Ronald Bacon v. Liberty Mutual Insurance Co.
Filing
PER CURIAM OPINION FILED - THE COURT: MICHAEL J. MELLOY, LAVENSKI R. SMITH and BOBBY E. SHEPHERD (PUBLISHED) [3939210] [11-1522]
United States Court of Appeals
For the Eighth Circuit
___________________________
No. 11-1522
___________________________
Ronald Tim Bacon
lllllllllllllllllllll Plaintiff - Appellant
v.
Liberty Mutual Insurance Company
lllllllllllllllllllll Defendant - Appellee
____________
Appeal from United States District Court
for the Southern District of Iowa - Council Bluffs
____________
Submitted: March 13, 2012
Filed: August 6, 2012
[Published]
____________
Before MELLOY, SMITH, and SHEPHERD, Circuit Judges.
____________
PER CURIAM.
Ronald "Tim" Bacon appeals the district court's1 grant of summary judgment
to Liberty Mutual Insurance Company ("Liberty Mutual") on Bacon's fraudulentmisrepresentation and breach-of-contract claims. We affirm.
1
The Honorable John A. Jarvey, United States District Judge for the Southern
District of Iowa.
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I. Background
"Bacon's suit against Liberty Mutual arises out of the settlement of a personal
injury lawsuit against Ridgetop Holdings, Inc. ('Ridgetop'), the parent company of
Bacon's employer, Davis Erection Company, Inc. ('Davis Erection')." Bacon v. Liberty
Mut. Ins. Co., 575 F.3d 781, 782 (8th Cir. 2009).
On July 28, 2003, Bacon, a Nebraska resident, worked for Davis Erection on
a construction project in Omaha, Nebraska. Bacon suffered severe injuries in a workrelated accident at the construction site.
Liberty Mutual, a nationwide insurance company doing business in Iowa and
Nebraska, provided Davis Erection with commercial liability and workers'
compensation insurance under an Owner Controlled Insurance Program (OCIP)—or
"wrap around" insurance policy—for all participating contractors at the construction
site. This insurance covered Bacon's workers' compensation benefits, which were
administered under Nebraska law. In 2006, Bacon filed a personal-injury complaint
in Nebraska state court against several entities, including Ridgetop; Kiewit
Construction Company, the general contractor at the construction site; and DBI-Sala,
a/k/a DB Industries, Inc., the manufacturer of the safety harness that Bacon was
wearing at the time of the accident. The complaint additionally named Davis Erection
and Liberty Mutual as defendants for the sole purpose of subrogation of Bacon's
workers' compensation benefits.
In June 2006, Bacon moved to Iowa. Liberty Mutual contributed $100,000 to
the purchase of his home. Since May 2006, Liberty Mutual has made weekly
disability payments to Bacon.
In August 2007, Liberty Mutual and Bacon's attorney, Jim Harris, began
negotiating a settlement of Liberty Mutual's workers' compensation rights. On August
1, 2007, Harris wrote to Liberty Mutual's attorneys in the Nebraska action, stating,
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"There is no subrogation claim against Kiewit or Ridgetop. The waiver of subrogation
clause in the contract along with the fact that Liberty cannot subrogate against a party
to who[m] they owe a duty are dispositive of this matter." On August 27, 2007, Linda
Ward, Liberty Mutual Senior Technical Claims Specialist, responded:
We are in agreement that we have no "recovery" rights as to any
settlement monies from Kiewit or Ridgetop. However, although we can
not recover from those entities, we would still have a claim to Statutory
Credit/offset against any net to Mr. Bacon from those entities. It goes to
the "no double recovery rule[,"] and to the State's Statutes as to our
future obligations to Mr. Bacon post his recovery from 3rd party monies.
Bacon and Liberty Mutual never reached agreement on settlement of lienrecovery amounts and litigation in preparation for trial continued.
Immediately prior to trial, on January 13, 2008, Ridgetop agreed to settle its
portion of Bacon's suit. Harris sent Ridgetop's counsel an email clarifying, inter alia,
that "inasmuch as Ridgetop and Davis Erection are interrelated corporations, they will
each waive any and all claims, cross-claims, subrogation, reimbursement or otherwise
against each other and their insurers." On January 29, 2008, Ridgetop's counsel
replied that "[t]his language will not work."
