Court Opinion

ID: 4402410
Source: CourtListenerOpinion
Date Created: 2019-05-31 14:06:02.547343+00
Date Added: 2024-06-11T07:49:54.198712
License: Public Domain

IN THE SUPREME COURT OF IOWA
                             No. 15–1766

                          Filed May 31, 2019

JEFFREY ANDERSON,

      Appellant,

vs.

ANDERSON TOOLING, INC., DEAN E. ANDERSON,
and CAROL A. ANDERSON,

    Appellees.
---------------------------------
ANDERSON TOOLING, INC.,

      Appellee,

vs.

LORI J. ANDERSON and FABRICATION AND
CONSTRUCTION SERVICES, INC.,

      Appellants.

      On review from the Iowa Court of Appeals.

      Appeal from the Iowa District Court for Jefferson County, Myron L.

Gookin, Judge.

      Appellants appeal from a judgment entered by the district court

following a jury verdict.     DECISION OF COURT OF APPEALS

AFFIRMED IN PART AND VACATED IN PART; DISTRICT COURT

JUDGMENT AFFIRMED.
                                  2

      Steven Gardner of Denefe, Gardner & Zingg, P.C., Ottumwa, for

appellants.

      Steven E. Ballard and Abigail L. Brown of Leff Law Firm, L.L.P.,

Iowa City, for appellees.
                                      3

CADY, Chief Justice.

      In this appeal, we primarily consider whether a judgment for civil

conspiracy was properly modified by the district court following a jury

trial. The court of appeals found the jury instruction pertaining to the

conspiracy did not permit judgment to be modified. On our review, we

affirm and adopt the opinion of the court of appeals except on the issue

of the conspiracy. We affirm the judgment of the district court.

      I. Background Facts and Proceedings.

      Spouses Dean and Carol Anderson own and operate Anderson

Tooling, Inc. (ATI). The company offers many services, including rigging.

Rigging is the movement of heavy machinery from one location to

another.   In 2005, Dean hired his brother, Jeffrey Anderson (Jeff), to

work as the company’s general manager and chief financial officer. He

also hired Jeff’s wife, Lori, as ATI’s bookkeeper.

      The couples met to discuss the terms of employment, but never

completed a formal employment contract. Instead, Dean and Jeff made

handwritten notes about the details discussed at the meeting. Generally,

both sets of notes provided for Jeff’s base salary at $52,000, with a

percentage of “profit” of twenty percent up to $200,000 and thirty

percent over $200,000.     Neither set of notes defined the word “profit.”

Jeff claims his notes represent a valid employment contract because both

brothers initialed the document. Dean denies having initialed it.

      The lack of specificity in the agreement became the basis of a

salary dispute between the brothers. In 2011, Jeff requested payments

of his deferred compensation pursuant to the percentage split in the

employment agreement.        Dean and Carol denied the existence of a
                                        4

written agreement and refused to pay Jeff.            They also claimed their

definition of profit did not align with Jeff’s. 1

      While employed at ATI, Jeff formed an independent company

named Fabrication & Construction Services Inc. (FabCon).                FabCon’s

original purpose was to complete repair work on the building where ATI

was located following flood damage. After this project, FabCon continued

to operate and began providing rigging services, in competition with ATI.

Upon learning of FabCon’s rigging operations, Dean fired Jeff and Lori

from ATI.

      A. Claims Filed.        Jeff asserts he was terminated due to his

request for payment of the deferred compensation. He commenced an

action against Dean, Carol, and ATI alleging a violation of the Iowa Wage

Payment Collection Law (IWPCL), breach of contract, tortious discharge,

and interference with contractual relationships.

      Dean, Carol, and ATI filed a number of counterclaims. They filed a

claim against Jeff for conversion, intentional interference with contracts,

interference with a prospective business advantage, breach of fiduciary

duty, and misappropriation of trade secrets.          Dean and Carol claimed

Jeff used ATI’s customer list and rate information to FabCon’s benefit.

They also claimed Jeff was stealing and mismanaging ATI funds.

      ATI sued Lori for breaching her fiduciary duty, claiming she

diverted its funds to FabCon, Jeff, and herself. Additionally, ATI brought

a claim against Lori and FabCon for conversion, intentional interference

with contracts, interference with prospective business advantage, and

conspiracy. These cases were consolidated for trial.

