                     United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                    ___________

                                    No. 02-3788
                                    ___________

Archer Daniels Midland Company,        *
                                       *
            Plaintiff-Appellee,        *
                                       * Appeal from the United States
      v.                               * District Court for the
                                       * District of Minnesota.
Aon Risk Services, Inc. of Minnesota, *
formerly known as Rollins Burdick      *
Hunter of Minnesota, Inc., formerly    *
known as Rollins Hudig Hall of         *
Minnesota, Inc.,                       *
                                       *
            Defendant-Appellant.       *
                                  ___________

                              Submitted: November 17, 2003

                                   Filed: January 21, 2004
                                    ___________

Before MURPHY, LAY, and FAGG, Circuit Judges.
                           ___________

LAY, Circuit Judge.

      Archer Daniels Midland Company (“ADM”) filed suit against Aon Risk
Services, Inc. of Minnesota (“Aon”), its insurance broker, alleging breach of contract,
breach of fiduciary duty, and negligence due to Aon’s failure to obtain contingent
business interruption and extra expense insurance coverage as requested by ADM.
The jury returned a verdict in favor of ADM. Aon appeals, asserting several errors.
We affirm.

                                I. BACKGROUND

       ADM, a Delaware corporation with its principal place of business in Illinois,
processes and markets a variety of agricultural commodities such as corn, wheat, and
soybeans. ADM uses corn to make such products as high-fructose corn syrup
(“HFCS”) and ethanol. Aon, a Minnesota corporation with its principal place of
business in Minnesota, is an insurance broker who acts as an intermediary between
insurance companies and its clients in trying to place insurance coverage for those
clients.

       Beginning in 1983, ADM established a property-insurance program known as
the “difference-in-conditions” (“DIC”) program. The DIC program was a “layered”
program covering all risks of property loss that were not specifically excluded. Under
this program, multiple insurers provided different layers of coverage totaling $100
million. The first five layers of coverage were in the amount of $5 or $10 million
each. The final layer was a $50 million excess layer that would be penetrated only
if the underlying insurers had to pay their $50 million in coverage.

      Each insurer in the DIC program provided coverage under the same terms,
which were found in the DIC policy specifically drafted for ADM. The policy
provided traditional property-insurance coverages and also included coverages for
contingent business interruption and extra expense.1

      1
          These coverages were found in Section 13Q, which provided as follows:

      Contingent Business Interruption and Extra Expense[:] This policy
      covers against loss of earnings and necessary extra expense resulting
      from necessary interruption of [ADM’s] business . . . caused by damage
                                         -2-
       Aon became ADM’s insurance broker for the DIC program in 1988. For the
1992-93 policy period, ADM instructed Aon to renew coverage in the DIC program
under the terms of the DIC policy but to obtain coverage for the $50 million excess
layer from a new insurer because the previous insurer’s premium increase was
unacceptable. Aon procured coverage for the $50 million excess layer from Hartford
Fire Insurance Company (“Hartford”). However, Aon failed to include contingent
business interruption and extra expense insurance coverage in the Hartford policy, an
omission that forms the basis of the case leading up to this appeal.

       In 1993, flooding occurred in many parts of the Mississippi River system,
which negatively impacted the Midwestern corn crop for that year and hampered the
ability to move products by barge on the river. ADM claimed the flood caused it to
incur extra expense in order to procure sufficient quantities of corn for its processing.
ADM also claimed prolonged closures of parts of the Mississippi and Illinois Rivers
caused it to lose income and incur additional expense as it sought alternative means
of transportation. ADM ultimately submitted claims to its insurers for losses from the
flood totaling more than $166 million. ADM believed the contingent business
interruption and extra expense coverages applied to a substantial amount of these
losses since Midwestern farmers, who were unable to provide sufficient corn, and the
U.S. Government, which operated the Mississippi River system, were two of ADM’s
suppliers.

      ADM’s insurers, other than Hartford, paid approximately $10.7 million to
ADM for damage to its property and certain other losses caused by the flood. The
insurers denied payment on ADM’s claims for contingent business interruption and


      to or destruction of real or personal property, by the perils insured
      against under this policy, of any supplier of goods or services which
      results in the inability of such supplier to supply [goods or services to
      ADM].


