Larry E. Forbes v. Benton County Agricultural Society ( 2021 )

IN THE COURT OF APPEALS OF IOWA
No. 20-1250
Filed May 12, 2021
LARRY E. FORBES,
Plaintiff-Appellant,
vs.
BENTON COUNTY AGRICULTURAL SOCIETY,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Benton County, Andrew B. Chappell,
Judge.
A personal injury plaintiff appeals the grant of summary judgment to the
defendant property owner on its defense of compromise and settlement.
AFFIRMED.
Jeffrey L. Clark of Thomas & Clark, LLC, Anamosa, for appellant.
Natalie Williams Burris of Swisher & Cohrt, P.L.C., Waterloo, for appellee.
Considered by Bower, C.J., Tabor, J., and Danilson, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206
(2021).
2
TABOR, Judge.
Larry Forbes sued the Benton County Agricultural Society1 after suffering a
serious head injury from a slip and fall at the fairgrounds. Not realizing Medicare
made conditional payments of $25,482 toward his medical expenses, Forbes
negotiated to settle his suit with the Ag. Society for $12,500. The district court
enforced that settlement on a motion for summary judgment. Forbes now argues
the agreement was unenforceable because the parties failed to reach a “meeting
of the minds.” In the alternative, he contends any agreement was voidable
because it resulted from a mutual mistake. Because settlement agreements are
essentially contracts and the district court properly applied contract law, we affirm.
I. Facts and Prior Proceedings
A brief rain dampened the Boomtown fireworks at the Benton County
fairgrounds in August 2017. Forbes alleged in his petition that while leaving the
grandstands, he slipped on a wet wooden ramp. He fell over a guardrail, landing
five feet below and striking his head. That strike caused a subdural hematoma
requiring emergency surgery.
Nearly two years later, he filed a negligence action.2 The Ag. Society
answered and advanced a defense of comparative fault. After the parties engaged
in discovery, the district court set the matter for an August 2020 trial.
1 For brevity, we will refer to the defendant as the Ag. Society.
2 Forbes claimed the Ag. Society was remiss in two ways: (1) by “failing to provide
a ramp surface that would provide traction in the event it became wet” and (b) by
“failing to provide a guardrail of adequate height to prevent an adult from falling
over the side of the ramp.”
3
Meanwhile, in November 2019, counsel for the Ag. Society, Natalie Burris,
contacted Forbes’s counsel, Jeffrey Clark, to make a settlement offer of
$10,000. Her letter stated: “Based on information you have provided to date, Mr.
Forbes had an excellent recovery, and his actual medical bills totaled $2,732, for
which Tricare[3] apparently had a subrogation interest.” Burris added: “There is no
indication that Mr. Forbes had to pay anything out-of-pocket, or that the medical
providers are actually charging anything beyond the $2,732.00 paid.”
Clark countered with a settlement offer of $12,500. His email said that
amount would pay the Tricare lien of $2732 and Clark’s attorney fees—with the
rest going to Forbes. The next day, Burris responded that her client’s insurance
carrier agreed to pay $12,500 in return for Forbes dismissing the suit with
prejudice. Along with the dismissal, Burris offered to draft a release in which
Forbes would acknowledge his duty to “satisfy any subrogation interests and
liens.” Her email continued: “As you know, insurance companies are required by
law to protect the interests of Medicare and submit information to Medicare
regarding a Plaintiff before a settlement can be finalized.” To that end, Burris
attached an information sheet for Clark to complete and return so that the insurer
could perform a “Medicare sweep.” Burris also highlighted the need for Clark to
request a “final CMS letter, showing the amount owed, if any, in reimbursement to
Medicare.”4
3 Tricare is the defense department’s health care program available to Forbes,
apparently through his service in the Navy.
4 CMS is the acronym for the Centers for Medicare and Medicaid Services, a
federal agency within the U.S. Department of Health and Human Services. See
Mueller v. Wellmark, Inc., 818 N.W.2d 244, 252 n.6 (Iowa 2012).
