The Kuhn Law Firm

Fraud can stop a contract from being enforced.

Fraud can stop a contract from being enforced because a court will often treat it as if the contract was never formed.  Contract lawyers faced with a fraud case, will often ask the client what she was told that she relied upon in deciding to enter the contract.  The following  opinion explores various forms of fraud theories that an aggrieved party may assert.


United States Court of Appeals
No. 11-1347
Lakeside Feeders, Inc., *
Appellant, *
* Appeal from the United
v. * States District Court for
* the Southern District of Iowa.
Producers Livestock Marketing *
Association, a Non-Stock Nebraska *
Corporate Cooperative; Producers *
Livestock Credit Corporation, a *
Non-Stock Nebraska Corporation, *
Appellees. *
Submitted: September 20, 2011
Filed: January 23, 2012
Before LOKEN, BEAM, and MURPHY, Circuit Judges.
BEAM, Circuit Judge.
Lakeside Feeders appeals from the district court’s1 grant of summary judgment
in favor of Producers Livestock Credit Corporation and Producers Livestock
Marketing Association (Producers) on Lakeside’s state-law claims for fraudulent
1The Honorable James E. Gritzner, United States District Judge for the
Southern District of Iowa.
misrepresentation, negligent misrepresentation and unjust enrichment. We affirm the
court’s resolution of these state law matters in favor of Producers.
Relevant here, Producers provides livestock marketing services, hedging
services, and lending services to producers of hogs in the central part of the United
States. On or about December 2007, an Iowa veterinarian, Dr. Tracy Gayer, along
with his wife, together doing business as Prairie Pork, Inc. (hereinafter Gayer),
entered into an agreement with Producers identified as the “Hog Program.” Very
generally, under this program, Producers advanced funds so that Gayer could acquire
hogs and raise them from weaned pigs to market weight. Specifically, the Hog
Program contemplated that Producers would advance seventy percent of the projected
value of each market hog entering the program and use it to pay feed bills as long as
Gayer maintained his thirty-percent equity requirement. The Program contract
referred to Producers as “Owner” and Gayer as “Feeder.”
Lakeside feeds, grows, and ultimately delivers to market pigs purchased and
owned by others. Gayer approached Lakeside in late 2007 about using its services
for the pigs at issue. As relevant here, Lakeside provided the feed and care for the
hogs at issue by way of a handshake agreement; there was no written contract
memorializing any agreement between Lakeside and Gayer, or between Lakeside and
Producers. Once the hogs reached market weight, Lakeside sold the hogs and
collected and forwarded the proceeds to Producers. Lakeside looked to Producers for
payment for its services because Producers, along with Gayer, received the Lakeside
billing for the feed and management of the pigs delivered to Lakeside under the Hog
Program. Producers paid these bills without incident, it seems, until around mid-
2008. Producers continued to send payments to Lakeside throughout 2008,
sometimes hundreds of thousands of dollars, but Lakeside’s outstanding bills
mounted. The time frame at issue coincides with a substantial decline in the value of
market hogs. To quote Lakeside, it was “one of the worst hog marketing periods in
history with ethanol demand driving input costs sky high and hog sale prices
precipitously dropping to an all time low.”
Around May 2008, Gayer failed to provide his share of funding to Producers
under the terms of the agreement, violating the equity ratio mandated by the Hog
Program. Accordingly, Producers communicated to Gayer that he needed to send
money to Producers so that it could continue to pay feed bills and get its own contract
with Gayer back into compliance with the seventy percent debt-on-the-finished-hog
value. Meanwhile, Producers communicated with Lakeside regarding Lakeside’s
mounting outstanding feed bills. Although Lakeside knew that Producers provided
the financing for the hogs at issue, there is a fact dispute about whether Lakeside was
aware of the seventy percent lending limit agreed upon by Producers in the Hog
Program with Gayer, or other details of the deal. Producers claims it educated
Lakeside about this term of the contract and Lakeside denies this knowledge. We, of
course, must resolve this factual dispute in Lakeside’s favor and assume it was not
aware of the specific financing relationship or other terms under the Hog Program.
