IN THE COURT OF APPEALS OF IOWA
No. 22-0392 Filed May 22, 2024
THOMAS GOETTSCH, Plaintiff-Appellant,
vs.
HEIDMAN LAW FIRM, P.L.L.C., Successor to HEIDMAN LAW FIRM, L.L.P, JOHN C. GRAY and JACOB B. NATWICK, Defendants-Appellees.
Appeal from the Iowa District Court for Woodbury County, Sarah Crane,
Judge.
A claimant appeals the dismissal of his legal malpractice claim.
AFFIRMED.
Peter C. Riley of Tom Riley Law Firm, P.L.C., Cedar Rapids, for appellant.
Kevin J. Visser, Paul D. Gamez, and Nicholas Petersen of Simmons Perrine
Moyer Bergman PLC, Cedar Rapids, for appellees.
Heard by Ahlers, P.J., and Chicchelly and Buller, JJ. 2
BULLER, Judge.
Thomas Goettsch1 appeals adverse rulings following a jury trial in a legal
malpractice case against attorneys John Gray and Jacob Natwick and their firm—
the Heidman Law Firm (collectively “Heidman,” for whom we will use plural
pronouns). The case arose from Heidman’s representation of Goettsch relating to
the buy-out of shares in a family-farm corporation. Goettsch claims the district
court should have included a requested alternative in its marshaling instruction and
challenges some of the court’s rulings on motions in limine. We affirm, finding the
requested instruction was not supported by the evidence, the preclusive effect of
a valuation ruling was correctly decided, and the remaining motion-in-limine issue
was unpreserved.
I. Background Facts
Murlen and Florence Goettsch founded Circle G Farms, Inc., an
S corporation, and placed their farmland in the corporation. Additional property
devised by Murlen to their seven children was transferred to the corporation in
2006, bringing the total corporate landholdings to 798 acres with no liens or
mortgages. Murlen and Florence transferred all shares of the corporation—1000
shares each—to the children: Jacquelynn, Paul, Margaret, Kathy, Dale, Goettsch,
and Brian. Goettsch and Brian were also the tenants of the Circle G Farms land
through their partnership: Goettsch Farms.
In 2005, the seven children entered into a Buy-Sell Agreement restricting
the transfer of Circle G shares outside the family. A few years later, Goettsch
1 Due to the large number of family members involved in the underlying matters,
we refer to the appellant as Goettsch and all other family members by first names. 3
purchased Jacquelynn’s shares. He also offered to buy the other shareholders’
stock, but the other siblings declined.
In 2012, the six siblings who still held shares in Circle G attended an annual
meeting at which Goettsch proposed buying out or redeeming the shares
belonging to Paul, Margaret, Kathy, and Dale. Goettsch proposed that Paul,
Margaret, Kathy, and Dale each receive eighty acres per thousand shares and a
$50,000 payment and enter a five-year lease with Goettsch Farms for $20,000 per
year (later increased to $40,000 per year); in return they would surrender their
shares. The siblings verbally voted in favor of the proposal, and several days later
Goettsch, Paul, and Brian signed an agreement for sale of stock and partial
distribution of corporate assets. Paul surrendered his stock to the corporation,
Circle G transferred an eighty-acre farm to Paul, and Goettsch wrote a check for
the lump sum. Margaret, Kathy, and Dale did not sign the agreement and
proposed a buyout of their stock over time for tax reasons. Goettsch rejected their
proposal.
After this rejection, the three siblings brought an action in federal court
against Goettsch, Brian, Paul, Circle G, and Goettsch Farms seeking to dissolve
Circle G, alleging oppressive conduct under the Iowa Corporation Act and breach
of fiduciary duty claims against Goettsch for renting himself the land at less than
half the going rate. Goettsch, Brian, Paul, Circle G, and Goettsch Farms retained
Heidman to represent them.
In 2014, the parties participated in a mediation and entered into a
stipulation. In that stipulation, Goettsch, Circle G Farms, and/or Goettsch Farms
made “an irrevocable election to purchase all of plaintiffs’ shares in Circle G 4
Farms, Inc. for fair value pursuant to that election and to a buyout of all their shares
of Circle G Farms, Inc. at fair value as defined in Iowa law.” The federal suit would
then be dismissed, the plaintiffs would file a complaint in state court requesting
equitable relief by way of dissolution or mandatory buyout under Iowa Code
section 490.1430 (2013), and the parties would request a transfer to the business
court.2 The stipulation further provided the business court would set the fair value
of the shares under Iowa Code section 490.1434(4) and determine whether
Goettsch or Circle G had purchased Paul’s shares.