4
A few days later, Clark responded with the information sheet and informed
Burris that the check should be payable to his firm. He stated he would “get rolling
on the clearance letter” from CMS.
When Burris had not heard back from Clark by early January 2020, she
again emailed: “Any luck getting a clearance letter from CMS? My client’s
insurance carrier completed the Medicare ‘sweep’ which showed your client is
Medicare eligible. As such, the carrier will need a final lien letter from CMS before
the settlement check can be issued.”
About three weeks later, Clark responded: “Medicare is now showing that
there were conditional payments made on this injury. I certainly was not aware of
that and they have not provided a letter at this point. I thought the Navy took care
of his medicals. I will have to keep you posted.” An exhibit from CMS showed the
amount of conditional payments was $25,482. After finding that out, Clark sent
Burris this email: “[S]o the Navy was cheap but Medicare kicked in a bunch. I
apologize for the surprise. I assume at this point you would want to litigate
comparative fault and I will see what Medicare might settle for.”
But the Ag. Society did not want to litigate comparative fault. Rather, it
moved to amend its answer to add the affirmative defense of compromise and
settlement. The Ag. Society also moved for summary judgment and asked the
district court to enforce its settlement agreement with Forbes.
Forbes resisted. He argued the settlement agreement was void, or at least
voidable, based on mutual mistake. Or, in the alternative, there was no “meeting
of the minds” before Forbes obtained a clearance letter from CMS. Forbes cited
5
the Burris email stating that a final lien letter from CMS was necessary before the
insurer could issue the settlement check.
In response, the Ag. Society contended any mistake was “unilateral.” In
other words, Forbes and Clark could have found out about the Medicare payments
“before presenting their settlement demand, but did not.”
The district court granted summary judgment for the Ag. Society, holding:
Contrary to [Forbes’s] argument, the Court finds that there was a
meeting of the minds in negotiating and acceptance of the settlement
agreement.
The Court also finds that, to the extent any mistake was made
regarding a basic assumption on which the contract was based, the
contract is not voidable because [Forbes] bore the risk of that
mistake.
In line with the summary-judgment ruling, the court found that the settlement
agreement between Forbes and the Ag. Society was binding and should be
enforced. Forbes appeals those rulings.
II. Scope and Standard of Review
The question is not whether a district court has authority to enforce a
settlement agreement in a pending case—it does. Gilbride v. Trunnelle, 620
N.W.2d 244, 249 (Iowa 2000). Instead, the question is whether summary judgment
was the proper remedy. If there are genuine issues of material fact surrounding
the settlement, the issue is not appropriate for summary judgment and must be
resolved by a fact finder. Wende v. Orv Rocker Ford Lincoln Mercury, Inc., 530
N.W.2d 92, 94 (Iowa Ct. App. 1995).
We review summary judgment for correction of legal error. Hollingshead v.
DC Misfits, LLC, 937 N.W.2d 616, 618 (Iowa 2020). As the moving party, the Ag.
Society had the burden to show there was no genuine issue of material fact. See
6
id. And we review the facts in the light most favorable to Forbes and will make
every legitimate inference in his favor. See id.III. Analysis
Forbes raises two issues. First, he claims a factual dispute existed over his
intent “to indemnify the Ag. Society as to conditional payments by Medicare.” This
first issue reprises his position that the settlement agreement did not reflect a
“meeting of the minds.” Second, Forbes contends the district court should have
found that mutual mistake precluded enforcing the agreement. He criticizes the
court for finding that either he assumed the risk of the mistake by acting on
incomplete information or it was reasonable to allocate the risk to him.
A. Meeting of the Minds
To address Forbes’s first issue, we start with the law on settlement
agreements. “Settlement agreements are essentially contracts, and general
principles of contract law apply to their creation and interpretation.” Sierra Club v.
