April 4, 2014

Winter 2014 Civil Case Law Update.  Over the past three months, the Iowa Supreme Court decided the following cases of interest:

           In Star Equipment, Ltd. v. State of Iowa, Iowa Department of Transportation, decided January 31, 2014, the Iowa Supreme Court held that where the Iowa Department of Transportation ("IDOT") hires a Targeted Small Business ("TSB") as the general contractor on a public construction project and waives the requirement of a construction surety bond, Iowa Code § 573.2 obligates the IDOT to pay any subcontractors' claims for unpaid work on the public improvement project. 

           In Hagenow v. Schmidt, decided February 7, 2014, the Iowa Supreme Court discussed the doctrines of legal excuse and sudden emergency and found that the defendant was entitled to a jury instruction on such doctrines.

           In Rent-A-Center, Inc. v. Iowa Civil Rights Commission, decided February 28, 2014, the Iowa Supreme Court held that the Iowa Civil Rights Commission (ICRC) is not prevented from pursuing an enforcement action under the Iowa Civil Rights Act (ICRA) against an employer where the complaining employee signed an agreement with the employer to arbitrate all employment-related claims.

           In Giza v. BNSF Railway Company, decided February 28, 2014, the Iowa Supreme Court found that federal law allows an employer sued under the Federal Employers' Liability Act (FELA) to present statistical evidence as to the typical retirement age of employees in the plaintiff's position.

More in-depth discussion of the above cases is below.

Star Equipment, Ltd. v. State of Iowa, Iowa Department of Transportation  In this case, IDOT hired Universal Concrete as a general contractor for two public construction projects to improve rest areas on Interstate 80 in Adair County.  Universal Concrete is a "Targeted Small Business," as defined by Iowa Code § 15.102, because it is an Iowa for profit business with annual gross income of less than $4 million and is at least fifty-one percent owned, operated, and actively managed by minorities, women, or persons with disabilities.  Iowa Code Chapter 573 generally requires general contractors to obtain surety bonds for state government construction projects in order to protect subcontractors and materialmen.  Premiums for surety bonds are a significant cost to the general contractor - typically one to three percent of the amount of the bonded contract.  However, under Iowa Code  § 12.44, state agencies are required to waive the bond requirement for TSBs that demonstrate an inability to secure a surety bond due to lack of experience, lack of net worth, or lack of capital.  Under this provision, IDOT waived the construction surety bond requirement as to Universal Concrete.  Universal Concrete sub-contracted with Manatt's, Inc., Short's Concrete Cutting Co., and Star Equipment, Ltd. for the Interstate 80 improvement projects.  The projects were completed, and IDOT paid Universal Concrete, retaining $3,436.75 of the contract price.  Universal Concrete, however, failed to pay the subcontractors in full, owing $15,685.55 to Manatt's, $5,775 to Short's Concrete, and $10,851.44 to Star Equipment.  The subcontractors contended that Iowa Code § 573.2[1] imposes liability on IDOT for the amount of their claims.  IDOT contended its liability was limited to the retained amount.  The Court held that IDOT was obligated to step into the shoes of the general contractor (Universal Concrete) and pay the subcontractors' claims for unpaid work on the public improvement where the surety bond was waived and the retained funds were insufficient to cover the amounts owed to the subcontractors.  The Court explained that the purpose of § 573.2 is to protect subcontractors and materialmen against non-payment.  Additionally, the Court noted that if the risk of non-payment fell on the subcontractors rather than the state, fewer subcontractors would work with TSBs.


Hagenow v. Schmidt The Iowa Supreme Court reviewed Plaintiffs' appeal from judgment on a defense verdict in this rear-end collision case.  The defendant, Betty Schmidt, a 75-year-old woman, was making a right hand turn on a red light and did not see a pickup truck stopped in the right turn lane in front of her.  Schmidt drove into Dennis Hagenow's truck, lodging her vehicle under his.  Schmidt had not perceived any problem with her vision or her health prior to the accident.  She was taken by ambulance to the hospital, and an hour after arriving at the hospital, she realized that she was unable to see to her left side.  It was determined that Schmidt had a stroke, which caused her to lose vision to the left side from both eyes.  Although Schmidt's medical chart stated it was unclear whether the stroke happened before or after the accident, her treating physician gave the opinion that Schmidt likely suffered the stroke before the accident.  Ordinarily, crashing into another vehicle at a red light constitutes negligence per se.  However, Schmidt argued that her "sudden medical emergency" rendered her free from liability.  The Court explained the difference between the doctrines of legal excuse and sudden emergency.  A "legal excuse" excuses the defendant's failure to obey a statute when confronted with an emergency not of her own making, whereas a "sudden emergency" is merely an expression of the reasonable person standard of care such that the law only requires a defendant to act reasonably in the event of an emergency.  The Court found that Schmidt was entitled to present a defense based on sudden emergency or legal excuse to the jury and affirmed the jury verdict in favor of Schmidt. 


