61 F.4th 615
8th Cir.2023Background
- Cargill purchased a commercial crime policy with employee-theft coverage; Diane Backis was a long-time Cargill employee who controlled pricing, sales entries, and accounting at its Albany, NY grain facility.
- From about 2008 until discovery in 2016, Backis falsified sales/prices and manipulated records, inducing Cargill to ship grain to Albany; she diverted ≈$3 million and BDO later calculated total losses of $32,115,192 (primarily ≈$29M in freight costs plus the $3M diverted).
- Cargill notified insurer National Union in April 2016 and in August 2016 invoked the policy’s investigative-settlement clause; Cargill and National Union jointly hired BDO, whose May 28, 2019 report was contractual and "definitive" on facts and quantum.
- National Union conceded coverage of the $3M embezzled but disputed coverage of the remaining ≈$29M freight loss; National Union sued for declaratory relief, Cargill counterclaimed for breach; district court granted judgment on the pleadings for Cargill; National Union appealed.
- Controlling legal questions: whether judgment on the pleadings was proper; whether Backis’s conduct qualified as employee "theft" (a "taking"); whether the freight loss resulted "directly from" the theft; and when prejudgment interest accrues.
Issues
| Issue | Plaintiff's Argument (Cargill) | Defendant's Argument (National Union) | Held |
|---|---|---|---|
| 1. Was judgment on the pleadings proper? | Pleadings incorporate BDO report; facts definitive; no material dispute. | Material facts remain and discovery needed; reserved defenses. | Yes. Report is binding; pleadings lack factual allegations to defeat 12(c). |
| 2. Did Backis’s conduct constitute "employee theft"/a "taking"? | Her control of pricing/records and inducement to ship grain amounted to an unlawful taking. | No physical seizure; her conduct wasn’t a "taking." | Yes. "Taking" includes implicit transfer of control; her exercise of control was theft. |
| 3. Did the ≈$29M freight loss result "directly from" the theft? | BDO found shipments (and freight costs) would not have occurred but for the scheme; no intervening cause. | Cargill’s decision to ship was an intervening act breaking causation. | Yes. The scheme was designed to induce shipments; losses flowed directly from the theft. |
| 4. When does prejudgment interest begin? | From Cargill’s April 2016 notice/request letter to insurer. | From the date BDO’s Report fixed the loss amount (May 2019). | April 2016. Minnesota statute triggers interest from date a request for payment is made; the notice sufficed. |
Key Cases Cited
- Ashley Cnty. v. Pfizer, Inc., 552 F.3d 659 (8th Cir.) (Rule 12(c) / judgment on the pleadings standard)
- Potthoff v. Morin, 245 F.3d 710 (8th Cir.) (accept pleaded facts and reasonable inferences on Rule 12 review)
- Avon State Bank v. BancInsure, Inc., 787 F.3d 952 (8th Cir.) (fraudulent employee acts can cause a direct loss to employer)
- Schwan’s Sales Enters., Inc. v. SIG Pack, Inc., 476 F.3d 594 (8th Cir.) (prejudgment interest governed by state law)
- Midwest Fam. Mut. Ins. Co. v. Wolters, 831 N.W.2d 628 (Minn.) (insurance contract interpretation principles)
- Econ. Premier Assur. Co. v. W. Nat’l Mut. Ins. Co., 839 N.W.2d 749 (Minn. Ct. App.) (give policy terms plain and ordinary meaning)
- Arcadia Dev. Corp. v. Cnty. of Hennepin, 528 N.W.2d 857 (Minn.) (purpose of prejudgment interest: compensate and promote settlement)