118 F.3d 1255 (8th Cir. 1997), 96-1844, Norwest Bank Minnesota, Nat. Ass'n v. Sween Corp.

Docket Nº:96-1844, 96-1874.
Citation:118 F.3d 1255
Party Name:NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, Appellee/Cross-Appellant, v. SWEEN CORPORATION; Maurice A. Sween; Keith B. Brekke, Appellants/Cross-Appellees, Office of the Comptroller of the Currency, Amicus Curiae.
Case Date:July 08, 1997
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

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118 F.3d 1255 (8th Cir. 1997)



SWEEN CORPORATION; Maurice A. Sween; Keith B. Brekke,


Office of the Comptroller of the Currency, Amicus Curiae.

Nos. 96-1844, 96-1874.

United States Court of Appeals, Eighth Circuit.

July 8, 1997

Submitted Feb. 12, 1997.

Suggestion for Rehearing En Banc

Denied Aug. 6, 1997.

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David K. Hackley (argued), Minneapolis, MN, for Appellants/Cross-Appellees.

Thomas L. Kimer (argued), Minneapolis, MN, for Appellee/Cross-Appellant.

Before FAGG, HEANEY, and JOHN R. GIBSON, Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

Norwest brought this action against Sween Corporation, Maurice Sween, and Keith Brekke, seeking a declaratory judgment that its Corporate Finance Division's business is incidental to its banking business, and that therefore Sween Corporation

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breached its agreement with Norwest by failing to pay it the advisory fee due under an agreement between Norwest Corporate Finance and Sween Corporation. Norwest asked the court to award it the advisory fee and attorneys' fees and expenses incurred in the action. Sometime after filing the complaint, Norwest dismissed Sween Corporation and Brekke voluntarily, but left Maurice Sween as a defendant. On cross-motions for summary judgment the district court ruled in favor of Norwest. Sween appeals, 1 arguing that the agreement is unenforceable because Norwest's actions under the agreement were not incidental to the business of banking, and that Norwest's acts were beyond its powers because it did not obtain prior approval from the Board of Governors of the Federal Reserve System to enter into the agreement. Even if the agreement is enforceable, Sween argues that the district court incorrectly computed the advisory fee owed to Norwest, and that the agreement's terms do not obligate Sween to pay Norwest's legal fees in this action. Norwest cross-appeals arguing that it is entitled to prejudgment interest on the award granted by the district court. We remand to the district court for the award of prejudgment interest to Norwest, and affirm the district court's judgment in all other respects.

Sween Corporation is a Minnesota corporation that develops and manufactures skin care products for the medical market. Norwest is a national bank established in Minneapolis, Minnesota pursuant to the National Bank Act as amended. Norwest provides investment advisory services related to mergers and acquisitions through a division of Norwest referred to as Norwest Corporate Finance. This division is not a separate legal entity. The common stock of Norwest is owned by Norwest Corporation, a bank holding company governed by the Bank Holding Company Act as amended. 2 Jeffrey Maas, Peter Slocum, and D. Christian Osborne worked for Norwest in the Norwest Corporate Finance Division when Norwest Corporate Finance 3 and Sween entered into the Engagement Agreement at issue. None of these three employees has ever been licensed as a Minnesota broker.

An Engagement Agreement between Sween Corporation, Sween, Brekke, and Norwest dated October 10, 1994, authorized Norwest to act as the exclusive advisor to initiate negotiations regarding the sale of all or part of Sween Corporation. Under the terms of the Engagement Agreement, upon the sale of Sween Corporation, Sween Corporation agreed to pay Norwest an advisory fee.

Immediately after October 10, 1994, Norwest prepared and circulated to prospective buyers an extensive brochure promoting Sween Corporation. Norwest contacted in excess of 135 potential buyers. By December 1994, Sween Corporation agreed to narrow the list to four prospective buyers. These buyers brought teams to Mankato for a week in December to meet with representatives of both Sween Corporation and Norwest for the purpose of investigating and evaluating Sween Corporation. Two top ranking executives of Coloplast A/S, one of the potential buyers, met with Sween personnel.

After these meetings, Maas was the go-between to the prospective buyers and sellers. On December 18, 1994, a representative of Coloplast called Maas and said that Coloplast was prepared to execute a letter of intent to purchase Sween Corporation for $80,000,000. Sween, Brekke, and David Hackley, an attorney representing Sween Corporation, met with a representative of

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Coloplast to discuss the purchase. Maas also attended the meeting and advised Sween. As a result of this meeting Coloplast entered into a letter of intent in which it agreed to purchase, at its option, either all the assets or all the shares of Sween Corporation on February 28, 1995. The purchase obligation was contingent upon a satisfactory due diligence examination of Sween Corporation, to be followed by the execution of a comprehensive purchase agreement.