The matter was tried that November. In a thorough ruling, the business
court walked through the factual background—including a dramatic tax bill the
parties would have owed (but could not afford) under Goettsch’s proposal. The
business court noted the substantial taxable gain that passed through to the
remaining shareholders at the transfer of acres to Paul—a tax liability Goettsch
neglected to warn Margaret, Kathy, and Dale about before receiving their tax
information for their 2012 taxes. The business court found no enforceable contract
or agreement was created in 2012, and the circumstances of Paul’s share sale
and the language of the agreement resulted in the corporation redeeming the
shares. The business court also voided (as a breach of the duty of good faith and
loyalty) a transaction by Goettsch where he paid a “deposit” to Circle G on the land
2 The business court is a specialty docket in the district court designed to address
“business and complex commercial litigation cases.” Iowa Sup. Ct. Amended Mem. of Operation, In the Matter of the Iowa Business Specialty Court 1 (Jan. 18, 2022) https://www.iowacourts.gov/collections/713/files/1475/embedDoc ument/. Because both this case and the prior action were heard on the business court docket, for clarity we will refer to the court in the prior action as the business court and the court in this action as the district court or the court. 5
the corporation had already transferred to Paul—a transaction Goettsch claims
transferred Paul’s shares to himself.
The business court then turned to valuation of the shares, noting “The
parties agree that the appropriate valuation method to use is the corporation’s net
asset value.” The business court further observed any sale price of the corporation
as a whole would be based on the farmland’s value, and net asset value was the
appropriate basis for corporations holding real estate for investment or rental. For
the valuation date, the business court used the date before Margaret, Kathy, and
Dale filed their federal action, though it acknowledged the land’s value was outside
the corporation’s control. The business court adopted a value for Circle G of just
over $1.4 million per 1000 shares. The business court also held the terms of the
siblings’ Buy-Sell Agreement did not apply based on the language of the
agreement, the valuation process in the agreement did not apply in a dissolution
action, and it was inappropriate to apply a minority-interest discount. The business
court further noted the Buy-Sell Agreement was not applied in the acquisition of
Paul’s shares by the corporation. Goettsch did not appeal this ruling.
Circle G and Goettsch bought the shares belonging to Margaret, Kathy, and
Dale for $4 million. And Goettsch eventually became the sole shareholder of
Circle G, but he remained unhappy about the price he had to pay to get there.
II. Proceedings
In late 2019, more than four years after the business court’s ruling, Goettsch
filed his petition in this matter. Goettsch claimed Heidman “fail[ed] . . . to meet the
standard of care,” resulting in an excess award to his siblings. More specifically,
Goettsch alleged that counsel did not advise him at the time of the stipulation that 6
(1) the valuation “would be highly favorable to Margaret, Kathy and Dale” and
(2) he could not insist the purchase be made under terms of value as a going
concern as provided in the 2005 Buy-Sell Agreement. On Heidman’s motion and
following a contested hearing, the case was transferred to the business docket.
Goettsch filed a motion in limine with the district court seeking to prohibit
“[a]ny mention, reference, statement or evidence in any form concerning or relating
to specific findings in the decision of the Iowa business court, which findings are
inadmissible and not relevant to the subject of this lawsuit.” He argued the
statements were unduly prejudicial and hearsay, asserting the only relevant fact
from the ruling was “the amount Thomas Goettsch paid.” Meanwhile, Heidman
also filed a motion in limine seeking, among other things, for the business court
ruling to have preclusive effect on the actual market value of the Circle G shares
and to prevent the relitigation of facts in the 2014 joint stipulation. Based on a
proposed jury instruction, Heidman also supplemented their motion in limine
seeking for the business court’s judgment on the 2012 meeting agreement to have
preclusive effect.
At a pretrial hearing, the district court reserved ruling on Goettsch’s motion
in limine to generally exclude the business court ruling from evidence, noting it was
a matter for “judgment calls during the trial.” The court further held the business
court’s finding that the siblings’ 2012 shareholder meeting did not result in an
enforceable contract was necessary and therefore preclusive. Following a post-
hearing supplemental motion, the court ruled any factual findings in the stipulation
in the prior case were not preclusive but could be used as prior admissions. But 7
the court also relayed that Goettsch could offer evidence or testimony contrary to
the stipulation’s facts.
