Anderson v. Anderson Tooling, Inc.

928 N.W.2d 821

Jeffrey ANDERSON, Appellant,

v.ANDERSON TOOLING, INC., Dean E. Anderson, and Carol A. Anderson, Appellees.

Anderson Tooling, Inc., Appellee,

v.Lori J. Anderson and Fabrication and Construction Services, Inc., Appellants.

No. 15-1766

Supreme Court of Iowa.

Filed May 31, 2019

Steven Gardner of Denefe, Gardner & Zingg, P.C., Ottumwa, for appellants.

Steven E. Ballard and Abigail L. Brown of Leff Law Firm, L.L.P., Iowa City, for appellees.

CADY, Chief Justice.

In this appeal, we primarily consider whether a judgment for civil conspiracy was properly modified by the district court following a jury trial. The court of appeals found the jury instruction pertaining to the conspiracy did not permit judgment to be modified. On our review, we affirm and adopt the opinion of the court of appeals except on the issue of the conspiracy. We affirm the judgment of the district court.

I. Background Facts and Proceedings.

Spouses Dean and Carol Anderson own and operate Anderson Tooling, Inc. (ATI). The company offers many services, including rigging. Rigging is the movement of heavy machinery from one location to another. In 2005, Dean hired his brother, Jeffrey Anderson (Jeff), to work as the company’s general manager and chief financial officer. He also hired Jeff’s wife, Lori, as ATI’s bookkeeper.

The couples met to discuss the terms of employment, but never completed a formal employment contract. Instead, Dean and Jeff made handwritten notes about the details discussed at the meeting. Generally, both sets of notes provided for Jeff’s base salary at $ 52,000, with a percentage of "profit" of twenty percent up to $ 200,000 and thirty percent over $ 200,000. Neither set of notes defined the word "profit." Jeff claims his notes represent a valid employment contract because both brothers initialed the document. Dean denies having initialed it.

The lack of specificity in the agreement became the basis of a salary dispute between the brothers. In 2011, Jeff requested payments of his deferred compensation pursuant to the percentage split in the employment agreement. Dean and Carol denied the existence of a written agreement and refused to pay Jeff. They also claimed their definition of profit did not align with Jeff’s.¹

While employed at ATI, Jeff formed an independent company named Fabrication & Construction Services Inc. (FabCon). FabCon’s original purpose was to complete repair work on the building where ATI was located following flood damage. After this project, FabCon continued to operate and began providing rigging services, in competition with ATI. Upon learning of FabCon’s rigging operations, Dean fired Jeff and Lori from ATI.

A. Claims Filed. Jeff asserts he was terminated due to his request for payment of the deferred compensation. He commenced an action against Dean, Carol, and ATI alleging a violation of the Iowa Wage Payment Collection Law (IWPCL), breach of contract, tortious discharge, and interference with contractual relationships.

Dean, Carol, and ATI filed a number of counterclaims. They filed a claim against Jeff for conversion, intentional interference with contracts, interference with a prospective business advantage, breach of fiduciary duty, and misappropriation of trade secrets. Dean and Carol claimed Jeff used ATI’s customer list and rate information to FabCon’s benefit. They also claimed Jeff was stealing and mismanaging ATI funds.

ATI sued Lori for breaching her fiduciary duty, claiming she diverted its funds to FabCon, Jeff, and herself. Additionally, ATI brought a claim against Lori and FabCon for conversion, intentional interference with contracts, interference with prospective business advantage, and conspiracy. These cases were consolidated for trial.

B. District Court Proceedings. On May 13, 2015, these matters proceeded to a jury trial. After nearly two weeks of testimony, the jury was given two verdict forms with sixty-eight interrogatories and began deliberation. The first verdict form related to Jeff’s claims against Dean, Carol, and ATI. The second verdict form related to the counterclaims against Jeff, Lori, and FabCon. On Jeff’s claims, the jury concluded ATI did not violate the IWPCL and did not owe Jeff unpaid profit sharing or accrued vacation. The jury found no employment contract existed, thus ATI did not breach or intentionally interfere with Jeff’s contract. It also concluded Dean and Carol did not act improperly as the company’s directors.

The jury did find that Jeff was an ATI employee and wrongfully discharged for pursing unpaid wages. It awarded him $ 89,387.01 in lost wages, $ 5000 for emotional distress, and $ 52,000 in punitive damages.