The heart of Lakeside’s tort claims centers around alleged representations
purportedly made by Producers to Lakeside that “when we get paid, you will get
paid,” or as Lakeside repeatedly claims, “Producers represented it would pay
Lakeside’s bills.” Presumably Lakeside took this to mean either that Producers would
“pay Lakeside in full,” or possibly that Lakeside would be “paid first” because
Lakeside’s primary complaint is that Producers unjustly paid itself off, including
payment of Producers’ non-feed-cost fees under the Hog Program. In any event,
many of Lakeside’s feed bills were left unpaid. However, even though Lakeside
repeatedly argues that Producers represented to Lakeside that Lakeside “would be
paid,” this merely reflects what Lakeside believed at the time and is not a verbatim
recitation of Producers’ statements in the record. Based upon oral conversations with
Producers, Lakeside’s president, James Noethe, testified that “[Producers] received
all the money and said that as they received more money I would get my outstanding
bills paid.” Noethe also stated, “I guess I trusted them that they would do that, and
that’s why I kept sending them all the money [from the hog sales] with basically all
the outstanding bills that I had there at the end of the feeding period.”
In addition to the oral representations, we look also to Producers’ written
representations, which vary from Noethe’s testimony in small, but significant, ways.
Faxes from Producers to Lakeside accompanying wire transfers made during the
relevant time period contained a listing of “outstanding feedbills . . . owed to
Lakeside Feeders.” One such fax prefaces such a list with a statement that “[t]he
following page shows the outstanding feedbills that Producers is aware of that Tracy
Gayer owes.” Producers also repeatedly stated in the faxes that “[w]e are at our
. . . lending limits until we receive money from Tracy or sell more hogs,” “[w]e are
expecting more money from Tracy so that we are able to pay more feedbills,” and that
“Producers hopes to have all the outstanding feedbills paid very soon.” These same
faxes delineate outstanding bills for “[Producers] Financed hogs” and “NON-
[Producers] Financed hogs.” Producers stated in faxes that it did not pay outstanding
bills on Non-Producers financed hogs.
Lakeside claims it relied upon the communications from Producers wherein,
according to Lakeside, Producers represented to Lakeside that Lakeside “would be”
paid when one of two circumstances occurred: (1) when Producers received more
money from Gayer, or (2) when Lakeside sold more hogs. Additionally, Lakeside
claims that Producers was fully aware at some point in late August 2008 that even
though Producers would be paid in full for monies advanced, Lakeside would not be
fully reimbursed and that Producers never informed Lakeside of that circumstance
despite Producers’ knowledge. Lakeside brought this diversity tort action against
Producers in federal court seeking $922,841.45 in unpaid bills and claiming
Producers’ actions induced Lakeside to forego taking protective measures such as
filing a lien2 to protect its interests.
The district court granted summary judgment in favor of Producers on each of
Lakeside’s Iowa state-law tort claims. On Lakeside’s fraudulent misrepresentation
claim, the court held that even assuming the statements at issue were material,
Lakeside failed to produce any evidence that they were false when made, a necessary
element of the claim. The court also held that Lakeside failed to establish that it
justifiably relied upon Producers’ representations in its decision to continue extending
credit. In doing so, the court reiterated that even though Producers paid the bills, it
repeatedly notified Lakeside that it had reached its lending limit and was thus unable
to advance more funds until it, too, received additional funds. The court also noted
Lakeside’s expertise and history in this business, recognizing Lakeside’s level of
sophistication as proof that Lakeside should not have blindly relied on any alleged
representations by Producers.
As to any alleged fraudulent nondisclosure, the court held that Lakeside failed
to produce evidence in support of its assertion that Producers knew at some discrete
time that it would not generate enough revenue from sales to satisfy Lakeside’s bills.
The court further held that Producers was under no legal duty to communicate any
internal speculations to Lakeside because there was no business relationship between
the two. Here, again, the court emphasized Lakeside’s level of sophistication in
support of its conclusion that Lakeside was equally aware, if not more keenly aware,
of any shortfall with regard to the gross market value of the hogs.