Rent-A-Center v. Iowa Civil Rights Commission  Nicole Henry began working for Rent-A-Center in April 2007.  In June 2007, as a condition of her continued employment, Henry signed an Arbitration Agreement with Rent-A-Center, agreeing to arbitrate all claims arising out of or related to her employment.  When the company declined to accommodate a 20-pound lifting restriction due to Henry's pregnancy, she was given a choice between unpaid leave and termination.  Henry chose unpaid leave and filed a complaint with the ICRC for pregnancy discrimination.  The ICRC then filed a statement of charges with the Iowa Department of Inspections and Appeals (DIA), charging Rent-A-Center with ICRA violations.  Rent-A-Center contended that the Arbitration Agreement prevented Rent-A-Center from pursuing the charges, arguing that the Federal Arbitration Act (FAA) preempts any state law that would grant authority to the ICRC to bring the claims.  The Court discussed the function of the ICRC to interpret, administer, and enforce the ICRA.  The Court also discussed the purpose of the FAA to liberally favor and enforce arbitration agreements, noting however that a non-party to an arbitration agreement cannot be bound to the agreement.  In EEOC v. Waffle House , the United States Supreme Court held that an arbitration agreement between an employer and an employee did not bar the EEOC from bringing an enforcement action against the employer to obtain relief for the employee.  The Iowa Supreme Court likewise held in this case that the arbitration agreement between Henry and Rent-A-Center did not bar the ICRC from bringing an enforcement action against the company based on Henry's claims because the ICRC was not a party to the arbitration agreement, and the ICRC has independent authority to investigate and rectify violations of the ICRA.    


Giza v. BNSF Railway Company The plaintiff, John Giza, had worked for the defendant railroad company since 1969.  Giza's job was physically demanding, requiring him to assemble and dissemble trains.  In October 2009, Giza was thrown off a railcar when the train derailed, resulting in torn and sprained ligaments in his left knee.  In November 2009, Giza underwent orthopedic surgery on the knee.  Despite physical therapy and knee injections after surgery, Giza could not go back to his former job because he could no longer climb ladders, walk on uneven surfaces, or stand for long periods of time.  Giza filed suit against the railroad company under FELA, which provides that railroads engaged in interstate commerce are liable to any employee injured due to the railroad's negligence.  Trial was limited to the question of damages.  Giza sought lost earning capacity, loss of value of household work services, and damages for his pain and suffering.  Giza was nearly 59 years old when the accident occurred, and he was eligible to retire with full benefits at age 60 because he had worked for the railroad for over 30 years.  However, Giza testified that he intended to work until age 66.  BNSF's expert filed a report showing that railroad employees with 30 or more years of service retire at an average age of 60.7, and over 62 percent of them retire at age sixty.  The district court, however, granted Giza's motion in limine to keep this evidence out of the trial.  At trial, Giza testified he planned to work until age 66; Giza's expert calculated $755,000 in lost income based on a retirement age of 66.  The jury returned a verdict of $1.25 million in favor of Giza.  BNSF appealed, arguing it should have been permitted to introduce statistical evidence of the typical retirement age of railroad workers.  The Court agreed, noting that Giza's expert's report indicated age 66 (Giza's claimed intended retirement age) is when an individual can retire on full Social Security benefits, but as a railroad worker Giza does not participate in Social Security.  The Court held BNSF could introduce evidence of when railroad employees with 30 years of service typically retire so long as the evidence does not directly or indirectly refer to retirement benefits.  The judgment was reversed and remanded for a new trial.


" ... when a bond has been waived pursuant to § 12.44, the remedies provided for under this paragraph are available in an action against the public corporation."   Iowa Code § 573.2.  


Best Regards,

Ahlers & Cooney's Litigation Practice Group


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