ROBERT W. PRATT, Chief Judge.
Union County, Iowa ("Plaintiff" or the "County") filed an Amended Complaint against Piper Jaffray & Co., Inc. ("Defendant" or "Piper") on January 30, 2008, asserting the following claims: 1) breach of fiduciary duty; 2) breach of contract; 3) negligent misrepresentation; 4) negligence; and 5) fraud. Clerk's No. 47. On September 29, 2010, the Court entered summary judgment in favor of Defendant on Plaintiff's breach of contract claim. Clerk's No. 240, 741 F.Supp.2d 1064 (S.D.Iowa 2010). A jury trial was, held on the remaining counts from December 6-16, 2010. See Clerk's Nos. 298, 300, 303, 305, 307, 312-13, 317. At trial, the "fraud" count was presented to the jury as two separate claims: one for fraudulent misrepresentation and one for fraudulent nondisclosure. See Clerk's No. 314.
On December 17, 2010, the jury returned its verdicts. Clerk's No. 318. The jury found in favor of Defendant on Plaintiff's claims for breach of fiduciary duty, negligence, negligent misrepresentation, and fraudulent misrepresentation. Id. The jury, however, found in favor of the County on the fraudulent nondisclosure claim, and awarded the County $1.00 in damages.
On January 20, 2011, the County filed a "Motion for New Trial on Damages," contending that it is entitled to a new trial on damages because of prejudice resulting from "errors committed at trial concerning the introduction and exclusion of evidence bearing on the question of the County's damages [and] incorrect jury and curative instructions (submitted over the County's objection)." Clerk's No. 334. The County further argues that the "jury's verdict, in assessing $1 in damages, completely disregarded the overwhelming damages testimony at trial." Id. at 1. Piper filed a resistance to the County's Motion on February 7, 2011. Clerk's No. 339. The County filed a Reply on February 17, 2011. Clerk's No. 340.
On January 20, 2011, Piper filed a Renewed Motion for Judgment as a Matter of Law (Clerk's No. 335), asserting that "the
The factual background of this case was set forth extensively in the Court's Order on Piper's Motion for Summary Judgment. See Clerk's No. 240, 741 F.Supp.2d at 1070-86. Because the evidence provided to the Court at the summary judgment stage was fundamentally the same as that presented at trial, the Court will not recount the factual background in this Order, except where relevant and necessary for consideration of the pending motions.
Federal Rule of Civil Procedure 50(a) provides that at any time before a case is submitted to a jury, either party may move for judgment as a matter of law. "If the court does not grant a motion for judgment as a matter of law made under subdivision (a), the court is considered to have submitted the action to the jury subject to the court's later deciding the legal questions raised by the motion." Fed. R.Civ.P. 50(b). In ruling on a renewed motion for judgment as a matter of law, the Court may "(1) allow judgment on the verdict, if the jury returned a verdict; (2) order a new trial, or (3) direct the entry of judgment as a matter of law." Fed. R.Civ.P. 50(b)(1). Further, in considering the post-verdict renewed motion for judgment as a matter of law, the trial court is:
Voegeli v. Lewis, 568 F.2d 89, 92 (8th Cir.1977) (quoting Griggs v. Firestone Tire & Rubber Co., 513 F.2d 851, 857 (8th Cir. 1975)). Accordingly, the Court must focus its analysis on "whether or not the record contains evidence sufficient to support the jury's verdict." Children's Broad. Corp. v. Walt Disney Co., 357 F.3d 860, 863 (8th Cir.2004).
As noted, the jury returned a verdict in favor of the County only on the County's claim against Piper for fraudulent nondisclosure. At trial, the Court instructed the jury on this claim as follows:
Final Jury Instr. No. 40 (Clerk's No. 314 at 44).
The instruction on "Alleged Nondisclosures" referenced in the second element provided:
Final Inst. No. 28.
Defendant argues that judgment as a matter of law must be granted in its favor because insufficient evidence was presented at trial as to the first, fourth, sixth, seventh, and eighth elements necessary to prove a claim for fraudulent nondisclosure. The Court will examine the sufficiency of the evidence as to the elements of the claim, recognizing that "[f]raud must be established by clear, satisfactory, and convincing evidence." McGough v. Gabus, 526 N.W.2d 328, 331 (Iowa 1995).
