UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 11-2526(DSD/AJB)
James Bigham, John Quarnstrom,
Robert Vranicar, Steve Ritchie,
Marty Strub, and Richard Leitschuh
as Trustees of the Sheet Metal
Local #10 Control Board Trust Fund,
and the Sheet Metal Local #10
Control Board Trust Fund,
Plaintiffs,
v.
Vogt Heating, Air Conditioning &
Plumbing, LLC,
Defendant.
Amy L. Court, Esq., Carl S. Wosmek, Esq., Christy E.
Lawrie, Esq. and McGrann, Shea, Carnival, Straughn &
Lamb, 800 Nicollet Mall, Suite 2600, Minneapolis, MN
55402, counsel for plaintiffs.
Alec J. Beck, Esq. and Ford & Harrison, 225 South Sixth
Street, Suite 3150, Minneapolis, MN 55402, counsel for
defendant .
This matter is before the court upon the motion for entry of
judgment by plaintiff Sheet Metal Local #10 Control Board Trust
Fund (Trustees) and the motion to set aside entry of default by 1
defendant Vogt Heating, Air Conditioning & Plumbing LLC (Vogt
Trustee plaintiffs include James Bigham, John Quarnstrom, 1
Robert Vranicar, Steve Ritche, Mary Strub and Richard Leitschuh.
CASE 0:11-cv-02526-DSD-AJB Document 31 Filed 04/23/12 Page 1 of 7
Heating). Based on a review of the file, record and proceedings
herein, and for the following reasons, the court grants the motion
by Vogt Heating.
BACKGROUND
In this benefits dispute, the Trustees allege that Vogt
Heating failed to submit employee reports and contributions to the
fringe-benefit fund. The collective-bargaining agreement, entered
into by the parties on December 2, 1992, requires Vogt Heating to
submit a report of hours worked by union employees and a
corresponding payment to the Trustees by the tenth day of each
month. See Compl. ¶ 13; Rice Aff. ¶ 2. Contributions not received
within five days, or the first working day thereafter, are
considered delinquent. Id. ¶¶ 13-14.
On September 1, 2011, the Trustees filed a complaint alleging
that Vogt Heating failed to submit its July 2011 report and
payment. Id. ¶ 18. Vogt Heating did not respond to the complaint
and the Trustees filed a motion for entry of default. See Court
Aff. ¶¶ 2-4, ECF No. 4. The clerk of court granted the motion,
see ECF No. 6, and the court scheduled a hearing for entry of
judgment. Prior to the hearing, Vogt Heating filed a motion to set
aside the default judgment, arguing that it overpaid $258,468.71
for an employee, John Super, who was not covered by the collectivebargaining
agreement. At oral argument, the court requested that
2
CASE 0:11-cv-02526-DSD-AJB Document 31 Filed 04/23/12 Page 2 of 7
the parties confer regarding whether Super should have been covered
by the collective-bargaining agreement. The parties did not reach
agreement, and the court now addresses the motions.
DISCUSSION
“The entry of default judgment should be a ‘rare judicial
act.’” Comiskey v. JFTJ Corp., 989 F.2d 1007, 1009 (8th Cir. 1993)
(quoting Edgar v. Slaughter, 548 F.2d 770, 773 (8th Cir. 1977)).
“There is a judicial preference for adjudication on the merits, and
it is likely that a party who promptly attacks an entry of default,
rather than waiting for grant of a default judgment, was guilty of
an oversight and wishes to defend the case on the merits.” Johnson
v. Dayton Elec. Mfg. Co., 140 F.3d 781, 784 (8th Cir. 1998)
(citations omitted); see United States v. Harre, 983 F.2d 128, 130
(8th Cir. 1993).
A “court may set aside an entry of default for good cause.”
Fed. R. Civ. P. 55(c). “When examining whether good cause exists,
the … court should weigh whether the conduct of the defaulting
party was blameworthy or culpable, whether the defaulting party has
a meritorious defense, and whether the other party would be
prejudiced if the default were excused.” Stephenson v. El-Batrawi,
524 F.3d 907, 912 (8th Cir. 2008) (citation and internal quotations
marks omitted).
3
CASE 0:11-cv-02526-DSD-AJB Document 31 Filed 04/23/12 Page 3 of 7
I. Blameworthy or Culpable
The court “focus[es] heavily on the blameworthiness of the
defaulting party,” and “distinguish[es] between contumacious or
intentional delay or disregard for deadlines and procedural rules,
and a ‘marginal failure’ to meet pleading or other deadlines.”
Johnson, 140 F.3d at 784. “‘[E]xcusable neglect’ includes ‘late
filings caused by inadvertence, mistake or carelessness.’” Id.
(quoting Pioneer Inv. Servs. v. Brunswick Assocs., 507 U.S. 380,
388 (1993)).
Vogt Heating alleges that its failure to respond to the
complaint was the result of oversight. Roughly three days after
receiving the complaint in this matter, Vogt Heating received a
notice of dismissal relating to a different dispute with the
Trustees. Winder Aff. ¶ 5. Robert Winder, the President of Vogt
Heating, mistakenly believed this was for the instant motion, but
the notice actually pertained to Vogt Heating’s alleged nonpayment
of its May 2011 contributions. Id.; Court Aff. ¶¶ 4-6. Such
confusion is reasonable and there is no evidence of intentional
delay or disregard for court deadlines. See United States ex rel.
Shaver v. Lucas W. Corp., 237 F.3d 932, 933 (8th Cir. 2001)
(setting aside default judgment when human-resources supervisor
mistakenly believed complaint related to contemporaneously filed
suit between same parties). Therefore, this factor weighs in favor
of setting aside the entry of default.
4
CASE 0:11-cv-02526-DSD-AJB Document 31 Filed 04/23/12 Page 4 of 7
II. Meritorious Defense
The defendant need not show that he will succeed on the
merits, but rather only that “the proffered evidence would permit
a finding for the defaulting party.” Johnson, 140 F.3d at 785
(citation and internal quotation marks omitted). “The underlying
concern is … whether there is some possibility that the outcome
… after a full trial will be contrary to the result achieved by
the default.” Stephenson, 524 F.3d at 914 (citations and internal
quotation marks omitted).
Vogt Heating alleges that it made overpayments for Super, and
that it is entitled to recover overpayments to the fund, or to
offset those overpayments against future obligations. In response,
the Trustees argue that an equitable restitution claim requires
more than a showing of overpayment, and that Vogt Heating must 2
demonstrate that equity demands repayment. See UIU Severance Pay
Trust Fund v. Local Union No. 18-U, 998 F.2d 509, 513 (7th Cir.
1993) (noting that court should consider laches, ratification and
unjust enrichment prior to issuing repayment). At this stage,
however, the court need only determine whether the factual support
The Trustees cite Stephenson for the proposition that Vogt 2
Heating has not shown a meritorious defense. In Stephenson, the
defendant made bald assertions denying wrongdoing, but “did not
provide any factual support for those statements.” Stephenson v.
Deutsche Bank AG, Nos. 02-4845, 02-3682, 02-3711, 03-5198, 04-
1469, 2007 WL 763087, at *8 (D. Minn. Mar. 9, 2007), aff’d sub nom.
Stephenson v. El-Batrawi, 524 F.3d 907 (8th Cir. 2008). The
present case is distinguishable, because Vogt Heating submitted
audited overpayment statements. See Winder Aff. Ex. A.
5
CASE 0:11-cv-02526-DSD-AJB Document 31 Filed 04/23/12 Page 5 of 7
for a meritorious defense exists. In other words, “[t]he court is
not required to determine the likelihood of success on the merits;
it is only required to determine whether if true, defendant’s claim
presents a meritorious defense.” Metcalf v. E.I. Du Pont De
Nemours & Co., No 05-1035, 2006 WL 1877069, at *5 (D. Minn. July 6,
2006). Therefore, the court finds that this factor weighs in favor
of setting aside the entry of default.
III. Prejudice
“[P]rejudice may not be found from delay alone or from the
fact that the defaulting party will be permitted to defend on the
merits.” Johnson, 140 F.3d at 785 (citation omitted). The court
considers factors such as “loss of evidence, increased difficulties
in discovery, or greater opportunities for fraud and collusion.”
Id. (citation omitted). As the Trustees concede, no such evidence
is present. See Pls.’ Mem. Opp’n 13. Therefore, this factor also
weighs in favor of setting aside the entry of default.
Accordingly, based upon a balancing of the three Johnson factors,
setting aside the entry of default is warranted.
CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED
that:
1. Plaintiffs’ motion for entry of judgment [ECF No. 8] is
denied;
6
CASE 0:11-cv-02526-DSD-AJB Document 31 Filed 04/23/12 Page 6 of 7
2. Defendant’s motion to set aside entry of default [ECF No.
16] is granted.
Dated: April 23, 2012
s/David S. Doty
David S. Doty, Judge
United States District Court
7
CASE 0:11-cv-02526-DSD-AJB Document 31 Filed 04/23/12 Page 7 of 7

Life Time Fitness, Inc., Plaintiff,

v.

Daniel DeCelles, Defendant.

Civil No. 12-420(DSD/SER).

United States District Court, D. Minnesota.

February 28, 2012.

V. John Ella, Esq., Sarah M. Fleegel, Esq., and Jackson Lewis, LLP, 225 South Sixth Street, Suite 3850, Minneapolis, MN 55402, counsel for plaintiff.

Leslie M. Witterschein, Esq., James A. Wahl, Esq., and Monroe, Moxness & Berg, PA, 8000 Norman Center Drive, Suite 1000, Bloomington, MN 55437 and Lee Henman, Jr., Esq., and Henman Law Firm, PC, 3131 East Camelback Road, Suite 200, Phoenix, AZ 85016, counsel for defendant.

ORDER

DAVID S. DOTY, District Judge.

This matter came before the court on February 27, 2012, upon the motion for temporary restraining order (TRO) by plaintiff Life Time Fitness, Inc. (LTF). LTF and defendant Daniel DeCelles appeared through counsel. Based on a review of the file, record and proceedings herein, and for the following reasons, the court grants the TRO in part.

BACKGROUND

LTF is a Minnesota corporation with health and fitness clubs across the nation, including five locations in Arizona. See Compl. ¶¶ 1, 5. LTF provides personal training services, with the goal of “promot[ing] healthy life styles and help[ing] … [clients] meet fitness goals.” Id. ¶ 7. DeCelles began working at the Tempe, Arizona LTF location on 1616 West Ruby Drive as a personal trainer on June 28, 2010. His primary responsibilities at LTF included recruiting new members; creating and conducting workout programs for existing members; and tracking members’ “health history, workout routines, completed workouts, data regarding LTF services… and personal contact information.” Id. ¶ 8.

DeCelles signed a personal trainer employment agreement (Agreement) as a condition of employment. The Agreement required DeCelles to not “directly or indirectly use [confidential business and proprietary information[1] (CBPI)] at any time during … employment at LTF.” Campbell Decl. Ex. 1, at 3. DeCelles also could not “directly or indirectly, during … employment at LTF or thereafter, use or disclose CBPI to any person or organization, unless authorized in writing by a person of authority at LTF.” Id. Upon termination of employment, DeCelles further agreed to “turn over to LTF any and all tangible items supplied … by LTF (including but not limited to CBPI), all member lists, and employee lists.” Id. at 4.

The Agreement also included several covenants:

2. Covenant Not to Solicit the Business of LTF Members, Customers, Clients, and Employees

I agree that during the term of my employment and for a period of twelve (12) months after my termination at LTF, … [I] will not directly or indirectly, on behalf of myself or any other person or entity:

a. call upon LTF’s members (including those solicited, obtained, serviced and/or maintained by Employee) for the purpose of soliciting and/or providing personal training-related services;

b. canvas, solicit, or accept any similar or competitive personal training-related business from any customer, member, employee and/or client of LTF;

c. induce customers, members, employees and/or clients to patronize any Competing Business offering or intending to offer personal training; or

d. request, advise, assist, or in any way facilitate any customer, member, or client of LTF to withdraw, reduce or cancel its business relationship with LTF.

3. Covenant Not to Solicit LTF Employees for other Employment

I agree that during the term of my employment and for a period of twelve (12) months after my termination at LTF, I will not directly or indirectly, on behalf of myself or any other person or entity:

a. request, advise, assist, or in any way facilitate any employee or supplier of LTF to withdraw, reduce or cancel its business or employment relationship with LTF; or

b. induce, solicit, request or advise any of LTF’s employees to accept employment with any Competing Business or otherwise take any action detrimental to the relationships between LTF and its employees.

4. Covenant Not to Compete

I agree that during the term of my employment with LTF and for a period of nine (9) months after my termination at LTF, I will not, directly or indirectly, on behalf of myself or any other person or entity:

a. be employed by or serve as an independent contractor or consultant to any Competing Business within the Covered Geographic Area;[2] or

b. advertise, market, sell, take orders for, or provide Personal training-related services for any Competing Business in the Covered Geographic Area.

Id. at 3-4.

DeCelles left his employment with LTF on November 12, 2011, and allegedly took thirty to forty LTF client files to his new employer, Arizona Spine and Disc. See id. ¶ 16; Compl. ¶¶ 24-26. After LTF contacted Arizona Spine and Disc regarding the terms of the Agreement, Decelles’s employment was terminated. See Compl. ¶ 26. In late January DeCelles began working at Pro Fitness (PF). See Campbell Decl. ¶ 23; Compl. ¶ 26. PF is a personal-fitness facility engaged in a business similar to LTF. See Compl. ¶ 28-30. PF is located at 7420 S. Rural Road, roughly 2.8 miles from LTF’s Tempe location. Ella Decl. Ex. 2.

Since joining PF, several LTF personal trainers have received phone calls on their personal phones from the owner of PF asking them to join the PF staff. See Compl. ¶ 33. Further, several LTF members who DeCelles previously trained have cancelled their memberships and requested refunds for money paid for personal training. See id. ¶¶ 34-35. LTF is required to issue refunds without a copy of the original member contracts, which LTF alleges DeCelles stole. Id. ¶ 37.

On February 17, 2012, LTF moved for a TRO, and the court scheduled a hearing for February 27, 2012. Following oral argument, the court advised the parties to confer and submit a joint proposed order by the end of the business day. The parties did not reach agreement, and the court now addresses the motion.

DISCUSSION

I. Personal Jurisdiction

DeCelles argues that the court lacks personal jurisdiction. “Due process is satisfied when a defendant consents to personal jurisdiction by entering into a contract that contains a valid forum selection clause.” Dominum Austin Partners, L.L.C. v. Emerson, 248 F.3d 720, 728 (8th Cir. 2001) (citations omitted).[3] “Forum selection clauses are prima facie valid and are enforced unless they are unjust or unreasonable or invalid ….” M.B. Rests. Inc. v. CKE Rests., Inc., 183 F.3d 750, 752 (8th Cir. 1999) (citation omitted). The Agreement states that “both parties agree that venue shall be proper in the state and federal courts of Minnesota.” Campbell Decl. Ex. 1, at 5. DeCelles does not argue that the forum selection clause is improper. Therefore, DeCelles has consented to personal jurisdiction in Minnesota.

DeCelles next argues that the court must determine whether the forum selection clause is permissive or mandatory prior to entering a TRO. The court disagrees. See, e.g., Bel Canto Design, Ltd. v. MSS HiFi, No. 11-cv-2126, 2011 WL 4036409, at *2 (D. Minn. Sept. 12, 2011) (transferring case to new venue after entering TRO); see also Mo. Housing Dev. Comm’n v. Brice, 919 F.2d 1306 (8th Cir. 1990) (citation omitted) (noting that more than one district may serve as a proper venue). Therefore, jurisdiction is proper.[4]

II. TRO

A TRO is an extraordinary equitable remedy, and the movant bears the burden of establishing its propriety. See Watkins Inc. v. Lewis, 346 F.3d 841, 844 (8th Cir. 2003). The court considers four factors in determining whether a TRO should issue: (1) the threat of irreparable harm to the movant in the absence of relief, (2) the balance between that harm and the harm that the relief may cause the non-moving party, (3) the likelihood of the movant’s ultimate success on the merits and (4) the public interest. See Dataphase Sys., Inc. v. C.L. Sys., Inc., 640 F.2d 109, 114 (8th Cir. 1981) (en banc).

As an initial matter, the court must determine whether Minnesota or Arizona law applies to this dispute. The court applies choice-of-law rules under diversity jurisdiction. See Interstate Cleaning Corp. v. Commercial Underwriters Ins. Co., 325 F.3d 1024, 1028 (8th Cir. 2003). The Agreement states that “[t]he law of the state of Minnesota shall govern the terms, interpretation, and enforcement of the Agreement.” Campbell Decl. Ex. 1, at 5. Minnesota courts traditionally enforce choice-of-law provisions. See Milliken & Co. v. Eagle Packaging Co., 295 N.W.2d 377, 380 n.1 (Minn. 1980). Therefore, the court applies Minnesota law.

A. Irreparable Harm

LTF argues that the continued competition by DeCelles in violation of the Agreement will result in irreparable harm. To show irreparable harm, “a party must show that the harm is certain and great and of such imminence that there is a clear and present need for equitable relief.” Iowa Utils. Bd. v. F.C.C., 109 F.3d 418, 425 (8th Cir. 1996). “[P]otential loss of goodwill qualifies as irreparable harm.” Id. at 426. Irreparable harm is presumed, where, as here, a “professional employee[] … acquire[s] influence over patients or clients of their employer.” See Rosewood Mortg. Corp. v. Hefty, 383 N.W.2d 456, 459 (Minn. Ct. App. 1986) (citation omitted). Moreover, DeCelles acknowledged that “immediate irreparable damage will result to LTF if [the] employee breaches any of the covenants set forth in this Agreement.” Campbell Decl. Ex. 1, at 4. Therefore, this factor weighs in favor of LTF.

B. Balance of Harms

The court has already determined that plaintiff’s goodwill is harmed by defendant’s acts. Balanced against that harm is the harm to the defendant’s ability to work as a personal trainer. Such harm is lessened, however, by the fact that there is no evidence in the record that a TRO will prevent DeCelles from working. Cf. CDI Energy Servs., Inc. v. W. River Pumps, Inc., 567 F.3d 398, 403 (8th Cir. 2009) (holding that balance of harms favored defendant when it “appear[ed] undisputed that an injunction would put the defendants out of business”). Indeed, DeCelles is only prevented from working within a five mile radius of LTF facilities. See Campbell Decl. Ex. 1, at 2. Therefore, this factor weighs in favor of LTF.

C. Likelihood of Success on the Merits

The court next considers the likelihood that the movant will prevail on the merits. S & M Constructors, Inc. v. Foley Co., 959 F.2d 97, 98 (8th Cir. 1992). A TRO “motion is too early a stage of the proceedings to woodenly assess a movant’s probability of success on the merits with mathematical precision.” Gen. Mills, Inc. v. Kellogg Co., 824 F.2d 622, 624 (8th Cir. 1987). The court does not decide whether the movant will ultimately win, or if a greater than fifty-percent likelihood of success exists. See Glenwood Bridge, Inc. v. City of Minneapolis, 940 F.2d 367, 371 (8th Cir. 1991).

LTF alleges claims for breach of contract, misappropriation of trade secrets, conversion, breach of the duty of loyalty, unfair competition and tortious interference with prospective business relationships. LTF need only demonstrate that it is likely to succeed on one claim in order to satisfy this prong of Dataphase. See United Healthcare Ins. Co. v. AdvancePCS, 316 F.3d 737, 742-43 (8th Cir. 2002).

Although disfavored, noncompete agreements are enforced when reasonable and supported by adequate consideration. See Prow v. Medtronic, Inc., 770 F.2d 117, 120 (8th Cir. 1985) (interpreting Minnesota law). To determine the reasonableness of a noncompete agreement, the court considers: (1) whether the restraint is necessary for the protection of the business or goodwill of the employer, (2) whether the restraint is greater than necessary to adequately protect the employer’s legitimate interests, (3) how long the restriction lasts and (4) the geographic scope of the restriction. Id. (citing Bennett v. Storz Broad. Co., 134 N.W.2d 892, 899 (1965)).[5]

In the present action, restraint is necessary to protect the legitimate interest of LTF in its “goodwill, trade secrets, and confidential information.” Medtronic, Inc. v. Advanced Bionics Corp., 630 N.W.2d 438, 4556 (Minn. Ct. App. 2001) (citation omitted). Further, the covenant is narrow in its geographic scope and length of time. See, e.g., Boston Scientific Corp. v. Duberg, 754 F. Supp. 2d. 1033, 1039 (D. Minn. 2010) (citation omitted) (noting that one-year restrictions are “consistently found” to be reasonable); Overholt Crop Ins. Serv. Co. v. Bredeson, 437 N.W.2d 698, 703 (Minn. Ct. App. 1989) (upholding a geographic restriction that was limited to area necessary to protect former employer). Moreover, consideration is not an issue. See Overholt Crop Ins. Serv. Co., 437 N.W.2d at 702 (explaining that “no independent consideration is necessary” to support a noncompete agreement when entered into at inception of employment). Therefore, because the covenant is reasonable, plaintiff is likely to succeed in its breach of contract claim, and this factor weighs in favor of LTF.[6]

D. Public Interest

The public interest does not strongly favor one party over the other. There is a public interest in upholding contractual agreements. See Med. Shoppe Int’l, Inc. v. S.B.S. Pill Dr., Inc., 336 F.3d 801, 805 (8th Cir. 2003). There also is a public interest in unrestrained competition. See Calvin Klein Cosmetics Corp. v. Lenox Labs., Inc., 815 F.2d 500, 505 (8th Cir. 1987). Here, it appears that DeCelles is engaging in competition that is in violation of the Agreement. Therefore, the public interest factor favors LTF. Accordingly, based upon a balancing of the four Dataphase factors, a TRO is warranted.

CONCLUSION

Accordingly, based on the above, IT IS HEREBY ORDERED that:

1. Plaintiff’s motion for a temporary restraining order [ECF No. 2] is granted in part;

2. Defendant whether alone, through an LLC or other corporate entity, or in concert with others, including any officer, agent, employee, and/or representative of Pro Fitness is restrained from directly or indirectly:

a. Being employed by, contracting with, or being connected in any manner with, any business competitive with LTF within a five mile radius of any place of business owned or affiliated with LTF that offers or intends to offer personal training;

b. Calling upon any of LTF’s members, customers, or clients for the purpose of soliciting or selling to any such persons any products or services similar to those of LTF;

c. Providing services to, diverting or taking away any of LTF’s clients;

d. Soliciting any of LTF’s employees;

e. Communicating, disclosing, divulging or furnishing any of LTF’s confidential and proprietary information or trade secrets to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever;

f. Using any of LTF’s confidential and proprietary information or trade secrets; or

g. Interfering with LTF’s current prospective business relations;

3. Defendant shall immediately cease employment with Pro Fitness;

4. Defendant shall return all of LTF’s confidential, proprietary, and trade secret information in his possession and control, including, but not limited to, all member files and contracts;

5. Defendant shall preserve all documents and data of any nature whatsoever, including but not limited to electronic documents, electronic mail, and corporate documents of or relating to LTF or Pro Fitness, and is not to destroy any documents or data of any nature whatsoever during the pendency of this action;

6. The parties may engage in expedited discovery, which includes one, eight-hour deposition per side;

7. Plaintiffs shall post a bond of $5,000 pursuant to Federal Rule of Civil Procedure 65 within two business days of the issuance of this order; and

8. This order shall remain in effect for fourteen days.

[1] Confidential business and proprietary information includes “any information or material that (a) is not generally known other than by LTF, (b) is reasonably determined to be confidential and (c) Employee may obtain knowledge about as a result of employment with LTF.” Campbell Decl. Ex. 1, at 2.

[2] A “covered geographic area” includes “the area within a five (5) mile radius from any place of business owned or affiliated with LTF that offers or intends to offer personal training.” Campbell Decl. Ex. 1, at 2.

[3] The court notes that only a prima facie showing of jurisdiction is necessary at the TRO stage. Coen v. Coen, 509 F.3d 900, 904 (8th Cir. 2007).

[4] DeCelles also appears to argue that venue is improper. A motion to transfer venue, however, is not before the court.

[5] The court notes that Arizona supplies a similar analysis. See Compass Bank v. Hartley, 430 F. Supp. 2d 973, 979-81 (D. Ariz. 2006).

[6] Even if the noncompete was unreasonable, the court has the power to “blue pencil” the Agreement. See Witzke v. Mesabi Rehab. Servs., Inc., 768 N.W.2d 127, 129 n.1 (Minn. Ct. App. 2009) (citation omitted) (giving court discretion “to modify unreasonable restrictions on competition in an employment agreement by enforcing restrictions only to the extent reasonable”); see also Campbell Decl. Ex. 1, at 4 (“If a court of competent jurisdiction holds that the restrictions … are unreasonable under the circumstances then existing, the parties to this Agreement agree that the Court shall substitute the maximum period, scope, or geographical area reasonable under the circumstances.”).

