Dee v. Burgett ( 2020 )

IN THE COURT OF APPEALS OF IOWA
No. 18-1537
Filed April 15, 2020
MIKE DEE, KRISS DEE, CHARLES DEPENA, STEVE FELTZ, JAMES FOGT,
MARC GILLOTTI, MATT HELGESON, KARI HELGESON, JASON
HELLICKSON, SUSAN HELLICKSON, BRAD KING, JILL KING, SURESH
KOTA, BHAGYALAKSHMI ARVAPALLI, DAVID LACEY, SARAH LACEY,
BRYAN LAMB, THEODORE J. LARE, KERSTIN LEVY, JEFF LORENZEN,
SCOTT LUKAN, KARA LUKAN, THERESA A. MCCONEGHEY, ALAN R.
MCCONEGHEY, BRIAN MEHLHAUS, LAURA MEHLHAUS, MARK MEYER,
ANN MEYER, BRENT MITCHELL, NAGENDRA MYNENI, TIMOTHY NEUGENT,
GERARD NEUGENT, KAAREN OLESEN, MICHAEL RIGGS, JOHN RIZZI,
JOANNE RIZZI, TIM STEPHANY, TONTO HOLDINGS, LLC, SCOTT VANCE,
HARV VANDER WEIDE, LOIS VANDER WEIDE, RAVI VEMULAPALLI, RANI
MAKKAPATI, BUDDEMEYER INVESTMENTS, LLC, MICHAEL L. MCKINNEY,
TODD MILBOURN, ELIZABETH MILBOURN, MAGNOLIA PARTNERS, LLC,
MARK SLOCOMB TRUSTEE, MICHAEL MALLOY, JOAN MALLOY, TERESA
JENSON, RON KING, NICK COLLISON, LUC DE TEMMERMAN, and ANN-
MARIE UYTTERSPROT,
Plaintiffs-Appellants,
vs.
SETH BURGETT,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Polk County, Michael D. Huppert,
Judge.
Plaintiffs appeal the district court decision granting a directed verdict to
defendant on their claims of fraud, breach of fiduciary duty, breach of contract, and
promissory estoppel. AFFIRMED IN PART, REVERSED IN PART, AND
REMANDED.
2
Thomas D. Story and Sean P. Moore and of Brown, Winick, Graves, Gross,
Baskerville & Schoenebaum, P.L.C., Des Moines, for appellants.
Thomas D. Hanson, Theodore W. Craig, Laura C. Wasson, and William M.
Reasoner of Dickinson, Mackaman, Tyler & Hagen, P.C., Des Moines, for
appellee.
Heard by Doyle, P.J., and Tabor and Schumacher, JJ.
3
SCHUMACHER, Judge.
Plaintiffs appeal the district court decision granting a directed verdict to
defendant on their claims of fraud, breach of fiduciary duty, breach of contract, and
promissory estoppel. The district court found there was sufficient evidence to
present a claim of breach of fiduciary duty to the jury except for the element of
damages. There was sufficient evidence of damages as to some of the plaintiffs,
and the court erred by granting a directed verdict on breach of fiduciary duty as to
those specific plaintiffs. We reverse and remand on this issue. We find no error
by the district court in excluding Exhibit U, a proceeds model Excel spreadsheet.
For the other claims—breach of contract, promissory estoppel, fraud, and breach
of fiduciary duty to all other plaintiffs—the court did not err in granting a directed
verdict.1 We affirm the district court on these claims.
I. Background Facts & Proceedings
Seth Burgett is the chief executive officer (CEO) of Verto Medical Solutions,
LLC (VMS), a company that manufactured and sold Yurbuds, a type of
headphones for athletes. Burgett owned forty-one percent of the shares of the
company. Richard Daniels was the chief operating officer (COO). Craig Ceranna
was the chief financial officer. The company was organized under an Operating
Agreement.
