This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2010).
STATE OF MINNESOTA
IN COURT OF APPEALS
A11-732
Joel O. Jansen, Appellant, vs. CNH America, LLC, Respondent.
Filed December 27, 2011
Affirmed
Halbrooks, Judge
Renville County District Court
File No. 65-CV-08-196

Considered and decided by Halbrooks, Presiding Judge; Stoneburner, Judge; and Worke, Judge.
U N P U B L I S H E D O P I N I O N
HALBROOKS, Judge
Appellant challenges the district court’s grant of summary judgment to the manufacturer of a front-end loader that he purchased, arguing that the district court erroneously determined as a matter of law that (1) the manufacturer had no statutory duty
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to repair, replace, or refund the purchase price of the loader under Minnesota’s lemon law, Minn. Stat. §§ 325F.6653-.6654 (2010), and (2) oral statements purportedly made by an employee of the dealership at the time of purchase did not alter the unambiguous terms of the written warranty agreement that appellant signed. For the reasons discussed below, we affirm.
FACTS
In September 2006, appellant Joel Jansen purchased a 2006 Case Model 430 skid-steer loader from a dealership in Willmar to use on his dairy farm. Appellant also purchased a three-year/4000-hour power-train warranty. After approximately 300 hours of operation, an engine fire damaged the loader beyond repair.
On January 13, 2007, appellant purchased a second Case Model 430 skid-steer loader, this time from Schoffman’s, Inc., a dealership in Redwood Falls that had no connection with the Willmar dealership. This second loader (the 2007 loader) is the subject of the present litigation.
Three documents constitute the purchase agreement among appellant, Schoffman’s, respondent CNH America, LLC (which manufactures Case equipment), and CNH Capital (the financial-services business of CNH America): the purchase agreement between appellant and Schoffman’s (signed on January 13, 2007); the retail installment sale contract and security agreement between appellant and Schoffman’s and assigned to CNH Capital (signed on January 18, 2007); and the case warranty and limitation of liability among appellant, CNH America, and Schoffman’s (signed on January 19, 2007).
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The purchase agreement provides, in part:
SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED (INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS) OVER AND ABOVE THOSE AS PROVIDED BY THE ORIGINAL EQUIPMENT MANUFACTURER.
. . . .
No person is authorized to give any other warranties or to assume any other liabilities on [CNH America’s] behalf unless made or assumed in writing by the company, and no person is authorized to give any warranties or to assume any liabilities on the seller’s behalf unless made or assumed in writing by the seller.
. . . .
THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR PARTICULAR PURPOSE ARE EXCLUDED, AS ARE ALL OTHER REPRESENTATIONS TO THE USER-PURCHASER, AND ALL OTHER OBLIGATIONS OR LIABILITIES, INCLUDING LIABILITY FOR INCIDENTAL AND CONSEQUENTIAL DAMAGES, ON THE PART OF THE COMPANY OR THE SELLER.
Under the retail installment sale contract and security agreement, between appellant and Schoffman’s, and assigned to CNH Capital, appellant made a down payment of approximately $5,000 and financed the balance (approximately $20,000) through CNH Capital. The contract terms provided for 48 monthly payments, beginning in February 2007. The contract provides, in part:
NO WARRANTY. The Equipment is sold AS IS except for any applicable manufacturer’s express, written warranty. If any manufacturer’s express warranty applies to the
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Equipment, such warranty is restricted to the manufacturer’s written, limited warranty provided separately to Buyer. Seller and manufacturer make no other representation or warranty, express or implied, and specifically exclude the implied warranties of merchantability and fitness for particular purpose. Neither Seller nor manufacturer will be liable for incidental or consequential damages resulting from a breach of the express warranty or any implied warranty imposed by law.
The case warranty and limitation of liability among appellant, CNH America, and Schoffman’s states that the “Case Warranty is limited to the written terms in this pamphlet. Case does not authorize any person, dealer or agent to change or extend the terms of this warranty in any manner.” The warranty also states that “the Warranty Period for all coverage begins at the time that any person, dealer or agent first places the unit into service . . . . The Warranty Period ends when either the month or machine hour limit is reached, whichever limit occurs first.” Under the manufacturer’s warranty, CNH America agreed to pay for parts and labor to repair defects in material or workmanship anywhere in the loader for one year and guaranteed the engine for two years or 2000 hours of operation. Just above the warranty’s signature line are five statements, each followed by “Yes” and “No,” intended to verify that the dealer has given the customer the relevant warranties and explained the warranty terms and coverage to the customer. Under the five statements is written: “The answers circled above are correct. I acknowledge that I have read and I accept this warranty policy statement.” Appellant did not respond (by circling) to any of the five statements, but he did sign in the space beneath the acknowledgement.
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The record establishes that appellant did not make any claims for warranty power-train service in the first 12 months that he owned the loader and did not make any claims for warranty engine service in the first 2000 hours of operation. But between January 2007 and January 12, 2008, appellant brought the 2007 loader to Schoffman’s 21 times for other warranty repairs. CNH America authorized, and paid for, warranty service each time. But on January 17 and January 21, 2008, when appellant brought the loader to Schoffman’s to have its hydraulic hoses repaired, the Schoffman’s warranty manager told him that the loader was out of warranty (as of January 12, 2008) and that he would have to pay for the repairs himself. Appellant disputed that the warranty had expired, and the matter was submitted to a CNH America manager of field service operations, who determined that because the loader’s one-year power-train warranty had expired (on January 12) and because the problem with the hydraulic hoses was unrelated to the engine (and thus not covered by the extended engine warranty), the requested service was not covered under the warranty. In response, appellant stopped making payments and defaulted in February 2008. In August 2008, CNH Capital commenced suit against appellant for breach of the January 2007 contract.
In December 2008, when the loader had reached approximately 2600 operating hours, a broken fuel pump punctured a hole in the loader’s engine, rendering the machine inoperable. Schoffman’s and CNH America both refused to repair the engine on the ground that it had operated for more than 2000 hours, the warranty limit.
By answer and third-party complaint, appellant asserted claims against Schoffman’s, CNH Capital, and CNH America for breach of warranty, breach of
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contract, and violation of Minnesota’s lemon law, Minn. Stat. §§ 325F.6651-.6656 (2010). Appellant’s third-party complaint alleged that when he purchased the loader in January 2007, a Schoffman’s employee gave him oral assurances that the warranty terms of the loader would be identical to the terms applicable to the loader that he purchased in 2006 from a different dealer—that is, a three-year, 4000-hour warranty.
The district court granted Schoffman’s and CNH America’s motions for summary judgment, reasoning that appellant had failed to show that the oral assurances alleged in the complaint took place, that any such assurances were disclaimed by documents signed by appellant at the time of the 2007 purchase, and that the lemon law did not apply because the manufacturer’s duty to repair farm tractors under the statute “is limited to warranties on the engine and power train,” Minn. Stat. § 325F.6653, and none of appellant’s warranty claims concerned the engine or power train.
The parties stipulated to the dismissal of CNH Capital before appellant noticed this appeal. The parties subsequently stipulated to the dismissal of Schoffman’s. CNH America is therefore the only remaining respondent.
D E C I S I O N
“On an appeal from summary judgment, we ask two questions: (1) whether there are any genuine issues of material fact and (2) whether the [district] court[] erred in [its] application of the law.” State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). A motion for summary judgment should be granted when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that either party is entitled
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to a judgment as a matter of law.” Minn. R. Civ. P. 56.03. The party moving for summary judgment has the burden of demonstrating that no genuine issue of material fact exists. Thiele v. Stich, 425 N.W.2d 580, 583 (Minn. 1988). A moving party is entitled to summary judgment when no facts exist in the record which would “giv[e] rise to a genuine issue for trial as to the existence of an essential element of the nonmoving party’s case.” Nicollet Restoration, Inc. v. City of St. Paul, 533 N.W.2d 845, 847 (Minn. 1995). Any doubts and factual inferences must be resolved in favor of the nonmoving party. Elstrom v. Indep. Sch. Dist. No. 270, 533 N.W.2d 51, 55 (Minn. App. 1995), review denied (Minn. July 27, 1995).
“In order to successfully oppose a motion for summary judgment, a party cannot rely upon mere general statements of fact but rather must demonstrate at the time the motion is made that specific facts are in existence which create a genuine issue for trial.” Hunt v. IBM Mid Am. Emps. Fed. Credit Union, 384 N.W.2d 853, 855 (Minn. 1986); see also Minn. R. Civ. P. 56.05 (requiring nonmoving party to present specific facts showing a genuine issue for trial). “Mere speculation, without some concrete evidence, is not enough to avoid summary judgment.” Bob Useldinger & Sons, Inc. v. Hangsleben, 505 N.W.2d 323, 328 (Minn. 1993).
I.
Appellant contends that CNH America was required by statute to repair, replace, or refund the purchase price of the loader in December 2008, when a broken fuel pump damaged the loader’s engine. Minnesota’s lemon law for farm machinery addresses both the manufacturer’s duty, under specific conditions, to repair a defective farm tractor after
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the end of the warranty period and the manufacturer’s duty to replace the tractor or refund the purchase price if the repairs prove impossible. The duty-to-repair provision provides:
If a farm tractor does not conform to applicable express written warranties and the consumer reports the nonconformity to the manufacturer and its authorized dealer during the term of the express written warranties or during the period of one year following the date of the original delivery of the farm tractor to the consumer, whichever is earlier, the manufacturer or its authorized dealers shall make the repairs necessary to make the farm tractor conform to the express written warranties, notwithstanding that the repairs are made after the expiration of the warranty term or the one-year period. For a self-propelled vehicle this section is limited to warranties on the engine and power train.
Minn. Stat. § 325F.6653. Under Minn. Stat. § 325F.6654, subd. 1(a), if the manufacturer or an authorized dealer is unable, after at least four attempts, to make the farm tractor conform to any applicable express written warranty or if the farm tractor is out of service for more than 60 days while the corrections are being attempted, the manufacturer must either replace the farm tractor or refund the purchase price to the consumer. The consumer may bring a civil action to enforce the refund-or-replace obligation, but no action may be brought unless the manufacturer “has received prior direct written notification from or on behalf of the consumer.” Id., subd. 1(a).
Appellant contends that CNH America violated the statute both by refusing to repair the loader’s engine in December 2008 and by failing to replace the loader (or refund the purchase price) after more than four unsuccessful attempts to make the loader conform to express warranties. We disagree.
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By the explicit terms of the statute, the duty-to-repair provision and the refund-and-replace provision of the lemon law, as applied to farm equipment, can only arise as to warranties on the engine and power train. Minn. Stat. §§ 325F.6653, .6654, subd. 1(b). Therefore appellant was required to demonstrate, among other things, the existence of specific facts that create a triable issue as to whether the loader’s nonconforming warranties involved the loader’s engine or power train. The only directly relevant record evidence is the affidavit of a CNH America warranty administrator, who reviewed the records of all of appellant’s claims for warranty service on the loader (all of which are in the record), and reported that appellant made no claims for warranty service on the loader’s power train during the power train’s 12-month warranty period and no claims for warranty service on the engine during the engine’s 2000-operating-hours warranty period. The only engine claim appellant made was the December 2008 claim, when the loader had 2600 operating hours and was therefore out of warranty.
Appellant does not dispute that he made no explicit warranty claims for defects in the engine or power train during the warranty period. Rather, he argues that the warranty claims that he made for recurring electrical, cylinder, and hydraulic-system problems within the warranty period may have eventually caused the fuel pump to break, damaging the engine. Appellant is arguing that the December 2008 engine damage relates back to the earlier reported defects, despite the fact that the earlier defects concededly do not implicate the engine or power-train warranties. He contends that a material issue of fact exists as to whether the electrical, cylinder, and hydraulic-system defects could have caused the eventual engine failure. But as the district court observed at the hearing,
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appellant has not come forward with any specific facts, in the form of an expert affidavit or some other evidence consisting of more than a bare assertion, to allow a jury to conclude that the engine failure could reasonably have been caused by the non-engine-related defects reported by appellant during the warranty period. Appellant’s speculation about the causal relationship between the reported nonconformities and the engine or power-train damage is insufficient to create a material issue of fact. The district court properly granted summary judgment on this issue. Appellant also argues that CNH America violated the lemon law by failing to notify him of his rights under the statute. Minn. Stat. § 325F.6652 requires the manufacturer to provide the consumer with written notice of the consumer’s right to a refund or replacement concerning a defective vehicle, provided the consumer notifies the manufacturer of the problem in writing and gives it an opportunity to repair the vehicle. Appellant contends that CNH America’s conceded failure to provide this notice entitles him to reversal of summary judgment and a replacement loader. Appellant did not raise this issue before the district court and has therefore waived it on appeal. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating that issues not properly raised before and ruled on by the district court may not be considered on appeal). We further note appellant provides no authority for his contention that the remedy for failing to provide statutory notice of the consumer’s rights under the lemon law is to require the manufacturer to provide a replacement vehicle. The warranty that appellant got when he bought the loader guarantees, subject to various limitations, the repair of any defective workmanship or materials by the dealer. As the record makes
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clear, appellant was aware of, and rightfully took full advantage of, the dealer’s duty to make warranty repairs, and he does not indicate that he was prejudiced by the failure to provide notice.
II.
Appellant contends that when he purchased the loader from Schoffman’s in January 2007, a Schoffman’s employee represented to him that the terms of the warranty on the 2007 loader would be the same as the terms of the warranty that he received when he purchased the 2006 loader from a different dealer—that is, a 4000-hour, three-year warranty, and not, as is written on the warranty he signed at the time of the 2007 purchase, a one-year, 2000-hour warranty. The only evidence of this alleged representation is appellant’s assertion in an affidavit.
Our analysis of this issue is complicated by the fact that Schoffman’s is no longer a party to this matter. Because the entire basis of appellant’s claims concerning the warranty involves the conduct of Schoffman’s employees at the time of the January 2007 purchase, it is unclear how this issue affects CNH America, if at all. Appellant’s counsel argued before the district court, without citing supporting authority, that CNH America was somehow bound by Schoffman’s actions because of an agency relationship between the two. Appellant does not demonstrate whether, if at all, Schoffman’s could, by oral agreement, alter the terms of a warranty between CNH America and a customer, particularly when CNH America, as the manufacturer, would be bound by the terms of the agreement.
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But even assuming, arguendo, that CNH America were bound by Schoffman’s alleged representations, appellant’s contention that those representations created a duty for CNH America that was in any way different from the express written terms of the warranty that appellant signed at the time of the January 2007 purchase is without merit. The Schoffman’s warranty is clear that it is the exclusive, and entire, warranty applicable to the 2007 loader. Appellant does not deny that he signed the warranty directly beneath language stating, “I have read and I accept this warranty policy statement,” or that he signed two other contractual agreements between himself and CNH America at the time of the 2007 loader purchase that contained similar warranty limitations. “In the absence of fraud or misrepresentation [neither of which is alleged here], a person who signs a contract may not avoid it on the ground that he did not read it or thought its terms to be different.” Gartner v. Eikill, 319 N.W.2d 397, 398 (Minn. 1982); see Currie State Bank v. Schmitz, 628 N.W.2d 205, 210 (Minn. App. 2001) (“Parties who sign plainly written documents must be held liable, otherwise such documents would be entirely worthless and chaos would prevail in our business relations.” (quotation omitted)).
“The parol evidence rule prohibits the admission of extrinsic evidence of prior or contemporaneous oral agreements, or prior written agreements, to explain the meaning of a contract when the parties have reduced their agreement to an unambiguous integrated writing.” Alpha Real Estate Co. of Rochester v. Delta Dental Plan of Minn., 664 N.W.2d 303, 312 (Minn. 2003) (quotation omitted). “[W]hen parties reduce their agreement to writing, parol evidence is ordinarily inadmissible to vary, contradict, or alter the written agreement.” Hruska v. Chandler Assocs., Inc., 372 N.W.2d 709, 713 (Minn. 1985).
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Here, the representations purportedly made by the unidentified Schoffman’s employee are squarely at odds with the terms of the warranty that appellant signed and as such are inadmissible and do not alter the terms of the warranty. And the case warranty and limitation of liability signed by appellant states that the “Case Warranty is limited to the written terms in this pamphlet. Case does not authorize any person, dealer or agent to change or extend the terms of this warranty in any manner.” Therefore, even if a Schoffman’s employee did make the statement as alleged by appellant, the statement could not alter the terms of the written warranty. While it may be true, as appellant argues, that under certain circumstances the agreement between the parties to a contract may comprise both oral and written terms, he offers no support for the contention that when an oral statement and a written contract term are at odds, the former controls.
On this record, we conclude that the terms of the warranty that appellant signed at the time of the January 2007 purchase established CNH America’s obligations with respect to the loader.
Affirmed.

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Spice Corp,
Plaintiff

v.