      1Dean   and Carol explained profit as whatever amount they were “able to take
out of the company as profit.”
                                    5

      B. District Court Proceedings. On May 13, 2015, these matters

proceeded to a jury trial. After nearly two weeks of testimony, the jury

was given two verdict forms with sixty-eight interrogatories and began

deliberation. The first verdict form related to Jeff’s claims against Dean,

Carol, and ATI.   The second verdict form related to the counterclaims

against Jeff, Lori, and FabCon. On Jeff’s claims, the jury concluded ATI

did not violate the IWPCL and did not owe Jeff unpaid profit sharing or

accrued vacation. The jury found no employment contract existed, thus

ATI did not breach or intentionally interfere with Jeff’s contract. It also

concluded Dean and Carol did not act improperly as the company’s

directors.

      The jury did find that Jeff was an ATI employee and wrongfully

discharged for pursing unpaid wages. It awarded him $89,387.01 in lost

wages, $5000 for emotional distress, and $52,000 in punitive damages.

      On Dean and Carol’s claims, the jury found Jeff breached his

fiduciary duty and awarded them $436,255.18 in damages. Moreover, it

concluded Jeff intentionally and improperly interfered with ATI’s

prospective business relationships, awarding $336,072.54 in damages.

Damages against Jeff totaled $772,297.72.      The district court entered

judgments in these amounts.

      The portion of the verdict form regarding the participation of Jeff,

Lori, and FabCon in a conspiracy to harm ATI provided,

            Q. Did Jeffery Anderson commit any of the wrongs of
      conversion, interference with a prospective business
      advantage, breach of fiduciary duty, or misappropriation of
      trade secrets? . . . A. Yes. . . .
            Q. Did Lori Anderson and [FabCon] participate in a
      conspiracy with Jeffery Anderson to appropriate funds and
      projects belonging to [ATI]. . . . A. Yes. . . .
           Q. Was [ATI] damaged           as    a   result   of   the
      conspiracy? . . . A. Yes. . . .
                                     6
            Q. State the amount of damages sustained by [ATI] as
      a result of the conspiracy. A. $0-duplication.

      The jury also concluded Jeff, Lori, and FabCon did not convert
ATI’s property but found their conduct did constitute willful and wanton

disregard for the opposing parties’ rights. No damages were awarded on

this finding.   The jury concluded that while Lori and FabCon knew of

ATI’s prospective relationships, only FabCon intentionally and improperly

interfered with those relationships, and that interference did not cause

harm. Finally, it found Lori did not breach a fiduciary duty.

      The parties agreed to a sealed verdict, allowing the jury to be

discharged following the rendering of a verdict and without reporting its

finding in court and in the presence of the litigants. See Iowa R. Civ. P.

1.931(3). When the jury finished its deliberations, the parties’ attorneys

were emailed the completed verdict form.         They confirmed it did not

contain irregularities and agreed the jury should be released.

      Following trial, both sides filed posttrial motions. Jeff filed motions

for new trial and judgment notwithstanding the verdict on the first

verdict form.    He claimed the jury’s no-contract determination was

contrary to the evidence because the parties disagreed on the terms of

the contract, not its existence. Additionally, he argued the finding that

Dean and Carol did not act improperly as corporate directors was

contrary to the evidence. Jeff had previously moved for a directed verdict

on both these issues at the close of evidence.

      Jeff also moved for remittitur and alternatively moved for new trial

on the second verdict form. He claimed the damages awarded against

him were the result of improper influences and were not supported by

the evidence. He asked the district court to remit the damages to $1.00
                                           7

for each claim or alternatively grant a new trial. The court denied all of

Jeff’s posttrial motions.

       ATI filed a motion under Iowa Rule of Civil Procedure 1.904(2) to

enlarge, amend, or modify the judgment to make Lori and FabCon jointly

and severally liable for the $772,297.72 judgment.                   Iowa R. Civ. P.

1.904(2). The district court granted the modification to extend liability

for the judgment to Lori and FabCon. 2 It also granted ATI’s motion for

judgment notwithstanding the verdict to reduce Jeff’s lost-earnings

damages from $89,387.01 to $34,667.00, concluding Jeff mitigated the

loss when he began working for another company at a higher salary

following his termination from ATI. 3

       Jeff, Lori, and FabCon appealed the decision of the district court.