Wayne Weber LLC, 689 N.W.2d 696, 702 (Iowa 2004). “The intent of the parties
controls the interpretation issues.” Id. In most cases, the parties need not reduce
their settlement agreement to a writing before it is enforceable. Wende, 530
N.W.2d at 95. Rather, for the agreement to bind the parties, it is enough if they
“manifest their mutual assent to the terms sought to be enforced.” Sierra Club,
689 N.W.2d at 702. We find mutual assent from “objective evidence that there has
7
been a meeting of the minds.”5 Est. of Cox v. Dunakey & Klatt, P.C., 893 N.W.2d
295, 303 (Iowa 2017).
Here, the parties exchanged emails revealing mutual assent to a $12,500
settlement. The Ag. Society started with a $10,000 offer based on the medical
information received from Forbes. Attorney Clark responded with the $12,500
counteroffer. Attorney Burris replied that her client’s insurance carrier agreed to
pay that amount. Her reply also outlined the federal requirements to provide
information to Medicare. Clark emailed back with directions for paying the
settlement amount to his firm and his agreement to secure the “clearance letter”
for Medicare. As the district court found, these were the “clear terms of the parties’
agreement.” We agree that the parties’ exchange left no genuine issue of material
fact in dispute.
Yet Forbes argues that the parties did not reach mutual assent on two
material terms: (1) the existence of Medicare’s $25,482 claim against the
settlement proceeds and (2) the Ag. Society’s condition that he agree to indemnify
it against any such claim. Forbes asserts that the Ag. Society introduced those
terms in its “purported acceptance” of his counteroffer. And he contends that his
attorney’s response that he would “get rolling” on the clearance letter shows the
settlement agreement was not final.
5 We recognize that some commentators consider this phrase “quaintly archaic.”
See Bryan A. Garner, Garner’s Dictionary of Legal Usage 571 (3d ed. 2011)
(quoting Grant Gilmore’s The Death of Contract 43 (1974)). In fact, Garner calls
“meeting of the minds” outmoded as a matter of substantive law because it
“denotes a subjective rather than objective theory of contract.” Id. But our case
law links a meeting of the minds to “objective evidence and not hidden subjective
intent.” See Schaer v. Webster Cnty., 644 N.W.2d 327, 338 (Iowa 2002). So we
do not shy away from the phrase.
8
Pushing back, the Ag. Society insists Forbes accepted those terms when
his counsel replied with instructions for depositing the settlement check and a
completed questionnaire on Forbes’s Medicare information. The Ag. Society has
the more compelling argument. Basic contract law governs. Forbes offered to
settle his lawsuit for $12,500. The Ag. Society accepted. “Acceptance of an offer
is a manifestation of assent to the terms thereof made by the offeree in a manner
invited or required by the offer.” Heartland Express, Inc. v. Terry, 631 N.W.2d 260,
270 (Iowa 2001) (quoting Restatement (Second) of Contracts § 50). Any additional
terms in Burris’s email accepting Forbes’s counteroffer drew no objection from
Clark. Rather, Clark followed Burris’s instructions on additional information to be
provided on the Medicare sweep and the clearance letter and instructed Burris
where to send the check. Clark did not suggest that his own uncertainty about his
client’s Medicare eligibility or the Ag. Society’s request for additional information
changed the contours of the settlement agreement.
On top of that, the Ag. Society contends those terms were legal mandates:
Ag. Society’s request for a completed Medicare information
questionnaire so its liability insurer could check to see if [Forbes] was
Medicare eligible, and request for a final CMS letter, were statutory
requirements imposed on its liability insurer pursuant to 42 U.S.C.
[section] 1395y(b)(8). As for the satisfaction of “any subrogation
interests and liens” from the settlement proceeds, the obligation of
an individual who benefited from conditional payments by Medicare
to reimburse Medicare is federally mandated. 42 C.F.R. [section]
411.24 requires the “beneficiary” to reimburse Medicare when he
receives a “primary payment” from a “primary payer” such as a
liability insurer. [Forbes] would have been obligated to reimburse
Medicare out of the settlement proceeds regardless of any provision
in the agreement with Ag. Society to do so.