Foresight Marketing Partners, Inc.;
Foresight Marketing Group, Inc.; and
Sandisk Corporation,
Defendants.
Plaintiff Spice Corp (“Spice”) brought this action against Defendants Foresight
Marketing Partners, Inc. (“FMP”), Foresight Marketing Group, Inc. (“FMG”), and SanDisk
Corporation (“SanDisk”). In its Complaint, Plaintiff asserts a number of claims against SanDisk, including: Conspiracy (Count I); Breach of Sales Representative Agreement (Count III); Failure to Pay Commissions on Demand (Count IV); Failure to Provide an Accounting (Count V); Promissory Estoppel (Count VII); Conversion and Constructive Trust (Count VIII); Tortious Interference with Business Expectancy (Count IX); Tortious Interference with Contract (X); Unjust Enrichment (Count XI); Misrepresentation (Count XII); Fraud (Count XIII); Breach of
Implied Covenants of Good Faith and Fair Dealing (Count XIV); and Recovery in Quantum
Meruit for Plaintiff’s Services to Defendant (Count XV). Before the Court is SanDisk’s Motion
for Summary Judgment on all Counts and Spice’s Motion for Partial Summary Judgment on
Counts III and IV. Spice has waived its claims for Conspiracy (Count I), Failure to Provide an
Accounting (Count V), Conversion and Constructive Trust (Count VII), Misrepresentation
(Count XII), Fraud (Count XIII), Breach of Implied Covenants of Good Faith and Fair Dealing
(Count XIV), and Recovery in Quantum Meruit for Plaintiff’s Services to Defendant (Count
CASE 0:07-cv-04767-JNE-JJG Document 158 Filed 12/22/11 Page 1 of 32
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XV).1 Therefore, the Court grants SanDisk’s Motion for Summary Judgment on those counts.
The remaining counts are discussed below.
I. BACKGROUND2
A. SanDisk-FMG Relationship
SanDisk is a multinational corporation that, among other things, sells flash memory and
USB drives. SanDisk uses independent manufacturing representatives to sell some of its
products. Defendant FMG was a SanDisk manufacturing representative from March 2004 until
July 19, 2006. Pursuant to the contract between SanDisk and FMG (“SanDisk-FMG Contract”)3,
SanDisk assigned to FMG certain accounts to call on. FMG earned a five percent commission
on all purchase orders shipped to its accounts. FMG was solely responsible for hiring employees
and agents to call on these accounts. SanDisk had no role in FMG’s hiring process, payment
practices, or allocation of accounts.
The SanDisk-FMG Contract stated that FMG “is an independent contractor . . . and is
solely responsible for all of its employees and agents and its labor costs and expenses arising in
connection therewith and for any and all claims, liabilities or damages or debts of any type
whatsoever that may arise on account of [FMG]’s activities or those of its employees or agents in
the performance of this Agreement.” Ex. 40 ¶ 4. Under the contract, FMG “ha[d] no authority,
1 Spice expressly waived its claims on Counts I, V, XII, and XII. Spice further failed to
oppose the motion for summary judgment on Counts VIII, XIV, and XV. “[F]ailure to oppose a
basis for summary judgment constitutes waiver of that argument.” Satcher v. Univ. of Ark. at
Pine Bluff Bd. of Trustees, 558 F.3d 731, 756 (8th Cir. 2009). During oral argument, Spice
acknowledged these claims have been waived.
2 The facts described below are undisputed or are those that a reasonable fact-finder could
find when viewing the record in the light most favorable to Spice.
3 These types of contracts are also referred to a manufacturer’s representative agreements
or sales representative agreements.
CASE 0:07-cv-04767-JNE-JJG Document 158 Filed 12/22/11 Page 2 of 32
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right or ability to bind or commit SanDisk in any way.” Id. Further, while SanDisk was “in no
manner associated with . . . [FMG]’s employment of other persons or incurring of other
expenses,” SanDisk also had “no right to exercise any control whatsoever over [FMG’s]
activities.” Id. Additionally, it was a non-exclusive representation agreement and did not limit
“SanDisk’s marketing or distribution activities or its appointment of other dealers, distributors,
licensees, agents or representatives of any kind inside and outside the Assigned territory and or
Accounts.” Id. at ¶ 1D.
In addition to assigning accounts and defining the relationship between SanDisk and
FMG, the SanDisk-FMG Contract also contained provisions relating to liability limitation,
warranty disclaimers, proprietary information, intellectual property rights and responsibilities,
and SanDisk’s responsibility to provide products and marketing materials. The contract also
provided that it could be terminated by either party upon 60 days written notice. Id. at ¶ 7C.
However, any provision, including the termination provision, could be waived “with the written
consent of the parties.” Id. at ¶ 9D.
B. Spice-FMG Relationship
In June 2006, FMG and Spice entered into a brokerage agreement (“Spice-FMG
Contract”), under which Spice would represent SanDisk products to a subset of the accounts
SanDisk assigned to FMG. Under the Spice-FMG Contract, Spice was to “represent[]
manufacturers on an exclusive basis for sale of certain products” and “develop certain customers
for the sale of such products.” Ex. 2. FMG promised to pay Spice commissions of four percent
on all net sales to Spice’s accounts. SanDisk was not involved in recruiting or hiring Spice and
played no role in negotiating the Spice-FMG Contract.
CASE 0:07-cv-04767-JNE-JJG Document 158 Filed 12/22/11 Page 3 of 32
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Spice, in turn, hired its own independent agents to sell SanDisk products to its assigned
accounts. It paid its agents a portion of the commissions Spice received from FMG. Spice did
not pay for its agents’ expenses or time incurred while selling SanDisk products.
C. Spice-FMG Dispute and Termination of the Spice-FMG Contract
Sometime around May 2006, a dispute arose between Spice and FMG. According to
Spice, commissions on several large Spice accounts were expected. Rather than pay the
commissions it owed to Spice, FMG attempted to renegotiate or alter the Spice-FMG Contract.
FMG attempted to make several changes to the contract, including a reduction in commissions
from four percent to three percent, retroactive to March 2006. On May 24, 2006, FMG sent
Spice a letter that, according to Spice, attempted to take away some of the accounts that Spice
had been calling on. This letter also informed Spice that FMG would not be renewing the
brokerage agreement at the end of its current term. SanDisk was copied on this letter.
What ensued was a series of communications between Spice, FMG, and SanDisk
regarding the dispute between FMG and Spice. In particular, FMG owed Spice a substantial
amount of commissions, which FMG had not yet paid. On June 19, 2006, Marc Forsythe, the
President of FMG, together with an individual named Doug Nobel, created a new company
called Foresight Marketing Partners, Inc. (“FMP”). As both Forsythe and Nobel explained in
their depositions, Forsythe wanted to become business partners with Nobel, but Nobel would
only agree if they created a new corporation that gave them a “fresh start.” Nobel Dep. 26:2-9.
Nobel did not want to be involved in FMG, in part because of FMG’s “contract and lack of
contracts with Spice Corporation.” Id. at 29:15-21. SanDisk had no role in Forsythe and
Nobel’s creation of FMP. SanDisk did, however, believe that the new business was a “good
partnership,” because “Marc needed the stability of Doug and his ability to do the books, keep
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track of things.” Bergeson Dep. 104:2-5. Forsythe asked SanDisk to terminate the SanDisk-
FMG Contract. SanDisk agreed to do so and gave FMG a written thirty-day notice of
termination. The next day, SanDisk entered into a new manufacturer’s representative agreement
with FMP (“SanDisk-FMP Contract”). FMG then notified Spice that it had “lost” its contract
with SanDisk and terminated the Spice-FMG Contract.
The emails and other communications between Spice, FMG, and SanDisk continued
through August 2006. Spice was concerned about being paid the commissions owed by FMG
and about Spice’s continuing representation of SanDisk products. Throughout this time period,
SanDisk repeatedly encouraged FMG to pay Spice the commissions FMG owed. FMG
repeatedly promised that it would pay the amounts owed. Tom Lenaghan, President of Spice,
testified that SanDisk promised Spice that SanDisk would pay the FMG-owed commissions if
FMG did not. Lenaghan also testified that SanDisk promised that Spice could continue to
service some of the Spice accounts in the future. It is these two promises that are the subject of
this lawsuit. In their submissions to the Court, both Spice and SanDisk refer to excerpts from the
email communications between the parties. However, rather than paraphrase the emails and take
statements out of context, the Court finds that the most effective way to convey what was
happening is to reproduce the emails in their entirety, or with only minimal omissions. Thus, the
following language represents the written communications, in chronological order, as they
appear in the record:4
• May 26, 2006 email from Dave Bergeson (SanDisk’s National Sales Manager) to Tom
Lenaghan (President of Spice) and Jeff Peterson (one of Spice’s independent sales
representatives) (ex. 9):
4 Typographical and grammatical errors appear in the emails themselves.
CASE 0:07-cv-04767-JNE-JJG Document 158 Filed 12/22/11 Page 5 of 32
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Tom
I have been made aware of the letter you received from FMG today. Please do not
contact myself or any other SanDisk employees until you and FMG have cleared you
plan.
SanDisk has a contract with FMG, thus all of our communication will occur with
FMG.
Ramsina and Janet please make your people aware that Jeff Peterson’s accounts
should be referred to Marc Forsythe until further notice.
Please abide by this request.
• May 30, 2006 email from Forsythe (FMG) to Bergeson (SanDisk) (Spice is copied on the
email) (ex. 10):
David,
All customer inquiries need to be directed to either myself at FMG office . . . or Doug
Nobel . . . . This should cover all customer needs regarding SanDisk products. We
are contacting each customer as well as emailing official communication to all
customers. This process should be completed by the end of this week.
I will also have new alternative contact info for David by the end of the week for each
account.
• June 1, 2006 (2:25 p.m.) email from Bergeson (SanDisk) to Lenaghan (Spice) and
Forsythe and Nobel (FMG) (ex. 11):
Guys this is what I was talking about leave the SanDisk customer out of this. Do not
make any changes until you have come to an agreement. I do not care what the
agreement is but do not involve the customer.
My suggestion was to leave as is until you come to an agreement. This is a very
“strong” suggestion I will not tolerate any confusion by our customer base that might
affect or disrupt current SanDisk business.
I suggest that Steve Peterson [(one of Spice’s independent representatives)] go to the
CVS meeting next week as you two negotiate.
Business as usual in the eyes of our customers is critical.
• June 1, 2006 (4:19 p.m.) email from Bergeson (SanDisk) to Lenaghan (Spice) and
Forsythe (FMG) (ex. 12):
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Tom and Marc
I know you are both working on coming to some sort of an agreement. I want to
make sure that we do the following
1. Do not send any correspondence to our customers regarding a change in
assignment. The last thing I want during this critical time of the year is to confuse
the customer.
2. It is early in you negotiations so I want to make sure we continue business as
usual
3. Let me know if through the course of your negotiations with each other if you
want payment sent to a lock box or mutually agreed upon location and I will make
the changes.
I do not want to confuse the customer I am concerned about messaging being sent to
the customer too soon in this process. Please abide by my request and I hope all turns
out well.
Marc I spoke to Tom this morning and ask him that I no be involved in your
negotiations. I did and am asking both of you and your teams to not make any
changes that might affect our customers unless mutually agree upon and sent to me in
writing.
• June 1, 2006 (5:19 p.m.) email from Lenaghan (Spice) to Forsythe (FMG) and Bergeson
(SanDisk) (ex. 10):
You must stop any contact with customers that Spice Corp has secures sales or
purchase orders on Sandisk product. Failure to do so will prove disruptive to Sandisk
and Spice efforts over the past two years and is violation of our written contract from
2004. You have sent us an accounting in May on over $21,000 currently owed to
Spice that FMG has failed to pay Spice Corp on. This also puts you in violation of
the 2004 agreement. I have place over 12 phone calls to you in the past 10 business
days and you have failed to return any of those calls. Your continued efforts to
disrupt and Sandisk business with customers we have received purchase orders from
will also put your company (FMG) in violation of our 2004 contract that clearly states
that you nor FMG is to contact any Spice customers regarding Sandisk product. I am
only to happy to try for resolution but must immediately once against stop any contact
with any customer that Spice Corp has generated sales and a PO for or Sandisk
product. The alternative will be expensive litigation for both FMG and Spice and
potential damage to Sandisk business. On current purchase orders received by
Sandisk you will owe Spice Corp in excess of $150,000 in accordance with our 2004
agreement. Once again stop you disruptive actions and cease all communication with
any customer represented by Spice in which sales or purchase orders have been sent
to FMG or Sandisk. You are well aware of the customer list.
• June 4, 2006 (6:11 p.m.) email from Lenaghan (Spice) to Forsythe (FMG) (Bergeson
(SanDisk) copied on email) (ex. 14):
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Marc Forsythe,
I, Steve Peterson, Dick Crawford and Jeff Peterson are extremely concerned over
your recent correspondence regarding SanDisk and the accounts we have been
working on for over two years. Spice received a recap from you thru 5/1/06 showing
that FMG owed Spice $21,419.33.
You acknowledge to me that you received payment from SanDisk yet no money has
been sent to Spice by FMG. SanDisk has received purchase orders on Pos from
customers assigned to Spice in writing or verbally by you and FMG. The Pos are in
excess of $2.5 million with Pos potentially to exceed a total greater than $5 million in
the next few months. Forecasts have been provided to FMG and SanDisk that exceed
more than $10 million in sales for a twelve month period. Spice is working with or
had SanDisk product placed with over 40 customers.
Your recent comments on voice mail along with emails leaves all members of the
Spice team at a loss. . . . You also left me with a message on this same email that
your non payment and attempt to change both verbal and written contracts is Spice?s
fault.
Marc, your logic is flawed anyone who as you and FMG have done withholding
payments of over $21,000 and try to change an agreement . . . [remainder of email not
provided in the record].
• June 4, 2006 (11:54 p.m.) email from Forsythe (FMG) to Lenaghan (Spice) (Bergeson
(SanDisk) copied on email) (ex. 14):
Please direct all notices in writing to the address noted on our agreement. I have sent
you Dougs number and email several times. You just don’t read your email unless it
relates to money.
Doug will direct you to our attorney. Since all of your messages are threatening and
hostile I don’t feel much like speaking with you. Also since you continually threaten
to sabotage SanDisk business I have trouble trusting you.
I have no time to meet with you.
As David has requested this will be resolved very soon I’m sure.
• June 5, 2006 (8:21 a.m.) email from Lenaghan (Spice) to Forsythe (FMG) ((Bergeson
(SanDisk) copied on email) (ex. 14):
Since I am responding to your email of 6/4/2006 you are wrong about me not
responding to emails or that I don’t read them. In your voice mail you asked me to
call your attorney on Friday and you won’t provide a number. Neither I nor anyone
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at Spice has ever left you a threatening message or treated you in a hostile fashion.
Clearly you are trying to justify non payment of money owed to Spice due to your
wrongful actions. In addition Spice has never threatend sabbotage against SanDisk
business. Everyone at Spice has been advised that it is business as usual until the
issue of your non payment of money due Spice can be worked out.
My attempt to meet with you in Orlando this week was to follow direction given to
both of us by David Bergeson for both Spice & FMG to try & resolve any issues.
Your response to me seems to suggest you intend to continue your wrongful actions
& avoid conclusion of the problem you have created. Once again I am available to
meet in Orlando to try & move forward thru the 6th of June 2006.
• June 5, 2006 (8:28 a.m.) email from Bergeson (SanDisk) to Lenaghan (Spice) and Forsythe
(FMG) (ex. 14):
Cut me out of this email chain
• June 5, 2006 (11:49 a.m.) email from Lenaghan (Spice) to Bergeson (SanDisk) (ex. 14):
I will have Jeff forward the account list for Spice on all customers we have shipped or
we are calling on. I would ask that you have all funds frozen going to FMG and sent
to an account number I will supply you with ASAP. . . . Spice intends to set aside
any money due FMG and pay FMG once all money has been recouped from past due
amounts to Spice. Your help in obtaining an accounting of previous payments made
to FMG would be great. I hope we can move forward with Spice and grow the
SanDisk sales. Thanks for your help.
• June 5, 2006 (12:05 p.m.) email from Bergeson (SanDisk) to Lenaghan (Spice) (ex. 14):
I need to get this from Marc or your attorney I cannot freeze funds unless I get this
officially. My contract is with FMG I would risk legal action. I cannot forward the
commission report you will have to get that from FMG or again have you attorney
request them.
• June 5, 2006 (12:19 p.m.) email from Jeff Peterson (Spice) to Bergeson (SanDisk) (ex. 13):
Tom asked me to send you this current list of accounts that Spice, Corp. has either
sold or is in the process of call on, so you know who we are dealing with. This is the
list we would like protected. Thank you David.
• June 13, 2006 email from Forsythe (FMG) to Lenaghan (Spice) (ex. 15):
We will be paying you the monies owed as outlined in the recap sent to you last
month. I will notify you when that check has been sent. I will recap to you the
negative balance for this months commissions which was due to customer returns.
This will be deducted from what was due to you last month.
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• June 21, 2006 letter from Spice’s attorney (Charles Cheney) to Bergeson (SanDisk) (ex.
17):
I am writing to you as Attorney for Spice Corp. concerning the Brokerage Agreement
between [FMG] and [Spice]. . . .
Spice believes that Foresight is in breach of this agreement since it has not paid them
$21,419.33 which was due on May 1, 2006. Within 45 to 60 days $120,000-$150,000
will be due to Spice. . . . The result of Foresight’s failure to pay Spice could have a
very detrimental effect on both Spice and SanDisk. If Spice is not paid, it will not be
able to pay its sub distributors. The sub distributors will then likely stop soliciting
business from Spice’s accounts and Spice’s ability to sell SanDisk product will also
be impaired. . . .
Spice has honored its agreement with Foresight and has secured a great deal of
business for SanDisk. If Foresight is allowed to continue to breach their agreement
with Spice, there will be serious ramifications for all involved. Spice asks that you
assist them in convincing Foresight that it must honor the original Brokerage
Agreement.
Spice also requests that SanDisk freeze all payments to Foresight until this matter is
settled. Please send Spice a report showing all past sales for customers sold SanDisk
products by Spice. Spice needs this information to determine the unpaid
commissions due from Foresight. We ask that you redirect all future commission
payments due Foresight to Spice until all past due receivables are recouped by Spice.
Once Spice has totally recouped all past due receivables it will deliver the remainder
of the payments received by Spice to Foresight.
Spice would like to enter into a standard rep agreement directly with SanDisk
covering all customers listed on the attached Schedule B as well as all other
customers we are currently representing. Spice has spent two years representing
SanDisk products to retailers and other distributors. They value the brand and believe
that they can continue to grow the business for Spice as well as SanDisk.
Spice is truly sorry for the problems being caused by Foresight. Mr. Lenaghan has
instructed all of his people to continue to represent SanDisk in a professional manner
and has stressed that they should cause no disruption to SanDisk or its customers.
• July 10, 2006 letter from FMG’s attorney (Jon Coats) to Lenaghan (Spice) (ex. 47):
Enclosed for your review please find a copy of the June 19, 2006 correspondence
from SanDisk Corporation terminating its contractual relationship with my client,
[FMG] Pursuant to ¶1, page 1 of your June 23, 2004 Brokerage Agreement with
[FMG], please accept this correspondence as written notice from my client that it has
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lost its rights to the SanDisk product line, and therefore, Spice Corp, shall
immediately cease representing said product line.
• July 18, 2006 (11:19 a.m.) email from Bergeson (SanDisk) to Jeff Peterson (Spice) (ex.
18):
You will get paid through August 31st as instructed today after that period we will
look at who has what. I was advised by attorneys to remain on the sidelines until that
period I have no say in who he has call on the account for the next months.
Hold tight
• July 18, 2006 (12:27 p.m.) email from Bergeson (SanDisk) to Jeff Peterson (Spice) (ex.
19):
I appreciate your efforts we will work things out.
• July 19, 2006 letter from FMG’s attorney (Jon Coats) to Lenaghan and Jeff Peterson
(Spice) (ex. 20):
Mr. Jeffrey Peterson and Mr. Tom Lenaghan -
Please be advised that your (Mr. Peterson’s) email communications to Mr. David
Bergeson of SanDisk on Tuesday, July 18, 2006 @ 12:22 P.M. and to Larry Pepin
with cc to Mr. Bergeson of Wednesday, July 19, 2006 @ 11:00 A.M., are in
contravention to Spice Corp.’s obligation to cease representation of the SanDisk
product line, pursuant to the terms and conditions contained in the Brokerage
Agreement drafted by Spice Corp., which specifically and unambiguously require that
such communications cease after Spice’s receipt of notice from my client, [FMG],
that it has lost its right to the SanDisk product line. . . .
PLEASE BE ADVISED THAT MY CLIENT HAS BEEN INFORMED BY
SANDISK OF YOUR ABOVE-REFERENCED COMMUNICATIONS AND
SANDISK HAS ASKED MY CLIENT TO ONCE AGAIN NOTIFY SPICE CORP
THAT SPICE CORP DOES NOT REPRESENT SANDISK PRODUCTS AND
THAT SUCH COMMUNICATIONS SHOULD CEASE IMMEDIATELY.
AGAIN, PLEASE GOVERN YOURSELF ACCORDINGLY.
• July 24, 2006 letter from Spice’s attorney (Cheney) to FMG’s attorney (Coats) (ex. 21):
Spice Corp. is in receipt of your letter dated July 10, 2006 informing Spice that it
must immediately cease representing the San Disk Corporation product line due to
San Disk Corporation terminating its contractual relationship with [FMG].
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Our investigation indicates that Marc Forsythe registered a corporation named
Foresight Marketing Partners, Inc. on June 19, 2006, the date of the letter from San
Disk Corporation giving [FMG] notice that it was terminating their contractual
relationship. [FMP] and [FMG] are both located at the same address and Marc
Forsythe is President of both companies. Our investigation further indicates that
Marc Forsythe has contacted a number of accounts that Spice represented prior to its
contractual relationship with [FMG] being terminated. This is problematic for two
reasons. First, Spice believes that Marc Forsythe was calling on Spice accounts prior
to receiving notice that its contract was being terminated. Also, we believe that that
Spice’s contract is still in force until Foresight’s contract is actually terminated, not
when it received notice that he contract would be terminated in the future.
Should our investigation determine that Marc Forsythe continues to represent San
Disk via [FMP] and we determine that there has been a fraudulent conveyance, Spice
Corp. will exercise all legal remedies available to it to ensure that it is properly paid
pursuant to its Brokerage Agreement with [FMG].
Spice is also concerned that [FMG] is late with payments due them for sales of
SanDisk product. Spice demands a reconciliation of the commissions due it and
immediate payment. [FMG] must also pay Spice on a timely basis for all sales made
prior to its contract being cancelled.
• July 25, 2006 email from Bergeson (SanDisk) to Forsythe (FMG) (ex. 49):
Unpaid they can more harm than good. Pay them you agreed to do so last week and
the week before.
If you cannot show me that you paid them I will suspend payments to FMG and
divide the money out myself.
This is taking way to much of my time. Please do what is right and pay these guys
what is due to them.
• July 25, 2006 email from Bergeson (SanDisk) to Lenaghan and Jeff Peterson (Spice), with
an accounting of all sales of SanDisk products to Spice accounts (ex. 22):
Hope this helps yours are in yellow. Both YTD and QTD
• July 28, 2006 letter from FMG’s attorney (Coats) to Spice’s attorney (Cheney) (ex. 50):
I am in receipt of and thank you for your correspondence of July 24, 2006 regarding
the [Brokerage Agreement between FMG and Spice].
The results of your investigation revealing the formation of a new corporate entity
named [FMP] are accurate. Additionally, [FMG] was verbally advised prior to its
receipt of the June 19, 2006 termination notice from SanDisk that SanDisk would in
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all likelihood be terminating its contract with [FMG]. The June 19, 2006
correspondence was simply written confirmation of SanDisk’s warning that it would
cancel its relationship with [FMG].
Obviously, a business decision was made to immediately form a new corporate entity
that was not entangled with disruptive third-party relationships that, in the opinion of
[FMG], led to the termination of its relationship with SanDisk. Fortunately, the
newly formed corporate entity of [FMP] has been able to establish a relationship with
SanDisk, thereby confirming the opinions previously held as to the cause of the
contract termination with [FMG].
Please take comfort in the fact that my client fully intends to comply with its
obligations arising under the [Spice-FMG Contract], which was terminated on July
19, 2006, ie, 30 days after June 19, 2006. Your client’s allegations of a “fraudulent
conveyance” are nonsensical. There has been no conveyance or transfer of property,
and [FMG] is still an active an ongoing corporate entity, it simply lost its contract
with SanDisk. . . .
Your client will receive all commission amounts earned up to the contract termination
date of July 19, 2006. . . .
Therefore, enclosed please find a check in the amount of $5,025.72 for May
commissions, along with the latest commission statement. . . . For purposes of
moving forward, my client will provide Spice Corp an updated monthly commission
statement at the end of each month showing all commissions due and negative
sales/commission amounts along with additional payments until Spice has received
all commissions due it through the contract termination date of July 19, 2006. . . .
• July 31, 2006 email from Bergeson (SanDisk) to Jeff Peterson (Spice) (ex. 23):
I have grown tired of this conversation. You are temporarily not representing
SanDisk. You worked for FMG and they are not longer that entity.
You are getting paid as I have said for at least the 10th time to both you an Tom.
You both are driving me crazy
• Aug. 8, 2006 email from Bergeson (SanDisk) to Jeff Peterson (Spice) and Jim Gall
(SanDisk) (Lenaghan (Spice) is copied on the email) (ex. 25):
You are feeding the fire forward all contacts to Jim he will distribute to the correct
rep.
Leave a message on your machine and on email forwarding to Jims number and email
address for all SanDisk questions and inquiries.
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This has to stop now.
• Aug. 30, 2006 email from Bergeson (SanDisk) to Lenaghan and Jeff Peterson (Spice) (ex.
26):
You have got to be kidding don’t mind. Your boss called our CEO, GM, and
executive VP.
BTW none are going to call him back. He burned any chance you two had of ever
doing any future business with SanDisk.
All of the above support my efforts and agree with my current path so his calls were
more damaging to his firm than helpful.
• Nov. 13, 2006 letter from Lenaghan (Spice) to SanDisk’s CEO (Nelson Chan), describing
Spice’s concerns about FMG, FMP, and Bergeson’s “questionable and unethical
activities.” (ex. 27)
• May 22, 2007 letter from SanDisk’s attorney (Damon Anastasia) to Lenaghan (Spice) (ex.
54):
Though some time has passed since we spoke by telephone in response to your letter
of November 13, 2006 to Mr. Nelson Chan of SanDisk Corporation (“SanDisk”), you
will recall that I stated SanDisk would conduct an investigation into your allegations
and I would notify you of that event. Having now completed its investigation,
SanDisk has concluded that no further action is necessary. It has closed its file in this
matter.
D. Spice Sues FMG, FMP, and SanDisk
In October 2007, Spice initiated this lawsuit against SanDisk, FMG, and FMP. The case
was removed to federal court based on diversity jurisdiction on December 5, 2007. Based on the
arbitration provision in the Spice-FMG Contract, on May 13, 2008, this Court issued an order
compelling arbitration of Spice’s claims against FMG and FMP. On May 14, 2008, the Court
granted SanDisk’s Motion to Stay pending the arbitration. FMG and FMP subsequently refused
to attend or participate in the arbitration. Spice alone attended the arbitration on September 14,
2009. The arbitrator found that FMG and FMP owed past-due commissions of $942,422.04,
attorney’s fees of $543,560.15, costs of $20,627.70, and punitive damages of $462.211.02. The
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arbitrator found FMP to be a successor corporation of FMG and made its award jointly and
severally against FMG and FMP. Both FMG and FMP, however, have been dissolved and,
according to Spice, have no assets.5 The Stay against SanDisk was subsequently lifted and the
parties conducted discovery. They now bring their Cross-Motions for Summary Judgment.
II. DISCUSSION
Summary judgment is proper “if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). To support an assertion that a fact cannot be or is genuinely disputed, a party must cite “to
particular parts of materials in the record,” show “that the materials cited do not establish the
absence or presence of a genuine dispute,” or show “that an adverse party cannot produce
admissible evidence to support the fact.” Fed. R. Civ. P. 56(c)(1)(A)-(B). “The court need
consider only the cited materials, but it may consider other materials in the record.” Fed. R. Civ.
P. 56(c)(3). In determining whether summary judgment is appropriate, a court must look at the
record and any inferences to be drawn from it in the light most favorable to the nonmovant.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
A. Breach of Sales Representative Agreement (Count III)
Spice alleges that on June 1, 2006, it formed an oral or implied contract, or sales
representative agreement, with SanDisk, in which SanDisk promised that Spice could service
SanDisk accounts after August 31, 2006. Under Minnesota law, an “agreement necessary to
form a contract . . . may be implied from circumstances that clearly and unequivocally indicate
the intention of the parties to enter into a contract.” Webb Bus. Promotions, Inc. v. Am.
5 Spice cites to page 247 of Doug Nobel’s deposition transcript—this page, however, was
not provided to the Court. Thus, the Court can find nothing in the record to support Spice’s
assertion that neither FMG nor FMP have any assets. For purposes of this motion, however, this
issue is irrelevant.
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Electrionics & Entm’t Corp., 617 N.W.2d 67, 75 (Minn. 2000). “A contract implied in fact is in
all respects a true contract. It requires a meeting of the minds the same as an express contract.”
Roberge v. Cambridge Co-op. Creamery, 79 N.W.2d 142, 145-46 (Minn. 1956); see also Mattice
v. Minn. Prop. Ins. Placement, 655 N.W.2d 336, 344 (Minn. Ct. App. 2002) (“[T]o be valid, the
parties must have a meeting of the minds regarding essential contract elements.”). “A contract
does not exist unless the parties have agreed ‘with reasonable certainty about the same thing and
on the same terms.’” Lupient v. Londo, 2004 WL 117600, at *4 (Minn. Ct. App. Jan. 27, 2004)
(quoting Peters v. Mut. Ben. Life Ins. Co., 420 N.W.2d 908, 914 (Minn. Ct. App. 1988)); see also