                                           -3-
extra expense, concluding those coverages did not apply because Midwestern farmers
and the U.S. Government were not “any supplier.”

       ADM filed suit against the DIC program insurers, including Hartford, in federal
court in Illinois alleging the contingent business interruption and extra expense
coverages provided under their policies extended to ADM’s lost income and extra
expense incurred as a result of the flood’s damage to Midwestern farmers and the
U.S. Government. ADM and the insurers (other than Hartford) eventually settled for
$23.5 million.2 The district court granted Hartford’s motion for partial summary
judgment on September 9, 1997, finding that Hartford’s policy insured only against
direct physical damage to ADM’s insured property.

       Thereafter, ADM filed suit against Aon on September 25, 1997, alleging
breach of contract, breach of fiduciary duty, and negligence, and seeking $50 million
in damages for Aon’s failure to secure contingent business interruption and extra
expense coverages in the Hartford policy. Aon moved to dismiss on the grounds that
ADM could not seek to recover from Hartford (or, therefore, Aon) in the $50 million
excess layer because it had not exhausted the underlying $50 million layers. The
district court3 denied the motion, holding that ADM had exhausted the lower layers
by agreeing to settle with the underlying insurers for a partial sum and absorbing the
balance of the $50 million.




      2
       Prior to settlement, the district court held that Midwestern farmers and the
U.S. Government were within the scope of the “any supplier” language of the
contingent business interruption and extra expense coverages. Archer-Daniels-
Midland Co. v. Phoenix Assurance Co. of New York, 936 F. Supp. 534, 544 (S.D. Ill.
1996).
      3
      The Honorable John R. Tunheim, United States District Judge for the District
of Minnesota.
                                         -4-
       Prior to trial, the district court entered orders excluding evidence that ADM
“passed on” its extra corn expense to its consumers by raising prices and that ADM
continued to produce ethanol during the period following the flood even though it
was losing money on this production. The district court also excluded evidence
proffered by one of Aon’s expert witnesses that ADM could have maximized profit
and minimized loss by switching production from ethanol to HFCS. In addition, the
district court prohibited Aon from introducing evidence concerning allegations of
price-fixing by ADM in the HFCS market.

       A jury trial began on March 4, 2002. Since Aon admitted negligence during
its opening statement, the trial primarily focused on damages. ADM introduced
evidence of the extra expense it incurred in obtaining suitable corn for production of
ethanol and HFCS. Aon offered expert testimony to refute ADM’s evidence and
argued that ADM’s alleged losses were offset by ADM’s use of hedging, a program
by which ADM would buy and sell commodity futures in order to minimize loss due
to price fluctuation. According to Aon, the expert ADM used to present evidence of
its increased corn costs did not take hedging into account in his analysis of ADM’s
total corn costs. On April 15, 2002, the jury returned a $16.5 million verdict in favor
of ADM. The district court entered judgment in favor of ADM on April 17, 2002.

       Aon then moved for a new trial, judgment as a matter of law, and a stay of
execution of judgment. The district court denied Aon’s post-trial motions and
awarded ADM $3.6 million in prejudgment interest. On appeal, Aon argues that the
district court erred in denying its motions for judgment as a matter of law or a new
trial and in awarding ADM $3.6 million in prejudgment interest.




                                          -5-
                                 II. DISCUSSION

A. Choice of Law

       We first address Aon’s contention that the district court should have construed
the DIC policy under Illinois law rather than Minnesota law. “In a diversity case, a
federal court applies the choice of law rules of the forum state.” Northwest Airlines,
Inc. v. Astraea Aviation Servs., Inc., 111 F.3d 1386, 1393 (8th Cir. 1997). The first
consideration under Minnesota’s choice of law rules is whether an actual conflict
exists between the laws of the different states. Jepson v. Gen. Cas. Co. of Wis., 513
N.W.2d 467, 469 (Minn. 1994). If the choice of one state’s laws over the other does
not create an actual conflict, there is no choice of law issue to be decided. Vetter v.
Sec. Cont’l Ins. Co., 567 N.W.2d 516, 521-22 (Minn. 1997).

