Azarax, Inc. v. Syverson

• Decision Date: 15 August 2019
• Docket Number: Civil No. 16-3228 (JRT/LIB)
• Citation: 398 F.Supp.3d 425
• Parties: AZARAX, INC., Plaintiff, v. William SYVERSON and Stinson Leonard Street, LLP, Defendants.
• Court: U.S. District Court — District of Minnesota

398 F.Supp.3d 425

AZARAX, INC., Plaintiff,

v.William SYVERSON and Stinson Leonard Street, LLP, Defendants.

Civil No. 16-3228 (JRT/LIB)

United States District Court, D. Minnesota.

Signed August 15, 2019

Michael D. Sydow, Sr., THE SYDOW FIRM, 3355 West Alabama, Suite 444, Houston, TX 77098, and V. John Ella, TREPANIER MACGILLIS BATTINA P.A., 310 Fourth Avenue South, Suite 8000, Minneapolis, MN 55415, for plaintiff.

Brooke D. Anthony, and Norman H. Pentelovitch, ANTHONY OSTLUND BAER & LOUWAGIE PA, 90 South Seventh Street, Suite 3600, Minneapolis, MN 55402, for defendants.

MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

JOHN R. TUNHEIM, Chief Judge

Plaintiff Azarax, Inc. ("Azarax") alleges that Defendants William Syverson ("Syverson") and Stinson Leonard Street LLP ("SLS") committed legal malpractice by representing and undermining its predecessor in an international transaction.¹ Defendants now move the Court for summary judgment. Because the Court finds both that Azarax lacks standing to pursue this claim and that, even if it could show standing, no attorney-client relationship existed between Defendants and Azarax's predecessor, the Court will grant summary judgment for Defendants and dismiss the case in its entirety.²

BACKGROUND

I. 2011 AND INITIAL AGREEMENTS

Azarax is the purported successor stemming from the merger of a Mexican corporation named Convey Communications S.A. de C.V. ("Convey Mexico") and a Panamanian corporation named 14 Biz Holdings. (Am. Compl. at 2, 4, Dec. 16, 2016, Docket No. 31.)

Syverson was a partner at the law firm of Leonard Street & Deinard and remained a partner when Leonard Street & Deinard merged with Stinson Morrison Hecker in 2015 to become Stinson Leonard Street ("SLS"). (Pl.'s Mem. Opp. at 5, Jan. 21, 2019, Docket No. 247.)³ While working for Leonard Street & Deinard and SLS, Syverson represented a company named Wireless Communications Ventures, LLC ("WCV"). (Decl. of Brooke D. Anthony ("Anthony Decl.") ¶ 2, Ex. 9 ("Syverson Dep.") at 70, Dec. 21, 2018, Docket No. 219-1.) WCV was formed to pursue telecommunications investment opportunities.

(Anthony Decl. ¶ 2, Ex. 8 ("Scapanski Dep.") at 60, Docket No. 219-1.)

In early 2011, Syverson and WCV began negotiations with Convey Mexico in pursuit of a joint telecommunications business venture. (Syverson Dep. at 74.) Convey Mexico was represented in the negotiations by Nicolas Barrera, Guy Rosbrook, and Garry Donoghue (collectively referred to as the "Convey Group"). (Anthony Decl. ¶ 2, Ex. 47 at 62-66, Docket No. 219-6; Anthony Decl. ¶ 2, Ex. 27 at 40, Docket No. 219-2.) As a result of these negotiations, WCV agreed to invest $1 million in Convey Mexico in exchange for 20% ownership. (Anthony Decl. ¶ 2, Ex. 17 ("Rosbrook Email") at 164, Docket No. 219-1; Anthony Decl. ¶ 2, Ex. 33 ("Dallas Agreement") at 12, Docket No. 219-3.) The negotiations leading to this agreement were adversarial, with both sides aware that Syverson represented WCV. For instance, on February 25, 2011, Rosbrook sent an email to the rest of the Convey Group informing them that Rosbrook had reached an agreement with WCV but that "the negotiations had its moments, such as [Syverson] dressed in his best clothes with his game face on for a tough negotiation." (Rosbrook Email at 164.)

After the initial investment agreement, the two sides began negotiating the creation of a new joint company for the purpose of pursuing Multi-ISMI Technology, a cell phone technology that allows users to operate the same cell phone in different countries without incurring roaming charges. (Pl.'s Mem. Opp. at 6.) Once again, negotiations were adversarial. On May 20, 2011, Syverson sent Rosbrook and Donoghue an email outlining WCV's response to a proposed term sheet. (Anthony Decl. ¶ 2, Ex. 18 at 167, Docket No. 219-1.) In the email, Syverson details the problems WCV has with the term sheet and outlines "our preferred position," meaning WCV's preferred position. (Id. ) In response to not being included on the email, Barrera explained to Rosbrook and Donoghue that "[t]his is an excellent example of how [Syverson] divided us ... he is not your friend and never will be. He is not on our side and will never be." (Id. ) Rosbrook agreed and stated that "[Syverson] is an attorney and we shouldn't have let an attorney get in so deep on this deal or with us." (Id. )

