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Employers Mutual v. Collins & Aikman, 04-3420 (2005)

Court: Court of Appeals for the Eighth Circuit Number: 04-3420 Visitors: 26
Filed: Aug. 16, 2005
Latest Update: Mar. 02, 2020
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ No. 04-3420 _ Employers Mutual Casualty Company, * * Plaintiff - Appellee, * * Appeal from the United States v. * District Court for the Southern * District of Iowa. Collins & Aikman Floorcoverings, Inc., * * Defendant - Appellant. * _ Submitted: June 22, 2005 Filed: August 16, 2005 _ Before MURPHY, BYE, and SMITH, Circuit Judges. _ BYE, Circuit Judge. This case arises out of a commercial transaction between Collins & Aikman Floorcoverings,
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                      United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 04-3420
                                   ___________

Employers Mutual Casualty Company, *
                                       *
            Plaintiff - Appellee,      *
                                       * Appeal from the United States
      v.                               * District Court for the Southern
                                       * District of Iowa.
Collins & Aikman Floorcoverings, Inc., *
                                       *
            Defendant - Appellant.     *
                                  ___________

                             Submitted: June 22, 2005
                                Filed: August 16, 2005
                                 ___________

Before MURPHY, BYE, and SMITH, Circuit Judges.
                           ___________

BYE, Circuit Judge.

      This case arises out of a commercial transaction between Collins & Aikman
Floorcoverings, Inc. (Collins) and Employers Mutual Casualty Co. (EMC). EMC
alleged carpeting it purchased from Collins failed to comply with applicable
warranties. Among other defenses, Collins alleged EMC's claims were barred by
Iowa's five-year statute of limitations governing breach of warranty claims. A jury
found in favor of EMC and rejected Collins's statute of limitations defense. Collins
now appeals the district court's denial of its motion for judgment as a matter of law.
We reverse.
                                          I

       In the mid-1990s, EMC began working on plans to build a new office building
and renovate an existing building in Des Moines, Iowa. As part of the project, EMC
solicited bids for carpeting from various carpet manufacturers, specifying the carpet
had to be durable enough for use under rolling chairs without the need for protective
floor mats. Collins's sales representative, Jim Depke, promised he could provide
carpeting to meet EMC's specifications and sold it a total of 23,931.39 yards. The
bulk of the carpeting – 21,701.39 yards – was delivered before December 31, 1996,
with the remainder – 2,230 yards – being delivered in 1998.

       In 1999, Joyce McMickle, EMC's facility coordinator, telephoned Collins and
notified it the carpeting beneath the chairs was showing signs of excess wear and
discoloration. In 2000, McMickle expressed the same concerns in a letter to Collins.
At trial, McMickle testified Depke told her Collins had never heard of such a problem
and would work "on EMC's behalf" to determine the source of the problem. In
February 2000, Depke conducted an on-site inspection and obtained samples of the
carpet for testing.

      In May 2000, Collins's representatives, including Depke and his sales manager,
Steve Broome, conducted a second walk-through inspection at which time, according
to McMickle's trial testimony, Depke or Broome again stated Collins had never
encountered this problem before and repeated the earlier promise to work "on EMC's
behalf" to determine the cause of the problems. Following the inspection, Broome
prepared a report indicating the problem with the carpet was a breakdown in the yarn
systems and it was unrelated to maintenance. Broome's report stated: "We make a
product that has a 15-year warranty. . . . I think we should step up to the plate and
honor this warranty." The next day, Broome wrote to EMC stating: "Please be
assured, that we are trying to understand why this condition has developed, since we
have not seen it occur in any previous installation."

                                         -2-
       On September 14, 2000, Collins offered to replace the worn sections of carpet
but EMC rejected the offer. Ten months later, on July 11, 2001, the sides again came
together to discuss the carpet problems. At this meeting, EMC formally rejected
Collins's earlier settlement offer. In response, Broome reiterated Collins's claim it did
not know the cause of the problems and again assured EMC it was continuing to
investigate the cause. On July 27, 2001, Collins wrote EMC asking to conduct yet
another inspection. EMC agreed to the additional testing and on October 2, 2001, the
parties met to discuss the results. At the meeting, Collins told EMC it believed the
carpet problems were caused by soiling and inadequate maintenance.