In a series of emails from January 29, 2008 to February 22, 2008, Liberty
Mutual's counsel sought Bacon's and Ridgetop's settlement amount, so that Liberty
Mutual could decide whether to assert a lien, set-off, or credit. Bacon's and Ridgetop's
counsel refused to disclose the settlement amount, citing to a confidentiality
agreement. Additionally, they asserted that the settlement amount was irrelevant to
whether Liberty Mutual had a lien. Bacon's counsel relied upon Ward's prior letter
and took the position that Liberty Mutual had already confirmed that it had no interest
in the settlement proceeds. Liberty Mutual argued that refusal to divulge the
settlement amount made it impossible for Liberty Mutual to calculate its rights to a
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statutory credit/offset on future obligations. During this exchange of emails, Bacon's
counsel shared Ward's August 27, 2007 letter with Ridgetop's counsel. Ridgetop's
counsel then asked Liberty Mutual to confirm the representation made in Ward's
August 27, 2007 letter that "Liberty Mutual . . . asserts no subrogation lien or any
other form of claim over the settlement proceeds to be paid by Zurich and AIG on
behalf of Ridgetop Holdings." Liberty Mutual maintained that knowledge of the
settlement amount was relevant to its "claim of a credit."
On February 28, 2008, Bacon filed a declaratory-judgment action in Douglas
County, Nebraska, asking the court to declare that Liberty Mutual waived its right to
subrogation against the settlement proceeds from Ridgetop. Bacon requested that the
court declare that no subrogation right exists against the parent company of an
insured, either past or future. On March 14, 2008, Liberty Mutual answered that it had
a "bona fide workers' compensation lien entitling [it] to statutory credit for the funds
netted by [Bacon] through the settlement agreement by and between [Bacon] and
Ridgetop Holdings, Inc." Bacon did not seek damages. The lawsuit was dismissed
without being settled or adjudicated.
While the declaratory-judgment action was still pending, but after Liberty
Mutual had answered the complaint in that action, Bacon filed the instant case against
Liberty Mutual in federal district court in Iowa, "asserting a claim of fraudulent
misrepresentation, for which he sought punitive damages, and a claim of breach of
contract." Bacon, 575 F.3d at 782. Bacon argued that
Liberty Mutual's answer to his complaint in the Nebraska declaratory
judgment action constituted a knowing misrepresentation made with the
intent to deceive. His breach-of-contract claim rested on his allegation
that Liberty Mutual's claim representative created a binding contract not
to pursue any claim to the settlement proceeds when she made the
alleged representation that Liberty Mutual waived any such claim.
Id. at 782–83.
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Liberty Mutual moved to dismiss the complaint "on the grounds of forum non
conveniens and that Nebraska law, which does not permit punitive damages for
fraudulent misrepresentation, should apply under the applicable choice-of-law rules."
Id. at 783. The district court concluded that Nebraska had a greater interest in
deciding the suit than Iowa and granted the motion to dismiss on the ground of forum
non conveniens. Id. The court did not address the choice-of-law issue. Id.
Bacon appealed, and we reversed the district court, holding that the doctrine
of forum non conveniens did not apply to permit the district court to dismiss the
action, rather than transfer venue, and, even if transfer to another federal forum were
unavailable, the district court abused its discretion in dismissing Bacon's claims. Id.
at 783–85.
Bacon had also asked this court to determine whether Iowa or Nebraska law
governed the suit in Iowa because "[o]nly under Iowa law will he be able to recover
punitive damages for his fraudulent misrepresentation claim." Id. at 785. Because the
district court dismissed the suit and never reached the choice-of-law question, "we
decline[d] to decide which state's law applies to this suit." Id. We directed the district
court that, upon remand, it "should use Iowa's choice-of-law rules to determine
whether Iowa or Nebraska law will govern this suit." Id.