9
Like the district court, we see no material factual dispute to be litigated on the
agreement.6
B. Mutual Mistake
In a second swipe at the grant of summary judgment, Forbes urges the
settlement agreement was voidable because it rested on a faulty assumption by
both parties. In his view, “[w]hen the underlying assumption that the Navy’s $2,732
payment was the only lien on the $12,500 proceeds was proven false, a mutual
mistake had been discovered.”
True, a mutual mistake allows the party adversely affected to argue that the
court should annul the contract based on the foundational misunderstanding. See
Dep’t of Human Servs. ex rel. Palmer v. Unisys Corp., 637 N.W.2d 142, 150 (Iowa
2001); see also Restatement (Second) Contracts § 152 (1981) (“Where a mistake
of both parties at the time a contract was made as to a basic assumption on which
the contract was made has a material effect on the agreed exchange of
performances, the contract is voidable by the adversely affected party unless he
bears the risk of the mistake . . . .”). But exceptions exist. The party adversely
6 Forbes cites Feuling v. North Iowa Mercy Health Center, No. 03-0464, 2004 WL
154562 (Iowa Ct. App. Jan. 28, 2004), in support of his position. In Feuling, our
court reversed a grant of summary judgment, finding a genuine issue of material
fact existed whether a provision in the settlement agreement required the patient
to indemnify and hold the medical center harmless from a known Medicare claim.
2004 WL 154562, at *3. The Feuling decision highlighted a letter from the plaintiff’s
attorney questioning the indemnification clause in the draft agreement as evidence
of a factual dispute. Id. at *2. The facts here are dissimilar. For instance, the Ag.
Society knew nothing about a Medicare claim when accepting Forbes’s offer. And
Forbes does not point to any objection to the indemnification clause proposed by
the Ag. Society in their attorneys’ email exchange.
10
affected may bear the risk of the mistake in three instances, two of which are at
play here.7 See Restatement (Second) Contracts § 154(b), (c), at 402–03.
The first of those two exceptions is called “conscious ignorance.” See id.
cmt. c. Under that exception, even if Forbes did not agree to bear the risk of
mistake, he was aware when he agreed to the settlement that he had limited
knowledge about potential Medicare payments. And despite that uncertainty, he
“undertook to perform” the bargain. See id. In doing so, he assumed the risk of
the mistake. See id. We agree with the district court that Forbes had exclusive
access to his medical records and the ability to investigate whether Medicare
would seek a recovery claim.
On the second exception, even if Forbes were not consciously ignorant
about the possibility of a Medicare recovery claim, the district court was still
reasonable in assigning the risk of mistake to him. See Pathology Consultants v.
Gratton, 343 N.W.2d 428, 438 (Iowa 1984); see Restatement (Second) of
Contracts § 154 cmt. a. As the court noted, Forbes’s fall occurred nearly two years
before he sued. In that time, he had the opportunity and the burden to inquire
thoroughly into the payment of his medical bills.8 It made sense for the court to
allocate the risk of any mistake to Forbes.
7 A party bears the risk of a mistake when
(a) the risk is allocated to him by agreement of the parties, or
(b) he is aware, at the time the contract is made, that he has
only limited knowledge with respect to the facts to which the mistake
relates but treats his limited knowledge as sufficient, or
(c) the risk is allocated to him by the court on the ground that
it is reasonable in the circumstances to do so.
Restatement (Second) of Contracts § 154 (1981).
8 If Forbes had contacted Medicare, and Medicare had provided a payment amount
later determined to be in error, we may have reached a different conclusion.
11
The district court properly granted summary judgment to the Ag. Society on
its defense of compromise and settlement.
AFFIRMED.