       Following the October 2, 2001, meeting, the parties attempted to mediate the
dispute. On August 6, 2002, after mediation proved unsuccessful, EMC filed suit.
It is undisputed the five-year statute of limitations covering 21,701.39 yards of the
carpeting (all but 2,230 yards) expired before EMC filed suit.

      In its lawsuit, EMC alleged 1) breach of implied warranty of fitness for
particular purpose, 2) breach of implied warranty of merchantability, 3) breach of
express written warranty, 4) negligence, 5) negligent misrepresentation, 6)
fraudulent misrepresentation and nondisclosure, and 7) breach of oral express
warranty. Collins denied the allegations and asserted various affirmative defenses,
including failure to mitigate damages, the statute of limitations and defenses under
the Uniform Commercial Code. The case proceeded to trial and a jury returned a
verdict in favor of EMC on its claims for breach of implied warranty and breach
of express oral warranty. The jury rejected Collins's affirmative defenses and
found the statute of limitations was tolled by the doctrine of fraudulent
concealment.

      Following the verdict, Collins renewed its JAML motion and moved for a
new trial and remittitur. The District Court denied Collins's JAML motion but


                                          -3-
conditionally granted the motion for new trial subject to EMC's acceptance of
remittitur in the amount of $205,186. EMC accepted the remittitur and judgment
was entered accordingly. This appeal followed. On appeal, Collins argues the
district court erred by denying its motion for JAML because 1) the evidence was
insufficient to support a finding of a fiduciary relationship, and 2) there was no
fraudulent concealment.

                                          II

      A.     JAML - Standard of Review

       We review the district court's denial of a motion for judgment as a matter of
law de novo using the same standards as the district court. Keenan v. Computer
Assocs. Int'l, 
13 F.3d 1266
, 1268 (8th Cir. 1994). A motion for judgment as a matter
of law presents a legal question to the district court and this court on appeal:
"[W]hether there is sufficient evidence to support the jury's verdict." 
Id. (quoting White
v. Pence, 
961 F.2d 776
, 779 (8th Cir. 1992)). We view the "evidence in the
light most favorable to the prevailing party and must not engage in a weighing or
evaluation of the evidence or consider questions of credibility." 
Id. A grant
of
judgment as a matter of law is proper only if the evidence viewed according to these
standards would not permit "reasonable jurors to differ as to the conclusions that
could be drawn." Dace v. ACF Indus., Inc., 
722 F.2d 374
, 375 (8th Cir. 1983).

      B.     Fraudulent Concealment

       In Iowa1 fraudulent concealment can toll the statute of limitations. To toll the
statute of limitations, the plaintiff must prove 1) "the defendant affirmatively
concealed the facts on which the plaintiff would predicate [the] cause of action," or

      1
       The parties agree Iowa law controls this diversity case.

                                         -4-
2) "a confidential or fiduciary relationship exists between the person concealing the
cause of action and the aggrieved party" combined with proof the defendant breached
its duty of disclosure. Rieff v. Evans, 
630 N.W.2d 278
, 290 (Iowa 2001) (quoting
McClendon v. Beck, 
569 N.W.2d 382
, 385 (Iowa 1997)). Where a fiduciary duty
exists between the parties, mere silence may be sufficient to prove the defendant
breached its duty of disclosure. Kurtz v. Trepp, 
375 N.W.2d 280
, 283 (Iowa Ct. App.
1985). Here, the jury rejected EMC's claim that Collins affirmatively concealed facts
but concluded a fiduciary relationship existed, thereby creating an affirmative duty
to disclose information.

      C.     Fiduciary Relationship

       Collins argues the doctrine of fraudulent concealment does not apply
because there was insufficient evidence to prove the existence of a fiduciary
relationship between it and EMC. We agree.