On remand, the district court concluded that Nebraska law applied. The court
characterized Bacon's fraudulent-misrepresentation claim as based "on Liberty
Mutual's refusal to reconfirm its agreement that it had no recovery rights as to any
settlement monies from Ridgetop and on its Answer in the Declaratory Judgment
action, in which Liberty Mutual asserted that it had 'a bona fide workers'
compensation lien.'" The court concluded that mere silence cannot constitute a
misrepresentation in the absence of a duty to disclose information and found that
Bacon failed to cite any "authority demonstrating the existence of such a duty." The
court failed "to see how a party's failure to reconfirm a contract, the import and
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meaning of which it disputes, can serve as a basis for a fraud claim." The court
explained that Bacon's fraud claim was based on "Liberty Mutual's refusal to agree
with his interpretation of an agreement purportedly entered into by the parties" and
that "[s]uch refusal does not, as a matter of law, amount to fraud." The court further
found no evidence "demonstrating [that] a material fact dispute [exists] with respect
to the falsity of the 'representation,' or that it was known to be false when 'made.'"
Observing that even if it resolved the choice-of-law issue in Bacon's favor and
applied Iowa law, the court found that Bacon's punitive damage claim would fail
because its fraudulent-misrepresentation claim failed. In the alternative, the court
determined that Bacon "did not produce clear, convincing and satisfactory evidence
supporting a finding that Liberty Mutual willfully and wantonly disregarded his
rights."
As to Bacon's breach-of-contract claim, the court assumed that a contract
existed and concluded that Liberty Mutual did not breach it because, "[u]pon Bacon's
settling of his lawsuit against Ridgetop, Liberty Mutual performed exactly as it said
it would, i.e., it did not assert a lien against the settlement monies, from Ridgetop, but
rather claimed an offset against those monies to its future workers' compensation
obligations."
II. Discussion
On appeal, Bacon argues that the district court erred in granting summary
judgment to Liberty Mutual on his fraudulent-misrepresentation and breach-ofcontract claims. According to Bacon, Liberty Mutual illegally delayed the
disbursement of settlement proceeds by fraudulently asserting a subrogation interest
in those settlement proceeds and breaching its earlier agreement that it had no such
right to subrogation from those settlement proceeds. Bacon also asserts that the
district court erred in applying Nebraska law to conclude that punitive damages are
not available.
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"We review de novo the district court's grant of summary judgment to [Liberty
Mutual] on the breach[-]of[-]contract [and fraudulent-misrepresentation] claim[s]."
Myers v. Richland Cnty, 429 F.3d 740, 750 (8th Cir. 2005).
As the district court pointed out—and as Bacon confirms on appeal2—the
parties agree that no true conflict exists between Iowa and Nebraska law regarding
Bacon's contract and fraud claims. As a result, no choice-of-law analysis is required.
See Modern Equip. Co. v. Cont'l W. Ins. Co., 355 F.3d 1125, 1128 n.7 (8th Cir. 2004)
("If there is not a true conflict between the laws . . . on the pertinent issue, then no
choice-of-law is required."). "Therefore, regardless of which state's law applies, our
interpretation and application of the [fraudulent-misrepresentation and breach-ofcontract claims] will be the same." Weitz Co, LLC v. Lloyd's of London, 574 F.3d 885,
890 (8th Cir. 2009). Only if we conclude that the district court erred in granting
summary judgment to Bacon on his claims need we engage in a choice-of-law
analysis to determine whether punitive damages are available. See Bacon, 575 F.3d
at 785.
A. Fraudulent Misrepresentation
According to Bacon, his fraudulent-misrepresentation claim is based upon
Liberty Mutual's affirmative assertion in its written answer to the Nebraska
declaratory-judgment action. Bacon alleges that Liberty Mutual represented that it
had a viable subrogation interest in the Ridgetop settlement proceeds when it knew
that it lacked such a right. Bacon maintains that Liberty Mutual knew that it lacked
such a right because Liberty Mutual knew in advance of the Ridgetop settlement that
Ridgetop was the parent company of Bacon's employer—Davis Erection—and that
no subrogation could exist by virtue of that relationship. He further asserts that
2
In his opening brief, Bacon states that "there is no conflict with regard to the
laws of Iowa and Nebraska with regard to Plaintiff's breach[-]of[-]contract and
fraudulent[-]misrepresentation claims. As such, this Court does not need to determine
which state's laws will apply to those claims under the Restatement."
