IN THE SUPREME COURT OF IOWA _____________________________________________________________ Supreme Court No. 18-1199 _____________________________________________________________ ROY KARON, an individual, and, PEDDLER LLC, an Iowa Corporation, Plaintiffs-Appellants, v. JAMES MITCHELL, an individual, WYNN ELLIOTT, an individual, ELLIOTT AVIATION, a corporation, ELLIOTT AVIATION AIRCRAFT SALES, INC., a corporation, d/b/a ELLIOTTJETS, Defendants-Appellees. _____________________________________________________________ APPEAL FROM THE IOWA DISTRICT COURT FOR POLK COUNTY THE HONORABLE DAVID N. MAY _____________________________________________________________ APPELLANTS FINAL REPLY BRIEF _____________________________________________________________ Steven J. Crowley AT#0001845 Edward J. Prill AT#0012435 CROWLEY & PRILL 3012 Division Street Burlington, Iowa 52601 Phone: 319.753.1330 Fax: 319.752.3934 ELECTRONICALLY FILED FEB 13, 2019 CLERK OF SUPREME COURT Email: [email protected] [email protected] ATTORNEYS FOR PLAINTIFFS-APPELLANTS TABLE OF CONTENTS Table of Contents………………………………………………….... 2 Table of Authorities………………………………………………… 3 Statement of the Issues……………………………………………... 4 Argument …………………………………………………………... 11 I. The DISTRICT COURT ERRED BY APPLYING THE DACRES/PRIMA PAINT ANALYSIS BECAUSE IT IGNORED PRELIMINARY ISSUES ALLEGED IN THE PETITION…………………………………………………………... 11 A. The facts of this case make this dispute a tort issue rather than a contract issue………………………………….... 11 B. Due to the facts of this case, this dispute should be governed by tort law…………………………………… 14 C. Significant preliminary issues should have been explored before the District Court engaged in a Dacres/Prima Paint analysis, and a modified Prima Paint rule is required if these preliminary issues are to be ignored……………………………………………... 17 D. This case is distinct from the various cases Defendants rely on in their argument, and therefore those cases are not directly applicable…………………………………. 18 II. UNLIKE THE CASE-SPECIFIC ANALYSIS EMPLOYED BY THE MODIFIED PRIMA PAINT TEST, A STRICT PRIMA PAINT RULE ELEVATES PERIPHERAL AND TANGENTIAL CLAUSES ABOVE THE BEDROCK OBJECTIVE OF THE CONTRACT, WHICH DOES NOT SUPPORT JUSTICE AND FAIR-DEALING………………. 19 A. ‘Legitimate fraudulent inducement cases’ are those cases in which the fraud goes to the bedrock objective of the contract................................................................. 20 B. Iowa courts already perform a similar analysis to the modified Prima Paint test in other contexts.................... 21 III. UPHOLDING THE DISTRICT COURT’S APPLICATION OF THE DACRES/PRIMA PAINT RULE IN THIS CASE IS A FLAGRANT DENIAL OF JUSTICE……………………... 23 2 A. The District Court’s holding deprives an Iowa citizen of a remedy for fraud committed in Iowa by an Iowa corporation……………………………………………... 25 B. The District Court’s holding is contrary to logic, because Peddler would not have entered into the Purchase Agreement if he had knowledge of the fraud committed by Defendants……………………………. 