United States Court of Appeals

For the Eighth Circuit

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No. 16-1735

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Acciona Windpower North America, LLC

lllllllllllllllllllll Plaintiff - Appellee

v.

City of West Branch, Iowa

lllllllllllllllllllll Defendant - Appellant

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Appeal from United States District Court 

for the Northern District of Iowa - Cedar Rapids

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 Submitted: December 15, 2016

 Filed: February 7, 2017

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Before KELLY and MURPHY, Circuit Judges, and MONTGOMERY, District 1

Judge.

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MURPHY, Circuit Judge.

In 2008 the city of West Branch, Iowa (West Branch or the city) entered into

an agreement with Acciona Windpower North America, LLC (Acciona), a company

The Honorable Ann D. Montgomery, United States District Judge for the

1

District of Minnesota, sitting by designation.
that manufactures and installs wind generation systems. Under the agreement,

Acciona would expand its business in West Branch if the city would consider

rebating a portion of Acciona's taxes each year for eight years. West Branch paid

rebates for three years, but then refused to pay subsequent rebates and ultimately

cancelled the agreement. The district court concluded that West Branch's actions 2

breached the contract and, after a bench trial, awarded Acciona $494,924.28 in

damages. West Branch appeals, and we affirm.

I.

Acciona and West Branch entered into a tax increment financing (TIF)

development agreement in 2008. TIF agreements are authorized by Iowa law, see

Iowa Code § 403.6, to encourage economic development in specified areas, see Fults

v. City of Coralville, 666 N.W.2d 548, 551 n.1 (Iowa 2003). The agreement between

West Branch and Acciona obligated the city to consider providing certain benefits to

Acciona if it expanded its business in West Branch. Most crucially, the agreement

obligated West Branch to consider "rebating to ACCIONA, for a period [of] eight

years, incremental property taxes actually paid with respect to" improvements made

by Acciona in West Branch. The agreement made clear that all rebate payments were

"subject to annual appropriation of the City Council." In the event that the city failed

to appropriate a rebate to Acciona in a given year, the agreement specified that "the

remaining rebate schedule shall be extended by one year so as to allow eight full

years of rebates under this Agreement."

West Branch paid rebates to Acciona pursuant to the agreement in fiscal years

2010, 2011, and 2012. In those years the procedure for determining whether a rebate

would be paid was the same. We therefore take fiscal year 2010 as an example. In

The Honorable Jon Stuart Scoles, United States Magistrate Judge for the

2

Northern District of Iowa, to whom the case was referred for final disposition by

consent of the parties pursuant to 28 U.S.C. § 636(c).

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November 2008 the West Branch city council approved a resolution rebating a

portion of Acciona's taxes for fiscal year 2010 to the company. The rebate was

included in the city's budget which was adopted in March 2009. After Acciona timely

paid its fiscal year 2010 taxes, the city formally approved and paid the rebate. 

Approximately the same process was followed in fiscal years 2011 and 2012.

In November 2011 West Branch's city council approved a resolution obligating

for appropriation a tax rebate to Acciona for fiscal year 2013. The authorized rebate

was subsequently included in the city's budget which was adopted in March 2012. 

After Acciona paid its taxes for fiscal year 2013, the city budget was amended and

the rebate to Acciona was removed. The city failed to pay a rebate to Acciona for

fiscal year 2014 under similar circumstances. Although the 2014 rebate wasinitially

approved in November 2012, and included in the city's budget in March 2013, the city

eliminated the rebate in amending its budget in May 2014. 

In addition to failing to pay Acciona rebates for fiscal years 2013 and 2014,

West Branch cancelled the agreement in May 2013 on the ground that Acciona was

failing to meet its contractual obligations. Acciona responded by filing this breach

of contract action in March 2014, and the parties proceeded to file cross motions for

summary judgment. The district court ruled that West Branch had breached its

agreement by cancelling without cause. The court also decided that Acciona was not

entitled to damages for rebates that could be due in future fiscal years, however,

because the agreement only obligated the city to consider the appropriation ofrebates. 