Daniels became acquainted with Doug Vander Weide, a financial advisor,
when Vander Weide was attending an Ironman triathlon in Hawaii and Daniels was
1 The district court also granted a directed verdict as to all of defendant’s
counterclaims. The defendant does not appeal.
4
marketing Yurbuds. Vander Weide recommended VMS as an investment to
several of his clients, and some of them became shareholders in VMS. One of the
investors was Jason Hellickson, who became the shareholder representative on
the board of directors for VMS. The other members of the board of directors were
Ron King and Burgett.
In 2014, Harman International Industries, Inc. (Harman), purchased the
assets of VMS in an Asset Purchase Agreement (APA). Harman agreed to pay
$37,000,000, less a holdback of $3,700,000, which would be payable eighteen
months after the sale date if certain provisions concerning indemnities, net working
capital adjustment, and debt adjustment were met. In addition, the APA contained
an earn-out provision that gave VMS the opportunity to earn $38,000,000 over a
period of three years—2015, 2016, and 2017—if the sale of Yurbuds met specified
targets for adjusted gross profits. Burgett received about $4,500,000 from the sale
proceeds of $37,000,000, but he paid part of it to Daniels and Ceranna, leaving
him with about $3,000,000. The shareholders received about $0.66 per $1.00
invested. Harman also hired Burgett to manage Harman’s Verto division.
Burgett, as an individual, entered into two side agreements after the sale.
From any holdback funds Burgett received under the APA, he agreed to pay
Daniels and Ceranna a portion of the funds. For the shareholders who had not
been made whole on their investment, on August 25, 2014, Burgett offered a
Reallocation Agreement that stated Burgett would reallocate any funds he received
from the APA earn-out provision to shareholders who entered into the agreement.
The plaintiffs in this case all signed the Reallocation Agreement.
5
Eighteen months after the APA went into effect, Harman told VMS that VMS
was not entitled to any funds under the holdback provision. On August 13, 2015,
Harman also stated VMS would not receive any funds under the earn-out provision
for 2015. The VMS board investigated filing suit against Harman because it
disagreed with the determination that it would not receive any holdback or earn-
out funds. Burgett was discharged from his employment with Harman on
November 17, 2015.
In response to Harmon’s position, VMS drafted a complaint against
Harman. Harman responded that VMS owed it money for indemnification.
Harman and VMS entered into negotiations for a settlement of holdback funds,
earn-out funds, severance payments for Burgett, and indemnification. During the
negotiation process, the board urged Burgett to consider any funds received in a
settlement as earn-out funds so shareholders would receive the money, as many
continued to be underwater in regard to their investment in VMS. Harman and
VMS eventually entered into a settlement agreement where Harman would pay
VMS $3,500,000. The settlement agreement stated, “For the avoidance of any
doubt, Harman shall not owe [VMS] any Earn-Out payments pursuant to Section
2.4 of the APA under any circumstances.” The VMS board approved the
settlement, although there was no agreement within VMS as to how the funds
would be allocated.
Burgett would not commit to an allocation scheme but stated he would not
take any funds as severance payments. On January 23, 2016, Burgett sent an
email to the board members, stating, “On the separation of remaining proceeds
from earn-out to holdback, I now understand if you decide not to make that
6
decision, it will be on me to determine a fair and defendable position with my
counsel on what the split would be.” Corporate counsel for VMS, Christopher Reid,
stated he did not believe the board could decide the allocation but it could make a
recommendation. The board sent a recommendation to Burgett stating all the
settlement proceeds should be considered earn-out funds.
During this process, several proceeds models were created by Daniel
Niccum, an accountant who was an independent contractor for VMS. These
proceeds models were in the form of Excel spreadsheets. The model produced
varying results depending on the formulas plugged into the model, such as if the
funds were allocated ninety percent to earn-out and ten percent to holdback, or
fifty percent to earn-out, forty-one percent to holdback, and the rest to severance.
On February 3, the VMS board approved a proceeds model with 100% of the
settlement funds allocated as earn-out.