Iowa case law holds that a fraud claim can be actionable based on one party's failure to disclose material information to another party. In order to be actionable, however, the party sued must have been under "`a legal duty to communicate'" the information that was not disclosed. Sinnard v. Roach, 414 N.W.2d 100, 105 (Iowa 1987) (quoting Wilden Clinic Inc. v. City of Des Moines, 229 N.W.2d 286, 293 (Iowa 1975)). This legal duty typically arises from a fiduciary relationship between the parties; however, it may also be created by "special circumstances," i.e., it may "`arise[] from a relation of trust, from confidence, from inequality of condition and knowledge, or other attendant circumstances.'"
"Whether the special circumstances are such as to give rise to a duty of disclosure is generally a question of law for the Court...." Iowa Civil Jury Inst. 810.2 cmt. (citing Restatement (Second) of Torts § 551 cmt. m (1977) ("Whether there is a duty to the other to disclose the fact in question is always a matter for the determination of the court. If there are disputed facts bearing upon the existence of the duty, as for example the defendant's knowledge of the fact, the other's ignorance of it or his opportunity to ascertain it, the customs of the particular trade, or the defendant's knowledge that the plaintiff reasonably expects him to make the disclosure, they are to be determined by the jury under appropriate instructions as to the existence of the duty.")). Plaintiff bore the burden at trial to prove the existence of a duty based upon special circumstances "by a preponderance of clear, satisfactory, and convincing evidence." McGough, 526 N.W.2d at 331. After careful consideration and extensive review of the record, the Court cannot conclude that the circumstances presented by Plaintiff in this case are legally sufficient to give rise to a duty on behalf of Piper.
Though Union County contends that Piper performed numerous tasks throughout the course of the parties' dealings that were "in line with" the duty it claims Piper undertook, it is clear that Piper is alleged to have owed the County a duty as a result of exchanges between the parties at a County Board meeting on December 9, 1996. Throughout all phases of this case, County officials have maintained that they "hired" Piper representative Tim Oswald ("Oswald") to be their financial advisor in relation to the CF Processing Development Project (hereinafter "Development Project") at their December 9, 1996 Board meeting. The County has further maintained that this hiring was confirmed by a letter from Oswald to the County on December 12, 1996.
At trial, three members of the Board testified about meeting Oswald at a Board meeting on December 9, 1996. Michael Reasoner ("Reasoner") testified:
Dec. 7 Trial Tr. at 5.
Board member Michael King ("King") also testified about his belief that the Board had "hired Piper Jaffray" to be its financial advisor with respect to the Development Project. Dec. 8 a.m. Trial Tr. at 26.
Id. at 48-51.
Finally, Gerald McLain testified about his belief that Oswald was hired as the County's "financial advisor":
Dec. 10 Trial Tr. at 145-46.
On December 12, 1996, Oswald wrote a follow-up letter that had been requested at the provided:
Pl.'s Trial Ex. 1.
Regarding this letter, Reasoner testified that letter was requested by the Board at the December 9, 1996 meeting:
Dec. 7 Trial Tr. at 7.
On cross-examination, Reasoner testified that, "[w]hen [he] read the document in totality," he read the bullet points as "highlighting" what Piper's role would be, i.e., that Piper "would help us give us the expertise to make the decision." Id. at 103. Reasoner further admitted, however, that Piper's letter never used the phrase "financial advisor" and expressly stated Piper would be the underwriter of the transaction, that Piper's services would be limited to the sale of securities, that Piper was not going to participate in the drafting of the Development Agreement, and that Piper would only "assist in the Development Agreement to provide analysis of the
King also testified about the December 12, 1996 letter, stating that he "was pretty much assured that everything we had asked for was covered [in the letter]." Dec. 8 a.m. Trial Tr. at 59. King testified that he read the bullet points in the letter as indicating that Oswald would "be involved in the creation and completion of working with the attorneys to put the Development Agreement together," and that Oswald "would review all the documents and recommend areas of concern that he had from A to Z, throw up a red flag if there was a problem," and that Oswald "would be our financial advisor, and he would take care of our financial and overall project to make sure that it worked." Id. at 60-62.