Jenson v. Taco John’s Int’l, Inc., 110 F.3d 525 (8th Cir. 1997) (“[A]n enforceable contract
requires reasonable certainty about the intent of the parties regarding the fundamental terms of
the contract.” (citing Hill v. Okay Constr. Co., Inc., 252 N.W.2d 107, 114 (Minn. 1977))). “The
test of contractual formation is an objective one, to be judged by the words and actions of the
parties and not by their subjective mental intent.” Hill, 252 N.W.2d at 114; see also Bergstedt,
Wahlberg, Berquist Assocs. v. Rothchild, 225 N.W.2d 261, 263 (Minn. 1975) (“It is the objective
thing, the manifestation of mutual assent, which is essential to the making of a contract.”).
In support of its argument, Spice points to Lenaghan’s testimony that Bergeson promised
Spice could continue to service some accounts in the future. Spice also points to the June 1,
2006 emails in which Bergeson suggested that Spice and FMG make no changes, or “leave as
is,” until they reached an agreement. Bergeson also suggested that one of Spice’s independent
sales agents go to a meeting at CVS, one of Spice’s accounts, and maintain “[b]usiness as usual
in the eyes of our customers.” Ex. 11. Bergeson did not want Spice or FMG to “make any
changes that might affect [SanDisk] customers unless mutually agree[d] upon and sent to
[Bergeson] in writing.” Ex. 12. On July 18, 2006, Bergeson told Jeff Peterson at Spice, “I
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appreciate your efforts we will work things out.” Ex. 19. Also on July 18, Bergeson told Spice
that after August 31st, “we will look at who has what. . . . Hold tight.” Ex. 18.
Considering all evidence in the light most favorable to Spice, there is simply not enough,
or any, specificity to form a contractual relationship. At most, there is just a vague promise that
Spice would get some unnamed accounts sometime in the future. “It is a fundamental rule of law
that an alleged contract which is so vague, indefinite, and uncertain as to place the meaning and
intent of the parties in the realm of speculation is void and unenforceable. Consequently, where
substantial and necessary terms are specifically left open for future negotiation, the purported
contract is fatally defective.” King v. Dalton Motors, Inc., 109 N.W.2d 51, 52 (Minn. 1961).
Here, all of the fundamental terms of a manufacturer’s representative agreement are missing.
First, it is uncertain which accounts SanDisk allegedly promised to Spice. Spice relies on
evidence that SanDisk was aware of which accounts Spice had been calling on under its contract
with FMG. For example, on June 5, 2006, Jeff Peterson at Spice sent Bergeson a list of Spice’s
accounts. Ex. 13. On July 25, 2006, Bergeson sent Spice a list of the year-to-date and quarterto-
date sales to Spice’s accounts. Ex. 22. However, SanDisk’s awareness of Spice’s accounts
under the Spice-FMG Contract is not tantamount to a promise of those same accounts in the
future. In fact, Lenaghan testified that Spice did not expect SanDisk to protect all of the
accounts assigned to Spice under the Spice-FMG Contract. Lenaghan testified that SanDisk
promised to give Spice the accounts for which there were new customer forms—accounts that
Spice had opened. But Spice points to nothing in the record indicating that the parties knew or
agreed upon which accounts those were. When asked during his deposition if Bergeson ever told
him which specific accounts would be Spice’s, Lenaghan responded, “He said that he knew what
accounts they were. Did he give me the specifics? No.” Lenaghan Dep. 178:15-179:2. Thus, it
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is not apparent that Spice even knew which accounts were purportedly being promised to it.
There is no evidence that SanDisk ever promised any specific accounts, that Spice ever asked for
any specific accounts, or that Spice ever provided SanDisk with a list of the specific accounts to
which it thought it was entitled. Further, the record does not include any list of specific accounts
that Spice claims SanDisk promised to it. Thus, even if SanDisk had promised Spice some
accounts in the future, Spice points to nothing in the record from which a jury could determine
which accounts those were.
The emails Spice relies on only further highlight this vagueness. No reasonable jury
could view Bergeson’s statement that after August 31st, “we will look at who has what,” as a
definite promise. It indicates that the status of the Spice accounts in the future is uncertain, to be
determined at a later date. Bergeson’s statement that “we will work things out” does not provide
any clarity as to how they might work it out. There is no evidence that “we will work things out”
means that SanDisk will award defined accounts to Spice in the future. Bergeson’s suggestion to
“leave as is” also does not support Spice’s position, since the status quo was Spice operating
under a contractual agreement with FMG—not with SanDisk.
All of the other fundamental terms of a manufacturer’s representative agreement are also
conspicuously absent. For example, there is no evidence regarding Spice’s commission rate
under the alleged contract, when commissions would be earned and paid, Spice and SanDisk’s
contractual obligations, Spice’s reporting requirements, how Spice would obtain products and
marketing materials from SanDisk, the duration of the alleged contract, or how the agreement
might be terminated and by whom. The Court need only look at the SanDisk-FMG Contract to
see what types of provisions may appear in one of these agreements. While it is not necessary
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that Spice’s alleged contract with SanDisk contain all of these provisions, it should at least
contain some of them.
Further, Spice had no reason to expect that it would have gotten a more generous contract
with SanDisk than FMG had with SanDisk. The SanDisk-FMG Contract was non-exclusive, for
a renewable term of one year, and clearly set forth the circumstances under which SanDisk could
terminate the agreement. The SanDisk-FMG Contract also sheds light on what sorts of
provisions SanDisk found important in a manufacturer’s representative agreement. For example,
there are numerous provisions related to SanDisk’s intellectual property rights, including:
SanDisk’s ability to acquire all rights in any modifications, design changes or improvements of
SanDisk products suggested by customers or employees; confidentiality of proprietary
information; and representatives’ use of SanDisk’s service marks, trademarks, trade names, and
product images. The SanDisk-FMG Contract also emphasizes that the manufacturer’s
representative “is solely responsible for all of its employees and agents” and that it has “no
authority, right or ability to bind or commit SanDisk in any way.” It is not reasonable to expect
SanDisk to enter into an oral manufacturer’s representative agreement with Spice that contained
none of these terms.
Even if SanDisk’s vague promise of future accounts was sufficiently definite, the Court
looks not only at the words used by the parties, but also at the parties’ conduct. On June 21,
2006, Spice’s attorney sent a letter to SanDisk, stating that “Spice would like to enter into a
standard rep agreement directly with SanDisk covering all customers listed on the attached
Schedule B as well as all other customers we are currently representing.” Had such an
agreement already existed as of June 1, 2006, as Spice claims, then this letter would have made
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no sense. When objectively viewing Spice’s conduct, it does not indicate that an oral or implied
manufacturer’s representative agreement existed as of June 1, 2006.
Moreover, even if there had been such a contract at some time, SanDisk terminated it on
several occasions. On July 31, 2006, SanDisk told Spice that Spice was “temporarily not
representing SanDisk.” On August 8, SanDisk told Spice to forward “all SanDisk questions and
inquiries” to Jim Gall, a SanDisk employee. On August 30, SanDisk wrote that Lenaghan
“burned any chance [Spice] had of ever doing any future business with SanDisk.” There is no
evidence that after July 31st, SanDisk made any promises to Spice regarding future accounts.
Viewing the evidence in the light most favorable to Spice, a reasonable jury could not
conclude that there was ever a “meeting of the minds” regarding the “essential contract
elements” of a Sales Representative Agreement. The record does not show that such an
agreement ever existed between Spice and SanDisk. Further, Spice points to no evidence to
show that the alleged agreement was not terminated by SanDisk. Thus, Spice’s claim for the
breach of that agreement must fail. SanDisk is entitled to summary judgment on this claim.
Spice’s motion for summary judgment on Count III is denied.
B. Failure to Pay Commissions on Demand (Count IV)
The Court notes that because there never was a contract between SanDisk and Spice
under which SanDisk was to pay commissions directly to Spice (i.e., no Manufacturer’s
Representative Agreement), SanDisk could not have breached such a contract by failing to pay
commissions on demand. Rather, Spice argues that SanDisk contractually promised to pay the
commissions owed by FMG, and thus breached that contract when it did not pay those FMGCASE
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owed commissions.6 As previously noted, to have a valid, enforceable contract, “the parties
must have a meeting of the minds regarding essential contract elements.” Mattice v. Minn. Prop.
Ins. Placement, 655 N.W.2d at 344. Whether such a contract exists is based on the objective
manifestations of the parties. See, e.g., Bergstedt, Wahlberg, Berquist Assocs. v. Rothchild, 225
N.W.2d at 263. Further, “an alleged contract which is so vague, indefinite, and uncertain as to
place the meaning and intent of the parties in the realm of speculation is void and
unenforceable.” King, 109 N.W.2d at 52.
In support of its argument, Spice points to SanDisk’s repeated assurances that “you will
get paid.” On July 31, 2006, Bergeson wrote to Jeff Peterson, “You are getting paid as I have
said for at least the 10th time to both you an[d] Tom.” Ex. 23. However, none of the above
written communications indicate that SanDisk will be paying Spice. For this missing detail,
Spice relies on Lenaghan’s deposition, in which he testified that Bergeson told him SanDisk
would pay if FMG did not. SanDisk argues that based on the words and actions of Spice,
SanDisk, and FMG, there was no “meeting of the minds” regarding SanDisk’s purported
obligation to pay the commissions FMG owed to Spice. When viewing the parties’ conduct
objectively, the Court agrees. The statement “you will get paid” does not indicate a clear
promise that SanDisk will pay Spice. Especially when reading the emails and letters in context,
it is apparent that SanDisk was merely relaying the assurances it kept getting from FMG that
FMG would pay the commissions it owed to Spice.
Spice relies on the email SanDisk sent to FMG, in which SanDisk threatened to “suspend
payments to FMG and divide the money out” itself if FMG did not pay. However, this statement
6 At some points, Spice seems to assert that this contract was formed on June 1, 2006.
However, at other times, it appears to argue that an entire course of conduct spanning from June
through July 2006 resulted in the formation of this contract. Thus, it is not clear to the Court as
of what date Spice alleges a contract was supposedly formed between Spice and SanDisk.
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22
was contained in an email sent to FMG, not to Spice, so it in no way was a representation from
SanDisk to Spice. Further, no reasonable jury could conclude that this statement was a promise
to set aside money for Spice. Read in context, it is merely part of SanDisk’s attempt to persuade
FMG to pay. The sentence immediately preceding the quoted phrase is: “Pay them you agreed to
do so last week and the week before.” Ex. 49. The sentences immediately following the quoted
phrase are: “This is taking way to[o] much of my time. Please do what is right and pay these
guys what is due to them.” Id. Similarly, Spice also relies on SanDisk’s suggestion of setting up
a lockbox, accessible to Spice and FMG. In the email from SanDisk to FMG and Spice,
Bergeson stated, “[l]et me know if through the course of your negotiations with each other if you
want payment sent to a lock box or mutually agreed upon location.” There is nothing in the
record indicating that Bergeson promised to set up such a lockbox. Bergeson was merely
offering a suggestion to assist FMG and Spice as they attempted to resolve their dispute. In fact,
under the SanDisk-FMG Contract, Bergeson was not permitted to withhold payment to FMG—
had he done so, he would have been in breach of the SanDisk-FMG Contract.
Additionally, even if Bergeson told Lenaghan that SanDisk would pay the commissions
owed by FMG, when determining whether a contract exists the Court looks at both the words
and actions of the parties. Neither Spice nor SanDisk acted in such a way as to indicate that
SanDisk was responsible for the payments owed by FMG. The record is replete with instances
in which SanDisk urged FMG to pay Spice the amounts owed. More importantly, Spice itself
continually demanded that FMG, not SanDisk, pay the owed commissions. Lenaghan repeatedly
wrote to FMG, demanding payment. Spice’s attorney wrote to FMG, demanding payment.
Between May and August 2006, the record reveals five written communications in which Spice
refers to FMG’s failure to pay the commissions owed. During this same time period, there are
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23
no written communications in which Spice refers to SanDisk’s failure to pay the same
commissions. Notably, up until the November 2006 letter to SanDisk’s CEO, the record is
devoid of any emails or letters in which Spice demands payment from SanDisk. Spice, did,
however, write to SanDisk on June 21, 2006, asking SanDisk to “assist [Spice] in convincing
Foresight that it must honor the original Brokerage Agreement” and pay Spice. Ex. 17. Thus,
even after the alleged contract between SanDisk and Spice was entered into, Spice consistently
only asked FMG for payment. When viewed objectively, Spice’s actions do not indicate that
Spice believed SanDisk was contractually obligated to pay FMG’s debt. Such circumstances do
not “clearly and unequivocally indicate the intention of the parties to enter into a contract.”
Webb Bus. Promotions, Inc., 617 N.W.2d at 75.
Further, even if Bergeson promised that SanDisk would pay if FMG did not, and the
parties had acted in a way that objectively manifested mutual assent, again the terms of the
alleged contract are too indefinite to be enforceable. There is nothing in the record indicating
that the parties agreed on exactly how much money SanDisk would pay. On June 1, 2006, Spice
copied SanDisk on an email which stated that FMG owed over $21,000, and forecasted that
FMG would owe Spice “in excess of $150,000” in the near future. On June 4, Spice copied
SanDisk on an email which stated that FMG owed Spice $21,419.33 and that purchase orders of
several million dollars were expected in the next few months, with forecasts of over ten million
dollars in sales over the next year. On June 21, 2006, Spice’s attorney sent a letter to SanDisk,
informing SanDisk that FMG owed $21,419.33, and that within the next forty-five to sixty days,
FMG would owe Spice somewhere between $120,000 and $150,000. Thus, the amount
purportedly promised is somewhere between $140,000 and over $170,000—this is not a definite
amount. Spice’s communications are projections of amounts to be owed in the future, which
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24
necessarily leave the term of payment open. “[W]here substantial and necessary terms are
specifically left open for future negotiation, the purported contract is fatally defective.” King,
109 N.W.2d at 52. Further, the record provides no evidence that SanDisk ever promised this, or
any other, amount. SanDisk’s alleged promise that Spice “will be paid,” does not indicate how
much Spice will be paid, when Spice will be paid, or for what Spice will be paid. Spice claims
that the promise is for the commissions owed by FMG, but there is no evidence as to exactly for
which sales those commissions were due or for what time period SanDisk was obligating itself.
There is no evidence as to whether SanDisk was promising to pay only the commissions FMG
owed up until the date of the promise (the date of which is unclear), or whether SanDisk was
promising to pay the commissions Spice earned up through the Spice-FMG Contract termination
date of July 19, 2006. “Contracts must be certain in terms, and not so indefinite and illusory as
to make it impossible to say just what is promised.” Druar v. Ellerbe & Co., 24 N.W.2d 820,
826 (Minn. 1946) (internal quotation marks omitted). Without evidence of the amount promised,
the date payment would be due, or any other essential terms, the promise is too indefinite to be
enforceable.
Moreover, it is undisputed that any promise by SanDisk to pay Spice the FMG-owed
commissions would have been an assurance or guarantee. As such, it falls within Minnesota’s
Statute of Frauds. Under Minnesota Statute § 513.01, a writing or memorandum “expressing the
consideration” is required for “every special promise to answer for the debt, default or doings of
another.” Minn. Stat. § 513.01(2) (2011); see also Bruce v. Walters, 231 N.W. 16, 17, 18 (Minn.
1930) (finding that an oral agreement between the parties to “pay a debt of another” is “within
the statute of frauds” and therefore “not enforceable”). A memorandum is sufficient only if it
“set[s] forth all the essential terms of the agreement so that it may be proved on the basis of such
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25
memorandum without resort to parol evidence.” In re Petroleum Carriers Co., 121 F. Supp.
520, 523 (D. Minn. 1954). Spice has pointed to no signed memoranda that satisfy the statute of
frauds. Nor did Spice address this argument in its brief. “The purpose of this provision of the
Statute of Frauds is to enable the courts to ensure that one who receives no benefit from a
promise is bound only by the exact terms of his promise.” Esselman v. Production Credit Ass’n
of St. Cloud, 380 N.W.2d 183, 186 (Minn. Ct. App. 1986). “There is [] a temptation for a
promisee, in a case where the real debtor has proved insolvent or unable to pay, to enlarge the
scope of the promise or to torture mere words of encouragement into an absolute promise.” Id.
at 187. Such appears to be the case here. With no writing, Spice fails to satisfy the statute of
frauds. Thus, SanDisk’s alleged guarantee to pay FMG’s debt is unenforceable.
For the reasons stated above, Spice is not entitled to summary judgment on this claim.
SanDisk’s motion for summary judgment on Count IV is granted.
C. Promissory Estoppel (Count VII)
Spice asserts that it reasonably relied upon SanDisk’s promise that Spice would get paid,
and thus Spice’s promissory estoppel claim should survive summary judgment.7 “Promissory
estoppel is an equitable doctrine that ‘impl[ies] a contract in law where none exists in fact.’”
Martens v. Minn. Mining & Mfg. Co., 616 N.W.2d 732, 746 (Minn. 2000) (quoting Grouse v.
Grp. Health Plan, Inc., 306 N.W.2d 114, 116 (Minn. 1981)). “It requires proof that 1) a clear
and definite promise was made, 2) the promisor intended to induce reliance and the promisee in
fact relied to his or her detriment, and 3) the promise must be enforced to prevent injustice.” Id.
7 Spice seemingly does not assert a promissory estoppel claim with respect to SanDisk’s
alleged promise of future accounts. If there ever was such a claim, the Court considers it waived
since it has not been addressed in any of Spice’s submissions.
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26
“[T]he promisor should reasonably expect to induce action or forbearance on the part of the
promisee.” Id.
As noted above, SanDisk’s alleged promise to pay the debts owed by FMG is within the
statute of frauds.
In Del Hayes & Sons, Inc. v. Mitchell, 230 N.W.2d 588, 594-94 (Minn.
1975), the Minnesota Supreme Court identified three approaches courts have
taken concerning the applicability of the statute of frauds defense to promissory
estoppel claims. Under the first (or “Restatement”) approach, “promissory
estoppel will defeat the statute of frauds only when the promise relied upon is a
promise to reduce the contract to writing.” The second approach . . . rejects “the
view that promissory estoppel can remove an oral contract from the statute of
frauds.” . . . The third and least restrictive approach described by the court states
that an oral promise can satisfy the statute of frauds only “where the detrimental
reliance is of such a character and magnitude that refusal to enforce the contract
would permit one party to perpetrate a fraud.” The court went on to note that “[a]
mere refusal to perform an oral agreement, unaccompanied by unconscionable
conduct, however, is not such a fraud as will justify disregarding the statute.”
Casazza v. Kiser, 313 F.3d 414, 421-22 (8th Cir. 2002) (citations omitted). While the
Del Hayes & Sons Court did not endorse any particular view, here, Spice fails to satisfy any of
the approaches. SanDisk’s alleged promise was not a promise to reduce the contract to writing.
Thus, in order for promissory estoppel to remove the alleged oral agreement from the statute of
frauds, SanDisk must have engaged in “unconscionable conduct.” Spice urges the Court to find
that SanDisk’s termination of the SanDisk-FMG Contract and entry into the SanDisk-FMP
Contract constitutes unconscionable or fraudulent conduct. However, under the SanDisk-FMG
Contract, SanDisk was allowed to terminate its relationship with FMG, and it was allowed to
enter into representation agreements with other entities. Nor does SanDisk’s continued payment
of commissions to FMP under the SanDisk-FMP Contract represent unconscionable conduct.
SanDisk was obligated to pay FMP under its agreement—to do otherwise would be a material
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breach of the SanDisk-FMP Contract. There is no evidence that SanDisk “perpetrate[d] a fraud.”
Thus, this promissory estoppel claim cannot survive.
Even if the statute of frauds defense did not apply to the promissory estoppel claim,
Spice’s claim still fails. First, Spice has failed to show a “clear and definite promise.” As
previously discussed, there was no discussion of the exact amount SanDisk purportedly promised
to pay Spice, for which commissions SanDisk would pay, or when or how the amount would be
paid. A claim for promissory estoppel may be dismissed on summary judgment when the
alleged promises are “too general to support a promissory estoppel claim.” Minn. Deli
Provisions Inc. v. Boar’s Head Provisions Co., 606 F.3d 544, 551 (8th Cir. 2010) (quoting
Elvgren Paint Supply Co. v. Benjamin Moore & Co., 948 F.2d 1082, 1084 (8th Cir. 1991)).
SanDisk’s promise that Spice “will be paid” is not a clear and definite promise to support a
promissory estoppel claim.
Further, Spice must show that it reasonably relied on SanDisk’s promise to Spice’s
detriment. Without addressing the reasonableness of Spice’s reliance, the record does not
support any finding that there was detriment. Spice “must demonstrate some detriment—
damage—caused by [its] reliance.” See Gauff v. Wimbley, 2011 WL 1363981 (D. Minn. Apr. 11,
2011). To prove detrimental reliance, Spice must show “an actual change in . . . position.”
Krutchen v. Zayo Bandwidth Northeast, LLC, 591 F. Supp. 2d 1002, 1017 (D. Minn. 2008).
“Mere speculation is insufficient to show reliance.” Id. In actions based on promissory estoppel,
“[r]elief may be limited to damages measured by the promisee’s reliance.” Dallum v. Farmers
Union Cent. Exchange, Inc., 462 N.W.2d 608, 613 (Minn. Ct. App. 1990) (quoting Grouse, 306
N.W.2d at 116). “In other words, relief may be limited to the party’s out-of-pocket expenses
made in reliance on the promise.” Id. Spice claims that the “loss [it] suffered was the time and
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28
money spent on maintaining relationships and sales contacts with SanDisk clients.” Pl.’s Mem.
Response to SanDisk’s Motion for Summ. J. 29. Lenaghan testified that Spice personnel
continued to call on accounts they had been soliciting, but there is no evidence of Spice’s out-ofpocket
expenses made in reliance on SanDisk’s promise to pay FMG’s debt. The record does
not show how much time was lost, nor the cost of that time to Spice. Further, the two individuals
who incurred these lost expenses and time were Jeff Peterson and Steve Peterson—two
independent contractors who Spice admittedly did not compensate for their time or expenses.8
Jeff Peterson and Steve Peterson are not parties to this lawsuit. Spice has put forth no evidence
of expenses Spice has incurred, or time Spice has spent in reliance on SanDisk’s promise. Thus,
there is no evidence from which a fact-finder could conclude that Spice detrimentally changed its
position in reliance on SanDisk’s promise to pay.
A promissory estoppel claim has to involve a promise that must be enforced to prevent
injustice. “[T]he test is not whether the promise should be enforced to do justice, but whether
enforcement is required to prevent an injustice.” Cohen v. Cowles Media Co., 479 N.W.2d 387,
391 (Minn. 1992). Given the applicability of the statute of frauds, the lack of a clear and definite
promise, and Spice’s failure to show any change in position or detriment, the Court concludes
that enforcement of SanDisk’s alleged promise to pay FMG’s debt is not required to prevent
injustice.
D. Tortious Interference with Business Expectancy (Count IX) and Tortious Interference
with Contract (Count X)
To prevail on a claim of tortious interference with contractual relations, Spice “must
prove that: (1) a contract existed; (2) the alleged wrongdoer . . . had knowledge of the contract;
8 Spice’s independent sales agents were compensated in the form of a portion of the sales
commissions, but were never paid for their time or expenses.
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(3) the alleged wrongdoer intentionally interfered with the contract; (4) the alleged wrongdoer’s
actions were not justified; and (5) damages were sustained as a result.” Minn. Deli Provisions
Inc. v. Boar’s Head Provisions Co., 606 F.3d 544, 549 (8th Cir. 2010) (quoting Guinness Import
Co. v. Mark VII Distrib., Inc., 153 F.3d 607, 613 (8th Cir. 1998)). “Further, ‘[t]o prevail on a
claim of interference with prospective economic relations, [Spice] must prove [SanDisk]
intentionally committed a wrongful act that improperly interfered with [Spice’s] prospective
business.’” Id.
Spice alleges that SanDisk interfered with the Spice-FMG Contract when SanDisk
terminated the SanDisk-FMG Contract and entered into the SanDisk-FMP Contract, knowing
that doing so would affect Spice’s contract with FMG. However, SanDisk’s mere knowledge of
the Spice-FMG Contract is not alone sufficient. Spice must prove that SanDisk was wrongful or
not justified in its actions. Spice cannot do so.
First, it is undisputed that it was FMG who asked SanDisk to terminate the SanDisk-
FMG Contract. There is no evidence that SanDisk had any role in the creation of FMP. Nor is
there evidence that SanDisk encouraged Forsythe to create a new company in order to terminate
his relationship with or avoid his obligations to Spice. The fact that FMP was created on June
19, 2006, the same day as the SanDisk-FMG Contract was terminated, is not evidence of
SanDisk’s supposed nefarious intent. In fact, the evidence consistently demonstrates that
SanDisk repeatedly urged FMG to perform under FMG’s contract with Spice.9
9 Spice notes in its brief that SanDisk continued to make payments to FMP until November
2008, even after Spice initiated this lawsuit. Spice appears to believe that this undercuts
SanDisk’s argument that SanDisk was trying to help Spice get paid by FMG. However, Spice
ignores the fact that SanDisk had a contract with FMP that obligated SanDisk to pay
commissions to FMP. Had SanDisk not done so, it would have been in breach of the SanDisk-
FMP Contract. SanDisk’s continued payments to FMP are not evidence that SanDisk was
somehow complicit in FMG’s nonpayment to Spice.
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Under the terms of the SanDisk-FMG Contract, FMG was prohibited from binding
SanDisk in any way. Additionally, SanDisk was permitted to terminate its relationship with
FMG and “appoint other agents or representatives to the assigned territory and/or accounts.” Ex.
40. SanDisk was free to enter into a contract with FMP, or any other entity. “Generally, a
defendant’s actions are justified if it pursues its legal rights via legal means.” Noble Sys. Corp.
v. Alorica Central, LLC, 543 F.3d 978 (8th Cir. 2008) (citing Langeland v. Farmers State Bank
of Trimont, 319 N.W.2d 26, 32-33 (Minn. 1982)). “The general rule with which we are
concerned is that one has the right to be secure in his contracts and to pursue his business . . . free
from the interference of others except where such others act in pursuance of a superior or equal
right.” Id. (quoting Bennett v. Storz Broad. Co., 134 N.W.2d 892, 897 (Minn. 1965)) (emphasis
added). “Liability for wrongful interference may be avoided by showing that the defendant was
justified by a lawful object which he had a right to assert.” Bennett, 134 N.W.2d at 897. There
is no evidence that the Spice-FMG Contract superseded the SanDisk-FMG Contract. SanDisk
was entitled to assert its rights under its contract with FMG.
Even though a defendant’s justification is ordinarily a question of fact to be proven by the
defendant, see Bennett, 134 N.W.2d at 900-01, here SanDisk has met its burden. Every business
decision is likely to have downstream consequences. SanDisk chose to terminate its contract
with FMG and enter into a new contract with FMP. SanDisk had the right to make such a
decision. Mere knowledge that a decision might affect other parties’ contracts is not the same as
intentional, unjustified interference. Spice provides no evidence to show that SanDisk was not
justified in terminating its contract with FMG or that SanDisk somehow acted in bad faith.
There is no evidence that SanDisk benefitted from interfering with Spice’s contract. SanDisk
was not a party to the Spice-FMG Contract and was not bound by that contract. Viewing the
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31
facts in the light most favorable to Spice, there is no evidence that SanDisk’s actions were
unjustified, as necessary for a claim of tortious interference with contractual relations. Likewise,
SanDisk’s actions did not constitute a wrongful act, as is necessary for a claim of tortious
interference with prospective relations.
E. Unjust Enrichment (Count XI)
Spice asserts that “[i]t would be inequitable and morally wrong for SanDisk to retain the
benefits conferred to them through the hard work and expertise of Spice, and not have to pay the
commissions they are owed.” Pl.’s Mem. Response to SanDisk’s Motion for Summ. J. 30. “To
establish an unjust enrichment claim, the claimant must show that the defendant has knowingly
received or obtained something of value for which the defendant in equity and good conscience
should pay.” City of Maple Grove v. Marketline Constr. Capital, LLC, 802 N.W.2d 809, 817
(Minn. Ct. App. 2011) (quoting ServiceMaster of St. Cloud v. GAB Bus. Servs., Inc., 544 N.W.2d
302, 306 (Minn.1996)). “Unjust enrichment claims do not lie simply because one party benefits
from the efforts or obligations of others, but instead it must be shown that a party was unjustly
enriched in the sense that the term ‘unjustly’ could mean illegally or unlawfully.” Id. at 817-18.
Spice argues that the benefit conferred was Spice’s services in maintaining business relationships
with SanDisk clients and continuing to process SanDisk sales through those clients. However,
the benefit Spice seeks to recover is the commissions from these sales. It is undisputed that
SanDisk did not retain the commissions—it paid the commissions to FMG, and then later to
FMP. Thus, there is no evidence that SanDisk unjustly retained any benefit, and so Spice’s
unjust enrichment claim must fail.
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32
III. CONCLUSION
It seems clear that Spice did valuable work and did not receive the payment for which it
had contracted—with FMG. Under the contract, FMG, as found by the arbitrator, owed Spice
hundreds of thousands of dollars. Rather than pay Spice, Forsythe moved out of state and
became (apparently) judgment-proof. Nothing in the written or allegedly implied contracts
creates an obligation on the part of SanDisk to indemnify Spice against Forsythe’s failures.
Based on the files, records, and proceedings herein, and for the reasons stated above, IT
IS ORDERED THAT:
1. SanDisk’s Motion for Summary Judgment [Docket No. 118] is GRANTED.
2. Summary judgment is GRANTED in favor of SanDisk as to Counts I, III, IV, V, VII,
VIII, IX, X, XI, XII, XIII, XIV, and XV of the Complaint.
3. Spice’s Motion for Partial Summary Judgment [Docket No. 123] is DENIED.
Dated: December 22, 2011
s/ Joan N. Ericksen
JOAN N. ERICKSEN
United States District Judge
CASE 0:07-cv-04767-JNE-JJG Document 158 Filed 12/22/11 Page 32 of 32