The district court also rejected Lakeside’s negligent misrepresentation claim.
Lakeside alleged that Producers made many representations with the sole purpose of
2Chapter 570A of the Iowa Code creates an agricultural supply dealer’s lien.
attempting to improve Producers’ pecuniary interest by inducing Lakeside to continue
feeding and managing Producers’ pigs. As is the case in all negligence actions,
though, Lakeside was required to establish that Producers had a duty toward Lakeside
to supply information, which the court held did not exist in this case.
Finally, as to Lakeside’s claim for unjust enrichment, the court held that while
Producers received a benefit from receipt of funds from Lakeside’s sale of the
animals, that, in the absence of Gayer’s payment of its debt to Producers which might
have otherwise gone to pay Lakeside’s feed bills, there is no evidence that Producers
was enriched at the expense of Lakeside. Producers was entitled to recover as it did
because its agreement with Gayer entitled it to recover its due bills prior to other
Lakeside appeals.
A. Standard of Review
We review the district court’s decision to grant a motion for summary judgment
de novo, viewing all evidence most favorably to, and making all reasonable
inferences for the non-moving party. Washington v. Countrywide Home Loans, Inc.,
655 F.3d 869, 871 (8th Cir. 2011). We will affirm the grant of summary judgment
if “there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). Additionally, because this case
is before the court on diversity jurisdiction, “[t]his [c]ourt will apply the substantive
law of the forum state,” Iowa. Callas Enters. v. Travelers Indem. Co. of Am., 193
F.3d 952, 955 (8th Cir. 1999) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78
B. Fraudulent Misrepresentation
Under Iowa law, to prevail on a fraudulent misrepresentation claim, a plaintiff
must establish by a preponderance of the evidence that
“(1) [the] 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 [justifiable] reliance on
the truth of the representation . . ., (7) the representation was a proximate
cause of [the] plaintiff’s damages, and (8) the amount of damages.”
Spreitzer v. Hawkeye State Bank, 779 N.W.2d 726, 735 (Iowa 2009) (alterations in
original) (quoting Givson v. ITT Hartford Ins. Co., 621 N.W.2d 388, 400 (Iowa
Lakeside focuses particularly on Producers’ specific representations that
Lakeside “would be paid” when more hogs were sold or Gayer sent additional money.
Plainly, Lakeside argues that hogs were later sold by Lakeside, yet Lakeside was not
paid. Lakeside further claims that at the time Producers made these representations,
it knew (or at least a jury could infer that Producers knew) that Gayer would be unable
to “come back” into compliance with the Hog Program, and that the eventual sale of
the hogs would fail to generate enough revenue to fully satisfy debts owed to all
There is no support for the argument that Producers’ representations amounted
to statements that Lakeside would be paid first, or even paid in full.3 Lakeside’s
3This is the logical way to understand Lakeside’s claims, as Producers did
continue to send many payments to Lakeside throughout 2008; just not enough to pay
Lakeside in full.
president testified about Lakeside’s belief that “when [Producers] got paid for the
pigs, then [Lakeside] would get paid” and on multiple occasions Lakeside represents
that the statement at issue from Producers is a statement that Lakeside “would be
paid.” However, that Lakeside “would be paid” is not the sum of what Producers
represented, nor does it accurately reflect Producers’ verbatim representations.
Giving Lakeside’s interpretation of Producers’ representations significance beyond
what Producers plainly stated is not supported by this record.
The faxes from Producers to Lakeside reviewing the outstanding bills state
“[w]e are at our . . . lending limits until we receive money from Tracy or sell more
hogs,” “[w]e are expecting more money from Tracy so that we are able to pay more
feedbills,” and we “might be able to send more money next week.” Gleaning more
meaning from these statements is a futile exercise. Producers did not say it would pay
in full, and there is nothing in the record to support the contention that these
statements were false when made–that Producers meant anything other than what was
plainly stated. Spreitzer, 779 N.W.2d at 735 (“Under the law, a representation must
be false at the time it was made to support a claim of fraud, and a representation that
was true cannot serve as a basis for a claim of fraud.”) Indeed, throughout 2008,
Producers did pay Lakeside significant sums of money toward the outstanding
balance owed. And, despite Lakeside’s contrary argument, Producers’ statements are
not ambiguous or subject to alternative interpretations sufficient to keep a fraud claim
viable beyond summary judgment. Id. at 735-36 (holding that if a representation is
capable of two interpretations, one of which the maker knows to be false and the
other true, it can serve as a basis for fraud if it is also made with the intention that it
be understood in the sense in which it is false).
