Court Opinion

ID: 9493863
Source: CourtListenerOpinion
Date Created: 2023-08-05 15:21:41.458387+00
Date Added: 2024-06-11T17:56:04.640553
License: Public Domain

BEAM, Circuit Judge,
dissenting in part.
I dissent from the court’s conclusion regarding the district court’s award to Edwards, because neither Nebraska law nor the record support it.
As the court’s citations make clear, even if fraud is involved, Nebraska rescission law requires each party to return the benefits of the rescinded bargain. In order to understand the problem, one must first understand the Agreement’s scheme. Pursuant to the Agreement, LBL provided Edwards with higher commission rates and assigned additional sub-agents. Edwards, in return, promised to repay his alleged debt to LBL out of his increased income. The Agreement did not affect the premiums paid by policyholders to LBL. Rather, it allocated to Edwards a larger slice of those premiums. On its books, LBL registered that larger slice as income to Edwards, but rather than pay it out to him, simply retained it and credited it against his purported debt. As the district court’s rescission order makes clear, Edwards never actually owed LBL that debt. Therefore, amounts credited against the debt by LBL did not actually confer a benefit on Edwards. Had the Agreement never existed, those increased amounts, treated as income to Edwards under the Agreement, would have flowed directly to LBL.
Given this scheme, the court correctly denies LBL restitution of any amounts it credited towards Edwards’ debt, as those amounts do not represent a benefit conferred upon Edwards by LBL. The court then takes up the district court’s $255,713.77 award to Edwards. As to that amount, the district court found:
The parties have stipulated that $255,713.77 in “payments [by Edwards] and credits” have been made towards the indebtedness owed to LBL from March 1, 1986, to March 31, 1998. Only “credits” to Edwards’ indebtedness — as opposed by [sic] payments by Edwards — were made after September of 1991 because LBL agreed to “put the payments in limbo until [Edwards] could accumulate enough agents to kind of offset that ... compensation that [LBL] took away from [him].”
(quoting trial record) (brackets in.original). This language makes clear that the $255,713.77 consists only partially of payments made by Edwards to LBL, and also partially of amounts credited by LBL against Edwards’ debt. Edwards certainly deserves restitution of the former amounts, as they constitute monies that but for the Agreement would have been his. But the credits are a different story. Absent the Agreement, monies credited by LBL against Edwards’ debt would have belonged to LBL. Therefore, these credits do not constitute a benefit conferred on LBL by Edwards under the Agreement, and should not be given to him as rescission restitution.
The district court made no effort to parse the stipulated amount to determine the proper award of rescission restitution required by Nebraska law. The district court failed to do so because it erroneously used the finding of fraud to support its approach, to the judgment entered. In order to sustain the district court’s award, and to avoid dealing with this error of law, the court fabricates benefits that LBL purportedly received by virtue of the Agreement. The court assumes that absent the Agreement, Edwards would have attracted less new insurance business for *467LBL, or that agents reassigned to him would have sold fewer LBL insurance policies. There is absolutely no support for this assumption. This new approach is simply designed to support the result reached by the court even as it ignores established Nebraska precedent. Indeed, neither the record, Nebraska case law, nor common sense supports the court’s premise. Because LBL would have received all the policy premiums anyway, such amounts should not be included in any rescission calculus.
The court’s resolution unnecessarily clouds Nebraska law. Under its logic, any contract could be argued to contain unquantifiable intangibles that can be used to form the basis of a rescission judgment. The court claims that Nebraska precedent is based upon real estate contract law and not the more complex world of insurance sales. But one can correctly argue that rescission of a real estate agreement would not return goodwill built up in the use of the property, mental anguish over a contract’s demise, or any number of other purported “benefits.”
Rather than contort Nebraska law to sustain the district court’s award on appeal, I would simply remand the damages question to the district court for determination of what portion of the $255,713.77 constitutes payments by Edwards to LBL, and what portion represents credits from LBL against the debt.4 This is what Nebraska law clearly requires.
On this point I dissent, but am otherwise happy to concur in a concisely reasoned opinion.

. This outcome would also require the district court to revisit its pre-judgment interest ruling.