Minnesota business lawyers are typically asked why cases are in federal court rather than state court.  Typically, to be in federal court a dispute must be over $75,000 and have plaintiffs and defendants from different states.  If a plaintiff and defendant are from the same state, generally, a dispute cannot be heard in federal court.  Also, if the dispute is not in excess of $75,000, it cannot be heard in federal court.  When calculating the amount in dispute, the amount expended for attorney’s fees are a part of the matter in controversy for subject matter jurisdiction purposes when they are provided for by contract or by state statute or otherwise as a matter of right, since these are part of the liability being enforced.

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
ARTHUR MUELLER,
Plaintiff,
v.
RADIOSHACK CORPORATION, a
Delaware Corporation doing business as
RadioShack,
Defendant.
Case No. 11-CV-0653 (PJS/JJG)
ORDER

Plaintiff Arthur Mueller leased retail space to defendant RadioShack Corporation
(“RadioShack”) in a shopping complex in Winona, Minnesota. Mueller believes that
RadioShack incorrectly calculated the rent that it owed under the parties’ lease agreement.
Accordingly, Mueller brought this putative class action in Minnesota state court seeking past-due rent, as well as attorney’s fees and declaratory and injunctive relief.1 About two weeks later, RadioShack removed this action to federal court on the basis of diversity jurisdiction. During the
short interval between the time that Mueller sued Radio Shack in state court and the time that
RadioShack removed Mueller’s action to federal court, Mueller sold his interest in the retail
space to Lake Community Bank. At the time of the sale, RadioShack owed no more than
1Mueller seeks to prosecute a class action on behalf of other landlords who entered into
similar leases with RadioShack and who, Mueller believes, were similarly underpaid on the basis
of RadioShack’s allegedly faulty interpretation of the lease agreement.
CASE 0:11-cv-00653-PJS-JJG Document 32 Filed 12/28/11 Page 1 of 9
$57,693.08 in past-due rent to Mueller. The parties agree that Lake Community Bank, and not
Mueller, is entitled to receive any rent that is due after the sale of the property.
This matter is before the Court on Mueller’s motion to remand pursuant to 28 U.S.C.
§ 1447(c) and RadioShack’s motion to join Lake Community Bank under Fed. R. Civ. P. 19(a).
For the reasons stated below, both motions are denied.
A. Mueller’s Motion to Remand
Mueller argues that the amount in controversy does not exceed $75,000, as is required for
the Court to exercise diversity jurisdiction. See 28 U.S.C. § 1332(a). Because he no longer owns
the retail space, Mueller says, the amount in controversy is, at most, $57,693.08.
When a complaint does not mention the amount in controversy — or alleges an amount
that is less than the jurisdictional minimum — the removing party bears the burden of proving,
by a preponderance of the evidence, that the amount in controversy in fact satisfies the
jurisdictional minimum. In re Minn. Mut. Life Ins. Co. Sales Practices Litig., 346 F.3d 830, 834
(8th Cir. 2003). The amount in controversy is measured as of the date of removal. James Neff
Kramper Family Farm P’ship v. IBP, Inc., 393 F.3d 828, 833-34 (8th Cir. 2005).2
2RadioShack argues that, in calculating the amount in controversy, the Court should not
take into account the fact that Mueller sold the property before the case was removed. Although
the Court need not reach this issue, the Court very much doubts that RadioShack is correct. The
“jurisdictional inquiry focuses on the claims made at the time of removal . . . .” James Neff
Kramper, 393 F.3d at 834 (emphasis added). This makes sense, as the federal court’s
jurisdiction is invoked at the time of removal. As always, in determining whether jurisdiction
exists, a court is not limited to the allegations in the complaint, but must instead assess
jurisdiction on the basis of all the facts known to it. Id. at 833-34.
The cases that RadioShack cites are not to the contrary. Although they contain broad
language to the effect that courts are to assess jurisdiction on the basis of the complaint as it was
filed in state court, none of them addresses whether a court should take into account an event that
(continued…)
-2-
CASE 0:11-cv-00653-PJS-JJG Document 32 Filed 12/28/11 Page 2 of 9
RadioShack argues that, taking into consideration Mueller’s claim for attorney’s fees, the
amount in controversy is met.3 The Court agrees.
Mueller does not dispute that a claim for contractual attorney’s fees counts toward the
amount in controversy for purposes of diversity jurisdiction. See Springstead v. Crawfordsville
State Bank, 231 U.S. 541, 541-42 (1913); see also 14AA Charles Alan Wright et al., Federal
Practice and Procedure § 3712, at 806-08 (4th ed. 2011) (“the law is now quite settled . . . that
the amount expended for attorney’s fees are a part of the matter in controversy for subject matter
jurisdiction purposes when they are provided for by contract or by state statute or otherwise as a
matter of right, since these are part of the liability being enforced” (footnotes omitted)).4 But
2(…continued)
occurred after the state-court action began but before the action was removed to federal court.
Instead, these cases mostly concern whether events occurring after removal — that is, after the
jurisdiction of the federal court has been invoked — can deprive a federal court of jurisdiction.
See, e.g., St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 292 (1938) (post-removal
reduction in amount of claim does not destroy jurisdiction). Because cases almost never change
much between the time that they are filed in state court and the time that they are removed to
federal court, the references in these cases to the complaint filed in state court are best
understood as (imprecise) references to the case as it existed at the time of removal.
3Although the lease agreement provides for the recovery of attorney’s fees, see Compl.
Ex. A Art. XIX § 2, Mueller does not cite this provision in his complaint. Instead, he seeks
attorney’s fees under Minn. Stat. §§ 555.08 and 555.10. Compl. ¶ 54. Nevertheless, both parties
have treated the complaint as raising a claim for attorney’s fees pursuant to the lease agreement
and have not addressed whether Mueller could recover fees under §§ 555.08 and 555.10. The
Court follows suit.
4The Eighth Circuit has said in dicta that “only statutory attorney fees count toward the
jurisdictional minimum calculation.” Rasmussen v. State Farm Mut. Auto. Ins. Co., 410 F.3d
1029, 1031 (8th Cir. 2005) (emphasis added); see also Hartis v. Chicago Title Ins. Co., 656 F.3d
778, 781-82 (8th Cir. 2009) (per curiam) (quoting Rasmussen). Although this language implies
that contractual attorney’s fees do not count toward the jurisdictional minimum, it is not entirely
clear that the Eighth Circuit had contractual fees in mind. Neither Rasmussen nor Hartis
discussed contractual fees or suggested why they should be treated differently than statutory fees
(continued…)
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CASE 0:11-cv-00653-PJS-JJG Document 32 Filed 12/28/11 Page 3 of 9
Mueller argues that the Court can take into account only the amount of fees that were incurred as
of the date that the state-court case commenced. Mueller relies primarily on a Seventh Circuit
case — Gardynski-Leschuck v. Ford Motor Company — that held that the value of future legal
services are not “in controversy” between the parties and may not be considered for purposes of
determining the jurisdictional amount. 142 F.3d 955, 958-59 (7th Cir. 1998); see also
GreatAmerica Leasing Corp. v. Rohr-Tippe Motors, Inc., 387 F. Supp. 2d 992, 995-96 (N.D.
Iowa 2005) (following Gardynski-Leschuck).
The Court disagrees with the reasoning of Gardynski-Leschuck (which is, of course, not
binding on this Court). Courts routinely take into account future damages when determining the
amount in controversy. See, e.g., Mass. Cas. Ins. Co. v. Harmon, 88 F.3d 415, 416 (6th Cir.
1996) (when the validity of a disability insurance policy is at issue, future potential benefits may
be taken into account in determining the amount in controversy); Burns v. Mass. Mut. Life Ins.
Co., 820 F.2d 246, 249 (8th Cir. 1987) (“Where the heart of a cause of action is a claim for future
benefits, the amount in controversy is the present value of the claimed future benefit.”); Broglie
v. MacKay-Smith, 541 F.2d 453, 455 (4th Cir. 1976) (“Damages which the plaintiff claims will
accrue in the future are properly counted against the jurisdictional amount if a right to future
payments . . . will be adjudged in the present suit.” (citation and quotations omitted)).
4(…continued)
for jurisdictional purposes. Hartis relied only on Rasmussen. Rasmussen simply held that the
plaintiff had not established a statutory basis for fees and cited Crawford v. F. Hoffman-La
Roche, Ltd., 267 F.3d 760 (8th Cir. 2001). Crawford had nothing to do with contractual fees.
Thus, it is not clear whether the Eighth Circuit meant to suggest that contractual fees are not
counted toward the amount in controversy — and, if so, what authority the Eighth Circuit was
relying on for that proposition. In any event, to the extent that Rasmussen and Hartis stand for
the proposition that contractual attorney’s fees do not count toward the jurisdictional minimum,
they are inconsistent with the Supreme Court’s decision in Springstead.
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Gardynski-Leschuck distinguishes such cases on the ground that attorney’s fees, unlike
other types of future damages, are avoidable. The Court is not convinced that this is a real
distinction; many types of future damages might be avoidable — in whole or in part — but courts
nevertheless take them into account in determining the amount in controversy. Gardynski-
Leschuck also points out that counting future fees could lead to the absurd result that bitterly
feuding parties could manufacture federal jurisdiction over a de minimis claim by their
determination to litigate to the death. The answer to this argument is that, to count toward the
jurisdictional amount, the attorney’s fees must be reasonable. See Charvat v. GVN Mich., Inc.,
561 F.3d 623, 630 n.5 (6th Cir. 2009) (noting that reasonable attorney’s fees, when mandated or
allowed by statute, may be included in the amount in controversy for purposes of diversity
jurisdiction). The Court will therefore take into account Mueller’s likely future attorney’s fees
for purposes of determining the amount in controversy.
Mueller next argues that, even if it is proper to take into account the amount of attorney’s
fees he may incur in the future, RadioShack has offered no evidence about the likely amount of
those fees. In fee-shifting cases, however, judges may and regularly do bring their own expertise
to bear in determining a reasonable fee. See Warnock v. Archer, 397 F.3d 1024, 1027 (8th Cir.
2005) (district courts may draw on their own experience and knowledge of prevailing market
rates).
A fee of just over $17,300 in this case would put the amount in controversy over the
jurisdictional threshold. In this Court’s experience, it is a rare case that can be litigated in federal
court through even the summary-judgment stage for less than $17,300. This Court has regularly
awarded far more than $17,300 in fees in cases that were resolved at or before the summary-
-5-
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judgment stage. See, e.g., Coleman v. Crossroads Lending Grp., Inc., No. 09-0221, 2010 WL
4676984, at *15 (D. Minn. Nov. 9, 2010) (awarding attorney’s fees of over $90,000 after a
motion for partial summary judgment and a paper “trial” on stipulated facts); Thompson v.
Speedway SuperAmerica, LLC, No. 08-1107, 2009 WL 2998163, at *1, *3 (D. Minn. Sept. 15,
2009) (awarding attorney’s fees of over $50,000 where compensable time included “little more
than drafting a complaint, exchanging written discovery, defending two relatively brief
depositions, and engaging in settlement negotiations”); Winthrop Resources Corp. v. Sabert
Corp., No. 07-1735, Docket No. 69 (D. Minn. July 21, 2008) (granting plaintiff’s unopposed
motion for over $100,000 in fees after plaintiff won summary judgment in its favor); Olson v.
Messerli & Kramer, P.A., No. 07-0439, 2008 WL 1699605, at *5 (D. Minn. Apr. 9, 2008)
(awarding $36,795.79 in fees and costs after plaintiff successfully opposed summary judgment
and the parties settled).
At oral argument, Mueller’s attorney estimated that her firm had already spent 30 hours
on this case. Multiplying by counsel’s hourly rate of $350 yields a fee of $10,500 — well over
half of the amount necessary to meet the jurisdictional minimum. Notably, Mueller incurred this
amount before the parties took any discovery or engaged in any motion practice on the merits of
the case. Mueller’s attorney pointed out that some of the hours were billed by her associate at a
lower rate. Nevertheless, this rough estimate demonstrates the near certainty that Mueller will
incur more than enough in attorney’s fees to put this case over the jurisdictional threshold. The
Court therefore denies Mueller’s motion to remand.
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CASE 0:11-cv-00653-PJS-JJG Document 32 Filed 12/28/11 Page 6 of 9
B. RadioShack’s Motion for Joinder
RadioShack moves under Fed. R. Civ. P. 19(a) to join its new landlord, Lake Community
Bank (“the Bank”), as a plaintiff in this lawsuit. Rule 19(a) requires joinder of a party if:
(A) in that person’s absence, the court cannot accord complete
relief among existing parties; or
(B) that person claims an interest relating to the subject of the
action and is so situated that disposing of the action in the person’s
absence may:
(i) as a practical matter impair or impede the
person’s ability to protect the interest; or
(ii) leave an existing party subject to a substantial
risk of incurring double, multiple, or otherwise
inconsistent obligations because of the interest.
None of these circumstances require the Bank’s joinder.
First, the Bank’s absence does not deprive the Court of the ability to afford complete
relief to Mueller and RadioShack. Mueller is seeking past-due rent through February 2011. If
the Bank were to be joined as a plaintiff, it would be seeking rent from March 2011 onward.
Mueller’s claim is thus separate and distinct from the Bank’s. The Court is fully capable of
awarding Mueller rent through February 2011 — or finding that RadioShack does not owe pastdue
rent to Mueller — without any reference to the Bank’s interest in obtaining past-due rent
beginning in March 2011.
Second, adjudicating this case in the Bank’s absence will not, as a practical matter, impair
the Bank’s interest. No matter the outcome of this litigation, the Bank will not be precluded
from bringing its own lawsuit for past-due rent against RadioShack — and, if the Bank does so,
the Bank will not be bound by anything decided in this action. See Pirrotta v. Indep. Sch. Dist.
-7-
CASE 0:11-cv-00653-PJS-JJG Document 32 Filed 12/28/11 Page 7 of 9
No. 347, Willmar, 396 N.W.2d 20, 21-22 (Minn. 1986). It is conceivable that if a number of
things were to happen — specifically, (1) if the parties were to litigate this action to a conclusion;
(2) if Mueller were to lose; (3) if the Bank were then to sue RadioShack; (4) if RadioShack were
then to defend on grounds of res judicata or collateral estoppel; and (5) if the Bank were then to
be held to have been in privity with Mueller — the Bank’s ability to protect its interests could be
impaired by the outcome of this litigation. But the chances of all of these contingencies being
fulfilled are small — and, based on the evidence before it, the Court cannot conclude that the
Bank is likely to be found to be in privity with Mueller. Moreover, the Bank seems unconcerned
about such a possibility; there is no dispute that the Bank is aware of this action and has not, to
date, shown any interest in joining it. Under these circumstances, the Court sees no reason to
force the Bank to bring claims against RadioShack. Cf. Gwartz v. Jefferson Mem’l Hosp. Ass’n,
23 F.3d 1426, 1429-30 (8th Cir. 1994) (plaintiff’s corporation was not a necessary party because
plaintiff had the same interest in establishing the facts that the corporation had).
Finally, RadioShack is not at risk of incurring double, multiple, or inconsistent
obligations in the Bank’s absence. As noted, the interests of Mueller and the Bank do not
overlap. Everyone agrees that, if RadioShack owes rent, it owes rent to Mueller through
February 2011, and it owes rent to the Bank from March 2011 onward. Under no circumstances
will RadioShack be ordered to make the same rent payments more than once. Likewise, under no
circumstances will RadioShack be ordered by one court to do something, and then be ordered by
another court not to do the same thing, leaving RadioShack with inconsistent obligations. See
Field v. Volkswagenwerk AG, 626 F.2d 293, 301-02 (3d Cir. 1980) (“the possibility of a
subsequent adjudication that may result in a judgment that is inconsistent as a matter of logic . . .
-8-
CASE 0:11-cv-00653-PJS-JJG Document 32 Filed 12/28/11 Page 8 of 9
[does not] trigger the application of Rule 19”), disagreed with on other grounds by Newman-
Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826 (1989). The Court therefore denies RadioShack’s
Rule 19 motion for joinder.
ORDER
Based on the foregoing, and on all of the files, records, and proceedings herein, IT IS
HEREBY ORDERED THAT:
1. Plaintiff’s motion to remand [Docket No. 8] is DENIED; and
2. Defendant’s motion for joinder [Docket No. 20] is DENIED.
Dated: December 28 , 2011 s/Patrick J. Schiltz
Patrick J. Schiltz
United States District Judge
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CASE 0:11-cv-00653-PJS-JJG Document 32 Filed 12/28/11 Page 9 of 9

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Ron Yary; Kenneth D. Resnick and Marion L.
Resnick, individually and as trustees of the
Marion L. Resnick Revocable Trust created
on September 7, 1995; and Irving Braverman,
Plaintiffs,
v.

