700 F.3d 1118 (8th Cir. 2012), 11-3050, Whitney v. The Guys, Inc.

Docket Nº:11-3050.
Citation:700 F.3d 1118
Opinion Judge:MELLOY, Circuit Judge.
Party Name:Joseph H. WHITNEY, Plaintiff-Appellant v. The GUYS, INC.; Agora Solution Corp.; MyBillingServices, Inc.; Info Billing, Inc.; MyTeleservices, Inc.; LaurenTel, Inc.; GreenTreeData, Inc.; LowCostBilling, Inc.; YourBillingSolutions, Inc.; MySuperLotto, Inc.; MyPrizeAwards Corp.; MyServiceAndSupport, Inc.; XYZ, Inc.; John R. Morrison, Defendants-Appelle
Attorney:Mark J. Kallenbach, argued, Minneapolis, MN, for appellant. Russell S. Ponessa, argued, Kevin R. Coan, Charlie R. Alden, on the brief, Minneapolis, MN, for appellees.
Judge Panel:Before RILEY, Chief Judge, MELLOY and SMITH, Circuit Judges.
Case Date:November 06, 2012
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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700 F.3d 1118 (8th Cir. 2012)

Joseph H. WHITNEY, Plaintiff-Appellant

v.

The GUYS, INC.; Agora Solution Corp.; MyBillingServices, Inc.; Info Billing, Inc.; MyTeleservices, Inc.; LaurenTel, Inc.; GreenTreeData, Inc.; LowCostBilling, Inc.; YourBillingSolutions, Inc.; MySuperLotto, Inc.; MyPrizeAwards Corp.; MyServiceAndSupport, Inc.; XYZ, Inc.; John R. Morrison, Defendants-Appellees.

No. 11-3050.

United States Court of Appeals, Eighth Circuit.

November 6, 2012

Submitted: May 16, 2012.

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Mark J. Kallenbach, argued, Minneapolis, MN, for appellant.

Russell S. Ponessa, argued, Kevin R. Coan, Charlie R. Alden, on the brief, Minneapolis, MN, for appellees.

Before RILEY, Chief Judge, MELLOY and SMITH, Circuit Judges.

MELLOY, Circuit Judge.

Plaintiff Joseph H. Whitney appeals the district court's dismissal of his declaratory judgment, contract, unjust-enrichment, tort, and shareholder claims. Applying a choice-of-law analysis, the district court dismissed the contract and unjust-enrichment claims as barred by a Delaware statute of limitations and dismissed the tort and declaratory judgment claims as derivative of the contract claims. The district court dismissed the shareholder claims as insufficiently pleaded pursuant to Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), and Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). We reverse as to the shareholder claims but affirm in all other respects.

I.

We set forth the facts as alleged by Whitney in a second amended complaint.

Whitney is a Texas citizen domiciled in Texas. He owns an office property in Minnesota. Defendant John R. Morrison is a Minnesota citizen domiciled in Minnesota. Several of the defendant corporations are Delaware corporations with their principal places of business located in Whitney's office property in Minnesota.1 The term " XYZ, Inc.," appearing in the caption above, is a label Whitney attaches to defendants he characterizes as " unknown derivative business entities." The remaining named corporate defendants are Delaware corporations with their principal places of business in states other than Minnesota.2

On April 25, 2005, Whitney and defendant John R. Morrison formed The Guys, Inc., in accordance with an unwritten contract. Pursuant to the contract, Whitney paid $150,000 and was to receive a one-half ownership interest in The Guys, Inc. Several of the above-named defendant corporations were already in existence and were to be wholly owned subsidiaries of The Guys, Inc.3 One defendant corporation was yet to be formed and was to be a wholly owned subsidiary of The Guys, Inc.4 Finally, Whitney was to receive a one-half ownership interest in the remaining named defendant corporations not wholly owned by The Guys, Inc.5

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In November 2005, Whitney made a capital contribution of $25,000 to defendant Agora Solution Corp. According to Whitney's complaint, even though he paid a total of $175,000 and was to receive ownership interests as described above, he either was not given such ownership or was not given evidence or acknowledgment of such ownership. He also was denied access to an accounting, a share of profits, and a right to participate in corporate affairs. Whitney does not allege specifically what he asked for, when he asked for it, or how it was denied in relation to these purported denials (other than, of course, the demand for such items inherent in service of the present complaint). He also does not allege any specific contract terms related to these denials or obligations other than, implicitly, those that might exist pursuant to Delaware law if he were an owner. He alleges generally and in the alternative that Morrison absconded with his funds, that the corporate defendants retained his funds without granting him an ownership interest, and that he is, in fact, an owner of the defendant corporations but that his ownership merely has not been honored.