Likewise, assuming Producers made a false representation, Lakeside is unable
to establish that Producers knew any such representation was false–i.e., that it knew
that Lakeside would not be paid when it received more money from Gayer or more
hogs sold. That Producers had concerns about Gayer’s continued ability to advance
funds at the time these outstanding bills mounted does not in any way detract from
the face value of the representations at issue. Even the later e-mail in August 2008
highlighted by Lakeside wherein Producers acknowledges that after the sale of the
pigs “Producers should get paid in full however, there will be outstanding feed bills
owed to [Lakeside],” is of no accord as to the alleged falsity of the representations at
issue. Producers previously represented to Lakeside that it would send more money,
which it did. At the time Producers made the representations discussed above, there
is no evidence supporting Producers’ knowledge of their falsity.
As further evidence that Producers had knowledge of the falsity of its alleged
representations, Lakeside argues that since Producers was “certainly aware 2008 was
one of the worst hog marketing periods in history,” it “could not realistically have had
an expectation . . . that future sales of . . . [p]igs would generate sufficient proceeds
to allow both Lakeside and Producers to be paid in full.” However, claiming that
Producers “should have known” does not pass muster. There is no record evidence
that Producers ever represented to Lakeside that it would be paid in full. And, turned
on its head, this argument could be fatal to Lakeside when viewed in the context of
an analysis of the sixth element of its fraud claim–that it acted in justifiable reliance
on the truth of the representation. Under that same logic, Lakeside should likewise
have been aware of the very same market, which could belie a claim that Lakeside
was justified in relying upon any alleged representations. Id. at 737 (“[T]he
[justifiable-reliance] 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 has been met.”) In fact, given Producers’ qualifications
on each of its wire transfers during the time frame at issue, one could conclude that
Lakeside continued to extend credit in the face of its own knowledge that it may not
be paid in full, which belies any justification for Lakeside’s alleged reliance. But,
again, we need not decide this issue because at the outset, Lakeside is unable to
establish that Producers made any false representations.
We affirm the district court’s grant of summary judgment in favor of Producers
on Lakeside’s fraudulent misrepresentation claim.
C. Fraudulent Nondisclosure
Lakeside also claims that even assuming Producers made no false
representations, there was a time at which Producers knew Lakeside would be left
with outstanding bills and Producers failed to inform Lakeside of this circumstance.
This claim is encompassed by the law of fraud. “A representation need not be an
affirmative misstatement; the concealment of or failure to disclose a material fact can
constitute fraud.” Clark v. McDaniel, 546 N.W.2d 590, 592 (Iowa 1996). “However,
for concealment to be actionable, the representation must ‘relate to a material matter
known to the party . . . which it is his legal duty to communicate to the other . . . party
whether the duty arises from a relation of trust, from confidence, from inequality of
condition and knowledge, or other attendant circumstances.'” Id. (first alteration in
original) (emphasis added) (quoting Sinnard v. Roach, 414 N.W.2d 100, 105 (Iowa
1987)). Lakeside did not expressly include a claim for fraudulent nondisclosure in
its amended complaint. Yet, to the extent this claim is encompassed by the law of
fraud and the fraudulent misrepresentation claim that was pled, we address the district
court’s analysis on this issue.
“There is no specific test for determining when a duty to reveal arises in fraud
cases.” Id. A duty can arise in various circumstances. In Iowa, in accordance with
the Restatement (Second) of Torts § 551(2), courts have “recognized a duty to
disclose in situations where the plaintiff and the defendant were involved in some
type of business transaction, such as buyer/seller or owner/contractor.” Wright v.