On cross-examination, King admitted that he spent "very little time" evaluating the prudence of the County entering into the project because, in King's view, "I had Tim Oswald involved in this as a financial agent, and that's who we hired. In county government we don't second-guess or go around and double-check our experts." Dec. 8 p.m. Trial Tr. at 36. King further testified that he saw no need to ask for any information because "[n]one was offered. To me that was — things were going well, it was a green light. There was no red flags thrown up." Id. at 37.
Finally, McLain testified that he read the last line of the letter, "we are comfortable that we can adequately represent the county" as meaning that Oswald had agreed to act as the County's financial officer. Dec. 10 Trial Tr. at 146-47. McLain read this line as indicating that he "could relax a little and go about my other businesses that I had, and things would be handled in a proper manner." Id. at 147. McLain further testified that he believed Oswald was advising the County in connection with the Development Agreement, and that the County hired Piper because if its good reputation and because Oswald "said that he was the best guy to do the job." Id. at 148.
Based on this testimony and taking the evidence in the light most favorable to the County, as it must, the Court accepts that at all times after receiving Oswald's December 12, 1996 letter, Board members were under the impression that they had hired a financial advisor in Tim Oswald. Indeed, Board members readily admitted at trial that they did virtually nothing to investigate the propriety of committing County resources to the Development Project because they believed that Oswald was watching out for the County's interests alone and would have "thrown up a red flag" if there was something that the County should have been concerned about. See Dec. 7 Trial Tr. at 82 (Q: "Between December 9, when you retain, per your testimony, Piper Jaffray, and when you signed the Development Agreement, what due diligence did you do as a county official to try to determine whether this was a good deal for the County?" Reasoner: "I was taking a person's word. I took their word that they were going to advise us and provide us information so we could make a decision.... That's what I did, I took that person, that individual, their reputation at their word."); Dec. 8 p.m. Trial Tr. at 37 (Q: "You didn't ask for any information. We've gone through that before; correct?"
To evaluate the overall sufficiency of the County's offered testimony on the duty element, it must be viewed in context. The Union County Board of Supervisors never met Oswald or had any conversations or interactions with him prior to the December 9, 1996 Board meeting. Prior to that time, however, County officials had already participated in numerous meetings related to the County becoming involved in the Development Project and had already begun the process of formalizing the County's involvement. Indeed, by November 8, 1996, the outline of the project was sufficiently concrete that Tim Oswald sent a letter to Larry Crosser, the developer of the project, Don Krings, a Union County official, and Joe Parker, a City of Creston official, with a "draft description of the process to complete this project, as well as a time schedule and an updated bond retirement schedule." Trial Ex. 88. At a November 18, 1996 Board meeting, the County formally adopted the preliminary finance plan enclosed in Oswald's letter, which contemplated the County "sign[ing] on to $6.9 million in debt," and assumed a minimum assessment on the plant of $12 million. See Dec. 7 Trial Tr. at 95-96, 98; Trial Ex. 756. The Board further agreed at that meeting to have Simmering-Cory draft a development agreement and, in fact, sent a letter to Tom Simmering authorizing him to "go forward to draft a TIF plan [that had] been authorized by the board." Dec. 7 Trial Tr. at 116 (Reasoner); Dec. 8 p.m. Trial Tr. at 20 (King); Trial Ex. 549. Moreover, on August 21, 1996 and on September 11, 1996, an attorney from Ahlers Law Firm attended County Board meetings in relation to the Development Project and billed the County for his time. See Dec. 8 p.m. Trial Tr. at 16-17 (King).
Given that Union County had already approved a preliminary plan of finance, and engaged outside entities to render advice and perform tasks intended to move the project forward, Oswald's "I work for you" statement at the December 9, 1996 Board meeting is not so direct a commitment to act as the County's financial advisor as the County would assert. The County's witnesses recall virtually nothing that Oswald said to them at the December 9, 1996 meeting, other than, "I work for you." There was absolutely no testimony that Oswald asked the County questions about its finances, or that the County provided Oswald with information about its income, debt limitations, or outstanding obligations, as would be expected if Oswald was going to "advise" the County about the propriety of entering into the Development Project. Likewise, there was no testimony that the County and Oswald discussed the scope or extent of Piper's "advisory" duties to the County, that the County told Piper it expected him to inform the County if it was unwise or imprudent to enter into the Development Project, or even that the parties discussed how Piper would be paid for its "advisory" services. When viewed outside of the vacuum in which the County presents it, the County is ultimately asking the Court to permit a legal duty to be imposed upon Piper based merely on the words, "I work for you," coupled with the fact that the County Board members inferred from those words that they had employed a financial advisor. To do so would be patently unreasonable and contrary to Iowa law.