Stuart A. Voigt,
Defendant.

Asserting claims under the Securities Exchange Act of 1934 and the Minnesota Securities
Act, Ron Yary, Kenneth Resnick, Marion Resnick, and Irving Braverman (collectively,
Plaintiffs) brought this action against Stuart Voigt. They also asserted claims of fraud and
negligent misrepresentation, constructive fraud and breach of fiduciary duty, breach of contract,
equitable and promissory estoppel, and unjust enrichment. The case is before the Court on
Voigt’s Motion to Dismiss Plaintiffs’ Amended Complaint. For the reasons set forth below, the
Court grants in part and denies in part the motion.
CASE 0:11-cv-00694-JNE-FLN Document 15 Filed 12/27/11 Page 1 of 18
2
I. BACKGROUND1
In 1992 or 1993, Voigt began lending money to Jeffrey Gardner for individual real estate
transactions. In 1998, Gardner organized Assured Financial, LLC (Assured), whose business
plan indicated that Assured would provide financing to companies engaged in residential
building construction and land development. Voigt was chairman of Assured’s board.
Kenneth Resnick and Voigt have been friends since 1973. In 2002, Voigt informed
Kenneth Resnick of an investment opportunity with Assured. After subsequent discussions with
Voigt, Kenneth Resnick agreed to invest in Assured. In June 2002, Kenneth Resnick wired
funds to Assured. In exchange, he received a 2-year promissory note from Assured and a
personal guarantee that Voigt had signed.
Voigt and Marion Resnick, Kenneth Resnick’s mother, were also friends. In May or June
2002, Voigt agreed to review Marion Resnick’s investment portfolio and to advise her as to
whether it was properly invested. He advised her to invest in Assured. In June 2002, Marion
Resnick wired funds to Assured. In exchange, she received a 2-year promissory note and a
personal guarantee that Voigt had signed. Later, in 2003 or 2004, Marion Resnick invested
additional funds in Assured.
In September 2004, Kenneth Resnick and Marion Resnick received letters that informed
them that they could either liquidate their investments in Assured or transfer their investments to
Hennessey Financial, LLC (Hennessey). Gardner organized Hennessey in 1999, and the
company engaged in mezzanine financing.2 Voigt was on its financial advisory board. Kenneth
1 The Background summarizes the Amended Complaint’s allegations. For present
purposes, the Court accepts them as true. See Williams v. Hobbs, 658 F.3d 842, 848 (8th Cir.
2011).
2 According to Plaintiffs, “[a] mezzanine real estate loan is a loan in which the lender’s
security interest in the real estate collateralizing the loan is subordinate to a more senior lender.”
CASE 0:11-cv-00694-JNE-FLN Document 15 Filed 12/27/11 Page 2 of 18
3
Resnick asked whether he and his mother should transfer their Assured investments to
Hennessey, and Voigt advised him that they should. Marion Resnick transferred her Assured
investment to Hennessey, and she received a 2-year promissory note dated October 1, 2004, from
Hennessey. She made additional investments in Hennessey in November 2004, late 2005, and
2007. Kenneth Resnick also transferred his Assured investment to Hennessey. He received a 2-
year promissory note dated November 1, 2004, from Hennessey. He made additional
investments in Hennessey in late 2005, 2006, and 2007. Voigt repeatedly told Kenneth Resnick
and Marion Resnick that their investments in Assured and Hennessey were safe and secure.
Voigt and Yary have been friends since 1970. In the summer of 2003, Yary talked to
Kenneth Resnick, who mentioned his investment in Assured through Voigt. Within two months,
Yary called Voigt and asked about investing with Voigt. Voigt solicited Yary to invest in
Hennessey in several telephone conversations between August 2003 and April 2004. Voigt
agreed to personally guarantee Yary’s investment. On January 27, 2004, Yary sent a check to
Hennessey. In exchange, he received a 5-year debenture dated January 28, 2004. Later, Yary
received financial disclosures from Voigt, but Yary never received an executed personal
guarantee from Voigt. Voigt told Yary that Hennessey was a very safe investment.
Braverman has been a friend of Marion Resnick for more than 50 years. In the fall of
2006, he learned from her about her and her son’s investments. Later, Braverman asked Kenneth
Resnick to speak to Voigt about the possibility of investing in Hennessey. Kenneth Resnick
called Voigt, who indicated that Braverman could invest in Hennessey. In early September
2006, Braverman met Voigt, Gardner, and an employee of Hennessey. Gardner and the
employee gave a sales presentation, Voigt indicated that he would “back up” Braverman’s
investment, and Voigt told Braverman not to worry about a warning in a private placement
CASE 0:11-cv-00694-JNE-FLN Document 15 Filed 12/27/11 Page 3 of 18
4
memorandum that Braverman had received from Gardner and the employee. Later that month,
Braverman invested funds in Hennessey. In exchange, he received a 2-year subordinated
debenture. The next month, Braverman invested additional funds, and he received a superseding
2-year subordinated debenture. Voigt told Braverman that an investment in Hennessey was safe
and secure.
By April 2007, Voigt had seen documents that indicated Hennessey was experiencing
significant losses and could fail. By late 2007, Hennessey was experiencing severe financial
difficulties. By 2008, Hennessey was making interest payments to investors not from profits
from mezzanine lending but from new principal investments.
Plaintiffs received letters from Hennessey dated May 1, 2008. The letters indicated that
Hennessey faced challenges from the decline of the real estate market and the near collapse of
the credit markets, that Hennessey had made progress in pursuing solutions to the challenges,
that Hennessey’s goal remained above market returns for its investors, and that Hennessey’s
primary goal, given market conditions, was to protect the future of Hennessey and its investors.
Plaintiffs received letters dated May 14, 2008, from Hennessey. The letters indicated that
Hennessey’s senior lender had stopped all investor payments and accruals as of May 1, was
discontinuing financing, and was seizing Hennessey’s assets. The letter indicated that Gardner
continued to look for refinancing solutions and that all investments would be lost if Gardner’s
efforts to obtain additional financing for Hennessey proved unsuccessful.
Upon receiving the May 14 letter, Kenneth Resnick called Voigt about the investments he
and his mother had made. Voigt stated that Hennessey was developing a plan to avoid
significant losses to their investments. In the following few weeks, Kenneth Resnick talked to
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5
Voigt on a daily basis. Voigt reassured Kenneth Resnick that a plan was being developed that
would prevent them from losing their investments.
Braverman’s son contacted Voigt immediately after Braverman received the May 14
letter. The son demanded that Voigt honor his personal guarantee of Braverman’s investment.
Voigt denied personally guaranteeing the investment.
Marion Resnick called Voigt after receiving the May 14 letter. Voigt told her that a plan
was being developed that would keep her investment safe.
Yary contacted Voigt after receiving the May 14 letter. Voigt stated that he stood to lose
a substantial investment and that he was in the same position as Yary and the other Plaintiffs.
Voigt reassured Yary that a plan was being developed that would prevent the loss of their
investments.
Plaintiffs received letters dated June 6, 2008. The letters stated that Hennessey would be
dissolved and that no payments to unsecured creditors would be made. The letter also mentioned
a reorganization plan in which unsecured creditors will receive preferred shares in a publicly
traded entity.
After receiving the June 6 letter, Kenneth Resnick told Voigt that they needed an attorney
to look out for their life savings as the reorganization plan was being developed. Voigt
responded that a lawyer, Todd Duckson, was negotiating with Hennessey’s senior lender, that
Duckson was a fine lawyer, and that Duckson was looking out for the interests of investors like
them. Voigt stated that he had recently talked to Duckson for three hours about the solution.
Kenneth Resnick conveyed Voigt’s assurances to Marion Resnick and Braverman.
A day or two later, Voigt told Kenneth Resnick that he had talked to Duckson. Voigt
mentioned an investor meeting at which Gardner would present to investors the solution to
CASE 0:11-cv-00694-JNE-FLN Document 15 Filed 12/27/11 Page 5 of 18
6
Hennessey’s financial problem. Voigt stated that the plan involved putting $10 million into a
public company and investors receiving stock valued at $4.00 to $4.50 per share.
Plaintiffs received letters dated June 12, 2008. The letters announced a meeting
scheduled to take place on June 25, 2008, when a reorganization plan would be presented. The
plan anticipated unsecured creditors receiving preferred shares in a publicly traded entity with
initial capital of $10 million. The plan announced in the June 12 letter was essentially the same
as the plan that Voigt had recently described to Kenneth Resnick.
Kenneth Resnick personally attended the June 25 meeting. Marion Resnick listened to
the meeting via telephone. Yary listened and watched a presentation via the Internet. At the
meeting, Gardner presented the reorganization plan and informed investors that, upon execution
of a subscription agreement, they would receive shares in a publicly traded company with $10
million in financing. The shares would be valued at $4.00 per share, the number of shares
received by each investor would correspond to the amount that Hennessey owed the investor,
and the new company would pay a dividend of approximately 2.5% of each investor’s
investment. Gardner stated that this plan was the only opportunity to recover any assets and that
the alternative was an unsatisfied judgment.
After the June 25 meeting, Yary asked Voigt whether he should sign the subscription
agreement, Voigt advised Yary to sign it, and Yary did so. Kenneth Resnick also asked Voigt
whether he and his mother should sign the agreement. Voigt told him that the agreement
represented the only chance of recovery. Kenneth Resnick and Marion Resnick signed the
agreement. Braverman also signed the agreement. The agreement included a release of
Hennessey and its affiliates from claims related to the prior relationship with the subscriber.
CASE 0:11-cv-00694-JNE-FLN Document 15 Filed 12/27/11 Page 6 of 18
7
The new company in which Plaintiffs received shares, Jaguar Financial Corporation, had
little to no assets. Its financing never approached the figure, $10 million, stated at the June 25
meeting. It was never a publicly traded company, and its shares have no value.
II. DISCUSSION
In ruling on a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of
the Federal Rules of Civil Procedure, a court accepts the facts alleged in the complaint as true
and grants all reasonable inferences in favor of the plaintiff. See Crooks v. Lynch, 557 F.3d 846,
848 (8th Cir. 2009). Although a pleading is not required to contain detailed factual allegations,
“[a] pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a
cause of action will not do.’” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “To survive a motion to dismiss, a complaint
must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face.’” Id. (quoting Twombly, 550 U.S. at 570).
The court “generally may not consider materials outside the pleadings,” but “[i]t may . . .
consider some public records, materials that do not contradict the complaint, or materials that are
‘necessarily embraced by the pleadings.’” Noble Sys. Corp. v. Alorica Cent., LLC, 543 F.3d 978,
982 (8th Cir. 2008) (quoting Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir.
1999)). Asserting that they are embraced by the pleadings, Voigt submitted copies of the Jaguar
Financial subscription agreement and Schedule D to his income tax returns from 2007 to 2009 in
support of his motion to dismiss. The subscription agreement is embraced by the Amended
Complaint; the schedules are not. The Court declines to consider the schedules. See Fed. R. Civ.
P. 12(d); Kushner v. Beverly Enters., Inc., 317 F.3d 820, 831 (8th Cir. 2003) (“When deciding a
motion to dismiss, a court may consider the complaint and documents whose contents are alleged
CASE 0:11-cv-00694-JNE-FLN Document 15 Filed 12/27/11 Page 7 of 18
8
in a complaint and whose authenticity no party questions, but which are not physically attached
to the pleading.” (internal quotation marks omitted)).
A. Release
Voigt asserts that Plaintiffs released all claims against Hennessey and its affiliated
parties, including Voigt, pursuant to the release contained in the Jaguar Financial subscription
agreement. Release is an affirmative defense. Fed. R. Civ. P. 8(c)(1). Nevertheless, it may
provide the basis for a dismissal pursuant to Rule 12(b)(6) under certain circumstances. Citibank
Global Mkts., Inc. v. Rodríguez Santana, 573 F.3d 17, 23 (1st Cir. 2009) (“Release is an
affirmative defense, and such a defense will support a motion to dismiss only where it is (1)
definitively ascertainable from the complaint and other sources of information that are
reviewable at this stage, and (2) the facts establish the affirmative defense with certitude.”
(citations omitted)); cf. Noble Sys. Corp. v. Alorica Cent., LLC, 543 F.3d 978, 983 (8th Cir.
2008) (“If an affirmative defense such as a privilege is apparent on the face of the complaint,
however, that privilege can provide the basis for dismissal under Rule 12(b)(6).”). But see
Deckard v. Gen. Motors Corp., 307 F.3d 556, 560 (7th Cir. 2002) (“A motion to dismiss was
improper since release is an affirmative defense, and the existence of a defense does not undercut
the adequacy of the claim.” (citation omitted)). Plaintiffs argue that they were defrauded by
executing the Jaguar Financial subscription agreement. Without expressing an opinion as to the
validity of the release in the Jaguar Financial subscription agreement, the Court concludes that
release is not a proper basis for a dismissal under Rule 12(b)(6) in this case.
B. Count I – Securities Exchange Act and Rule 10b-5
In Count I, Plaintiffs claim that Voigt violated section 10(b) of the Securities Exchange
Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5. Under section 10(b), it is
CASE 0:11-cv-00694-JNE-FLN Document 15 Filed 12/27/11 Page 8 of 18
9
unlawful “[t]o use or employ, in connection with the purchase or sale of any security . . . any
manipulative or deceptive device or contrivance in contravention of such rules and regulations as
the Commission may prescribe as necessary or appropriate in the public interest or for the
protection of investors.” Rule 10b-5 implements this provision by making it unlawful “[t]o make
any untrue statement of a material fact or to omit to state a material fact necessary in order to
make the statements made, in the light of the circumstances under which they were made, not
misleading.” To prevail on a claim that a defendant made material misrepresentations or
omissions in violation of section 10(b) and Rule 10b-5, a plaintiff “must prove ‘(1) a material
misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the
misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the
misrepresentation or omission; (5) economic loss; and (6) loss causation.’” Matrixx Initiatives,
Inc. v. Siracusano, 131 S. Ct. 1309, 1317 (2011) (quoting Stoneridge Inv. Partners, LLC v.
Scientific-Atlanta, Inc., 552 U.S. 148, 157 (2008)).
1. 28 U.S.C. § 1658(b)(2)
Citing 28 U.S.C. § 1658(b)(2), Voigt asserts that part of Count I is untimely. Section
1658(b) states:
[A] private right of action that involves a claim of fraud, deceit, manipulation, or
contrivance in contravention of a regulatory requirement concerning the securities
laws, as defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(47)), may be brought not later than the earlier of—
(1) 2 years after the discovery of the facts constituting the violation; or
(2) 5 years after such violation.
The parties executed a tolling agreement on April 22, 2010. Voigt contends that the claims of
Plaintiffs who bought securities before April 22, 2005, should be dismissed. Specifically, Voigt
identifies the following purchases that took place before April 22, 2005: Kenneth Resnick’s
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10
investments in Assured and initial investment in Hennessey, Marion Resnick’s investments in
Assured and initial investment in Hennessey, and Yary’s investment in Hennessey.
Plaintiffs respond that they purchased the securities giving rise to their claims well within
the 5-year period. In support, they state that Kenneth Resnick and Marion Resnick reinvested
the principal from previous investments and added new principal in new debt instruments after
April 22, 2005. Plaintiffs also state that they converted their investments in Hennessey to shares
of Jaguar Financial in July 2008.
Setting forth “an unqualified bar on actions instituted ‘5 years after such violation,’”
§ 1658(b)(2) gives “defendants total repose after five years.” Merck & Co. v. Reynolds, 130 S.
Ct. 1784, 1797 (2010); see McCann v. Hy-Vee, Inc., No. 11-1459, 2011 WL 5924414, at *6 (7th
Cir. Nov. 22, 2011); In re Exxon Mobil Corp. Sec. Litig., 500 F.3d 189, 199-200 (3d Cir. 2007).
To the extent Count I is based on misrepresentations or omissions made in connection with the
purchase of securities before April 22, 2005, the claim is untimely. The Court dismisses Count I
in part.
2. Misrepresentations or omissions with particularity
Voigt contends that Count I should be dismissed because Plaintiffs failed to plead
misrepresentations or omissions with particularity as required by the Private Securities Litigation
Reform Act (PSLRA). “The PSLRA imposes a heightened pleading standard in cases alleging
securities fraud.” Lustgraaf v. Behrens, 619 F.3d 867, 873 (8th Cir. 2010). Under the PSLRA,
“the complaint shall specify each statement alleged to have been misleading, the reason or
reasons why the statement is misleading, and, if an allegation regarding the statement or
omission is made on information and belief, the complaint shall state with particularity all facts
on which that belief is formed.” 15 U.S.C. § 78u-4(b)(1); see Detroit Gen. Retirement Sys. v.
CASE 0:11-cv-00694-JNE-FLN Document 15 Filed 12/27/11 Page 10 of 18
11
Medtronic, Inc., 621 F.3d 800, 805 (8th Cir. 2010). Pointing to a small subset of the Amended
Complaint’s paragraphs, Voigt contends that Plaintiffs failed to articulate the requisite “who,
what, when, where, and how” of the alleged misrepresentations and omissions. Read in its
entirety, the Amended Complaint does not lack the requisite particularity.
3. Loss causation
Voigt asserts that Count I should be dismissed because Plaintiffs failed to plead loss
causation. “To adequately plead loss causation, the complaint must state facts showing a causal
connection between the defendant’s misstatements and the plaintiff’s losses.” McAdams v.
McCord, 584 F.3d 1111, 1114 (8th Cir. 2009). “The plaintiff must show ‘that the loss was
foreseeable and that the loss was caused by the materialization of the concealed risk.’” Id.
(quoting Schaaf v. Residential Funding Corp., 517 F.3d 544, 550 (8th Cir. 2008)).
Voigt asserts that Plaintiffs failed to plead loss causation with respect to their investments
in Hennessey. “There are several ways in which a plaintiff might go about proving loss
causation. . . . [We have] suggest[ed] that loss causation might be shown if a broker falsely
assures the plaintiff that a particular investment is ‘risk-free.’” Ray v. Citigroup Global Mkts.,
Inc., 482 F.3d 991, 995 (7th Cir. 2007); see Bastian v. Petren Res. Corp., 892 F.2d 680, 685-86
(7th Cir. 1990); Bruschi v. Brown, 876 F.2d 1526, 1531 (11th Cir. 1989). According to the
Amended Complaint, Voigt repeatedly assured Plaintiffs of the safety and security of the
investments in Hennessey, the investments in Hennessey were actually subject to a high degree
of risk, and Voigt failed to inform Plaintiffs of Hennessey’s financial deterioration. The Court
rejects Voigt’s argument that Plaintiffs failed to plead loss causation with respect to their
Hennessey investments.
CASE 0:11-cv-00694-JNE-FLN Document 15 Filed 12/27/11 Page 11 of 18
12
Voigt also contends that Plaintiffs failed to plead loss causation with respect to their
conversion to shares of Jaguar Financial. According to the Amended Complaint, Voigt told
Plaintiffs that the solution to Hennessey’s financial problems involved conversion into shares of
a company with $10 million in financing and that the plan was their only opportunity to recover
some of their losses. The company never had close to the amount of financing represented, and
the shares of Jaguar Financial have no value. The Court concludes that Plaintiffs have
sufficiently alleged loss causation with respect to their conversion to shares of Jaguar Financial.
Finally, Voigt contends that Plaintiffs did not experience a loss by converting their
investments in Hennessey to shares of Jaguar Financial because the investments in Hennessey
and the shares of Jaguar Financial were worthless. In support, Voigt points to Plaintiffs’
allegation that Gardner stated at the June 25 meeting that conversion to shares of Jaguar
Financial was the only opportunity to recover any assets and that the alternative was an
unsatisfied judgment. Nevertheless, Plaintiffs also alleged that Voigt, who did not execute the
subscription agreement to convert his investment in Hennessey to shares of Jaguar Financial, did
not lose his entire investment in Hennessey. Drawing all reasonable inferences in Plaintiffs’
favor, the Court rejects Voigt’s assertion that Plaintiffs failed to allege a loss in connection with
their conversion to shares of Jaguar Financial.
4. Scienter with particularity
Voigt maintains that Plaintiffs failed to plead scienter with particularity. Under the
PSLRA, a plaintiff must “state with particularity facts giving rise to a strong inference that the
defendant acted with the required state of mind.” 15 U.S.C. § 78u-4(b)(2)(A); see Lustgraaf, 619
F.3d at 873. “The inquiry . . . is whether all of the facts alleged, taken collectively, give rise to a
strong inference of scienter, not whether any individual allegation, scrutinized in isolation, meets
CASE 0:11-cv-00694-JNE-FLN Document 15 Filed 12/27/11 Page 12 of 18
13
that standard.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322-23 (2007). “[I]n
determining whether the pleaded facts give rise to a ‘strong’ inference of scienter, the court must
take into account plausible opposing inferences.” Id. at 323. The Supreme Court explained:
The strength of an inference cannot be decided in a vacuum. The inquiry
is inherently comparative: How likely is it that one conclusion, as compared to
others, follows from the underlying facts? To determine whether the plaintiff has
alleged facts that give rise to the requisite “strong inference” of scienter, a court
must consider plausible, nonculpable explanations for the defendant’s conduct, as
well as inferences favoring the plaintiff. The inference that the defendant acted
with scienter need not be irrefutable, i.e., of the “smoking-gun” genre, or even the
“most plausible of competing inferences.” Recall in this regard that § 21D(b)’s
pleading requirements are but one constraint among many the PSLRA installed to
screen out frivolous suits, while allowing meritorious actions to move forward.
Yet the inference of scienter must be more than merely “reasonable” or
“permissible”—it must be cogent and compelling, thus strong in light of other
explanations. A complaint will survive, we hold, only if a reasonable person
would deem the inference of scienter cogent and at least as compelling as any
opposing inference one could draw from the facts alleged.
Id. at 323-24 (citations omitted); see Minneapolis Firefighters’ Relief Ass’n v. MEMC Elec.
Materials, Inc., 641 F.3d 1023, 1029 (8th Cir. 2011). “Scienter can be established in three ways:
(1) from facts demonstrating a mental state embracing an intent to deceive, manipulate, or
defraud; (2) from conduct which rises to the level of severe recklessness; or (3) from allegations
of motive and opportunity.” Detroit Gen. Retirement Sys., 621 F.3d at 808 (quoting Cornelia I.
Crowell GST Trust v. Possis Med., Inc., 519 F.3d 778, 782 (8th Cir. 2008)).
Voigt contends that Plaintiffs failed to allege facts that give rise to a strong inference of
scienter. He notes that he personally sustained losses in Assured and Hennessey, and he asserts
that Plaintiffs’ allegations are implausible. Plaintiffs respond that Voigt repeatedly lied to them
about the safety of investing in Assured and Hennessey, that he encouraged elderly,
unsophisticated investors of limited means to concentrate their investments in extremely risky
investments, and that he lied about receiving a commission on Yary’s investment. Reading the
Amended Complaint in its entirety and acknowledging its allegations regarding the losses
CASE 0:11-cv-00694-JNE-FLN Document 15 Filed 12/27/11 Page 13 of 18
14
sustained by Voigt, the Court concludes that Plaintiffs have alleged facts that give rise to a strong
inference of scienter.
5. Control person
Section 20(a) of the Securities Exchange Act “provides for liability of those who, subject
to certain defenses, ‘directly or indirectly’ control a primary violator of the federal securities
laws.” Lustgraaf, 619 F.3d at 873. To the extent Plaintiffs assert a claim against him as a
control person, Voigt contends that Plaintiffs failed to adequately plead the claim. Plaintiffs do
not respond to this argument. The Court dismisses Count I to the extent Plaintiffs assert a claim
against Voigt as a control person. See id. at 873-75.
C. Count II – Minnesota Securities Act
In Count II, Plaintiffs assert that Voigt violated the Minnesota Securities Act. Voigt
contends that Count II should be dismissed for the same reasons that Count I should be
dismissed. Opposing Voigt’s motion to dismiss Count II, Plaintiffs incorporate their arguments
raised in connection with Count I. For the reasons set forth above, the Court dismisses in part
Count II. See Sailors v. N. States Power Co., 4 F.3d 610, 614 n.5 (8th Cir. 1993) (“As to Sailors’
claims under the Minnesota Securities Act, the parties agree that we are bound by our decision
on the federal claims.” (citation omitted)).
D. Count III – Fraud and negligent misrepresentation
Plaintiffs allege claims of fraud and negligent misrepresentation in Count III. To
establish common law fraud, a plaintiff must prove:
(1) a false representation of a past or existing material fact susceptible of
knowledge; (2) made with knowledge of the falsity of the representation or made
without knowing whether it was true or false; (3) with the intention to induce
action in reliance thereon; (4) that the representation caused action in reliance
thereon; and (5) pecuniary damages as a result of the reliance.
CASE 0:11-cv-00694-JNE-FLN Document 15 Filed 12/27/11 Page 14 of 18
15
U.S. Bank N.A. v. Cold Spring Granite Co., 802 N.W.2d 363, 373 (Minn. 2011). “Where a
representation regarding a future event is alleged . . . an additional element of proof is that the
party making the representation had no intention of performing when the promise was made.”
Martens v. Minn. Mining & Mfg. Co., 616 N.W.2d 732, 747 (Minn. 2000). A person makes a
negligent misrepresentation when:
(1) in the course of his or her business, profession, or employment, or in a
transaction in which he or she has a pecuniary interest, (2) the person supplies
false information for the guidance of others in their business transactions, (3)
another justifiably relies on the information, and (4) the person making the
representation has failed to exercise reasonable care in obtaining or
communicating the information.
Valspar Refinish, Inc. v. Gaylord’s, Inc., 764 N.W.2d 359, 369 (Minn. 2009). Claims of fraud
and negligent misrepresentation are subject to the pleading requirements of Rule 9(b) of the
Federal Rules of Civil Procedure. Trooien v. Mansour, 608 F.3d 1020, 1028 (8th Cir. 2010).
Voigt argues that Count III should be dismissed because Plaintiffs failed to plead material
misrepresentations on which they relied, Plaintiffs failed to adequately allege Voigt knew his
alleged misrepresentations were false when made, and Plaintiffs failed to allege any proximate
relationship between his alleged misrepresentations and their losses. Having reviewed the
Amended Complaint, the Court concludes that Plaintiffs have adequately alleged claims of fraud
and negligent misrepresentation. The Court denies Voigt’s motion to dismiss with respect to
Count III.
E. Count IV – Constructive fraud and breach of fiduciary duty
Count IV is a claim of constructive fraud and breach of fiduciary duty. Voigt contends
that Count IV should be dismissed because Plaintiffs failed to allege that he had a fiduciary
relationship with them. Plaintiffs respond that Voigt “had a ‘confidential relationship’ with
Plaintiffs Marion and Ken Resnick and Irv Braverman.”
CASE 0:11-cv-00694-JNE-FLN Document 15 Filed 12/27/11 Page 15 of 18
16
“Constructive fraud is, by definition, not actual fraud but conduct that the law treats as
fraud, irrespective of the actor’s intent or motive. Constructive fraud reposes exclusively in the
context of fiduciary obligations and is simply a characterization of a breach of such a duty.” Perl
v. St. Paul Fire & Marine Ins. Co., 345 N.W.2d 209, 213 (Minn. 1984) (internal quotation marks
omitted). “A fiduciary relationship exists ‘when confidence is reposed on one side and there is
resulting superiority and influence on the other; and the relation and duties involved in it need
not be legal, but may be moral, social, domestic, or merely personal.’” Toombs v. Daniels, 361
N.W.2d 801, 809 (Minn. 1985) (quoting Stark v. Equitable Life Assurance Soc’y, 285 N.W. 466,
470 (Minn. 1939)). “Such a relationship transcends the ordinary business relationship which, if
it involves reliance on a professional, surely involves a certain degree of trust and a duty of good
faith and yet is not classified as ‘fiduciary.’” Carlson v. SALA Architects, Inc., 732 N.W.2d 324,
331 (Minn. Ct. App. 2007). Although “friendship alone does not constitute a confidential
relationship, friendship is one factor that may be considered.” Norlander v. Cronk, 221 N.W.2d
108, 111 (Minn. 1974); see Hope v. Klabal, 457 F.3d 784, 791 (8th Cir. 2006) (“[A] fiduciary
relationship is not established under Minnesota law in the context of commercial transactions
simply by a long acquaintance between the parties or by the plaintiff having faith and confidence
in the defendant where the plaintiff should have known the defendant was representing an
adverse interest.”). “The existence of a fiduciary relationship is a question of fact.” Toombs,
361 N.W.2d at 809. “[W]hile a relationship might not be fiduciary per se, the facts of the case
might create such a relationship.” Carlson, 732 N.W.2d at 331. Accepting as true the Amended
Complaint’s allegations, the Court concludes that Plaintiffs have adequately alleged that Voigt
had fiduciary relationships with Marion Resnick, Kenneth Resnick, and Braverman. Plaintiffs
CASE 0:11-cv-00694-JNE-FLN Document 15 Filed 12/27/11 Page 16 of 18
17
failed to sufficiently allege that Voigt had a fiduciary relationship with Yary. Count IV is
dismissed to the extent it is asserted by Yary.
F. Counts V and VI – Breach of contract, and equitable and promissory estoppel
Voigt contends that Plaintiffs’ claims of breach of contract should be dismissed because
Kenneth Resnick’s and Marion Resnick’s claims based on Voigt’s guarantees executed in 2002
are implausible. Voigt asserts that Kenneth Resnick and Marion Resnick failed to identify the
terms of the guarantees and that they failed to attach the guarantees to the Amended Complaint.
The Court rejects Voigt’s contention that the claims are implausible. The Amended Complaint
adequately alleges that Voigt executed personal guarantees, that Kenneth Resnick and Marion
Resnick sustained investment losses that are covered by the guarantees, and that Voigt failed to
honor his guarantees.
Next, Voigt contends that Plaintiffs’ claims of breach of contract are barred by the statute
of frauds. See Minn. Stat. § 513.01 (2010). He asserts that Plaintiffs “cannot proceed on a claim
for promissory or equitable estoppel as an end-run around the statute of frauds.” “An agreement
may be taken out of the statute of frauds . . . by application of the doctrines of promissory or
equitable estoppel.” Berg v. Carlstrom, 347 N.W.2d 809, 812 (Minn. 1984); see Casazza v.
Kiser, 313 F.3d 414, 421 (8th Cir. 2002) (“We might be inclined to agree . . . that Minnesota
does not endorse such a hard-nosed view.”); Holmes v. Torguson, 41 F.3d 1251, 1255 (8th Cir.
1994). The Court denies Voigt’s motion to dismiss with respect to Counts V and VI.
G. Count VII – Unjust enrichment
Voigt asserts that Plaintiffs’ claims of unjust enrichment should be dismissed because
Plaintiffs cannot prevail on any of their fraud claims. Having rejected the premise of Voigt’s
argument, the Court declines to dismiss Count VII.
CASE 0:11-cv-00694-JNE-FLN Document 15 Filed 12/27/11 Page 17 of 18
18
III. CONCLUSION
Based on the files, records, and proceedings herein, and for the reasons stated above, IT
IS ORDERED THAT:
1. Voigt’s Motion to Dismiss Plaintiffs’ Amended Complaint [Docket No. 6]
is GRANTED IN PART and DENIED IN PART.
2. Counts I, II, and IV are dismissed in part.
Dated: December 27, 2011
s/ Joan N. Ericksen
JOAN N. ERICKSEN
United States District Judge
CASE 0:11-cv-00694-JNE-FLN Document 15 Filed 12/27/11 Page 18 of 18