Brooke Grp. Ltd., 652 N.W.2d 159, 174 (Iowa 2002). This prevents “one with
superior knowledge, dealing with inexperienced persons who rely on him or her,
[from] purposely suppress[ing] the truth respecting a material fact involved in the
transaction.” Kunkle Water & Elec., Inc. v. City of Prescott, 347 N.W.2d 648, 653
(Iowa 1984). A duty to disclose might also arise from the “attendant circumstances,”
such as “contrivance intended to exclude suspicion and prevent inquiry.” Wright, 652
N.W.2d at 175 (quotations omitted). Or, a duty to disclose occurs when a party
acquires information “‘that he knows will make untrue or misleading a previous
representation that when made was true or believed to be so.'” Id. (quoting
Restatement (Second) of Torts § 551(2)(c)).
The district court held that Producers owed no duty to Lakeside relating to
Lakeside’s claim of fraudulent nondisclosure because Lakeside and Producers were
not involved in a business transaction together. Lakeside responds that during the
course of dealing, Producers’ representatives had about 50 or more conversations and
more than 30 communications in writing with Lakeside, Producers paid the feed bills
for the pigs in the Hog Program, requested timely reports and updates from Lakeside,
and otherwise conducted itself as if it owned the hogs at issue, all of which, according
to Lakeside, demonstrates a business transaction that triggers a duty on the part of
Producers. The sum of Lakeside’s argument is that because the two businesses were
engaged in a “business transaction,” Producers had a duty to disclose.
We agree with the district court’s analysis regarding any alleged fraudulent
nondisclosure on the part of Producers. Were we to determine that any alleged
nondisclosure was material, Producers was under 4 no legal duty to disclose such
4In its brief, Lakeside offers no explanation as to why it was important for
Lakeside to know how Producers intended to apply the proceeds of the hogs
sales–i.e., why such information was material. We surmise that Lakeside might argue
that had Lakeside been told outright that, in fact, it would not be paid in full for the
services it was already extending on credit, it would have taken steps to better secure
its interest in the services rendered. But, in many ways, the “writing was already on
the wall” so-to-speak as the outstanding bills mounted and Producers clearly claimed
it had limitations on its continued payments to Lakeside. It is unclear why Lakeside
had not already taken such steps that were available to protect its interest. In the end,
though, any determination regarding materiality is inconsequential because this
information. Despite Lakeside’s argument, 5 its dealings with Producers were not the
sort of business transaction contemplated by the fraudulent nondisclosure
jurisprudence. Producers had no obligation to inform Lakeside how it applied the
proceeds under the Hog Program. Lakeside is unable to establish that it somehow
was inexperienced or relied upon Producers to guide Lakeside and help it make
prudent business decisions regarding Lakeside’s business practice of extending credit
or securing such extensions. That these two veteran hog feeding outfits merely did
“business” together is not enough to support this claim. See id. at 174 (compiling
Iowa cases recognizing a duty to disclose in situations where the parties were
engaged in some type of “business transaction,” each where one party had superior
knowledge and expertise of some kind such as a buyer and seller dealing on a used
vehicle or hotel, or a situation where the defendant contracted to repair plaintiff’s
water system). Additionally, even assuming that Producers later knew that indeed it
“would not pay” all of the outstanding bills, this “subsequently acquired information”
did not make untrue or misleading its previous representation that it would pay when
it received money from Gayer or more hogs were sold. See id. at 175. Stated earlier,
Producers did pay Lakeside throughout the fall of 2008, just not in full.
Both parties expend an excessive amount of time briefing and arguing about
whether Producers was an “owner” of the pigs at issue. Lakeside adamantly claims
that Producers owned the pigs. In support of this claim, Lakeside references Noethe’s
situation does not fall within one of the circumstances creating liability for
5Here again, Lakeside highlights the August 2008 e-mail wherein Producers
speculated that after the sale of the pigs, “Producers should get paid in full however,
there will be outstanding feed bills owed to [Lakeside].” For purposes of the instant
analysis only, we assume that this e-mail contained something more than speculation
and that Producers in fact knew at some discrete time that Lakeside’s bills would not
be paid.
stated belief that Producers acted like an owner of the pigs at all times, and further
points to the terms of the Hog Program between Producers and Gayer wherein it
repeatedly refers to Producers as “Owner.” The Hog Program also contains a clause
On the occurrence of any Event of Default, Owner [(Producers)] shall
have, in addition to its rights and remedies at law and in equity . . . [t]he
right to feed and care for the Livestock. All costs and expenses of
feeding and caring for the Livestock may be offset against any amounts
due to Feeder pursuant to Section 8 herein.
