DUBUQUE INJECTION SERVICE COMPANY, Plaintiff/Counterclaim Defendant-Appellant/Cross-Appellee,
STEVEN J. KRESS, Defendant/Counterclaim Plaintiff-Appellee/Cross-Appellant. DUBUQUE INJECTION SERVICE COMPANY, Plaintiff,
BK DIESEL SERVICE, INC. Defendant/Cross-Appellant.
from the Iowa District Court for Dubuque County, Monica
Injection Service Company (DIS) appeals, and Steven Kress
cross-appeals the outcome of a jury trial on claims by DIS
for breach of fiduciary duty, misappropriation of trade
secrets, and interference with business relationships and on
Steven's counterclaim for unpaid wages. AFFIRMED ON
APPEAL AND ON CROSS-APPEAL.
D. Gamez, Kevin J. Visser, and Abbe M. Stensland of Simmons
Perrine Moyer Bergman P.L.C., Cedar Rapids, for appellant.
Richard K. Whitty, Peter D. Arling, and McKenzie R. Hill of
O'Connor & Thomas, P.C., Dubuque, for appellee.
by Danilson, C.J., and Potterfield and Bower, JJ.
DANILSON, Chief Judge.
Injection Service Company (DIS) appeals the district
court's denial of its motion for new trial following a
jury verdict finding Steven Kress-a shareholder of DIS-not
liable for breach of fiduciary duty, and finding
Stevenand BK Diesel Service, Inc. (BK) not liable
for misappropriation of trade secrets and interference with
business relationships. DIS asserts a new trial should be
granted because the district court erred in (1) allowing
admission of evidence regarding two non-parties' personal
bankruptcy, (2) instructing the jury on the ratification
defense, and (3) refusing to allow the admission of
protective orders regarding trade secrets into evidence.
Steven cross-appeals on the basis of an evidentiary ruling
affecting Steven's counterclaim against DIS for unpaid
wages. We conclude none of the claims raised by the parties
on appeal and cross-appeal warrant reversal or a new trial
and therefore affirm.
Background Facts & Proceedings.
formed in 1987 by Steven, Doug Hefel, and Randy Hefel after
Steven approached Doug with the idea of purchasing a local
diesel injection repair company. Randy was appointed
president of DIS, Doug vice president, and Steven secretary
and treasurer. Steven, Doug, and Randy are the only
shareholders of DIS, each owning a one-third interest.
had some previous knowledge of the trade, and it was the
understanding of the parties at the outset Steven would run
the business. Doug was involved for the first year helping to
gain attention for the business, but subsequently had minimal
involvement. Randy, who has an education in accounting, set
up the books for DIS and did the bookkeeping for a period of
time. However, Randy's day-to-day involvement in DIS
stopped between 1990 and about 2008, when Randy again began
working regularly at DIS. Steven completed training in the
diesel-fuel-injection trade and managed the business and the
on-site shop. Steven worked long hours, opening and closing
the shop each day. DIS was able to get off its feet and
eventually excelled. A distribution was first made to each of
the shareholders in 1996. Throughout the years, the
shareholders each received distributions totaling
approximately $370, 000.
early years of the company, Steven was paid a salary of
approximately $20, 000 or $30, 000 a year. By 1990
Steven's salary had risen to $54, 500. Steven's
salary steadily increased between 2000 and 2010-his tax
return reflecting an income of $499, 950 in 2010. Steven
conceded he was in charge of payroll for the company, but
asserted in 2006 Randy told Steven to begin taking his salary
in one or two lump sums, leaving $100, 000 to $150, 000 in
the DIS bank account. Doug and Randy maintained they were
unaware of the amount of Steven's salary.
record also reflects Steven purchased personal items through
DIS, including vehicles in 2005, 2007, and 2010; the gas for
Steven's home; Steven's cell phone service; vehicle
parts; a gun safe; and other items. Members of Steven's
family were added to the DIS payroll although, except for
Steven's son, they did not work there. Steven stated
Randy told him in order to save taxes he should make
purchases through DIS from money that he would have been paid
in salary. Steven also stated Randy told him to include his
family members on the payroll, also to save tax money. Doug
and Randy claimed they did not know about the personal
purchases or the family members on the DIS payroll. However,
the personal purchases made and the addition of Steven's
family members to the payroll were documented and reflected
in the DIS business records, as was Steven's yearly
bookkeeping mistake caused Steven to take too much money for
his salary in 2010, resulting in a loss to DIS for the year.