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 12-420(DSD/SER)
Life Time Fitness, Inc.,
Plaintiff,
v. ORDER
Daniel DeCelles,
Defendant.
V. John Ella, Esq., Sarah M. Fleegel, Esq. and Jackson
Lewis, LLP, 225 South Sixth Street, Suite 3850,
Minneapolis, MN 55402, counsel for plaintiff.
Leslie M. Witterschein, Esq., James A. Wahl, Esq. and
Monroe, Moxness & Berg, PA, 8000 Norman Center Drive,
Suite 1000, Bloomington, MN 55437 and Lee Henman, Jr.,
Esq. and Henman Law Firm, PC, 3131 East Camelback Road,
Suite 200, Phoenix, AZ 85016, counsel for defendant.
This matter came before the court on February 27, 2012, upon
the motion for temporary restraining order (TRO) by plaintiff Life
Time Fitness, Inc. (LTF). LTF and defendant Daniel DeCelles
appeared through counsel. Based on a review of the file, record
and proceedings herein, and for the following reasons, the court
grants the TRO in part.
BACKGROUND
LTF is a Minnesota corporation with health and fitness clubs
across the nation, including five locations in Arizona. See Compl.
¶¶ 1, 5. LTF provides personal training services, with the goal of
CASE 0:12-cv-00420-DSD-SER Document 13 Filed 02/28/12 Page 1 of 13
“promot[ing] healthy life styles and help[ing] … [clients] meet
fitness goals.” Id. ¶ 7. DeCelles began working at the Tempe,
Arizona LTF location on 1616 West Ruby Drive as a personal trainer
on June 28, 2010. His primary responsibilities at LTF included
recruiting new members; creating and conducting workout programs
for existing members; and tracking members’ “health history,
workout routines, completed workouts, data regarding LTF services
… and personal contact information.” Id. ¶ 8.
DeCelles signed a personal trainer employment agreement
(Agreement) as a condition of employment. The Agreement required
DeCelles to not “directly or indirectly use [confidential business
and proprietary information (CBPI)] at any time during … 1
employment at LTF.” Campbell Decl. Ex. 1, at 3. DeCelles also
could not “directly or indirectly, during … employment at LTF or
thereafter, use or disclose CBPI to any person or organization,
unless authorized in writing by a person of authority at LTF.” Id.
Upon termination of employment, DeCelles further agreed to “turn
over to LTF any and all tangible items supplied … by LTF
(including but not limited to CBPI), all member lists, and employee
lists.” Id. at 4.
Confidential business and proprietary information includes 1
“any information or material that (a) is not generally known other
than by LTF, (b) is reasonably determined to be confidential and
(c) Employee may obtain knowledge about as a result of employment
with LTF.” Campbell Decl. Ex. 1, at 2.
2
CASE 0:12-cv-00420-DSD-SER Document 13 Filed 02/28/12 Page 2 of 13
The Agreement also included several covenants:
2. Covenant Not to Solicit the Business of LTF
Members, Customers, Clients, and Employees
I agree that during the term of my
employment and for a period of twelve (12)
months after my termination at LTF, … [I]
will not directly or indirectly, on behalf of
myself or any other person or entity:
a. call upon LTF’s members (including
those solicited, obtained, serviced and/or
maintained by Employee) for the purpose of
soliciting and/or providing personal trainingrelated
services;
b. canvas, solicit, or accept any similar
or competitive personal training-related
business from any customer, member, employee
and/or client of LTF;
c. induce customers, members, employees
and/or clients to patronize any Competing
Business offering or intending to offer
personal training; or
d. request, advise, assist, or in any way
facilitate any customer, member, or client of
LTF to withdraw, reduce or cancel its business
relationship with LTF.
3. Covenant Not to Solicit LTF Employees for
other Employment
I agree that during the term of my
employment and for a period of twelve (12)
months after my termination at LTF, I will not
directly or indirectly, on behalf of myself or
any other person or entity:
a. request, advise, assist, or in any way
facilitate any employee or supplier of LTF to
withdraw, reduce or cancel its business or
employment relationship with LTF; or
b. induce, solicit, request or advise any
of LTF’s employees to accept employment with
any Competing Business or otherwise take any
action detrimental to the relationships
between LTF and its employees.
4. Covenant Not to Compete
I agree that during the term of my
employment with LTF and for a period of nine
(9) months after my termination at LTF, I will
3
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not, directly or indirectly, on behalf of
myself or any other person or entity:
a. be employed by or serve as an
independent contractor or consultant to any
Competing Business within the Covered
Geographic Area; or 2
b. advertise, market, sell, take orders
for, or provide Personal training-related
services for any Competing Business in the
Covered Geographic Area.
Id. at 3-4.
DeCelles left his employment with LTF on November 12, 2011,
and allegedly took thirty to forty LTF client files to his new
employer, Arizona Spine and Disc. See id. ¶ 16; Compl. ¶¶ 24-26.
After LTF contacted Arizona Spine and Disc regarding the terms of
the Agreement, Decelles’s employment was terminated. See Compl.
¶ 26. In late January DeCelles began working at Pro Fitness (PF).
See Campbell Decl. ¶ 23; Compl. ¶ 26. PF is a personal-fitness
facility engaged in a business similar to LTF. See Compl. ¶ 28-30.
PF is located at 7420 S. Rural Road, roughly 2.8 miles from LTF’s
Tempe location. Ella Decl. Ex. 2.
Since joining PF, several LTF personal trainers have received
phone calls on their personal phones from the owner of PF asking
them to join the PF staff. See Compl. ¶ 33. Further, several LTF
members who DeCelles previously trained have cancelled their
memberships and requested refunds for money paid for personal
A “covered geographic area” includes “the area within a five 2
(5) mile radius from any place of business owned or affiliated with
LTF that offers or intends to offer personal training.” Campbell
Decl. Ex. 1, at 2.
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training. See id. ¶¶ 34-35. LTF is required to issue refunds
without a copy of the original member contracts, which LTF alleges
DeCelles stole. Id. ¶ 37.
On February 17, 2012, LTF moved for a TRO, and the court
scheduled a hearing for February 27, 2012. Following oral
argument, the court advised the parties to confer and submit a
joint proposed order by the end of the business day. The parties
did not reach agreement, and the court now addresses the motion.
DISCUSSION
I. Personal Jurisdiction
DeCelles argues that the court lacks personal jurisdiction.
“Due process is satisfied when a defendant consents to personal
jurisdiction by entering into a contract that contains a valid
forum selection clause.” Dominum Austin Partners, L.L.C. v.
Emerson, 248 F.3d 720, 728 (8th Cir. 2001) (citations omitted). 3
“Forum selection clauses are prima facie valid and are enforced
unless they are unjust or unreasonable or invalid ….” M.B.
Rests. Inc. v. CKE Rests., Inc., 183 F.3d 750, 752 (8th Cir. 1999)
(citation omitted). The Agreement states that “both parties agree
that venue shall be proper in the state and federal courts of
Minnesota.” Campbell Decl. Ex. 1, at 5. DeCelles does not argue
The court notes that only a prima facie showing of 3
jurisdiction is necessary at the TRO stage. Coen v. Coen, 509 F.3d
900, 904 (8th Cir. 2007).
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that the forum selection clause is improper. Therefore, DeCelles
has consented to personal jurisdiction in Minnesota.
DeCelles next argues that the court must determine whether the
forum selection clause is permissive or mandatory prior to entering
a TRO. The court disagrees. See, e.g., Bel Canto Design, Ltd. v.
MSS HiFi, No. 11-cv-2126, 2011 WL 4036409, at *2 (D. Minn. Sept.
12, 2011) (transferring case to new venue after entering TRO); see
also Mo. Housing Dev. Comm’n v. Brice, 919 F.2d 1306 (8th Cir.
1990) (citation omitted) (noting that more than one district may
serve as a proper venue). Therefore, jurisdiction is proper. 4
II. TRO
A TRO is an extraordinary equitable remedy, and the movant
bears the burden of establishing its propriety. See Watkins Inc.
v. Lewis, 346 F.3d 841, 844 (8th Cir. 2003). The court considers
four factors in determining whether a TRO should issue: (1) the
threat of irreparable harm to the movant in the absence of relief,
(2) the balance between that harm and the harm that the relief may
cause the non-moving party, (3) the likelihood of the movant’s
ultimate success on the merits and (4) the public interest. See
Dataphase Sys., Inc. v. C.L. Sys., Inc., 640 F.2d 109, 114 (8th
Cir. 1981) (en banc).
DeCelles also appears to argue that venue is improper. A 4
motion to transfer venue, however, is not before the court.
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As an initial matter, the court must determine whether
Minnesota or Arizona law applies to this dispute. The court
applies choice-of-law rules under diversity jurisdiction. See
Interstate Cleaning Corp. v. Commercial Underwriters Ins. Co., 325
F.3d 1024, 1028 (8th Cir. 2003). The Agreement states that “[t]he
law of the state of Minnesota shall govern the terms,
interpretation, and enforcement of the Agreement.” Campbell Decl.
Ex. 1, at 5. Minnesota courts traditionally enforce choice-of-law
provisions. See Milliken & Co. v. Eagle Packaging Co., 295 N.W.2d
377, 380 n.1 (Minn. 1980). Therefore, the court applies Minnesota
law.
A. Irreparable Harm
LTF argues that the continued competition by DeCelles in
violation of the Agreement will result in irreparable harm. To
show irreparable harm, “a party must show that the harm is certain
and great and of such imminence that there is a clear and present
need for equitable relief.” Iowa Utils. Bd. v. F.C.C., 109 F.3d
418, 425 (8th Cir. 1996). “[P]otential loss of goodwill qualifies
as irreparable harm.” Id. at 426. Irreparable harm is presumed,
where, as here, a “professional employee[] … acquire[s] influence
over patients or clients of their employer.” See Rosewood Mortg.
Corp. v. Hefty, 383 N.W.2d 456, 459 (Minn. Ct. App. 1986) (citation
omitted). Moreover, DeCelles acknowledged that “immediate
irreparable damage will result to LTF if [the] employee breaches
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any of the covenants set forth in this Agreement.” Campbell Decl.
Ex. 1, at 4. Therefore, this factor weighs in favor of LTF.
B. Balance of Harms
The court has already determined that plaintiff’s goodwill is
harmed by defendant’s acts. Balanced against that harm is the harm
to the defendant’s ability to work as a personal trainer. Such
harm is lessened, however, by the fact that there is no evidence in
the record that a TRO will prevent DeCelles from working. Cf. CDI
Energy Servs., Inc. v. W. River Pumps, Inc., 567 F.3d 398, 403 (8th
Cir. 2009) (holding that balance of harms favored defendant when it
“appear[ed] undisputed that an injunction would put the defendants
out of business”). Indeed, DeCelles is only prevented from working
within a five mile radius of LTF facilities. See Campbell Decl.
Ex. 1, at 2. Therefore, this factor weighs in favor of LTF.
C. Likelihood of Success on the Merits
The court next considers the likelihood that the movant will
prevail on the merits. S & M Constructors, Inc. v. Foley Co., 959
F.2d 97, 98 (8th Cir. 1992). A TRO “motion is too early a stage of
the proceedings to woodenly assess a movant’s probability of
success on the merits with mathematical precision.” Gen. Mills,
Inc. v. Kellogg Co., 824 F.2d 622, 624 (8th Cir. 1987). The court
does not decide whether the movant will ultimately win, or if a
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greater than fifty-percent likelihood of success exists. See
Glenwood Bridge, Inc. v. City of Minneapolis, 940 F.2d 367, 371
(8th Cir. 1991).
LTF alleges claims for breach of contract, misappropriation of
trade secrets, conversion, breach of the duty of loyalty, unfair
competition and tortious interference with prospective business
relationships. LTF need only demonstrate that it is likely to
succeed on one claim in order to satisfy this prong of Dataphase.
See United Healthcare Ins. Co. v. AdvancePCS, 316 F.3d 737, 742–43
(8th Cir. 2002).
Although disfavored, noncompete agreements are enforced when
reasonable and supported by adequate consideration. See Prow v.
Medtronic, Inc., 770 F.2d 117, 120 (8th Cir. 1985) (interpreting
Minnesota law). To determine the reasonableness of a noncompete
agreement, the court considers: (1) whether the restraint is
necessary for the protection of the business or goodwill of the
employer, (2) whether the restraint is greater than necessary to
adequately protect the employer’s legitimate interests, (3) how
long the restriction lasts and (4) the geographic scope of the
restriction. Id. (citing Bennett v. Storz Broad. Co., 134 N.W.2d
892, 899 (1965)). 5
The court notes that Arizona supplies a similar analysis. 5
See Compass Bank v. Hartley, 430 F. Supp. 2d 973, 979-81 (D. Ariz.
2006).
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CASE 0:12-cv-00420-DSD-SER Document 13 Filed 02/28/12 Page 9 of 13
In the present action, restraint is necessary to protect the
legitimate interest of LTF in its “goodwill, trade secrets, and
confidential information.” Medtronic, Inc. v. Advanced Bionics
Corp., 630 N.W.2d 438, 4556 (Minn. Ct. App. 2001) (citation
omitted). Further, the covenant is narrow in its geographic scope
and length of time. See, e.g., Boston Scientific Corp. v. Duberg,
754 F. Supp. 2d. 1033, 1039 (D. Minn. 2010) (citation omitted)
(noting that one-year restrictions are “consistently found” to be
reasonable); Overholt Crop Ins. Serv. Co. v. Bredeson, 437 N.W.2d
698, 703 (Minn. Ct. App. 1989) (upholding a geographic restriction
that was limited to area necessary to protect former employer).
Moreover, consideration is not an issue. See Overholt Crop Ins.
Serv. Co., 437 N.W.2d at 702 (explaining that “no independent
consideration is necessary” to support a noncompete agreement when
entered into at inception of employment). Therefore, because the
covenant is reasonable, plaintiff is likely to succeed in its
breach of contract claim, and this factor weighs in favor of LTF. 6
Even if the noncompete was unreasonable, the court has the 6
power to “blue pencil” the Agreement. See Witzke v. Mesabi Rehab.
Servs., Inc., 768 N.W.2d 127, 129 n.1 (Minn. Ct. App. 2009)
(citation omitted) (giving court discretion “to modify unreasonable
restrictions on competition in an employment agreement by enforcing
restrictions only to the extent reasonable”); see also Campbell
Decl. Ex. 1, at 4 (“If a court of competent jurisdiction holds that
the restrictions … are unreasonable under the circumstances then
existing, the parties to this Agreement agree that the Court shall
substitute the maximum period, scope, or geographical area
reasonable under the circumstances.”).
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CASE 0:12-cv-00420-DSD-SER Document 13 Filed 02/28/12 Page 10 of 13
D. Public Interest
The public interest does not strongly favor one party over the
other. There is a public interest in upholding contractual
agreements. See Med. Shoppe Int’l, Inc. v. S.B.S. Pill Dr., Inc.,
336 F.3d 801, 805 (8th Cir. 2003). There also is a public interest
in unrestrained competition. See Calvin Klein Cosmetics Corp. v.
Lenox Labs., Inc., 815 F.2d 500, 505 (8th Cir. 1987). Here, it
appears that DeCelles is engaging in competition that is in
violation of the Agreement. Therefore, the public interest factor
favors LTF. Accordingly, based upon a balancing of the four
Dataphase factors, a TRO is warranted.
CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that:
1. Plaintiff’s motion for a temporary restraining order [ECF
No. 2] is granted in part;
2. Defendant whether alone, through an LLC or other
corporate entity, or in concert with others, including any officer,
agent, employee, and/or representative of Pro Fitness is restrained
from directly or indirectly:
a. Being employed by, contracting with, or being connected
in any manner with, any business competitive with LTF within
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a five mile radius of any place of business owned or
affiliated with LTF that offers or intends to offer personal
training;
b. Calling upon any of LTF’s members, customers, or
clients for the purpose of soliciting or selling to any such
persons any products or services similar to those of LTF;
c. Providing services to, diverting or taking away any
of LTF’s clients;
d. Soliciting any of LTF’s employees;
e. Communicating, disclosing, divulging or furnishing
any of LTF’s confidential and proprietary information or trade
secrets to any person, firm, corporation, association, or
other entity for any reason or purpose whatsoever;
f. Using any of LTF’s confidential and proprietary
information or trade secrets; or
g. Interfering with LTF’s current prospective business
relations;
3. Defendant shall immediately cease employment with Pro
Fitness;
4. Defendant shall return all of LTF’s confidential,
proprietary, and trade secret information in his possession and
control, including, but not limited to, all member files and
contracts;
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CASE 0:12-cv-00420-DSD-SER Document 13 Filed 02/28/12 Page 12 of 13
5. Defendant shall preserve all documents and data of any
nature whatsoever, including but not limited to electronic
documents, electronic mail, and corporate documents of or relating
to LTF or Pro Fitness, and is not to destroy any documents or data
of any nature whatsoever during the pendency of this action;
6. The parties may engage in expedited discovery, which
includes one, eight-hour deposition per side;
7. Plaintiffs shall post a bond of $5,000 pursuant to
Federal Rule of Civil Procedure 65 within two business days of the
issuance of this order; and
8. This order shall remain in effect for fourteen days.
Dated: February 28, 2012
s/David S. Doty
David S. Doty, Judge
United States District Court
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Kerry L. Bundy, Esq., Christopher J.L. Diedrich, Esq., Matthew B. Kilby, Esq., Michael F. Cockson, Esq., and Jeffrey P. Justman, Esq., Faegre Baker Daniels LLP, Minneapolis, MN, and R. Thomas Farrar, Esq., and Umberto C. Bonavita, Esq., Robert Allen Law, Miami, FL, on behalf of Defendants VICEM Yat Sanayi ve Ticaret AS and Vicem Yachts, Inc.

MEMORANDUM OPINION AND ORDER

ANN D. MONTGOMERY, District Judge.

I. INTRODUCTION

On February 2, 2012, the undersigned United States District Judge heard oral argument on Plaintiffs Windsor Crafts Sales, LLC (“Windsor Sales“) and Crosby Yacht Yard Inc.’s (“Crosby”) Motion for Summary Judgment [Docket No. 96]. Defendants VICEM Yat Sanayi ve Ticaret AS (“Vicem“) and Vicem Yachts, Inc. (“Vicem US”) oppose this Motion. For the reasons set forth below, Plaintiffs’ Motion is granted in part and denied in part.

II. BACKGROUND^[1]

Vicem is a Turkish corporation engaged in the manufacture and sale of luxury yachts, and Vicem US is a Vicem subsidiary with its principal place of business in Florida. Am. Compl. [Docket No. 29] ¶¶ 3-4. Windsor Craft Sales, LLC, is a Minnesota distributor of luxury yachts, and Crosby builds, restores, and repairs yachts in Massachusetts. Id. ¶¶ 1-2. In 2007, Defendants and Windsor Craft Yachts, LLC (“Windsor Yachts”) entered into a Distribution Agreement^[2] granting Windsor Yachts exclusive purchase and distribution rights of Vicem yachts. Id. ¶¶ 7, 8; Cockson Decl. [Docket No. 38] Ex. A (“Vicem Agreement”) ¶ 1 (“[Vicem] hereby appoints [Windsor Yachts] as the authorized and exclusive distributor for the promotion and sale of [the Windsor yachts]. . . . [Windsor Yachts] shall have the exclusive rights worldwide to sell the [Windsor yachts]. . . .”). The Vicem Agreement specified that the thirty-foot and thirty-six-foot yachts would be built with cold-molded mahogany wood treated with West System Epoxy. See Dayhoff Decl. [Docket No. 99] Ex. 12 (“Master Letter Agreement”) at A-2, A-9 (the thirty-foot hull was to be made with “[t]hree layers of hand selected African Mahogany that is Cold Molded by Old World Craftsmen using the most advanced West System Epoxy” and the thirty-six-foot hull with “Cold Molded Mahogany West System Epoxy w/ Awlgrip or Varnish Finish”).

The Vicem Agreement warranted that “all Products will be manufactured in the highest quality and be delivered to Distributor in good commercial condition.” Vicem Agreement ¶ 8. The Vicem Agreement also represented that the “Products will be free from all material defects and shall be fit for their intended purpose.” Id. Pursuant to the Vicem Agreement, Windsor Yachts was to inspect the first shipment and either accept or reject all or some of those yachts, and then accept or reject future shipments within thirty days of delivery. Id. ¶ 8(a-b). The Vicem Agreement mandated that it “shall be governed by and construed in accordance with the laws of the State of Minnesota.” Id. ¶ 22. Windsor Yachts purchased 31 yachts from Vicem. Am. Compl. ¶ 14.

In July 2008, Windsor Yachts entered into a Distributor Agreement, Bundy Decl. [Docket No. 106] Ex. 10 (“Windsor Agreement”), with Windsor Sales to make it an authorized Windsor Yachts’ distributor. Am. Compl. ¶ 15. The Windsor Agreement appointed Windsor Sales an “authorized Distributor for the promotion and sale of [Windsor Yachts'] boats.” Windsor Agreement § 1. Under the Windsor Agreement, Windsor Sales purchased twenty-seven yachts from Windsor Yachts. Am. Compl. ¶¶ 17-22. Windsor Yachts also entered into a dealer agreement with Crosby, who purchased one Vicem yacht. Id. ¶¶ 26-27. Windsor Yachts filed for bankruptcy in June 2009, see In re Windsor Craft Yachts, L.L.C., No. 09-43555 (Bankr. D. Minn.), and in early 2010 Windsor Sales purchased the four remaining Vicem yachts from the Windsor Yachts’ bankruptcy estate. Am. Compl. ¶ 23.

Upon receipt of the first yachts in the summer of 2007, Windsor Yachts noticed some blemishes, stripes, brush marks, and sawdust in the varnish; Vicem assured them that these would “not be a problem on any other Windsor Crafts.” Dayhoff 2d. Decl. [Docket No. 100] Ex. 27. However, yachts continued to arrive with paint and varnish problems. See, e.g., id. Exs. 28-29. On January 20, 2009, Windsor Sales contacted Vicem to inquire about Hull 18 because its dealer in Seattle was concerned the boat would sink as the “e-glass [was] separating from the wood for some reason on the bottom of the boat.” Id. Ex. 49. Vicem instructed that the boat should not be put in the water. Id. Ex. 26 (“Grame Dep.”) 198:16-21. In February 2009 in response to an inquiry from Windsor Sales about cracks in Hull 22, Vicem’s expert stated that the crack was visible because “in these gaps some places were filled with epoxy and [in] some places the epoxy was not applied.” Dayhoff Decl. Ex. 22 (“Unal Dep.”) 160:14-17. Windsor Sales conducted an inspection of the yachts and determined by December 2009 that a majority of the thirty-one yachts had cracked hulls. See, e.g., Dayhoff 2d. Decl. Exs. 45, 52-54. On January 6, 2010, Windsor Sales provided Vicem with a written revocation of acceptance of the yachts. Am. Compl. ¶ 44. On January 13, Defendants refused to accept revocation. Id. ¶ 45.

Plaintiffs’ Complaint was filed on February 1, 2010. This Court denied Defendants’ Motion to Dismiss in its October 13, 2010 Order [Docket No. 53]. Plaintiffs filed this Motion for Summary Judgment on November 8, 2011.

III. DISCUSSION

A. Standard of Review

Federal Rule of Civil Procedure 56(a) provides that summary judgment shall be granted if “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); see Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citing Fed. R. Civ. P. 56(c)).^[3] On a motion for summary judgment, the court views the evidence in the light most favorable to the nonmoving party. Ludwig, 54 F.3d at 470. The nonmoving party, however, may not “rest on mere allegations or denials, but must demonstrate on the record the existence of specific facts which create a genuine issue for trial.” Krenik v. Cnty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995).

B. Applicable Law

In its October 13, 2010 Order, this Court did not reach the issue of whether Minnesota or Florida law applies to the claims at issue. Id. at 8 (“At this juncture, the Court need not resolve what state’s law applies to the breach of warranty claims.”). Defendants now contend, as in their Motion to Dismiss, that Florida law applies or, in the alternative, that New York, Massachusetts, Georgia, or Michigan law applies. Id. Plaintiffs argue that Minnesota law applies. The conflict of law issue will now be addressed.

In Minnesota, general choice of law agreements govern the choice of substantive law and are given effect. See Schwan’s Sales Enter., Inc. v. SIG Pack, Inc., 476 F.3d 594, 596 (8th Cir. 2007). Minnesota courts have long been “`committed to the rule’ that parties may agree [which law] shall govern their agreement and will interpret and apply [that law] where such an agreement is made.” Milliken & Co. v. Eagle Packaging Co., 295 N.W.2d 377, 380 n.1 (Minn. 1980) (quoting Combined Ins. Co. of Am. v. Bode, 77 N.W.2d 533, 536 (Minn. 1956)). “[M]atters of procedure and remedies [are] governed by the law of the forum state.” Davis v. Furlong, 328 N.W.2d 150, 153 (Minn. 1983). The Vicem Agreement between Windsor Yachts and Defendants clearly states that Minnesota law governs. Vicem Agreement ¶ 22 (stipulating that this agreement “shall be governed by and construed in accordance with the laws of the State of Minnesota”). Minnesota law governs both substantive and procedural issues in this case.

Even under the Jepson choice of law framework, Minnesota law would still be the governing law. The first consideration under Jepson is whether an actual conflict exists. Jepson v. General Cas. Co. of Wis., 513 N.W.2d 467, 469 (Minn. 1994). Florida and Minnesota law differ on the issue of privity — here, Florida law requires privity to maintain a breach of warranty action while Minnesota law does not. Compare T.W.M. & S.M. v. Am. Med. Sys., Inc., 886 F.Supp. 842, 844 (N.D. Fla. 1995) (“The law of Florida is that to recover for the breach of a warranty, either express or implied, the plaintiff must be in privity of contract with the defendant.”) with Durfee v. Rod Baxter Imports, Inc., 262 N.W.2d 349, 357 (Minn. 1977) (stating that “the absence of privity would not bar” breach of warranty claims). The second consideration in a Jepson choice of law analysis — whether either law may be constitutionally applied — is more problematic. To determine whether a state’s law can be constitutionally applied, “that State must have a significant contact or significant aggregation of contacts, creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair.” Jepson, 513 N.W.2d at 469 (quoting Allstate Ins. Co. v. Hague, 449 U.S. 302, 312-13 (1981)). However, “[c]ontracting parties can, of course, make their expectations explicit by providing in their contract [] that the law of a particular jurisdiction shall govern questions of contract interpretation. . . .” Hague, 449 U.S. at 328. Here, the parties have agreed to be bound by Minnesota law, so applying Florida law (or any of the other states’ law) would be fundamentally unfair and arbitrary. Defendants contracted with a Minnesota party with the intent that the boats would be distributed from Minnesota. States where the boats are docked, in transit, or subsequently sold lack significant contacts to overrule the parties’ choice of Minnesota law at the time of contracting.