       In concluding that it correctly applied Minnesota law, the district court pointed
out that Aon failed to demonstrate that a conflict exists between the legal principles
and standards applicable to contract interpretation, negligence, or breach of contract
and fiduciary duty under Minnesota and Illinois law. Thus, there was no choice of
law issue for the district court to decide. Id. at 522. We conclude the relevant legal
principles concerning the district court’s interpretation of the DIC policy are the same
in both states.

B. Business Interruption

       On appeal, Aon argues that ADM cannot recover contingent extra expense
under Section 13Q because it did not suffer any business interruption as a result of
the flood. Aon asserts that under Section 13Q, ADM was required to establish that
it actually ceased production at its plants in order for the extra expense coverage to
apply. Because ADM failed to prove this element of its case, Aon claims it is entitled
to judgment as a matter of law.

                                          -6-
       Although Aon couches its argument in terms of a failure of proof, the crux of
its argument is that the district court incorrectly interpreted the meaning of the phrase
“interruption of business” as used in Section 13Q. Because the district court provided
the meaning of “interruption of business” in a jury instruction, ADM argues we must
review the issue for an abuse of discretion. See Warren v. Prejean, 301 F.3d 893, 900
(8th Cir. 2002) (stating that a district court’s jury instructions are reviewed for an
abuse of discretion). However, the district court fashioned its jury instruction based
on an interpretation of the DIC policy. All issues related to the district court’s
interpretation of an insurance policy present questions of law, which we review de
novo. United Fire & Cas. Co. v. Fid. Title Ins. Co., 258 F.3d 714, 718 (8th Cir.
2001).

       An insurance policy is a contract, the terms of which must be construed in the
context of the entire contract. Outboard Marine Corp. v. Liberty Mut. Ins. Co., 607
N.E.2d 1204, 1212 (Ill. 1992); Henning Nelson Constr. Co. v. Fireman’s Fund Am.
Life Ins. Co., 383 N.W.2d 645, 652 (Minn. 1986); Employers Mut. Liability Ins. Co.
of Wisc. v. Eagles Lodge of Hallock, Minn., 165 N.W.2d 554, 556 (Minn. 1969). In
construing an insurance policy, the court’s overriding concern must be to ascertain
the intent of the parties based on the language of the whole policy. Outboard Marine,
607 N.E.2d at 1212; Bobich v. Oja, 104 N.W.2d 19, 24 (Minn. 1960); Gen. Mills, Inc.
v. Gold Medal Ins. Co., 622 N.W.2d 147, 151 (Minn. Ct. App. 2001). Unambiguous
language in the insurance policy must be given its plain and ordinary meaning, but
any ambiguities in the policy’s language will be construed in favor of the insured.
Outboard Marine, 607 N.E.2d at 1212; Henning, 383 N.W.2d at 652; Bobich, 104
N.W.2d at 24.

       The district court interpreted the phrase “interruption of business” as applied
to the extra expense coverage in Section 13Q as follows:




                                           -7-
      The phrase “interruption of business,” as used in section 13Q of the DIC
      policy, does not require ADM to show that its corn processing plants
      stopped or slowed production. An interruption of business means some
      harm to the insured’s business, including the payment of extra expense,
      that would not have been incurred but for damage that an insured peril
      has caused to the property of any supplier.

In our view, the district court’s interpretation of the phrase “interruption of business”
as applied to the extra expense coverage of Section 13Q is based on the language of
the policy as a whole and correctly embodies the parties’ intent.

       Section 13Q of the DIC policy insures against loss of earnings and extra
expense incurred as a result of a necessary interruption of business. The loss of
earnings and extra expense coverages provided by Section 13Q are separate and
distinct, and, as discussed below, they mirror the coverages provided in other sections
of the policy.

        The DIC policy sets forth the terms of coverage for extra expense in Section
10. Section 10B defines “extra expense” as “the excess, if any, of the total cost
. . . chargeable to the conduct of the insured’s business over and above the total cost
that would normally have been incurred to conduct the business during the same
period had no peril insured against and not excluded occurred.” Section 10B
specifically excludes from the definition any “extra expense in excess of that
necessary to continue as nearly as practicable the normal conduct of the insured’s
business.” Because the definition of extra expense contained in Section 10B applies
wherever the term is used in the DIC policy, it applies to the extra expense coverage
provided by Section 13Q.