Doug and Randy called a shareholder meeting for December 12,
2011. At the meeting, Doug and Randy voted to remove Steven
as a director and officer of DIS but asked that he continue
managing the company. Also at the meeting, Doug and Randy
offered to sell their shares to Steven for $400, 000 each.
testified that on December 12, 2011, he requested the
bookkeeper issue a check to the Internal Revenue Service in
the amount of $100, 000 to cover his anticipated 2011 tax
liability. Randy later directed the bookkeeper to
reverse the payment.
and his wife filed for bankruptcy in October 2010. After the
December 12, 2011 meeting, Steven learned Doug had
substantially undervalued his shares in DIS in the bankruptcy
proceedings, despite demanding $400, 000 from Steven for the
shares. Steven also learned Doug had taken out an individual
loan in the amount of $170, 000 and signed a personal
guaranty for $400, 000 for one of his other companies.
on this knowledge, Steven claimed he felt he could no longer
trust Doug and Randy. Therefore, Steven removed an amount of
DIS business records from the company building and took them
to his home to protect his interest and to prevent the
records from being altered. Steven also claimed he no longer
wanted to rent the DIS shop space from Randy, so he met with
a commercial lender to inquire about obtaining a loan for a
new building. During the meeting, Steven provided both
personal and DIS financial information to the lender.
night of January 3, 2012, Randy called Steven to obtain the
company's Quick Books software password. Steven refused,
and instead told Randy to meet him at the DIS building the
next day to review any Quick Books records. The next morning
Randy met Steven and his son in the DIS parking lot and
informed them they were both on unpaid leave.
January 5, 2012, Steven made a counteroffer to purchase Doug
and Randy's DIS shares for a total of $400, 000, which
they rejected. In March 2012, Steven purchased a new building
and, in June 2012, Steven and his business partner, Mike
Boge, opened BK. Between March and June, DIS filed this
lawsuit against Steven. The lawsuit was later consolidated
with a February 27, 2014 lawsuit filed by DIS against BK.
jury trial began on June 23, 2015. The jury returned its
verdict on July 2, 2015, denying all claims by DIS and
denying Steven's counterclaim. DIS now appeals and Steven
II. Standard of Review.
review evidentiary rulings for an abuse of discretion.
Hall v. Jennie Edmundson Mem'l Hosp., 812 N.W.2d
681, 685 (Iowa 2012). "An abuse of discretion exists
when the court exercises its discretion on 'grounds or
for reasons clearly untenable or to an extent clearly
unreasonable.'" Heinz v. Heinz, 653 N.W.2d
334, 338 (Iowa 2002) (citation omitted).
review challenges to jury instructions given by the district
court for correction of errors at law. Alcala v. Marriott
Int'l, Inc., 880 N.W.2d 699, 707 (Iowa 2016);
see also State v. Schuler, 774 N.W.2d 294, 297 (Iowa
2009) ("We review jury instructions to decide if they
are correct statements of the law and are supported by
substantial evidence." (citation omitted)).
contends a new trial is warranted because the trial court
improperly allowed evidence of Doug's personal bankruptcy
to be admitted at trial, instructed the jury on the
ratification defense, and did not allow admission of
previously-filed protective orders regarding trade secrets.
Steven asserts a new trial is warranted on his counterclaim
because the trial court improperly allowed admission of a DIS
challenges the district court's decision to allow
evidence regarding Doug and his wife's personal
bankruptcy to be admitted at trial. Steven asserts error is
not fully preserved on this issue because counsel for DIS did
not make proper objections during all the instances the
bankruptcy evidence was discussed in testimony.
"To preserve error for appellate review, a party must
alert the district court to the issue at a time when the
district court can take corrective action." Schmitt
v. Koehring Cranes, Inc., 798 N.W.2d 491, 496 (Iowa Ct.
App. 2011). "Additionally, the grounds of the objection
must be specifically stated to inform the trial court of the
basis for the complaint." Id. at 501.
contends it preserved error by its motion in limine,
objections, or both. The motion in limine attempted to
exclude any mention of the personal bankruptcy of Doug Hefel
and his spouse and the associated proceedings, as well as any
criminal investigation and civil proceedings currently
pending and related to the bankruptcy proceedings. With
respect to the preservation of error by a motion in limine,
our supreme court recited the applicable principles in
Quad City Bank & Trust v. Jim Kircher &
Associates, P.C., 804 N.W.2d 83, 89-90 (Iowa 2011):
A ruling sustaining a motion in limine is generally not an
evidentiary ruling. Twyford v. Weber, 220 N.W.2d
919, 923 (Iowa 1974). Rather, a ruling sustaining a motion in
limine simply adds a procedural step to the introduction of
allegedly objectionable evidence. Id.; accord
Johnson v. Interstate Power Co., 481 N.W.2d 310, 317
(Iowa 1992) (recognizing a ruling sustaining a motion in
limine "merely adds a procedural step to the offer of
evidence [and that i]f the evidence is not offered, there is
nothing preserved to review on appeal"). Thus, a motion
in limine "serves the useful purpose of raising and
pointing out before trial certain evidentiary rulings the
court may be called upon to make during the course of the
trial" and, if sustained, excludes reference or
introduction of this evidence until its admissibility is
determined by the trial court, outside the presence of a
jury, in an offer of proof. Twyford, 220 N.W.2d at
922-23 (recognizing further that the offer of proof allows
the aggrieved party to present a proper record for review on
appeal and, in the absence of such an offer, error may not be
The abovementioned rules regarding a motion in limine serve
as the basis for the rule that "error claimed in a
court's ruling on a motion in limine is waived unless a
timely objection is made when the evidence is offered at
trial." State v. Alberts, 722 N.W.2d 402, 406
(Iowa 2006) (quoting State v. Tangie, 616 N.W.2d
564, 568 (Iowa 2000)) (internal quotation marks omitted);
accord Simkins v. City of Davenport, 232 N.W.2d 561,
565 (Iowa 1975). This is because the error only occurs, if at
all, when the evidence is offered at trial and is either
admitted or refused. State v. Langley, 265 N.W.2d
718, 720 (Iowa 1978) (recognizing further, normally "the
ruling is not a final one; it is a red flag to counsel that
the evidence is not to be brought before the jury unless and
until it is separately taken up with the court . . . at
trial"). There is, however, an exception to this general
rule. When the court's ruling on a motion in limine
leaves no question that the challenged evidence will or will
not be admitted at trial, counsel need not renew its
objection to the evidence at trial to preserve error.