To the extent that Oswald's "I work for you" statement is insufficient standing alone, the County relies on Oswald's December 12, 1996 follow-up letter. In particular,
Union County claimed at trial that several additional pieces of evidence further support a conclusion that Piper's actions
First, the County points out that on December 10, 1996, Piper wrote a letter to John McKinney of Ahlers Law Firm stating, "The Board of Supervisors have instructed us to begin working with you on the process to complete a development agreement and sell G.O. notes." Trial Ex. 553. Nothing about this statement, however, indicates that Piper is "advising" the County. Indeed, the letter does little more than recount the terms that the County had already preliminarily approved and reference that various public hearings will need to be held. Id. Second, Piper was asked by Ahlers in a letter dated January 24, 1997 to review a copy of the development agreement and provide its thoughts. Trial Ex. 112A. This letter to Piper, however, does nothing to prove that Piper agreed to advise the County. Third, the County points out that Oswald "advised" it to "approve and execute the development agreement" in a letter dated February 28, 1997. Trial Ex. 12. This letter, however, was written by Oswald to Ahlers, not to the Board of Supervisors. Moreover, while the letter states once the next required step, a public hearing, is completed, it "would be appropriate to approve and execute the development agreement," the letter also clearly states that Oswald was not aware of certain comments that had circulated regarding the Development Agreement — a fact inconsistent with the County's claim that Piper was doing more than acting as an underwriter. See id. ("It is my understanding that you have been provided comments on the above development agreement by the developer's attorney, Amy Beattie. I have not heard of those comments, however, I am assuming at this point that they are not substantive with respect to the security offered by the Coop or the County's obligations."). The County also points out that in a July 17, 1997 letter from Oswald to Reasoner, Oswald states that Larry Crosser received some necessary approvals from his bank and told the County "it is time to pick up your process and move it forward." Trial Ex. 16. Though the County presents this statement as "advising" it to move forward, the County's position ignores the context and tenor of the letter overall, which mostly discusses completing the financing project in a timely fashion, with no commentary whatsoever on whether the project is a wise or valuable investment for the County. Moreover, this letter also states that Piper had asked the County "to hold up moving forward with the $4 million cash grant" because Larry Crosser was waiting on some additional approvals. Id. According to the letter, "Larry Crosser received word from his bank, First Bank Systems, that they would guaranty an issue of industrial revenue bonds that will be used to fund the construction of the new soybean plant." Id. Since the County was never going to issue industrial development revenue bonds, this letter directly undermines the County's assertion that it never had any information that would lead it to believe that entities other than the County were providing funding for the Development Project.
Next, the County points out that a letter dated May 7, 1997 from Ahlers Law Firm to Tim Kenyon states, "At Tim Oswald's
Having reviewed all of the evidence placed before the jury in this case, and resolving all factual disputes in the light most favorable to Union County, the Court is still left with the firm conviction that Iowa courts would not find the "special circumstances" of this case sufficient to support the "duty" element of Plaintiff's fraudulent nondisclosure claim. Plaintiff's evidence, even taken in toto, demonstrates nothing more than that Piper said "I work for you," wrote the December 12, 1996 letter, and that Board members inferred that Piper had somehow agreed to advise the County.
Union County's claim of fraudulent nondisclosure required it to demonstrate that the County actually relied to its detriment on Piper's nondisclosures, and that any such reliance was "justifiable." See Midwest Home Distributor, Inc. v. Domco Indus., 585 N.W.2d 735, 743 (Iowa 1998) ("[J]ustifiable reliance is an essential element of fraudulent misrepresentation."). "`Reliance upon [a defendant's representation] is justifiable if a person acting with reasonable and ordinary prudence and caution would have a right to rely on the representations.'" Pollmann v. Belle Plaine Livestock Auction, Inc., 567 N.W.2d 405, 410 (Iowa 1997) (quoting Kaiser Agric. Chems. v. Ottumwa Prod. Credit Ass'n, 428 N.W.2d 681, 683 (Iowa Ct. App.1988)). "Reliance is not justified if the person receiving the information knows or in the exercise of ordinary care should know that the information is false." Pollmann, 567 N.W.2d at 410.