It argued there was insufficient evidence to support the jury’s damage

determination, parts of the verdict were inconsistent, and the district

court erred by granting ATI’s modification motion.               We transferred the

case to the court of appeals.

       C. Court of Appeals Proceedings. The court of appeals reasoned

there was substantial evidence to support the jury’s no-contract finding.

The court found the fighting issue was not whether an employment
contract was entered into but whether a contract involving the profit-

sharing terms existed.          It also concluded that appellants failed to

preserve error on the damage determination and inconsistency issues.

        2The court also modified the judgment to hold Lori and FabCon jointly and

severally liable for one-half of court costs along with Jeff.
        3The court rejected the portion of the motion claiming Jeff was not entitled to a

tortious discharge award or punitive damages. It reasoned that an employer is not
absolved from liability simply “because the employer ultimately succeeds in proving
wages were not due” under an employment agreement.
                                           8

The court of appeals affirmed the district court’s ruling on all these

issues.

      However, the court of appeals reversed the district court’s order

imposing joint and several liability on Lori and FabCon.                   It reasoned

Jeff’s conduct did not form the basis of a conspiracy, given the verdict

form and the jury instruction’s limited the scope of conspiracy. 4 Thus, it

determined a conspiracy did not exist for Lori and FabCon to join.

      The appellees requested further review of the court of appeals’

reversal of the conspiracy liability issue.                The appellants filed a

resistance to the further review application. However, they request that

if further review is granted, this court review all issues raised in the

original appeal. These issues include whether an employment contract

existed, the jury’s findings and verdict forms were consistent, and the

record supported all the jury’s determinations.

      On review, we adopt the court of appeals opinion and disposition of

all claims except the liability issue. On this issue, we find the district

court did not abuse its discretion by granting the motion to amend.

      II. Standard of Review.

      “[O]ur review of a court’s ruling on a motion to amend the verdict

should be for abuse of discretion.” Ostrem v. State Farm Mut. Auto. Ins.,

666 N.W.2d 544, 547 (Iowa 2003). An abuse of discretion occurs when

       4For example, in analyzing whether the appellants conspired to appropriate

funds and projects belonging to ATI, the court of appeals explained,
              A conspiracy to appropriate funds and projects belonging to ATI
      necessarily falls outside the tort of interference with prospective business
      relationships.     The jury was instructed “ ‘prospective business
      relationship’ means a reasonable likely business relationship of financial
      benefit to ATI.” “Likely” does not equate to funds and projects already
      owned or in the possession of ATI. Therefore Jeff’s tortious interference
      conduct cannot be the basis of a conspiracy to appropriate funds and
      projects belonging to ATI.
                                      9

the “decision is based on a ground or reason that is clearly untenable or

when the court’s discretion is exercised to a clearly unreasonable

degree.” Pexa v. Auto Owners Ins., 686 N.W.2d 150, 160 (Iowa 2004).

      III. Civil Conspiracy Claims and Damages.

      The narrow issue we face is whether the district court properly

modified the judgment to extend liability to Lori and FabCon based on

the jury’s civil conspiracy findings. Generally, civil conspiracy requires

an understanding between two or more parties to harm another; “[i]t

involves some mutual mental action coupled with an intent to commit

the act which results in injury.”      Basic Chems., Inc. v. Benson, 251
N.W.2d 220, 233 (Iowa 1977).       A person becomes liable for the harm

caused by another’s tortious conduct when they commit, encourage, or

assist such conduct. See Ezzone v. Riccardi, 525 N.W.2d 388, 398 (Iowa

1994); see also Restatement (Second) of Torts § 876, at 315 (1979).

      Significantly, “[c]ivil conspiracy is not in itself actionable; rather it

is the acts causing injury undertaken in furtherance of the conspiracy

which give rise to the action.” Basic Chems., Inc., 251 N.W.2d at 233.

Accordingly a claim of civil conspiracy is “essentially [a] method[] for

imposing joint and several liability on all actors who committed a tortious

act or any wrongful acts in furtherance thereof.”        Salem Grain Co. v.