26 IV. DACRES AND PRIMA PAINT DO NOT APPLY TO VENUE/FORUM-SELECTION CLAUSES IN IOWA……... 28 A. Venue/forum selection clauses do not receive equal treatment under federal law……………………………. 28 B. Refusing to apply the Prima Paint Rule to venue/forum selection clauses does not create problems…………… 30 V. THE DISTRICT COURT SHOULD NOT HAVE RELIED ON THE PURCHASE AGREEMENT IN RENDERING ITS RULING ON DEFENDANTS’ MOTION TO DISMISS…… 33 Conclusion…………………………………………………….......... 36 3 TABLE OF AUTHORITIES Cases Page(s) Eichenwald v. Rivello, 318 F. Supp. 3d 766, 773 (U.S.D.C. Maryland 2018) 12 Landstar Inlay Inc. v. Samrow, 325 P.3d 327, 339 (Wash. App. 2014) 12 McCarrell v. Hoffmann–La Roche, Inc., 153 A.3d 207, 220 (N.J. 2017) 12 Blanks v. Fluor Corp., 450 S.W.3d 308, 373 (Mo. App. 2014) 12 Ritchie v. Rupe, 443 S.W.3d 856, 889 (Tex. 2014) 12 Ackerman v. State, 913 N.W.2d 610, 617 (Iowa 2018) 12, 13 Travelers Indemnity Co. of Connecticut v. Richard McKenzie & Sons, Inc., 326 F. Supp. 3d 1332, 1345 (U.S.D.C., M.D. Fla. 2018) 13 Terra International, Inc. v. Mississippi Chemical Corporation. 119 F.3d 688 (8th Cir. 1997). 14, 15, 16 17, 19 High Plains Const., Inc. v. Gay, 831 F.Supp. 2d 1089 (S.D. Iowa 2011) 14, 19, 24 Liberty Bank, F.S.B. v. Best Litho, Inc. 737 N.W.2d 312 (Iowa Ct. App. 2007). 18 Tuxedo Intern. Inc. v. Rosenberg, 127 Nev. 11, 25 (Nev. 2011) 19 Cheney v. IPD Analytics, LLC, 583 F. Supp. 2d 108 (D.D.C. 2008)). 19 Cf. Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 514 (9th Cir. 1988). 19 Restatement of Contracts (second) Section 1 20 4 McKeon’s Estate, 289 N.W. 915, 918 (1940); 1 Page Contracts (1st Ed.) § 22 et. Seq.; 13 C.J. 263 et eq.; 6 R.C.L. 585 et. Eq. 21 Nevada Care, Inc. v. Department of Human Services, 783 N.W.2d 459, 466 (Iowa 2010). 22 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986) 23 Bitner v. Ottumwa Community School Dist., 549 N.W.2d 295, 300 (Iowa 1996). 23 Servewell Plumbing, LLC v. Fed.Ins.Co., 439 F.3d 786, 790(8th Circ.2006) 25 M.B. Rests, Inc. v. CKE Rests, Inc., 183 F.2d750, 752 (8th Circ.1999) 25 M.S. Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S.Ct. 1907, 1916 (1972); 24, 29 Haynes v. Presbyterian Hosp. Ass’n, 45 N.W.2d 151, 154 (Iowa 1950). 25 Hoffman v. Minuteman Press Intern., Inc., 747 F. Supp. 552, 558 (W.D. Mo. 1990). 26 Preston v. Ferrer, 552 U.S. 346, 353, 128 S.Ct. 978, 983; Southland Corp. 465 U.S. at 10, 104 S.Ct. 852 29 Atl. Marine Constr. Co. v. U.S. Dist. Court for the W. Dist. Of Tex., 571 U.S. 49, 63 (2013 29 Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 33 (1988 29 Williams v. Aire Serv, LLC, 2018 WL 4955198 (D. Maine October 12, 2018). 29 Boyd v. Grand Trunk W.R. Co., 338 U.S. 263, 70 S.Ct. 26, 94 29 L.Ed. 55(1949). 5 Morris v. McFarland Clinic, P.C. 2004 WL 306110 (S.D. Iowa 30 2004) Republic Credit Corp I v. Rance, 172 F. Supp. 1179, 1183 (S.D. Iowa 2001) 30, 31 Dacres v. John Deere Ins. Co., 548 N.W.2d 576 (IA 1996) 32 Troester v. Sisters of Mercy Health Corp., 328 N.W.2d 308 (Iowa 1982). 