2.2 million in revenue. However,

Southwest Iowa Egg had stopped purchasing substantial product from Chemtech 

in August 2010, Sunbest had stopped in February 2011, and SunRise Farms had 

stopped in April 2011. These lost customers were not reflected in the projections 

provided to Martin. Additionally, Chemtech’s price for NMP tripled in early 2011 

when Chemtech switched distributors. 
13

2. Falsity of representations and nondisclosure. The district court 

concluded that concealment of a fact may constitute a representation. The 

defendants dispute the finding and maintain they had no duty to disclose. The 

defendants also maintain the district court utilized the wrong standard when 

determining whether the representations made to Martin were false. 

Under Iowa law, “failure to disclose material information can constitute 

fraud if the concealment is made by a party under duty to communicate the 

concealed fact.” Wright v. Brooke Grp. Ltd., 652 N.W.2d 159, 174 (Iowa 2002) 

(internal quotation marks omitted). Here, Martin negotiated to have the following 

language included in the stock purchase agreement:

No representation or warranty of Company in this Agreement and 

no statement in any instrument, certificate or other document 

Company or either of Shareholders delivers to Purchaser in 

connection with the transactions contemplated by this Agreement 

does or will omit to state a material fact necessary to make the 

statements herein or therein, in light of the circumstances in which 

they were made, misleading. There is no fact known to Company or 

either of Shareholders that has specific application to either 

Company or its business [other than general economic or industry 

conditions] and that has a material adverse effect on the assets, 

business, prospects, financial condition, or results of operations of 

Company that has not been set forth in the Agreement or disclosed 

in writing to Purchaser.

Additionally, “[w]e recognize a disclosure obligation can be triggered when a 

party to a business transaction makes a partial or ambiguous statement of the 

facts. In that circumstance, other matters may need to be said to prevent the 

statement from being misleading.” Iowa Supreme Ct. Att’y Disciplinary Bd. v. 

Olson, 807 N.W.2d 268, 281 (Iowa 2011) (citing Restatement (Second) of Torts 

§ 551.(2)(b) (1976)).
14

The defendants provided Martin with projections that failed to take into 

account the known facts that the cost of NMP in 2011 was three times the 

amount it cost in 2010 and the three largest customers had stopped making 

substantial purchases from Chemtech. They did not correct these 

representations or convey that the projection was based on old information.

They also failed to disclose ongoing issues with the inconsistency of NMP’s 

performance. While they accounted for the commissions due to their 

salespeople, they did not convey the nature of the debt to Martin.5

3. Knowledge of falsity and intent to deceive. The defendants maintain 

the district court erred in finding they had an intent to deceive because 

“[n]owhere in the record is there affirmative proof.” However, “an intent to 

defraud may properly be inferred from circumstances, words, and actions shown 

in evidence.” Wilden Clinic, Inc. v. Des Moines, 229 N.W.2d 286, 292 (Iowa 

1975). 

Knowledge of falsity and intent to deceive are closely related. They “are 

shown not only when the speaker has actual knowledge of the falsity of his 

representations but also when he speaks in reckless disregard of whether his 

representations are true or false.” Grefe v. Ross, 231 N.W.2d 863, 867 (Iowa 

1975). Chemtech had changed suppliers for NMP in January 2011, resulting in 

NMP tripling in price. Additionally, Southwest Iowa Egg had stopped purchasing 

 

5 Two different versions of balance sheets were admitted into evidence at trial. 

According to Eastman’s testimony, on the sheet provided to Martin in April 2011, the 

commissions owed to personnel were netted against client advances. Similarly, he 

testified the later version of the balance sheet had the commissions included under 

accrued expenses. However, the nature of the debt—that it was money owed to sales 

personnel for back commissions—was not clearly disclosed on either sheet.
15

substantial product from Chemtech in August 2010, Sunbest had stopped in 

February 2011, and SunRise Farms had stopped in April 2011—well before 

Martin signed the performance agreement on May 23, 2011. Although Eastman

was aware of the inconsistency of NMP, the loss of business from the three 

largest customers, and the increased cost of NMP, Eastman still conveyed to 

Martin that they “conservatively” expected sales to reach $4 million in 2011—

approximately $1.8 million more than their 2010 sales. At the very least, 

Eastman acted with reckless disregard of whether his representations were true. 