The court therefore granted Acciona's request for specific performance for the future

fiscal years. Finally, the court concluded that genuine issuesfor trial remained on the

question of whether Acciona was entitled to damages for prior fiscal years in which

the city had obligated rebates for appropriation but subsequently failed to pay them.

After a bench trial, the district court ruled that Acciona was entitled to recover

compensatory damages for the tax rebates obligated for appropriation but not paid in

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fiscal years 2013 and 2014. West Branch filed a motion to amend or correct the

judgment which was denied. West Branch appeals, arguing that the district court

erred in finding that Acciona is entitled to damagesfor rebates not paid in fiscal years

2013 and 2014. 

II.

As this appeal follows a bench trial, we review the district court's "legal

conclusions de novo and factual findings for clear error." Urban Hotel Dev. Co. v.

President Dev. Group, L.C., 535 F.3d 874, 879 (8th Cir. 2008). It is uncontested that

Iowa law applies in this diversity case. See id. at 877. Iowa courts "generally review

the construction and interpretation of a contract as a matter of law." Hartig Drug Co.

v. Hartig, 602 N.W.2d 794, 797 (Iowa 1999). An exception to this rule occurs when

a lower court's contract "interpretation was predicated upon extrinsic evidence," as

those findings "are binding on appeal if supported by substantial evidence." Id.

A.

West Branch first argues that the district court erred in its interpretation of the

parties' agreement. Specifically, West Branch contends that the district court erred

in concluding that the city breached the agreement when it failed to pay rebates in

fiscal years 2013 and 2014 that had been obligated for appropriation. West Branch

notes that all rebate payments under the agreement are "subject to annual

appropriation of the City Council" and suggeststhat a rebate is not appropriated until

the moment at which it is paid. In other words, West Branch argues that under the

agreement it had the power to decide not to pay the rebates obligated for

appropriation up until the moment the rebate checks were sent. In support of its

argument West Branch points to the meaning of "appropriate," witness testimony at

trial, and an admission by Acciona at the summary judgment stage. None of these

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pieces of evidence singly or in combination are sufficient to persuade us that West

Branch's interpretation of the parties' agreement is correct. 

Under Iowa law, a key rule of contract interpretation is that courts "give effect

to the language of the entire contract according to its commonly accepted and

ordinary meaning." Hartig Drug Co., 602 N.W.2d at 797. A corollary of this rule is

that it is "well-established . . . that an 'interpretation which gives a reasonable, lawful,

and effective meaning to all terms is preferred to an interpretation which leaves a part

unreasonable, unlawful, or of no effect.'" DeJong v. Sioux Ctr., Iowa, 168 F.3d 1115,

1120 (8th Cir. 1999) (quoting Fashion Fabrics ofIowa, Inc. v. Retail Inv'rs Corp., 266

N.W.2d 22, 26 (Iowa 1978)). As the district court noted in its thorough and well

reasoned opinion, the parties' agreement specifies that West Branch must annually

certify "no later than December 1 . . . the amount obligated for appropriation for

rebate to Acciona." The agreement further states that, in the event the city decides

to obligate a rebate for appropriation, "[t]he rebate shall be paid to ACCIONA within

thirty days of receipt by the City of the incremental taxes paid." If we were to accept

West Branch's interpretation ofthe parties' agreement and conclude that the city could

permissibly decline at any time to issue a rebate payment it had obligated for

appropriation, this contractual provision would be "of no effect." See DeJong, 168

F.3d at 1120 (quoting Fashion Fabrics of Iowa, 266 N.W.2d at 26). This

interpretation of the parties' agreement is disfavored under Iowa law. 

The better interpretation of the parties' agreement—one that gives full effect

to all of the agreement's provisions—is the interpretation adopted by the district court

and advanced by Acciona on appeal. Under this view, if the city council elects to

obligate a rebate for appropriation, nothing in the agreement preventsthe city council

from changing its mind and "unappropriating" the rebate up until the moment

Acciona pays its taxes for a given fiscal year. Once Acciona pays its taxes, however,

the contractual provision mandating payment of the rebate within thirty days barsthe

city from deciding not to pay a previously obligated rebate. In other words, a legal

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obligation to pay rebates that have been obligated for appropriation by the city

council and approved as part of the city's budget arises under the agreement once

Acciona pays its taxes for a given fiscal year. We conclude this is the proper

interpretation of the parties' agreement, and we agree with the district court that West

Branch breached the agreement when it declined to pay rebates it had obligated for

appropriation in fiscal years 2013 and 2014 after Acciona had already paid its taxes

for those years. 