On Dean and Carol’s claims, the jury found Jeff breached his fiduciary duty and awarded them $ 436,255.18 in damages. Moreover, it concluded Jeff intentionally and improperly interfered with ATI’s prospective business relationships, awarding $ 336,072.54 in damages. Damages against Jeff totaled $ 772,297.72. The district court entered judgments in these amounts.

The portion of the verdict form regarding the participation of Jeff, Lori, and FabCon in a conspiracy to harm ATI provided,

Q. Did Jeffery Anderson commit any of the wrongs of conversion, interference with a prospective business advantage, breach of fiduciary duty, or misappropriation of trade secrets? ... A. Yes....

Q. Did Lori Anderson and [FabCon] participate in a conspiracy with Jeffery Anderson to appropriate funds and projects belonging to [ATI].... A. Yes....

Q. Was [ATI] damaged as a result of the conspiracy? ... A. Yes....

Q. State the amount of damages sustained by [ATI] as a result of the conspiracy. A. $ 0-duplication.

The jury also concluded Jeff, Lori, and FabCon did not convert ATI’s property but found their conduct did constitute willful and wanton disregard for the opposing parties' rights. No damages were awarded on this finding. The jury concluded that while Lori and FabCon knew of ATI’s prospective relationships, only FabCon intentionally and improperly interfered with those relationships, and that interference did not cause harm. Finally, it found Lori did not breach a fiduciary duty.

The parties agreed to a sealed verdict, allowing the jury to be discharged following the rendering of a verdict and without reporting its finding in court and in the presence of the litigants. See Iowa R. Civ. P. 1.931(3). When the jury finished its deliberations, the parties' attorneys were emailed the completed verdict form. They confirmed it did not contain irregularities and agreed the jury should be released.

Following trial, both sides filed posttrial motions. Jeff filed motions for new trial and judgment notwithstanding the verdict on the first verdict form. He claimed the jury’s no-contract determination was contrary to the evidence because the parties disagreed on the terms of the contract, not its existence. Additionally, he argued the finding that Dean and Carol did not act improperly as corporate directors was contrary to the evidence. Jeff had previously moved for a directed verdict on both these issues at the close of evidence.

Jeff also moved for remittitur and alternatively moved for new trial on the second verdict form. He claimed the damages awarded against him were the result of improper influences and were not supported by the evidence. He asked the district court to remit the damages to $ 1.00 for each claim or alternatively grant a new trial. The court denied all of Jeff’s posttrial motions.

ATI filed a motion under Iowa Rule of Civil Procedure 1.904(2) to enlarge, amend, or modify the judgment to make Lori and FabCon jointly and severally liable for the $ 772,297.72 judgment. Iowa R. Civ. P. 1.904(2). The district court granted the modification to extend liability for the judgment to Lori and FabCon.² It also granted ATI’s motion for judgment notwithstanding the verdict to reduce Jeff’s lost-earnings damages from $ 89,387.01 to $ 34,667.00, concluding Jeff mitigated the loss when he began working for another company at a higher salary following his termination from ATI.³

Jeff, Lori, and FabCon appealed the decision of the district court. It argued there was insufficient evidence to support the jury’s damage determination, parts of the verdict were inconsistent, and the district court erred by granting ATI’s modification motion. We transferred the case to the court of appeals.

C. Court of Appeals Proceedings. The court of appeals reasoned there was substantial evidence to support the jury’s no-contract finding. The court found the fighting issue was not whether an employment contract was entered into but whether a contract involving the profit-sharing terms existed. It also concluded that appellants failed to preserve error on the damage determination and inconsistency issues. The court of appeals affirmed the district court’s ruling on all these issues.

However, the court of appeals reversed the district court’s order imposing joint and several liability on Lori and FabCon. It reasoned Jeff’s conduct did not form the basis of a conspiracy, given the verdict form and the jury instruction’s limited the scope of conspiracy.⁴ Thus, it determined a conspiracy did not exist for Lori and FabCon to join.

The appellees requested further review of the court of appeals' reversal of the conspiracy liability issue. The appellants filed a resistance to the further review application. However, they request that if further review is granted, this court review all issues raised in the original appeal. These issues include whether an employment contract existed, the jury’s findings and verdict forms were consistent, and the record supported all the jury’s determinations.

On review, we adopt the court of appeals opinion and disposition of all claims except the liability issue. On this issue, we find the district court did not abuse its discretion by granting the motion to amend.

II. Standard of Review.

"[O]ur review of a court’s ruling on a motion to amend the verdict should be for abuse of...