Burgett received the settlement funds on March 15 and immediately paid
himself a severance payment of $290,000. He determined the remainder of the
settlement proceeds should be considered holdback funds, rather than earn-out
funds. With the settlement proceeds allocated as holdback funds, Burgett received
about $1,200,000. Under his separate agreement with Daniels and Ceranna, he
paid part of the $1,200,000 to them. The remaining $2,300,000 from the
settlement proceeds was paid to shareholders under the terms of the Operating
Agreement.
Hellickson and King, as the other board members for VMS, strenuously
expressed their concerns to Burgett about his decisions. Within a short amount of
time, Burgett agreed to return the severance payment to VMS for distribution to
7
shareholders. On April 11, Burgett fired Hellickson and King from the VMS board
of directors.
On July 11, 2016, plaintiffs, who are shareholders who signed the
Reallocation Agreement, filed an action against Burgett on theories of fraud,
breach of fiduciary duty, breach of contract, and promissory estoppel. If the
settlement proceeds had been allocated as earn-out funds, the shareholders who
signed Reallocation Agreements would have received the $1,200,000 that went to
Burgett.
A jury trial commenced on July 30, 2018. Burgett and Daniels testified the
statement in the settlement agreement, “Harman shall not owe [VMS] any Earn-
Out payments . . . under any circumstances,” meant Burgett was prohibited from
allocating the settlement proceeds as earn-out funds. Hellickson and King testified
they believed the clause meant Harman would not owe earn-out payments for
2016 and 2017. Reid, corporate counsel for VMS, stated the settlement
agreement did not classify the settlement proceeds as holdback, earn-out, or
severance, and the settlement agreement took no position on how the funds
should be allocated.
Vander Weide testified his clients as a whole were short about $810,000 on
their investment in VMS. He testified that Hellickson was short $225,000; Mike
and Kris Dee were short $11,000 to $12,000; John Rizzi was short $32,000; Nage
Myeni was short $24,000 to $25,000; Jim Cantone was short $24,000; and Brad
8
and Jill King were short $24,000. Vander Weide could not recall specific amounts
for his other clients who were plaintiffs.2
During the trial, the court admitted Exhibit 31, which was a proceeds model
showing returns to investors if the allocation of the settlement proceeds had been
ninety percent earn-out funds and ten percent holdback funds. The exhibit did not
contain information correlating payment amounts to individual shareholders. The
identifying information was in plaintiffs’ Exhibit 45 and Burgett’s Exhibit U, which
were the same exhibit, and which we will refer to as Exhibit U. Exhibit U was an
Excel spreadsheet that showed various returns for shareholders depending upon
variables plugged into the spreadsheet. This exhibit was the heart of controversy
at the five-day jury trial. Burgett attached Exhibit U to an email he sent to Richards
and Niccum on March 10, 2016.3 The email was admitted as an exhibit. The
attachment, Exhibit U, was not admitted.
Exhibit U was on Burgett’s proposed exhibits list prior to trial, but he elected
not to submit the exhibit during the trial. Plaintiffs attempted numerous times to
have the exhibit admitted.4 Plaintiffs planned to call Niccum, who created the
model, as a witness, but Niccum reported difficulties with air travel on his
scheduled appearance day and did not attend any subsequent day of the trial.5
During the course of the trial, Niccum signed a certificate pursuant to Iowa Rule of
2 King and Hellickson were the only two plaintiffs called to testify. Vander Weide
dismissed his claim prior to trial.
3 The document name is Verto Proceeds Model v1.0_SETTLEMENT_3.10.16.xlsx.
4 A physical copy of Exhibit U was exchanged on the third day of trial and was
modified by plaintiffs to add information on the final day of trial.
5 Niccum was not deposed prior to trial for an evidentiary deposition and was not
subpoenaed for trial.