      "A fiduciary relation exists between two persons when one of them is under a
duty to act for or to give advice for the benefit of another upon matters within the
scope of the relation." Kurth v. Van Horn, 
380 N.W.2d 693
, 695 (Iowa 1986)
(quoting Restatement (Second) of Torts § 874 cmt. a, at 300 (1979)).

      Fiduciary relationship is

             [a] very broad term embracing both technical fiduciary
             relations and those informal relations which exist wherever
             one man trusts in or relies upon another. One founded on
             trust or confidence reposed by one person in the integrity
             and fidelity of another. A "fiduciary relation" arises
             whenever confidence is reposed on one side, and
             domination and influence result on the other; the relation
             can be legal, social, domestic, or merely personal. Such

                                        -5-
             relationship exists when there is a reposing of faith,
             confidence and trust, and the placing of reliance by one
             upon the judgment and advice of the other.

Id. at 695-96
(quoting Black's Law Dictionary 564 (5th ed. 1979) (citations omitted)).

             A fiduciary relationship imparts a position of peculiar
             confidence placed by one individual in another. A
             fiduciary is a person with a duty to act primarily for the
             benefit of another. A fiduciary is in a position to have and
             exercise, and does have and exercise influence over
             another. A fiduciary relationship implies a condition of
             superiority of one of the parties over the other. Generally,
             in a fiduciary relationship, the property, interest or
             authority of the other is placed in the charge of the
             fiduciary.

Id. (quoting First
Bank of Wakeeney v. Moden, 262, 
681 P.2d 11
, 13 (Kan. 1984)
(per curiam) (emphasis in original)).

"Because the circumstances giving rise to a fiduciary duty are so diverse, any such
relationship must be evaluated on the facts and circumstances of each individual
case." 
Id. The evidence
EMC presented to establish a fiduciary relationship was limited
to statements by Collins's staff indicating it would "work on EMC's behalf" to
determine the cause of the carpet problem. The district court personally felt the
evidence was insufficient to establish a fiduciary relationship but concluded it was
ultimately a jury issue.2 We conclude, in the context of this buyer/seller relationship,

      2
       Collins argues the district court erred when it submitted the question to the
jury because in Iowa the existence of a fiduciary duty is a matter of law for the court.
We disagree. In Davis v. Ottumwa Young Men's Christian Assoc., 
438 N.W.2d 10
,
17 (Iowa 1989), the Iowa Supreme Court reversed a grant of summary judgment

                                          -6-
Collins's statements were an insufficient basis upon which to find a fiduciary
relationship.

       We are mindful this court has previously held a fiduciary duty can arise within
a buyer/seller relationship. For example, in Asa-Brant, Inc. v. ADM Investor Serv.,
Inc., 
344 F.3d 738
, 741 (8th Cir. 2003), several farmers entered into complicated
hedge-to-arrive contracts (HTAs) with grain elevators for the sale and purchase of
grain.

      In an HTA, a grain producer agrees to deliver at an unspecified time a
      predetermined quantity and grade of grain. The price of the grain is
      determined by reference to a futures contract price established by the
      Chicago Board of Trade (CBOT), plus or minus a variable component
      referred to as the "basis." "Basis is the difference between the price of
      the designated futures contract and the cash price for that commodity."
      Grain Land Coop v. Kar Kim Farms, Inc., 
199 F.3d 983
, 987 (8th Cir.
      1999). The basis remains unfixed, or "floating," until the farmer elects
      to fix the basis, at which point the grain will be delivered. Under an
      HTA, a farmer has at least two sale options on his crop: he can deliver
      grain under the HTA, or he can defer delivery on (i.e., "roll") the



