Thirteen-year-old Efrain Ramos-Domingo (Efrain) was killed by a Union Pacific Railroad Company (Union Pacific) train in Schuyler, Nebraska, on July 27, 2005. Two days later, Efrain's mother, Manuela Domingo Gaspar Gonzalez (Manuela), was approached by a Union Pacific claims representative and signed a document releasing Union Pacific from liability for Efrain's death, in exchange for $15,000. The primary question presented in this appeal is whether Manuela has alleged facts that would show the purported release to be void or voidable.
Manuela filed a complaint in district court on November 27, 2006, alleging claims for wrongful death and breach of fiduciary duty. Specifically, Manuela alleged that the design of the pedestrian crossing at which Efrain had been killed, and the way in which Union Pacific operated trains there, had been negligent and that Union Pacific's negligence had caused Efrain's death.
But Manuela also alleged facts with respect to her release of Union Pacific from liability. Manuela alleged that 2 days after Efrain's death, a Union Pacific claims representative had approached her with respect to settlement. Manuela does not
Manuela alleged that she had not understood the meaning of the release and had not known that by signing the release, she was giving up the right to pursue legal action against Union Pacific arising from Efrain's death. She alleged that Union Pacific's claims representative had not advised her of the legal consequences of signing the release.
Union Pacific filed a motion to dismiss Manuela's complaint pursuant to Neb. Ct. R. Pldg. § 6-1112(b)(6). Union Pacific argued that the release barred Manuela's claims and that if Manuela was asking the court to void the release, then she was required to tender the proceeds of the settlement before doing so. The district court sustained the motion to dismiss with respect to the wrongful death claim, reasoning that the release was an "insuperable bar to relief." But the court overruled the motion with respect to the fiduciary duty claim.
Discovery proceeded on the remaining claim. Among other things, Manuela sought to compel Union Pacific to produce information relating to "each `direct settlement' in which the claimants are not employees of Union Pacific . . . and which involved a death" for the 5 years preceding Efrain's death. Union Pacific objected on the grounds that the information sought was not relevant to the fiduciary duty claim and that the request was overly broad and unduly burdensome. In particular, Union Pacific claimed that the information was not easily available for disclosure. In response, Manuela argued that the information was relevant to show Union Pacific's handling of claims of this kind. And Manuela pointed to deposition testimony of Union Pacific representatives suggesting that Union Pacific maintained a claims database from which it could have easily obtained and supplied the sort of information Manuela was requesting. The district court, without explaining its precise reasoning, denied Manuela's motion.
Manuela also sought to compel production of other documents that, generally speaking, contained information relating to Union Pacific's claims representatives. Manuela sought a privilege log for a document that, according to Union Pacific, contained the handwritten notes of its claims representative about legal advice from counsel for Union Pacific. Manuela also sought documents describing Union Pacific's process for evaluating the performance and productivity of its claims representatives; Union Pacific and Manuela disagreed about their relevance to her fiduciary duty claim. And Manuela sought the Union Pacific file for the claims representative who met with Manuela in this case. Again, Union Pacific and Manuela disputed the relevance of the materials. And again, without particularly explaining its reasoning, the court denied Manuela's motion.
The district court also, upon Union Pacific's motion, entered a protective order with respect to Union Pacific's production of the section of its claims manual dealing with grade crossing accidents. Union Pacific had reservations about producing the document, alleging that it was outdated, was not in use at the time of Efrain's death, was proprietary, and potentially could be used against Union Pacific in other litigation. Union Pacific agreed to produce the document, but asked for and obtained an order from the district court
Manuela moved for attorney fees in association with her motions to compel discovery and submitted an affidavit evidencing expenses that, in her appellate brief, she argues added up to $3,756.70.
II. ASSIGNMENTS OF ERROR
Manuela assigns, as renumbered, that the district court erred by (1) sustaining Union Pacific's motions to dismiss her wrongful death claim, (2) sustaining Union Pacific's motion for summary judgment on her fiduciary duty claim, (3) sustaining Union Pacific's motion for a protective order, (4) overruling her motions to compel discovery, and (5) awarding inadequate attorney fees.