"The justifiable-reliance standard does not mean a plaintiff can blindly rely on a representation." Spreitzer v. Hawkeye State Bank, 779 N.W.2d 726, 737 (Iowa 2009) (citing Lockard v. Carson, 287 N.W.2d 871, 878 (Iowa 1980)). "Instead, the standard requires plaintiffs to utilize their abilities to observe the obvious, and the entire context of the transaction is considered to determine if the justifiable-reliance element is met." Id. (citations omitted). Relevant factors in the consideration include:
Id. (quoting Davidson v. Wilson, 973 F.2d 1391, 1400 (8th Cir.1992)). Another relevant consideration is whether the "oral representation clearly contradicts a written agreement. In such instances, reliance on the oral representation by a plaintiff can be utterly unjustified in the face of a clear written contradiction." Id. (citations
The Court finds that the evidence presented in this case was insufficient to support the jury's finding that the County justifiably relied on Piper to disclose to it the "alleged nondisclosures" in Final Instruction Number 28. At best, the basis for the County's reliance on Piper to advise it on the propriety of entering into the Development Project was Oswald's "I work for you" statement combined with the December 12, 1996 letter. As discussed previously, however, there is no evidence in the record, save for the December 12, 1996 letter, delineating in precisely what capacity Oswald was going to be working for the County. Moreover, the December 12, 1996 letter itself contains language that should have raised doubts about the County's claimed belief that Piper was acting as a financial advisor. For instance, the December 12, 1996 letter specifically states that Piper will be the "underwriter of the proposed debt" and that its "services are to be limited to the structuring and sale of securities." Trial Ex. 1. Rather than ask for clarification, however, the County ignored this language and forged ahead with its reliance on Piper to "throw up red flags."
The Spreitzer factors do nothing but reinforce a conclusion that the County was unjustified in its reliance on Piper. Piper and the County had no prior personal or business relationship, and there was no prior or existing fiduciary relationship between them. While certainly Piper was more experienced than was the County in financial matters, the County Board members tasked with determining whether the Development Project would ultimately move forward were elected governmental officials, most with fairly extensive backgrounds in County governance and with experience in bonding and municipal financing transactions generally, if not in transactions as large as the Development Project.
Moreover, and perhaps most significantly, the County had access, in one form or another, to virtually all of the information they claim Piper failed to disclose.
Although the County has attempted to give the impression that County Board members were little more than simple farmers and small business owners, the fact remains that these individuals were publically elected officials, charged with protecting the interests of the County's
The County cites case law supporting a proposition that "`ordinary business care and prudence' do not require a party relying on professional advice to second guess the advice given. This would `nullify the very purpose of seeking the advise of a presumed expert in the first place.'" Pl.'s Resistance Br. at 17 (quoting United States v. Boyle, 469 U.S. 241, 251, 105 S.Ct. 687, 83 L.Ed.2d 622 (1985)). The case law cited, however, arose in the context of professional rendering affirmative advice, such as when "an accountant or attorney advises a taxpayer on a matter of tax law, such as whether a liability exists." See Boyle, 469 U.S. at 251, 105 S.Ct. 687 (emphasis in original). No such affirmative advice was given in this case. Piper never told the County that investment in the project was a wise decision or that it would be fiscally prudent to proceed with committing funds to the project. Rather, Piper is accused of failing to disclose information that might have caused the County to refuse to participate. In this factual context, it would be improper to examine only what Piper allegedly failed to disclose. Indeed, to determine whether the County's reliance on Piper to disclose the allegedly nondisclosed information was justified, it is necessary to examine the entire context of the parties' relationship. Thus, it is highly significant and relevant to the justifiable reliance element that the County and Piper never met one-on-one, never contacted each other with questions or requests for information, never discussed
Viewing the entire context of the parties' dealings, it is clear from the record that the County utterly failed to utilize its ability to observe the obvious, blindly expecting Piper to "throw up red flags," despite that fact that there is no evidence supporting a conclusion that the County ever communicated this expectation to Piper. The Court finds the evidence presented at trial insufficient as a matter of law to demonstrate by a preponderance of clear, convincing, and satisfactory evidence, that the County was justified in relying on Piper to advise it in connection with the Development Project.
