Hopp v. Leistad Systems, Inc.

IN THE COURT OF APPEALS OF IOWA

No. 22-0056
Filed January 25, 2023

BRADLEY HOPP, MEGAN HOPP, DAWN POWELL, GRACE ROBINSON and
LARRY STONE,
Plaintiffs-Appellants,

vs.

LEISTAD SYSTEMS, INC., ROGER LEISTAD, Individually, ROGER LEISTAD,
as agent of Deborah Leistad, ROGER LEISTAD, as agent, owner,
shareholder, president, or director of Leistad Systems, Inc., ROGER
LEISTAD, as agent of Edward Leistad, DEBORAH LEISTAD, Individually,
DEBORAH LEISTAD, as agent, shareholder, director, or officer of Leistad,
Inc., DEBORAH LEISTAD as beneficiary of the Estate of Edward Leistad and
as beneficiary of The Edward L. Leistad Revocable Trust Dated September
27, 2016, the EDWARD REVOCABLE TRUST dated September 27, 2016,
Defendants-Appellees.
________________________________________________________________

Appeal from the Iowa District Court for Clay County, Charles Borth, Judge.

Plaintiffs appeal the grant of summary judgment for defendants on claims

stemming from a contract dispute. AFFIRMED.

Ryan Beardshear of Metcalf & Beardshear, Moville, for appellants Megan

and Bradley Hopp.

Anne J. Quail of Quail Law, PLC, Spencer, for appellants Grace Robinson,

Dawn Powell, and Larry Stone.

Elizabeth R. Meyer and Logan S. Kraus of Dentons Davis Brown, for

appellees Roger Leistad and Leistad Systems, Inc.
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Nick Critelli and Lylea Critelli of Critelli Law, P.C., Des Moines, for appellee

Deborah Leistad.

Martin L. Fisher of Fisher Law Firm, Adair, for appellees Estate of Edward

L. Leistad and Edward L. Leistad Revocable Trust.

Considered by Ahlers, P.J., and Badding and Chicchelly, JJ.
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BADDING, Judge.

Plaintiffs Bradley Hopp, Megan Hopp, Dawn Powell, Grace Robinson, and

Larry Stone were associate distributors of Leistad Systems, Inc., which sold

branded promotional products from Safeguard Business Systems, Inc. They sued

Leistad Systems, along with the estate and trust of its deceased owner, Edward

Leistad; his wife, Deborah; and his brother, Roger, after Leistad Systems was sold

to Safeguard without paying the associate distributors under a termination

provision. The district court granted the motions for summary judgment filed by

the Leistad defendants on all of the associate distributors’ claims. The associate

distributors appeal.

I. Background Facts and Proceedings

Edward Leistad owned a business called Leistad Systems, Inc., which

operated under the name of “Safeguard Midwest.” Leistad Systems ran a regional

distributorship that sold branded promotional products to business customers

under a contract with Safeguard Business Systems, Inc. Edward entered into this

contract with Safeguard in January 1987, which appointed him as a distributor of

Safeguard products and services “with the right to solicit sales of them to

customers located in [his] territory.” He later assigned the contract to his company,

Leistad Systems.

Part of the sales for Leistad Systems came through Edward himself, but

others were accomplished through associate distributors, who earned

commissions for their sales of Safeguard products. At the start of a relationship

with an associate distributor, Edward or Leistad Systems would enter into a

contract with the distributor. Bradley and Megan Hopp signed their contract in April
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2002, Dawn Powell in 2005, and Grace Robinson in July 2012, with an amendment

in January 2013. Larry Stone, who was originally an associate distributor for a

different distributor, did not have a contract with Edward or Leistad Systems when

he started selling for them in 1998, though Edward wrote him a letter in 2001

outlining the terms of their agreement. Although contracts for Powell and Stone

could not be located, the parties agreed that all of them contained a provision for

payments after termination of the agreement.

That provision in the Hopps’ contract with Leistad Systems stated:

We will make payments to you or your estate after termination
of this Agreement under the following circumstances:
(A) If, after this Agreement has been in effect for more than
five (5) years and your total yearly sales exceed $200,000 (i) you die
or become permanently disabled; and (ii) you transfer your rights
under the Agreement to us, we will pay you (or your estate) for four
(4) years after the effective date of termination 50% of net earned
commissions otherwise due to you under the then current
commission schedule on all repeat sales of Safeguard Systems to
customers from whom you were entitled to receive commissions
while this Agreement was still in effect. . . .
(B) We will make additional payments to you (or your estate)
if we sell the Rights to receive commissions to which you would have
been entitled except for termination and you or your estate are then
entitled to payments under (A) above. . . .