9
Evidence 5.902(11) stating Exhibit U was a record of a regularly conducted activity
under Iowa Rule of Evidence 5.803(6). The court found the exhibit to be
inadmissible hearsay, stating that although the March 20, 2016 email was
admissible as an admission of a party opponent, it could not find the attachment
to the email to be admissible on the same grounds. The court also determined the
exhibit was not admissible under the business records exception.
At the close of evidence, Burgett filed a motion for directed verdict. The
district court found there was no evidence of breach of the Reallocation Agreement
as it was signed prior to the settlement agreement, so the Reallocation Agreement
could not address the question of allocation of the settlement proceeds. On the
issue of promissory estoppel, the court found there was no evidence Burgett
promised the settlement proceeds would be allocated as earn-out funds or that
Hellickson and King justifiably relied on a promise to their detriment. 6 For similar
reasons, the court found there was no evidence of fraud. The court granted a
directed verdict to Burgett on these claims.
The court determined Burgett, as the CEO, owed a fiduciary duty to the
shareholders and there was sufficient evidence of breach of a fiduciary duty for the
issue to be submitted to the jury. However, the court found:
[A]t this stage of the proceedings, the record is insufficient to allow
this jury to assess what any individual plaintiff—plaintiffs’ damages
are which would flow from the one issue that would otherwise be
submitted to the jury, and that is the breach of fiduciary duty. Much
has been said and many attempts have been made to put various
models and assessments into the record. The only one which is part
of any record that the jury might have a chance to look at would be
Exhibit 31. That exhibit is inadequate to allow this jury to make the
6 The claims of promissory estoppel and fraud pertained only to Hellickson and
King.
10
somewhat involved analysis of what is to be done to get from breach
to damage for one or more of any of the individual plaintiffs or Mr.
King and Mr. Hellickson on their respective limited claims for fraud
and promissory estoppel.
The court granted a directed verdict to Burgett on the claim of breach of fiduciary
duty. The court then dismissed the jury. Plaintiffs now appeal.7
II. Breach of Fiduciary Duty
The district court found plaintiffs presented sufficient evidence of breach of
fiduciary duty to submit the issue to the jury, except it concluded there was not
sufficient evidence to submit the element of damages to the jury. See Iowa Civ.
Jury Instr. 3200.1 (providing the elements of a claim of breach of fiduciary duty are
a fiduciary relationship, breach of the duty, proximate cause, and damages).
Vander Weide testified to the following damages amounts: (1) Hellickson,
$225,000; (2) Mike and Kris Dee, $11,000 to $12,000; (3) John Rizzi, $32,000; (4)
Nage Myeni, $24,000 to $25,000; (5) Jim Cantone, $24,000; and (5) Brad and Jill
King, $24,000. For these specific plaintiffs there was sufficient evidence of
damages and the court should have submitted the issue of breach of fiduciary duty
to the jury. We reverse the district court’s grant of directed verdict as to these
plaintiffs.
III. Evidentiary Rulings
Plaintiffs claim the district court should have admitted Exhibit U, a proceeds
model created to show the amount of all VMS shareholders’ investments and the
7 The electronic record is over 5000 pages and the appendix is over 800 pages.
However, Plaintiffs’ brief contains no reference to the record in the argument
section. See Iowa R. App. P. 6.904(4) (requiring appellate briefs to contain
references to the record).
11
proceeds they would receive under the settlement agreement. They state the
exhibit was necessary to prove damages, as it would allow a showing of the
amount each plaintiff invested in VMS and never received back. We review for the
correction of errors of law rulings “to determin[e] whether statements come within
an exception to the general prohibition on hearsay evidence.” Hawkins v. Grinnell
Reg’l Med. Ctr., 929 N.W.2d 261, 265 (Iowa 2019).