Lastly, even if another states’ law could be constitutionally applied and the analysis progressed to the five-factor test outlined in Milkovich v. Saari, 203 N.W.2d 408 (Minn. 1973), Minnesota law would prevail as the proper law to apply. The Milkovich factors are: (1) predictability of result; (2) maintenance of interstate and international order; (3) simplification of the judicial task; (4) advancement of the forum’s governmental interest; and (5) application of the better rule of law. Id. at 412. In this case, as in Jepson, where the conflict stems from a contract, predictability of result is important. When parties enter into a contract, “the legal system will endeavor to give each side the benefit of their bargain. . . . [which] enhances the predictability of the parties’ contractual arrangements.” Jepson, 513 N.W.2d at 470. The predictable result, that contracted by the parties, would be for Minnesota law to govern. The remaining four factors do not weight heavily in this case, so even under the five-factor Milkovich test, Minnesota law is proper. Therefore, Minnesota law will be applied in this dispute.

C. Breach of Contract

Plaintiffs move for summary judgment on their breach of express and implied warranty claims. Plaintiffs contend that privity is not necessary but has been established, that the express warranties and implied warranties of merchantability and fitness for a particular purpose exist and are not disclaimed, and the Defendants breached those warranties, resulting in damage to Windsor Sales. Each argument will be addressed in turn.

1. Privity

As discussed in the Jepson analysis, Florida law requires privity for a breach of warranty claim, T.W.M. & S.M., 886 F.Supp. at 844, but Minnesota law does not, Durfee, 262 N.W.2d at 357. Since Minnesota law applies, privity is not a necessary prerequisite here. Even if it were required, privity has been established here. Defendants renew their argument that Windsor Sales is not in privity with them because Windsor Yachts assigned its rights without Vicem’s permission. Defs.’ Mem. in Opp’n to Summ. J. Mot. [Docket No. 104] (“Defs.’ Mem.”) 17-19. However, the discovery conducted after the motion to dismiss has shown privity between Windsor Sales and Defendants. Specifically, Windsor Yachts made Windsor Sales its subcontractor, a delegation contemplated by the Vicem Agreement. Cockson Decl. Ex. A. Addendum C-1 (“Limited Warranty”) ¶¶ 1, 3, 6, 7 (making numerous mentions of “authorized [Windsor Yachts] dealer[s]“). Furthermore, Defendants indemnified Windsor Yachts, “its parent and subsidiary companies, and their respective officers, directors, employees, successors, subcontractors, licensees, assigns, and customers . . . for any and all claims, losses, costs, [and] damages. . . .”, Vicem Agreement ¶ 20, which demonstrates an understanding that Windsor Yachts would subcontract with entities such as Windsor Sales. This Court concluded at the motion to dismiss stage that “an adequate legal connection exists between Windsor Sales and Defendants to establish privity of contract,” Oct. 13, 2010 Order at 10, and discovery has buttressed the initial showing of privity of contract.

Plaintiff Crosby has also established that it was an intended third party beneficiary of the Vicem Agreement, and therefore its claims may proceed. Third party beneficiary rights in Minnesota are established when the parties to the contract specifically intended to benefit a third party at the time of the contract. Julian Johnson Const. Corp. v. Parranto, 352 N.W.2d 808, 811 (Minn. Ct. App. 1984) (stating that third party beneficiary rights can be established “by showing that the parties to the contract intended to benefit [the third party] at the time they entered the contract”). Because the Vicem Agreement specifically contemplated the use of authorized Windsor Yachts’ dealers, and because Crosby was one of those dealers, the Vicem Agreement created rights and benefits for Crosby. See Oct. 13, 2010 Order at 10-11.

2. Express Warranty

In Minnesota, a claim for breach of express warranty requires establishing three elements: (1) the warranty’s existence; (2) a breach of the warranty; and (3) a causal link between the breach and the harm. Peterson v. Bendix Home Sys., Inc., 318 N.W.2d 50, 52-53 (Minn. 1982). Minnesota law provides —

(1) Express warranties by the seller are created as follows:

(a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.

(b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.

Minn. Stat. § 336.2-313(1). Further, “[i]t is not necessary to the creation of an express warranty that the seller use formal words such as `warrant’ or `guarantee’ or that the seller have a specific intention to make a warranty, but . . . a statement purporting to be merely the seller’s opinion or commendation of the goods does not create a warranty.” Minn. Stat. § 336.2-313(2).

To be actionable, warranties must be more than “mere puffery.” See Royal Bus. Mach., Inc. v. Lorraine Corp., 633 F.2d 34, 41 (7th Cir. 1980) (“No express warranty was created by Royal’s affirmation that [its products] were of high quality.”); see also Frederickson v. Hackney, 198 N.W. 806, 806-07 (Minn. 1924) (finding no express warranty in “trade talk of the conventional and permissible type,” such as “his father was the greatest living dairy bull” and “he would be a wonderful asset and would put [his owner] `on the map’”). However, an oral sales pitch is materially different than a written, contractual warranty —

Where the parties, after negotiations, have reduced the contract of sale to writing, a statement of the quality of the goods to be sold is to be considered not as a mere matter of description or opinion of the seller, but as the “averment of a material fact, of which he [the seller] has taken to himself the knowledge and the existence of which he warrants.”

Saunders v. Cowl, 277 N.W. 12, 14 (Minn. 1938) (quotation omitted). Written provisions in contracts are “a promise, not an expression of opinion. . . .” Id.

In this case, the existence of an express warranty is clear. While the statement that the yachts were to be “of the highest quality” is more difficult to quantify, the guarantees that the yachts would be “delivered to Distributor in good commercial condition,” and “free from all material defects and shall be fit for their intended purpose,” Vicem Agreement ¶ 18, are affirmations of fact and promises as required by Minn. Stat. § 336.2-313.

The remaining two elements of a breach of express warranty claim — breach and causation — involve disputed, material facts, and are therefore not proper for summary judgment. Both parties vigorously contest and provide contradicting evidence on the following issues: (1) the current state of the yachts; (2) the quality and quantity of the epoxy applied to the yachts; and (3) the effects of Plaintiffs’ storage, maintenance, and transportation of the yachts. As to the current state of the yachts, Plaintiffs have shown evidence that as of July 2011, every yacht exhibited varnish or paint defects. Dayhoff Decl. Exs. 15, 24. Plaintiffs also show that nineteen of the yachts exhibited fractures, twenty-five have elevated moisture readings, and twenty-one have delaminations. Dayhoff Decl. Ex. 24 at 75-76. As a result of these defects, Plaintiffs claim the vessels need substantial repairs and can no longer be marketed as new. Dayhoff 2d. Decl. Exs. 62-63. Conversely, Defendants aver the boats are not nearly as damaged as Plaintiffs allege and that using a resistance-type meter, rather than a capacitance-type meter as Plaintiffs did, shows normal moisture levels for all but a few, isolated areas. See Bundy Decl. Ex. 24 at 16-18, 23, 28, 32, 42, 45, 54-55, 60, 64, 66, 69, 72, 74.

Defendants also contest that the two additional brands of epoxy used on the yachts — SP Systems and Interlux — are “essentially equivalent to West System epoxy” and are “regularly used in wood-epoxy boatbuilding and repair.” Bundy Decl. Ex. 23 at 15. Defendants further contend that the hull of every boat was encapsulated in epoxy. Bundy Decl. Ex. 43 (“Sponberg Dep.”) 142:25-143:15. Plaintiffs’ experts did not cite any material differences between the brands of epoxy, but have shown evidence that gaps were “left between where the keel and the plank meet.” Unal Dep. 159:1-7; see also Dayhoff Decl. Ex. 24. Moreover, Plaintiffs highlight that Defendants’ own expert admitted that “some places were filled with epoxy and some places the epoxy was not applied, resulting in the gaps in some places.” Unal Dep. 160:8-17.

Furthermore, Defendants and Plaintiffs dispute material facts regarding the maintenance, storage, and transportation of the yachts. Defendants aver that for at least one boat — Hull 18, which was dropped by Plaintiffs — transportation has caused damage to the yachts. Bundy Decl. Ex. 6 at 177:3-17, 181:10-13. Additionally, Defendants’ experts allege that at least eleven of the yachts were poorly supported for long-term storage or over-the-road transport, Bundy Decl. Ex. 23 at 7, and that improper blocking of the boats likely caused hull cracks, Bundy Decl. Ex. 24 at 76. Defendants also assert that routine maintenance requires that the varnish on the yachts be repainted on a regular basis, at least once a season — and, since Plaintiffs have not done so, many of the vessels’ defects are the direct result of Plaintiffs’ improper storage, shrinkwrapping, or maintenance. Bundy Decl. Exs. 23, 24. Plaintiffs, on the other hand, contend that Defendants’ expert testimony is speculative, unreliable, and inadmissible. See Kumho Tire Co. v. Carmichael, 526 U.S. 137, 149 (1999); and Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 592-93 (1993). It is premature to now disqualify Defendants’ expert testimony, given that this argument first surfaced in Plaintiffs’ Reply Memorandum [Docket No. 109] and given the inferences applied to the nonmoving party at the summary judgment stage. Ludwig, 54 F.3d at 470. As a result, a material factual dispute remains. Accordingly, although an express warranty has been established, summary judgment is inappropriate on the questions of the breach of that warranty and the causation of the alleged damages.

3. Implied Warranty

Minnesota law recognizes an implied warranty of fitness for a particular purpose, Luther v. Standard Conveyor Co., 89 N.W.2d 179, 183-84 (Minn. 1958) (“[W]here the buyer fully informs the seller of his particular needs and the seller undertakes to supply an article suitable for the purpose intended, there is an implied warranty that the article will be fit for that purpose.”), as well as an implied warranty of merchantability, Minn. Stat. § 336.2-314(1) (“Unless excluded . . . a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind.”). Both of these implied warranties may be disclaimed, however, if disclaimed conspicuously and in writing. Minn. Stat. § 336.2-316(2) (“[T]o exclude . . . the implied warranty of merchantability . . . the language must mention merchantability and in case of a writing must be conspicuous, and to exclude . . . any implied warranty of fitness the exclusion must be by a writing and conspicuous.”).

Plaintiffs’ claims under implied warranty of merchantability and fitness for a particular purpose fail because they have been specifically disclaimed. The Vicem Agreement specifically disclaims these implied warranties. Limited Warranty ¶ 2 (“[A]ll implied warranties (INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE) are excluded and disclaimed from warranty coverage where allowed by law.”). Furthermore, in the Windsor Agreement between Windsor Craft and Windsor Sales, these implied warranties were specifically disclaimed. Distributor Agreement 2 at ¶ 11(c) (The express warranty “IS EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING SPECIFICALLY ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.”). Because these disclaimers are written and conspicuous, Plaintiffs’ implied warranty claims fail as a matter of law and are dismissed.^[4]

D. Revocation

Revocation of acceptance, in whole or in part, is proper when a buyer has accepted a “commercial unit whose nonconformity substantially impairs its value to the buyer,” so long as that acceptance was based “on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured,” or “without discovery of such nonconformity if the acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller’s assurances.” Minn. Stat. §§ 336.2-608(1)(a-b). Substantial impairment “necessarily involves factual findings,” but when the “basic facts are found, the question of whether they constitute substantial impairment is legal in character.” Durfee, 262 N.W.2d at 354; see also, Nutrisoya Foods, Inc. v. Sunrich, LLC, 641 F.3d 282, 288 (8th Cir. 2011). While minor defects not substantially interfering with a product’s operation are not grounds for revocation, a product has been determined “substantially impaired” if the defect, though curable, has shaken the faith of the purchaser in that product. See Durfee, 262 N.W.2d at 353-54. The test of “substantial impairment” “ultimately rests on a commonsense perception of substantial impairment, akin to the determination of a material breach under traditional contract law.” Id. at 353 (discussing Minn. Stat. § 336.2-608).

Additionally, the revocation of acceptance “must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects,” and the revocation is not “effective until the buyer notifies the seller of it.” Minn. Stat. § 336.2-608(2). When the buyer has accepted the goods and paid the seller for them, the “buyer must within a reasonable time after the buyer discovers or should have discovered any breach notify the seller of breach or be barred from any remedy.” Id. § 336.2-607(3)(a). “The burden is on the buyer to establish any breach with respect to the goods accepted.” Id. § 336.2-607(4).

1. Substantial Impairment

Plaintiffs argue that the yachts’ defects, both in their varnish and paint as well as their structural hull integrity, has substantially impaired the yachts’ value to them. Pls.’ Mem. in Supp. of Summ. J. Mot. [Docket No. 101] (“Pls.’ Mem.”) 26-27. Specifically, Plaintiffs argue that their complaints about varnish and paint were repeatedly assuaged by Defendants but never fully rectified. Dayhoff 2d. Decl. Ex. 28. Additionally, as to the hull integrity and the alleged elevated moisture levels, Plaintiffs contend that the yachts’ value has been substantially impaired because even if the defects were curable, they “have absolutely no confidence in the merchantability and safety of these yachts.” Pls.’ Mem. 27. Defendants respond that all paint and varnish issues were addressed at time of delivery by refinishing certain boats. Defs.’ Mem. 38-39; Unal Decl. ¶¶ 3-4. Defendants also contend that the boats are “easily repairable.” Defs.’ Mem. 38.

The record shows that Plaintiffs complained about the varnish and paint on the yachts, Defendants seasonably cured the problem, and that Plaintiffs subsequently accepted the repainted, revarnished boats. See Bundy Decl. Ex. 7 (“Blake Dep.”) 237:11-238:23. Plaintiffs’ reasonable assumption that the visible paint and varnish defects would be cured appears to have been seasonably rectified. However, a factual dispute remains concerning the epoxy, an undiscovered “nonconformity” which may have been difficult to discover before acceptance. To the extent that the paint and varnish may have failed because the underlying epoxy was insufficient or nonexistent, a material factual dispute remains precluding summary judgment.

Under a “commonsense perception of substantial impairment,” the cracked hulls and the yachts’ overall lack of integrity here rises, or sinks, to the level of substantial impairment. Even if repairable, cracked hulls and un-seaworthy vessels “shake the faith of the purchaser” and are a substantial impairment. Defendants argue, however, that Plaintiffs failed to revoke acceptance before substantially changing the condition of the yachts through improper storage, maintenance, and transportation. See supra Section III(C)(2). Because material facts remain in dispute about the cause of the yachts’ substantial impairment, summary judgment on this issue is denied.

2. Reasonable Time

Defendants argue that even if the yachts were substantially impaired, Plaintiffs failed to revoke acceptance within a reasonable time after discovering the impairment. Defs.’ Mem. 39-41. Defendants aver that since the first hull crack was discovered in January 2009, Plaintiffs’ revocation a year later in January 2010 was not within the “reasonable time” required by Minn. Stat. § 336.2-608(2). Plaintiffs respond that the hull cracks were latent defects, that they immediately notified Defendants of the hull crack discovered in January 2009, that Defendants attempted to repair the first cracked hull over several months, and that Plaintiffs acted reasonably in believing that the first-discovered hull defect was an anomaly rather than a pervasive structural problem. Plaintiffs’ Reply Mem. [Docket No. 109] 6.

Although Defendants repeatedly reference that Plaintiffs received the first yacht in 2007, the hull defects were a difficult-to-discover latent defect specifically contemplated by Minn. Stat. § 336.2-608(1)(a-b) and therefore the reasonable time for revocation begins only when those latent defects are expressed. Id.; see, e.g., Driscoll v. Standard Hardware, 785 N.W.2d 805, 816 (Minn. Ct. App. 2010) (“But warranties are not disclaimed if a product contains latent defects that cannot be ascertained by a professional buyer examining the product.”). Moreover, once Plaintiffs notified Defendants of the hull crack, Defendants took three months to complete the repair. Dayhoff Supp. Decl. [Docket No. 110] Ex. 79; Dayhoff Decl. Ex. 23 at 97:24-98:6. In Minnesota, the analysis of whether the revocation was within a reasonable time does not run while repairs are being performed. See Inland Prods. Corp. v. Donovan, Inc., 62 N.W.2d 211, 219 (Minn. 1954) (“[C]ooperation by the plaintiff in the defendant’s attempts to remedy its defaults. . . . should not be charged to the buyer as delay in notifying the seller of the defects.”). It was not until the second cracked hull was discovered later in 2009 that Plaintiffs first became aware that this was more than an isolated problem. See Dayhoff Supp. Decl. Ex. 80 at 58:15-19, Ex. 81 at ¶¶ 4, 8. And it was not until additional cracks were discovered in December 2009, bringing the total of cracked hulls to six, that Plaintiffs conducted a thorough investigation of every yacht to determine if hull fracture was an endemic problem. Dayhoff Decl. Ex. 6 at 238:24-240:16; Dayhoff 2d. Decl. Exs. 51-52. Therefore, the reasonableness determination does not begin at Plaintiffs’ first acceptance of the first yacht (in 2007) but when the latent defect first became known to Plaintiffs (sometime in 2009). The precise determination of “what constitutes a reasonable time within the context of revocation of acceptance is a jury question that depends on the facts and circumstances of the case.” Johannsen v. Minn. Valley Ford Tractor Co., 304 N.W.2d 654, 657 (Minn. 1981). Accordingly, the issue of whether revocation occurred in a reasonable time is also not appropriate for summary judgment.

E. Defendants’ Counterclaims

Defendants allege several counterclaims against Plaintiffs: (1) breach of contract for failure to remit payment; (2) breach of contract for failure to sell and service; (3) unjust enrichment; (4) set-off; and (5) recoupment. Defs.’ Answer & Countercl. [Docket No. 56]. To the extent that any of these counterclaims relate to the four yachts purchased from Windsor Craft’s bankruptcy estate, they are improper. See Regions Bank v. J.R. Oil Co., 387 F.3d 721, 731-32 (8th Cir. 2004) (finding where a bankruptcy court approved and “found the sale to be in good faith, for fair value, and in the best interest of [the bankrupt entity] and its creditors . . . [it is] free and clear of all liens, [and] is a judgment that is good as against the world, not merely as against parties to the proceedings.”). Defendants delivered the yachts to Windsor Craft, which later declared bankruptcy. Therefore, the bankruptcy sale of the four boats to Windsor Sales was valid, and the principle of res judicata forecloses Defendants from relitigating claims relating to these yachts. Therefore, Defendants’ counterclaims will be limited in scope to the five already manufactured yachts which Windsor Sales has refused to purchase.

Defendants’ counterclaim for breach of contract for failure to remit payment hinges on whether Defendants first breached the contract and whether Plaintiffs have revoked the contract. Because express warranties exist and material factual disputes persist about whether those warranties have been breached, see supra Section III(C)(2), or the agreement revoked, see supra Section III(D), Defendants’ counterclaim for breach of contract survives summary judgment.

Summary judgment is granted on Defendants’ counterclaim for breach of contract for failure to sell and service, because it merely repackages several affirmative defenses. Consistent with Rule 1, courts should dismiss redundant claims to “secure the just, speedy, and inexpensive determination” of a trial. Fed. R. Civ. P. 1. Additionally, Rule 8 states that “If a party mistakenly designates a defense as a counterclaim . . . the court must, if justice requires, treat the pleading as though it were correctly designated, and may impose terms for doing so.” Fed. R. Civ. P. 8(c)(2). Counterclaims which are “repetitious of issues already before the court via the complaint or affirmative defenses” should be dismissed. Gratke v. Andersen Windows, Inc., No. 10-CV-963, 2010 WL 5439763, at *2 (D. Minn. Dec. 8, 2010) (internal citations omitted). Counterclaims that “merely `repackage’ affirmative defenses should also be dismissed,” id., because what “is really an answer or defense to a suit does not become an independent piece of litigation because of its label,” id. (quoting Tenneco, Inc. v. Saxony Bar & Tube, Inc., 776 F.2d 1375, 1379 (7th Cir. 1985)). As discussed previously, see supra Section III(C)(2), Plaintiffs’ storage, maintenance, and transportation of the yachts are a factor in whether the express warranties have been breached, whether any breach caused the damages, and whether Plaintiffs’ damages are reduced by their actions while in possession of the yachts. Defendants have already asserted these arguments as affirmative defenses, stating that Plaintiffs’ claims fail “for unclean hands,” for “intervening and superseding cause and for lack of causation,” for “failure to mitigate damages,” and because “ordinary wear and tear which was assumed by or an obligation of Windsor Yachts.” Defs.’ Answer & Countercl. at 10-11, ¶ 4, 10, 16, 17. Because Defendants’ counterclaim for Plaintiffs’ failure to service and sell the yachts is already at issue as an affirmative defense and will be resolved at trial, the counterclaim is redundant and summary judgment is therefore warranted.

Defendants’ counterclaim for unjust enrichment is without merit and warrants summary judgment. An unjust enrichment claim requires a showing that “another party knowingly received something of value to which he was not entitled, and that the circumstances are such that it would be unjust for that person to retain the benefit.” Schumacher v. Schumacher, 627 N.W.2d 725, 729 (Minn. App. 2001). A claim of unjust enrichment does not apply, however, “where the rights of the parties are governed by a valid contract.” M.M. Silta, Inc. v. Cleveland Cliffs, Inc., 616 F.3d 872, 880 (8th Cir. 2010) (quoting U.S. Fire Ins. Co. v. Minn. State Zoological Bd., 307 N.W.2d 490, 497 (Minn. 1981)). As Defendants’ counterclaim relates to the four yachts purchased out of bankruptcy, no unjust enrichment survives the application of res judicata. Defendants have also alleged that Plaintiffs were unjustly enriched by the service they received on the deficient and damaged yachts. The rights of the parties, however, were governed by a valid contract and Defendants were contractually obligated to render such services. Because Plaintiffs paid for the yachts, Defendants were required under the contract to make any repairs prior to Plaintiffs’ acceptance and to service any yacht issues covered by the express warranty. Therefore, Defendants’ counterclaim does not survive summary judgment.

Finally, Defendants’ counterclaims for set-off and recoupment are denied. Defendants are not entitled to receive payments from Plaintiffs for the four yachts purchased out of bankruptcy for the reasons previously discussed, so the recoupment claims fail. As for the five yachts manufactured but not yet purchased by Plaintiffs, set-off is not a valid counterclaim for exercising Defendants’ rights under the Vicem Agreement. Set-off is distinguished from recoupment in that it “involves a transaction unrelated to the plaintiff’s action.” Norwest Bank Minn., N.A. v. Midwestern Mach. Co., 481 N.W.2d 875, 879-80 (Minn. Ct. App. 1992) (quoting Household Finance Corp. v. Pugh, 288 N.W.2d 701, 704 n.5 (Minn. 1980). Defendants’ allegations for set-off all stem from the same contract and transaction at issue in Plaintiffs’ claims — the Vicem Agreement — and therefore set-off is inappropriate. Accordingly, summary judgment is granted as to Defendants’ counterclaims for set-off and recoupment.

The issues remaining for trial are: (1) whether the express warranty was breached by Defendants and whether and to what extent that breach caused the alleged damages; (2) whether the yachts’ value was substantially impaired by the breach and whether Plaintiffs revoked the contract within a reasonable time; and (3) whether Plaintiffs breached the contract by failing to remit payment for the remaining five yachts.

IV. ORDER

Based upon the foregoing, and all of the files, records, and proceedings herein, IT IS HEREBY ORDERED that: Plaintiffs’ Motion for Summary Judgment [Docket No. 96] is DENIED in part and GRANTED in part.

[1] On a motion for summary judgment, the Court views the evidence in the light most favorable to the nonmoving party. Ludwig v. Anderson, 54 F.3d 465, 470 (8th Cir. 1995).

[2] The Vicem Agreement includes the Distribution Agreement, as well as “the Addendums referred to herein, and the Master Letter Agreement between the parties. . . .” Cockson Decl. Ex. A ¶ 23.

[3] The summary judgment standard was previously located in Rule 56(c).

[4] District courts have the power to grant summary judgment sua sponte when “the party against whom the judgment is entered has had a full and fair opportunity to contest that there are no genuine issues of material fact to be tried and the party granted judgment is entitled to it as a matter of law.” Burlington N. R.R. Co. v. Omaha Pub. Power Dist., 888 F.2d 1228, 1231 n.3 (8th Cir. 1989); see also Chrysler Credit Corp. v. Cathey, 977 F.2d 447, 449 (8th Cir. 1992) (affirming a district court’s sua sponte grant of summary judgment where the non-moving party’s “right to judgment turned on the same issue as [the moving party's] right to judgment . . ..”). Because Minnesota law allows the disclaimer of implied warranties of merchantability and fitness for a particular purpose, and because these implied warranties have in fact been disclaimed, summary judgment is warranted on Plaintiffs’ implied warranty claims.

Jack E. Pierce, Pierce Law Firm, P.A., Minneapolis, Minnesota, for respondent.

Scott G. Johnson, Robins, Kaplan, Miller & Ciresi L.L.P., Minneapolis, Minnesota, for appellant.

Considered and decided by Kalitowski, Presiding Judge; Schellhas, Judge; and Bjorkman, Judge.

UNPUBLISHED OPINION

SCHELLHAS, Judge.

Appellant challenges the district court’s orders granting summary judgment to respondent in its mechanic’s lien foreclosure action and on appellant’s counterclaim for an offset against the amount of the mechanic’s lien. We reverse and remand.

FACTS

Appellant Carolyn Reuben owns a single-family residence in south Minneapolis. On August 19, 2009, a tornado damaged Reuben’s home and garage. Reuben’s insurer estimated the damage repair cost to be $11,891.23. To repair the damage, Reuben entered into two contracts with respondent The Gopher Company Inc. on August 28. A roofing contract provided that Gopher would remove and replace the roofs on the house and garage. A siding contract provided that Gopher would remove and replace the soffit and fascia on the house and trim wrap the windows on the house. Reuben also planned to replace some windows, and Gopher agreed to wrap the windows with aluminum when they were installed. For the work covered by the contracts, Reuben agreed to pay Gopher the amount of her insurance proceeds and made a down payment of $6,000.