West Branch's argumentsfor rejecting thisinterpretation of the plain language

of the parties' agreement are not persuasive. For example, West Branch cites to the

testimony of two trial witnesses, one of whom testified for Acciona, in support of its

argument that the parties understood the word "appropriate" in their agreement to be

synonymous with "pay" and that West Branch therefore never appropriated rebates

for Acciona in fiscal years 2013 and 2014. While extrinsic evidence like that cited

by West Branch may be considered when interpreting a contract, "the words of the

agreement are still the most important evidence of the part[ies'] intentions at the time

they entered into the contract." Pillsbury Co. v. Wells Dairy, Inc., 752 N.W.2d 430,

436 (Iowa 2008). We have already concluded that the plain language of the parties'

agreement supports the interpretation adopted by the district court, not the

interpretation advocated by West Branch. Moreover, the district court found that the

Acciona witness who testified that the city had not made an "appropriation for

payment" in fiscal years 2013 and 2014 did not mean that the rebates had not been

appropriated, but rather that the rebates had not been paid. The district court's

findings regarding the meaning and weight to be accorded witness testimony are

factual determinations we review for clear error. See Urban Hotel Dev., 535 F.3d at

879; Pillsbury, 752 N.W.2d at 436. Since we see no clear error here, we conclude

that the evidence at trial does not require adopting the West Branch interpretation of

the parties' agreement.

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On a related matter, we agree with the district court that an admission made by

Acciona at the summary judgment stage does not compel a conclusion that the city

did not appropriate rebates in fiscal years 2013 and 2014. It is true, as West Branch

points out, that in its summary judgment papers Acciona averred that it was

undisputed that "[t]he City did not appropriate the $265,140 rebate to be paid to

Acciona" for fiscal year 2014. The district court noted, however, that Acciona has

always argued that the rebate was appropriated, just not paid. In other words the

district court concluded that Acciona, like its witness at trial, may have been

imprecise with a term of art but did not intend to admit that the rebate was never

appropriated. We agree. We have previously noted that "[a] judicial admission must

be deliberate, clear, and unambiguous," and we generally reject efforts to convert

"carelessly worded" stipulations into dispositive admissions. Grandoe Corp. v.

Gander Mountain Co., 761 F.3d 876, 885 (8th Cir. 2014) (internal quotation marks

omitted). We agree with the district court that Acciona's admission at summary

judgment is best read as a poorly worded effort to admit that it is undisputed that the

rebates were never paid, not an unambiguous admission that the rebates were never

appropriated. West Branch is therefore not entitled to relief on this ground.

B.

West Branch also argues that if the district court's interpretation of the parties'

agreement stands, the agreement itself becomes null and void because it "purports to

contract away the city's legislative power and duty to make—and reconsider—annual

appropriation decisions." There is no question, however, that the Iowa Code permits

municipalities to enter into TIF agreementsto stimulate economic development. See,

e.g., Fults, 666 N.W.2d at 552–53 (citing Iowa Code § 403). There are limits to

municipalities' powers with respect to such agreements, such as the limits imposed

by the Iowa Constitution on municipal indebtedness. See id. at 556. Municipalities

generally avoid overstepping their bounds with respect to TIF agreements by making

the payment of rebates under such agreements subject to annual appropriation. In

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other words, TIF agreements typically promise only that a city will consider

appropriating a rebate each year and avoid promising that such a rebate will actually

be paid. See, e.g., id. at 557. This is precisely the structure of the agreement between

Acciona and West Branch in this case, and it is a structure that has routinely been

approved by Iowa courts. See id.