A. Plaintiffs assert the exhibit should not be considered hearsay
because it was an admission by a party opponent. An admission by a party
opponent is not hearsay. Iowa R. Evid. 5.801(d)(2); State v. Hanes, 790 N.W.2d
545, 553 (Iowa 2010). A statement is not hearsay if it “is offered against an
opposing party” and “[w]as made by the [opposing] party in an individual or
representative capacity,” or “[i]s one the [opposing] party manifested that it adopted
or believed to be true.” Iowa R. Evid. 5.801(d)(2)(A)–(B). The statements of a
party opponent are excluded from the hearsay rule. Pitts v. Farm Bureau Life Ins.
Co., 818 N.W.2d 91, 108 (Iowa 2012).
“[T]he term adoptive admission is applied to evidence of other conduct of a
party which manifests circumstantially the party’s assent to the truth of a statement
made by another person.” State v. Menke, 227 N.W.2d 184, 188 (Iowa 1975)
(citation omitted). There must be clear and unambiguous assent to a statement
before it will be considered an adoptive admission. Id. “Admissions by adoption
or acquiescence can only be established by ‘the totality of circumstances viewed
in terms of probable human behavior.’” State v. Beckett, 383 N.W.2d 66, 69 (Iowa
Ct. App. 1985) (quoting State v. Hamilton, 236 N.W.2d 325, 330 (Iowa 1976)).
12
We previously stated:
When hearsay accusations are sought to be introduced as evidence
against a defendant in a criminal proceeding on grounds that the
hearsay was “adopted” by defendant as an admission of his guilt, the
trial court must first determine that the asserted adoptive admission
be manifested by conduct or statements which are unequivocal,
positive, and definite in nature, clearly showing that in fact defendant
intended to adopt the hearsay statements as his own.
Id. (emphasis added in Beckett) (quoting Village of New Hope v. Duplessie, 231
N.W.2d 548, 553 (Minn. 1975)).
Adoption of a statement of another may be made by a clear statement of
assent. Iowa Supreme Ct. Attorney Disciplinary Bd. v. Noel, 923 N.W.2d 575, 584
(Iowa 2019). Additionally,
The written statements of a third person may be so dealt with by the
party that his assent to the correctness of the statements may be
inferred, and they would thus by adoption become his own
statements. . . . The party’s possession of a document made by a
third person may well be evidence of the party’s knowledge of its
contents.
Hamilton, 236 N.W.2d at 330 (citation omitted). Furthermore, “[w]hile we have
traditionally accepted admissions by silence or tacit admissions, we also stressed
that because silence is often more ambiguous than verbal expression, tacit
admissions should be received with caution.” State v. Paredes, 775 N.W.2d 554,
570 (Iowa 2009).
In this case the issue arises as to whether an attachment to an email should
be considered a statement of a party opponent or an adoptive admission. An email
authored by a party is “not hearsay because it is an admission by a party
opponent.” State v. Brouse, No. 15-0638, 2016 WL 7395724, at *8, n.4 (Iowa Ct.
App. Dec. 21, 2016). By attaching documents to an email, is a party making or
13
adopting the information in the attachments? Specifically, by attaching Exhibit U
to an email, did Burgett adopt the information contained in Exhibit U?
A division of the Arizona Court of Appeals stated that a party’s action of
forwarding an email was not an adoption of the statements in the email. Taylor-
Bertling v. Foley, No. 2 CA-CV 2013-0079, 2013 WL 12388549, at *3 (Ariz. Ct.