Consol. Grain & Barge Co., 900 N.W.2d 909, 924 (Neb. 2017); see also

Reilly v. Anderson, 727 N.W.2d 102, 109 (Iowa 2006) (holding Iowa’s

Comparative Fault Act does not extinguish joint and several liability for

parties acting in concert).

      Because civil conspiracy cannot support an independent cause of

action, it cannot have its own measure of damages. Instead, damages

are assessed based on the harm caused by the underlying tortious
                                          10

activity. 5 See Hoeffner v. Orrick, Herrington & Sutcliffe LLP, 924 N.Y.S.2d
376, 377–78 (App. Div. 2011); 15A C.J.S. Conspiracy § 46, at 393–94

(2012). Thus, the joint and several liability shared by coconspirators is

only for the damage caused by the underlying tort.

       This backdrop illuminates the issue in the present case. The jury

found Lori and FabCon participated in a civil conspiracy with Jeff to

appropriate funds and projects belonging to ATI.                   In response to a

request to determine the amount of damages sustained as a result of the

conspiracy, the jury answered “0-duplication.”              Yet, this question does

not follow the legal framework of civil conspiracy that bases damage

amounts on the underlying tort.            Because civil conspiracy is merely a

means of distributing liability, the conspiracy claim would not result in

an independent award of damages, absent some egregious aggravating

factor not present in this case. 6

       Nevertheless, the jury award of zero dollars with the addition of

“duplication” conforms to Instruction No. 51, stating, “A party cannot

recover duplicate damages. Do not allow amounts awarded under one

item of damage to be included in any amount awarded under another

item of damage.” See 205 Corp. v. Brandow, 517 N.W.2d 548, 551 (Iowa
1994) (remanding to district court to amend judgment in light of

duplicative damages). In other words, any additional finding of damages

        5Punitive damages may be available in particularly egregious cases of civil

conspiracy like those involving fraud. See All. Mortg. Co. v. Rothwell, 900 P.2d 601, 610
(Cal. 1995) (en banc) (“Punitive damages are recoverable in those fraud actions involving
intentional, but not negligent, misrepresentations.”); Lockwood Grader Corp. v.
Bockhaus, 270 P.2d 193, 199 (Colo. 1954) (en banc) (holding plaintiff was not entitled to
exemplary damage when he was unable to prove actual damage).
       6The jury did not award punitive damages despite finding Jeff, Lori, and

FabCon’s conduct constituted willful and wanton disregard for the right of the opposing
party. This indicates the jury did not consider the facts of this case particularly
egregious.
                                     11

would be duplicative of the amounts already awarded for the underlying

torts that are the basis of the conspiracy.           The problem is the

instructions and answers created confusion as to which torts were the

basis of the conspiracy claim.

      IV. Judicial Changes to Flawed Jury Verdict.

      Generally, a court may only make nonsubstantive changes to a

jury verdict.   See Clinton Physical Therapy Servs., P.C. v. John Deere

Health Care, Inc., 714 N.W.2d 603, 614 (Iowa 2006).         If an error in a

“verdict can be resolved based upon the instructions given to the jury

and without violating the intent of the jury,” then the change is

nonsubstantive. Sch. Dist. No. 12 v. Sec. Life of Denver Ins., 185 P.3d
781, 787 (Colo. 2008) (en banc). Courts have “the power to put a . . .

defective verdict in such form as to make it conform to the intention of

the jury, and carry its findings into effect, where the intention can be

ascertained with certainty.”     89 C.J.S. Trial § 1074, at 516; accord

Rutledge v. Johnson, 282 N.W.2d 111, 114–15 (Iowa 1979). Examination

of the record, including the verdict form and jury instructions, is one

source the court may use to ascertain the jury’s intent. See Ostrem, 666
N.W.2d at 547 (concluding the district court’s denial of a motion to

amend was not an abuse of discretion after examination of the verdict

form and instructions to determine jury’s intent).

      In this case, the defects in the jury verdict are mirrored in the jury

instruction and inform the disposition of this case.        See Poulsen v.

Russell, 300 N.W.2d 289, 294 (Iowa 1981) (“Unless objected to by a

party, an instruction to the jury, right or wrong, is the law of the case.”).