Gopher began its work in late September. During Gopher’s work, Reuben “repeatedly complained . . . about the appearance of the work and the quality of the workmanship.” On October 16, Gopher sent Reuben an invoice in the amount of $11,550.73 for the completed work. The invoice credited Reuben with $828 because Gopher did not trim wrap the windows because they had not yet been installed. Reuben informed Gopher that she would not pay the remaining balance “until the job was done correctly.”

On January 13, 2010, Gopher filed a mechanic’s lien against Reuben’s home in the amount of $5,550.73, and commenced an action to foreclose the lien, alleging three claims for relief: (1) foreclosure of its mechanic’s lien; (2) breach of contract; and (3) quantum meruit. Reuben answered and counterclaimed, alleging breach of contract.

Reuben hired an expert, a professional civil engineer employed by Roof Spec Inc., which is an “independent engineering firm specializing in the evaluation, design, management and construction observation services of the building envelope which includes roofing and waterproofing,” to review Gopher’s work. The expert found “the shingle roof assembly . . . to be in acceptable condition,” “[a] similar shingle roof assembly . . . on the garage . . . to be in acceptable condition,” and “the gutters, fascia, and soffit appeared to be in acceptable condition.”

The expert noted the following deficiencies: some areas required additional sealant, the fit and finish of the new flashing installed at the chimney “was poor as the two pieces of counterflashing did not intersect at the top of the cricket,” the fit and finish of the new flashing installed at the entry canopy “was poor as the two pieces of metal did not meet at the ridge,” “[r]oofing nails and other debris were found scattered at isolated locations on the roof surface,” “[s]hingle debris was found at various locations,” “unpainted nails had been used to attach the fascia at various locations” and many were underdriven, “[l]aps in the fascia were noticeable at some locations,” “sealant had not been applied over the laps,” “[a] loose piece of soffit was present at the northwest of the residence,” downspout “straps were fastened to the structure behind the downspout and did not cover the original strap locations,” “[t]he stucco at the original strap locations was noticeably different in color than the rest of the house,” “the holes for the fasteners at the original gutter straps had not been sealed,” “[a]n opening in the stucco wall was present at the gutter end over the front entryway of the home,” and “[t]he attachment method for the downspout extensions was insufficient and the downspout extensions were not securely held in place.” The expert observed that “the sheet metal installation is of marginal quality and incomplete according to the contract” and no new trim wrap was installed on any of the windows as contemplated by the siding contract. He recommended that trim wrap be installed according to the siding contract; that changes in the installed downspouts, soffit, and fascia be made; and that the debris be removed.

On November 16, 2010, Gopher moved for summary judgment to foreclose its mechanic’s lien. In support of its motion, Gopher submitted an affidavit from its president, characterizing the minor deficiencies in the work as “punch list” items that Gopher would have fixed at no additional cost, but Reuben denied it access to her property. Reuben opposed the summary-judgment motion, arguing that genuine issues of material fact existed regarding whether Gopher substantially completed the work contemplated in the contracts, whether she denied Gopher access to her property to complete the work, the propriety of Gopher’s contract-price reduction for the unwrapped windows, and the cost to correct Gopher’s work deficiencies. The district court granted summary judgment to Gopher, stating:

Here Reuben raises issues regarding the work done by Gopher but provides no evidence, just mere assertions that reflect her beliefs about the work and the materials. Her own expert’s report, the City of Minneapolis’s approval and the contract and other extensive documentation provided by Gopher support a conclusion that there is no genuine issue of material fact regarding whether Gopher is entitled to be paid the amount remaining on the contract. That amount, with adjustment for the window wrapping and the “sign allowance” she received for permitting Gopher to place a sign on her property, is $5,550.73, the amount Gopher claims.

Reuben asserts in her answer that she is entitled to an offset or damages for any cost she will incur in “correcting” the work done by Gopher or in completing the items listed by her expert. As noted, the clean-up items reflected in her expert’s report are items that Gopher would have done, and continues to be prepared to do upon full payment, if Reuben granted them access to her home. The work and materials were as agreed upon and do not require correcting. The “punch list” items were not done due to Reuben’s own unilateral actions. The mechanic’s lien amount will not be reduced.

(Emphasis omitted.)

Gopher later moved for summary judgment on Reuben’s counterclaim for breach of contract, and the district court also granted the motion, noting that “[t]he basis for Reuben’s claim is the same as her defense to the mechanic’s lien.”

This appeal follows.

DECISION

Summary judgment is appropriate “if 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 to a judgment as a matter of law.” Minn. R. Civ. P. 56.03. The district court’s function on a summary-judgment motion is not to decide issues of fact but to determine whether genuine factual issues exist. J.E.B. v. Danks, 785 N.W.2d 741, 747 (Minn. 2010). A genuine issue of fact exists if reasonable persons might draw different conclusions based on the evidence. DLH, Inc. v. Russ, 566 N.W.2d 60, 70 (Minn. 1997). “[T]he party resisting summary judgment must do more than rest on mere averments”; it must provide concrete evidence of genuine and material fact issues for the elements necessary to prove its claim. Id. at 71. On appeal we determine whether genuine issues of material fact exist and “whether the [district] court erred in its application of the law.” Offerdahl v. Univ. of Minn. Hosps. & Clinics, 426 N.W.2d 425, 427 (Minn. 1988). We “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).

Substantial Performance

In building and construction contracts, the general rule is that a party fulfills its duty under the contract with “substantial performance.” Material Movers, Inc. v. Hill, 316 N.W.2d 13, 18 (Minn. 1982). Substantial performance is defined as

performance of all the essentials necessary to the full accomplishment of the purposes for which the thing contracted for has been constructed, except for some slight and unintentional defects which can be readily remedied or for which an allowance covering the cost of remedying the same can be made from the contract price. Deviations or lack of performance which are either intentional or so material that the owner does not get substantially that for which he bargained are not permissible.

Id. (quoting Ylijarvi v. Brockphaler, 213 Minn. 385, 390, 7 N.W.2d 314, 318 (1942)). “Whether a contractor has substantially performed and the amount of damages occasioned by omissions and defects are fact questions.” Knutson v. Lasher, 219 Minn. 594, 603, 18 N.W.2d 688, 694 (1945). Here, the district court granted summary judgment to Gopher on the basis that Reuben’s “own expert’s report, the City of Minneapolis’s approval and the contract and other extensive documentation provided by Gopher support a conclusion that there is no genuine issue of material fact regarding whether Gopher is entitled to be paid the amount remaining on the contract.” (Emphasis omitted.) The district court stated that Reuben’s expert’s report indicated that the work “was properly done except some minor things.”

Reuben argues that her affidavit, her expert’s affidavit and report, and photographs of the work provide evidence “that Gopher failed to perform its work under the . . . [c]ontracts” and “demonstrate that there was, at a minimum, a genuine issue of material fact regarding whether Gopher substantially performed its contracts.” We agree. Although Reuben’s expert stated that the new roofs on the house, entry canopy, and garage and the new gutters, fascia, and soffit were in “acceptable condition,” the expert noted numerous deficiencies in the work and estimated that the cost to correct the deficiencies was $4,700. Gopher also did not trim wrap the windows as contemplated by the contract. Viewing the evidence in the light most favorable to Reuben, an issue of material fact exists regarding whether Gopher substantially performed the contract by performing “all the essentials necessary to the full accomplishment of the purposes for which” the roofs and siding were constructed. See Material Movers, 316 N.W.2d at 18 (defining substantial performance). We conclude that the district court erred by granting summary judgment to Gopher on its mechanic’s lien foreclosure action.

Offsetting the Amount of the Mechanic’s Lien

Mechanics’ liens are purely creatures of statute, existing only within the terms of the governing statutes. Automated Bldg. Components, Inc. v. New Horizon Homes, Inc., 514 N.W.2d 826, 828 (Minn. App. 1994), review denied (Minn. June 15, 1994). The purpose of a mechanic’s lien “is to reimburse laborers and material providers who improve real estate and are not paid for their services.” Eischen Cabinet Co. v. Hildebrandt, 683 N.W.2d 813, 816 (Minn. 2004). When, as here, the improvement was provided pursuant to an agreed-upon contract price, the amount of the lien is the unpaid portion of that price. Delyea v. Turner, 264 Minn. 169, 174, 118 N.W.2d 436, 440 (1962) (construing Minn. Stat. § 514.03).

When a lienor’s work is defective,

the appropriate measure of damages . . . is to take either the cost of reconstruction in accordance with the contract, if this is possible without unreasonable economic waste, or the difference in the value of the building as contracted for and the value as actually built, if reconstruction would constitute unreasonable waste.

Johnson v. Garages, Etc., Inc., 367 N.W.2d 85, 86 (Minn. App. 1985) (quoting N. Petrochemical Co. v. Thorsen & Thorshov, Inc., 297 Minn. 118, 124, 211 N.W.2d 159, 165 (1973)) (quotation marks omitted). A property owner’s right to deductions for defective improvements “is one of recoupment, not counterclaim.” Knutson, 219 Minn. at 599, 18 N.W.2d at 692. The distinction between the two is important because, unlike a counterclaim, recoupment is purely defensive. Household Fin. Corp. v. Pugh, 288 N.W.2d 701, 704 & n.5 (Minn. 1980). Recoupment is a common-law doctrine that allows equitable adjustment of the lienor’s recovery in light of the lienor’s breach of contract in the transaction from which the lien arises. Townsend v. Minneapolis Cold-Storage & Freezer Co., 46 Minn. 121, 124-25, 48 N.W. 682, 683 (1891). Recoupment can only reduce the amount of the lien, while a counterclaim can allow the property owner to recover more than the value of the lien. See Household Fin., 288 N.W.2d at 704 & n.5 (noting that damages recovered under a counterclaim can exceed plaintiff’s claim, but recoupment operates only to reduce plaintiff’s damages). Essentially, the amount recouped represents the portion of the unpaid contract price for which the property owner did not receive the full value of the bargained-for improvements due to the lienor’s breach. Cf. Eischen Cabinet, 683 N.W.2d at 816 (stating that the lien’s purpose is to ensure that the lienor is paid for improving the property); Delyea, 264 Minn. at 174, 118 N.W.2d at 440 (holding that the amount of the lien is a function of the unpaid portion of the underlying contract to provide those improvements).

Gopher argues that Reuben waived any right to recoupment because she failed to plead recoupment as an affirmative defense. But Reuben’s breach-of-contract counterclaim can constitute an affirmative defense of recoupment based on the damages caused by defects in the construction. See Townsend, 46 Minn. at 124, 48 N.W. at 683 (holding that a matter pleaded as a counterclaim may also constitute a recoupment defense).

Reuben argues that a material question of fact exists regarding whether Reuben is entitled to an offset for the cost of correcting the work done by Gopher. The district court concluded that no genuine issue of material fact exists regarding whether Reuben is entitled to an offset because Gopher was willing to correct the deficiencies but Reuben denied Gopher access to her property. The president of Gopher stated in his affidavit that Gopher would have fixed the deficiencies, but Reuben “specifically instructed” Gopher “not to return to the property.” Reuben stated in her affidavit that she “never told Gopher representatives that they were not allowed on my property to complete the work.” We conclude that an issue of fact exists, and that it is material because if Reuben excluded Gopher from the property, Gopher’s failure to remedy the defects would be justified. See Carlson Real Estate Co. v. Soltan, 549 N.W.2d 376, 379-80 (Minn. App. 1996) (noting that a first breaching party cannot escape liability if the other party subsequently breaches) (citing Space Ctr., Inc. v. 451 Corp., 298 N.W.2d 443, 451 (Minn. 1980)), review denied (Minn. Aug. 20, 1996). If Reuben did not deny Gopher access to her property, Reuben is entitled to an offset for the cost of correcting the deficiencies or for the difference in the value of the roofs, fascia, and soffit as contracted for and the value as actually built. See Johnson, 367 N.W.2d at 86.

The parties do not dispute the existence of deficiencies, although they characterize them differently. An issue of material fact exists regarding the proper damages for Gopher’s failure to trim wrap the windows. The parties do not dispute that Reuben was going to contact Gopher when the new windows were installed so it could wrap the windows; that the contract does not provide a timeframe for the installation; that when Gopher did not hear from Reuben, it notified her that it would not be installing the trim wrap and credited her bill $828; and that Reuben did not contact Gopher when the windows were installed. But the parties do not agree on the amount that the contract price should be reduced. Gopher deducted $828 from the contract price for the window wrap work. Reuben submitted evidence that the cost to trim wrap her windows was $3,200. A material question of fact therefore exists.

Because questions of material fact exist, the district court erred by granting summary judgment in favor of Gopher on Reuben’s recoupment claim.

Reversed and remanded.

Marc J. Kessler, HAHN LOESER & PARKS LLP, Columbus, Ohio, for Appellee.

ON BRIEF: Nicole T. Fiorelli, Patrick J. Perotti, DWORKEN & BERNSTEIN CO., L.P.A., Painesville, Ohio, DWORKEN & BERNSTEIN, Painesville, Ohio, for Appellants.

Marc J. Kessler, Kerry R. Green, HAHN LOESER & PARKS LLP, Columbus, Ohio, for Appellee.

Before: MARTIN and GIBBONS, Circuit Judges; STEEH, District Judge.^[*]

Pursuant to Sixth Circuit Rule 206

OPINION

BOYCE F. MARTIN, Jr., Circuit Judge.

Michael Salling rented a car from Budget Rent-A-Car at the airport in Cleveland, Ohio. He drove the car sixty-four miles in one day, refilled the fuel tank, and returned the car to the same Budget location from which he rented the car. In addition to rental and other fees that he does not dispute, he was charged a $13.99 fuel service fee that he disputes.

Salling sued in federal district court as an individual and as a putative class representative under the Class Action Fairness Act, 28 U.S.C. § 1332(d), claiming that the $13.99 charge was a contract breach by Budget under Ohio law. Salling claims that his contract with Budget granted him the right to avoid this charge by returning his rental car with a full fuel tank. Budget argues that, because Salling drove under seventy-five miles during the rental period, to avoid the charge he was required to return the car with a full fuel tank and to submit a receipt to Budget.

Salling also claimed fraud and unjust enrichment on the same facts. Budget moved to dismiss. The district court denied this motion on the breach of contract and unjust enrichment claims, but granted it on the fraud claim. Salling amended his complaint to adequately plead his fraud claim. Budget then moved for summary judgment on all three claims. The district court granted Budget’s motion, ruling that the contract was not ambiguous and that Budget had not breached the contract, committed fraud, or been unjustly enriched. Salling appeals the dismissal of his breach of contract claim. For the reasons that follow, we AFFIRM the district court’s grant of summary judgment.

I.

We have jurisdiction in this case under the Class Action Fairness Act. The Act provides that a federal district court has jurisdiction in a civil action where there is diversity, 28 U.S.C. § 1332(d)(2)(A), the amount in controversy exceeds $5 million, § 1332(d)), and the proposed class includes at least one hundred members, § 1332 (d)(5)(B). We have held that a defendant seeking removal must prove, by a preponderance of the evidence, that jurisdictional requirements have been met. See Hayes v. Equitable Energy Res. Co., 266 F.3d 560, 572 (6th Cir. 2001).

In removing the case, Budget proved diversity sufficiently—Budget is incorporated under Delaware law with a principal place of business in New Jersey; Salling is an Ohio resident. Budget also provided a spreadsheet in discovery that shows the number of renters who drove fewer than seventy-five miles and calculated the revenues it collected nationally from those renters under its “EZ FUEL” program during the period in question. The EZ FUEL program is the program under which Budget charged Salling and other renters an automatic flat fee when their rental cars were driven fewer than seventy-five miles. The spreadsheet indicates that about one million renters drove fewer than seventy-five miles, were charged the EZ FUEL fee, and returned their rental cars with a “fuel gauge read[ing] 8.” In the context of the spreadsheet, this appears to mean that a Budget representative checked the gas gauge and found it to be full when the rental car was returned. This group of renters is within the class for whom Salling is the putative representative. The spreadsheet indicates that Budget collected $11.2 million in revenues from these drivers. Thus, Budget has sufficiently proved that the class includes at least one hundred members and that the amount in controversy exceeds $5 million.

II.

This Court “review[s] a district court’s grant of summary judgment de novo.” Binay v. Bettendorf, 601 F.3d 640, 646 (6th Cir. 2010) (citation omitted). Summary judgment is proper if the materials in the record “show[] 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). “In deciding a motion for summary judgment, the court must view the factual evidence and draw all reasonable inferences in favor of the nonmoving party.” Banks v. Wolfe Cnty. Bd. of Educ., 330 F.3d 888, 892 (6th Cir. 2003) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).

III.

Salling has framed this case as one about contract interpretation. Budget asserts that, regardless of the interpretation of the contract, the voluntary payment doctrine bars recovery under a theory of breach because Salling voluntarily paid the $13.99 charge at issue. Budget argues that, because the payment was voluntary, Salling should have resolved the issue when he returned the car. Salling argues that Budget did not preserve the voluntary payment defense such that this Court may consider the defense on appeal. Salling contends further that Budget’s defense fails on its merits even if properly before this Court.

A review of the pleadings and papers filed in the case reveals that Budget did not raise the voluntary payment defense until it submitted its summary judgment reply brief. This Court has held that “[a]rguments raised only in reply, and not in the original pleadings, are not properly raised before the district court, and so are also not properly preserved for appeal.” Travelers Prop. Cas. Co. of Am. v. Hillerich & Bradsby Co., 598 F.3d 257, 275 (6th Cir. 2010) (citation omitted).

However, we have also held that “judicial economy requires that this court address the merits of the arguments raised by the parties at this stage of the litigation, rather than forcing the parties to raise it with the district court anew on remand.” Lexicon, Inc. v. Safeco Ins. Co. of Am., 436 F.3d 662, 670 n.6 (6th Cir. 2006). We have interpreted Lexicon to mean that an “issue raised for the first time in defendant’s response to plaintiff’s reply brief for summary judgment [is] not waived [where] the district court fully addressed the argument in its order and [where] both parties fully briefed the issue on appeal.” Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 553 (6th Cir. 2008).

Here, the district court considered the voluntary payment doctrine defense in its opinion and found that the defense barred Salling’s unjust enrichment claim; both parties have briefed and argued the issue on appeal. If we were to remand, Budget could raise this defense in another summary judgment motion. Kovacevich v. Kent State Univ., 224 F.3d 806, 820 (6th Cir. 2000) (“District courts may in their discretion permit renewed or successive motions for summary judgment . . . . `[T]he denial of summary judgment has no res judicata effect, and the district court may, in its discretion, allow a party to. . . file successive motions, particularly if good reasons exist.’”) (citation omitted).

Here, for the sake of judicial economy, we think the better course is to decide the case now.

IV.

Ohio recognizes the voluntary payment doctrine. “As articulated by the Ohio Supreme Court: `In the absence of fraud, duress, compulsion or mistake of fact, money, voluntarily paid by one person to another on a claim of right to such payment, cannot be recovered merely because the person who made the payment mistook the law as to his liability to pay.’” Scott v. Fairbanks Capital Corp., 284 F. Supp. 2d. 880, 894 (S.D. Ohio 2003) (quoting State ex. rel. Dickman v. Defenbacher, 86 N.E.2d 5, 7 (Ohio 1949)). The record shows that Salling paid the $13.99 charge voluntarily. He has not claimed duress or compulsion. His fraud claim was dismissed by the district court in its summary judgment grant and he has not appealed that ruling. Finally, Salling made no mistake of fact. Just the opposite is true—Salling paid the charge in anticipation of filing suit and he received a receipt that enumerated the $13.99 charge in question separately from all other rental charges. He believed that paying the charge on a car driven fewer than seventy-five miles and returned with a full tank would give him standing to bring this suit. Though Salling argues that he “had no choice but to pay the fee,” and that his payment was thus not voluntary, we cannot agree. We find that his payment was voluntary.

Salling contends that the contract breach claim still stands because the voluntary payment doctrine does not apply where a party breaches a provision of a written contract. He urges that, because he interprets Budget’s actions as a breach of the contract, the doctrine does not apply. He is mistaken: “A payment made by reason of a wrong construction of the terms of a contract is not made under a mistake of fact, but under a mistake of law, and if voluntary cannot be recovered back.” Nationwide Life Ins. Co. v. Myers, 425 N.E.2d 952, 956 (Ohio Ct. App. 1981) (quoting Cincinnati v. Cincinnati Gaslight & Coke Co., 41 N.E. 239, at syllabus para. 3 (Ohio 1895)) (internal quotation marks omitted).

Because Budget’s defense under the voluntary payment doctrine succeeds, we do not reach the contract interpretation issue. The judgment of the district court is AFFIRMED.

[*] The Honorable George Caram Steeh III, United States District Judge for the Eastern District of Michigan, sitting by designation.

OPINION

MADAME JUSTICE TODD.

We granted allowance of appeal in the instant case to consider whether a trial court may refuse to award contractual interest to the prevailing party in a contract dispute based on a finding of dilatory conduct by the prevailing party. We hold, inter alia, that a trial court may not refuse to award interest to the prevailing party when the right to interest has been expressly reserved under the terms of the contract. Thus, we remand this matter to the trial court for recalculation of its award in favor of Appellant TruServ Corporation (“TruServ”).^[1]

I. Background

TruServ is a hardware wholesale cooperative for retail hardware, lumber, and building supply dealers. Members of the cooperative, who are billed on a bi-monthly basis for the materials they purchase, are shareholders and part owners of the cooperative. On May 26, 1994, Morgan’s Tool & Supply Co., Inc. (“MTS”), a Louisiana corporation owned and operated by John L. and Gail N. Morgan (the “Morgans”), executed a “Retailer’s Application for Membership and Membership Agreement” (“Membership Agreement”) with TruServ’s predecessor, ServiStar Corporation (“ServiStar”). The application was approved, and, on June 30, 1994, MTS was accepted as a member in the cooperative. That same year, the Morgans executed an “Unlimited Guaranty of Credit” (hereinafter “Guarantee”), by which they agreed to guarantee the debts of MTS. The Guarantee further obligated the Morgans to pay any expenses, including counsel fees and legal expenses, incurred by ServiStar in an effort to collect amounts owed by MTS and to enforce the Guarantee.

In June 1997, ServiStar merged with TruServ. It is undisputed that, following the merger, a new document entitled “Retail Member Agreement” became the controlling contract between MTS and TruServ. Relevant to this appeal, the Retail Member Agreement provided that the member — in this case, MTS — agrees:

[t]o pay on the date due all invoices on accounts receivable statements and any other financial obligations to the Company and subsidiaries, and to pay a one and one-half percent (1-1/2%) per month service charge,^[2] but not to exceed the maximum amount permitted by law, on past due balances of accounts. Upon either termination of this Agreement or Member’s failure to pay on the date due all invoices on accounts receivable statements and any other financial obligations to the Company, to pay immediately all amounts due, including future dated invoices, from the Member to the Company and its subsidiaries.

Retail Member Agreement at 2 (R.R. at 1151a). The Retail Member Agreement, which was to “continue in force from year to year unless . . . terminated,” further provided:

In the event that the Company initiates proceedings to recover amounts due it by Member or for any breach of this Agreement or to seek equitable or injunctive relief against the Member, the Company shall be entitled to the recovery of all associated costs, interest and reasonable attorney’s fees.

Id. at 4-5 (R.R. at 1153-54a).

MTS ultimately became delinquent on the two accounts it had with TruServ, and, after the parties were unable to agree on a payment plan to bring the accounts current, TruServ advised MTS by letter dated June 3, 1999 that it was terminating its Retail Member Agreement with MTS. On July 19, 1999, TruServ filed a complaint against MTS and the Morgans (collectively and hereinafter “MTS”), alleging breach of contract and unjust enrichment. TruServ sought $78,826.93 in damages, which, according to TruServ’s complaint, represented “goods and services ordered and received by Morgan’s Tool, as well as service charges.” Complaint at 3 (R.R. at 18a). In addition to that amount, TruServ sought “service charges as shall continue to accrue, prejudgment interest, post-judgment interest, costs, attorney’s fees and any other relief” the court deems appropriate. Id. at 4 (R.R. at 19a).

MTS filed an answer on September 16, 1999, and, on December 27, 2000, filed a motion for production of documents and a motion to compel TruServ to answer interrogatories. On January 29, 2001, MTS filed a counterclaim, alleging breach of contract and breach of the duty of good faith and fair dealing. On May 21, 2001, a joint motion was filed to postpone the trial due to John Morgan’s health issues. Approximately one year later, on May 13, 2002, TruServ’s counsel withdrew from the case. On June 5, 2003, TruServ, represented by new counsel, filed a response to MTS’ counterclaims, and MTS responded on July 1, 2003. No further activity between July 2003 and March 2007 is reflected on the docket, with the exception of two changes of counsel for TruServ on February 11, 2005 and March 14, 2007.

On April 21, 2008, the matter proceeded to a nonjury trial before the Honorable S. Michael Yeager of the Butler County Court of Common Pleas. The trial court concluded MTS had breached its Retail Member Agreement with TruServ by failing to pay for the merchandise it had ordered and received. The court awarded TruServ $78,826.93 in damages, plus $23,648.08 in costs and counsel fees.^[3] The court, however, concluding “the decision of whether to award prejudgment interest is at the discretion of the court,” Rule 1925(a) Opinion, 9/24/08, at 3-4, declined to award interest on the basis that TruServ was dilatory in prosecuting its claim: TruServ is “not entitled to recover interest on the amount due because there were times after suit was filed that [TruServ] allowed this case to linger in the system as opposed to aggressively pursuing timely resolution.” Trial Court Opinion, 4/23/08, at 3 (R.R. at 417a).^[4]

Thereafter, TruServ appealed to the Superior Court, arguing the trial court erred in failing to award TruServ “contractual pre-judgment interest” when the Retail Member Agreement, which the trial court found controlling, expressly provided for such an award. Appellant’s Superior Court Brief at 3 (R.R. at 520a). The Superior Court affirmed the trial court’s order on the basis that TruServ had breached its duty to mitigate its losses. TruServ Corp. v. Morgan’s Tool & Supply Co., Inc., 1480 WDA 2008, unpublished memorandum (Pa. Super. filed July 1, 2009). The Superior Court relied on its decision in Somerset Cmty. Hosp. v. Mitchell, 685 A.2d 141 (Pa. Super. 1996), wherein it held:

a party who suffers a loss due to the breach of a contract has the duty to make reasonable efforts to mitigate his losses. The burden to prove this duty to mitigate is placed on the party who actually breaches the contract; the breaching party must show how further loss could have been avoided through the reasonable efforts of the injured party. An injured party, however, is not obligated to mitigate damages when both it and the liable party have an equal opportunity to reduce damages.