App. Nov. 20, 2013). The court noted the party forwarding the email “made no
statement of agreement and added no further explanation or comment.” Id. In
reaching this conclusion, the court discussed Arizona’s evidentiary rule concerning
a statement of an opposing party and the adoption of a statement.8 Id.Another court found emails sent by a defendant were “admissible as party-
opponent admissions.” Paron Capital Mgmt, L.L.C. v. Crombie, No. 6380-VCP,
2012 WL 214777, at *3 (Del Ch. Jan. 24, 2012). The court noted that
notwithstanding the hearsay nature of the attachments to the email, which were
“several financial projections,” the attachments were admissible as the type of facts
or data typically relied upon by experts. Id. Thus, the court determined the
attachments were hearsay but came within an exception to the hearsay rule. Id.We consider the totality of the circumstances in determining whether a party
has adopted a statement. Beckett, 383 N.W.2d at 69. While a party’s assent or
8 On the other hand, the Texas Court of Appeals found an email and its
attachments were admissible as admissions of a party opponent. Direct Value,
L.L.C. v. Stock Bldg. Supply, L.L.C., 388 S.W.3d 386, 391 n.5 (Tex. App. 2012),
abrogated on other grounds by Dudley Constr., Ltd. v. Act Pipe & Supply, Inc., 545
S.W.3d 532, 541 (Tex. 2018). The court found there was sufficient evidence of
acceptance of a bid based on an email to which a purchase order and bid
documents were attached. Id. at 391. The court cited the Texas equivalent of
Iowa Rule of Evidence 5.801 but did not engage in a discussion as to why the
email and attachments should be considered admissions of a party opponent. See
id. at 391 n.4.
14
adoption of a statement of another must be clear and unambiguous, we may find
an adoptive admission by circumstantial evidence. Menke, 227 N.W.2d at 188. A
party’s assent to a statement of another may be inferred from the surrounding
circumstances. See Hamilton, 236 N.W.2d at 330.
Considering the totality of the circumstances, we conclude Burgett did not
adopt Exhibit U. On March 10, Burgett sent Daniels and Niccum an email with the
subject line, “Documents that generated proceeds—$199,828 and $85,727.”
There was no text to the body of the email. One of the attachments was Verto
Proceeds Model v1.0_SETTLEMENT_3.10.16.xlsx. This attachment is the exhibit
at issue, Exhibit U. Niccum, an independent contractor for VMS, created this
document.9 We conclude Burgett’s attachment of the document, without any clear
and unambiguous assent or adoption in the body of the email, did not constitute
an adoption of the information in the document so as to be considered an
admission by a party opponent. See Iowa R. Evid. 5.801(d)(2); see also Menke,
227 N.W.2d at 188; Beckett, 383 N.W.2d at 69. We conclude the district court did
not err by determining the document was not admissible on this ground.
B. Because we have determined Exhibit U was hearsay, we next
consider whether the district court erred by concluding the exhibit did not fit within
the business record exception to the hearsay rule. Business records are a
recognized exception to the hearsay rule. GE Money Bank v. Morales, 773 N.W.2d
533, 538 (Iowa 2009).
9 VMS is not a party to these proceedings.
15
Under Iowa Rule of Evidence 5.803(6), a party must establish the following
foundational elements in order to admit a document containing hearsay into
evidence under the business records exception:
(1) That it is a business record;
(2) That it was made at or near the time of an act;
(3) That it was made by, or from information transmitted by, a person
with knowledge;
(4) That it was kept in the course of a regularly conducted business
activity;
(5) That it was the regular practice of that business activity to make
such a business record.
State v. Reynolds, 746 N.W.2d 837, 841 (Iowa 2008).
“While it is essential that the record be kept in the course of regularly
conducted business activity, that fact alone is not dispositive; the record must also
satisfy the other rule 5.803(6) conditions to establish admissibility of the hearsay
statements in the record.” Id. at 843. As noted in Reynolds, it is not enough for
the document to be a business record. See id. A party seeking to show that a
document comes within the business record exception must also show the
document meets the other requirements to adequately establish the business
record foundation for the documents. Id.The plaintiffs did not lay a foundation for the admission of the attachment
as a business record.10 See State v. Burgdorf, 861 N.W.2d 273, 277 (Iowa Ct.
App. 2014) (noting if there was not compliance with the “conditions precedent” for
authenticating a document as a business record, the document was inadmissible).