34 Berger v General United Group, Inc., 268 N.W.2d 630, 634 (Iowa 1978). 33,34 McCarthy v. McCarthy, 162 N.W.2d 444, 447 (Iowa 1968); 34 Bales v. Iowa State highway Commission, 249 Iowa 57, 63, 86 N.W.2d 244, 248 (1957). 34 George v. D.W. Zinser Co., 762 N.W.2d 865, 867-889 (Iowa 2009) 34 Stotts v. Eveleth 668 N.W.2d 803, 812 (Iowa 2004) 35 6 STATEMENT OF THE ISSUES I. THE DISTRICT COURT ERRED BY APPLYING THE DACRES/PRIMA PAINT ANALYSIS BECAUSE IT IGNORED PRELIMINARY ISSUES ALLEGED IN THE PETITION. Cases: Eichenwald v. Rivello, 318 F. Supp. 3d 766, 773 (U.S.D.C. Maryland 2018) Landstar Inlay Inc. v. Samrow, 325 P.3d 327, 339 (Wash. App. 2014) McCarrell v. Hoffmann–La Roche, Inc., 153 A.3d 207, 220 (N.J. 2017) Blanks v. Fluor Corp., 450 S.W.3d 308, 373 (Mo. App. 2014) Ritchie v. Rupe, 443 S.W.3d 856, 889 (Tex. 2014) Ackerman v. State, 913 N.W.2d 610, 617 (Iowa 2018) Travelers Indemnity Co. of Connecticut v. Richard McKenzie & Sons, Inc., 326 F. Supp. 3d 1332, 1345 (U.S.D.C., M.D. Fla. 2018) Terra International, Inc. v. Mississippi Chemical Corporation, 119 F.3d 688 (8th Cir. 1997) High Plains Const., Inc. v. Gay, 831 F.Supp.2d 1089 (S.D. Iowa 2011) Liberty Bank, F.S.B. v. Best Litho, Inc. 737 N.W.2d 312 (Iowa Ct. App. 2007) Tuxedo Intern. Inc. v. Rosenberg, 127 Nev. 11, 25 (Nev. 2011) Cheney v. IPD Analytics, LLC, 583 F. Supp. 2d 108 (D.D.C. 2008) Cf. Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 514 (9th Cir. 1988) 7 II. UNLIKE THE CASE-SPECIFIC ANALYSIS EMPLOYED BY THE MODIFIED PRIMA PAINT TEST, A STRICT PRIMA PAINT RULE ELEVATES PERIPHERAL AND TANGENTIAL CLAUSES ABOVE THE BEDROCK OBJECTIVE OF THE CONTRACT, WHICH DOES NOT SUPPORT JUSTICE AND FAIR-DEALING. Cases: Restatement (Second) of Contracts Section 1 In Re McKeon’s Estate, 289 N.W. 915, 918 (1940) 1 Page Contracts (1st Ed.) § 22 et. Seq.; 13 C.J. 263 et eq.; 6 R.C.L. 585 et. Eq. Nevada Care, Inc. v. Department of Human Services, 783 N.W.2d 459, 466 (Iowa 2010) Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986) Bitner v. Ottumwa Community School Dist., 549 N.W.2d 295, 300 (Iowa 1996) III. UPHOLDING THE DISTRICT COURT’S APPLICATION OF THE DACRES/PRIMA PAINT RULE IN THIS CASE IS A FLAGRANT DENIAL OF JUSTICE. Cases: High Plains Const., Inc. v. Gay, 831 F.Supp.2d 1089, 1101 (S.D. Iowa 2011) Servewell Plumbing, LLC v. Fed. Ins. Co., 439 F.3d 786, 790 (8th Circ.2006) M.B. Rests, Inc. v. CKE Rests, Inc., 183 F.2d 750, 752 (8th Circ.1999) M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907 (1972) Haynes v. Presbyterian Hosp. Ass’n, 45 N.W.2d 151, 154 (Iowa 1950) 8 Hoffman v. Minuteman Press Intern., Inc., 747 F. Supp. 552, 558 (W.D. Mo. 1990 IV. DACRES AND PRIMA PAINT DO NOT APPLY TO VENUE/FORUM-SELECTION CLAUSES IN IOWA. Cases: Preston v. Ferrer, 552 U.S. 346, 128 S.Ct. 978 (2008) Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852 (1984) Atl. Marine Constr. Co. v. U.S. Dist. Court for the W.
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