It is important to note, at the outset, that the scope of our review is different with respect to each of Manuela's two claims for relief. Because Manuela's fiduciary duty claim was disposed of by summary judgment, we consider the evidence that was presented in support of and opposition to that motion.
1. WRONGFUL DEATH CLAIM
Manuela's wrongful death claim was dismissed for failure to state a claim. We review a district court's order granting a motion to dismiss de novo.
Although the issue presented is the viability of Manuela's wrongful death claim, our analysis does not relate to the facts underlying that claim. Rather, our analysis is focused on the release, because its existence is apparent on the face of the complaint, and one who seeks to avoid the legal effect of a release of a claim for damages has the burden of pleading and proving the facts which entitle such party to relief.
Manuela argues that the circumstances show her failure to understand the release and the unequal bargaining position that she was in. Union Pacific, on the other hand, relies upon the general rule that in the absence of fraud, one who signs an instrument without reading it, when one can read and has had the opportunity to do so, cannot avoid the effect of one's signature merely because one was not informed of the contents of the instrument.
The general rule is that a release of a claim for relief should not be upheld if fraud, deceit, oppression, or unconscionable advantage is connected with the transaction.
Even an innocent or accidental misrepresentation, if intended to be acted upon by the releasor, and actually relied upon, can be effective to avoid a release.
For instance, in Jordan v. Guerra,
And, the court found, there was sufficient evidence to support the findings that the adjuster had hurried to reach a settlement before the father could secure independent advice, that the settlement was inadequate, and that the adjuster had misled the father into believing that he had no claim beyond funeral expenses and time lost and that those were the only items covered by the release.
Similarly, in Jacobs v. Farmland Mut. Ins. Co.,
And in Heuter v. Coastal Air Lines, Inc.,
On appeal, however, the New Jersey appellate court explained that the rule permitting avoidance of a release was not limited to circumstances involving fraudulent misrepresentation or similar misconduct. Rather, the court explained, it is
The court rejected the defense that the agents had made no "affirmative misstatement," explaining that "even assuming the agents refrained from making any affirmative misstatement," the agents' conduct gave rise to a triable issue "as to whether there had been `imposition practiced upon the signer with intent to deceive him as to the purport of the paper signed.'"
Case law is, in fact, replete with instances in which persons illiterate in English have been able to obtain relief from releases that were inadequately explained to them or that they simply did not understand.
Nebraska law contains similar examples. For instance, in Ward v. Spelts,
Similarly, in West v. Wegner,
Courts have also explained that a release can be voided on the ground of duress, which occurs when pressure is brought to force accession to unjust, unconscionable, or illegal demands.
And in Carroll v. Fetty,
When all of these well-established principles are considered, it is evident that Manuela has alleged facts sufficient to state a claim for relief from the release. She specifically alleged that she does not read or speak English and did not understand the effect of the release. While she has not made specific allegations regarding misinformation or inaccurate language interpretation, affirmative misstatements are not necessary. Manuela has alleged facts that would, if proved, support an inference that the release was void as not representing a binding mutual understanding between the parties. And Manuela has at least alleged facts that "raise a reasonable expectation that discovery will reveal evidence"
These are, obviously, only allegations, and Union Pacific is entitled to present evidence that its employees acted in good faith and acquitted themselves equitably. But Manuela has alleged facts that could allow a trier of fact to conclude otherwise, and given our standard of review on a motion to dismiss, that is all that is required. On the face of her complaint,
Having reached that conclusion, we do not address Manuela's alternative argument that the release was invalid because at the time it was executed, she had not been appointed personal representative of Efrain's estate. Only a decedent's personal representative may bring a claim for wrongful death of that decedent,
But the complaint in this case, while it suggests that Manuela had not been appointed personal representative at the time the release was executed, does not allege anything about when she was appointed or whether or not the settlement was ever ratified by the personal representative or the probate court. Simply put, there is no basis in the complaint to resolve this issue one way or the other, and given our conclusion above with respect to rescission, we need not address it further.
(b) Alternative Grounds for Dismissal
In arguing for affirmance, Union Pacific offers several alternative reasons which it contends support the district court's dismissal of the claim.