Jury Instruction 46 explains that in order to recover on a conspiracy

claim against Lori and FabCon, ATI must prove,
                                      12
      1. [Jeff] committed the wrongs of conversion, intentional
      interference with a prospective business advantage, breach
      of fiduciary duty, or misappropriation of trade secrets as
      defined [within these instructions].
      2. Lori [and FabCon] participated in a conspiracy with [Jeff]
      to appropriate funds and projects belonging to ATI.
      3. The nature and extent of damage.

      Thus, the jury was aware that its findings regarding Jeff’s tortious

conduct were the first required element for a conspiracy verdict. It likely

knew the damage determinations resulting from this conduct would also

apply to the conspiracy portion of the verdict form. Accordingly, the jury

understandably refused to award damages under the conspiracy section

in order to avoid duplication. As the court of appeals held,

      The jury consistently found Jeff committed wrongdoing—
      interfering with ATI’s prospective business relationships and
      breaching his fiduciary duties to ATI. The jury determined
      Lori and FabCon conspired with Jeff “to appropriate funds
      and projects belonging to [ATI],” and that ATI was damaged
      as a result of the conspiracy.

Due to the faulty structure of the verdict form, it initially appeared as if
Jeff was the only person liable for the judgment.           However, the jury

determined that Lori and FabCon participated in a conspiracy with Jeff,

and Jeff’s conduct was the basis of the conspiracy.          And, finally, the

damages    resulting   from   these   actions   were   in    the   amount   of

$772,297.72.

      Despite these flaws, we find the district court did not abuse its

discretion in granting the amendment to extend liability to Lori and

FabCon because the jury’s intent is clear from examination of the record.

We understand that it was possible that the conspiracy pertained to

some but not all of the tortious conduct alleged and that a full award of

damages would have been improper. Yet, the jury was instructed that it

was not permitted to award duplicative damages. It also considered all
                                      13

tort claims alleged and found Jeff breached his fiduciary duty and

interfered with a prospective business advantage. It also determined the

breach and interference caused damage.          Thus, in considering the

conspiracy claim, a logical deduction can be drawn that the jury found

the two torts committed by Jeff to be the two torts that served as the

basis for the conspiracy. It found Lori conspired with Jeff but followed

the instructions and awarded no damages because they would have been

duplicative of the damages awarded for Jeff’s torts.      Thus, the district

court’s ruling, in effect, honors the intention of the jury and correctly

applies our rule of law, holding coconspirators jointly and severally liable

for damages resulting from the conspiracy.            Finally, the court’s

modification is a permissible nonsubstantive change because it is based

on the instructions given to the jury and effectuates the jury’s intent.

Sch. Dist. No. 12, 185 P.3d at 787.

      V. Other Flaws in Verdict Form.

      The appellants assert problems with the verdict forms in addition

to the failure to require the jury to identify the specific torts involved in

the conspiracy, including the manner in which the forms were organized

and the assumption or suggestion that the torts by Jeff would be the

basis for a conspiracy. Yet, these other issues have not been adequately

preserved for our review.       Appellants failed to object to the jury

instructions and verdict form before closing arguments were made at

trial, thereby waiving their right to appeal.    See, e.g., Iowa R. Civ. P.

1.924 (stating objections to jury instructions are waived if not made prior

to closing arguments); Olson v. Sumpter, 728 N.W.2d 844, 850 (Iowa

2007) (finding district court erred in its grant of a new trial when appellee

failed to object to jury instructions and verdict form before closing

arguments).
                                    14

      Finally, we observe that the central issue in this appeal was not

addressed and corrected at trial because counsel agreed to a sealed

verdict and were not present when the verdict was returned to review it

carefully before the court discharged the jury. We do not discourage the

use of sealed verdicts, but caution that they may not always be suitable,

especially in complex litigation of this nature. The defects in the verdict

forms alleged on appeal could have been addressed at trial and may have

been corrected so that an appeal would have been avoided.             This

observation is not a criticism but an endorsement of the importance of

every stage of trial.

      VI. Conclusion.

      We find the district court did not abuse its discretion in granting

the motion to amend the judgment. Accordingly, we affirm in part and

vacate in part the decision of the court of appeals and affirm the

judgment of the district court.

      DECISION OF COURT OF APPEALS AFFIRMED IN PART AND

VACATED IN PART; DISTRICT COURT JUDGMENT AFFIRMED.

      All justices concur except McDonald, J., who takes no part.