                                           -8-
       As defined in Section 10B, extra expense clearly includes those expenses
necessary to carry on business operations.4 Section 10B would not make any sense
if the DIC policy were interpreted as covering only the extra expense incurred as a
result of a complete cessation of business. Accordingly, Aon’s argument that the
policy only covers extra expense if business operations were stopped is inconsistent
with the terms of the policy.

         The district court’s determination that ADM need not have stopped or slowed
production in order to recover extra expense under Section 13Q is further supported
by the policy’s terms of coverage for loss of earnings, which are set forth in Section
9 of the DIC policy under the title “Loss of Income.” Under this section, the DIC
policy provides loss of income coverage “in the event the insured is wholly or
partially prevented from producing goods or from continuing business operations or
services” and cannot “make up lost production within a reasonable period of time
. . . or continue business operations or services” through the use of other property or
service or by working extra time or overtime. In this situation, the policy covers the
actual loss of gross earnings sustained “during the period of interruption of
production or suspension of business operations.”

       With respect to loss of earnings coverage under Section 13Q, the district court
ruled that a shutdown or cessation of business was required. Aon contends there is
no justification for the district court’s interpretation of “interruption of business”
under Section 13Q as requiring a shutdown for loss of earnings coverage but not
requiring one for extra expense coverage. However, contrary to Aon’s argument, the
district court’s interpretation of “interruption of business” for loss of earnings

      4
       In proceedings before the magistrate judge in this case, Aon’s counsel
affirmed such an interpretation, stating “[u]nder extra expense, the insurance
company will pay you, as the insured, whatever extra money you had to put out to
keep yourself in business so that you could continue on rather than shut down.”
(Appellee’s App. at AA514.)
                                          -9-
coverage under Section 13Q is consistent with the DIC policy. Unlike Section 10,
Section 9 specifically requires a suspension of operations before loss of earnings
coverage can apply. The absence of a similar limitation in Section 10 is evidence of
the parties’ intent not to limit extra expense coverage in that manner.

       To support its position that the phrase “interruption of business” requires a
cessation of business, Aon relies primarily on Butwin Sportswear Co. v. St. Paul Fire
& Marine Insurance Co., 534 N.W.2d 565 (Minn. Ct. App. 1995). We find Butwin
inapposite because the policy at issue there specifically required a suspension of
operations before the insured could recover extra expenses. Id. at 567. Likewise,
other cases Aon cites are not persuasive for the same reason or because they do not
involve extra expense coverage. See Winters v. State Farm Fire & Cas. Co., 73 F.3d
224, 229 (9th Cir. 1995) (policy required a suspension of operations); Ramada Inn
Ramogreen, Inc. v. Travelers Indem. Co. of Am., 835 F.2d 812, 813 (11th Cir. 1988)
(involving loss of earnings coverage); Am. States Ins. Co. v. Creative Walking, Inc.,
16 F. Supp. 2d 1062, 1063-64 (E.D. Mo. 1998) (policy required a suspension of
operations and covered extra expense to avoid or minimize a suspension); Rothenberg
v. Liberty Mut. Ins. Co., 153 S.E.2d 447, 448 (Ga. Ct. App. 1967) (involving loss of
earnings coverage); Great N. Oil Co. v. St. Paul Fire & Marine Ins. Co., 227 N.W.2d
789, 794 (Minn. 1975) (same); Quality Oilfield Prods., Inc. v. Michigan Mut. Ins.
Co., 971 S.W.2d 635, 639 (Tex. Ct. App. 1998) (involving loss of income coverage);
Keetch v. Mut. of Enumclaw Ins. Co., 831 P.2d 784, 785 (Wash. Ct. App. 1992)
(involving loss of earnings coverage).

       The cases cited by both parties demonstrate that parties to an insurance contract
can require a slowdown or cessation of business before extra expense coverage
applies. The DIC policy, however, does not include such a requirement with respect
to the extra expense coverage of Section 13Q, and we are not at liberty to rewrite the
policy to include one. See Polychron v. Crum & Forster Ins. Cos., 916 F.2d 461, 463
(8th Cir. 1990). Accordingly, we hold that the district court did not err in its

                                          -10-
interpretation of the phrase “interruption of business” as applied to the extra expense
coverage of Section 13Q.