Robinson’s contract contained a similar, though not identical, “Payments

After Termination” provision:

Leistad will make payments to Robinson after terminations of
this Agreement under the following circumstances:
(A) If Robinson terminates the Agreement after 5 years.
(B) If Robinson dies or becomes permanently [disabled] within
the first 5 years of the Agreement.
(C) If, after this Agreement has been in effect for more than
five (5) years, you die or become permanently disabled, or you
transfer your rights under the Agreement to us, Leistad will Pay
Robinson for four (4) years after the effective date of terminations or
expiration, 50% of the commissions due Robinson on all repeat sales
of Safeguard products to customers from whom Robinson was
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entitled to receive commissions while this Agreement was still in
effect. . . .

In September 2016, Edward informed his brother, Roger, that he had been

diagnosed with cancer. Around the same time, Edward and his wife, Deborah,

created trusts, into which they transferred all of their shares in Leistad Systems.

The following July, Edward exchanged a series of emails with Powell about his

plans for the company after his death. He mentioned selling his distributorship to

Safeguard but said he would never do so “without making sure all my associates

would also have a good deal. . . . Above all, you will not be left hanging high &[]

dry.” In response, Powell questioned: “[W]ould that mean that all the distributors

in our distributorship would have to sign new contracts?” Edward’s answer is not

in the record but, in September, he asked his brother Roger to help with the sale

of the distributorship to Safeguard with the hope that “the sales teams at his

distributorship could continue to work together.”

Edward died on October 2, 2017, triggering a sixty-day termination provision

in his regional distributorship agreement with Safeguard. The Hopps’ contract with

Leistad Systems in turn provided that it would terminate sixty days after termination

of that regional distributorship agreement, or on January 30, 2018. Though her

contract did not contain that same termination provision, Robinson admitted it

terminated on the same date as the Hopps’ contract, as did Powell and Stone.

Near the end of October, Roger began negotiating Leistad Systems’ sale to

Safeguard. The negotiations resulted in an asset purchase agreement signed by

Deborah on behalf of Leistad Systems and Edward’s trust on January 31, 2018.

Under this agreement, Leistad Systems sold its assets to Safeguard for
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$650,000.00 and entered into a management services agreement to facilitate the

transfer of the distributorship. Roger was named as Leistad Systems’

representative under the agreement and charged with the “handling of the day-to-

day operations of the Business on a temporary basis.”

As part of the sale of Leistad Systems to Safeguard, Megan Hopp, Powell,

Robinson, and Stone had to sign new associate distributor agreements with

Safeguard. These agreements did not contain the same “Payments After

Termination” provisions their old contracts had. Using a template form from

Safeguard, Roger sent the new associate distributor agreements to Hopp, Powell,

Robinson, and Stone to review on January 22, 2018. He encouraged them “to

take the opportunity to review and discuss your [a]greement with your legal

counsel” before signing, although he wanted the signed agreements returned to

him by January 29.

After reviewing the agreement, Powell questioned: “Am I missing something

or did Safeguard take out the part where if we leave Safeguard we get repeat

commissions for a set amount of time? So, it is my understanding that if I die or if

I quit, after 30 days I am just done?” Piggy-backing on Powell’s email, Robinson

asserted: “As Dawn stated, we are vested associates. Anything less is

unacceptable.” In reply, Roger emailed the group that the “‘vested’ issue is . . .

complicated” and best explained “in a one on one format.” He closed his email by

summarizing:

The current Purchase Agreement Debbie has is a good one.
The Management Services Agreement I will have with Safeguard at
the closing is a good one. The Associate Agreements are good ones
and provide positive foundation for all of you going forward. I also
believe it is good for Safeguard. This is a Win-Win for all parties
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involved. This is not the time to bicker on the “vested” issue relating
to termination. This can be addressed in the way forward. Signing
these Agreements insures you are “vested” with your base of
customers and “vested” with the current commission structure
provided to you by Ed, and “vested” to market Safeguard Products
in the territories you have been serving. Please don’t blow it!

Megan Hopp executed her new agreement on January 29, 2018, while

Powell and Robinson signed theirs on January 30. Stone also signed a new

agreement, although his is not in the record. Bradley Hopp did not sign one.

