Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Maverick Benefit Advisors, LLC v. Bostrom

Supreme Court of Wyoming

October 6, 2016

DAVID J. BOSTROM; BOSTROM ENTERPRISES, LLC; and MOUNTAIN STATES REVIEW, INC., Appellees (Defendants/Third Party Plaintiffs).

         Appeal from the District Court of Washakie County The Honorable David B. Park, Judge

          Representing Appellants: Douglas W. Bailey and Henry F. Bailey, Jr. of Bailey|Stock|Harmon|Cottam P.C., Cheyenne, Wyoming. Argument by Mr. Douglas Bailey.

          Representing Appellees: Timothy W. Miller of Miller Law Office, Casper, Wyoming.

          Before BURKE, C.J., and HILL, DAVIS, FOX, JJ, and DAY, D.J.

          FOX, Justice.

         [¶1] The purchasers of a health claims administration company learned that they had not acquired all the assets they contracted to purchase. After continuing to operate the business for 18 months, they stopped making payments on the Promissory Note and commenced an action asserting breach of contract, among other claims. The seller counterclaimed for breach of contract, seeking full payment under the Asset Purchase Agreement, and the purchasers raised the affirmative defense that seller was first to breach. At trial, at the close of the purchasers' evidence, the district court granted seller's Rule 50 motion for judgment as a matter of law. It held that the purchasers failed to prove damages, and noted that rescission was no longer available because they elected to seek damages. The district court went on to enter judgment in favor of the seller, ruling that the purchasers' first-to-breach affirmative defense was no longer available. We conclude that because they continued operating the business long after they had knowledge of the seller's alleged breach, the purchasers waived the first-to-breach affirmative defense, and we affirm the district court's order.


         [¶2] We consolidate and restate the issues as follows:

1. May the purchasers assert the first-to-breach affirmative defense on the seller's breach-of-contract counterclaim?
2. Does the seller have a contractual right to its attorney fees on appeal?


         [¶3] Mountain Benefit Associates, LLC (MBA) is a third-party administrator of health benefit plans for self-insured and partially self-insured employers. David Bostrom started MBA in the mid-1980s. In August or September of 2009, Mr. Bostrom approached Taylor Haynes (Dr. Haynes) regarding his potential purchase of MBA, and over the course of the next few months, Mr. Bostrom; Dr. Haynes; and Elisabeth Wasson, Dr. Haynes' wife, had a number of discussions and written communications regarding the sale of MBA. During that time, Mr. Bostrom provided Dr. Haynes and Ms. Wasson with information, including enrollment records for the clients of MBA. In addition, Dr. Haynes and Ms. Wasson submitted written questions to Mr. Bostrom.

         [¶4] One such question asked for a "[b]rief description of any significant client relationships severed within the last two years." In response, Mr. Bostrom identified three groups that had terminated their relationships with MBA over the last two years. Ms. Wasson explained that because the major asset they were purchasing was the client list, or MBA's book of business, the retention rate of MBA's clients was significant to her when she evaluated the business. Mr. Bostrom represented that MBA had a client retention rate of 98 percent.

         [¶5] On February 1, 2010, Dr. Haynes and Ms. Wasson's business, Maverick Benefit Advisors, LLC (Maverick), entered into an Asset Purchase Agreement with MBA pursuant to which Maverick was to purchase MBA's health insurance claims administration business. That agreement contained a provision warranting the information provided by MBA was true:

The representations and warranties of the Seller contained in this Agreement or other instrument furnished by the Seller pursuant to this Agreement do not contain any untrue statement of a material fact and do not omit to state any fact necessary to make any statement herein or therein not misleading or necessary to a correct presentation of all material aspects of the Business and the matters contemplated under this Agreement.

         Maverick agreed to pay a total of $4, 395, 582 for the business. Maverick paid one-half of the purchase price in cash and executed a Promissory Note for the remaining balance of $2, 197, 791. Maverick's principals, Dr. Haynes and Ms. Wasson, personally guaranteed the note. In addition, Maverick entered into a Personal Service Contract with Mr. Bostrom, the previous owner of MBA, to secure his assistance with the transition in ownership and management of the business.

         [¶6] Ms. Wasson testified that over the next 18 months, she discovered a number of inaccuracies in the information provided by Mr. Bostrom prior to the sale. For example, the 98 percent retention rate provided by Mr. Bostrom was not supported by the facts: over the two years prior to the purchase, MBA had lost 35 percent of its business. At trial, Mr. Bostrom admitted that when he responded to the question of whether MBA had lost any significant clients, he should have included a fourth group, Oftedal Construction Company, which had approximately 200 members enrolled on average, but that he failed to do so. He also admitted that MBA lost a number of other clients that he did not consider to be significant and therefore did not disclose to Dr. Haynes and Ms. Wasson. In fact, in 2008, MBA lost a total of 19 groups; and in 2009, it lost a total of 15 groups.[1]

         [¶7] Ms. Wasson and Dr. Haynes also discovered that Mr. Bostrom had failed to disclose information relating to the Wyoming Associated Builders Insurance Trust (WABIT) group, MBA's largest client. The enrollment figures provided by Mr. Bostrom to Dr. Haynes and Ms. Wasson showed that WABIT had 780 enrolled members; after the purchase, they learned that WABIT's enrollment had steadily declined from July of 2009 through closing on the sale of MBA to 300-350 members, roughly half of what had been represented. In addition, in July of 2009, MBA advanced $84, 241 to WABIT because WABIT did not have enough money to cover pending claims. MBA made a second advance to WABIT in November of 2009 in the amount of $73, 000.[2] Also in November, Mr. Bostrom learned that WABIT had lost a lawsuit and its checking account was being garnished to pay attorney fees. Mr. Bostrom admitted that he did not disclose WABIT's declining enrollment, the money MBA had advanced to WABIT, or WABIT's legal and financial trouble to Dr. Haynes and Ms. Wasson.

         [¶8] In August of 2009, MBA's net income was approximately $40, 000 per month. Maverick purchased MBA in February of 2010. By the end of 2010, its net income was $5, 000 per month. Maverick stopped making payments on the Promissory Note after August of 2011 and filed this lawsuit against Mr. Bostrom; Bostrom Enterprises, LLC; and Mountain States Review, Inc. (hereinafter collectively referred to as Mountain States), seeking damages but not rescission. Mountain States counterclaimed on the Promissory Note and brought a third-party complaint against Maverick, MBA, Dr. Haynes, and Ms. Wasson (hereinafter collectively referred to as Maverick) on the Personal Guaranty. Maverick asserted an affirmative defense that Mr. Bostrom was the first to breach the contract and Maverick is therefore excused from performing its contractual duties.

         [¶9] At trial, after Maverick rested its case, Mountain States moved for judgment as a matter of law on all of the pending claims. The district court granted the motion, ruling that Maverick had not proven damages:

I think the jury just would have no way of computing damages in this case for any of those claims so based on the lack of evidence from which the jury could with some certainty compute damages and the law is clear that a jury may not speculate or guess as to damages, those claims have to fail because of the fact that even if the jury were to find those breaches they would be unable to award any damages.

         The district court also granted the motion with respect to Mountain States' claims on the Promissory Note and the Personal Guaranty and ruled that Maverick's first-to-breach affirmative defense could not be presented to the jury. The court entered judgment for the balance of the note, plus interest, in favor of Mountain States. Maverick timely filed this appeal, raising only the issue of its ability to assert its affirmative defense.

         STANDARD ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.