Under Iowa law, causation has two components: 1) "`the defendant's conduct must have in fact caused the plaintiffs damages (generally a factual inquiry)'" and 2) "`the policy of the law must require the defendant to be legally responsible for the injury (generally a legal question).'" Scoggins v. Wal-Mart Stores, Inc., 560 N.W.2d 564, 567 (Iowa 1997) (quoting Gerst v. Marshall, 549 N.W.2d 810, 815 (Iowa 1996)). In conducting the factual inquiry, a court must look to two components: 1) "whether the harm would not have occurred but for the negligence of the defendant, and 2) whether the negligence of the defendant was a substantial factor in bringing about the harm." Id. (citing Gerst, 549 N.W.2d at 817). In evaluating whether a defendant's conduct is a "substantial factor" in bringing about the harm sustained, courts must look to the "`proximity and foreseeability of the harm flowing from the actor's conduct, although it is not necessary that the actual consequences of a defendant's negligence should have been foreseen.'" Id. (quoting Kelly v. Sinclair Oil Corp., 476 N.W.2d 341, 349 (Iowa 1991)).
In conducting the legal inquiry, the court must determine if "`the policy of the law will extend responsibility to those consequences which have in fact been produced by an actor's conduct.'" Id. (quoting Kelly, 476 N.W.2d at 349). Ordinarily, this question can be answered affirmatively where it can be shown that there is "no other rule of law relieving the actor of liability because of the manner in which his negligence resulted in the harm," id. (quoting Kelly, 476 N.W.2d at 349), and where the resultant harm "result from the risks that made the actor's conduct tortious." Thompson v. Kaczinski, 774 N.W.2d 829, 837 (Iowa 2009).
Piper contends that the County failed to present clear, convincing, and satisfactory evidence of causation. Indeed, Piper asserts that the "County introduced no evidence indicating that it would have done anything differently had it been aware of any of Piper's alleged nondisclosures."
The County argues in response that County officials "uniformly testified that they would have wanted to know [the allegedly nondisclosed information] in making the decision whether to participate in the CF project, and on what terms." Pl.'s Resistance Br. at 18. As examples, the County contends that Reasoner, King, and McLain each testified as to: 1) a willingness to proceed only if there was no risk to the County taxpayers; 2) a belief that after financing was paid off, the County would have a $19 million commercial venture on its tax rolls; and 3) a belief that Crestland's guarantee was solid.
The Court does not agree that the County did not need to present any evidence that the County would have done something differently had it known of the "alleged nondisclosures." Under the County's causation formulation, Piper would be liable to pay for all damages incurred by the County even if County Board members had testified that they would have financed the Development Project regardless of whether they knew of the allegedly nondisclosed information. Such a novel concept is utterly unsupported by case law and would eviscerate the requirements of both factual and legal causation, effectively transforming a fraudulent nondisclosure claim into a strict liability tort.
The Court agrees with Piper that the County has failed to establish that the alleged nondisclosures caused the County's claimed damages. At trial, the County alleged eleven types or categories of information that Piper failed to disclose. See Final Inst. No. 28. County Board members, to varying degrees, testified that Piper did not make them aware of the information in those "alleged nondisclosures." The Board members did not, however, testify that any of the alleged nondisclosures, if known, would have caused them to take different action, to seek out different security, or to decline participation in the Development Project. And, there is no evidence in the record that would support an inference that the County actually could have obtained any more security on the project that what it actually got.
The very little testimony Board members gave indicating that the "alleged nondisclosures" would have been relevant to their decision-making process pertained at best, to only the third, tenth and eleventh categories of alleged nondisclosures (the minimum assessment was "high," Crestland's financial losses, and the risks of the project). See Final Inst. No. 28. Even on these three categories, however, the testimony was far too speculative to support a finding that the County would not have incurred damage but for Piper's alleged nondisclosures or that Piper's failure to disclose information was a substantial factor in causing damage to the County.
For instance, Reasoner only testified that he would liked to have known about risk factors of the project and Crestland's financial condition, but did not state that the County's decision to participate would have changed in any way:
Dec. 7 Trial Tr. at 144.
