Anderson v. Anderson Tooling, Inc. , 928 N.W.2d 821 ( 2019 )

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
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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.”
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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. . . .
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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
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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.
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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.
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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
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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.
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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,
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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
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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).
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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.