After trial, the jury returned a unanimous verdict finding Heidman was not
negligent in their representation of Goettsch. Goettsch filed a post-trial motion
requesting a new trial, objecting to the district court’s limine ruling granting
preclusive effect to the business court’s finding the alleged 2012 agreement was
not an enforceable contract. His motion also asserted the court should have
included certain requested jury instructions and the jury’s verdict “fail[ed] to
effectuate substantial justice.” The court dismissed these (and other) claims,
denying Goettsch’s motion for new trial. Goettsch appeals, challenging only the
trial court’s decision to omit a portion of a requested instruction and the court’s
rulings on the pretrial motions in limine relating to the business court’s findings.
III. Standard of Review
“[W]e review refusals to give a requested jury instruction for correction of
errors at law.” Alcala v. Marriott Int’l, Inc., 880 N.W.2d 699, 707 (Iowa 2016). While
we review evidentiary rulings for an abuse of discretion, “[g]enerally, the district
court’s ruling on a motion in limine is not subject to appellate review because the
error, if any, occurs when the evidence is offered at trial and is either admitted or
refused.” Wailes v. Hy-Vee, Inc., 861 N.W.2d 262, 264 (Iowa Ct. App. 2014)
(explaining error is not preserved unless challenged when the evidence is offered
at trial); see also Thomas A. Mayes & Anuradha Vaitheswaran, Error Preservation
in Civil Appeals in Iowa: Perspectives on Present Practice, 55 Drake L.
Rev. 39, 56–57 (2006) (“As a general rule, a court’s ruling on a motion in limine
does not preserve error.”). But “[w]here the district court’s ruling on a motion in 8
limine is unequivocal, ‘the decision on the motion has the effect of [an evidentiary]
ruling’ and thus preserves the issue for appellate review.” Wailes, 861 N.W.2d
at 264 (citation omitted).
IV. Discussion
“Legal malpractice claims sound in negligence.” Vossoughi v. Polaschek,
859 N.W.2d 643, 649 (Iowa 2015).
To establish a prima facie claim for legal malpractice, a plaintiff must produce substantial evidence demonstrating: (1) an attorney-client relationship existed giving rise to a duty; (2) the attorney violated or breached the duty, either by an overt act or a failure to act; (3) the breach of duty proximately caused injury to the client; and (4) the client did sustain an actual injury, loss, or damage.
Stender v. Blessum, 897 N.W.2d 491, 502 (Iowa 2017). In instructing the jury, the
court here split the second element in two: requiring a finding the attorneys
engaged in the specific acts/omissions alleged and then a finding whether the
acts/omissions violated the standard of care.
A. Jury Instruction
Goettsch first asserts the trial court erred in refusing to include a requested
specification of negligence in the malpractice marshaling instruction: “[Heidman]
engaged in one or more of the following acts or omissions . . . Failing to advise
Thomas Goettsch that an alternative claim be made to set aside the transaction to
Paul.” Heidman objected to the entire negligence specification in Goettsch’s
proposed instruction (which included five suggested acts/omissions), citing
multiple issues—including that it was “misleading and misstates the law as applied
to the facts of this case,” that this specific section “improperly suggests that the 9
proof of the alleged . . . omission . . . is sufficient to prove negligence,” and the
section was barred by issue preclusion from the business court ruling.
At the close of evidence, the court and counsel discussed the relevant
instructions. Goettsch proposed three specifications of negligent acts or
omissions—two relating to advice about the stipulation provided to the business
court, and the third is the contested instruction here: “Failing to advise Thomas
Goettsch that an alternative claim be made to set aside the transaction to Paul.”
Heidman again objected to the last, noting the business court proceedings
established the redemption of Paul’s shares and the instruction “would mislead the
jury” and no damages were connected to the possibility of unwinding the
transaction. After hearing arguments, the court decided not to instruct the jury on
the third specification:
THE COURT: All right. So I’m not going to give it as a separate specification. I think it’s part and parcel of the counterfactual that you’re arguing in . . . as part of the—what your argument is they shouldn’t—Mr. Gray and Mr. Natwick shouldn’t have advised Mr. Goettsch to sign the stipulation. Your counterfactual is instead of advising them to sign the stipulation, they advised him to fight the oppression and, you know, your argument is part of that could have been trying to set aside the transaction with Paul Goettsch. So I don’t find that there’s any damages tied to this or that it’s a separate specification. [GOETTSCH’S COUNSEL]: All right. But, obviously, then, I can argue this is what should have been done and this is how you basically enhance your position in defending the litigation matters. THE COURT: I think you can argue it, because I think it goes to your—your theory of what happens in a counterfactual where they don’t agree to the stipulation. [GOETTSCH’S COUNSEL]: Okay.