Likewise, King testified only that: 1) if given figures about the valuation of the plant, he would have asked Oswald to provide further explanation, and 2) if he had known about Crestland's losses in prior years, he would have taken a closer look at whether the County should be involved in the project:
Dec. 8 a.m. Trial Tr. at 87-88.
Finally, McLain's only testimony on the subject was when he was asked what he would have done if he had been shown records about Crestland's financial losses. McLain stated, "Seeing this loss here on this, I would probably start questioning what was going on, why were we doing — proceeding." Dec. 10 Trial Tr. at 150-51.
Absent any non-speculative evidence that the County could or would have done anything differently had it known the information that Piper allegedly failed to disclose, the Court finds that the evidence presented at trial was insufficient to support a conclusion that Piper's alleged actions caused the County's damages. See Clark v. Kansas City Missouri School Dist., 375 F.3d 698, 701 (8th Cir.2004) (finding that "judgment as a matter of law is proper when the record contains no proof beyond speculation to support the verdict" (citations omitted)).
Piper argues that the county presented no actual evidence, let alone clear and convincing evidence, that Piper intended to deceive the County by purposefully concealing information. Def.'s Mot. Br. at 12. According to Piper, there is no evidence in the record that Piper ever knew the County lacked any information. Id. Indeed, Tim Oswald testified that, as to each allegedly undisclosed item, he either believed the County already had the information, believed it was not material to the transaction, or was never asked about it. Id. Moreover, Piper contends that it is "impossible to reasonably infer, as the County does, that Piper would even believe it possible to conceal such publicly available information, when the entire process was being conducted in a public fish-bowl and was the talk of the town." Id. at 13.
Plaintiff counters that the jury verdict is amply supported because the "County presented the jury with compelling evidence that Piper intentionally withheld vital information from the County — evidence supporting an inference that these nondisclosures were intentional to secure the County's participation in the project." Pl.'s Resistance Br. at 13. According to Plaintiff, Piper's "omissions and misrepresentations, taken together, comprise a constellation of concealment from which the jury reasonably inferred a design to induce the County to unwittingly serve as the needed source of unsecured `equity' for the entire CF financing." Id. (citing Atlas Pile Driving Co. v. DiCon Financial Co., 886 F.2d 986 (8th Cir.1989)).
In 1975, the Iowa Supreme Court discussed the difference between non-actionable silence and a fraudulent failure to disclose:
Wilden, 229 N.W.2d at 292-93 (quoting 37 Am. Jur. 2d, Fraud & Deceit, § 145).
The Court agrees with Piper that the record does not contain a preponderance of clear, satisfactory, and convincing evidence that Piper intentionally withheld information from the County in order to deceive it into entering into the Development Agreement. While it is true that Wilden supports the proposition that intent may be inferred from an individual's failure to disclose material information when that individual is charged with a legal or equitable duty to disclose that information, Wilden also requires that the "silence must, under the conditions existing, amount to fraud." In this case, the record simply does not support a conclusion, by a preponderance of clear, satisfactory, and convincing evidence, that Oswald's silence on any of the alleged nondisclosures is sufficient to amount to fraud.
The Court does not set aside a jury verdict lightly. However, in this case, the Court is convinced that the evidence is not susceptible to reasonable inferences sustaining the County's position that Piper is liable for fraudulent nondisclosure. Indeed, the Court cannot find a single case, either under Iowa law or under the law of any other jurisdiction, that would support a conclusion that Piper committed the tort of fraudulent nondisclosure on the facts presented in this case. The County's main "evidence" is comprised of little more than the Board members' personal beliefs (unsupported by any real testimony about the
The County's Motion asserts that a new trial on damages is proper because the Court improperly permitted or excluded various items of evidence, and because the Court improperly instructed the jury.
Nonetheless, the Court notes that it has carefully reviewed the arguments by both parties on the issue and would deny the motion even if it had not granted Piper's request for judgment as a matter of law. The Court does not agree with Plaintiff that either its evidentiary rulings on expert testimony or its jury instructions were erroneous or unfairly prejudicial, for reasons stated both in the Court's pretrial orders and in its trial rulings on the parties' evidentiary objections and proposed jury instructions.
For the reasons stated herein, Defendant's Renewed Motion for Judgment as a
IT IS SO ORDERED.