TruServ Corp. v. Morgan’s Tool and Supply Co., Inc., 1480 WDA 2008, at 10 (quoting Somerset, 685 A.2d at 150).

With respect to the instant case, the Superior Court noted that, “[f]or almost four years, there was a substantial delay in resolution of this action. The record demonstrates that [TruServ] did not make reasonable efforts to mitigate its losses. Conversely, Morgan’s Tools complied with its obligations with respect to the pleadings in a timely fashion.” TruServ, 1480 WDA 2008 at 12. The court then concluded, “[u]nder the unique facts of this case . . . the trial court did not abuse its discretion in declining to award [TruServ] pre-judgment interest.” Id.

Judge Colville filed a dissenting memorandum, wherein he noted the parties had agreed in the Retail Member Agreement to the payment of interest in the form of service charges, and, as a result, the award of such interest was a contractual obligation and not a matter of damages to be awarded at the trial court’s discretion. Id. (Colville, J., dissenting). Judge Colville, therefore, would have vacated the trial court’s order and remanded for a recalculation of the amount of the judgment.

In October 2009, TruServ filed a petition for allowance of appeal with this Court. On April 14, 2010, this Court granted allowance of appeal to consider the following issue: “Whether a trial court has discretion to refuse to award contractual interest based on the dilatory conduct of the victorious party.” TruServ Corp. v. Morgan’s Tool & Supply Co., Inc., 605 Pa. 589, 992 A.2d 858 (2010) (order). As this issue presents a question of law, our standard of review is de novo and our scope of review is plenary. Helpin v. Trustees of the University of Pennsylvania, ___ Pa. ___, 10 A.3d 267, 270 (2010).

In support of its position that the trial court erred in refusing to include interest in its award, TruServ first argues that, pursuant to Section 354 of the Restatement (Second) of Contracts, when a party breaches a contract to pay a definite sum of money, “the award of prejudgment interest is mandatory.” Appellant’s Brief at 18. TruServ notes that comment (c) to Section 354 provides: “Unless otherwise agreed, interest is always recoverable for the non-payment of money once payment has become due and there has been a breach,” and TruServ contends this rule applies whether or not the contract calls for interest. Id. TruServ further claims that interest under Section 354 “is allowable at the legal rate from the time payment is withheld after it has become the duty of the debtor to make such payment,” and contends that allowance of such interest “does not depend upon discretion but is a legal right. Id. (quoting Palmgreen v. Palmer’s Garage, Inc., 383 Pa. 105, 108, 117 A.2d 721, 722 (1955)).^[5]

TruServ additionally argues that, because the Retail Member Agreement clearly and unambiguously provided for an award of interest on past-due balances, pursuant to comment (a) to Section 354, which states that Section 354 does not pertain to an injured party’s right to interest under the terms of a contract, the trial court was obliged to enforce the clear language of the contract. Appellant’s Brief at 22. To the extent the Superior Court relied on its own decisions in Somerset, supra, and Penneys v. Pennsylvania R.R. Co., 408 Pa. 276, 183 A.2d 544 (1962), in upholding the trial court’s refusal to award TruServ interest, TruServ contends the Superior Court’s decisions in those cases are distinguishable in that, inter alia, neither involved contracts that contained an interest provision. Appellant’s Brief at 24.

Furthermore, with regard to the Superior Court’s determination that TruServ did not make reasonable efforts to mitigate its losses, TruServ maintains that mitigation principles are inapplicable to an award of contractual interest. To this end, TruServ urges this Court to utilize the approach we have adopted in cases involving commercial leases, wherein we have held a landlord has no duty to mitigate. Appellant’s Brief at 27 (citing Stonehedge Square Ltd. P’ship v. Movie Merchants, Inc., 552 Pa. 412, 715 A.2d 1082 (1998)). TruServ further avers that the Superior Court’s reliance on mitigation principles was particularly erroneous in the instant case because the trial court’s decision was not based on a determination that TruServ failed to mitigate its damages; rather, the trial court based its decision solely on a belief that it possessed discretionary authority to award contractual interest. Appellant’s Reply Brief at 2.

In its brief to this Court, MTS contends that, even if TruServ had a right to prejudgment interest pursuant to Section 354 of the Restatement (Second) of Contracts, that right was not absolute. Specifically, MTS points to language in Section 354(1) which provides “interest is recoverable from the time for performance on the amount due less all deductions to which the party in breach is entitled,” and posits that a delay in litigation may support such a deduction. Appellee’s Brief at 9 (emphasis original) (citing Penneys, supra, and Somerset, supra). MTS further avers that the language of Section 354(1) “is consistent with the general principle . . . that a non-breaching party in a contract case has a duty to mitigate its losses.” Appellee’s Brief at 10.

To the extent TruServ relies on comment (a) to Section 354 to support its claim that it has an absolute right to interest because the Retail Member Agreement provides for the same, MTS argues that the Retail Member Agreement entitles TruServ only to “all associated costs, interest and reasonable attorney’s fees,” and does not give TruServ “any greater rights than it otherwise would have in any other contract action under common law.” Id. at 11. MTS further contends that, to the extent the Retail Member Agreement provides for the payment of a 1.5% monthly service charge on past due balances, a service charge is distinct from interest, and notes that, in the Retail Member Agreement, “`service charges’ are discussed in the context of payments due on invoices, while `interest’ is used in a provision outlining recoverable fees and costs should there be litigation.” Id. at 12. Thus, MTS argues that, even if TruServ is contractually entitled to some form of interest, the rate of interest should be at the “statutory rate of 6% per year, not the higher `service charge’ rate [of 18% per annum].” Id. n. 3.^[6]

Regardless, MTS maintains that TruServ’s recovery of interest is “governed by principles of mitigation.” Id. at 12. MTS points out that comment (a) to Section 354 is silent as to whether a court can deny interest to the nonbreaching party when that party has delayed in prosecuting its claim, and alleges TruServ fails to articulate why the doctrine of mitigation, which MTS contends is applicable in the context of a damages award, should not also apply to an award of contractual interest. Id. at 13.

Finally, MTS asserts that public policy will be served by allowing a trial court to deny prejudgment interest where the prevailing party in a contract dispute has been dilatory in prosecuting its claim; to hold otherwise would provide an incentive for plaintiffs “to string their claims out for years to maximize the available interest.” Id. at 14. MTS suggests that denying interest based on a prevailing party’s delay in prosecuting its breach of contract claim is consistent with Rule 238 of the Rules of Civil Procedure, which allows for the recovery of delay damages in tort cases, but excludes damages for any period of time during which the plaintiff caused the delay.

After careful consideration, and for the reasons that follow, we conclude the Superior Court erred in affirming the trial court’s refusal to award TruServ interest on the amount owed by MTS.

II. Discussion

A. Service Charge v. Interest

As a preliminary matter, we address certain issues regarding the terminology used by the parties in the instant case. As part of our task involves the interpretation of the relevant agreements, we note that, when interpreting the language of a contract, this Court’s goal is to ascertain the intent of the parties and give it effect. LJL Transport., Inc. v. Pilot Air Freight Corp., 599 Pa. 546, 559, 962 A.2d 639, 647 (2009). When the words of a contract are clear and unambiguous, the intent of the parties must be ascertained from the language employed in the contract, which shall be given its commonly accepted and plain meaning. Id.

As noted above, the Retail Member Agreement provides for payment of a 1.5% monthly “service charge” by MTS on its past-due balances. MTS contends this service charge is distinct from interest, and, as a result, if we conclude that TruServ is entitled to interest, it cannot exceed the statutory prejudgment interest rate of 6% per annum. We do not agree. A service charge is defined as, inter alia, “charges payable by the buyer and imposed by the seller as an incident to the extension of credit.” Black’s Law Dictionary 1400 (8th ed. 1999). Similarly, “interest” is defined as, inter alia, “compensation fixed by agreement or allowed by law for the use or detention of money, or for the loss of money by one who is entitled to its use.” Id. at 829. However, “where a note does not carry interest until after maturity and default, such interest is not a charge for the extension of time for payment, but a charge in event of default in payment.” 47 C.J.S. Interest and Usury § 428.

In the instant case, the service charge, as described in the Retail Member Agreement, is not a charge or fee that MTS was required to pay in exchange for its ability to purchase items on credit. Rather, the service charge consisted of a calculated percentage of the past-due balance balances of accounts. If MTS paid its balance in full by the date payment was due, no service charge was incurred, and MTS could continue to purchase items on credit. Under these circumstances, we conclude the term “service charge,” as used in the Retail Member Agreement, simply means “interest,” and we reject MTS’ suggestion that the use of the term “service charge” in the Retail Member Agreement precludes TruServ’s recovery of interest at a rate greater than the statutory prejudgment interest rate of 6% per annum.

B. Types of Interest

Although at times TruServ has used the terms interchangeably,^[7] there is a distinction between “contractual interest” and “prejudgment interest.”^[8] Where a contract provides for the payment of money and one party breaches the contract by failing to pay, the nonbreaching party may recover interest on the amount owed under the contract in one of two ways.

First, “[i]nterest may be reserved by the terms of the contract between the parties and is then called conventional or contractual interest.” See 25 Williston on Contracts § 66:109 (4th ed.) (emphasis added).

Alternatively, where the parties to a contract have not specifically addressed the payment of interest in the terms of the contract, the nonbreaching party may recover, as damages, interest on the amount due under the contract. See id. (citing Restatement (Second) of Contracts § 354). This Court has referred to interest awarded as damages in such circumstances as prejudgment interest. See Fernandez v. Levin, 519 Pa. 375, 379, 548 A.2d 1191, 1193 (1988).

The annual contractual rate of interest set forth in the Retail Member Agreement (18%) is higher than the statutory prejudgment interest rate in Pennsylvania (6%); thus, the type of interest, if any, to which TruServ is entitled, will affect the amount of that interest. Accordingly, we must consider these two distinct concepts in further detail, as applied to the case sub judice.

C. Contractual Interest

As noted above, where a party to a contract reserves the right to the payment of interest, that interest is considered conventional or contractual interest. In cases where the contract expressly provides for the payment of interest, or the payment of interest is implied by the nature of the promise, the interest is said to become an integral part of the debt itself, and, therefore, is recoverable as of right under the terms of the contract. See, e.g., Restatement (Second) of Contracts § 354 cmt. a; Somerset, 685 A.2d at 148 (“[i]f the parties have agreed on the payment of interest, it is payable not as damages but pursuant to a contract duty that is enforceable”) (emphasis original); Philadelphia Housing Auth. v. Cedarcrestone, Inc., 562 F. Supp. 2d 653, 658-59 (E.D. Pa. 2008) (noting that, under Pennsylvania law, where parties to a contract agree on the payment of interest, such interest is payable not as damages, but pursuant to a contract duty that is enforceable as is any other such duty, subject to legal restrictions on the rate of interest) (citing Somerset).

Moreover, it is a well-established principle of contract law that, where the language of a contract is clear and unambiguous, a trial court is required to give effect to that language. Madison Constr. Co. v. Harleysville Mut. Ins. Co., 557 Pa. 595, 606, 735 A.2d 100, 106 (1999). Indeed, this Court has cautioned that it is not the function of a court to rewrite agreements between parties, and a court must give effect to the clear terms to which the parties have agreed. Amoco Oil Co. v. Snyder, 505 Pa. 214, 478 A.2d 795 (1984). Thus, we have no hesitation in concluding that, where the terms of a contract provide for the payment of interest, a court’s award of such interest in favor of the prevailing party is not discretionary. Accordingly, because the Retail Member Agreement between TruServ and MTS clearly provided for the payment of interest at a rate of 18% per annum on MTS’s past due balances, MTS had a contractual obligation to pay that interest, and the trial court did not have discretion to refuse to include such interest in its award.

Perhaps recognizing that the award of contractual interest was not discretionary, the panel majority of the Superior Court, as noted above, affirmed the trial court’s decision on the basis that TruServ failed to take reasonable steps to mitigate its losses. A party who suffers a loss due to a breach of contract generally has a duty to make reasonable efforts to mitigate his losses. Delliponti v. DeAngelis, 545 Pa. 434, 443, 681 A.2d 1261, 1265 (1996); Bafile v. Borough of Muncy, 527 Pa. 25, 588 A.2d 462 (1991). Moreover, the burden is on the breaching party to show how losses could have been avoided. Delliponti, 545 Pa. at 443, 681 A.2d at 1265 (reinstating employee’s back pay because borough did not establish that employee failed to mitigate her damages); Ecksel v. Orleans Constr. Co., 519 A.2d 1021, 1028 (Pa. Super. 1987) (burden is on the party that breaches a contract to show how further loss could have been avoided through the reasonable efforts of the injured party).

However, “an injured party . . . is not obligated to mitigate damages when both it and the liable party have an equal opportunity to reduce damages.” Somerset, 685 A.2d at 150; Fiat Motors of North America, Inc. v. Mellon Bank, N.A., 827 F.2d 924, 930 (3rd Cir. 1987) (applying Pennsylvania law in an action for breach of a letter of credit and holding the duty to mitigate damages “is not applicable where the party whose duty it is primarily to perform a contract has equal opportunity for performance”). Indeed, where it cannot be determined which party was responsible for delay in litigation, this Court has held equity entitles the nonbreaching party to interest from the breaching party, which had the use of the nonbreaching party’s money during the course of the litigation. Penneys, 408 Pa. at 280-82, 183 A.2d at 546-47. Similarly, and consistent with this proposition, in Dox Planks of Northeastern Pa. v. Ohio Farmers Ins. Co., 621 A.2d 132, 136 (Pa. Super. 1993), the Superior Court affirmed the trial court’s holding that a subcontractor was not obligated to mitigate its damages after a contractor’s breach of a contract to pay, because the contractor had already received the subcontractor’s precast concrete barriers and was using them on a highway project at the time of breach, precluding the subcontractor from taking steps to avoid any loss.

In cases where the payment of interest is an express term of the contract, as in the instant case, some courts have held that the right to recover contractual interest is not subject to mitigation. See, e.g., Universal Investment Co. v. Sahara Motor Inn, Inc., 619 P.2d 485 (Ariz. Ct. App. Div. 2 1980) (doctrine of avoidable consequences^[9] is not applicable when there is an absolute promise to pay); Lake Ridge Academy v. Carney, 613 N.E.2d 183, 190 (Ohio 1993) (where a liquidated damages clause is deemed valid, nonbreaching party does not have a duty to mitigate damages following a breach).

After consideration, we conclude that, to the extent the Superior Court affirmed the trial court’s decision on the ground that TruServ failed to take reasonable steps to mitigate its losses, the court erred. Although the Superior Court opined that TruServ could have reduced its losses — i.e., the amount of contractual interest to which it was entitled — by prosecuting its claim in a more expedient fashion, MTS likewise could have reduced the amount of contractual interest to which TruServ was entitled by paying its invoices in a timely manner or by acting affirmatively to settle or bring the lawsuit to a conclusion. We recognize that, in situations involving a breach of contract for the payment of a sum certain, the breaching party could always reduce its obligation for losses incurred by the non-breaching party simply by paying the amount due and performing the contract. Nevertheless, we conclude that a party who breaches a contract containing an express promise to pay interest may not be permitted to reduce or escape entirely his contractual obligation by subsequently arguing that the nonbreaching party did not prosecute its breach of contract claim with dispatch. Thus, to the degree the Superior Court affirmed the trial court’s disallowance of contractual interest due to TruServ, based on a finding that TruServ failed to mitigate its losses, we hold that such affirmance was in error.

D. Prejudgment Interest

As noted above, even where a party’s right to the payment of interest is not specifically addressed by the terms of a contract, a nonbreaching party to a contract may recover, as damages, interest on the amount due under the contract; again, this Court refers to such interest as prejudgment interest. The purpose of awarding interest as damages:

is to compensate an aggrieved party for detention of money rightfully due him or her, and to afford him or her full indemnification or compensation for the wrongful interference with his or her property rights. The allowance of interest as an element of damages is not punitive, but is based on the general assumption that retention of the money benefits the debtor and injures the creditor.

25 C.J.S. Damages, § 80.

Many jurisdictions have enacted statutory provisions for interest as damages. Id. at § 82. In 1988, in Fernandez, supra, this Court adopted Section 354 of the Restatement (Second) of Contracts as the law of this Commonwealth with respect to the recovery of interest as damages in breach of contract actions. Section 354, titled “Interest As Damages,” provides:

(1) If the breach consists of a failure to pay a definite sum in money or to render a performance with fixed or ascertainable monetary value, interest is recoverable from the time for performance on the amount due less all deductions to which the party in breach is entitled.

(2) In any other case, such interest may be allowed as justice requires on the amount that would have been just compensation had it been paid when performance was due.

Restatement (Second) of Contracts § 354. In adopting Section 354, we stated:

For over a century it has been the law of this Commonwealth that the right to interest upon money owing upon contract is a legal right. West Republic Mining Co. v. Jones & Laughlins, 108 Pa. 55 (1885). That right to interest begins at the time payment is withheld after it has been the duty of the debtor to make such payment. Palmgreen v. Palmer’s Garage, Inc., 393 Pa. 105, 108, 117 A.2d 721, 722 (1955).

Fernandez, 519 Pa. at 379, 548 A.2d at 1193.^[10]

With regard to prejudgment interest, we have explained, “[i]nterest has been defined `to be a compensation allowed to the creditor for delay of payment by the debtor,’ and is said to be impliedly due `whenever a liquidated sum of money is unjustly withheld.’” School Dist. of City of Carbondale v. Fidelity & Deposit Co. of Maryland, 346 Pa. 491, 492, 31 A.2d 279, 280 (1943) (citations omitted). However, “as prerequisites to running of prejudgment interest, the debt must have been liquidated with some degree of certainty and the duty to pay it must have become fixed.” Id. at 493, 31 A.2d at 280; Restatement (Second) of Contracts § 354(1) (“If the breach consists of a failure to pay a definite sum of money or to render a performance with fixed or ascertainable monetary value, interest is recoverable.”).^[11] Thus, even where the terms of a contract do not expressly provide for the payment of interest, a nonbreaching party has a legal right to recover interest, as damages, on a definite sum owed under the contract.

Furthermore, as is the case with an award of contractual interest, an award of prejudgment interest under Section 354(1) is not subject to a court’s discretion. See id.; Dox Planks, 621 A.2d at 136 (citing Fernandez, and holding a successful plaintiff in a contract case is entitled to prejudgment interest at the statutory rate as a matter of right); Peterson v. Crown Fin. Corp., 661 F.2d 287, 293 (3rd Cir. 1981) (applying Pennsylvania law and holding that a “court is thus obligated to award `simple interest at the statutory legal rate’ only in those circumstances in which the plaintiff proves that the defendant breached a promise to pay `a definite sum of money’”).^[12]

In addition, we hold that a party’s award of interest on a sum certain under Section 354(1) is not subject to reduction based on mitigation principles. Indeed, Section 354 distinguishes between interest due on an obligation to pay a definite sum, which is recoverable as a matter of right under Subsection 354(1), and interest on losses incurred as a consequence of a breach of a promise to pay, which is subject to discretion under Subsection 354(2). See Restatement (Second) of Contracts § 354 cmt. d (“Damages for breach of contract include not only the value of the promised performance but also compensation for consequential loss. . . . In such cases, the award of interest is left to judicial discretion, under the rule stated in Subsection (2).”) The same rationale underlying our determination that TruServ’s right to recover contractual interest was not subject to mitigation — namely, that a party is not obligated to mitigate damages where both it and the liable party have an equal opportunity to reduce losses — is also applicable with respect to TruServ’s right to recover prejudgment interest on a sum certain owed by MTS. Specifically, MTS could have avoided or reduced its obligation to pay prejudgment interest had it paid its outstanding balance when TruServ demanded that MTS bring its account current, or upon TruServ’s termination of the Retail Member Agreement. Accordingly, to the extent the lower courts determined that TruServ was not entitled to prejudgment interest because it did not mitigate its losses, the courts erred.

III. Conclusion

We hold that TruServ was entitled to recover from MTS interest on MTS’s outstanding account balance, and, further, that the mitigation doctrine does not operate to reduce the amount which TruServ is entitled to recover.^[13] Having answered the legal question we accepted for review, we leave it to the trial court, as the finder of fact, to determine what portion of the interest to which TruServ is entitled constitutes contractual interest, which, pursuant to the Retail Member Agreement, accrued at a rate of 18% per annum, and which portion constitutes prejudgment interest, which accrued at the statutory legal rate of 6%.^[14]

Order of the Superior Court reversed. Case remanded to the Superior Court for remand to the trial court. Jurisdiction relinquished.

Messrs. Justice Eakin, Baer and McCaffery and Madame Justice Orie Melvin join the opinion.

Mr. Justice Saylor files a concurring and dissenting opinion in which Mr. Chief Justice Castille joins.

CONCURRING AND DISSENTING OPINION

MR. JUSTICE SAYLOR.

I agree with the majority that the service charge served the role of interest while the parties’ contract remained extant, see Majority Opinion, slip op. at 9-10, and with its position that a mitigation overlay is inconsistent with the manner in which interest is otherwise treated under Pennsylvania law. See id. at 14, 17. I differ, however, with the majority position that contractual interest should be regarded as different in character from prejudgment interest. See id. at 10-11. I also respectfully disagree with the majority’s holding that additional fact finding is necessary to determine the interest rate to be applied to the period of time after termination of the Retail Member Agreement. See id. at 18-19.

From my reading of the long line of decisions pertaining to the award of interest in breach-of-contract cases, Pennsylvania law incorporates a series of judicial rules which generally favor the award of prejudgment interest where damages are reasonably ascertainable, whether or not the parties to a contract incorporated an interest rate into their agreement. See W. Republic Mining Co. v. Jones & Laughlins, 108 Pa. 55, 68 (1885) (“The right to interest upon money owing upon contract depends not on discretion, but upon legal right.” (citation omitted)); Pittsburgh Constr. Co. v. Griffith, 834 A.2d 572, 590-91 (Pa. Super. 2003) (collecting cases). See generally 10 STANDARD PENNSYLVANIA PRACTICE §60:74 (2011). These rules include potent subsidiary propositions, such as that prejudgment interest should be awarded by a court even if a jury has failed to do so upon the matter being submitted to it. See Peyton v. Margiotti, 398 Pa. 86, 95, 156 A.2d 865, 869-70 (1959).

In this landscape, I do not see any benefit in distinguishing between contractual and prejudgment interest on damages for breach of contract. Rather, in my view, contractual interest is best conceptualized as a subset of prejudgment interest. Contractual interest serves the role of prejudgment interest where it has been made part and parcel of the underlying agreement; whereas a default rule of prejudgment interest is merely supplied by the judicial rules in the absence of contractual prescription.

While the decisional law favors the award of interest, in the interest of fairness, I believe the statutory rate should be applied in the absence of a clear expression of intention, in the parties’ written agreements, to specify a higher rate. See generally 25 WILLISTON ON CONTRACTS §66:116 (4th ed. 2011) (“Where the contract between the parties makes no provision for interest, if any is allowed, it will normally be given at the statutory or `legal’ rate; and the same is true where the contract . . . provides for interest but does not specify the interest rate.”).^[1] Presently, I do not regard the Retail Member Agreement as clearly extending the eighteen percent rate of interest into the period following its termination.^[2] Thus, I would hold that the statutory rate pertains in that time period.

Finally, while I am circumspect about depriving fact finders of the ability to engage in an equitable assessment concerning the appropriateness of mitigation, I find the majority’s treatment to be entirely consistent with the practice of allowing less flexibility in the interest arena to minimize the difficulties in administration once liability and the underlying damages for breach are determined. Cf. Stonehenge Square LP v. Movie Merchants, Inc., 552 Pa. 412, 417-18, 715 A.2d 1082, 1085 (1998) (explaining, in rejecting a mitigation-of-loss approach for commercial leases, that the “potential for complexity, expense, and delay is unwelcome and would adversely affect the existing schema utilized to finance commercial development”). Notably, the policies favoring interest awards and the disfavor for mitigation gain some additional justification, since the defendant retains the use of the principal monies in question through the date of judgment.

Mr. Chief Justice Castille joins this concurring and dissenting opinion.

[1] TruServ, a Delaware corporation with an office in Butler, Pennsylvania, was the successor by merger to ServiStar Coast to Coast Corporation, f/k/a ServiStar Corporation. According to Appellant, TruServ is now known as True Value. For purposes of this opinion, we will continue to refer to Appellant as TruServ.

[2] The equivalent of 18% per annum.

[3] Although the trial court initially declined to award TruServ counsel fees because TruServ purportedly failed to provide the court “with any documentation containing the percentage of counsel fees to be awarded and that the parties had agreed upon in the event of a default necessitating the filing of a legal action,” Trial Court Opinion, 4/23/08, at 4 (R.R. at 418(a)), following, inter alia, TruServ’s motion for post-trial relief and a status conference, the trial court entered an order on July 2, 2008 which awarded costs and counsel fees in the amount of $23,648.08. Judgment was entered on August 5, 2008.

[4] The trial court dismissed MTS’s counterclaim for breach of contract and breach of the duty of good faith and fair dealing on the basis that the damages alleged were speculative.