On May 27, 2011, Rosbrook sent an email to Barrera and Donoghue expressing distrust of Syverson. (Anthony Decl. ¶ 2, Ex. 19 at 171, Docket No. 219-1.) In response, Donoghue stated that "[Syverson] is an idiot, or extremely smart, now perhaps we know why he was stalling on the Mexican agreements." (Id. at 171.) Barrera explained that Syverson had lied to him regarding an investment agreement. (Id. at 170.) On June 14, Barrera sent the others an email stating: "I have patiently been waiting for [Syverson] to send over a term sheet and [Shareholders Agreement] to then build a case and strategy. So far I have not had any communication from WCV ... the ball is on their side." (Anthony Decl. ¶ 2, Ex. 20 at 173, Docket No. 219-1.) On June 30, Rosbrook sent an email detailing negotiation strategy, suggesting a unified front against WCV and Syverson, informing the other two men of WCV's positions, and referring to WCV and Syverson interchangeably. (Anthony Decl. ¶ 2, Ex. 21 at 178, Docket No. 219-1.) Rosbrook also suggested that the Convey Group have an attorney look at the proposed agreement before moving forward. (Id. ) The Convey Group did eventually have an attorney review the term sheet. (Anthony Decl. ¶ 2, Ex. 47 at 63, Docket No. 219-6.)

Despite the tense back and forth, the negotiations were ultimately successful, and resulted in the creation of AmRoam Holdings, LLC ("AmRoam"). (Dallas Agreement at 12.) The Dallas Agreement was the first informal document to commemorate the agreement and was signed by the parties on September 23, 2011. (Id. at 12-13.) Syverson was the only attorney present at this meeting. (Decl. of Michael D. Sydow ("Sydow Decl.") ¶ 7, Ex. F ("2d Syverson Dep.") at 82-83, Jan. 21, 2019, Docket No. 252.) On October 13, 2011, the parties formalized the Dallas Agreement and laid out the formation of the company by signing the AmRoam Agreement. (Anthony Decl. ¶ 2, Ex. 43 ("AmRoam Agreement") at 5, Docket No. 219-6.) The AmRoam Agreement was drafted by Syverson. (Syverson Dep. at 74.) Between the two agreements, the parties established that WCV owned a 52% interest in AmRoam and 14 Biz Holdings owned a 48% interest, (Dallas Agreement at 12); that Convey Mexico would use AmRoam as its exclusive service provider in the United States, (id. ); and that Barrera would act as the CEO/President of AmRoam, (AmRoam Agreement at 49).

Subsequently, Convey Mexico created a new shareholder agreement ("SHA") to memorialize WCV's agreed upon 20% interest. (Anthony Decl. ¶ 2, Ex. 24 ("Convey SHA"), Dec. 21, 2018, Docket No. 220.) The new Convey SHA was drafted by Syverson. (2d Syverson Dep. at 64.) Syverson claims that he drafted the Convey SHA as the legal representative of WCV. (Id. )

Prior to the Dallas Agreement, AmRoam Agreement, and SHA being signed, WCV asked Syverson to serve as AmRoam's attorney, and Syverson executed an engagement letter which stated that he was hired for the purpose of facilitating AmRoam's formation, that his "sole client will be AmRoam Holdings," and that he would "not be representing any other person or entity in the matter." (Anthony Decl. ¶ 2, Ex. 36 at 7, Dec. 21, 2018, Docket No. 222.) He executed a similar engagement letter after the Dallas Agreement was signed, stating that he would function as AmRoam's attorney for its "general business matters" and that AmRoam would be Syverson's only client "in the matter." (Id. at 3.)

II. THE ENSUING YEARS AND FAILURE OF THE JOINT VENTURE

After the creation of AmRoam and installation of Barrera as its CEO, AmRoam began looking for telecommunications investment opportunities. In early 2013, Barrera negotiated a preliminary contract on behalf of Convey Mexico (the "Convey-Nextel Agreement"), in which Convey Mexico and Nextel, a Mexican telecommunications company, would jointly provide cellular services in the U.S. and Mexico to allow users to make cross border calls without incurring roaming charges. (Anthony Decl. ¶ 2, Ex. 48 at 69-91, Docket No. 219-6.)

The Convey-Nextel agreement was executed in Spanish and was not written or negotiated by Syverson. (See Anthony Decl. ¶ 2, Ex. 46 at 59, Docket No. 219-6; Syverson Dep. at 76.) Syverson took issue with the contract, because he believed that the agreement should have been between AmRoam (or one of its subsidiaries) and Nextel, given that AmRoam was established for the purpose of pursuing these types of opportunities. (Anthony Decl. ¶ 2, Ex. 29, Docket No. 221; Syverson Dep. at 76-77.) Accordingly, Syverson asked Barrera to send him the contract and to ensure that the contract belonged to AmRoam, or at least that AmRoam would be the benefactor. (Anthony Decl. ¶ 2, Ex. 29.) Barrera confirmed that the contract would end up belonging to AmRoam. (Id. )

In response, Syverson reiterated to Barrera and Donoghue that "[i]t is going to be extremely important that from here on out that we, meaning WCV, be involved in the process of finalizing contracts," and asked that WCV be included in the future so that its input would be taken into account. (Anthony Decl. ¶ 2, Ex. 46 at 59 (emphasis added).)

The parties disagree substantially over what happened next. Both sides agree that Convey and Nextel spent the next year and a half working towards the introduction of the cross-border technology. However, the joint venture between Nextel and Convey fell apart in August 2014.

Azarax contends that Syverson covertly met with Nextel and essentially sabotaged the Convey-Nextel project by telling Nextel that Convey Mexico was failing to keep up its end of the agreement, by trying to convince Nextel to terminate that contract,...