C. Evidentiary Rulings

      Aon challenges three of the district court’s evidentiary rulings. We review
each ruling for an abuse of discretion, bearing in mind that the district court has
substantial discretion in admitting or excluding evidence and its decision will not be
overturned unless it affects the substantial rights of the challenging party. Bennett
v. Hidden Valley Golf & Ski, Inc., 318 F.3d 868, 878 (8th Cir. 2003).

      1. Exclusion of Evidence that ADM Passed On Its Extra Corn Expense

        Aon argues the district court erred by excluding all evidence that ADM passed
on its extra corn expense to its customers in the form of higher prices. Aon claims
exclusion of this evidence prevented it from showing that ADM did not suffer any net
shortfall as a result of the extra corn expense incurred in the production of HFCS. To
the contrary, Aon claims that ADM actually made a $51 million profit on HFCS sales
in the year of the flood. Aon also claims the district court’s ruling allowed ADM to
recover a windfall, which is inconsistent with the district court’s jury instruction that
any damages awarded should make ADM whole but not provide it with a windfall
profit.

       ADM argues the district court correctly excluded evidence related to Aon’s
“pass on” theory because the DIC policy covers extra expenses without offset for
profits or sales revenues. ADM claims that because the loss of earnings and extra
expense coverages in Section 13Q are separate coverages, there is no basis for Aon’s
argument that contingent extra expense is tied to lost earnings or limited by lost
earnings avoided. We agree.



                                          -11-
       The DIC policy does not state that ADM’s extra expense recovery must be
limited by or measured against its profits or sales. In fact, the formula for measuring
extra expense under the DIC policy merely requires calculating the difference
between the costs incurred and the costs that would have been incurred during the
same period had no insured peril occurred. If the parties intended to limit extra
expense coverage by reference to earnings or profits, they could have provided such
a limitation in the language of the policy.

       Admitting evidence that ADM passed on its extra corn expense to customers
would have been contrary to the plain language of the DIC policy. Accordingly, we
find that the district court did not abuse its discretion in excluding the evidence. We
also reject Aon’s contention that exclusion of this evidence allowed ADM a windfall
recovery. Because the DIC policy did not require extra expense coverage to be
measured against profits or revenues, there could be no impermissible windfall where
extra expense damages were awarded based on the formula set forth in the policy.

      2. Admission of Expert Testimony

      Aon next argues the district court erred in admitting the testimony of ADM’s
damages expert, Dr. Bruce Scherr, because Dr. Scherr’s testimony did not take into
account the impact of hedging on ADM’s total corn costs and, therefore, did not
incorporate all aspects of the economic reality of ADM’s total corn cost. Essentially,
Aon contends Dr. Scherr’s failure to consider the impact of hedging meant that he
was not qualified to testify about ADM’s total corn costs in the year of the flood or
the corn costs ADM normally would have incurred if the flood had not taken place.

       We review a district court’s decision to admit expert testimony for an abuse of
discretion. Hartley v. Dillard’s, Inc., 310 F.3d 1054, 1060 (8th Cir. 2002). “Expert
testimony is admissible if it is reliable and will help the jury understand the evidence
or decide a fact in issue.” Id.; see also Fed. R. Evid. 702. An expert need not have

                                          -12-
an opinion on an ultimate issue of fact in order for the testimony to be admissible.
Bonner v. ISP Techs., Inc., 259 F.3d 924, 929 (8th Cir. 2001). Generally, the factual
basis of an expert’s opinion goes to credibility of the testimony, not admissibility. Id.
An expert’s opinion must be excluded only if it “is so fundamentally unsupported that
it can offer no assistance to the jury.” Id. at 929-30 (quoting Hose v. Chicago
Northwestern Transp. Co., 70 F.3d 968, 974 (8th Cir. 1996)).

       Dr. Scherr’s testimony was relevant for determining ADM’s extra corn expense
in the year of the flood. His testimony explained that the 1993 flood caused the
market price of corn to increase by about twenty-five cents per bushel, which caused
ADM to incur $113 million in extra expenses for corn. His testimony was based on
reliable data from the United States Department of Agriculture. Although Dr. Scherr
did not factor hedging into his analysis, his testimony was reliable and would assist
the jury in determining ADM’s extra corn expense for the year of the flood. On this
basis, we conclude the district court did not abuse its discretion in admitting the
testimony of Dr. Scherr.