Schmit Towing, Inc., Appellant,
v.
Chris Frovik, individually, d/b/a FTR Towing and Recovery, Respondent.

Court of Appeals of Minnesota.
Filed November 9, 2010.

Ryan P. Myers, Christopher P. Parrington, Benjamin R. Skjold, Skjold Barthel, P.A., Minneapolis, Minnesota, for appellant.

Wendy G. M. Lahn, Susan Guertin, Law Office of Charles W. LaDue, Coon Rapids, Minnesota, for respondent.

Considered and decided by Larkin, Presiding Judge; Peterson, Judge; and Hudson, Judge.

UNPUBLISHED OPINION

LARKIN, Judge.

Appellant challenges the district court’s grant of summary judgment for respondent, which was based on the district court’s conclusion that a noncompete clause in the parties’ independent-contractor agreement was invalid. Because the district court improperly applied a post-employment independent-consideration requirement when determining the validity of the noncompete clause, we reverse and remand.

FACTS

Appellant Schmit Towing, Inc. is a Minnesota corporation engaged in the business of towing vehicles pursuant to private and government contracts. Respondent Chris Frovik, doing business as Frovik Towing and Recovery (FTR), is a Minnesota resident who engages in the business of towing vehicles.

On or about June 9, 2006, Schmit entered into a subcontract agreement (first agreement) with FTR, wherein FTR would provide towing services to Schmit. This contract did not contain a noncompete clause. On July 31, 2007, Schmit and FTR mutually terminated the first agreement. That same day, the parties entered into another agreement (second agreement), which contained a noncompete clause. In March 2009, Schmit filed a complaint alleging, among other claims, that FTR had breached the noncompete clause by providing towing services for Schmit’s competitor. Schmit sought injunctive relief, which was denied by the district court.

FTR moved to dismiss for failure to state a claim upon which relief could be granted. Schmit moved for partial summary judgment. Because the district court considered matters outside of the pleadings, it treated FTR’s motion as one for summary judgment.[1] The district court granted summary judgment in favor of FTR, based on its conclusion that the parties’ noncompete agreement was invalid, and denied Schmit’s motion for partial summary judgment. This appeal follows.

DECISION

On appeal from summary judgment, “[w]e review de novo whether a genuine issue of material fact exists” and “whether the district court erred in its application of the law.” STAR Ctrs., Inc. v. Faegre & Benson, L.L.P., 644 N.W.2d 72, 77 (Minn. 2002). “[T]he reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted.” Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).

The formation of a contract requires an offer, acceptance, and consideration. Commercial Assocs, Inc. v. Work Connection, Inc., 712 N.W.2d 772, 782 (Minn. App. 2006). “A claim of breach of contract requires proof of three elements: (1) the formation of a contract, (2) the performance of conditions precedent by the plaintiff, and (3) the breach of the contract by the defendant.” Thomas B. Olson & Assocs., P.A. v. Leffert, Jay & Polglaze, P.A., 756 N.W.2d 907, 918 (Minn. App. 2008), review denied (Minn. Jan. 20, 2009). The party asserting a breach-of-contract claim must also demonstrate the damages to which he is entitled. See Border State Bank of Greenbush v. Bagley Livestock Exchange, Inc., 690 N.W.2d 326, 336 (Minn. App. 2004) (“Liability for breach of contract requires proof that damages resulted from or were caused by the breach.”), review denied (Minn. Feb. 23, 2005). To extend a breach-of-contract analysis any further than these basic principles, the court must invoke some public-policy rationale for subjecting a particular agreement to a higher degree of scrutiny. See Rossman v. 740 River Drive, 308 Minn. 134, 136, 241 N.W.2d 91, 92 (1976) (“[P]ublic policy requires that freedom of contract remain inviolate except only in cases when the particular contract violates some principle which is of even greater importance to the general public.”).

“Minnesota courts do not favor noncompetition agreements because they are partial restraints on trade.” Midwest Sports Marketing, Inc. v. Hillerich & Bradsby of Canada, Ltd., 552 N.W.2d 254, 265 (Minn. App. 1996), review denied (Minn. Sept. 20, 1996). Restrictions “broader than necessary to protect the employer’s legitimate interest are generally held to be invalid, and the determination of the necessity for the restriction is dependent upon the nature and extent of the business, the nature and extent of the service of the employee, and other pertinent conditions.” Bennett v. Storz Broadcasting Co., 270 Minn. 525, 534, 134 N.W.2d 892, 899 (1965). “But restrictive covenants are enforced to the extent reasonably necessary to protect legitimate business interests. Legitimate interests that may be protected include the company’s goodwill, trade secrets, and confidential information.” Medtronic, Inc. v. Advanced Bionics Corp., 630 N.W.2d 438, 456 (Minn. App. 2001).

Noncompete agreements are “invalid unless bargained for and supported by adequate consideration.” Sanborn Mfg. Co. v. Currie, 500 N.W.2d 161, 164 (Minn. App. 1993). The adequacy of consideration for a noncompete agreement depends on the facts of the particular case. Overholt Crop Ins. Service Co., Inc. v. Bredeson, 437 N.W.2d 698, 702 (Minn. App. 1989). But a noncompete agreement entered into subsequent to an initial employment contract requires independent consideration. Id. “This requirement reflects the fact that employers and employees have unequal bargaining power. When the employer fails to inform prospective employees of noncompetition agreements until after they have accepted jobs, the employer takes undue advantage of the inequality between the parties.” Sanborn, 500 N.W.2d at 164 (quotation omitted). The underlying public-policy concern is based on the disparity in bargaining power that exists in an employer-employee relationship or that may exist in the relationship between an employer and an independent contractor. See, e.g., Bunia v. Knight Ridder, 544 N.W.2d 60, 63-64 (Minn. App. 1996) (holding exculpatory clause invalid as against public policy due to the disparate bargaining power between that particular employer and an independent contractor). However, where no disparity exists, public policy is not at issue and the parties are free to contract as they wish. See Rossman, 308 Minn. at 136, 241 N.W.2d at 92.

In granting summary judgment for FTR, the district court reasoned that the first agreement was a valid contract, for an indefinite term, which could be terminated by either party upon notice. The district court described the parties’ relationship as an “independent contractor arrangement,” which was “akin to that of an at-will employer/employee relationship, wherein either party may terminate at will.” Next, the district court analogized the parties’ termination of the first agreement and execution of the second agreement to “terminating an at-will employee, but then telling the employee that [he or she] can be rehired if [he or she signs] a non-compete.” Based on this analogy, the district court determined the validity of the parties’ noncompete agreement by applying the independent-consideration requirement applicable to post-employment noncompete agreements, instead of applying the principles that govern noncompete agreements in general. The district court ultimately concluded that because Schmit’s claims were predicated on the validity of the noncompete clause in the second agreement, which lacked additional, independent consideration, the claims failed as a matter of law.

There is no dispute that FTR was an independent contractor and not an employee of Schmit. And the requirement of independent consideration to validate a noncompete agreement entered into subsequent to an initial contract has only been applied in the context of employer-employee relationships. See Sanborn, 500 N.W.2d at 164 (requiring independent consideration for a noncompete between an employer and employee); Freeman v. Duluth Clinics, Ltd., 334 N.W.2d 626, 630 (Minn. 1983) (same); Jostens, Inc. v. National Computer Systems, Inc., 318 N.W.2d 691, 703-04 (Minn. 1982) (same); National Recruiters, Inc. v. Cashman, 323 N.W.2d 736, 740-41 (Minn. 1982) (same); Davies & Davies Agency, Inc. v. Davies, 298 N.W.2d 127, 131 (Minn. 1980) (same). FTR fails to cite any case in which this requirement has been applied outside of the employer-employee context. Imposing the requirement in this case would therefore require an extension of existing law. “[T]he task of extending existing law falls to the supreme court or the legislature, but it does not fall to this court.” Tereault v. Palmer, 413 N.W.2d 283, 286 (Minn. App. 1987), review denied (Minn. Dec. 18, 1987). We therefore conclude that the district court improperly applied the post-employment independent-consideration requirement and, as a result, erroneously granted summary judgment in favor of FTR. Accordingly, we reverse and remand for further proceedings.

In determining the validity of the second agreement on remand, the district court may consider the legal principles that generally govern noncompete agreements, including, as appropriate, antitrust law. See Minn. Stat. § 325D.51 (2008) (“A contract, combination, or conspiracy between two or more persons in unreasonable restraint of trade or commerce is unlawful.”). Schmit argues that we should apply these principles on appeal, determine that the noncompete agreement is valid, and award summary judgment in Schmit’s favor, along with damages. But as Schmit recognizes, the district court did not apply these principles when determining the validity of the second agreement. We do not consider issues for the first time on appeal. Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating that an appellate court will generally not consider matters not argued to and considered by the district court). Remand is the appropriate remedy. And because we reverse based on an error of law, we do not consider Schmit’s argument that the district court erred by failing to view the facts in a light most favorable to Schmit.

Lastly, FTR makes several arguments as to why this court should affirm summary judgment in its favor. FTR alleges that it did not breach the contract because its purpose was frustrated; that the second agreement was signed under duress; and that FTR did not improperly compete with Schmit. We do not consider these arguments because they require fact-finding and were not addressed by the district court. See In re Welfare of M.D.O., 462 N.W.2d 370, 374-75 (Minn. 1990) (holding that the role of the court of appeals is to correct errors, not to find facts); Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988) (“The function of the court of appeals is limited to identifying errors and then correcting them.” (citations omitted)).

Reversed and remanded.

[1] “If, on a motion asserting the defense that the pleading fails to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56. . . .” Minn. R. Civ. P. 12.02.

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 10-3444
___________
AvidAir Helicopter Supply, Inc.,