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Liberty Mutual knew that it lacked a subrogation right because its own workers'
compensation policy contained a waiver-of-subrogation endorsement, which
precluded subrogation against all who performed work or provided services on the
construction project. Finally, he contends that Liberty Mutual knew that it lacked a
subrogation right because the policy language in the OCIP insurance policy precluded
subrogation. As a result, Bacon argues that he reasonably relied on Liberty Mutual's
earlier assertion that it had no viable subrogation interest in the Ridgetop settlement.
According to Bacon, Liberty's after-the-fact assertion that it did have a subrogation
interest amounted to a fraudulent misrepresentation.
In response, Liberty Mutual argues that the district court correctly concluded
that a party's failure to reconfirm a contract—the import and meaning of which it
disputes—cannot serve as a basis for a fraud claim, especially considering that Bacon
did not rely upon the representation that he asserts forms the basis of the fraud claim.
To establish a claim of fraudulent misrepresentation, a plaintiff must
prove (1) defendant made a representation to the plaintiff, (2) the
representation was false, (3) the representation was material, (4) the
defendant knew the representation was false, (5) the defendant intended
to deceive the plaintiff, (6) the plaintiff acted in reliance on the truth of
the representation and was justified in relying on the representation, (7)
the representation was a proximate cause of plaintiff's damages, and (8)
the amount of damages.
Gibson v. ITT Hartford Ins. Co., 621 N.W.2d 388, 400 (Iowa 2001).
According to Bacon, Liberty Mutual's answer in the Nebraska declaratoryjudgment action constitutes the "false misrepresentation." In its answer, Liberty
Mutual stated that it had a "bona fide workers' compensation lien entitling [it] to
statutory credit for the funds netted by [Bacon] through the settlement agreement by
and between [Bacon] and Ridgetop Holdings, Inc." According to Bacon, this false
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misrepresentation was contrary to Liberty Mutual's prior position in Ward's August
27, 2007 letter to Bacon's counsel.
We affirm the district court's conclusion that Bacon failed to prove that Liberty
Mutual made a false representation in its declaratory-judgment answer by stating that
it had a lien entitling it to a statutory credit. Neither party disputes that Ward's August
27, 2007 letter to Bacon's counsel provided, in relevant part:
We are in agreement that we have no "recovery" rights as to any
settlement monies from Kiewit or Ridgetop. However, although we can
not recover from those entities, we would still have a claim to Statutory
Credit/offset against any net to Mr. Bacon from those entities. It goes to
the "no double recovery rule," and to the State's Statutes as to our future
obligations to Mr. Bacon post his recovery from 3rd party monies.
(Emphasis added.)
Thus, Liberty Mutual's position in Ward's August 27, 2007 letter may be read
consistently with its position in the declaratory-judgment action. Liberty Mutual
contended that it was entitled to a statutory credit for any funds that Bacon receives
from, inter alia, Ridgetop. As Liberty Mutual points out, in neither Ward's August 27,
2007 letter nor Liberty Mutual's declaratory-judgment answer did Liberty Mutual
assert that it had a right of "subrogation."As the district court concluded, Liberty
Mutual's refusal to agree with Bacon's contrary interpretation of Ward's August 27,
2007 letter "does not, as a matter of law, amount to fraud."
Moreover, even assuming that Liberty Mutual's declaratory-judgment answer
was "false," Bacon must still identify evidence in the record showing that Liberty
Mutual "knew" that the representation was false. As the district court concluded, there
is no evidence in the record demonstrating that Liberty Mutual knew the
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representation to be false, especially considering that "the import and meaning" of
Ward's August 27, 2007 letter is disputed.
Finally, Bacon did not "rely upon" the representation made in the declaratoryjudgment answer. When Liberty Mutual answered the complaint, Bacon had already
settled his case with Ridgetop. The statement that Bacon "relied upon," if any, was
Ward's August 27, 2007 letter to Bacon's counsel. And, Bacon only "relies upon" the
first sentence of Ward's letter, which states, "We are in agreement that we have no
'recovery' rights as to any settlement monies from Kiewit or Ridgetop."
As a result, we hold that the district court did not err in granting summary
judgment to Liberty Mutual on Bacon's fraudulent-misrepresentation claim.