[5] TruServ concedes that an award of prejudgment interest arguably is discretionary under Subsection 354(2), which provides for the payment of interest “as justice requires.” Appellant’s Brief at 23. TruServ emphasizes, however, that Subsection 354(2) applies only to instances where the breach did not consist of a failure to pay a definite sum of money, or the performance did not have a fixed or readily ascertainable monetary value. Id. (citing Restatement (Second) of Contracts, § 354 cmt. d). Thus, as the amount owed by MTS was certain, TruServ contends Section 354(2) does not apply to the instant case.

[6] As MTS notes, the statutory legal rate of interest in Pennsylvania is 6% per annum. 41 P.S. § 202.

[7] For example, in its brief on appeal to the Superior Court, TruServ argued it was entitled to “contractual pre-judgment interest.” See, e.g., TruServ, 1480 WDA 2008 at 7 (quoting TruServ’s Superior Court Brief at 11).

[8] See, e.g., 25 C.J.S. Damages § 83 (“There is a distinction between interest awarded by virtue of the terms of a contract and interest awarded by way of damages for breach of the contract, although the recovery in both cases is frequently spoken of as a recovery of interest.”).

[9] The doctrine of avoidable consequences is another term for the doctrine of mitigation of damages. See 47 C.J.S. Damages § 47.

[10] This Court previously adopted the Restatement (First) of Contracts § 337(a) (1932) in Penneys v. Pennsylvania R.R. Co., 408 Pa. 276, 183 A.2d 544 (1962). Section 337, which was amended and renumbered as Section 354 in the Second Restatement, was entitled “When Interest is Recoverable As Damages,” and provided, in relevant part:

If the parties have not by contract determined otherwise, simple interest at the statutory legal rate is recoverable as damages for breach of contract as follows:

(a) Where the defendant commits a breach of a contract to pay a definite sum of money . . . interest is allowed on the amount of the debt or money value from the time performance was due, after making all the deductions to which the defendant may be entitled.

Restatement of Contracts (First) § 337(a) (1932) (emphasis added).

[11] Prejudgment interest, or interest awarded as an element of damages, for breach of a contract to pay money must be fixed by a time specified in the contract, or, if not so specified, by the making of a demand or by the commencement of a suit: “[o]ne cannot be in default in the payment of a debt until the payment is ascertained, or capable of ascertainment, . . . hence default, so as to render a party liable for interest, cannot occur unless the sum due is certain.” 25 C.J.S. Damages § 82. But see Spang & Co. v. USX Corp., 599 A.2d 978, 984 (Pa. Super. 1991) (prejudgment interest is awardable in contract cases as a matter of right, and no exception exists where damages must be determined at trial).

[12] Compare Restatement (Second) of Contracts § 354(2) (in cases where a breach does not consist of a failure to pay a definite sum of money or render a performance with a fixed or ascertainable value, prejudgment interest “may be allowed as justice requires on the amount that would have been just compensation had it been paid when performance was due.”). Unlike an award of interest pursuant to Subsection 354(1), an award of interest under Subsection 354(2) is within the trial court’s discretion.

[13] The trial court’s award in favor of TruServ included interest equal to a 1.5% monthly service charge on MTS’ past due account balances, but only as of the date of MTS’ last Member Statement, dated June 11, 1999.

[14] TruServ does not contend that it is entitled to recover both contractual interest and prejudgment interest for the same time period. Indeed, comment (a) to Section 354 provides “[i]f the parties have agreed on the payment of interest, it is payable not as damages but pursuant to a contract duty that is enforceable.” Restatement (Second) of Contracts § 354 cmt. a. This language clearly indicates that a party may recover contractual interest or prejudgment interest, but not both for the same time period.

[1] Like other bright-line rules, the judicial rules pertaining to interest may not yield the most just outcome in every individual case. It is therefore important that such rules be measured ones.

[2] Compare Retail Member Agreement at 2 (listing the financial obligations of the Member, which includes paying a monthly one and one-half percent “service charge” on “past due balance accounts,” and noting that the Member must immediately pay “all amounts due” upon termination of the contract), with id. at 5 (stating that the Company is entitled to the recovery of, inter alia, “interest” in the event that it initiates proceedings to recover amounts due by the Member).

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
A11-1573
Maria M. Schimming, Appellant, vs. Equity Services of St. Paul, Inc., Respondent.
Filed April 23, 2012
Affirmed
Hudson, Judge
Ramsey County District Court
File No. 62-CV-09-13339
Maria Schimming, Eagan, Minnesota (pro se appellant)
Kirsten J. Libby, Jon E. Paulson, Libby Law Office, P.A., St. Paul, Minnesota (for respondent)
Considered and decided by Hudson, Presiding Judge; Halbrooks, Judge; and Collins, Judge.
U N P U B L I S H E D O P I N I O N
HUDSON, Judge
Appellant challenges the district court’s summary judgment in favor of respondent on appellant’s claims of unlawful termination, invasion of privacy, negligent infliction of Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.
2
emotional distress, intentional infliction of emotional distress, and defamation. Because there are no genuine issues of material fact and summary judgment is appropriate as a matter of law, we affirm.
FACTS
Pro se appellant Maria Schimming worked as a home health-care nurse for respondent from 2005 to 2008. Respondent reimbursed its employees for payments to a health-insurance provider. Appellant applied to Blue Cross-Blue Shield of Minnesota (Blue Cross) for health insurance. In July 2008, Blue Cross cashed a check from appellant but subsequently denied her insurance application. Ultimately, Blue Cross approved appellant’s application in December 2008. On six occasions in 2008 before Blue Cross approved the application, respondent reimbursed appellant $505. Respondent contacted Blue Cross to determine if appellant was insured. After determining appellant had not been insured when receiving the reimbursements, respondent discharged appellant.
In December 2009, appellant sued respondent pleading claims for unlawful termination, invasion of privacy, negligent infliction of emotional distress, intentional infliction of emotional distress, and defamation. Respondent asserted counterclaims of conversion and fraud and later moved for summary judgment on all claims. The district court granted summary judgment as to appellant’s claims but denied summary judgment as to respondent’s counterclaims. Pursuant to Minn. R. Civ. P. 68, respondent offered to dismiss its counterclaims with prejudice in return for appellant dismissing her claims against respondent with prejudice. Appellant declined the offer. After a two-day trial,
3
the jury found that appellant’s conduct resulted in conversion of respondent’s property, assessing damages of $833.17, but that she did not commit fraudulent misrepresentation. The district court concluded that, pursuant to rule 68, respondent was entitled to costs and disbursements.
Appellant filed a notice of appeal on September 6, 2011, simultaneously with her brief, which commenced respondent’s 30-day briefing period. See Minn. R. Civ. App. P. 131.01, subd. 2 (stating that respondent’s brief is due within 30 days after service of appellant’s brief). However, appellant failed to order a transcript as required by Minn. R. Civ. App. P. 110.02. Appellant moved for additional time to order the transcript; that motion was denied on the basis that allowing appellant to order a transcript at a late stage in the appeal process would prejudice respondent. This appeal follows.
D E C I S I O N
A party seeking review of a district court’s decision must provide a transcript as part of the record on review. Minn. R. Civ. App. P. 110.02. Failure to order a transcript may result in dismissal, or the court may conduct a review of the appeal that is limited to whether the district court’s conclusions of law are supported by the findings of fact. Duluth Herald & News Tribune v. Plymouth Optical Co., 286 Minn. 495, 498, 176 N.W.2d 552, 555 (1970). Dismissal is appropriate if, absent the transcript, the record is inadequate. Noltimier v. Noltimier, 280 Minn. 28, 29, 157 N.W.2d 530, 531 (1968).
4
Here, appellant challenges only the district court’s grant of summary judgment, which we may review without a trial transcript.1
In her lawsuit against respondent, appellant claimed unlawful termination, invasion of privacy, negligent infliction of emotional distress, intentional infliction of emotional distress, and defamation. Appellant challenges the district court’s summary judgment in favor of respondent on her claims, but her arguments are often unclear. Appellant recites caselaw but provides little, if any, analysis and does not argue in what way the district court may have erred. Therefore, appellant arguably has waived her arguments on appeal because her briefing is inadequate. See Schoepke v. Alexander Smith & Sons Carpet Co., 290 Minn. 518, 519–20, 187 N.W.2d 133, 135 (1971) (determining that “assignment of error based on mere assertion and not supported by any argument or authorities in appellant’s brief is waived,” unless prejudicial error is obvious). In the interests of justice, however, we will address appellant’s claims. See Minn. R. Civ. App. P. 103.04 (noting that appellate courts may address issues as justice requires).
Summary judgment allows a court to dispose of a claim on the merits “if there is no genuine dispute regarding the material facts, and a party is entitled to judgment under the law applicable to such facts.” DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997). “[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). “We review de novo whether a genuine issue of material fact exists” and
1 The record includes the transcript of the summary-judgment hearing.
5
“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). We ask in reviewing summary judgment whether: (1) genuine issues of material fact exist and (2) the district court erred in applying the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).
Unlawful termination
Appellant argues that the district court erred in granting summary judgment on her unlawful-termination claim because the jury found that appellant did not commit fraud. The district court concluded that, because Minnesota is an at-will state and no employment contract existed, appellant’s unlawful-termination claim failed. “In the absence of an express or implied agreement to the contrary, . . . Minnesota law presumes that employment for an indefinite duration is at will.” Kvidera v. Rotation Eng’g & Mfg. Co., 705 N.W.2d 416, 420 (Minn. App. 2005) (quotation omitted). But a presumption of at-will employment may be overcome if an employee engages in conduct protected by statute. Kratzer v. Welsh Cos., LLC, 771 N.W.2d 14, 18–19 (Minn. 2009) (noting that whistleblower statute makes it illegal for employer to terminate employee for reporting to employer a violation of federal or state law).
Here, no employment contract existed, and appellant did not assert that she was discharged for statutorily protected behavior. In addition, the employer’s insurance-reimbursement plan stated that “[t]his plan shall not be deemed to constitute an employment contract.” Because appellant failed to provide any evidence showing that she was not an at-will employee, the district court did not err in granting summary judgment to respondent on appellant’s unlawful-termination claim. See Lubbers v.
6
Anderson, 539 N.W.2d 398, 401 (Minn. 1995) (“A defendant is entitled to summary judgment as a matter of law when the record reflects a complete lack of proof on an essential element of the plaintiff’s claim.”).
Invasion of privacy
Appellant argues that the district court erred by granting summary judgment to respondent on her invasion-of-privacy claim because “respondent violated the law by invading [her] privacy without consent” when it obtained information from Blue Cross regarding her lack of insurance. The district court concluded that private information does not include information regarding whether a person has insurance coverage and, therefore, respondent did not violate appellant’s privacy by contacting Blue Cross to inquire about appellant’s insurance coverage. Minn. Stat. § 72A.502, subd. 2 (2010), authorizes accessing privileged or personal information in connection with insurance transactions if that information “is reasonably necessary to detect or prevent criminal activity [or] fraud.” Blue Cross & Blue Shield of Minn. v. Larson, 472 N.W.2d 885, 886 (Minn. App. 1991) (citing Minn. Stat. § 72A.502, subd. 2 (1990)) (determining legislature specifically authorized disclosure of personal or privileged information in cases involving insurance fraud), review denied (Minn. Sept. 17, 1991).
Here, appellant indicated to respondent that she was insured by Blue Cross, and therefore respondent was authorized under Minn. Stat. § 72A.502 to obtain from Blue Cross information that appellant was not insured. In doing so, respondent did not violate appellant’s privacy. Therefore, the district court did not err as a matter of law by granting summary judgment on appellant’s invasion-of-privacy claim.
7
Negligent infliction of emotional distress
Appellant argues that the district court erred in granting respondent summary judgment on her negligent-infliction-of-emotional-distress claim. Appellant argues that she suffered emotional distress caused by respondent’s “extreme, outrageous, and reckless” conduct that “passes the boundaries of decency and is utterly intolerable to the civilized community.” A negligent-infliction-of-emotional-distress claim succeeds “when that plaintiff is within a zone of danger of physical impact, reasonably fears for his or her own safety, and consequently suffers severe emotional distress with resultant physical injury.” Bohdan v. Alltool Mfg., Co., 411 N.W.2d 902, 907 (Minn. App. 1987), review denied (Minn. Nov. 13, 1987). “An exception to the ‘zone-of-danger’ rule is that a plaintiff may recover damages for mental anguish or suffering for a direct invasion of his rights, such as defamation, malicious prosecution, or other willful, wanton or malicious conduct.” Id. But whether pleading the zone of danger or its exception, plaintiff must show physical manifestations of the distress to prove “the genuineness and gravity of the emotional suffering.” Soucek v. Banham, 503 N.W.2d 153, 164 (Minn. App. 1993) (quotation omitted).
It is undisputed that appellant alleged no physical injuries. Therefore, appellant cannot demonstrate severe emotional distress, and the district court did not err in granting respondent summary judgment on appellant’s negligent-infliction-of-emotional-distress claim.
8
Intentional infliction of emotional distress
Appellant appears to apply the same argument that she asserted for her negligent-infliction-of-emotional-distress claim to her intentional-infliction-of-emotional-distress claim: that she suffered emotional distress caused by respondent’s “extreme, outrageous, and reckless” conduct that “passes the boundaries of decency and is utterly intolerable to the civilized community.” To recover for intentional infliction of emotional distress, a plaintiff must show: (1) that the conduct is extreme and outrageous, (2) that it is intentional or reckless, (3) that it causes emotional distress, and (4) that the distress is severe. Hubbard v. United Press Int’l, 330 N.W.2d 428, 438–39 (Minn. 1983). Summary judgment on an intentional-infliction-of-emotional-distress claim is granted “if a party does not meet the high standard of proof needed” to establish emotional distress. Kuelbs v. Williams, 609 N.W.2d 10, 17 (Minn. App. 2000), review denied (Minn. June 27, 2000).
The district court concluded that appellant had not satisfied the elements of an intentional-infliction-of-emotional-distress claim because, among other reasons, she failed to demonstrate severe mental distress. The district court found that appellant’s complaint contained conclusory statements that offered nothing more than evidence of therapy, depression, anxiety, and financial difficulties typical for a person who recently lost her job. We agree that these averments do not satisfy the heavy burden of demonstrating severe emotional distress, and therefore appellant’s intentional-infliction-of-emotional-distress claim was insufficient to withstand a summary judgment motion.
9
Defamation
Appellant argues that the district court erred by dismissing her defamation claim because respondent’s employee stated in the presence of others that appellant stole money from respondent when the employee’s statement was “proven . . . false per judge’s order.”2 To establish defamation, a plaintiff must prove that a statement: (1) was false, (2) was communicated to someone else, and (3) tended to harm the plaintiff’s reputation. Richie v. Paramount Pictures Corp., 544 N.W.2d 21, 25 (Minn. 1996).
Because appellant disputed the truth of respondent employee’s statement, the district court accepted for purposes of summary judgment that the statement was false. But a statement, even if defamatory, is qualifiedly privileged if it is made upon a proper occasion, from a proper motive, and based on reasonable or probable cause. McBride v. Sears, Roebuck & Co., 306 Minn. 93, 96, 235 N.W.2d 371, 374 (1975). To defeat qualified privilege, a plaintiff must prove actual malice, which is “ill-will and improper motive or wishing wantonly and without cause to injure the plaintiff.” Bauer v. State, 511 N.W.2d 447, 449 (Minn. 1994). We agree with the district court that respondent’s statement was qualifiedly privileged and that appellant did not present evidence sufficient to overcome the qualified privilege. Appellant provided no evidence of ill will or wanton conduct on the part of respondent, and therefore summary judgment was appropriate on the defamation claim.
2 Appellant uses the term “slander” throughout her brief. However, caselaw generally uses the broader category of defamation. “Oral defamation is slander; written defamation is libel.” Black’s Law Dictionary 480 (9th ed. 2009) (quotation omitted).
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Appellant also argues that the district court erred in dismissing the defamation claim because she must show prospective employers the discharge letter from respondent, which states that appellant was terminated for knowingly committing insurance fraud. Appellant asserts that she must reveal the letter because potential future employers require a reason for her discharge, and respondent knew appellant would be compelled to provide the letter to prospective employers.
The district court ruled on appellant’s “forced self-slander” claim separately. But because it represents a theory of defamation, we include it as part of appellant’s defamation claim. As the district court recognized, it appears that appellant’s “forced self-slander” claim may have been intended to be a claim for compelled self publication. Typically, when a defendant communicates a statement to a plaintiff, who communicates the statement to a third party, publication of the statement does not occur. Keuchle v. Life’s Companion P.C.A., Inc., 653 N.W.2d 214, 219 (Minn. App. 2002). But publication occurs if “the plaintiff is compelled to publish the defamatory statement to a third person and if it was foreseeable to the defendant that the plaintiff would be so compelled.” Id. In any event, as with appellant’s general defamation claim, the record does not establish that when respondent provided the reason for appellant’s discharge, it was done with malice. See Michaelson v. Minn. Mining & Mfg. Co., 474 N.W.2d 174, 181 (Minn. App. 1991) (stating that the law does not imply malice from a communication, and actual malice must be proved), aff’d, 479 N.W.2d 58 (Minn. 1992) (quotation omitted). We conclude that summary judgment was appropriate.
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Finally, appellant alleged, although not in her formal pleadings, that respondent did not pay her salary and vacation pay owed within the required time frame. Appellant also makes this argument on appeal. As the district court noted, if a discharged employee was entrusted with money or property while employed, the employer has ten working days to adjust the person’s owed wages. Minn. Stat. § 181.14, subd. 4 (2010). Appellant was entrusted with keys and medications that she asserts she returned to respondent after she was discharged. However, respondent argues that appellant also was entrusted with respondent’s property in the form of a personal loan made to appellant, in addition to the unpaid insurance-reimbursement payments. The district court found that it was undisputed that respondent provided the required accounting within the ten-day period. On appeal, appellant disputes that respondent provided this accounting, but she has provided no evidence to support this assertion. In addition, accrued vacation is an earned right to paid time off, not payment when discharged, unless an employment contract states otherwise. Lee v. Fresenius Med. Care, Inc., 741 N.W.2d 117, 126 (Minn. 2007). Appellant provides no evidence of an employment contract allowing for payment of vacation time upon discharge.
Affirmed.

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
A11-298
Amy Radford, Respondent, vs. Airizes Miller, Appellant, Terry Roemhildt, et al., Defendants.
Filed April 23, 2012
Affirmed
Halbrooks, Judge
Kanabec County District Court
File No. 33-CV-09-430
Jeffrey Alan Nath, Law Office of Jeffrey A. Nath, PLLC, White Bear Lake, Minnesota (for appellant)
Amy Radford, Minneapolis, Minnesota (pro se respondent)
Considered and decided by Hudson, Presiding Judge; Halbrooks, Judge; and Collins, Judge. Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.
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U N P U B L I S H E D O P I N I O N
HALBROOKS, Judge
After a jury trial, respondent was awarded $20,000 against appellant on her claim of invasion of privacy by intrusion upon seclusion. Appellant challenges the district court’s denial of his motion for judgment as a matter of law (JMOL) or a new trial. We affirm.
FACTS
Appellant Airizes Miller held record title to property in Kanabec County. He obtained the title by quitclaim deed from Visions Real Estate Holding Co. Inc. owned by Terry Roemhildt. Miller recorded the deed with the office of the Kanabec County Recorder on July 12, 2005. Miller subsequently transferred the land back to Roemhildt by quitclaim deed on October 11, 2008, but Roemhildt never recorded the deed. On January 7, 2009, Miller sold the land to respondent Amy Radford for $39,000. Radford recorded the deed with Kanabec County.
Before buying the property, Radford checked the Kanabec County records and saw no notice of Roemhildt’s interest in the property. After Radford finalized the agreement with Miller, she and her family went to the property multiple weekends to clean up the land, collect dead fall, build a driveway, and prepare the property to build a permanent home. During one of the weekends that Radford and her family were at the property, Roemhildt came onto the property and left a note in their canopy tent, stating that he owned the land and providing his phone number. After Roemhildt and Radford talked, Roemhildt faxed her the documents that he had regarding his quitclaim deed.
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Radford conducted a title search on the land and confirmed that it was Miller’s land to sell. Roemhildt also went to the recorder’s office and ascertained that the land remained in Miller’s name.
Miller tried to cancel his purchase agreement with Radford. Miller testified that the agreement included terms that Radford would obtain financing to pay the full purchase price. When she did not get a loan after five to seven months, Miller said that he no longer wanted to work with Radford and that the transaction was off because she breached the contract. But Miller continued to accept $500 monthly payments from Radford during this time. After Miller claimed that he cancelled the transaction, he went to Florida for a period of time, but subsequently learned that Radford was still developing the land. Miller testified at trial that because the land was still in his name, he told Roemhildt to put up “no trespassing” signs to make it clear that he did not want Radford on the property. Roemhildt posted two signs, one on each side of the driveway that Radford put in, and signed “Airizes Miller” on them. Radford called the Kanabec County Sheriff six times because Roemhildt continued to show up at the property. Finally, Radford filed a lawsuit.
Radford sued Miller, as well as Terry Roemhildt, Michelle Roemhildt, and Visions Real Estate. Radford asserted that (1) she is the rightful owner of the land; (2) the defendants conspired to commit fraud and deprive her of the rights to the property; (3) she is entitled to damages based on private nuisance, trespass, and invasion of privacy by intruding upon her seclusion; and (4) the damages owed by defendants offset the $36,000 she still owed on her contract for deed. Radford and Miller represented
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themselves at trial; an attorney represented Terry and Michelle Roemhildt and Visions Real Estate.
After a two-day jury trial, the district court submitted to the jury the issues of invasion of privacy against Miller and Terry Roemhildt and whether Radford had prior knowledge of Roemhildt’s interest in the property. The district court dismissed the claims of conspiracy to commit fraud and nuisance because Radford did not present evidence of damages for those claims, as well as the claims against Michelle Roemhildt and Visions Real Estate. The district court reserved for its own resolution Radford’s quiet-title claim. The jury found that Terry Roemhildt did not intentionally intrude upon Radford’s seclusion, but that Miller did, and awarded Radford $20,000 in damages. The district court found that Miller has title to the disputed land, subject to the purchase agreement with Radford. Miller brought posttrial motions for JMOL or for a new trial, which the district court denied. This appeal follows.
D E C I S I O N
I.
Miller argues that the district court erred by not granting his motion for JMOL or, in the alternative, a new trial. A district court may grant a motion for JMOL when a party “has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party.” Minn. R. Civ. P. 50.01(a). The district court should not grant JMOL when reasonable jurors could draw different conclusions from the record. Bahr v. Boise Cascade Corp., 766 N.W.2d 910, 919 (Minn. 2009). We review a district court’s JMOL decision de novo, but we examine “the evidence in a light most
5
favorable to the nonmoving party.” Jerry’s Enters., Inc. v. Larkin, Hoffman, Daly & Lindgren, Ltd., 711 N.W.2d 811, 816 (Minn. 2006).
Miller contends that Radford failed to prove the necessary components of the tort of invasion of privacy by intrusion upon seclusion. There are three elements to this claim: “an intrusion; that is highly offensive; and into some matter in which a person has a legitimate expectation of privacy.” Swarthout v. Mut. Serv. Life Ins. Co., 632 N.W.2d 741, 744 (Minn. App. 2001); Restatement (Second) of Torts § 652B (1977).
Miller argues that there was no intrusion because Roemhildt was the only one to go onto Radford’s property, and Miller cannot be liable for the actions of a third party. An intrusion can be perpetrated by different means. It can be a physical intrusion into a physical space; it can be through a “defendant’s senses, with or without mechanical aids, to oversee or overhear a person’s private affairs”; or it can be through investigating a person’s private affairs, such as “opening private or personal mail, searching [a] safe or wallet, [or] examining a private bank account.” Restatement (Second) of Torts § 652B, cmt. b.
In response to Radford’s questions during trial, Miller testified:
I owned the land and [Roemhildt] has permission to be on the land. I’m the one who told him to write my name on [the no] trespassing sign. He had permission, my permission, to be there. . . .
. . . .
. . . I told you that I wanted you off the property, we were done. You did not follow direct orders. I had [Roemhildt] go out there and we were contacting each other and I told him to put up those signs. And like I said earlier, I
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told the officer too that he has my permission. So therefore he does have permission to be out on the land. You did not.
When the evidence is considered in the light most favorable to Radford, it establishes a direct link between Miller’s direction to Roemhildt to post the “no trespassing” signs and the physical intrusion onto Radford’s land. Because Miller’s actions directly caused the physical intrusion upon the seclusion of Radford, the district court did not err in denying Miller’s motion for JMOL.
Next, Miller contends that Radford failed to establish that the intrusion was highly offensive. To be highly offensive, the intrusion must be substantial to a reasonable person and one to which a reasonable person would strongly object. Swarthout, 632 N.W.2d at 745 (quoting Restatement (Second) of Torts § 652B, cmt. d). The illustration from the Restatement provides:
[T]here is no liability for knocking at the plaintiff’s door, or calling . . . on one occasion or even two or three, to demand payment of a debt. It is only when the telephone calls are repeated with such persistence and frequency as to amount to a course of hounding the plaintiff, that becomes a substantial burden to his existence, that his privacy is invaded.
Restatement (Second) of Torts § 652B, cmt. d. Radford testified that she called the Kanabec County Sheriff six times because Roemhildt continued to show up at the property and that, as a result of the intrusions, she no longer felt safe to bring her children to the property. This evidence, when viewed in the light most favorable to Radford, is sufficient to establish that the intrusion was highly offensive.
Finally, Miller contends that Radford did not present any evidence of damages as a result of the intrusion. But Radford testified regarding her damages. In addition to
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feeling that the property was no longer a safe place for her children, Radford testified that she was unable to build on the property throughout the spring and summer because the city would not issue a permit with the pending legal action. Being unable to build was significant to Radford and her family because they “purchased the property to build [their] future home, to have a place out in the country . . . to be self sufficient. This was going to be [their] permanent home.” Radford had also invested time and resources in the land—she made $500 monthly payments and put in a driveway. This is sufficient evidence to support the finding of damages.
Miller also asserts that the district court erred by denying his motion for a new trial. A new trial may be granted if the “verdict, decision, or report is not justified by the evidence, or is contrary to law.” Minn. R. Civ. P. 59.01(g). “Whether the verdict is justified by the evidence presents a factual question and the district court may properly weigh the evidence.” Clifford v. Geritom Med., Inc., 681 N.W.2d 680, 687 (Minn. 2004).
In weighing the evidence, the district court reasoned:
[T]here was testimony by Defendant Miller that he directed Terry Roemhildt to write Miller’s name on no-trespassing signs and place the signs on the subject property. Miller testified he owned the property and ordered [Radford] to remove herself from the property, despite the contract between Miller and [Radford] in which Miller agreed to sell the property to [her]. Miller also testified that he gave Terry Roemhildt, as well as a police officer, permission to access the property.
The evidence, when viewed in the light most favorable to [Radford], supports the jury’s verdict that Defendant Miller intentionally intruded upon the solitude or seclusion of [Radford] and that [she] had a reasonable expectation of privacy in her solitude or seclusion. The Court is satisfied that there was no sympathy, improper motive, passion, or
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prejudice introduced at trial that would render the need for a new trial under these circumstances. As the verdict is sustained by a preponderance of the evidence, Defendant Miller’s motion for a new trial is denied.
Because the district court weighed the evidence and has broad discretionary power to order a new trial, it did not err in denying Miller’s motion for a new trial.
II.
Miller contends that the district court erred by allowing the claim of invasion of privacy against him go to the jury. Minn. R. Civ. P. 41.02(a) provides, “The court may upon its own initiative, or upon motion of a party, and upon such notice as it may prescribe, dismiss an action or claim for failure to prosecute or to comply with these rules or any order of the court.” The purpose of the rule is to enforce the rules of procedure. Lampert Lumber Co. v. Joyce, 405 N.W.2d 423, 425 (Minn. 1987). We review a district court’s application of rule 41.02 for an abuse of discretion. Zuleski v. Pipella, 309 Minn. 585, 586, 245 N.W.2d 586, 587 (1976).
Miller claims that Radford abandoned her invasion-of-privacy claim against him at the end of trial when the district court was determining which jury instructions to give. When the district court was clarifying the claims that Radford wanted to pursue, it asked, “Your demand for damages for invasion of privacy for whom?” She responded, “Against Terry Roemhildt only.” But the district court still submitted the invasion-of-privacy claim against Miller to the jury with no objection from any of the parties.
The conditions that might warrant the dismissal of a complaint under rule 41.02 are not present. First, Radford offered evidence to support the claim of invasion of
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privacy against Miller through testimony that Miller did intrude into her seclusion when he instructed Roemhildt to post the “no trespassing” signs. Second, there were no allegations that Radford failed to abide by the rules of civil procedure or did not follow an order from the district court. Finally, Miller did not bring a motion to dismiss, and the district court has broad discretion to dismiss the case on its own initiative, as it “may” do so. See Minn. Stat. § 645.44, subd. 15 (2010) (defining “may” as permissive). Because the district court has broad discretion under rule 41.02 and because Radford did not violate any rules of procedure or fail to make her case, the district court did not err by submitting the claim to the jury.
III.
Miller contends that the district court erred by not submitting to the jury the issue of the validity of the vacant-land purchase agreement and the amendment to the purchase agreement. A party who disagrees with a jury instruction, or the failure to give a jury instruction, must make a proper objection before the district court instructs the jury. Minn. R. Civ. P. 51.03. A party cannot assign error to the district court for the failure to give an instruction unless it was properly requested under rule 51.01. Minn. R. Civ. P. 51.04(a)(2). Nevertheless, if a party fails to object, this court can still consider plain error if it affected substantial rights. Minn. R. Civ. P. 51.04(b); see also H Window Co. v. Cascade Wood Prods., Inc., 596 N.W.2d 271, 275 (Minn. App. 1999), review denied (Minn. Aug. 17, 1999). To constitute plain error, the omission must be “with respect to a fundamental law.” Anderson v. Ohm, 258 N.W.2d 114, 118 (Minn. 1977). And a party’s rights are substantially affected when the correctness of an entire claim is destroyed, the
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result is a miscarriage of justice, or it causes substantial prejudice to a party. Lindstrom v. Yellow Taxi Co. of Minneapolis, 298 Minn. 224, 229, 214 N.W.2d 672, 676 (1974).
Because Miller failed to object to the jury instructions, there must be a plain error of law that substantially affected his rights. The district court opted to determine the issue of quiet title (the issue associated with the validity of the purchase agreement) because of the equitable issues involved and the complexity of the issues. The district court reasoned that an action to quiet title involves equitable remedies when used to determine adverse claims, relying on Gabler v. Fedoruk, 756 N.W.2d 725, 730 (Minn. App. 2008) (stating that an action to quiet title and an action to determine adverse claims are equitable actions). The district court stated, “It is within the court’s discretion whether to submit an equitable action, such as an action to quiet title or determine adverse claims, to the jury.” The district court cited to Denman v. Gans, 607 N.W.2d 788, 793-94 (Minn. App. 2000), review denied (Minn. June 27, 2000), which held that “[b]ecause appellant’s action was fundamentally to quiet title or to determine an adverse claim, the action is one that would traditionally be considered equitable. Accordingly, appellants were not entitled to a jury trial as a matter of right.” Because the district court correctly applied the law by using its discretion to resolve the issue of quiet title, there was no plain error of law.
Affirmed.