The terms of the Hog Program, argues Lakeside, establish that as of June 2008, when
Gayer failed to perform under the Hog Program, Producers assumed responsibility for
the feed and care of the pigs and was thus wholly liable (Lakeside claims “legally
responsible”) for all of Lakeside’s outstanding unpaid feed bills. Producers just as
adamantly claims that at all times its role was that of lender, pointing out that the Hog
Program clearly establishes the same, making very clear at the bottom of each page
that, “[Producers] is the owner for security purposes only; and does not share in any
of the losses or profits; and entitled to recover their cost from the hog proceeds.”
Each brief is carefully drafted to support the respective, competing claims: Lakeside
repeatedly refers to the livestock at issue as “Producers Pigs,” for example, and
Producers takes pains to discuss the credit extended by Lakeside to Gayer, alone, and
refers to the livestock as “Gayer’s hogs.”
The extent of the focus on, and discussion of, Producers’ ownership status
frankly eludes this court. Indeed, Lakeside repeatedly acknowledges that “Lakeside
is not required to prove Producers owned the . . . pigs in order to recover under any
of its claims for relief.” Lakeside argues in its brief that it discusses Producers’
ownership status in an attempt to establish the elements of duty, justified reliance, or
other elements of the tort claims raised by Lakeside in this action.6 In that context,
this evidence is certainly relevant and informs our analysis, but only to a certain
degree. We tread carefully and review this evidence only as necessary for each of the
tort claim analyses, however, because relying upon the terms of the Producers/Gayer
Hog Program to establish blanket liability comes very close to an attempt to raise a
contract claim based, possibly, on the theory that Lakeside is a third-party beneficiary
to the contract between Producers and Gayer, or the like–a route not chosen by
Lakeside in this litigation. There are no contract claims before the court, and we will
not indulge any attempt to couch a contract claim as a tort claim. That said, we
review the evidence of Producers’ alleged ownership status in the light we deem
necessary for the correct analysis.
Lakeside reasons that because Producers was allegedly “legally responsible”
to Lakeside in June 2008 under the terms of the Hog Program for all of Lakeside’s
remaining unpaid bills, the district court’s grant of summary judgment should be
reversed. Yet, it does not necessarily follow that Producers’ alleged liability as
owner, alone, results in reversal of the district court’s order. In the end, an issue of
fact regarding Producers’ ownership status is of no consequence. Even viewing these
facts in the light most favorable to Lakeside, Producers still prevails. Despite any
alleged ownership status, Producers was under no legal obligation to disclose
information to Lakeside, because, as discussed above, the dealings between the two
entities was not the sort contemplated by fraudulent nondisclosure jurisprudence.
When there is no duty,
one party to a business transaction is not liable to the other for harm
caused by his failure to disclose to the other facts of which he knows the
other is ignorant and which he further knows the other, if he knew of
6Although also relevant to the fraudulent misrepresentation tort claim, we did
not discuss Producers’ duty in our analysis, as we disposed of that claim on other
them, would regard as material in determining his course of action in the
transaction in question.
Restatement (Second) of Torts § 551 cmt. a. We therefore affirm the district court’s
grant of summary judgment in favor of Producers on Lakeside’s fraudulent
nondisclosure claim.