(i) Prayer for Relief
Union Pacific contends that Manuela's complaint is defective because it does not contain a prayer that the release be voided. We find this argument unpersuasive for two reasons. First, as noted above, Manuela has alleged facts which would support a finding that the release was not simply voidable, but void ab initio. In that case, affirmative relief from the court is not required; as a technical matter, the claim does not involve "rescission" at all, because there is nothing to rescind. Of course, as a practical matter, the court would still need to find that the release was void in order to grant relief on the underlying claim. But if the release is void, then it is not necessary for the court to grant rescission in order to invalidate it.
Second, to the extent that Manuela's complaint should have sought rescission, she asked for leave to amend her complaint at the hearing on Union Pacific's motion to dismiss. Neb. Ct. R. Pldg. § 6-1115(a) provides that leave to amend a pleading "shall be freely given when justice so requires." But the district court, finding that the release was an "insuperable bar to relief," dismissed the wrongful death claim without expressly ruling on that request.
We review a district court's decision on a motion for leave to amend a complaint for an abuse of discretion, but a district court's discretion to deny such leave is limited.
(ii) Tender and Restitution
Union Pacific argues that Manuela was required, as a prerequisite to her suit, to tender back the $15,000 she received as consideration for the release. Union Pacific relies upon Doe v. Golnick,
a. Rescission at Law and Rescission in Equity
The general rule upon which we relied in Doe was that when a person seeks to avoid the effect of a release, he or she must first tender or return whatever he or she has received for executing the release.
So, because rescission is not accomplished in equity until the court so decrees, the plaintiff has no obligation before suit to tender or return goods or money received from the defendant.
The distinction between rescission at law and in equity is difficult to make in a case involving rescission of a settlement agreement, given that the plaintiff generally seeks to prosecute an underlying claim, as opposed to, for instance, obtaining the return of chattel transferred under a contract. In Doe, we characterized it as rescission at law, based on the fact that the underlying suit was an action at law.
b. Fraud in Inducement and Fraud in Execution
First and most important, it is well established that a rescinding party is not required to tender or return consideration when the ground for rescission is fraud in the execution as opposed to fraud in the inducement.
When a settlement or release is merely voidable, due to fraud in the inducement, the consideration should be tendered or returned as a condition precedent to maintaining an action on the original claim.
It is on that basis that our decision in Doe is distinguishable. In Doe, although our opinion did not discuss it, an examination of the transcript shows that the plaintiff's testimony supported only fraud in the inducement. Although the plaintiff in Doe claimed that the settlement had been obtained by duress, she did not assert that the terms of the settlement varied from what she understood them to be. But in this case, as discussed above, Manuela's complaint alleges facts supporting both fraud in the inducement and fraud in the execution. To the extent that she has alleged fraud in the execution, she was not required to tender or return Union Pacific's consideration in order to assert her underlying wrongful death claim.
c. Other Exceptions
But even where fraud in the inducement is alleged, the tender-or-return requirement may not be imposed where it would be inequitable to do so or where the underlying action is for money damages against which the value of the consideration could be set off against a recovery. We have held that while the power of a party to avoid a transaction for fraud or misrepresentation may be conditioned on an offer to return the consideration received, a failure to do so does not preclude avoidance if the consideration "`is merely money paid, the amount of which can be credited in partial cancellation of the injured party's claim,'" or "`constitutes a comparatively small part of the whole consideration.'"
And courts have also generally held, as this court did in Davy v. School Dist. Of Columbus,
Otherwise, "the wrongdoer goes unwhipped of justice in every case where fraud is practi[c]ed on the improvident or poor, who forsooth have spent some of what was obtained in the deal before discovering the fraud."