Michael Woodrow De Vries, Latham & Watkins LLP, Costa Mesa, CA, for the plaintiff-appellee.

698*698 Henry M. Burgoyne III, Karl S. Kronenberger, Kronenberger Burgoyne LLP, San Francisco, CA, for the assignee-appellee.

Before: CYNTHIA HOLCOMB HALL, W. FLETCHER and RICHARD A. PAEZ, Circuit Judges.

WILLIAM A. FLETCHER, Circuit Judge:

John Zuccarini is a judgment debtor who owns the rights to many Internet domain names. DS Holdings (“DSH”) is the assignee of the judgment against Zuccarini. DSH attempted to levy upon Zuccarini’s domain name holdings in the Northern District of California where VeriSign, the official registry for all “.com” and “.net” domain names, has its headquarters. The district court appointed a receiver to take control of and auction off some of Zuccarini’s domain names in order to satisfy the judgment.

Zuccarini appeals, contending that the Northern District of California is not a proper place to levy upon his domain names and that the appointment of the receiver was therefore improper.

We affirm.

I. Background

In December 2000, Office Depot obtained a judgment against Zuccarini under the Anticybersquatting Consumer Protection Act of 1999 (“ACPA”), 15 U.S.C. § 1125(d), arising out of Zuccarini’s registration of the domain name “offic-depot.com.” Office Depot was unable to collect on the judgment and eventually assigned the judgment to DSH.

DSH sought to levy upon some of the other domain names owned by Zuccarini. DSH registered the judgment in the district court for the Northern District of California. DSH then obtained a preservation order from the district court and engaged in discovery. It learned that Zuccarini owned more than 248 domain names registered with VeriSign, of which more than 190 were “.com” domain names. DSH targeted the “.com” domain names in its levy.

Some background information on the structure of the domain name system will be helpful to the reader:

Every computer connected to the Internet has a unique Internet Protocol (“IP”) address. IP addresses are long strings of numbers, such as 64.233.161.147. The Internet [domain name system] provides an alphanumeric shorthand for IP addresses. The hierarchy of each domain name is divided by periods. Thus, reading a domain name from right to left, the portion of the domain name to the right of the first period is the top-level domain (“TLD”). TLDs include .com, .gov, .net., and .biz. Each TLD is divided into second-level domains identified by the designation to the left of the first period, such as “example” in “example.com” or “example.net.” … Each domain name is unique and thus can only be registered to one entity….

A domain name is created when it is registered with the appropriate registry operator. A registry operator maintains the definitive database, or registry, that associates the registered domain names with the proper IP numbers for the respective domain name servers. The domain name servers direct Internet queries to the related web resources. A registrant can register a domain name only through companies that serve as 699*699 registrars for second level domain names. Registrars accept registrations for new or expiring domain names, connect to the appropriate registry operator’s TLD servers to determine whether the name is available, and register available domain names on behalf of registrants….

The majority of domain name registrations for commercial purposes utilize the .com TLD.

Coalition for ICANN Transparency, Inc. v. VeriSign, Inc., 464 F.Supp.2d 948, 951-53 (N.D.Cal.2006), reversed by 567 F.3d 1084 (9th Cir.2009).

As explained in Coalition for ICANN Transparency, there are three primary actors in the domain name system. First, companies called “registries” operate a database (or “registry”) for all domain names within the scope of their authority. Second, companies called “registrars” register domain names with registries on behalf of those who own the names. Registrars maintain an ownership record for each domain name they have registered with a registry. Action by a registrar is needed to transfer ownership of a domain name from one registrant to another. Third, individuals and companies called “registrants” own the domain names. Registrants interact with the registrars, who in turn interact with the registries.

VeriSign is the registry for the domain names “.com” and “.net”. Id. at 953. Its headquarters are located in Mountain View, California, in the Northern District of California. During discovery, DSH learned that the registrars for Zuccarini’s “.com” and “.net” domain names were located in the United States, Germany, and Israel. DSH filed a request in the district court for a turnover order to compel the registrars of certain “.com” domain names owned by Zuccarini to transfer ownership to DSH. The district court denied the request, holding that, under California Civil Procedure Code § 699.040, it could not order third parties to turn over property. DSH then moved for the appointment of a receiver who would obtain and sell the “.com” domain names in question and would use the proceeds to satisfy the judgment. The district court granted the motion to appoint a receiver.

Zuccarini appealed. We have jurisdiction under 28 U.S.C. § 1292(a)(2) to entertain an appeal from an interlocutory order appointing a receiver.

II. Standard of Review

We review for abuse of discretion a district court order appointing a receiver. Canada Life Assurance Co. v. LaPeter, 563 F.3d 837, 844 (9th Cir.2009). We review de novo a district court’s interpretation of law, including state law. Capital Dev. Co. v. Port of Astoria, 109 F.3d 516, 518 (9th Cir.1997).

III. Discussion

DSH does not argue that the district court in the Northern District of California has in personam jurisdiction over Zuccarini. Rather, it argues that the court has jurisdiction over Zuccarini’s intangible property that is located, for purposes of attachment, in the Northern District.

The type of jurisdiction at issue is “type two quasi in rem.” See Restatement (First) of Judgments § 32 (1942). Type two quasi in rem jurisdiction is used to establish the ownership of property in a dispute unrelated to the property. Type two quasi-in rem jurisdiction is sometimes called “attachment jurisdiction.” See Restatement (Second) of Judgments § 8 (1982). So far as the record in this case shows, the domain names upon which DSH seeks to levy were not involved in the 700*700 underlying litigation that led to the judgment against Zuccarini.

A district court can obtain quasi in rem jurisdiction over property situated within its geographical borders. See Pennington v. Fourth Nat’l Bank, 243 U.S. 269, 272, 37 S.Ct. 282, 61 L.Ed. 713 (1917); Fed.R.Civ.P. 4(n)(2) (“[T]he court may assert jurisdiction over the defendant’s assets found in the district. Jurisdiction is acquired by seizing the assets under the circumstances and in the manner provided by state law in that district.”). Though “the situs of intangibles is often a matter of controversy,” Hanson v. Denckla, 357 U.S. 235, 246-47, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958), quasi in rem jurisdiction can be asserted over intangible property. Harris v. Balk, 198 U.S. 215, 25 S.Ct. 625, 49 L.Ed. 1023 (1905). Due process requires a constitutionally sufficient relationship among the defendant, the forum, and the litigation. Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977). In an action to execute on a judgment, due process concerns are satisfied, assuming proper notice, by the previous rendering of a judgment by a court of competent jurisdiction. Id. at 210 n. 36, 97 S.Ct. 2569 (“Once it has been determined by a court of competent jurisdiction that the defendant is a debtor of the plaintiff, there would seem to be no unfairness in allowing an action to realize on that debt in a State where the defendant has property, whether or not that State would have jurisdiction to determine the existence of the debt as an original matter.”); Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co., 284 F.3d 1114, 1127 (9th Cir.2002) (quoting Shaffer).

We have previously noted that “[s]tate law has been applied under Rule 69(a) to garnishment, mandamus, arrest, contempt of a party, and appointment of receivers,” when such actions are undertaken in aid of executing on a judgment. In re Merrill Lynch Relocation Mgmt., Inc., 812 F.2d 1116, 1120 (9th Cir.1987); see also Edmonston v. Sisk, 156 F.2d 300, 301 (10th Cir. 1946) (applying Rule 69(a), and state law, to appointment of receiver in aid of an action for execution); 12 Charles Alan Wright, Arthur R. Miller & Richard L. Marcus, Federal Practice and Procedure § 3012 at 148-49. We now take the opportunity to explain why this is so.

Federal Rule of Civil Procedure 69 governs procedures on execution of a judgment and, for the most part, directs the district court to look to state rules. The version of Rule 69(a) relied upon by the district court provided as follows:

Process to enforce a judgment for the payment of money shall be a writ of execution, unless the court directs otherwise. The procedure on execution, in proceedings supplementary to and in aid of a judgment, and in proceedings on and in aid of execution shall be in accordance with the practice and procedure of the state in which the district court is held, existing at the time the remedy is sought, except that any statute of the United States governs to the extent that it is applicable….^[1]

701*701 To paraphrase, Rule 69 provides that state law applies generally, but a federal statute governs to the extent it applies.

Rule 66 governs the appointment of a receiver in federal court. It provides:

These rules govern an action in which the appointment of a receiver is sought or a receiver sues or is sued. But the practice in administering an estate by a receiver or a similar court-appointed officer must accord with the historical practice in federal courts or with a local rule. An action in which a receiver has been appointed may be dismissed only by court order.

The federal rules, including Rule 66, qualify as federal statutes under Rule 69(a). Bair v. Bank of Am. Nat’l Trust & Sav. Ass’n, 112 F.2d 247, 249-50 (9th Cir.1940) (applying federal rule to Rule 69 action); see also Schneider v. Nat’l R.R. Passenger Corp., 72 F.3d 17, 19 (2d Cir.1995) (“This term includes the Federal Rules of Civil Procedure, since they have the force and effect of federal statutes.”); Okla. Radio Assoc. v. FDIC, 969 F.2d 940, 942 (10th Cir.1992). Therefore, Rule 66 prevails over any state law to the extent it applies. However, Rule 66 does not provide a rule governing the proper location for appointment of a receiver in aid of execution of a judgment. Because Rule 66 does not provide a governing rule, we look to state law.

California Civil Procedure Code § 695.010(a) provides, “Except as otherwise provided by law, all property of the judgment debtor is subject to enforcement of a money judgment.” Section 699.710 provides, inter alia, “[A]ll property that is subject to enforcement of a money judgment… is subject to levy under a writ of execution to satisfy a money judgment.” Under these provisions, all property of a judgment debtor can be used to satisfy a writ of execution.

California Civil Procedure Code § 708.620 governs the appointment of a receiver in aid of the execution of a judgment in California state courts. It provides:

The court may appoint a receiver to enforce the judgment where the judgment creditor shows that, considering the interests of both the judgment creditor and the judgment debtor, the appointment of a receiver is a reasonable method to obtain the fair and orderly satisfaction of the judgment.

This rule does not indicate where a receiver over property should be appointed. However, § 699.510(a) provides that the appropriate place to direct a writ of execution is the county where the levy is to be made:

[A]fter entry of a money judgment, a writ of execution shall be issued by the clerk of the court upon application of the judgment creditor and shall be directed to the levying officer in the county where the levy is to be made and to any registered process server.

The combined effect of these provisions is to provide that if the domain names are property subject to execution, and if they are located in the Northern District of California, that district is an appropriate location to execute judgment on them through the appointment of a receiver. There are thus two questions before us. First, are domain names property that is subject to execution? Second, if so, where are the domain names located for purposes of execution? We address these questions in turn.

First, we have already held that domain names are intangible property under California law. Kremen v. Cohen, 337 F.3d 1024, 1030 (9th Cir.2003). In Palacio Del Mar Homeowners Ass’n, Inc. v. McMahon, 174 Cal.App.4th 1386, 1391, 95 Cal.Rptr.3d 445 (2009), a California 702*702 Court of Appeal held that domain names do not constitute property subject to a turnover order because they cannot be taken into custody. The court in Palacio Del Mar based its holding on a reading of California Civil Procedure Code § 699.040, which provides that, with respect to a turnover order, property must “be levied upon by taking it into custody.” However, the court left open the question whether domain names constitute intangible property generally, and it cited Kremen with approval. Moreover, the “taking it into custody” language in § 699.040 does not appear in § 708.620, which governs the appointment of receivers. We conclude that Kremen is still an accurate statement of California law, and that domain names are intangible property subject to a writ of execution.

Second, we note that “attaching a situs to intangible property is necessarily a legal fiction; therefore, the selection of a situs for intangibles must be context-specific, embodying a `common sense appraisal of the requirements of justice and convenience in particular conditions.’” Af-Cap Inc. v. Republic of Congo, 383 F.3d 361, 371 (5th Cir.2004) (quoting U.S. Indus., Inc. v. Gregg, 540 F.2d 142, 151 n. 5 (3rd Cir.1976)). That is, the location of intangible property varies depending on the purpose to be served:

The situs may be in one place for ad valorem tax purposes; it may be in another place for venue purposes, i.e., garnishment; it may be in more than one place for tax purposes in certain circumstances; it may be in still a different place when the need for establishing its true situs is to determine whether an overriding national concern, like the application of the Act of State Doctrine is involved.

Tabacalera Severiano Jorge, S.A. v. Standard Cigar Co., 392 F.2d 706, 714-15 (5th Cir.1968) (citations omitted). A single piece of intangible property may be located in multiple places for some purposes. Curry v. McCanless, 307 U.S. 357, 367-68, 59 S.Ct. 900, 83 L.Ed. 1339 (1939).

California law says nothing specific about the location of domain names. However, in the Anticybersquatting Consumer Protection Act Congress has addressed the question. Under the ACPA, a trademark owner in a civil cybersquatting action can proceed in personam against the cybersquatter. If there is no in personam jurisdiction in any judicial district of the United States, the owner may proceed in rem against the allegedly infringing domain name. 15 U.S.C. § 1125(d)(2)(A)(ii)(I). The ACPA provides that in rem jurisdiction over these domain names shall be “in the judicial district in which the domain name registrar, domain name registry, or other domain name authority that registered or assigned the domain name is located….” 15 U.S.C. § 1125(d)(2)(A). The ACPA also provides for the legal situs of the domain name once a lawsuit has been filed:

In an in rem action under this paragraph, a domain name shall be deemed to have its situs in the judicial district in which … the domain name registrar, registry, or other domain name authority that registered or assigned the domain name is located….

Id. § 1125(d)(2)(C)(i); see also Mattel, Inc. v. Barbie-Club.com, 310 F.3d 293, 302 (2d Cir.2002) (interpreting these provisions). Although the current proceeding is not an action under the ACPA, the statute is authority for the proposition that domain names are personal property located wherever the registry or the registrar are located. Both parties make practical arguments relevant to an appraisal of the interests of “justice and convenience.” Af-Cap Inc., 383 F.3d at 371. Zuccarini argues that since registrars tell the registries who owns domain names, any attachment 703*703 should be directed to registrars. Zuccarini also argues that if the domain names under VeriSign’s control are located in the district where VeriSign has its headquarters, every “.net” and “.com” domain name is located in that district.

DSH admits that instructions concerning the transfer of ownership of domain names must go through registrars. But it points out that the registrars are essentially intermediaries, that the registry controls the database of all domain names, and that any change in ownership is ultimately reflected in the registry. Additionally, DSH points out that it would greatly impede the ability of judgment creditors to levy upon domain names if they were required to bring suits in the many different places where registrars of the domain names are located.

Given the persuasive but not controlling language of the ACPA, and the practicalities involved in bringing suit to execute judgments against owners of domain names, we conclude under California law that domain names are located where the registry is located for the purpose of asserting quasi in rem jurisdiction. Although the question is not directly before us, we add that we see no reason why for that purpose domain names are not also located where the relevant registrar is located.

Conclusion

Because VeriSign has its headquarters in the Northern District of California, the district court had quasi in rem jurisdiction over the domain names registered with VeriSign for purposes of appointing a receiver to assist in executing a judgment against the owner of the names.

AFFIRMED.

[1] The rule was amended as of December 1, 2008. The updated text of the rule is as follows:

A money judgment is enforced by a writ of execution, unless the court directs otherwise. The procedure on execution—and in proceedings supplementary to and in aid of judgment or execution—must accord with the procedure of the state where the court is located, but a federal statute governs to the extent it applies.

Fed.R.Civ.P. 69(a)(1) (2009). The advisory committee notes indicate that these amendments were merely stylistic. Advisory Committee Note (2007).

IN THE SUPREME COURT STATE OF NORTH DAKOTA 2012 ND 37

Mark Rickert, Plaintiff and Appellee
v.
Dakota Sanitation Plus, Inc., a North Dakota Corporation, and Peggy Becker, individually, as a director of Dakota Sanitation Plus, Inc., and as an officer of Dakota Sanitation Plus, Inc., Defendants and Appellants

No. 20110158

Appeal from the District Court of Morton County, South Central Judicial District, the Honorable Donald L. Jorgensen, Judge.
AFFIRMED.
Opinion of the Court by Kapsner, Justice.
Ariston Edward Johnson (argued), P.O. Box 1260, Watford City, N.D. 58854-1260 and David Del Schweigert (appeared), P.O. Box 955, Bismarck, N.D. 58502-0955, for plaintiff and appellee.
Robert V. Bolinske, 7600 Northgate Drive, Bismarck, N.D. 58504, for defendants and appellants.

Rickert v. Dakota Sanitation PlusNo. 20110158

Kapsner, Justice.

[¶1] Dakota Sanitation Plus, Inc. (“DSP”) and Peggy Becker appeal from a district court judgment awarding Mark Rickert the value of his shares in DSP at the time the corporation was dissolved in December 2007. We affirm.

I

[¶2] Harvey Rickert was the father of Mark Rickert and Kim Rickert. Prior to his death in 1998, Harvey Rickert operated an unincorporated trash removal business called Dakota Sanitation which had a contract to provide residential trash removal for the City of Mandan. Becker lived with and was engaged to Harvey Rickert, and she worked in the trash removal business with him. Shortly before his death, Harvey Rickert signed a written document stating:

On this day, January 14, 1998, I, Harvey Rickert, would like to state my wishes in the event of my death. I wish to divide the profits of the contract from November of 1997 to October of 2007 from the City of Mandan between Kim Rickert, Mark Rickert, Peggy Becker and Delton Heid. The profits, after all expenses are paid, should be divided with Delton Heid receiving 15% of the profits as long as he is employed by Dakota Sanitation. Kim Rickert, Mark Rickert and Peggy Becker would equally divide the remaining 85%. The two trucks used for this Mandan route shall be given to Peggy Becker. The contract in 2007 shall go to Peggy Becker, who shall, if I am alive, pay a sum of $2,000 per month to Harvey Rickert. Peggy Becker would also have the right to bid the contract using the name Dakota Sanitation. The parties concede this document was not a valid testamentary instrument.

[¶3] Harvey Rickert died on January 25, 1998. Becker, Mark Rickert, and Kim Rickert thereafter incorporated DSP, with each owning one-third of the shares. Becker was the president of the corporation and was in charge of its daily operations. The three stockholders shared the corporate profits equally.(1) DSP provided residential trash removal under the existing contract with Mandan and, when that contract expired in October 2007, DSP was awarded a new contract for trash removal in Mandan through October 2012.

[¶4] Becker contends the shareholders in DSP had entered into an unwritten agreement which provided that, after expiration of the original Mandan contract in 2007, the corporation would be dissolved, Becker would receive all the assets of DSP, and Becker would acquire “the sole and exclusive right to the City of Mandan contract.” At a special shareholders’ meeting in December 2007, Becker and Kim Rickert voted to dissolve DSP. Mark Rickert voted against dissolution. All of the corporate assets, including the new Mandan contract, were subsequently transferred to Armstrong Sanitation and Rolloff, Inc., a separate corporation solely owned by Becker.

[¶5] Mark Rickert made a written demand for payment of the fair value of his shares as a dissenting shareholder under N.D.C.C. § 10-19.1-87. When DSP and Becker failed to comply with Mark Rickert’s demand, he brought this action seeking recovery of the fair value of his shares on the date of dissolution and damages for fraud. DSP and Becker answered and counterclaimed, with Becker seeking damages against Mark Rickert for unjust enrichment. DSP and Becker argued that Mark Rickert was not entitled to payment for the value of his shares because of the alleged unwritten shareholder agreement that DSP would be dissolved in 2007 and Becker would receive all of the corporate assets, with no compensation to Mark Rickert or Kim Rickert.

[¶6] Mark Rickert moved for partial summary judgment on the issue of existence of the alleged agreement, and the district court concluded there was no implied or oral contract among the shareholders. A bench trial was held to determine the value of the corporation, and the district court found the value of the corporation at the time of dissolution was $557,273. Partial judgment was entered awarding Mark Rickert the fair value of his shares as of the date of dissolution, plus interest, costs, and attorney fees. The parties stipulated to dismissal of all remaining claims, and a final judgment was entered.

II

[¶7] DSP and Becker contend the district court erred in granting partial summary judgment determining that there was no agreement among the parties to dissolve the corporation in 2007 and to give Becker all of the corporation’s assets, including the Mandan contract, without any remuneration to the other shareholders.