D. Lakeside’s Expert’s Opinion
In opposition to Producers’ motion for summary judgment, Lakeside submitted
the testimony of a banking and forensic accounting expert opining as to whether
Producers’ conduct was consistent with that of an owner and not merely a lender. The
district court held that because the issue before the court was whether Producers owed
a legal duty to Lakeside, and Lakeside argued that Producers’ ownership status
informed that decision, the expert more or less offered a legal conclusion based upon
facts submitted to the expert by Lakeside regarding the owner/lender status of
Producers and that, as such, the court need not consider it as binding. In re
Acceptance Ins. Cos. Sec. Litig., 423 F.3d 899, 905 (8th Cir. 2005) (“When the expert
opinions are little more than legal conclusions, a district court should not be held to
have abused its discretion by excluding such statements.”). Lakeside argues that its
expert provided testimony that was more technical in nature, applying extensive
banking and forensic accounting experience to give industry-specific context to
financial data and the actions of Producers, and that the expert could opine on the
well-recognized meaning of the Producer/Gayer transaction in the business or
industry. Nucor Corp. v. Neb. Pub. Power Dist., 891 F.2d 1343, 1350 (8th Cir. 1989)
(“Courts have frequently recognized the value of expert testimony defining terms of
a technical nature and testifying as to whether such terms have acquired a wellrecognized
meaning in the business or industry.”).
We review for abuse of discretion the district court’s decision to exclude expert
testimony for purposes of determining whether there exists an issue of material fact.
In re Baycol Prods. Litig., 596 F. 3d 884, 889 (8th Cir. 2010). The district court did
not abuse its discretion in excluding this testimony. Contrary to Nucor, the case
primarily relied upon by Lakeside, whether or not Producers functioned as owner or
lender was not “ambiguous in the sense that [it was] of a sufficiently technical nature
to be the subject of expert testimony.” Nucor, 891 F.2d at 1350. In Nucor, the court
allowed expert testimony to inform the jury of differing views regarding the statutory
terminology contained in the contract at issue–i.e., in order to determine whether a
breach of contract occurred, the jury had to determine whether particular rates were
“fair, reasonable, and nondiscriminatory,” as those terms were contemplated by their
regulatory function. Id.
Here, expert testimony regarding the ownership status, or not, of Producers was
not necessary to assist the trier of fact in its determination regarding the elements of
the tort claims raised in this action. Federal Rule of Evidence 702 permits expert
testimony to assist the jury in understanding technical or scientific evidence, which
the court, in its broad discretion, determined was not necessary in this case. See Fed.
R. Evid. 702. Lakeside claims this testimony was relevant to whether Lakeside
justifiably relied on Producers’ representations and further gives some factual context
to the question of Producers’ duty to Lakeside. While true, expert testimony was not
needed to inform the district court on those legal issues and, as noted earlier, whether
or not Producers owned the livestock is ultimately a non sequitur. Therefore, the
district court did not abuse its discretion in excluding the expert testimony at issue.
E. Negligent Misrepresentation
Negligent misrepresentation occurs when:
“[o]ne who, in the course of his business . . . or in any other transaction
in which he has a pecuniary interest, supplies false information for the
guidance of others in their business transactions, is subject to liability
for pecuniary loss caused to them by their justifiable reliance upon the
information, if he fails to exercise reasonable care or competence in
obtaining or communicating the information.”
Sturm v. Peoples Trust & Savs. Bank, 713 N.W.2d 1, 5 (Iowa 2006) (quoting
Restatement (Second) of Torts § 552). When determining whether the tort of
negligent misrepresentation imposes a duty of care in a particular case, Iowa courts
distinguish between those transactions where a defendant is in the business or
profession of supplying information to others from those transactions that are arm’s
length and adversarial. Sain v. Cedar Rapids Cmty. Sch. Dist., 626 N.W.2d 115, 124
(Iowa 2001). It is for this reason the district court granted summary judgment in
favor of Producers on Lakeside’s negligent misrepresentation claim. The district
court held that Producers was not in the business of supplying information to
Lakeside but rather the two conducted themselves at arm’s length.