During his closing argument, Goettsch’s counsel argued that unwinding Paul’s
transaction would have placed Goettsch in a stronger position against the petition
in federal court. He then told the jury, 10
Now, that error is not part of what the judge read you in the instructions were the basis of our claim, because that didn’t result in any immediate damage. But it should have been done because it would have avoided all the problems that you had with that transaction once he went through the court proceeding. And, number two, it eliminates the potential of a deadlock and grounds for dissolution in the future action, and certainly that was there.
Counsel again argued about setting aside the Paul transaction during rebuttal.
When ruling on this issue in the motion for new trial, the district court
observed that the allegation in the requested instruction had not been identified as
a separate theory with separate damages. The court noted Goettsch “had not
disclosed any damages tied to a claim on that issue” and then referred to the jury
instruction conference discussion. The district court also found Goettsch “ha[d]
not demonstrated any irregularity or error of law that would require a new trial.”
“[A] party is entitled to have its legal theory submitted to the jury if that theory
is supported by substantial evidence.” Eisenhauer ex rel. T.D. v. Henry Cnty.
Health Ctr., 935 N.W.2d 1, 10 (Iowa 2019). For a plaintiff to succeed in a
negligence action, the court considers “the context of the relationship between
those theories of negligence supported by the evidence and the theory of damages
sought by the plaintiff.” Faber v. Herman, 731 N.W.2d 1, 7 (Iowa 2007). “Actual
causation, as well as legal causation, must exist between the breach of the duty of
care and the damages sought.” Id. at 7.
The damages Goettsch sought were: (1) overpayment for shares with
damages of $3,562,000; (2) interest on the loan he took out to pay the negotiated
buyout of his siblings; (3) lost income from land he sold to pay his loan; and (4) “lost
gain” from taxes not attributable to his siblings due to the delayed sale of farmland. 11
Goettsch did not offer below and does not offer on appeal any argument
how the alleged failure of Heidman to advise Goettsch to make a new claim to set
aside (or unwind) the transaction with Paul caused the alleged damages. He urges
on appeal that unwinding “would have been beneficial” by avoiding potential
deadlock among other issues. And his expert witness testified “unwinding a
transaction where everybody’s in agreement is easy to do,” with a clarification that
“everybody” meant Paul, Goettsch, and Circle G. But the problem is there’s no
indication everybody agreed here. Paul testified,
I had no thought of ever doing that. It’s what all seven of us agreed on and I—the paperwork was done. I had the money. I had the deed to my [eighty] acres, and I had no intention, because everyone had agreed that it was the right thing to do, and we did it. And I had no intention of ever trying to change that back.
Goettsch’s counsel clarified Paul testified during a deposition he would have
“considered it,” but then said “no” to undoing the transaction when the Heidman
attorneys asked him.
In making his negligence claim, Goettsch relies on a series of condition-
precedent hypotheticals: first the court would have unwound the transaction, then
Paul would have been willing to vote with him despite Goettsch taking away the
eighty acres Paul wanted, and finally Goettsch would have successfully defended
the oppression claim in federal court. And, as attorney Natwick observed, “doing
so would not solve Goettsch’s underlying problem”: having his siblings as
shareholders in Circle G. Instead, Natwick testified they discussed setting aside
the Paul transfer, “but we didn’t recommend that they take a position contrary to
what they want or what we’re advocating for.” None of these hypothetical 12
scenarios is an actual and legal cause of the specific damages claimed by
Goettsch.
In our review of the record, we find no substantive evidence supports legal
or actual causation needed to link Goettsch’s theory of negligence to either the
Paul transaction or the damages Goettsch sought. Nor does Goettsch cite any
independent legal error beyond whether the instruction was supported by the facts.
Thus the district court did not err in not giving the requested instruction.
Last on this point, we recognize Goettsch briefly suggests Heidman should
have recognized a conflict of interest and advised their clients (likely Goettsch,
Paul, and Circle G) “to seek independent counsel.” But Goettsch did not raise or
argue this claim below. And because it’s not preserved, we end our analysis here.
See Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002) (“It is a fundamental
doctrine of appellate review that issues must ordinarily be both raised and decided
by the district court before we will decide them on appeal.”).
B. Preclusive Effect of Business Court Ruling
Goettsch also challenges two aspects of the district court’s rulings in limine
relating to the business court’s ruling. He first urges the district court erred in
granting preclusive effect to the business court’s ruling on the enforceability of the
alleged agreement from the siblings’ 2012 shareholder meeting. And from there,
Goettsch argues the district court should have excluded evidence of any non-
preclusive findings in the ruling as irrelevant.
1. Existence of Enforceable 2012 Agreement
Goettsch contends the court erred in granting Heidman’s motion in limine,
ruling the business court’s no-enforceable-contract finding from the siblings’ 2012 13
shareholder meeting was necessary and thus had preclusive effect. Because the
pretrial ruling on this issue was unequivocal, error was preserved. See Wailes,
861 N.W.2d at 264. Goettsch argues the business court’s ruling on the 2012
agreement “was not necessary or essential to the issues of valuation, treatment of
Paul’s shares[,] and tax consequences.” He also asserts this ruling prevented him
from arguing Heidman should have sought to enforce the agreement in the prior
litigation.
The district court revisited this argument as part of Goettsch’s post-trial
motion and noted Goettsch “ha[d] not shown the ruling was incorrect.” Instead,
the court found the ruling met the requirements for issue preclusion, and Goettsch
“did not identify any theory of damages tied to” the enforceability of the 2012
agreement.
To us, Goettsch’s argument is logically inconsistent, as the enforceability of
the 2012 agreement had direct bearing on the valuation issue. If the siblings had
entered an enforceable agreement at the 2012 shareholder meeting as Goetsch
alleged, then the value of each sibling’s 1000 shares would have been set by the
agreement: eighty acres of the corporation’s land, $50,000, and a five-year lease
at $40,000 per year. In fact, the court found Paul’s transaction had a value of
$1,070,000. The court also adopted the parties’ stipulation that all sibling
shareholders would have incurred tax liability of more than $100,000 each under
the 2012 agreement. As a result, whether the agreement was enforceable was an
essential and necessary finding in the business court’s ruling determining the value
of Circle G shares and tax consequences. 14
Beyond the logic problems, Goettsch offers no legal argument to show the
oral agreement was enforceable and the business court erred in its ruling.
Assuming without deciding the issue was adequately briefed, we agree with the
district court Goettsch has not established a legal error on this issue.
2. Admissibility of Prior Judgment.
Goettsch also claims the court should have granted his own motion in limine
to exclude any non-preclusive findings from the business court ruling. He contends
he “was clearly prejudiced by the admission of the ruling and the statements made
in the business court ruling that were disparaging to [Goettsch]” and that Heidman
should not benefit from statements arising out of their representation of him.
But we do not reach the question of prejudice, as this alleged error was not
preserved. The district court expressly reserved ruling on the motion, noting the
admissibility and use of the ruling would be “a question of timing and judgment
calls during the trial.” Because this ruling was not unequivocal, it did not preserve
error. See Wailes, 861 N.W.2d at 264.
Looking past the initial ruling, Goettsch also failed to preserve error at trial
because he did not object when the entire ruling was entered evidence as an
exhibit. See Quad City Bank & Tr. V. Jim Kircher & Assocs., P.C., 804
N.W.2d 83, 89 (Iowa 2011) (“[E]rror 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.”
(citation omitted)). Even more damning, Goettsch’s own counsel offered the
unredacted business court ruling into evidence; he cannot now challenge the
admission of his own evidence as error. McCracken v. Edward D. Jones & Co.,
445 N.W.2d 375, 378 (Iowa Ct. App. 1989) (“[I]t is elementary a litigant cannot 15
complain of error which he has invited or to which he has assented.”); see also
State v. Trane, 984 N.W.2d 429, 435 (Iowa 2023) (finding defendant waived error
on evidence he himself elicited or admitted).
V. Disposition
On Goettsch’s preserved issues, we conclude the district court did not err
in denying the requested negligence alternative instruction or in its ruling on the
preclusive effect of a necessary and essential portion of the prior action’s ruling.
And we find Goettsch did not preserve error on his remaining claims.