Alberts, 722 N.W.2d at 406; State v.
Miller, 229 N.W.2d 762, 768 (Iowa 1975). "In such a
situation, the decision on the motion has the effect of [an
evidentiary] ruling." Tangie, 616 N.W.2d at 569
(quoting Miller, 229 N.W.2d at 768) (internal
quotation marks omitted).
The key to deciding whether the general rule or the exception
applies in a given case is determining what the trial court
purported to do in its ruling. Alberts, 722 N.W.2d
at 406. As we have recognized:
"A ruling only granting or denying protection from
prejudicial references to challenged evidence cannot preserve
the inadmissibility issue for appellate review."
However, "if the ruling reaches the ultimate issue [of
admissibility] and declares the evidence admissible or
inadmissible, it is ordinarily a final ruling and need not be
questioned again during trial [to preserve error]."
Id. (quoting State v. O'Connell, 275 N.W.2d 197,
202 (Iowa 1979)). Compare State v. Daly, 623 N.W.2d
799, 800 (Iowa 2001) (holding that an exception to the
general rule applied when counsel asked the court whether its
ruling was the final order of the court and the court
responded, "yes"), with Johnson, 481
N.W.2d at 316-17 (holding the general rule applied, and error
was not preserved, when the court's ruling merely
prohibited a party from mentioning the challenged evidence
without first obtaining permission from the court outside the
presence of the jury). Accordingly, . . . we first must
determine the intent of the district court ruling on [the
movant's] motion in limine.
the district court's ruling or position evolved as the
hearing progressed. Unfortunately, we do not have a written
order in limine that could clearly define the limits of
admissibility and provide aid to counsel to preserve error.
In the absence of a written order, we have closely examined
the official transcript of the hearing. From our examination
of that record, we conclude the district court unambiguously
partially overruled the motion and determined any evidence
that one of the owners of DIS, Douglas Hefel, had filed
bankruptcy, had received a bankruptcy discharge, and had the
discharge revoked was admissible. The motion was also
unambiguously overruled to the extent Steven could testify
someone told him not to talk to the bankruptcy trustee if
contacted, and Steven knew Doug had substantially undervalued
his share in the company. On these issues the motion in
limine was "resolved in such a way it [was] beyond
question whether or not the challenged evidence [would] be
admitted during trial, " and counsel for DIS was not
required to make specific objections to the evidence as it
was presented. Tangie, 616 N.W.2d at 569 (citation
motion in limine was sustained to the extent no reference was
to be made relative to Doug's bankruptcy schedules, the
specific reason why the bankruptcy discharge was revoked, or
any evidence of a federal indictment.
court also indicated Steven could testify in a limited
fashion that Steven did what he did because of his
perceptions of this knowledge. However, the court-on two
occasions-indicated it would have to "hear how the story
is laid out" and "I don't know exactly how all
of this would be presented, so I am going to have to see it
as it develops." The court even indicated the questions
on this topic "are going to have to be very narrow and
then they're going to be subject to, I assume, a great
deal of objection."
not recited the disputed evidence as it came in during the
trial, and as best as we can determine, the following
portions of testimony are the extent of such evidence.
(1) During Steven's testimony on cross-examination by
Q. . . . In 2010, did you come to learn that your fellow
shareholder, Douglas Hefel, had filed for bankruptcy
protection? . . . . A. Yes.
Counsel for DIS objected to this testimony on the basis of
(2) Also on Steven's testimony on cross-examination:
Q. During his bankruptcy, did he ever talk to you about a
problem that he was having with a creditor known as Dutrac
Community Credit Union?
A. I did talk to Doug about the problems he was having with
Dutrac Community Credit Union. Counsel for DIS objected to
this testimony on the basis of relevance.
(3) On direct examination of Doug's wife:
Q. There has been some testimony that you and your husband
took bankruptcy. Do you recall the date on which ...