Opinion ID: 2033184
Heading Depth: 3
Heading Rank: 3

Heading: Determining Which Issues Are Legal

Text: If we adopt the holding in Ross, it would then be necessary to determine which of the shareholders' claims in the present case are legal such that they should be heard by a jury. Fraudulent misrepresentation is a legal claim. See Steckelberg v. Randolph, 448 N.W.2d 458, 459 (Iowa 1989). But see 27A Am.Jur.2d Equity § 6 (stating that fraud is one of the most important grounds for equitable intervention). Negligence is a legal claim. See Bohan v. Hogan, 567 N.W.2d 234, 237 (Iowa 1997). Breach of fiduciary duty is an equitable claim. Cunningham v. Kartridg Pak Co., 332 N.W.2d 881, 883 (Iowa 1983) (As a matter of general corporate law, shareholders have no claim for injuries to their corporations by third parties unless within the context of a derivative action.). Confusion would be triggered when negligence or fraud were the actions that caused the alleged equitable breach. A breach of fiduciary duty claim is not an individual tort in its own right at common law. Clinton Land Co. v. M/S Assocs., Inc., 340 N.W.2d 232, 234 n. 1 (Iowa 1983). It is usually brought at law, bootstrapped by a tort like negligence or fraudulent misrepresentation. See id. However, it is a recognized individual claim in equity under a derivative suit. Rowen v. LeMars Mut. Ins. Co., 282 N.W.2d 639, 651-52 (Iowa 1979); 27A Am.Jur.2d. Equity § 6. The question here becomes, if this court were to adopt the Ross reasoning, would the negligence and fraud claims be severable from the breach of duty claim such that a jury should hear them? Were we to adopt Ross, this would create quite a quandary for the lower courts to distinguish between the claims. For this reason, as well as those stated throughout the opinion, we choose not to extend the Supreme Court's holding in relation to the Seventh Amendment to shareholder's derivative suits brought in Iowa. The Ross minority similarly recognized this classification problem created by the majority. See Ross, 396 U.S. at 550, 90 S.Ct. at 744, 24 L.Ed.2d at 743 (Stewart, J., dissenting). Justice Stewart stated: The fact is, of course, that there are, for the most part, no such things as inherently legal issues or inherently equitable issues. There are only factual issues, and like chameleons [they] take their color from surrounding circumstances. Thus, the Court's nature of the issue approach is hardly meaningful. Id. (Stewart, J., dissenting) (quotations and footnote omitted). The issue of money damages makes it no clearer. [A]n action seeking recovery of monetary damages will generally give rise to a right to trial by jury.... 19 Am.Jur.2d Corporations § 2465; see Carstens, 461 N.W.2d at 333. However, just because shareholders are seeking money damages in a derivative suit does not mean a jury is warranted because the derivative suit itself is founded in equity. 19 Am.Jur.2d Corporations § 2465. The Minnesota Supreme Court has addressed the issue of money damages in an equity case and held: [A] right to a jury trial is not guaranteed merely because plaintiffs only seek monetary damages. Uselman v. Uselman, 464 N.W.2d 130, 137 (Minn.1990). A request for reimbursement/restitution disguised as money damages is properly heard in equity. See id. In the present case, the shareholders seek money damages for the actions of the officers and directors that led to LaPorte City Cooperative Elevators losing a substantial amount of money by, e.g., failing to collect on accounts receivable, failing to comply with the company's credit policy, and failing to maintain awareness about the company's financial situation. Through the defendant's actions, the shareholders are alleging the company lost money. Thus, they are actually seeking restitution, styled as money damages. Restitution is defined as an [a]ct of ... restoration of anything to its rightful owner; the act of making good or giving equivalent for any loss, damage or injury.... Black's Law Dictionary 1477 (rev. 4th ed.1968). Restitution is an equitable remedy which creates no right to a jury. See Krinsk v. Fund Asset Mgmt., Inc., 875 F.2d 404, 414 (2d Cir.1989). Money damages to remedy the corporation are not uncommon in derivative suitsyet the case remains in equity. See generally Rowen, 282 N.W.2d at 656 ([A] money award in a derivative suit is more appropriately referred to as a judgment for restitution rather than as one for damages.... [W]e use the terms interchangeably.). Similarly, punitive damages, like the kind asked for in the present case, are also within the purview of the equity court. Holden v. Constr. Mach. Co., 202 N.W.2d 348, 359 (Iowa 1972) (holding this is true even where no actual damages can be shown); Charles v. Epperson & Co., 258 Iowa 409, 432, 137 N.W.2d 605, 617-618 (1965) (finding exemplary damages appropriate for defendant's fraudulent conduct). But see Fleitmann, 240 U.S. at 28-29, 36 S.Ct. at 234, 60 L.Ed. at 506-07 (declaring claims for treble damages should be heard by a jury).