During a two-day meeting representatives of Sween Corporation and Coloplast negotiated the terms of the stock purchase agreement. During the first day, Hackley and Douglas Hemer represented Sween Corporation. On one or more occasions, Maas and Sween attended the meetings and participated in negotiations. At the conclusion of this process, Sween Corporation and Coloplast reached a stock purchase agreement. Attorneys represented Sween Corporation at all times through the negotiations leading to the stock purchase agreement. Norwest did not draft or prepare any part of the stock purchase agreement. On February 28, 1995, Sween Corporation transferred all of its shares to Coloplast's Georgia subsidiary. Norwest fully performed its obligations under the Engagement Agreement, but Sween Corporation refused to pay the advisory fee due to Norwest under the Agreement.

Norwest brought this action before the district court seeking a declaratory judgment that its acts under the Engagement Agreement were incidental to its banking business, and that therefore it was not required to have a Minnesota real estate broker's license to maintain an action to collect the advisory fee. Norwest claimed that Sween had breached the Engagement Agreement by failing to pay the advisory fee and asked the court to award the fee, as well as attorneys' fees and expenses in connection with enforcing the Engagement Agreement.

The district court granted summary judgment to Norwest concluding that the acts engaged in by Norwest under the Engagement Agreement were incidental to the business of banking, and that therefore Norwest and Norwest Corporate Finance's employees were exempt from the Minnesota broker license requirement. See Norwest Bank Minn., Nat'l Ass'n v. Sween Corp., 916 F.Supp. 1494, 1510-11 (D.Minn.1996). The court also concluded that Norwest was not required to obtain prior approval from the Federal Reserve before entering into the Engagement Agreement. Id. at 1507-08. The court ordered Sween to pay Norwest $2,741,707 in fees due under the Engagement Agreement, and also held Sween liable for Norwest's attorneys' fees in connection with this suit. Id. at 1508-11.



The primary issue before us is whether Sween is obligated to pay Norwest the fee that he promised to pay under the Engagement Agreement. Sween argues that Minnesota law prohibits Norwest from collecting the fee. In formulating his argument, Sween first contends that Norwest is a broker under Minnesota law, 4 which Norwest does not dispute. Sween next points to a Minnesota statute that prohibits a person required to be licensed from bringing a suit for collection of compensation for the performance of acts for which a license is required, without proving that the person was licensed properly at the time the alleged action occurred. Minn.Stat. § 82.33, subd. 1 (1996). Sween argues that because neither Norwest Corporate Finance, nor its employees, were licensed as brokers under Minnesota law at the time the parties acted under the Engagement Agreement, Norwest cannot bring this suit to collect the advisory fee.

Norwest responds by first pointing to Minnesota Statute section 82.18(e), that exempts various entities, including banks, from the term "broker" when engaged in the

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transaction of business within the scope of their corporate powers as provided by law. Norwest then asserts that pursuant to the National Bank Act, as a national bank, it had federal authority to enter into the Engagement Agreement and to fulfill its duties under that agreement. See 12 U.S.C. § 24(Seventh) (1994). Sween responds that Norwest's acts went beyond the authority provided to Norwest under the Act. We review a grant of summary judgment de novo. See McKee v. Federal Kemper Life Assurance Co., 927 F.2d 326, 328 (8th Cir.1991). We will affirm only if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986).

The National Bank Act vests each national bank with the authority "[t]o exercise ... all such incidental powers as shall be necessary to carry on the business of banking." Id. Though the statute lists a few activities in which banks are authorized to engage, the incidental powers are not confined to activities that are considered essential to the exercise of express powers. See First Nat'l Bank v. Taylor, 907 F.2d 775, 778 (8th Cir.), cert. denied, 498 U.S. 972, 111 S.Ct. 442, 112 L.Ed.2d 425 (1990). Our analysis thus focuses on whether the acts conducted under the Engagement Agreement fall within the "incidental powers" necessary to carry on the business of a national bank.

The Office of the Comptroller of the Currency, as the administrator charged with the regulation of national banks, has primary responsibility for supervising the "business of banking." See 12 U.S.C. § 27 (1994). It is well established that we must defer to the reasonable judgments of agencies...

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