Megan Hopp, Powell, Robinson, and Stone kept selling Safeguard products as

associate distributors through the end of 2018 when Safeguard sold the rights to

Leistad Systems’ former territory to a different regional distributorship. Roger’s

management services agreement was terminated, which prompted the termination

of the 2018 associate distributor agreements.

The Hopps, Powell, and Robinson, filed a multi-count petition against

Leistad Systems; Edward’s estate and trust; and Deborah and Roger in their

individual and representative capacities in January 2020. Their petition included

claims for fraudulent misrepresentation, inducement, and nondisclosure; tortious

interference with a contract; breach of good faith and fair dealing for franchise

agreements under Iowa Code section 537A.10 (2020); breach of fiduciary duty in

wrongfully dissolving their partnership with Edward; and unjust enrichment. In May

2021, Deborah moved for summary judgment on all of the claims against her,

which was followed by similar motions from the other defendants. Around the

same time, the associate distributors successfully added a claim under Iowa Code

chapter 684, Iowa’s Voidable Transactions Act. And Stone was allowed to

intervene in the proceedings as a plaintiff against the Leistad defendants.
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Following a hearing on the motions, the district court entered a ruling

dismissing all of the associate distributors’ claims. The court found that “[e]ach

and every one of the Plaintiffs’ claims rely upon [their] claim that they should have

received some payment due to their claimed ‘vested rights’ under the payment-

after-termination provisions of the associate distributor [agreements] that they had

entered into prior to their January 2018 agreements.” The court reasoned those

claims could not succeed because, whether or not they signed the new

agreements, their old contracts terminated on January 30, 2018. The associate

distributors appeal.

II. Standard of Review

As our supreme court recently stated in Kostoglanis v. Yates:

The standards for granting summary judgment are well
established and need not be repeated in full herein. We review
summary judgment rulings for correction of errors at law. Summary
judgment is proper when the movant establishes there is no genuine
issue of material fact and it is entitled to judgment as a matter of law.
We view the evidence in the light most favorable to the nonmoving
party.

956 N.W.2d 158–59 (Iowa 2021) (cleaned up).

III. Analysis

A. Claims for fraud, tortious interference, breach of good
faith and fair dealing in franchise agreement, and unjust enrichment

Each of these claims seeks damages for the loss of the associate

distributors’ termination payments in their original contracts with Leistad Systems.

Though grounded in different theories, the associate distributors claim their right

to those payments was lost because the Leistad defendants persuaded them to

sign new agreements in 2018 that did not have the payment-after-termination
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provisions. In moving for summary judgment on these claims, the Leistad

defendants argued the associate distributors could not prove they were damaged

because their old contracts terminated on January 30, 2018, and they did not

satisfy the conditions precedent necessary to receive the termination payments

under those contracts. While the district court hung its hat on the former argument,

we conclude both have merit. See Little v. Davis, 974 N.W.2d 70, 73 (Iowa 2022)

(“We can affirm the district court’s grant of summary judgment on any ground urged

on appeal that was also raised in the district court.”).

We first observe that even though not all of the contracts provided they

would terminate sixty days after Leistad Systems’ regional distributorship

agreement with Safeguard terminated,1 all of the associate distributors admitted

that fact in their resistances to the summary judgment motions and in their briefs

on appeal. As a result, if they had not entered into new associate distributorship

agreements with Safeguard, their old agreements with Leistad Systems would

have terminated on January 30, 2018. The district court accordingly found that

any rights the associate distributors may have had under their old agreements

“expired as a matter of law upon the termination of their contracts on

January 30, 2018, regardless of whether or not they signed the 2018 agreements.

They would, therefore, not be entitled to any damages thereunder.”

The associate distributors argue the court erred in reaching that conclusion

because their right to the termination payments survived the termination of their

1 As far as we can tell, the Hopps’ contract is the only one that contained this
particular termination provision. Robinson’s contract did not have a similar
provision, and the contracts for Powell and Stone could not be located.
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contracts.2 See Lorenzen Steffen Ins. Agency, Inc. v. United Fire & Cas. Co.,

No. 02-0113, 2003 WL 1967963, at *3 (Iowa Ct. App. Apr. 30, 2003) (discussing

contract provisions that survived the termination of the contract). But that would

be true only if the conditions precedent to those payments were met. See

Mosebach v. Blythe, 282 N.W.2d 755, 759 (Iowa Ct. App. 1979) (“Conditions

precedent are those facts and events, occurring subsequently to the making of a

valid contract, that must exist or occur before there is a right to immediate

performance, before there is a breach of contract duty, before the usual judicial

remedies are available.” (cleaned up)). The undisputed facts show they were not.