In this case, although Manuela has not specifically alleged an inability to repay the $15,000 she received, she did allege that she has "no financial means," including the means to pay for Efrain's burial. It would be reasonable to infer that the $15,000 has been spent and that Manuela is unable to tender that much money to Union Pacific. Under those circumstances, it is reasonable to infer from Manuela's complaint that "restoration [may be] impossible" within the meaning of our decision in Davy
(iii) Evidence That Manuela's Native Language Is Spanish
Union Pacific also argues that the release was translated to Manuela in Spanish and that, therefore, she should have understood it. In order to understand this argument, it is necessary to briefly examine the record that was developed on the fiduciary duty claim after the wrongful death claim was dismissed. The evidence, generally summarized, shows that when the release was executed, Manuela was accompanied and advised by the man with whom she was living and a priest who spoke Spanish, who tried to explain the release to her. But Manuela averred that her first language is not Spanish, but Q'anjob'al, a Mayan dialect. She averred that at the time of the settlement, she understood some Spanish, but was not fluent.
Union Pacific takes issue with that averment, pointing out that the affidavit she made for the record was read to her in
But, more important, Manuela has appealed from the dismissal of her wrongful death claim. As noted above, the scope of our review is limited, on that claim, to Manuela's complaint. In her complaint, she alleged that she did not speak English or understand the release and its legal consequences. Union Pacific's argument is directed at whether she could ultimately prove those facts, but under our standard of review, we ask only whether her allegations are plausible. They are.
(iv) Reasonable Diligence
Finally, Union Pacific argues that Manuela failed to prosecute her claim for rescission with reasonable diligence. We have said that a party seeking rescission of a contract on the grounds of fraud, misrepresentation, or business coercion must do so promptly upon the discovery of the facts giving rise to the right to rescind.
The complaint here was filed 16 months after the accident, and there is no basis in the complaint for evaluating when Manuela might have learned of the basis for rescission. Nor is there any basis in the complaint for concluding that Union Pacific was somehow unfairly prejudiced by any delay. Nor, we note, would the timeliness of Manuela's claim for rescission be at issue were the release to be found void, as opposed to voidable. On the facts alleged here, we cannot say as a matter of law that Manuela failed to act within a reasonable time
(c) Conclusion on Wrongful Death Claim and Rescission
In sum, we find that Manuela has alleged facts that, if proved, could demonstrate that the release was void on the basis of its failure to represent a binding mutual understanding of the parties or was voidable as the product of fraud, overreaching, or duress. We find no merit to Union Pacific's alternative grounds for affirming the dismissal of Manuela's wrongful death claim. In particular, we find that tender or return of the consideration for the release is not necessary if the release is void due to fraud in the execution and that even if it is merely voidable, Manuela may still be able to prove an exception to the tender requirement. Therefore, we find merit to Manuela's first assignment of error. The district court erred in dismissing her wrongful death claim.
2. FIDUCIARY DUTY CLAIM
Manuela argues that the court erred in granting summary judgment against her fiduciary duty claim. In reviewing a summary judgment, we view the evidence in the light most favorable to the party against whom the judgment was granted, giving that party the benefit of all reasonable inferences deducible from the evidence.
Manuela argues that Union Pacific had a fiduciary duty to act in her interests, which duty its representative breached by permitting her to settle her claim. Evaluating Manuela's argument will, again, require a brief examination of the record that was made after the dismissal of the wrongful death claim and submitted on the motion for summary judgment. Manuela relies on evidence that the Union Pacific claims representative who negotiated the settlement held himself out to Manuela as being concerned about her well-being.
At his deposition, the claims representative explained that based on his knowledge of Efrain's accident, he did not believe Union Pacific had been at fault, but that Union Pacific wants to be a "good neighbor" in Schuyler, so the settlement was an attempt to help Efrain's family with burial expenses. The claims representative offered a $15,000 settlement to pay for the costs of the funeral home, travel to Guatemala to bury Efrain, and incidental expenses. Manuela points to evidence in the record suggesting that Union Pacific's claims representatives are trained to gain the trust and confidence of potential claimants in order to facilitate settlement. And in her affidavit, Manuela averred that Union Pacific employees had told her that "they were here to offer their help."
This, according to Manuela, was sufficient to support a finding of a fiduciary duty from Union Pacific to Manuela. We disagree. A fiduciary duty arises out of a confidential relationship which exists when one party gains the confidence of the other and purports to act or advise with the other's interest in mind.
Obviously, the mere fact that the parties entered into a settlement agreement is insufficient to support a finding of
Manuela also suggests that a fiduciary duty was created by the claims representative's, in effect, "practicing law."