The plaintiffs did not show the record was “made at or near the time of an act”; “it
was made by, or from information transmitted by, a person with knowledge”; “it
10 The certification was provided to defendant on the fourth day of trial.
16
was kept in the course of a regularly conducted business activity”; or “it was the
regular practice of that business activity to make such a business record.”11
Reynolds, 746 N.W.2d at 841. We determine the plaintiffs did not sufficiently
establish the foundational elements for Exhibit U to be admitted under the business
record exception.
C. Finally, we consider the assertion in the plaintiffs’ reply brief that if
strict application of the hearsay rule and business records exception prohibit
admission of Exhibit U, the trial court should have permitted admission under a
residual exception. We reject this argument, based on the trial court’s rulings
regarding hearsay and business records. Specifically, plaintiffs urge admission
based on Exhibit U being reliable and necessary, and they urge that the jury should
be able to use a laptop during deliberations to walk through the steps to populate
damages. In their argument, plaintiffs compare the use of a laptop for the
manipulation of various formulas to the use of overhead projectors to view exhibits.
The plaintiffs appear to argue that their proposal to permit the jury to manipulate
financial models is equivalent to the use of a monitor or overhead projector to view
evidence. We disagree and reject this residual exception argument.
11 Burgett testified during plaintiff’s case that Exhibit U was created for purposes
of litigation. See Palmer v. Hoffman, 318 U.S. 109, 114 (1943) (holding that
accident report made by engineer following grade crossing accident was
“calculated for use essentially in the court, not in the business” of railroad); Jordan
v. Binns, 712 F.3d 1123, 1135-36 (7th Cir. 2013) (excluding insurance adjuster’s
report prepared after accident because “[l]itigation generally is not a regularly
conducted business activity” and “documents prepared with an eye toward
litigation raise serious trustworthiness concerns”); 7 Laurie Kratky Doré, Iowa
Practice Series: Evidence § 5.803:6 (Nov. 2019 Update).
17
IV. Directed Verdicts
We review the district court’s ruling on a motion for directed verdict for the
correction of errors at law. Stender v. Blessum, 897 N.W.2d 491, 501 (Iowa 2017).
We consider “the evidence in the light most favorable to the resisting party.”
Thornton v. Am. Interstate Ins. Co., 897 N.W.2d 445, 460 (Iowa 2017) (quoting
Johnson v. Farm Bureau Mut. Ins., 533 N.W.2d 203, 205–06 (Iowa 1995)). “Our
role on appeal is to decide ‘whether the trial court correctly determined [whether]
there was sufficient evidence to submit the issue to the jury.’” Dorshkind v. Oak
Park Place of Dubuque II, L.L.C., 835 N.W.2d 293, 300 (Iowa 2013) (citation
omitted). “[I]f reasonable minds can differ as to how the issue should be resolved,
a jury question is engendered,” making a directed verdict inappropriate. Miranda
v. Said, 836 N.W.2d 8, 14 (Iowa 2013).
A. Breach of Contract
In order to prove a breach-of-contract claim, a party must show:
(1) the existence of a contract; (2) the terms and conditions of the
contract; (3) that it has performed all the terms and conditions
required under the contract; (4) the defendant’s breach of the
contract in some particular way; and (5) that plaintiff has suffered
damages as a result of the breach.
Iowa Mortg. Ctr., L.L.C. v. Baccam, 841 N.W.2d 107, 110–11 (Iowa 2013) (quoting
Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 224 (Iowa
1998)).
The district court found plaintiffs were claiming there was a breach of the
Reallocation Agreement. On August 25, 2014, Burgett offered the Reallocation
Agreement to shareholders who had not been made whole on their investment.
The settlement agreement was dated February 24, 2016. The district court found
18
the Reallocation Agreement did not address the allocation of the settlement
proceeds because the Reallocation Agreement was executed before the
settlement agreement. The court also found the settlement agreement did not
specify how the settlement proceeds should be allocated.