Whitney asserts that these general allegations concerning the failure to grant or acknowledge his ownership and Morrison's solicitation of his funds (and Morrison's or one or more corporate defendants' retention of his funds) support the following ten counts of his complaint: declaratory judgment, breach of contract, promissory estoppel, unjust enrichment, fraud, misrepresentation of intention, accounting, breach of shareholder's rights/receiver/liquidation, breach of fiduciary duty, and conversion.

Additional facts alleged and relevant to our analysis are as follows. In paragraph fourteen of the complaint, where Whitney first alleges he paid $150,000, he does not state to whom he paid this amount. In a later paragraph of the complaint, however, he states, " Corporate Defendants accepted Whitney's one hundred seventy-five thousand dollar[s] ($175,000) of capital contributions that Whitney made at Morrison's request." Whitney ultimately asserts his breach of contract and most of his other claims against the corporate defendants as well as Morrison.

Whitney filed his complaint on October 20, 2010, more than five years after the date of the purported contract and initial payment. Defendants moved to dismiss, and the district court granted the motion, holding that the declaratory judgment claim seeking a declaration of rights pursuant to a purported contract was duplicative of the breach of contract claim and required dismissal with prejudice. The district court then characterized the fraud, misrepresentation of intent, and conversion claims as tort claims. The court concluded " the wrongful conduct underlying these tort claims is identical to Whitney's contract claim— that Morrison promised to give him one-half ownership of certain corporate entities in exchange for monetary contributions, and Morrison thereafter failed to recognize Whitney's ownership interest." The court concluded Whitney could not maintain a separate tort claim in these circumstances and dismissed these three tort claims with prejudice.

The court then characterized the breach-of-contract, promissory estoppel, and unjust-enrichment claims as contract or quasi-contract claims and applied a choice-of-law analysis as set forth in Jepson v. General Casualty Co. of Wisconsin, 513 N.W.2d 467, 469 (Minn.1994). The court concluded that Delaware, rather than Minnesota, law controlled, and the court dismissed these contract claims with prejudice as time barred by a three-year Delaware statute of limitations.

Finally, the court looked at the remaining shareholder claims and found that the

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pleadings failed to satisfy the Twombly standard. The court dismissed the shareholder claims without prejudice.

II.

We review de novo the district court's dismissal of the complaint. Our de novo review applies to the choice-of-law analysis behind the dismissals. Eggleton v. Plasser & Theurer Exp. Von Bahnbaumaschinen Gesellschaft, MBH, 495 F.3d 582, 585 (8th Cir.2007).

A. Choice of Law

Whitney argues that Minnesota law applies and that his claims were timely pursuant to Minnesota's six-year statute of limitations. Minn.Stat. § 541.05 subd. 1(1). Defendants argue that Delaware law applies and that Whitney's claims are time barred by Delaware's three-year statute of limitations. Del.Code Ann. tit. 10, § 8106(a).

In determining which state's law applies, we generally employ the forum state's choice-of-law rules. See Eggleton, 495 F.3d at 585. Minnesota's choice-of-law rules involve a multistep analysis. Christian v. Birch, 763 N.W.2d 50, 56 (Minn.App.2009). The first step requires examination of whether the different states' laws actually present a conflict, i.e., " if the choice of one forum's law over the other will determine the outcome of the case." Nodak Mut. Ins. Co. v. Am. Family Mut. Ins. Co., 604 N.W.2d 91, 94 (Minn.2000). Here, the statute-of-limitations issue makes the choice of law outcome-determinative, so there is an actual conflict. See, e.g., Christian, 763 N.W.2d at 56 (" The district court correctly determined that there was an outcome-determinative conflict between the Minnesota and Wisconsin statutes of limitations." ).6

The second step requires determination of whether the different states' laws constitutionally may be applied to the case at hand. Jepson, 513 N.W.2d at 469. The parties agree that the application of Minnesota law presents no constitutional concerns. Whitney argues, however, that the application of Delaware law to his contract claims is not constitutionally permissible.

The district court determined, " The subject of the purported contract was ownership of Delaware corporations, and the alleged breach involved those same corporations' conduct and actions regarding their ownership. In the Court's view, this is sufficient contact to permit Delaware law to constitutionally apply." We agree. It is constitutional to apply a given state's law to a dispute if that state has a " significant aggregation of contacts, creating state interests, such that choice of...

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