Before payments after termination would be made to the Hopps, their

contract required the agreement to have been in effect for more than five years

with total yearly sales exceeding $200,000 and (1) “you die or become

permanently disabled” or (2) “you transfer your rights under the Agreement to us.”

A separate provision allowed for “additional payments to you (or your estate” if

Leistad Systems sold “the Rights to receive commissions to which you would have

been entitled except for termination and you or your estate are then entitled to

payments” under the preceding paragraph. (Emphasis added.) Robinson’s

agreement, although phrased differently, also required that she die, become

permanently disabled, or transfer her rights under the agreement to Leistad

Systems before becoming entitled to payments after termination.

2For the first time in their reply brief, the associate distributors also argue that their
pre-2018 contracts with Leistad Systems were ambiguous. Our supreme court
has “long held that an issue cannot be asserted for the first time in a reply brief.”
Young v. Gregg, 480 N.W.2d 75, 78 (Iowa 1992). We accordingly grant the Leistad
defendants’ motion to strike this portion of the associate distributors’ reply brief and
do not consider the argument further.
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There is no dispute that the associate distributors were not deceased or

permanently disabled. The focus is instead on the third condition—whether their

rights under the agreement were transferred to Leistad Systems. The associate

distributors argue that “absent the fraudulent conduct by Defendants,” they “could

have, and would have, enforced their rights under [the contracts] upon termination

and demanded a return on their investment.” Even upon viewing the facts in the

light most favorable to the associate distributors, and affording them every

legitimate inference the record will bear, we cannot find support for that assertion

in the record. See Garrison v. New Fashion Pork LLP, 977 N.W.2d 67, 76

(Iowa 2022).

The Hopps’ contract had a provision addressing assignment of their rights

under the agreement, which stated:

You must transfer all your Rights either to another person or
us. You may not assign or transfer your Rights within the first five
(5) years. If you wish to transfer your Rights after five (5) years, the
follow must first occur:
(A) You first offer us your Rights on the terms described
below. This offer to us must be in writing and it must include a list of
all the customers in respect of whom you enjoy Rights. If we do not
accept the assignment of your Rights within thirty (30) days after we
receive your offer, then
(B) You may transfer your Rights to a third person who must
be approved by us and by Safeguard, but we and Safeguard agree
not to unreasonably withhold approval. . . .

The Hopps did not take any steps to transfer their rights under the agreement to

Leistad Systems before or after the contract terminated. Nor did it appear they

intended to do so.

Megan Hopp was asked at her deposition:

Q. Okay. So my question to you is at what point in time did
you go back to this 2002 agreement and offer your rights in writing
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to Leistad, Inc., to Safeguard, to anybody? When did you do that?
A. Go back to this agreement and offer my rights in writing?
Q. Yeah. That’s what it says. You have to offer us your rights.
You have to put your offer in writing. Did you do that? A. There
wasn’t a need to do that.
Q. Okay. Why— A. Why would I need to do that? I’m sorry.
I don’t understand why I would need to do that.

Her husband, Bradley, testified similarly at his deposition:

Q. Okay. Can you tell me what you did within that 120 days
to preserve any rights that you might have had in that contract after
Ed’s death? A. We were still trying to figure out how all the dust was
going to settle. At that time, I had not gone back and reread the 2002
contract, so I was not aware of the . . . 120-day notice. It was
Christmas time and we were busy with a lot of other things, and so I
just—I didn’t know what we needed to do. And, again, based on our
establishment of a trust relationship and based on emails from Ed
that he was looking out for our equity, I trusted that individuals were
going to take care of and do their portion that they needed to do
based on Ed’s will and defend our equity.

But the contract put the onus on the Hopps to request that Leistad Systems

accept the assignment of their rights under the contract. And Leistad Systems’

acceptance was not required, under either the Hopps’ contract or Robinson’s

contract, which simply provided that Robinson’s rights under the agreement “may

not be assigned . . . without the prior written consent of Leistad and Safeguard,

which will not be unreasonably withheld.”