The court determined there was no evidence of a contractual obligation to
allocate the settlement proceeds as earn-out funds instead of holdback funds. The
court concluded:
So there is nothing in this record that upon which this jury
could conclude that Mr. Burgett was under an obligation pursuant to
the Reallocation Agreements to treat the settlement proceeds in
whole or in part as earn-out. Therefore, there is no evidence to show
that he has breached the allocation—the Reallocation Agreements.
For that reason, the defendant’s motion for directed verdict as to the
contract claim is granted.
We find no error in the district court’s conclusion that neither the
Reallocation Agreement nor the settlement agreement created a contractual
obligation for Burgett to allocate the settlements proceeds as earn-out funds. We
determine the district court did not err in granting a directed verdict to Burgett on
plaintiffs’ breach of contract claim.
B. Promissory Estoppel
The elements of a claim of promissory estoppel are:
(1) a clear and definite promise; (2) the promise was made with the
promisor’s clear understanding that the promisee was seeking an
assurance upon which the promisee could rely and without which he
would not act; (3) the promisee acted to his substantial detriment in
reasonable reliance on the promise; and (4) injustice can be avoided
only by enforcement of the promise.
Schoff v. Combined Ins. Co. of Am., 604 N.W.2d 43, 49 (Iowa 1999) (footnote
omitted).
19
The district court stated “[T]he record is devoid of any evidence that would
allow this jury to conclude that Mr. Burgett ever made a clear and definite promise
that he would do anything regarding the settlement proceeds except treat those as
100 percent holdback.” For this reason, the court concluded a directed verdict
should be granted on the issue of promissory estoppel.
A claim of promissory estoppel must be based on a clear and definite
promise. Kunde v. Estate of Bowman, 920 N.W.2d 803, 812 (Iowa 2018). There
is no evidence in the record to show Burgett made a clear and definite promise to
treat the settlement proceeds as earn-out funds. The district court did not err in
granting Burgett’s motion for a directed verdict on the claim of promissory estoppel.
C. Fraud
For a claim of fraud, a plaintiff must show
(1) defendant made a representation to the plaintiff, (2) the
representation was false, (3) the representation was material, (4) the
defendant knew the representation was false, (5) the defendant
intended to deceive the plaintiff, (6) the plaintiff acted in reliance on
the truth of the representation and was justified in relying on the
representation, (7) the representation was a proximate cause of
plaintiff’s damages, and (8) the amount of damages.
Holliday v. Rain & Hail L.L.C., 690 N.W.2d 59, 64 (Iowa 2004) (citing Gibson v.
ITT Hartford Ins. Co., 621 N.W.2d 388, 400 (Iowa 2001)). “Each element must
be established ‘by a preponderance of clear, satisfactory, and convincing proof.’”
Dier v. Peters, 815 N.W.2d 1, 7 (Iowa 2012) (citation omitted).
The district court stated, “[T]he evidence is also devoid of anything that rises
to the level of a representation upon which Mr. King and Mr. Hellickson would have
relied in signing the settlement agreement with Harman.” For this reason, the court
granted a directed verdict on the fraud claim.
20
We find no error in the district court’s conclusion. The evidence does not
show Burgett made a representation concerning the allocation of the settlement
proceeds that Hellickson and King relied upon to their detriment. We conclude the
court did not err in granting Burgett’s motion for directed verdict on the claim of
fraud.
V. Conclusion
The district court found there was sufficient evidence to present a claim of
breach of fiduciary duty to the jury except for the element of damages. There was
sufficient evidence of damages as to some of the plaintiffs as testified to by Vander
Weide, and the court erred by granting a directed verdict on breach of fiduciary
duty as to those specific plaintiffs. We reverse and remand on this issue. We find
no error in the exclusion of Exhibit U as it was not an admission by a party
opponent, a business record within the meaning of an exception to hearsay, or
admissible as a residual exception. For the other claims—breach of contract,
promissory estoppel, fraud, and breach of fiduciary duty to all other plaintiffs—the
court did not err in granting a directed verdict. We affirm the district court on these
claims.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.