Plaintiff – Appellant,

v.
Rolls-Royce Corporation,

Defendant – Appellee.
**
___________
Submitted: September 20, 2011
Filed: December 13, 2011
___________
Before MELLOY, SMITH, and BENTON, Circuit Judges.
___________
MELLOY, Circuit Judge.
This appeal comes to us from two consolidated suits brought under the
Uniform Trade Secrets Acts of Indiana and Missouri. Both suits involve information
about the repair and overhaul of helicopter engines published by Appellee Rolls-
Royce Corp. Rolls-Royce sought damages and injunctive relief for alleged trade
secret violations. Appellant AvidAir Helicopter Supply Inc. sought a declaration that
the information in question was not protected by trade secret law. AvidAir also
alleged that Rolls-Royce had violated antitrust laws and tortiously interfered with its
business interest. In multiple summary judgment rulings below, the district court1
held in favor of Rolls-Royce by finding that some, though not all, of the information
in question was a protected trade secret. The court ruled against AvidAir on its
antitrust and tortious interference claims. A jury later awarded Rolls-Royce $350,000
in actual damages, and the court issued a permanent injunction requiring AvidAir to
return the protected documents to Rolls-Royce. AvidAir appeals the rulings. For the
reasons stated below, we affirm.
I.
Rolls-Royce Corp. develops and produces the Model 250 engine used in
civilian and military helicopters. Before 1994, Rolls-Royce’s predecessor, Allison
Engine Co., did not exert tight control over access to the technical information
required in the repair and overhaul market for these engines. This led to the
development of third-party overhaul shops. AvidAir is a Missouri company that
entered the repair and overhaul market in 1994. AvidAir’s business focuses on the
overhaul of compressor cases, one of three modules in the Model 250 engine.
Federal regulations require that an overhauled engine be certified for return to
service. In order to certify the return to service for a Model 250 engine, an overhaul
shop must follow a procedure that has been approved by the Federal Aviation
Administration (FAA). The approved overhaul procedure for the Model 250 requires,
inter alia, details about processes, procedures, techniques and material specifications
contained in Distributor Overhaul Information Letters (DOILs) issued first by
Allison, and later by Rolls-Royce.2 DOIL 24 related specifically to the compressor
1The Honorable Ortrie D. Smith, United States District Judge for the Western
District of Missouri.
2The parties occasionally refer to the letters as OILs, or AMC-OILs. Following
the district court, we will refer to the documents as DOILs for the sake of clarity.
-2-
case, and like the other DOILs, it was periodically updated through numbered
revisions. Because Allison had not restricted the redistribution of earlier revisions,
AvidAir was able to acquire DOIL 24, Revisions 1 through 7 from various sources
sometime in the 1990s.
In 1994, Allison began to restructure its approach to the overhaul of Model 250
engines. Allison appointed twenty-five Authorized Maintenance Centers (AMCs) to
whom it would exclusively issue technical information (such as DOILs and other
overhaul manuals). Allison executed agreements with each AMC that specified the
proprietary nature of this technical information, prohibited the AMCs from
disseminating this information, and required the AMCs to return all proprietary
documents at the end of their relationship. Allison also began including a proprietary
rights legend on the front page of its DOILs. All of the documents at issue on appeal
contain this rights legend.
Rolls-Royce, plc. acquired Allison in 1995 and eventually changed its name
in 2002 to Rolls-Royce Corp. Rolls-Royce issued a cease and desist letter to AvidAir
in 2002, demanding it stop using DOIL 24 in its overhaul of Model 250 engines. In
2003, the FAA responded to a Rolls-Royce complaint by inspecting AvidAir’s
overhaul process. The FAA found that AvidAir was not following the latest approved
overhaul instructions contained in DOIL 24, Revision 13. Because AvidAir was not
an AMC, it had never been authorized to receive a copy of the latest DOIL. After the
FAA inspection, AvidAir eventually obtained a copy of DOIL 24, Revision 13
without Rolls-Royce’s permission. Though there is a dispute about the extent to
which AvidAir changed its overhaul procedure after obtaining Revision 13, AvidAir
admits that it made adjustments for new measurements contained within Revision 13,
-3-
and it certified to the FAA that it was in compliance with the document. AvidAir also
obtained copies of other DOILs, though not all are at issue in this appeal.3
On September 29, 2006, AvidAir filed suit in the Western District of Missouri
seeking a declaration that Rolls-Royce’s DOILs were not trade secrets and alleging
that Rolls-Royce violated antitrust laws and tortiously interfered with its business.
According to AvidAir, DOIL 24 Revision 13 was substantially the same as earlier,
publicly available revisions. On October 2, 2006, Rolls-Royce filed its own suit
against AvidAir in the Southern District of Indiana for trade-secret violations under
the Lanham Act. In 2007, both cases were consolidated and eventually transferred
to the Western District of Missouri. The issues were bifurcated, and both parties filed
for partial summary judgment as to the trade-secret status of DOIL 24. This issue was
submitted to a magistrate judge for determination. 4 On April 7, 2009, the magistrate
judge issued a report and recommendation that the district court grant summary
judgment in favor of Rolls-Royce as to DOIL 24, Revision 13 (finding it was a
protected trade secret) but grant AvidAir summary judgment on Revisions 1–10
(finding they were not trade secrets). On June 23, 2009, the district court adopted
the report in full.5
3The district court’s misappropriation orders involved DOIL 24, Revisions 12
and 13; DOIL 3, Revision 16, and DOIL 8; Revision 6. The court’s injunction order
applied to these four DOILs, as well as BookFax 97-AMC-059, which was a notice
of a change to DOIL 24, Revision 12 that became part of DOIL 24, Revision 13.
Rolls-Royce withdrew its claims on all other DOILs.
4The Honorable William A. Knox, United States Magistrate Judge for the
Western District of Missouri.
5The district court also adopted the report’s finding that it should deny
AvidAir’s motion for summary judgment with respect to Revisions 11 and 12.
Though the record supported a finding that Revision 12 was a trade secret, Rolls-
Royce had not yet asked for summary judgment on that issue. On September 28,
2009, the court granted summary judgment in favor of Rolls-Royce as to Revision 12.
-4-
On June 20, 2009, AvidAir acquired a full technical library from Precision Air
Power, which was a branch of a Rolls-Royce AMC. Relying on this acquisition,
AvidAir filed a motion to reconsider the district court’s Order of June 23, 2009 and
a motion for leave to amend the complaint. AvidAir argued that its purchase of
Precision’s library demonstrated AMCs were not restricted from distributing
information pertaining to the Model 250 engine and that the information was
therefore in the public domain. The court found that the proprietary-rights legends
on the documents, as well as Rolls-Royce’s AMC Agreement (under which Precision
was prohibited from disclosing confidential materials) contradicted this argument.
The district court concluded that the time for amending the pleadings was long
passed, and on September 23, 2009, it denied AvidAir’s motion in full.
Both parties again filed motions for summary judgment, and the district court
granted motions in favor of Rolls-Royce on AvidAir’s antitrust claim, AvidAir’s
tortious interference claim, and Rolls-Royce’s trade secret claims involving DOIL 3
and DOIL 8. The issue of damages was submitted to a jury, which awarded Rolls-
Royce $350,000 in actual damages. After the jury award, the district court granted
in part Rolls-Royce’s Motion for Permanent Injunction. Pursuant to the injunction,
AvidAir is required to return all of Rolls-Royce’s trade secrets, but AvidAir is not
prevented from continuing to operate in the Model 250 overhaul market according
to procedures developed from publicly available knowledge.
AvidAir appeals the court’s rulings.
II.
AvidAir presents many issues on appeal, though the principal issue before us
is whether the district court erred in granting Rolls-Royce summary judgment on its
trade secret claims. We review grants of summary judgment de novo, applying the
same standard as the district court. Strategic Directions Grp., Inc. v. Bristol-Myers
-5-
Squibb Co., 293 F.3d 1062, 1064 (8th Cir. 2002). Summary judgment is appropriate
when there is no genuine issue of material fact and the moving party is entitled to
judgment as a matter of law. Id.
Though the existence of a trade secret is a fact-intensive inquiry, it is ultimately
a question of law determined by the court. Steve Silveus Ins., Inc. v. Goshert, 873
N.E.2d 165, 179 (Ind. Ct. App. 2007); Lyn-Flex West, Inc. v. Dieckhaus, 24 S.W.3d
693, 698 (Mo. Ct. App. 1999). Under the Uniform Trade Secrets Act (UTSA), which
has been adopted by both Indiana and Missouri,6 a trade secret is:
information, including a formula, pattern, compilation, program, device,
method, technique, or process, that: (1) derives independent economic
value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use; and (2) is the subject
of efforts that are reasonable under the circumstances to maintain its
secrecy.
Ind. Code § 24-2-3-2; see also Mo. Rev. Stat. § 417.453(4).
6The present appeal is a consolidation of two cases filed in Indiana and
Missouri. The district court determined that because both states had adopted the
UTSA, and because both states approved of reliance on decisions from other UTSA
jurisdictions, it was unnecessary to determine which state’s law governed the
existence of a trade secret and looked to case law from both states. The parties do not
contest this conclusion, and we will follow the same approach.
-6-
The district court found the DOILs were 7 compilations of publicly available
information and new proprietary information. Compilations are specifically
contemplated in the UTSA definition of a trade secret, and the fact that some or even
most of the information was publicly available is not dispositive of the first factor in
the UTSA definition. Compilations of non-secret and secret information can be
valuable so long as the combination affords a competitive advantage and is not
readily ascertainable. See Amoco Prod. Co. v. Laird, 622 N.E.2d 912, 919–20 (Ind.
1993). Compilations are valuable, not because of the quantum of secret information,
but because the expenditure of time, effort, and expense involved in its compilation
gives a business a competitive advantage. Id.; N. Elec. Co. v. Torma, 819 N.E.2d
417, 426 (Ind. Ct. App. 2004); Lyn-Flex West, 24 S.W.3d at 699. This value is not
dependent on how much of the information is otherwise unavailable because “the
effort of compiling useful information is, of itself, entitled to protection even if the
information is otherwise generally known.” Torma, 819 N.E.2d at 426; see also
Penalty Kick Mgmt. Ltd. v. Coca Cola Co., 318 F.3d 1284, 1291 (11th Cir. 2003)
(“[E]ven if all of the information is publicly available, a unique combination of that
information, which adds value to the information, also may qualify as a trade
secret.”). But see Nationwide Mut. Ins. Co. v. Mortensen, 606 F.3d 22, 29 (2d Cir.
2010) (denying trade secret protection for information that had merely changed in
form but not substance).
7The Report and Recommendation of April 7, 2009 and the district court Order
of June 23, 2009, both focus exclusively on DOIL 24. The district court later used
the DOIL 24 analysis as a “framework” for resolving the trade secret status of DOIL
3, Revision 16; DOIL 8, Revision 6; and the BookFax. See Order of September 9,
2009 at *4. Though the record is more developed for DOIL 24 than the other
documents, AvidAir did not challenge the district court’s use of this framework for
analysis. Instead, AvidAir maintains the same argument for all of the
documents—that the changes were too small to be valuable, and that the documents
were not protected by confidentiality agreements. We will therefore consider the
analysis as it applies to all of the documents, even though much of the record
specifically refers to DOIL 24.
-7-
AvidAir argues that the DOILs cannot provide independent economic value
because there is only a trivial amount of information that was not readily
ascertainable from prior revisions. Such a trivial amount of information, AvidAir
contends, offers no engineering advances from previous revisions. As the above-cited
cases demonstrate, though, existence of a trade secret is determined by the value of
a secret, not the merit of its technical improvements. Unlike patent law, which
predicates protection on novelty and nonobviousness, trade secret laws are meant to
govern commercial ethics. See Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470,
489–90 (1974) (noting this as the reason why trade secret protection is weaker than
patent protection); Water Servs., Inc. v. Tesco Chems., Inc., 410 F.2d 163, 172 (5th
Cir. 1969) (“‘[Trade Secret] protection is not based on a policy of rewarding or
otherwise encouraging the development of secret processes or devices. The protection
is merely against breach of faith and reprehensible means of learning another’s secret.
For this limited protection it is not appropriate to require also the kind of novelty and
invention which is a requisite of patentability.’” (quoting Restatement of Torts § 757
cmt. b (1939))); 1-1 Roger M. Milgrim & Eric E. Bensen, Milgrim on Trade Secrets
§ 1.08 (2011). But see Kewanee Oil, 416 U.S. at 481–82 (acknowledging that
maintaining standards of commercial ethics and encouraging invention “are the
broadly stated policies behind trade secret law”). Trade secret protection does not
shield an idea from “infringing” other uses of the idea; instead it protects valuable
information from being misappropriated despite reasonable efforts to keep it secret.
In the present case, we need not examine whether the documents introduce significant
engineering differences so long as it is established that the documents have a value
independent of older publicly available versions.
The UTSA states that a trade secret derives its value from not being readily
ascertainable. Ind. Code § 24-2-3-2; Mo. Rev. Stat. § 417.453(4). The fact that
information can be ultimately discerned by others—whether through independent
investigation, accidental discovery, or reverse engineering—does not make it
unprotectable. See Laird, 622 N.E.2d at 918 (“Even if information potentially could
-8-
have been duplicated by other proper means, it is no defense to claim that one’s
product could have been developed independently of plaintiff’s, if in fact it was
developed by using plaintiff’s proprietary designs.”) (internal quotation marks
omitted). Instead, the court must look at whether the duplication of the information
would require a substantial investment of time, effort, and energy. Id. at 919–20.
AvidAir does not dispute that the revised DOILs were updated as a result of Rolls-
Royce’s own research and testing, or that AvidAir avoided the burdensome expense
of reverse engineering the updated specifications contained in the DOILs by simply
acquiring the documents that Rolls-Royce claimed were protected. AvidAir instead
contends that the changes were too trivial to create any value.
We disagree. The value of Rolls-Royce’s documents is apparent when a shop
is required to certify the return to service for an overhauled engine. To certify to the
FAA that the overhaul was completed in accordance with an FAA-approved
procedure, that shop must have updated technical information for the engine.
AvidAir claims that it can obtain FAA approval for a procedure that is based on only
publicly available information, and if this is true, AvidAir may be free to do so. This
is, however, not what AvidAir did. Instead of obtaining FAA approval based on an
independent investigation of changes to the approved procedure, AvidAir simply
appropriated the documents it knew were claimed to be trade secrets and then
certified that its procedure was in compliance with the updated documents. Indeed,
even after the district court adjudicated the trade secret status of DOIL 24, Revision
13, AvidAir again misappropriated it and other documents from Precision, claiming
it did so lawfully in order to benefit from Rolls-Royce’s efforts to update proprietary
information. AvidAir’s repeated attempts to secure the revised DOILs without Rolls-
Royce’s approval belies its claim that the information in the documents was readily
ascertainable or not independently valuable.
The second factor we must consider is whether Rolls-Royce established
reasonable efforts to maintain the secrecy of its DOILs. Reasonable efforts to
-9-
maintain secrecy need not be overly extravagant, and absolute secrecy is not required.
Torma, 819 N.E.2d at 428; Zemco Mfg., Inc. v. Navistar Int’l Transp. Corp., 759
N.E.2d 239, 246 (Ind. Ct. App. 2001). The use of proprietary legends on documents
or the existence of confidentiality agreements are frequently-considered factors in
establishing or denying a trade secret claim. See, e.g., Wyeth v. Natural Biologics,
Inc., 395 F.3d 897, 899–900 & n.4 (8th Cir. 2005) (applying Minnesota UTSA);
Diamond Power Int’l, Inc. v. Davidson, 540 F. Supp. 2d 1322, 1334–35 (N.D. Ga.
2007) (applying Georgia UTSA); Nilssen v. Motorola, Inc., 963 F. Supp. 664, 679–80
(N.D. Ill. 1997) (applying Illinois UTSA). Misplaced trust in a third party who
breaches a duty of confidentiality does not necessarily negate efforts to maintain
secrecy. Torma, 819 N.E.2d at 428; see also Kewanee Oil, 416 U.S. at 475 (“This
necessary element of secrecy is not lost, however, if the holder of the trade secret
reveals the trade secret to another in confidence, and under an implied obligation not
to use or disclose it.” (internal quotation marks omitted)).
It is undisputed that all of the documents in question were labeled with
proprietary-rights legends. Though AvidAir claims the documents were “freely
available” in the industry, it failed to present any evidence that Rolls-Royce actually
distributed them to a party not bound by confidentiality agreements. We agree with
the district court that these were reasonable efforts to maintain secrecy. AvidAir
maintains that the DOILs were possessed “without restriction” by others, but this
argument is unsupported by the record. All the record reflects is that AvidAir either
acquired the documents from others who were not authorized to provide AvidAir with
the documents, or acquired the documents from others who had themselves
misappropriated the documents. The fact that a trade secret was successfully
misappropriated does not defeat the fact that there were reasonable efforts to maintain
its secrecy. See Wyeth, 395 F.3d at 900 (“‘The existence of a trade secret is not
negated merely because an employee or other person has acquired the trade secret
without express or specific notice that it is a trade secret if, under all the
circumstances, the employee or other person knows or has reason to know that the
-10-
owner intends or expects the secrecy of the type of information comprising the trade
secret to be maintained.’” (quoting Minn. Stat. § 325C.01, subd. 5)).
AvidAir devotes a great deal of attention to its acquisition of Precision’s
technical library, and it argues that Precision was not bound by the AMC Agreement
originally entered into by Allison. The AMC Agreement noted in ¶ 6.2 that Allison
would provide “general technical data and other Manuals (as referenced in the
Manual List),” and that “[s]uch material may be Allison proprietary and may bear
appropriate copyright and Marks restrictions. No distribution of this material is to be
made outside Authorized Maintenance Center Business Operation(s) except as
provided in each document, the Policy Manual or as specifically Authorized by
Allison.” AvidAir contends that, because the “Manual List” appended to the
agreement does not list the DOILs, this restriction does not apply to them.
Rolls-Royce argues that the “Manual List” is exemplary and not exhaustive. Viewing
the Agreement in the light most favorable to AvidAir, we conclude that the absence
of DOILs on the “Manual List” does not support AvidAir’s contention. The
Agreement unambiguously applies to “general technical data,” which covers the
DOILs regardless of whether they were or were not defined as “Manuals.” The AMC
Agreement does not excuse AvidAir from misappropriating trade secrets.8
8AvidAir’s Motion for Leave to Amend was part and parcel of its argument that
Rolls-Royce did not exert reasonable efforts to maintain the secrecy of its proprietary
information. AvidAir attempted to demonstrate that it lawfully obtained the
documents in question from Precision’s technical library after proceedings had
already been underway, and it sought to expand its claims under this argument. The
court reviews a denial of a motion for leave to amend under an abuse of discretion
standard. Marmo v. Tyson Fresh Meats, Inc., 457 F.3d 748, 755 (8th Cir. 2006). The
district court concluded that “there is no just reason to continuously amend the
pleadings to encompass events and transactions that occurred after the case was
filed.” Order of September 23, 2009. Because AvidAir was merely trying to reassert
arguments that had already been considered and dismissed by the court, this was not
an abuse of discretion.
-11-
AvidAir argues that Rolls-Royce is attempting to reclaim and remove
information that was previously available in public. All of the information in earlier
revisions that was already available to the public, however, is still available to the
public. The district court ruled that DOIL 24, Revisions 1 through 10 were not trade
secrets. Giving protection for Revision 13 does not make it a misappropriation to
acquire Revision 1, which contains some of the same information. But the fact that
some of the information is available in Revision 1 does not give AvidAir the right to
misappropriate the entirety of Revision 13, which has a separate value to competitors
because of FAA regulations. AvidAir is not entitled to the value of the proprietary
revised documents, even if the new technical specifications are relatively minor in the
context of the overhaul process as a whole.
III.
Having concluded that the documents in question were protected trade secrets,
the district court did not err in granting an injunction in favor of Rolls-Royce.We
review a grant of permanent injunction for abuse of discretion. Kennedy Bldg.
Assocs. v. CBS Corp., 476 F.3d 530, 533 (8th Cir. 2007). We will affirm a grant of
injunctive relief unless the district court “‘clearly erred in its characterization of the
facts, made a mistake of law, or abused its discretion in considering the equities.’”
South Dakota v. Ubbelohde, 330 F.3d 1014, 1026 (8th Cir. 2003) (quoting Bhd. of
Maint. of Way Emp., Lodge 16 v. Burlington N. R.R. Co., 802 F.2d 1016, 1020 (8th
Cir. 1986)). Under the UTSA, “[a]ctual or threatened misappropriation may be
enjoined.” Ind. Code § 24-2-3-3(a); Mo. Rev. Stat. § 417.455.1.
AvidAir offers no argument as to how the district court abused its discretion,
other than reiterating that the trade secrets were obtained lawfully, and thus not
misappropriated. The district court found, and we agree, this argument was not
supported by the record. Furthermore, the injunction granted by the court was narrow
and minimized the hardship imposed on AvidAir. The injunction requires AvidAir
-12-
to return all proprietary information, but did not enjoin AvidAir from using a separate
overhaul process developed from publicly available information. If, as AvidAir
argues, it can obtain FAA approval for a process that uses only publicly available
information, it may be free to do so. This injunction merely prevents AvidAir from
enjoying the unfettered benefits of Rolls-Royce’s efforts to update the process.
IV.
AvidAir also challenges the district court’s grant of summary judgment for
Rolls-Royce on AvidAir’s antitrust and tortious interference claims. The standard of
review for summary judgment determinations is de novo. Strategic Directions Grp.,
Inc., 293 F.3d at 1064. We conclude that AvidAir’s claims were both resolved by the
district court’s determination that the documents were trade secrets.
AvidAir’s antitrust claim was based on its theory that Rolls-Royce’s trade secret
suit was a sham litigation in violation of Sherman Act §§ 1 and 2. The Supreme
Court has held that those who petition the courts for redress are generally immune
from antitrust liability, unless the lawsuit “is a mere sham to cover . . . an attempt to
interfere directly with the business relationships of a competitor.” E. R.R. Presidents
Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 144 (1961). In order to
determine whether a lawsuit is a sham, the Court established a two-part test. “First,
the lawsuit must be objectively baseless in the sense that no reasonable litigant could
realistically expect success on the merits.” Prof’l Real Estate Investors, Inc. v.
Columbia Pictures Indus., Inc., 508 U.S. 49, 60 (1993). Only if the lawsuit is baseless
does the court look to the second, subjective factor of whether the baseless lawsuit
was “‘an attempt to interfere directly with the business relationships of a competitor.’”
Id. at 60–61 (quoting Noerr, 365 U.S. at 144).
AvidAir’s argument that Rolls-Royce attempted to interfere with its business
by improperly seeking trade secret protection does not pass the first prong of the
-13-
sham litigation test. A lawsuit that leads to a jury award of $350,000 is not
objectively baseless, even if it did not succeed on each claim of the complaint. See
id. at 60 n.5 (“A winning lawsuit is by definition a reasonable effort at petitioning for
redress and therefore not a sham.”). Indeed, AvidAir essentially concedes that this
argument must fail if we do not reverse the district court’s trade secret ruling.
Because we affirm the district court’s rulings on Rolls-Royce’s trade secrets, we also
affirm the dismissal of AvidAir’s antitrust claim.
Rolls-Royce’s success in establishing its trade secrets likewise defeats
AvidAir’s tortious interference claim. For AvidAir to succeed under a theory of
tortious interference, it must prove, “(1) a contract or valid business expectancy; (2)
defendant’s knowledge of the contract or relationship; (3) a breach induced or caused
by defendant’s intentional interference; (4) absence of justification; and (5) damages.”
Rice v. Hodapp, 919 S.W.2d 240, 245 (Mo. 1996) (en banc). To satisfy the
justification element of an interference claim, AvidAir must demonstrate that Rolls-
Royce “lacked a legal right to justify [its] actions.” Horizon Mem’l Grp., L.L.C. v.
Bailey, 280 S.W.3d 657, 662 (Mo. Ct. App. 2009). However, not only does
ownership of a valid trade secret justify an attempt to protect a trade secret, good faith
efforts to enforce legal rights are even justified when a court later decides the claimed
rights don’t actually exist. See, e.g., Healthcare Servs. of the Ozarks, Inc. v.
Copeland, 198 S.W.3d 604, 614 (Mo. 2006) (en banc). Rolls-Royce had a legal right
to protect its trade secrets and did not lack justification for its actions. Even though
Rolls-Royce abandoned its claims about other DOILs, its success on the claims now
on appeal is enough to establish its good faith in bringing suit. The district court did
not err in concluding that AvidAir had failed to establish tortious interference.
V.
For the foregoing reasons, we affirm the judgment of the district court.
______________________________
-14-

http://www.mnbar.org/sections/real-property/forms/leaseopenerv4.htm

https://www.ag.state.mn.us/Brochures/pubLandlordTenants.pdf

Minn. Stat. 540.18: parent is jointly & severally liable for up to $1,000 for willful, malicious acts of child who is under 18 and living with parent; but only special damages recoverable.

Minn. Stat. 611A.79, subd. 3: increases limit to $5,000 for bias offenses; but parent not liable if reasonable efforts to control child to prevent conduct is undertaken.

Minn Stat. 340A.90: social host liability – if knowingly or recklessly provide space and a person is injured then parent can be held liable.

Special damages are damages that are specific to the injury or wrong committed and are usually capable of calculating with mathematical certainty. Think, out-of-pocket expenses. These are different from “general damages” that also flow from the injury but are not calculable. For example, a car accident victim has has medical expenses, the special damages will be all the costs of treatment, loss of income and other dollar losses. If the victim has pain and suffering as well, then general damages will be some amount of money awarded based on the jury’s or judge’s judgment and common sense to compensate the injured person.

STATE OF MINNESOTA

IN SUPREME COURT

A10-0658

Court of Appeals                                                                                                          Gildea, C.J.

Park Nicollet Clinic,

Appellant,

vs.                                                                                                           Filed:  December 7, 2011

                                                                                                             Office of Appellate Courts

Arlyn A. Hamann, M.D.,

Respondent.

________________________

Kerry L. Middleton, Rhiannon C. Beckendorf, Littler Mendelson, P.C., Minneapolis, Minnesota, for appellant.

David P. Jendrzejek, Taylor D. Tarvestad, Moss & Barnett, P.A., Minneapolis, Minnesota, for respondent.

________________________

S Y L L A B U S

Where the complaint alleges that performance on a contract was due in April 2005, claims based on the failure to perform on that contract accrued in April 2005.

Reversed.

O P I N I O N

GILDEA, Chief Justice.

This case arises from an employment relationship between appellant Park Nicollet Clinic and respondent Dr. Arlyn Hamann.  The district court dismissed Hamann’s complaint against Park Nicollet, holding that the statute of limitations barred his claims.  The court of appeals reversed.  Because we conclude that Hamann’s claims accrued in April 2005, when Park Nicollet committed the allegedly wrongful conduct at issue, we conclude that the statute of limitations bars Hamann’s claims and reverse.

This case comes to us on review from a motion to dismiss, so we rely on Hamann’s complaint for a recitation of the facts relevant to this dispute.  According to the complaint, Hamann began his employment with Park Nicollet in 1974, as a physician in the Obstetrics and Gynecology Department (“Department”) of Park Nicollet’s Saint Louis Park clinic.  Hamann’s job duties included seeing obstetrics patients at night and on weekends, which involved working before or after normal business hours.[1]

In 1995, Park Nicollet adopted a Length of Service Recognition Policy (“Policy”), and disseminated a copy to all Department physicians.  The purpose of the Policy was “[t]o reward length of service” and to encourage physicians to “continue to practice with Park Nicollet over a long period of time.”  To receive benefits under the Policy, a physician had to: (1) be at least 60 years old; (2) have “[a]t least 15 years of taking OB [night] call;” (3) be working at least two-thirds of a full-time position; and (4) have the approval of physicians in the “call rotation.”  Once a physician met the criteria he “would be exempted from night call” and “receive no salary reduction for not taking night call.”  After the adoption of the Policy, at least one physician exercised his rights under the Policy, and ceased taking night call with no salary reduction.