Because the undisputed facts show the conditions precedent for the

termination payments were not met, the associate distributors cannot show they

were damaged by entering into the new agreements in January 2018, which

allowed them to continue selling Safeguard products and receive commissions for

their sales. We accordingly conclude the district court did not err in entering

summary judgment on these claims.
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B. Claim for wrongful dissolution of partnership

For this claim against Leistad Systems and Edward’s estate, the associate

distributors argue they were partners with Edward in the selling of Safeguard

products. As partners, they assert Leistad Systems and Edward owed them a

fiduciary duty in dissolving the partnership and distributing its assets. The

associate distributors seek either specific performance of the partnership

agreement or “damages for the past and future value of [their] ownership interest

in the Leistad-Safeguard distributorship.” The district court granted summary

judgment on this claim, finding the “undisputed facts . . . as evidenced by the

various written contracts between the parties, show an express intention to create

the relationship of principal and independent sales agent,” not partners. We agree.

The written contracts that appear in the record describe the relationship

between the associate distributors and Leistad Systems as “that of principal and

independent sales agent, and not employer and employee or buyer and seller.”

The associate distributors argue “the failure of the words ‘partner’ or ‘partnership’

to appear in the parties’ written agreements is not dispositive.” While that may be

true, see Thorp Credit, Inc. v. Wuchter, 412 N.W.2d 641, 647 (Iowa Ct. App. 1987),

the conduct of the parties and the circumstances surrounding the transaction do

not show an intent to associate or the elements necessary to create a partnership.

See Chariton Feed & Grain, Inc. v. Harder, 369 N.W.2d 777, 785 (Iowa 1985)

(listing those elements but noting the “intent of the parties to associate as partners

is ‘the crucial test’” (citation omitted)).

The district court aptly summarized the record on the partnership elements:
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There is no evidence that Defendants ever shared profits with
Plaintiffs. There is no evidence that Defendants co-owned any of the
assets of Leistad Systems. There is no evidence that Plaintiffs had
control over Leistad Systems. There is no evidence that the parties’
tax returns were ever filed as if their association was a partnership.

The associate distributors point to their website, which lists them as

“Associate Partners.” However, this change was made sometime after they were

employed with Leistad Systems and only because, according to an email from

Edward, it sounded “more impressive than distributors.” That does not show an

intent to become partners. See id. at 787 (“When a party refers to himself or herself

as a partner in the course of a conversation, courts are very reluctant to give the

statement any weight at all.”). Nor does the withholding of some of Megan Hopp’s

commission payments over a ten-year period to pay a regional distributor for the

purchase of his distributorship. This was not a sharing of profits with Hopp but

instead a term of her relationship with Leistad Systems as an independent sales

agent for that distributorship area. The district court correctly granted summary

judgment as to this claim.

C. Claim for voidable transaction

This leaves the associate distributors with their voidable-transaction claim

under Iowa Code chapter 684. This statute “advances the principle that a debtor’s

property constitutes a fund from which the debtor’s obligations should be paid and

the debtor may not frustrate a creditor’s right to obtain satisfaction from the fund.”

Benson v. Richardson, 537 N.W.2d 748, 756 (Iowa 1995). “When a debtor

disposes of property with the intent to delay or defraud creditors, we deem the

disposition inequitable and will set it aside.” Id. The associate distributors cast

themselves as creditors of Edward and Leistad Systems and claim the Leistad
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defendants “knowingly transferred the assets out of Leistad Systems” to Safeguard

“with the intent to delay or defraud” them.

The district court granted summary judgment on this claim, finding “[f]irst,

Plaintiffs and Defendants are in no way parties to the creditor-debtor relationship”

and second that the associate distributors “cannot establish, as a matter of law,

that any fraud was perpetrated by the Defendants.”3 We agree with the latter

conclusion. The undisputed facts show that the sale of Leistad Systems’ assets

to Safeguard “was nothing more than a routine asset-purchase agreement

transacted by an owner-operator looking for an exit.” Algreen v. Gardner,

No. 17-0104, 2018 WL 3057438, at *3 (Iowa Ct. App. June 20, 2018). We affirm

the grant of summary judgment on this claim.

IV. Conclusion

Upon viewing the evidence in the light most favorable to the associate

distributors, we find no genuine issues of material fact precluding summary

judgment on their claims against the Leistad defendants. We accordingly affirm

the district court’s grant of summary judgment on those claims.

AFFIRMED.

3We note the voidable-transactions claim was added to the associate distributors’
petition after the Leistad defendants filed their motions for summary judgment. The
district court nevertheless included the claim in its ruling. While the associate
distributors note that the court made a sua sponte ruling on the claim, they do not
assign that as error on appeal. See Morris v. Steffes Grp., Inc., 924
N.W.2d 491, 498 (Iowa 2019) (holding “unbriefed issues” were waived). So we
consider the issue waived and proceed to the merits.