While correct, there is an additional aspect of the claim that creates an obstacle
for Lakeside. “‘[T]he tort does not apply when a defendant directly provides
information to a plaintiff in the course of a transaction between the two parties, which
information harms the plaintiff in the transaction with the defendant.'” Sturm, 713
N.W.2d at 5 (quoting Sain, 626 N.W.2d at 126). Stated differently,
the supplied ‘for the guidance of others in their business transactions’
requirement recognizes that the tort predominantly applies to situations
where the information supplied harmed the plaintiff in its relations with
third parties, as opposed to harm to a plaintiff in its relations with the
provider of the information.
Sain, 626 N.W.2d at 126. Limiting the application of the tort to this situation is
compatible with the approach that there is no duty imposed on parties who deal at
arm’s length. Id.
Lakeside argues that Producers is in the business of supplying information and
thus owed Lakeside a duty of care. In doing so Lakeside notes Producers’ direct
communications with Lakeside and argues that the agreement between Producers and
Gayer even contemplates a service fee for Producers’ supply of information to others.
But Lakeside misses the mark here. Because Producers was not in the business or
profession of supplying information or guidance to others as contemplated by the
Iowa jurisprudence in this area, the claimed harm is solely to Lakeside as a result of
its dealings with Producers, which is a different way of articulating that Producers
and Lakeside dealt at arm’s length. Lakeside is unable to maintain its claim for
negligent misrepresentation. Accordingly, we affirm the district court’s grant of
summary judgment in favor of Producers on this issue.
F. Unjust Enrichment
“Unjust enrichment is a doctrine that ‘evolved from the most basic legal
concept of preventing injustice.'” In re Estate of Roethler, 801 N.W.2d 833, 845
(Iowa 2011) (quoting State ex rel. Palmer v. Unisys Corp., 637 N.W.2d 142, 149
(Iowa 2001)). “The doctrine of unjust enrichment is based on the principle that a
party should not be permitted to be unjustly enriched at the expense of another or
receive property or benefits without paying just compensation.” Palmer, 637 N.W.2d
at 154. To recover for unjust enrichment, Lakeside must show: “(1) [Producers] was
enriched by the receipt of a benefit; (2) the enrichment was at the expense of
[Lakeside]; and (3) it is unjust to allow the defendant to retain the benefit under the
circumstances.” Id. at 154-55.
The district court held that while both parties agree that Producers received a
benefit in part because Lakeside provided feed and other services for the livestock,
there is no evidence that Producers was enriched at the expense of Lakeside nor is it
unjust to allow Producers to retain the benefit under these circumstances. We agree,
although in resolving this matter we need not go so far as to determine Producers’
status as owner/lender, nor do we need to determine Producers’ priority for secured
interest purposes.7
Producers did not receive anything to which it was not entitled to receive under
its contract with Gayer. Lakeside makes claims that Producers “force[d] Lakeside to
perform future care, feeding and general labor” and that Producers “induced Lakeside
to incur the costs and perform the work required to generate the sale of proceeds,”
apparently through Producers’ own representations. Yet these allegations are baseless
and unsupported by the record. Having previously determined that Producers made
no false representations to Lakeside, it follows that Lakeside was on equal footing
throughout these dealings and interactions and there is no evidence of the sort of
coercion to which Lakeside now alludes. Producers did not “reap profits” “without
making good on its representation to reimburse Lakeside,” as Lakeside claims. We
previously discussed at length that Producers did in fact continue to pay Lakeside as
it represented.
We do not attempt to surmise as to why Lakeside failed to take steps to legally
protect its interest by way of a lien or at the very least 8 a contract, but ultimately it is
7Despite the district court’s determination that Producers had a “superior legal
right” in this case, Producers readily acknowledged at oral argument that were it to
face a timely perfected lien from a valid lienholder (unlike Lakeside), armed with the
filings contained in the record, Producers could have a tough fight. But, that
discussion is for another day, as there are no such challenges at play.
8Iowa Code Ann. §§ 570A-570A.6.
these failings that paved the way for the instant circumstance. It is not unjust to allow
Producers to retain the benefit in these particular happenings when a shortfall existed,
as it is not inequitable to allow a contracting party the right to fulfillment of
contractual obligations, which in this case includes the payment of fees contemplated
by the Hog Program.
For the reasons stated herein, we affirm the district court’s grant of summary
judgment in favor of Producers.

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