noting "[a] determination as to whether a fiduciary relationship exists would,
ordinarily, be a fact issue." See also Top of Iowa Coop. v. Schewe, 
324 F.3d 627
,
634 (8th Cir. 2002) (applying Iowa law and affirming the jury's finding of a fiduciary
relationship despite district court's misgivings about the sufficiency of the evidence).
We disagree with Collins's argument that Weltzin v. Cobank, ACB, 
633 N.W.2d 290
,
292 (Iowa 2001), holds the existence of a fiduciary duty should be resolved in each
instance by the trial court as a question of law. In Weltzin, the Iowa Supreme Court
affirmed the trial court's grant of summary judgment on the issue, but did so because
the court found 'the facts are insufficient to support a legal conclusion that defendants
. . . have a duty to the plaintiffs under [the theory of] breach of fiduciary duty.' 
Id. Thus, under
Iowa law this is "ordinarily" a fact question, but when the undisputed
facts are insufficient to find a fiduciary relationship exists, the question may be
resolved by the trial court as a matter of law.

                                          -7-
      contract if he thinks he can get a better price in the cash-grain market
      (the current market price for grain). The buyers of the grain, usually
      grain elevators, would enter into HTAs with farmers and then establish
      a position equal to the contract with the farmers on the CBOT. In other
      words, the elevator would agree to sell on the CBOT the grain it agreed
      to purchase from the farmer. If the farmer elected to roll his HTA, the
      grain elevator would buy back its position on the CBOT (as it now had
      no grain to sell on that date) and would establish a new position on the
      CBOT consistent with the rolled HTA.

      From 1995 to 1996, the grain market experienced unexpected price
      hikes. This market "inversion" created an environment where farmers
      consistently could make more money selling on the cash market, and
      consequently those farmers with HTA contracts continually rolled their
      HTAs, as their grain was more valuable now than in the future. Grain
      elevators across the country were forced to buy back expensive positions
      on the CBOT and purchase less valuable futures positions. The
      continual rolling added up to enormous margin costs on the HTAs. The
      question of whether farmers could continually roll their contracts, and
      who should pay for these large margin costs, sparked litigation
      throughout the Bread Belt.

Id. at 741-42.
      The Asa-Brandt farmers were informed by the grain elevator they owed money
on the HTAs and could no longer roll the contracts. The farmers sued arguing the
elevator owed them a fiduciary duty and breached the duty by failing to adequately
advise them regarding the risks associated with HTAs. A jury found in favor of the
farmers and the elevator appealed arguing the jury's finding of a fiduciary relationship
between a buyer and seller was unprecedented and erroneous. This court affirmed,
holding

      [T]he jury in this case heard evidence that [the elevator's] manager . . .
      was more experienced, more sophisticated, and more privy to
      information than were the Farmers about HTAs and the risks inherent in

                                          -8-
      their use. The Farmers also testified that they were encouraged . . . to
      enter into HTAs, and that they relied upon [the manager's] advice in
      executing them.

      Obviously, this fiduciary relationship did not arise through a simple
      buyer/seller relationship. Rather, as the district court found, it arose
      through the Farmers' reliance upon their cooperative, its manager, and
      his advice to them with respect to growing and marketing their grain,
      advice which included measures to improve their yield, when to sell
      their grain, and most importantly, how to use HTAs to enhance the
      profitability of their operations.

Id. at 744-45.
       We do not find Asa-Brant persuasive in the context of this case. Here, there
is no compelling evidence of a fiduciary relationship between Collins and EMC. This
case involved two large, sophisticated business entities and there is no evidence of
inequality between them. Nor did Collins exercise influence over or dominate EMC.
Further, EMC does not argue it was dependent upon Collins. Rather, the sole
evidence of a fiduciary relationship comes from Collins's statement it would work on
behalf of EMC to discover the source of the carpet problems. Acting on behalf of
another may indicate a fiduciary relationship, but based on all the facts and
circumstances of this case we conclude those two statements were insufficient as a
matter of law to transform this arms-length buyer/seller business transaction into a
fiduciary relationship.

                                         III

       The judgment of the district court is reversed and we remand with instructions
to enter judgment as a matter of law in favor of Collins.
                       ______________________________




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