B. Breach of Contract
Bacon argues that Liberty Mutual breached its earlier agreement that it had no
subrogation interest. According to Bacon, the consideration for that earlier agreement
was a promise for a promise—Liberty Mutual agreed not to assert a subrogation claim
from any settlement proceeds resulting from either Ridgetop or Kiewit in the thirdparty action. Bacon, in turn, agreed to continue pursuing those third-party actions
against Ridgetop and others even though both factual and legal hurdles remained in
his path. Bacon maintains that Liberty Mutual's breach of its earlier agreement that
it had no subrogation right against Ridgetop's settlement proceeds unreasonably and
illegally delayed disbursements of needed settlement proceeds to Bacon.
In response, Liberty Mutual contends that Bacon's breach-of-contract claim
fails because (1) Liberty Mutual performed as promised and (2) if a meeting of the
minds existed, it was simply that Liberty Mutual would give up its lien rights in
exchange for future credit rights. Liberty Mutual maintains that Bacon's counsel
repudiated this agreement three times following the parties' exchange of
correspondence by refusing to provide Liberty Mutual the information necessary to
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calculate its future credit amount and by attempting to extinguish Liberty Mutual's
right to a future credit.
In a breach-of-contract claim, the complaining party must prove: (1) the
existence of a contract; (2) the terms and conditions of the contract; (3)
that it has performed all the terms and conditions required under the
contract; (4) the defendant's breach of the contract in some particular
way; and (5) that plaintiff has suffered damages as a result of the breach.
Iowa-Illinois Gas & Elec. Co. v. Black & Veatch, 497 N.W.2d 821, 825
(Iowa 1993). A party breaches a contract when, without legal excuse, it
fails to perform any promise which forms a whole or a part of the
contract. Magnusson Agency v. Public Entity Nat'l Co., 560 N.W.2d 20,
27 (Iowa 1997).
Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 224 (Iowa 1998).
In his complaint, Bacon alleged that Liberty Mutual breached its contract with
him by failing to perform its written promise that it was "'in agreement that [it] ha[s]
no 'recovery' rights as to settlement monies from Ridgetop or Kiewit.'" Before the
district court, Bacon "identifie[d] the contract as Liberty Mutual's promise not to
enforce any subrogation interest in any recovery from Ridgetop in exchange for Jim
Harris'[s] promise to pursue third-party claims against other defendants from whom
Liberty Mutual could subrogate." The district court found "no clear promise by Harris
to pursue third-party claims against other defendants from whom Liberty Mutual
could subrogate, which is the purported consideration for the contract Bacon alleges."
But the district court cited Liberty Mutual's concession that a contract exists and
therefore considered Liberty Mutual's potential breach of that contract.
For purposes of this appeal, we will, as the district court did, assume that a
contract exists.3 We conclude that Bacon has failed to prove that Liberty Mutual
3
On appeal, Liberty Mutual argues that in its motion for summary judgment it
argued that there was no consideration supporting the existence of a contract.
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"breached" that contract. Looking at Ward's August 27, 2007 letter, Liberty Mutual
agreed that it had "no 'recovery' rights as to any settlement monies from Kiewit or
Ridgetop," but it argued that it had "a claim to Statutory Credit/offset against any net
to Mr. Bacon from those entities." As explained supra, Liberty Mutual's declaratoryjudgment answer reads consistently with Ward's August 27, 2007 letter. In its answer,
Liberty Mutual stated that it had a "bona fide workers' compensation lien entitling [it]
to statutory credit for the funds netted by [Bacon] through the settlement agreement
by and between [Bacon] and Ridgetop Holdings, Inc." As the district court observed,
"[u]pon Bacon's settling of his lawsuit against Ridgetop, Liberty Mutual performed
exactly as it said it would, i.e., it did not assert a lien against the settlement monies,
from Ridgetop, but rather claimed an offset against those monies to its future workers'
compensation obligations."
Therefore, the district court did not err in granting summary judgment to
Liberty Mutual on Bacon's breach-of-contract claim.
III. Conclusion
Accordingly, we affirm the judgment of the district court.4
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However, Liberty Mutual has failed to explain why the district court stated that
"Liberty Mutual concedes the existence of a contract."
4
Because we hold that the district court did not err in granting summary
judgment to Liberty Mutual on Bacon’s claims, we need not address whether Iowa
or Nebraska law would have applied to Bacon’s claim for punitive damages.
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