[¶8] We have outlined the standards governing summary judgment under N.D.R.Civ.P. 56:

“Summary judgment is a procedural device for the prompt resolution of a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law. A party moving for summary judgment has the burden of showing there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. In determining whether summary judgment was appropriately granted, we must view the evidence in the light most favorable to the party opposing the motion, and that party will be given the benefit of all favorable inferences which can reasonably be drawn from the record. On appeal, this Court decides whether the information available to the district court precluded the existence of a genuine issue of material fact and entitled the moving party to judgment as a matter of law. Whether the district court properly granted summary judgment is a question of law which we review de novo on the entire record.” Richard v. Washburn Pub. Sch., 2011 ND 240, ¶ 9 (quoting Loper v. Adams, 2011 ND 68, ¶ 19, 795 N.W.2d 899). A party opposing a properly supported motion for summary judgment must demonstrate there is a genuine issue of material fact:

If the moving party meets its initial burden of showing the absence of a genuine issue of material fact, the party opposing the motion may not rest on mere allegations or denials in the pleadings but must present competent admissible evidence to show the existence of a genuine issue of material fact. Mere speculation is not enough to defeat a motion for summary judgment, and when no pertinent evidence on an essential element is presented to the district court in resistance to the motion for summary judgment, it is presumed no such evidence exists. Beaudoin v. JB Mineral Servs., LLC, 2011 ND 229, ¶ 7 (citation omitted).

[¶9] The linchpin of DSP and Becker’s argument on appeal is their contention that, when DSP was incorporated after Harvey Rickert’s death in 1998, the shareholders entered into an implied oral agreement that the corporation would be dissolved in 2007 and Becker would be given all of its assets.

Section 10-19.1-83, N.D.C.C., authorizes a procedure for shareholders of a corporation to agree to provisions governing the control, liquidation, and dissolution of the corporation. The procedure outlined in the statute, however, requires that the agreement be in writing, signed by all of the shareholders of the corporation, and filed with the corporation. DSP and Becker concede that the agreement in this case does not comply with the requirements of the statute, but argue that the statute does not provide the exclusive method for shareholders to agree on matters relating to liquidation and dissolution of the corporation. DSP and Becker rely upon subsection 6 of N.D.C.C. § 10-19.1-83, which provides:
This section does not apply to, limit, or restrict agreements otherwise valid, nor is the procedure set forth in this section the exclusive method of agreement among shareholders or between the shareholders and the corporation with respect to any of the matters described in this section. DSP and Becker contend that, under N.D.C.C. § 10-19.1-83(6), an unwritten agreement by shareholders to dissolve a corporation on a certain date and to transfer all corporate assets to one shareholder is enforceable.

[¶10] Section 10-19.1-83(6), N.D.C.C., while recognizing that the statute is not the exclusive method of agreement among shareholders regarding the described subject matter, specifically notes that any other agreement must be “otherwise valid.” Therefore, any other form of agreement addressing control, liquidation, or dissolution of a corporation needs to be “otherwise valid” under generally applicable principles of contract law. One of the generally applicable principles of contract law is the statute of frauds. Under N.D.C.C. § 9-06-04(1), “[a]n agreement that by its terms is not to be performed within a year from the making thereof” is “invalid, unless the same or some note or memorandum thereof is in writing and subscribed by the party to be charged, or by the party’s agent.” The statute applies to any contract which by its express terms cannot be fully performed within one year. First State Bank of Goodrich v. Oster, 500 N.W.2d 593, 597 (N.D. 1993); Thompson v. North Dakota Workers’ Comp. Bureau, 490 N.W.2d 248, 252 (N.D. 1992). The alleged unwritten agreement in this case provided that the three shareholders would each receive equal shares of the corporate profits from 1998 to 2007, and then would dissolve the corporation and transfer all assets to Becker. DSP and Becker do not argue that there is a writing or memorandum signed by Mark Rickert evidencing the alleged agreement, nor do they contend it was possible to perform the agreement within one year from its making. By its express terms the alleged agreement was not to be performed within one year, and it clearly fell within the scope of N.D.C.C. § 9-06-04(1).

[¶11] DSP and Becker contend that, although the alleged agreement would ordinarily be barred by the statute of frauds, it is taken out of the statute of frauds in this case by partial performance. Specifically, DSP and Becker contend that Mark Rickert’s receipt of one-third of the corporate profits from 1998 to 2007 demonstrated that he was accepting benefits in accordance with the alleged agreement and constituted partial performance sufficient to take the agreement out of the statute of frauds.

[¶12] This Court has previously questioned whether the doctrine of partial performance applies to an oral agreement which by its terms cannot be performed within one year and which does not involve real estate:

We also observe that the general rule is that under provisions similar to Section 9-06-04(l), N.D.C.C., contracts which cannot be performed within one year are not taken out of the statute of frauds by part performance. However, that general rule is subject to an exception for cases involving real estate. Thompson, 490 N.W.2d at 252 n.3 (citations omitted); see 73 Am. Jur. 2d Statute of Frauds § 419 (2001); 37 C.J.S. Frauds, Statute of § 191 (2008). In this case, as in Thompson, we deem it unnecessary to decide whether an agreement unrelated to real estate which cannot be performed within one year can be removed from the statute of frauds by partial performance, because we conclude DSP and Becker failed to present competent admissible evidence demonstrating partial performance sufficient to take the alleged contract out of the statute of frauds.

[¶13] In support of their contention that there has been partial performance sufficient to remove the alleged agreement from the statute of frauds, DSP and Becker rely solely upon evidence showing Mark Rickert accepted a share of the profits from the corporation. DSP and Becker repeatedly argued: “plaintiff Mark Rickert accepted the benefits of the agreement between the parties for ten years;” “he has been paid each and every month for the entire ten year period;” “[o]ver the next ten years, plaintiff Mark Rickert, while doing essentially no work whatsoever for the business, collected monthly payments specifically pursuant to [Harvey Rickert's] writing and agreement of the parties;” “for over 10 years he contributed virtually nothing to the running of the subject business but during that entire period of time accepted monthly payments in exact accordance with the terms of the agreement;” “[i]t . . . would be inequitable for plaintiff Rickert to both accept and retain the ten years of monthly payments and, contrary to the agreement of the parties, also continue to have an ownership in the assets of the corporation;” and, “[h]is acceptance of those benefits demonstrates his consent to the agreement which all parties followed.”

[¶14] When it is alleged that partial performance removes an unwritten agreement from the statute of frauds, the most important question is whether the part performance is consistent only with the existence of the alleged oral contract In re Estate of Thompson, 2008 ND 144, ¶ 12, 752 N.W.2d 624; Fladeland v. Gudbranson, 2004 ND 118, ¶ 8, 681 N.W.2d 431; Johnson Farms v. McEnroe, 1997 ND 179, ¶ 19, 568 N.W.2d 920. As further clarified in Estate of Thompson, at ¶ 13 (quoting Anderson v. Mooney, 279 N.W.2d 423, 429 (N.D. 1979)):

“‘Another requirement of the doctrine * * * is that the acts relied upon as constituting part performance must unmistakably point to the existence of the claimed agreement. If they point to some other relationship . . . or may be accounted for on some other hypothesis, they are not sufficient.’” See also Buettner v. Nostdahl, 204 N.W.2d 187, 195 (N.D. 1973), overruled on other grounds by Shark v. Thompson, 373 N.W.2d 859, 867-69 (N.D. 1985).

[¶15] In order to survive Mark Rickert’s properly supported motion for summary judgment, DSP and Becker were required to present competent admissible evidence demonstrating an act of partial performance which was consistent only with the existence of the alleged unwritten contract and which could not “‘be accounted for on some other hypothesis.’” Estate of Thompson, 2008 ND 144, ¶ 13, 752 N.W.2d 624 (quoting Anderson, 279 N.W.2d at 429). It is certainly not uncommon, however, for a passive shareholder in a closely held corporation to receive a share of the profits, and distribution of corporate profits to shareholders is expressly provided for in N.D.C.C. § 10-19.1-92. Mark Rickert’s acceptance of his share of the profits of the corporation although providing no work is entirely consistent with the benefits routinely afforded to a passive shareholder. He owned one-third of the shares and received one-third of the profits. It can hardly be argued that his acceptance of his share of the profits is consistent only with an alleged oral agreement to dissolve the corporation several years later and allow Becker to receive all of the corporation’s assets.

[¶16] If the parties had intended to limit the duration of the corporation at the time of incorporation, see N.D.C.C. § 10-19.1-10(2)(b), or to provide for a specific distribution of assets upon dissolution, they could have simply included such provisions in the articles of incorporation or complied with the requirements of N.D.C.C. § 10-19.1-83. DSP and Becker now claim the parties entered into an unwritten agreement to dissolve the corporation some nine years later and to give all of the assets, including the renewed Mandan contract, to Becker. They further seek to avoid the statute of frauds by claiming partial performance, but point to no evidence of any conduct or action of the parties prior to the 2007 dissolution that is inconsistent with the usual and ordinary operation of a closely held corporation with passive shareholders.

[¶17] After review of the entire record, and viewing the evidence in the light most favorable to DSP and Becker, we conclude the alleged agreement was barred by the statute of frauds as a matter of law and the district court did not err in granting partial summary judgment determining there was not an enforceable agreement between the parties to dissolve the corporation in 2007 and to give all of the corporation’s assets to Becker.

III

[¶18] DSP and Becker contend that the district court erred in denying discovery on the issue of damages, claiming the court erroneously allowed Mark Rickert to provide a “bill of particulars” of his claimed damages rather than specifically answering the interrogatories propounded by DSP and Becker. DSP and Becker also contend the court erred in allowing Mark Rickert’s expert witness to testify and in effectively denying a motion for continuance when the expert’s report was not completed until the day before trial and they did not receive a copy of the report before trial.

[¶19] The trial court has broad discretion over discovery disputes, and this Court applies a very limited standard of review:

“A district court has broad discretion regarding the scope of discovery, and its discovery decisions will not be reversed on appeal absent an abuse of discretion.” Investors Title Ins. Co. v. Herzig, 2010 ND 169, ¶ 38, 788 N.W.2d 312 (quoting Martin v. Trinity Hosp., 2008 ND 176, ¶ 17, 755 N.W.2d 900). “A party asserting the court abused its discretion in denying discovery carries a heavy burden.” Id.
An abuse of discretion by the district court is never assumed, and the burden is on the party seeking relief affirmatively to establish it. The district court abuses its discretion only when it acts in an arbitrary, unreasonable, or unconscionable manner, or when its decision is not the product of a rational mental process leading to a reasoned determination. The party seeking relief must show more than the district court made a “poor” decision, but that it positively abused the discretion it has under the rule. We will not overturn the district court’s decision merely because it is not the decision we may have made if we were deciding the motion.
Id. (quoting Martin, at ¶ 17). Leno v. K & L Homes, Inc., 2011 ND 171, ¶ 23, 803 N.W.2d 543.

A

[¶20] DSP and Becker first contend the district court erred when it allowed Mark Rickert to submit a “bill of particulars” of the damages sought.

[¶21] In order to place this argument in context, it is necessary to outline the procedural posture of the case. The discovery process engaged in by the parties in this case was contentious, including numerous motions to compel, motions for sanctions, a motion for appointment of a discovery master, hearings before the court, and numerous discovery orders. Early in the proceedings, DSP and Becker served interrogatories upon Mark Rickert. Included in the 75 interrogatories were approximately 50 nearly identical, boilerplate interrogatories which essentially enumerated each paragraph of Mark Rickert’s complaint and for each directed that he “set forth in detail all facts upon which you rely for the allegations contained in paragraph [X] of your Complaint, and identify all documents you claim support said allegation.” For those paragraphs in the complaint alleging damages, the corresponding interrogatories generally requested that Mark Rickert “set forth each and every item of damage you claim as alleged in paragraph [X] of your Complaint set forth exactly how in detail each such item was computed, the identity of each person involved in said computation, and identify all documents you claim support said allegation.” Mark Rickert objected to most of the interrogatories, and the court considered the matter along with several other discovery disputes at a hearing on July 13, 2009. In the context of the various discovery disputes, the court noted that the interrogatories essentially sought an itemization of damages and clarification of the fraud allegations:

THE COURT: . . .
Now then, let me go to the Defendant’s interrogatories. First of all, I’m going to cause–I note, Mr. Johnson, that in the plaintiff’s complaint, and which Mr. Bolinske by his interrogatories had requested, essentially, what I would term a bill of particulars and particularly with the nature of damages claimed and the assertion of fraud under paragraph or claim number 6.
I’m going to cause the plaintiff by July 27 of 2009, to itemize damage claims. By doing so, it is not the intent of the Court to cause the Plaintiff to forego any residual claims or to compromise any claims, but rather in the context of a bill of particulars, that to disclose an itemization of damages asserted and the bases for those damages under each of your claims. Again by the 27th of July, 2009.
That once the same has been disclosed, the Court will then revisit Defendant’s interrogatories so as to see whether or not there are additional interrogatories in supplementation of the claim itemization as herein ordered.
Now, Mr. Bolinske, does that give you a starting point?
MR. BOLINSKE: Yes, it does, Your Honor.

[¶22] The court clearly indicated that this was merely a “starting point” and it would “revisit” the interrogatories if necessary after the itemization had been made. Counsel for DSP and Becker did not object to, but apparently agreed with, this procedure at the time. It appears that the district court, faced with voluminous “shotgun” interrogatories, attempted to pare down the scope of discovery by requiring Mark Rickert to itemize the claimed damages and provide further details of the claimed fraud as a “starting point” for future discovery requests. In doing so, the court unfortunately used the term of art “bill of particulars.”

[¶23] As DSP and Becker point out, our rules of procedure do not recognize use of a “bill of particulars” in a civil case. Cf. N.D.R.Crim.P. 7(f) (court may direct the filing of a bill of particulars in a criminal case). Although the district court’s use of the label “bill of particulars” may have caused some confusion, the procedure employed was properly intended to narrow and focus the scope of further discovery by requiring Mark Rickert to more clearly outline the basis for the damages he sought and to delineate and clarify his allegations of fraud. DSP and Becker did not object to this procedure at the time, and have not drawn our attention to any specific interrogatory that was not responded to which caused them prejudice.

[¶24] Although the district court’s use of the term “bill of particulars” may have been unfortunate, DSP and Becker have not demonstrated that the court acted in an arbitrary, unreasonable, or unconscionable manner, or that its decision was not the product of a rational mental process leading to a reasoned determination. See Leno, 2011 ND 171, ¶ 23, 803 N.W.2d 543. We conclude that the discovery procedure ordered by the district court did not constitute an abuse of discretion.

B

[¶25] DSP and Becker also contend that the district court erred in allowing Mark Rickert’s expert witness to testify and in effectively denying a motion for a continuance when the witness’s report was not completed until the day before trial and DSP and Becker did not receive a copy of the report before trial.

[¶26] The sole issue which actually went to trial in this case was the value of the corporation as of the date of dissolution in 2007. In the “bill of particulars” Mark Rickert submitted in response to the district court’s discovery order, he indicated he would be securing an expert witness once sufficient corporate financial information was received in discovery:

The actual amounts of these items of damages cannot be calculated at this time because the case remains in the early phases of discovery. The Plaintiff intends to collect sufficient data through discovery to submit to one or more experts who will be able to form an opinion as to the value of Dakota Sanitation Plus, Inc., as a going concern at the time of its dissolution. On May 17, 2010, more than three months before trial, Mark Rickert served a witness list upon DSP and Becker’s counsel identifying Dianna Kindseth, an accountant, as an expert who would testify regarding the valuation of the corporation and the valuation of corporate contracts. Counsel for DSP and Becker did not attempt to depose Kindseth, nor did he serve an interrogatory under N.D.R.Civ.P. 26(b)(4)(A) requesting disclosure of the substance of the facts and opinions to which Kindseth would testify or a summary of the grounds for her opinions.

[¶27] When Mark Rickert called Kindseth as a witness at trial, DSP and Becker objected, arguing that Kindseth had not been identified in answers to their original interrogatories or in the “bill of particulars” served by Mark Rickert and that the May 17, 2010, identification in a witness list came after expiration of the court’s deadline for discovery. Counsel for Mark Rickert responded that the deadline for discovery had been extended by stipulation of the parties after counsel for DSP and Becker had twice failed to appear at scheduled depositions of Craig Anderson, the corporation’s accountant. Mark Rickert’s counsel further explained that Kindseth’s report was delayed by the ongoing difficulties and obstructions in discovery:

[MR. SCHWEIGERT] Time came for Mr. Anderson’s deposition the first time, and the Court is well aware of what happened on those occasions when Mr. Anderson unfortunately showed for his deposition on two occasions but Mr. Bolinske failed to show on those occasions.
When the time came for us to–obviously, until we had the information from Mr. Anderson, we were kind of boot strapped, frankly, in doing a valuation of this business.
After we finally got the information from Mr. Anderson and the necessary documents that we have pursuant to the court’s order, in a plaintiff’s witness list, as directed by the court to identify, dated May 17, 2010, we identified Dianna Kindseth who was expected to be called as an expert witness in [the] field of valuation of a corporation, to wit, and that sort of thing.
Frankly, we didn’t have the necessary information until very recently here. We gave her the necessary information, but it obviously takes her a while to do a complete valuation. Unfortunately, due to the delay[s] that have been caused by things that were out of our control, we actually were unable to get the valuation until Friday. We got basically a rough estimate of what it would be, and just yesterday we actually got the completed summary.
THE COURT: Mr. Bolinske, did you on May 17, 2010, become aware of Dianna Kindseth’s involvement?
MR. BOLINSKE: When that was received, yes, we did.
THE COURT: And have you since that time attempted to take Ms. Kindseth’s deposition?
MR. BOLINSKE: Your Honor, the discovery order indicated that it was due–discovery expired on April 1st. The stipulated that Mr. Schweigert refers to related only to Mr. Anderson. It was at my suggestion, because it was tax time. It did not relate to any other expert witness other than Mr. Anderson. And we did that to accommodate him because it was tax season.
THE COURT: Well, I understand that portion. But I also understand that this is a valuation of an ongoing or at that time a functional business, since defunct, but it also relies a large part on the accounting prepared of the business itself.
Now, my question is: When you received this on May 17, we are here on August 31, did you take any steps to cause the court to address the issue?
MR. BOLINSKE: No, I did not, Your Honor.
THE COURT: Objection overruled. The witness may testify.

[¶28] DSP and Becker contend on appeal that the court erred in allowing Kindseth to testify at trial because they did not receive a copy of Kindseth’s report before trial and Mark Rickert had failed to update discovery responses with information regarding Kindseth’s anticipated testimony. The record demonstrates, however, that DSP and Becker never requested the information in the report through a proper interrogatory under N.D.R.Civ.P. 26(b)(4)(A)(i). Unlike the federal rules, which require automatic disclosure of an expert witness’s report, our rules require that the opposing party specifically request disclosure of the facts and opinions to which the expert will testify and the grounds for each opinion. Compare N.D.R.Civ.P. 26(b)(4), with Fed.R.Civ.P. 26(a)(2)(A). There is no requirement to provide a report or other details of the expert’s opinion unless the opposing party expressly requests it by interrogatory or deposition. See N.D.R.Civ.P. 26(b)(4)(A).

[¶29] DSP and Becker do not point to any interrogatory or other discovery request which required Mark Rickert to disclose “the substance of the facts and opinions to which the expert is expected to testify and a summary of the grounds for each opinion.” N.D.R.Civ.P. 26(b)(4)(A)(i). The vague boilerplate interrogatories served by DSP and Becker, which essentially asked Mark Rickert to set forth in detail all facts, all witnesses, and all documents supporting all of his claims, do not comply with the requirements of N.D.R.Civ.P. 26(b)(4)(A)(i). We conclude the court did not abuse its discretion in allowing Kindseth to testify as an expert regarding the value of the corporation.

C

[¶30] After the court ruled Kindseth would be allowed to testify, DSP and Becker moved for a continuance. The court held that Kindseth would be allowed to testify that day as scheduled, and the trial would be continued for one day to allow DSP and Becker an opportunity to secure an expert witness. DSP and Becker contend the court’s action essentially constituted a denial of their motion, and the court erred in not continuing the trial for a sufficient time to allow them to secure an expert witness to respond to Kindseth’s testimony.

[¶31] The district court has broad discretion over the progress and conduct of a trial, and the determination whether to grant a continuance lies within the sound discretion of the district court. Lund v. Lund, 201l ND 53, ¶ 7, 795 N.W.2d 318. We will not reverse a district court’s decision to deny a motion for a continuance absent an abuse of discretion. Id.

[¶32] DSP and Becker argue that a one-day continuance to locate an expert witness is not a reasonable continuance, and that they were “severely prejudiced” by their inability to challenge Kindseth’s testimony with an opinion from their own expert. DSP and Becker, however, had ample opportunity to secure their own expert before trial. The case had been pending for more than two years, and it was clear from the outset that valuation of the corporation would be a key issue in the case. They further knew more than three months before trial that Mark Rickert intended to have Kindseth testify as an expert regarding the value of the corporation. DSP and Becker, however, did nothing to procure their own expert, but then claimed surprise and sought a continuance when Kindseth, as promised, was called as an expert witness.

[¶33] Any prejudice to DSP and Becker caused by their inability to respond to Kindseth’s expert testimony with an expert of their own was the result of their own voluntarily made choices, not an abuse of discretion by the court. We conclude the district court did not abuse its discretion by failing to grant a longer continuance to allow DSP and Becker to secure an expert witness.

IV

[¶34] DSP and Becker contend the district court erred in failing to consider relevant evidence on the issue of the value of the corporation.

[¶35] Kindseth, Mark Rickert’s expert witness, testified at length about her methodology for valuing the corporation and testified that the value of DSP on the date of dissolution in December 2007 was $557,273. When Becker was asked her opinion on the value of the corporation, the court sustained an objection based on Becker’s failure to give a value when specifically asked at her deposition. During an offer of proof on the issue, Becker testified she believed the corporation had a value of $275,000, based upon the actual profits made on the Mandan contract by her corporation, Armstrong Sanitation and Rolloff, Inc. (“Armstrong”), in 2008 and 2009. She testified that actual profits on the Mandan contract in 2008 and 2009 were lower than in prior years because of higher expenses, including wage increases, rent increases, and fuel costs. Kim Rickert was allowed to testify that he believed DSP had a value between $250,000 and $275,000, based upon the lower actual profits earned by Armstrong in 2008 and 2009. The court found the value of the corporation on the date of dissolution was $557,273.

[¶36] DSP and Becker contend that the court “forgot” that both Becker and Kim Rickert testified to the value of the corporation, pointing to the following language in the court’s Memorandum Decision: “the only valuation of DSP, Inc., as of December 21, 2007, the date of dissolution, is the fair value determined by Dianna L. Kindseth.” They further contend the court should have considered the actual profits of Armstrong from 2008 and 2009 in determining the value of DSP in December 2007.

[¶37] Initially, we note that Becker’s testimony was not admitted at trial and came in only as part of an offer of proof. DSP and Becker have not challenged the court’s evidentiary ruling excluding Becker’s testimony on this issue. The court therefore did not “forget” to consider evidence it had ruled was inadmissible.

[¶38] More significantly, however, DSP and Becker’s argument demonstrates a fundamental misunderstanding of the remedy available to a dissenting shareholder under N.D.C.C. § 10-19.1-87.(2) Section 10-19.1-87(1), N.D.C.C., allows a dissenting shareholder to “obtain payment for the fair value of the shareholder’s shares.” “Fair value of the shares” is defined as “the value of the shares of a corporation immediately before the effective date of a corporate action” which triggers the dissenting shareholder’s rights. N.D.C.C. § 10-19.1-88(1)(b). When the district court indicated that Kindseth’s testimony was the only valuation of DSP, the court clearly stressed that it was the only valuation “as of December 21, 2007, the date of dissolution.” When testifying regarding their opinions of the value of the corporation, both Becker and Kim Rickert testified that their valuations were based upon the actual profits received by Armstrong in 2008 and 2009. When Becker and Kim Rickert attempted to testify about the actual profits earned by Armstrong in 2008 and 2009, Mark Rickert repeatedly objected and the district court repeatedly indicated that it considered any evidence of Armstrong’s profits received after the 2007 dissolution of DSP to be irrelevant to the determination of the value of DSP at the time of dissolution.

[¶39] The statutory scheme clearly indicates that post-event occurrences have no bearing on the valuation of stock to be awarded to a dissenting shareholder; rather, it is the value of the dissenting shareholder’s shares “immediately before the effective date of a corporate action” that controls. See N.D.C.C. § 10-19.1-88(1)(b). In other words, Mark Rickert was entitled to the value of his shares as if they had been valued and disposed of on December 21, 2007, without taking into consideration the actual profits earned by a different corporation, operating with different management practices and under different circumstances, in subsequent years. The intent of the dissenting shareholder provisions is to provide the fair value of shares to a dissenting shareholder as it existed immediately before the triggering event. Changes in economic circumstances occurring after the corporate action which affect the value of the shares are irrelevant to the determination of the fair value of the shares under N.D.C.C. §§ 10-19.1-87 and 10-19.1-88.

[¶40] We conclude the district court did not fail to consider relevant evidence on the issue of the value of the corporation.

V

[¶41] We have considered the remaining issues and arguments raised by the parties and find them to be either unnecessary to our decision or without merit. The judgment is affirmed.

[¶42] Carol Ronning Kapsner
Mary Muehlen Maring
Daniel J. Crothers
Dale V. Sandstrom
Gerald W. VandeWalle, C.J.

Footnotes:

1. Delton Heid, a long-time employee of Dakota Sanitation, apparently received payments based upon a percentage of the profits of DSP until he quit working for the corporation, but he was never a shareholder.

2. The parties have not questioned on appeal whether dissolution is an event which triggers a dissenting shareholder’s right to seek the remedies available under N.D.C.C. § 10-19.1-87. Accordingly, for purposes of this appeal we will assume that a shareholder who dissents from a vote to dissolve the corporation may seek remedies as a dissenting shareholder under N.D.C.C. § 10-19.1-87.