      3. Exclusion of Evidence that Certain Expenses were Unnecessary

       Aon’s final evidentiary challenge relates to the district court’s exclusion of
evidence that $72 million of ADM’s extra expenses were unnecessary. The expenses
related to ADM’s production of ethanol. Aon sought to introduce testimony that
ADM should have produced fewer gallons of ethanol in the year of the flood and
“swung” its capacity to HFCS instead in order to reduce its extra corn expense. We
conclude that the district court did not abuse its discretion by excluding this evidence.
Aon was permitted to introduce other evidence that ADM’s extra corn expenses were
unnecessary. As the district court found, the evidence Aon sought to introduce was




                                          -13-
not relevant because nothing in the DIC policy permitted an insurer to challenge the
rationality of ADM’s ethanol production decisions.5

D. Growing Crops Exclusion

       Aon contends the district court erroneously concluded that the “growing crops”
exclusion of the DIC policy only applied to crops grown by ADM. In contrast to the
district court’s conclusion, Aon argues the exclusion applies to crops grown by
farmers who supplied corn to ADM through local and county grain elevators.
Because this issue involves the district court’s interpretation of the DIC policy, we
apply a de novo standard of review. United Fire & Cas. Co., 258 F.3d at 718.

       Section 5 of the DIC policy sets forth the scope of ADM’s property covered
under the policy. Section 7 of the policy specifies what property is excluded from
coverage, including land, trees, plants, and growing crops. The coverages provided
in Section 13Q, however, apply to the “real or personal property . . . of any supplier.”
Having reviewed the policy as a whole, we conclude the exclusions in Section 7 apply
only to limit the property covered by Section 5 and do not apply to Section 13Q.
Section 13Q does not reference any exclusions or other limitations on the scope of
the suppliers’ property that is covered. In contrast, Section 5 specifically provides
that ADM’s property is covered “except as herein excluded.” Therefore, the district
court did not err in concluding that the growing crops exclusion contained in Section




      5
       On appeal, Aon claims it is entitled to judgment as a matter of law because
ADM failed to prove that its extra corn expenses were necessary. The parties dispute
whether this issue was properly preserved for appeal. Whether or not the issue was
properly preserved, we find no merit in Aon’s argument. The DIC policy provides
coverage for extra expenses necessary to continue as nearly as practicable the normal
conduct of ADM’s business operations. We conclude ADM produced sufficient
evidence that the extra corn expenses were necessary to continue normal operations.
                                          -14-
7 applies only to claims involving ADM’s property and not to claims involving the
property of ADM’s suppliers.

E. Exhaustion of Underlying Policy Limits

      Aon argues ADM cannot recover under the excess insurance layer of the DIC
policy because it has not exhausted the underlying layers. The district court rejected
the argument based on its conclusion that ADM’s decision to settle with the
underlying insurers for less than the full $50 million meant ADM had exhausted the
lower layers. Aon claims this ruling was error.6

       The district court provided a thorough and well-reasoned analysis to support
its conclusion that ADM’s decision to settle for less than the underlying $50 million
limit and absorbing the balance did not preclude ADM from pursuing coverage under
the excess layer. The district court relied on Drake v. Ryan, 514 N.W.2d 785, 789
(Minn. 1994), in determining that “exhaustion” did not mean that ADM must have
collected every dollar of the underlying coverages and that settlement with the
underlying insurers does not absolve an excess insurer from liability. The district
court also distinguished other Illinois and Minnesota cases relied upon by Aon to
support its position. Having reviewed the issue, we conclude that the district court
did not err in concluding ADM was not precluded from seeking recovery under the
excess layer.