See McGough v. Gabus, 526 N.W.2d 328, 332 (Iowa 1995) (concluding a jury 

could find the defendant had recklessly disregarded the truth where he 

overvalued the worth of the business in spite of a “substantially lower” appraisal). 

4. Justifiable reliance. The defendants rely on a contract provision, 

which states, “[Martin] is making this investment based solely on his own analysis 

and investigation and not upon any representation, warranty, or guarantee of the 

Company or its current shareholders,” for the proposition that Martin’s reliance 

was unjustified. On the other hand, Martin took a different job and walked away 

from Chemtech until Eastman and Harlan agreed to include a disclosure 

obligation in the purchase agreement. When deciding whether someone has 

justifiably relied on the representations made to them, we consider the following 

factors:

(1) the sophistication and expertise of the plaintiff in financial . . . 

matters; (2) the existence of long-standing business or personal 

relationships; (3) access to the relevant information; (4) the 

existence of a fiduciary relationship; (5) concealment of the fraud; 

(6) the opportunity to detect the fraud; (7) whether the plaintiff 

initiated the . . . transaction or sought to expedite the transaction; 

and (8) the generality or specificity of the misrepresentations.
16

Spreitzer v. Hawkeye State Bank, 779 N.W.2d 726, 737 (Iowa 2009). “[W]e 

require reliance on the representation to be justified, not reasonable.” Id. This 

standard “does not mean a plaintiff can blindly rely on a representation.” Id. at 

738. “Instead, the standard requires plaintiffs to utilize their abilities to observe 

the obvious, and the entire context of the transaction is considered to determine 

if the justifiable-reliance has been met.” Id. “Examples of misrepresentations 

that may not be justifiably relied upon include situations where a plaintiff has 

equal knowledge or situations where falsity can be discovered by a cursory 

examination.” Hammes v. JCLB Props., LLC., 764 N.W.2d 552, 556 (Iowa Ct. 

App. 2008). 

Here, it is undisputed that Eastman initially approached Martin about 

investing in Chemtech and continued to aggressively pursue him. At the time, 

Martin was well-educated and possessed substantial business experience. 

However, as the district court acknowledged, “[H]e had never before invested in 

a small, privately held company, had minimal accounting experience, and most 

importantly had no knowledge concerning Chemtech’s specific business or its 

operations.” Martin had access to Chemtech’s employees and records before 

signing the purchase agreement. However, Eastman was the “point man” for 

Martin during the due diligence period and provided specific information to Martin 

regarding the financial condition of the company as well as the current 

customers. Additionally, Eastman concealed the increased price of NMP and 

ongoing performance issues with the product. Martin engaged outside 
17

professionals to analyze and investigate the business opportunity. However, he 

relied on the information Eastman provided him in doing so. 

There was not a fiduciary, long-standing business, or personal relationship 

between Martin and the defendants. Additionally, Martin apparently had access 

to some of the relevant information, although, as the district court recognized, 

Martin had access only “to the extent other Chemtech employees would have 

responded truthfully and completely if asked the right questions.” While these 

factors could favor a finding that the reliance was unjustified, “the scale is tipped 

in one direction or the other only by a balance of all of the factors.” Spreitzer, 

779 N.W.2d at 738. Here, we find, as did the district court, that the factors 

balance in favor of a finding of justifiable reliance. Martin may reasonably be 

expected to ascertain the glowing reports were overly optimistic. However, the

defendants had key information—the recent loss of major customers, recent and 

substantial increase in the cost of the product, and complaints about the 

performance of the product. Information that a cursory examination would not 

disclose. Martin did not have experience in this line of business nor could he be 

expected to ascertain or perceive the information not being disclosed to him. 

5. Cause of damages. The district court awarded Martin $212,340 in 

compensatory damages. The court declined to award punitive damages. The 

defendants do not dispute the way the court determined the award of damages. 