In early 2004, Hamann informed the Department Chair that he planned to exercise his rights under the Policy after he turned 60 years old later in 2004.  The Department Chair confirmed the existence of the Policy and Hamann’s eligibility to receive benefits under the Policy.  But because a number of Department physicians were on maternity leave at the time, the Department Chair requested that Hamann postpone exercising his rights under the Policy until April 2005, to prevent short staffing in the interim.  Hamann agreed.

In April 2005, Hamann again informed the Department Chair that he wished to exercise his rights under the Policy and be exempt from night call with no salary reduction.  The Department Chair told Hamann “the Policy no longer existed and would no longer be honored.”  Hamann alleges that the Department Chair made it clear to Hamann in the April 2005 discussion that Hamann “had to continue to take OB night call” and “his salary would be cut if he refused.”  Based on his conversation with the Department Chair, Hamann alleges that he was “compelled to continue to take OB night call,” and that he continued to do so rather than face a decrease in salary.  And Hamann alleges that continuing to take night call after April 2005, when he was in his early sixties, “adversely affected his health.”

In February 2008, Hamann withdrew from taking night call for health reasons.  Because Hamann stopped taking night call, Park Nicollet reduced Hamann’s salary.  After Park Nicollet reduced his salary, Hamann commenced this action.

In the complaint, Hamann asserts claims for breach of contract and promissory estoppel.[2]  Hamann alleges that Park Nicollet breached the Policy by refusing to allow him “to be exempt from night call without salary reduction.”  Hamann claims damages in the form of lost salary, reduction in benefits, and mental anguish and emotional distress.  Hamann also alleges that in reliance on the Policy he did not pursue other employment opportunities available to him, but instead “continued to practice with Park Nicollet for over nine years, including bearing the burden of OB night call.”  In lieu of answering, Park Nicollet filed a motion to dismiss for failure to state a claim pursuant to Minn. R. Civ. P. 12.02(e), arguing that the statute of limitations had expired.

The district court granted Park Nicollet’s motion to dismiss, holding that Hamann’s cause of action accrued, and the 2-year statute of limitations began to run, in April 2005 when Park Nicollet informed Hamann it would not honor its obligations under the Policy.  Hamann appealed, and the court of appeals reversed.  Hamann v. Park Nicollet Clinic, 792 N.W.2d 468 (Minn. App. 2010).  The court of appeals recognized that “Park Nicollet repudiated [the P]olicy in April 2005.”  Id. at 471.  But the court concluded that “each pay period during which Park Nicollet failed to satisfy its obligations under the [P]olicy constitutes a separate alleged breach” that gave rise to a new cause of action.  Id.  Based on its determination that a new cause of action accrued “each time a payment was due but not paid,” the court held that the statute of limitations did not bar Hamann’s claims.  Id. at 472.  We granted Park Nicollet’s petition for review.

We review “[t]he construction and application of a statute of limitations, including the law governing the accrual of a cause of action,” de novo.  MacRae v. Grp. Health Plan, Inc., 753 N.W.2d 711, 716 (Minn. 2008).  The procedural posture of this case—review of the grant of a motion to dismiss—also dictates that we apply a de novo review.  Bodah v. Lakeville Motor Express, Inc., 663 N.W.2d 550, 553 (Minn. 2003) (noting that an appellate court reviews de novo “whether the complaint sets forth a legally sufficient claim for relief”).  Finally, in reviewing the decision to dismiss the complaint, we “consider only the facts alleged in the complaint, accepting those facts as true and must construe all reasonable inferences in favor of the nonmoving party.”  Id.

I.

            The question presented in this case is whether the statute of limitations bars Hamann’s breach of contract and promissory estoppel claims.  Statutes of limitation are

based to a great extent on the proposition that if one person has a claim against another . . . it would be inequitable for him to assert such claim after an unreasonable lapse of time, during which such other has been permitted to rest in the belief that no such claim existed.

Bachertz v. Hayes-Lucas Lumber Co., 201 Minn. 171, 176, 275 N.W. 694, 697 (1937) (citation omitted) (internal quotation marks omitted).  Requiring parties to bring claims within the limitations period decreases the likelihood that actions will be brought after “papers may be lost, facts forgotten, or witnesses dead.”  Id. at 176, 275 N.W. at 697 (citation omitted) (internal quotation marks omitted).

When addressing a question as to the statute of limitations, we typically first determine which statute of limitations applies to the claims asserted.  That determination is unnecessary in this case because the parties agree that the statute of limitations set forth in Minn. Stat. § 541.07(5) (2010) governs each of Hamann’s claims.  Under this statute, actions “for the recovery of wages” shall be brought within 2 years.[3]  Minn. Stat. § 541.07(5).  We have consistently applied this statute of limitations period whenever “the gravamen of the action is the breach of an employment contract.”  See Portlance v. Golden Valley State Bank, 405 N.W.2d 240, 243 (Minn. 1987).[4]

With the applicable statute of limitations determined, we turn to the question of when the statute began to run.  The statute of limitations begins to run on a claim when “the cause of action accrues.”  Minn. Stat. § 541.01 (2010); see Bachertz, 201 Minn. at 176, 275 N.W. at 697.  A cause of action accrues when all of the elements of the action have occurred, such that the cause of action could be brought and would survive a motion to dismiss for failure to state a claim.  Dalton v. Dow Chem. Co., 280 Minn. 147, 153, 158 N.W.2d 580, 584 (1968).  Moreover, “the running of the statute [of limitations] does not depend on the ability to ascertain the exact amount of damages.”  Herrmann v. McMenomy & Severson, 590 N.W.2d 641, 643 (Minn. 1999) (footnote omitted); see also Bachertz, 201 Minn. at 176, 275 N.W. at 697 (noting that a cause of action for breach of contract accrues at the time of the breach, even if “actual damages resulting therefrom do not occur until afterwards” (citation omitted) (internal quotation marks omitted)).

With these general principles in mind, we turn to the parties’ arguments.  Hamann argues that his claims did not accrue until February 2008, when Park Nicollet first reduced his salary due to his failure to take night call, and he contends that a new claim accrued with each paycheck Park Nicollet issued thereafter.  Park Nicollet contends that Hamann’s claims accrued in April 2005, because that is when Hamann attempted to invoke the Policy and learned that the Policy was no longer in existence.  We agree with Park Nicollet that Hamann’s claims accrued in April 2005.

A.

Based on the allegations in the complaint, we conclude that Hamann’s claims for breach of contract and promissory estoppel would have survived a motion to dismiss for failure to state a claim in April 2005.  Noske v. Friedberg, 670 N.W.2d 740, 742 (Minn. 2003) (“The showing a plaintiff must make in order to survive a motion to dismiss under Minn. R. Civ. P. 12.02(e) is minimal.”).  In order to state a claim for breach of contract, the plaintiff must show (1) formation of a contract, (2) performance by plaintiff of any conditions precedent to his right to demand performance by the defendant, and (3) breach of the contract by defendant.  Briggs Transp. Co. v. Ranzenberger, 299 Minn. 127, 129, 217 N.W.2d 198, 200 (1974).[5]  All of these elements existed in April 2005, according to the allegations in the complaint.

As to the first element, the complaint alleges that a contract was formed in 1995, when Park Nicollet adopted the Policy.  The complaint alleges that as of April 2005, Hamann met the criteria set out in the Policy, which satisfies the second element of a breach of contract claim.  The complaint also alleges the existence of the third element—the breach—as of April 2005.  Hamann asserts that in April 2005, Park Nicollet breached the contract when Hamann “asked Park Nicollet to honor its promises and allow him to be exempt from night call without salary reduction.”  In response to his request, the complaint alleges that “Park Nicollet refused to honor its agreement, declaring that the Policy no longer existed.”  The allegation of the April 2005 breach is confirmed elsewhere in the complaint when Hamann alleges that he was told in April 2005 “for the first time that the Policy no longer existed[, that it] would no longer be honored,” and “that he had to continue to take OB night call and . . . his salary would be cut if he refused.”

In sum, the wrongful conduct underlying the breach of contract claim is Park Nicollet’s refusal to honor the Policy.  This refusal occurred in April 2005, according to the complaint.  At that time, Hamann demanded that Park Nicollet perform.  He alleges that he met the requirements of the Policy in April 2005 and was therefore entitled to take advantage of the benefits of the Policy (i.e., he could stop taking night call and his salary would not be reduced).  According to the complaint, despite Hamann’s demand for performance and his satisfaction of the Policy’s criteria, Park Nicollet refused to perform.  As a result of Park Nicollet’s refusal, the complaint alleges that Hamann had to continue taking night call.  Because the allegations of the complaint establish that as of April 2005, Hamann’s breach of contract claim would have survived a motion to dismiss, the statute of limitations applicable to the claim began to run in April 2005.  See Dalton, 280 Minn. at 153, 158 N.W.2d at 584.

The allegations in the complaint likewise establish that as of April 2005, Hamann’s promissory estoppel claim would have survived a motion to dismiss.  To state a claim for promissory estoppel, the plaintiff must show that (1) there was a clear and definite promise, (2) the promisor intended to induce reliance and such reliance occurred, and (3) the promise must be enforced to prevent injustice.  Olson v. Synergistic Techs. Bus. Sys., Inc., 628 N.W.2d 142, 152 (Minn. 2001).

With respect to the first element, the promise at issue is the Policy commitment that Hamann could stop taking night call after age 60 and not have his salary reduced.  Specifically, the complaint alleges that Park Nicollet’s liability on a promissory estoppel theory stems from Park Nicollet’s failure to honor its promise to allow Hamann to be “exempt from night call without salary reduction.”  Hamann alleges that he relied on Park Nicollet’s promise and that the promise of the Policy induced him to “continue[] to practice with Park Nicollet for over nine years” after the Policy was adopted in 1995.  The complaint also alleges that Park Nicollet “should have reasonably expected” that the Policy would “induce action or forbearance on Dr. Hamann’s part,” satisfying the second element.  And, with respect to the third element, the complaint alleges that injustice can be avoided only through enforcement of the Policy.  Because the allegations of the complaint establish that Hamann’s promissory estoppel claim would have survived a motion to dismiss for failure to state a claim as of April 2005, the statute of limitations began to run on the claim at that time.  See Dalton, 280 Minn. at 153, 158 N.W.2d at 584.

B.

Notwithstanding the allegations of the complaint, Hamann argues that his claim is timely for two reasons.  First, he argues that “Park Nicollet committed a series of discrete breaches of the Policy, that occurred during each pay period in which Dr. Hamann met the policy requirements but was not compensated in accordance with the Policy.”  Because he filed this action within 2 years of his receipt of a paycheck in which Park Nicollet had reduced his salary, Hamann argues his action is timely.  Second, he argues that Park Nicollet’s April 2005 statement that the Policy no longer existed was merely an anticipatory repudiation that did not commence the running of the limitations period.  We address each argument in turn.

1.

Hamann argues that his claims continued to accrue with each paycheck he received that did not comply with the Policy.  The court of appeals agreed.  The court held that “Hamann’s claims are not limited to compensation for a single pay period following Park Nicollet’s repudiation of its [P]olicy.”  Hamann v. Park Nicollet Clinic, 792 N.W.2d 468, 471 (Minn. App. 2010).  Rather, under the court’s reasoning, “each pay period during which Park Nicollet failed to satisfy its obligations under the [P]olicy constitutes a separate alleged breach” that gave rise to a new cause of action.  Id.  Accordingly, the court held that the statute of limitations did not bar Hamann’s claims.  In reaching this conclusion, the court relied on our decision in Levin v. C.O.M.B. Co., 441 N.W.2d 801 (Minn. 1989).  Hamann, 792 N.W.2d at 471.

In Levin, plaintiff Levin had a contract with his employer, effective September 1981, providing that Levin would be paid, as a commission in addition to his salary, a portion of the company’s annual sales in excess of $15 million.  441 N.W.2d at 802.  Levin received a commission check for the year ending August 31, 1982, but received no commission payments in subsequent years.  Id. at 803.  Levin inquired about unpaid commissions in August 1984, and his employer implied that no commissions would be paid.  Id.  In October 1986, Levin brought suit to recover outstanding commissions.  Id.[6]

Levin’s employer moved for summary judgment, arguing the claims were barred under the 2-year statute of limitations in Minn. Stat. § 541.07(5).  441 N.W.2d at 803.  We concluded that Levin’s complaint claimed “a series of breaches, repeated failures to pay commissions . . . each of which breaches could have occurred only at the close or at some date after the close of a contract year.”  Id.  Each failure to pay commissions therefore constituted a new cause of action from which the statute of limitations would run.  Id.; see also Botten v. Shorma, 440 F.3d 979, 980 (8th Cir. 2006) (determining that a cause of action for bonuses accrued each time a bonus payment was due under an agreement); Wood v. Cullen, 13 Minn. 394, 397 (Gil. 365, 368) (1868) (holding that a separate statute of limitations began to run from each installment of wages when it became due).

Levin does not support the court of appeals’ conclusion that Hamann’s cause of action accrued anew with each paycheck.  In Levin, each year’s obligation, if any, to pay a commission was distinct from that in any other year, and the extent of the employer’s obligation could only be determined after the sales year was completed and total sales could be determined.  Accordingly, each year in which the employer failed to pay commissions was a separate cause of action “with different accrual dates.”  Levin, 441 N.W.2d at 803.

In contrast to Levin, the obligation at issue in this case was not something that Park Nicollet was contractually or otherwise required to perform on an ongoing basis.  The wrongful conduct at issue here, according to the complaint, is Park Nicollet’s decision to require that physicians over age 60 take night call.  Requiring physicians over age 60 to take night call is wrongful only because of the benefits Park Nicollet offered in the Policy.  Aside from the promise in the Policy itself, Hamann alleges no other contractual provision or law that would bind Park Nicollet to the night call restriction.  Because Park Nicollet revoked the Policy in April 2005, it had no continuing obligation to pay Hamann’s original salary after he ceased taking night call in February 2008.  See, e.g., Maher v. Tietex Corp., 500 S.E.2d 204, 208 (S.C. Ct. App. 1998) (finding that an employee’s cause of action for bonuses accrued when the employer unilaterally changed the bonus contract from one requiring mandatory bonuses to one making bonuses discretionary with the employer).  This case is therefore distinguishable from Levin and the other cases cited by Hamann in which an employer has a continuing contractual or statutory obligation to pay wages or other benefits that gives rise to a new cause of action each time there is an improper payment.  See, e.g., Figueroa v. D.C. Metro. Police Dep’t, 633 F.3d 1129, 1134-35 (D.C. Cir. 2011) (holding that because an employer has an ongoing statutory duty to pay overtime, claims for unpaid overtime brought under the Fair Labor Standards Act accrue each time an employer fails to pay proper overtime wages); RDO Foods Co. v. United Brands Int’l, Inc., 194 F. Supp. 2d 962, 971 (D.N.D. 2002) (concluding that a separate wrong occurred each time an employer “failed to pay the management fee as determined by the formula set forth in the management agreement”); McGoldrick v. Datatrak Int’l, Inc., 42 F. Supp. 2d 893, 897-98 (D. Minn. 1999) (finding the employer had an existing and continuing contractual obligation to pay plaintiff’s salary, resulting in accrual of a new cause of action each time wages were due and unpaid).

In contrast to these cases, the complaint here alleges a single breach of an obligation that Park Nicollet owed in April 2005, when Hamann sought performance.  According to the complaint, Park Nicollet failed to perform its obligation to allow Hamann to be free from night call without a reduction in salary in April 2005.  Park Nicollet’s obligation under the Policy did not reappear in February 2008, when Hamann ceased taking night call.  That Hamann did not fully appreciate the effects of Park Nicollet’s April 2005 breach until some years later does not postpone the accrual of his cause of action based on that breach or transform Park Nicollet’s wrongful conduct in April 2005 into a continuing breach of an ongoing obligation that could give rise to separate causes of action.

The rule we apply here has been recognized by several courts.  For example in Tull v. City of Albuquerque, the court held that the plaintiffs’ cause of action accrued when their employer, the City, failed to provide plaintiffs with “a [promised] raise in conjunction with their assumption of expanded job duties,” as required under the City’s Merit System Ordinance.  907 P.2d 1010, 1011 (N.M. Ct. App. 1995).  Although the City’s breach had “continuing consequences in the form of lower paychecks,” the court found that the lower paychecks were merely damages resulting from the actionable wrong that was the “City’s initial refusal to increase Plaintiffs’ salaries.”  Id. at 1013.  Therefore, the applicable 3-year statute of limitations barred the claim of the plaintiffs, who had waited 7 years after the change in their job responsibilities before suing.  Id. at 1012-13.

In Press v. Howard University, a doctor claimed that his employer, the University, had breached its employment contract with him by wrongfully suspending him from clinic duties, causing him to lose income from a profit-sharing plan.  540 A.2d 733, 734 (D.C. 1988).  The court found that “the alleged breach of contract—the suspension—occurred only once.”  Id. at 735.  The damages the doctor suffered, although continuing into the future in the form of lost income, all flowed from the one single breach.  Id.  The court therefore concluded that the doctor’s claim accrued at the time of the doctor’s suspension.  Id.; see also Woodland v. Joseph T. Ryerson & Son, Inc., 302 F.3d 839, 842-43 (8th Cir. 2002) (holding that the employer’s initial refusal to hire was a single discrete act giving rise to a cause of action, and a new cause of action did not accrue later when the lack of seniority cost the plaintiff a promotion and overtime hours); Alldread v. City of Grenada, 988 F.2d 1425, 1431-32 (5th Cir. 1993) (concluding that a single Fair Labor Standards Act violation occurred when an employer coerced firefighter employees to sign a contract agreeing to waive compensation for sleep time, resulting in lower overtime wages); Taylor v. Gen. Motors Corp., 826 F.2d 452, 456 (6th Cir. 1987) (determining that a breach occurred and the cause of action accrued when the employer failed to promote plaintiff).

As these cases make clear, courts must examine the nature of the wrongful conduct at issue in order to determine when the cause of action accrues.  If, for example, the wrongful conduct is the failure to pay wages, a cause of action accrues with each failure to pay wages earned.  See, e.g., Wood, 13 Minn. at 397 (Gil. at 368).  But that is not the wrongful conduct that forms the basis for Hamann’s action.  The conduct that Hamann alleges is wrongful here is Park Nicollet’s refusal to comply with the Policy.  This wrongful conduct occurred in April 2005.  The reduction of Hamann’s salary in February 2008 and thereafter was a consequence of the wrongful conduct but it is not the wrong for which Hamann seeks redress.  See Ariadne Fin. Servs. Pty. Ltd. v. United States, 133 F.3d 874, 879 (Fed. Cir. 1998) (concluding that a claim was time-barred because the claim did “not involve a series of distinct events, each giving rise to an independent cause of action,” but rather sought “compensation for repudiation of a contract that promised continuing performance into the future”).  Hamann’s paychecks therefore do not create separate causes of action with distinct accrual dates.

2.

Hamann also argues that his claims did not accrue in April 2005 because Park Nicollet’s statement in April 2005—that the Policy no longer existed—was an anticipatory repudiation of a future obligation to pay wages.  The court of appeals agreed with Hamann’s reasoning and concluded that in April 2005 Park Nicollet repudiated a future contractual duty to pay Hamann’s original salary when he ceased taking night call.  Hamann, 792 N.W.2d at 472.  We agree with the district court that Park Nicollet’s statements in April 2005 do not constitute an anticipatory repudiation.

Park Nicollet’s April 2005 statements do not constitute an anticipatory repudiation because Park Nicollet’s performance was due immediately when Hamann, having satisfied the Policy’s eligibility criteria, sought to invoke the benefits of the Policy.  Failure to perform under a contract when performance is due establishes an immediate breach.  See Associated Cinemas of Am., Inc., v. World Amusement Co., 201 Minn. 94, 99, 276 N.W. 7, 10 (1937).  An anticipatory repudiation, however, occurs when a promisor renounces a contractual duty before the time for performance has arrived.  See Wold v. Wold, 138 Minn. 409, 415, 165 N.W. 229, 231 (1917).  Where a party to a contract does nothing more than declare “an intention not to comply with its terms prior to the time the declarant must perform,” the statute of limitations does not begin to run.  Levin, 441 N.W.2d at 804; accord Matteson v. Blaisdell, 148 Minn. 352, 355, 182 N.W. 442, 443 (1921).  In Levin, we held that the employer’s statement to Levin that the employer would not pay commissions constituted an anticipatory repudiation of the employer’s future obligation to pay commissions.  441 N.W.2d at 804.  Because commissions were due to Levin at the end of each year and were based entirely on the sales that occurred during that year, the employer’s obligation to pay commissions could not be breached in advance of the sales on which the calculation of commissions were based.  The breach could occur only at the end of any individual sales year.  Id.

The court of appeals found that the facts of this case were analogous to Levin, determining that “Park Nicollet had a future obligation to pay or provide specific benefits to Dr. Hamann at certain stated intervals for an indefinite period into the future.”  Hamann, 792 N.W.2d at 472.  Claims for benefits continued to accrue, the court of appeals reasoned, because Hamann continued his employment with Park Nicollet.  Id.  We agree that an employer’s declaration of an intention not to perform contractual obligations due in the future does not itself start the limitations period.

But the breach at issue in this case—relieving Hamann from night call without reducing his salary—was not an obligation that would arise at some point in the future; it was an obligation owed to Hamann in April 2005, when Haman demanded performance.  Unlike the obligation to make commission payments at issue in Levin, which could necessarily be breached only at the end of each year in which commission payments were earned, Park Nicollet’s Policy set out a present contractual obligation.  Hamann, having satisfied the eligibility criteria, triggered that obligation when he informed the Department Chair in April 2005 that he wished to “exercise the Policy.”  And Park Nicollet breached the obligation when the Department Chair declined to allow Hamann to do so.  That Hamann did not feel the effects of the breach in the form of a salary reduction until sometime later does not convert Park Nicollet’s breach of a presently existing obligation into the repudiation of a future one.[7]

Our characterization of Park Nicollet’s performance—as a presently existing obligation—also comports with Hamann’s argument that Park Nicollet had a duty “to perform under the Policy the moment Dr. Hamann’s rights in the Policy vested” and breached the Policy by “deny[ing] Hamann the right to be exempt from OB night call.”  In this way, the Policy is similar to a contract calling for payment on demand.  As soon as Hamann had satisfied the conditions of the Policy and “informed the Department Chair that he wished to exercise the Policy and stop taking night call,” Park Nicollet had a duty to perform.  Failure to perform, therefore, is not an anticipatory repudiation.  Instead, the failure to perform established an immediate breach in April 2005 from which the statute of limitations began to run.  See Bannitz v. Hardware Mut. Cas. Co. of Stevens Point, Wis., 219 Minn. 235, 237, 17 N.W.2d 372, 373 (1945) (finding that the statute of limitations begins to run on a contractual obligation payable on demand when such demand is made).

For all of these reasons, we hold that Hamann’s cause of action accrued, and the statute of limitations began to run as to his claims, in April 2005.  Because Hamann filed this action in October 2009, it is barred by the statute of limitations.  See Minn. Stat. § 541.07(5).  We therefore reverse the court of appeals.

Reversed.