      6
       We note that throughout this appeal the parties consistently have focused their
arguments on the terms of the DIC policy. However, Aon now contends this issue
must be resolved under the terms of the policy ADM had with Employers Insurance
of Wausau (“Wausau”) the year before Aon secured the Hartford policy. However,
we, like the district court, conclude the DIC policy is the only policy relevant to this
appeal.
                                          -15-
F. Prejudgment Interest

       Aon argues the district court erred in its award of prejudgment interest. Under
Minnesota’s prejudgment interest statute, the interest on pecuniary damages generally
is calculated from the date the action is commenced until the date of the verdict.
Minn. Stat. § 549.09, subd. 1(b) (2002). An exception to the general rule is the offer-
counteroffer provision of the statute. Under this exception, “[i]f either party serves
a written offer of settlement, the other party may serve a written acceptance or a
written counteroffer within 30 days.” Id. If the losing party makes a written
settlement offer

      closer to the judgment or award than the prevailing party’s offer, the
      prevailing party shall receive interest only on the amount of the
      settlement offer or the judgment or award, whichever is less, and only
      from the time of commencement of the action . . . until the time the
      settlement offer was made.

Id.

       On September 5, 2001, Aon’s counsel sent a letter addressed to Judge John
Tunheim and Magistrate Judge Raymond Erickson concerning a settlement
conference between the parties scheduled for September 7, 2001. In the letter, Aon’s
counsel stated that its settlement position remained unchanged and that Aon was
willing to settle the case based on the cost of taking it through trial and the appellate
process, which Aon estimated to be approximately $1.5 million. The letter suggested
that the settlement conference may be unnecessary given the parties’ unchanged
positions. A copy of the letter was sent to ADM’s counsel.

       Aon claims the September 5, 2001 letter constituted a written offer of
settlement under § 549.09. Because ADM never submitted a written settlement offer,



                                          -16-
Aon asserts its offer was closer to the final judgment and ADM is entitled to interest
only from September 27, 1997, through September 5, 2001.

       The district court never specifically addressed whether Aon’s letter fell within
the offer-counteroffer exception, even though both parties argued the issue before the
district court. The district court merely stated that Aon’s settlement offers were not
in writing and were, therefore, invalid for purposes of § 549.09. The parties dispute
the standard of review to be applied to this issue. Because we hold the district court’s
determination that neither of Aon’s settlement offers were valid necessarily involved
an interpretation of Minnesota’s prejudgment interest, we review the issue de novo.
See Transit Cas. Co. v. Selective Ins. Co. of Southeast, 137 F.3d 540, 543 (8th Cir.
1998) (stating district court’s interpretation of state law is reviewed de novo); Grab
v. JanSport, Inc., 466 N.W.2d 762, 764 (Minn. Ct. App. 1991).

       In order for an offer to be valid under § 549.09, it “must be in writing and must
offer, in sufficiently clear and definite terms, to dispose completely the claims
between the negotiating parties.” Hodder v. Goodyear Tire & Rubber Co., 426
N.W.2d 826, 840 (Minn. 1988). The offer must be served on the other party. Grab,
466 N.W.2d at 764. The statute’s aim of promoting settlement “is best accomplished
by offers which are straightforward and would in an effective and practical manner
settle matters between the negotiating parties.” Hodder, 426 N.W.2d at 840.

       We believe Aon’s argument that the September 5, 2001 letter is a valid
settlement offer puts form over substance. See Buysse v. Baumann-Furrie & Co., 498
N.W.2d 289, 294 (Minn. Ct. App. 1993) (rejecting the argument that a court-imposed
stipulation amounted to an offer within meaning of § 549.09). The true intent of the
letter was to advise the district court that the September 7, 2001 settlement conference
might be a needless expenditure of the court’s time since neither party was willing to
budge from their respective settlement positions. The letter was directed to the
district court, not ADM, and specifically asked the court for direction as to whether

                                          -17-
the court wished to proceed with the settlement conference. The mere fact that Aon
recited its willingness to settle for $1.5 million does not convert the letter into an
offer. It is clear from the letter that Aon included this information to support its
suggestion that the settlement conference would be a waste of the court’s time. In our
view, the letter cannot be construed as a “straightforward” offer that would invite
ADM’s acceptance or rejection or provide an effective means of settling the dispute.
On this basis, we conclude that the September 5, 2001 letter was not a “written offer
of settlement” as contemplated by § 549.09, and the district court did not err in its
award of prejudgment interest.

                                  III. CONCLUSION

         For the reasons set forth in this opinion, we affirm the judgment of the district
court.
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