And the fiduciary nature of the attorney-client relationship is premised upon the client's right to believe and rely upon his or her attorney's representations and to be governed by the attorney's counsel.
3. DISCOVERY ISSUES
Manuela's three final assignments of error are directed at the court's rulings on the parties' disputes during the discovery process. Decisions regarding discovery are directed to the discretion of the trial court, and will be upheld in the absence of an abuse of discretion.
(a) Protective Order
The first argument we address is Manuela's claim that the court erred in granting Union Pacific's motion for a protective order regarding its claims manual. As described above, Union Pacific obtained an order that the parties were to keep the document secure and private, not disclose it for any purpose other than this case, not distribute it to any third persons other than counsel or retained experts, and
Neb. Ct. R. Disc. § 6-326(c) provides that a trial court may, "for good cause shown, ... make any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense." The law gives trial courts broad latitude to grant protective orders to prevent disclosure of materials for many types of information, including, but not limited to, trade secrets or other confidential research, development, or commercial information.
Union Pacific argued that the claims manual should be protected because, among other reasons, it was outdated, was proprietary, and could be used "inappropriately" in other litigation against Union Pacific. While we recognize that this is not a particularly compelling showing of good cause for a protective order, we also note that Manuela has presented no argument, either to the trial court or this court, explaining how she has been prejudiced by the protective order, and we are mindful of the trial court's broad discretion with respect to protective orders. Because there is no suggestion that Manuela's case has been prejudiced by the protective order, we conclude that the court did not abuse its discretion by entering it.
(b) Motions to Compel
Manuela argues that the district court abused its discretion in denying several of her motions to compel, as described above. But given the procedural posture of this case, we decline to address her arguments. As described above, Union Pacific objected to the discovery requests at issue by, among other things, disputing the relevance of the materials sought. And, because the court did not explain its reasoning for denying Manuela's motions, we do not know whether the court agreed with Union Pacific that the materials sought were irrelevant.
This is significant because, at the time that the discovery disputes were resolved, the issues in this case were fundamentally different. Manuela's wrongful death claim had been dismissed, and discovery was being conducted as to her fiduciary duty claim before summary judgment was entered. But we have concluded that the wrongful death claim should not have been dismissed. And we have concluded that judgment was properly entered against Manuela on the fiduciary duty claim.
So, when this case is remanded, the claim upon which discovery was being conducted will be gone and, instead, any discovery will be conducted with respect to the wrongful death claim (and related rescission arguments). This means that the relevance of the disputed materials may well be different. We have no way of knowing whether Union Pacific will continue to dispute their relevance, whether
Our appellate review of discovery decisions that were made in an entirely different legal context would be at best advisory, and not particularly good advice at that. In other words, because Manuela's claims for relief have changed, the discovery arguments that the parties had been making are moot. So, we do not address the merits of Manuela's arguments regarding her motions to compel. Rather, we direct the parties and the district court, upon remand, to revisit any remaining discovery disputes in light of the changed legal context in which they are presented. And we encourage the district court, should it be required to rule on any such disputes, to articulate the basis for its rulings, in order to facilitate possible appellate review of their merits.
(c) Attorney Fees
Finally, Manuela argues that the court awarded her insufficient attorney fees. When an attorney fee is authorized, the amount of the fee is addressed to the trial court's discretion, and its ruling will not be disturbed on appeal absent an abuse of discretion.
But Manuela's motion for attorney fees was based on an affidavit from her attorney, who averred as to her rates and expenses with respect to the entire January 9, 2008, hearing on her motion to compel. Manuela's attorney averred as to the time necessary for the hearing, travel to the hearing, and writing of her brief, and to various travel expenses. And as noted above, while Manuela prevailed on some of the issues presented by her motion to compel, she did not prevail on all of them.
Attorney fees are a permissible sanction for a discovery violation.
For the foregoing reasons, we conclude that the district court erred in dismissing Manuela's wrongful death claim. As to
AFFIRMED IN PART, REVERSED AND REMANDED IN PART FOR FURTHER PROCEEDINGS, AND IN PART REMANDED WITH DIRECTIONS.