West Branch nonetheless argues that the parties' agreement is null and void

because the agreement limits West Branch's ability to decline to pay rebates at any

time. In other words, West Branch contends that the fact that the agreement requires

the city to pay rebates already obligated for appropriation within thirty days of

Acciona paying its taxes amounts to an impermissible delegation of the city's

legislative power to appropriate funds. We disagree. First, and as noted above, TIF

agreements are clearly authorized by Iowa law, see Iowa Code § 403.6, which

distinguishes the agreement here from the contracts in the cases on which West

Branch relies for its legislative delegation argument, see, e.g., Marco Dev. Corp. v.

City of Cedar Falls, 473 N.W.2d 41, 43 (Iowa 1991) (concluding that a contract to

widen a street was an impermissible delegation of a city's legislative function). 

Second, chapter 403.6 of the Iowa Code specifies that it should be "liberally

interpreted to achieve the purposes of th[e] chapter" and notes that cities have the

power "to make and execute contracts and other instruments necessary or convenient

to the exercise of its powers under th[e] chapter." Iowa Code § 403.6(1). Although

the Iowa Code may not specifically authorize cities to agree to pay rebates that have

been obligated for appropriation within a set time frame, a reasonable interpretation

of this part of the Iowa Code suggests that cities have the power to include

contractual provisions not specifically authorized so long as the provisions do not

meaningfully limit the city's legislative powers. Such is the case here. 

The timing provision challenged by West Branch is extremely narrow and

essentially procedural; as noted above, West Branch could decide to unappropriate

rebates it had obligated for appropriation up until the moment at which Acciona pays

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its taxes for a given year. Under these circumstances, we conclude this provision and

the agreement as a whole are enforceable under Iowa law.

C.

Finally, West Branch argues that the district court abused its discretion by

"allow[ing] Acciona to change its damagestheory and calculation on the eve of trial." 

Before the district court, West Branch sought relief from Acciona's allegedly

improper actions through a motion for sanctions that invoked Federal Rules of Civil

Procedure 16(f) and 37(c). This motion was largely denied by the district court. We

review a district court's decision on whether to impose sanctions for abuse of

discretion. See Carmody v. Kan. City Bd. of Police Comm'rs, 713 F.3d 401, 404–05

(8th Cir. 2013) (Rule 37(c)); Nick v. Morgan's Foods, Inc., 270 F.3d 590, 594–95 (8th

Cir. 2001) (Rule 16(f)). We see no abuse of discretion here.

West Branch argues that Acciona was improperly permitted to change its

damages calculation on the eve of trial. Specifically, West Branch claims that

Acciona revealed too late that it would seek damages for both fiscal years 2013 and

2014 and that Acciona "ramped up the amount of tax rebates claimed" shortly before

trial. The district court concluded that Acciona's actions were essentially harmless

because they resulted in "no surprise or prejudice to the City." We see no abuse of

discretion in that decision. Contrary to West Branch's argument, Acciona sought

compensatory damages for multiple fiscal years from the very beginning of this

lawsuit. See, e.g., Compl. at 3–4 (JA0007–08) (requesting compensatory damages

for West Branch's breach of contract). Acciona's pretrial clarification that the

company would seek compensatory damages for fiscal years 2013 and 2014 was

therefore entirely consistent with the theory of damages articulated by Acciona at the

outset of this case, not a sea change on the eve of trial. This fact distinguishes this

case fromthose on which West Branch relies for its argument that Acciona should not

have been permitted to seek damages for fiscal year 2013. See, e.g., US Salt, Inc. v.

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Broken Arrow, Inc., No. 07-1988 (RHK/JSM), 2008 WL 2277602, at *3–4 (D. Minn.

May 30, 2008) (disallowing a party to change its theory of damages on the eve of trial

from lost profits to reliance, incidental, or consequential damages).

Furthermore, the damages calculation used by Acciona appears to have been

based on information in the parties' agreement and documents originally in West

Branch's control. The manner in which Acciona calculated its damages should

therefore not have surprised or prejudiced the city. Indeed, it appears the city

concedes that the damages calculation used by Acciona and the district court is

accurate, as West Branch does not challenge the damage calculations themselves on

appeal. Under these circumstances, we cannot find that the district court abused its

discretion by concluding that Acciona's alleged improper actions were harmless and

declining to sanction the company.

III.

Accordingly, we affirm the judgment of the district court.

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