Rather, they maintain substantial evidence in the record does not support the 

district court’s determination that the defendants’ actions were the cause of 

Martin’s purported damages. Specifically, the defendants maintain substantial 
18

evidence does not support the district court’s findings that Martin would have 

taken the job with Kerry and moved his family to Wisconsin.

We believe substantial evidence in the record does support the district 

court’s finding that Martin would have accepted the Kerry job. Martin had already 

accepted the Kerry job when his contract negotiations fell through with 

Chemtech. Martin testified that he intended to begin working for Kerry while his 

family remained in Ankeny due to his children’s activities. He would be allowed 

to work from Ankeny part-time and in Kerry’s Wisconsin office the rest of the 

time. His family was not expected to move to Wisconsin until the following 

school year. Even if Martin used the Kerry job as leverage, we are convinced, as 

was the district court, that Martin would have taken the Kerry position if he had 

been given accurate information about Chemtech. 

The terms of the Kerry employment were summarized in an April 14, 2011 

letter to Martin. They stated Martin would be paid $165,000 per year, with a 

$10,000 “sign-on” bonus, and the potential for a thirty-five percent annual bonus, 

pro-rated for 2011.

A plaintiff cannot recover from fraud if the fact or damage is speculative or 

uncertain, but a plaintiff is entitled to recover if damage has been proven, 

although the amount is speculative. Robinson v. Perpetual Servs. Corp., 412 

N.W.2d 562, 567 (Iowa 1987). “So long as there is a reasonable basis in the 

record from which the amount of damages can be inferred or approximated, 

recovery will be allowed.” Id. Future income is somewhat speculative in nature, 

especially when considering at-will employment, as Martin accepted at Kerry. 

See Tredrea v. Anesthesia & Analgesia, P.C., 584 N.W.2d 276, 288 (Iowa 1998).
19

(concluding a trial court has considerable discretion in determining whether to 

submit lost income as a damage item to a jury). In Olson v. Nieman’s, Ltd., 579 

N.W.2d 299, 312–13 (Iowa 1998), our supreme court explained its decision in 

Smith v. Smithway Motor Xpress, Inc., 464 N.W.2d 682, 688 (Iowa 1990),

addressing future-income damages:

In Smith we reversed a trial court’s refusal to submit future 

damages. We recognized that such damages in an at-will 

employment are somewhat speculative because “it is often difficult, 

if not impossible, to know how long the employee would have 

continued to work for the employer.” Nevertheless, we remanded 

on the question of lost future wages. We held that the plaintiff 

would be entitled to such damages “if the jury concludes from the 

evidence [the plaintiff] would have been employed by [the 

defendant] subsequent to the date of trial had it not been for the 

workers’ compensation claim.” We then went on to say “[t]he jury 

must then determine the likely duration of [the plaintiff’s] 

employment [with the defendant].” The difference between the 

plaintiff’s wages with the defendant-employer and the present 

employer reduced to present value would be the amount of the 

award. 

(Internal citations omitted.)

The district court awarded Martin $212,340 in damages. The court 

awarded the sum of twelve-months salary, the ten percent “sign-on” bonus, and 

$37,340 for the prorated 35% bonus for 2011.6 The district court denied Martin’s 

claim for the amount he paid his attorney and accountant because “the evidence 

does not support the conclusion that these expenses were caused in substantial 

part by Defendants’ fraud.” The court also denied Martin’s claim for punitive 

damages. 

 

6 Martin testified at trial that Kerry had in fact met its sales goals and had paid out the 

bonus to its employees in 2011.
20

While the amount of damages was somewhat speculative in nature, we 

cannot say the district court abused its considerable discretion. Here, Martin had 

accepted the employment with Kerry, and the district court reasonably limited the 

loss of income to twelve months plus the sign-on bonus and a pro-rated portion 

of the thirty-five percent bonus. 

IV. Conclusion.

Because we find substantial evidence in the record supports the district 

court’s finding of facts, and the facts support the district court’s judgment in favor 

of Martin in the fraud action, we affirm the judgment and the damages awarded.

AFFIRMED.