Despite the Court's concern as to how the jury reached a conclusion that Piper owed a duty of disclosure based on "special circumstances," when it rejected the notion that Piper had a duty as a financial advisor or as a fiduciary, the Court is nonetheless mindful that Rule 50(b) requires it to consider the evidence in the light most favorable to the jury's verdict. Accordingly, the Court will examine whether the verdict should be allowed to stand without regard to the jury's verdicts on other counts. In considering whether Piper owed a duty arising out of "special circumstances," however, the Court will interchangeably refer to this alleged duty as either a financial advisory duty or as a duty arising out of special circumstances.
Second, County officials uniformly testified that their constituents wanted this project and that everyone agreed it would be a great opportunity for Union County. See Dec. 7 Trial Tr. at 8 (Reasoner testifying: "That's why we got involved because it would help create good jobs in the area, it would also enhance the average price per bushel that the farmer would get for his grain which would be taken to the bean crush plant."); Dec. 8 p.m. Trial Tr. at 16 (Q: "Did any of your constituents come up to you and say, "we don't want you to do that"? King: "Not that I remember." Q: "In fact, they were all in favor of it, and you were under the impression at that time that you were doing something to further something that your constituents wanted to see happen, weren't you"? King: "In a guarded position, yes."). Indeed, Reasoner testified that the purpose of the December 9, 1996 meeting was to engage in "discussion to decide should we do this, should we not do this as a board." Dec. 7 Trial Tr. at 5. The Court is perplexed as to why Piper should have been aware that the County was seeking a "financial advisor" when it appears, by all accounts, to have already been planning to proceed with participation in the Development Project.
Though the duty at issue in this fraudulent nondisclosure claim is not necessarily a fiduciary one, the Court nonetheless believes that a person charged with a duty to disclose information must have some basis to believe that such a duty is owed. In this case, the record is devoid of any evidence whatsoever that Piper knew that the County was looking to it for financial advice or that the County expected Piper to "raise red flags." Indeed, the record supports a conclusion that the County's expectations of Piper were unilaterally imposed and that the County never gave Piper any particular reason to believe that the County was looking for advice about the propriety of the transaction. As noted, not one member of the County Board ever asked Piper a question about whether the Development Project was a good idea for the County, whether there was anything to be concerned about in proceeding with the project, whether the County could take additional steps to protect itself or the County taxpayers, or about anything at all.
Regarding the County's claim that all of the Board members testified that they thought they would have a $19 million commercial venture on the tax rolls after the financing was paid off, Reasoner did testify that he believed that after the termination of the minimum assessment agreement, the property would be "valued at 19 million dollars, that's what the assessor had determined." Dec. 7 Trial Tr. at 30. The Court can find no similar testimony by either King or McLain. Contrary to Reasoner's cited testimony, however, substantial testimony at trial, including testimony by Reasoner, revealed that everyone involved in the project knew that the $19 million minimum assessment was not reflective of the actual value of the assessed property; rather it was simply the amount that needed to be assessed to ensure tax payments would cover the note issuances. See, e.g., Dec. 7 Trial Tr. at 19 (Reasoner testifying that "we were originally at a lower level as to the amount of value of the plant that would be necessary to make this work. I think it was initially around 10, 12 million dollars, and there's a discussion now that it would be necessary to increase that for this to be viable"); Dec. 10 Trial Tr. at 153-54 (McLain testifying that "It was going to take a $19 million assessment to make the payment of the bonds viable, and if that's what it took, then the minimum assessment would have to be 19 million dollars.");
Finally, regarding Crestland's stability, Reasoner simply testified that "[t]heir reputation in the community was great." Dec. 7 Trial Tr. at 12. King testified that Crestland was perceived at the time as "a pretty viable business" that was "flourishing, that was doing better every day." Dec. 8 a.m. Trial Tr. at 40-41. McLain testified only that he was surprised when Crestland went bankrupt because "I just didn't think that that company was in that kind of shape." Dec. 10 Trial Tr. at 144.
Erroneous evidentiary rulings warrant a new trial only where they affect "the substantial rights of the parties." Fed.R.Civ.P. 61; Anderson v. Genuine Parts Co., 128 F.3d 1267, 1270 (8th Cir.1997). Erroneous jury instructions warrant a new trial only where the objecting party can show that it was materially prejudiced by the erroneous instruction. See Fink v. Foley-Belsaw Co., 983 F.2d 111, 114 (8th Cir.1993).
