Bredberg v. Long

• Decision Date: 06 January 1985
• Docket Number: No. 85-5012,85-5012
• Citation: 778 F.2d 1285
• Parties: 27 Wage & Hour Cas. (BN 721, 103 Lab.Cas. P 34,720 Carl A. BREDBERG and Diane Bredberg, Appellees, v. Dean LONG, Nelda Long, and Realife, Inc., d/b/a Realife Ranch, Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1285

778 F.2d 1285

27 Wage & Hour Cas. (BN 721, 103 Lab.Cas. P 34,720

Carl A. BREDBERG and Diane Bredberg, Appellees, v. Dean LONG, Nelda Long, and Realife, Inc., d/b/a Realife Ranch, Appellants.

No. 85-5012.

United States Court of Appeals Eighth Circuit.

Submitted Sept. 9, 1985.

Filed Dec. 9, 1985.

Rehearing Denied Jan. 6, 1985.

Rodney J. Mason, St. Paul, Minn., for appellant.

Elton A. Kuderer, Fairmont, Minn., for appellee.

Before ROSS, Circuit Judge, FLOYD R. GIBSON, Senior Circuit Judge, and ARNOLD, Circuit Judge.

ARNOLD, Circuit Judge.

Plaintiffs Carl and Diane Bredberg prevailed in a suit brought in the United States District Court for the District of Minnesota ¹ on claims against Nelda Long, Dean Long, and Realife, Inc. for fraudulent misrepresentation and violation of the Fair Labor Standards Act (FLSA), 29 U.S.C. Secs. 206 and 207. The defendants raise numerous issues on appeal. We hold that venue was not proper for the FLSA claim and therefore reverse as to it. On the fraud claim, we reverse the award of punitive damages against Dean and Nelda Long. In all other respects, the judgment will be affirmed.

I.

The Bredbergs' claims arose from the circumstances of their decision to join and their two year membership in Realife Ranch, a religious community located near Rogers, Arkansas. Realife Ranch was operated under the corporate aegis of Realife, Inc., an Oklahoma corporation registered to do business in Arkansas; both entities were formed by Nelda and Dean Long. (Where distinguishing between the two is unimportant, both Realife Ranch and Realife, Inc., will be referred to as "Realife.") Before they moved to Realife, the Bredbergs and their three children lived in another religious community with fifteen friends and relatives on the Bredbergs' farm at Dunnell, Minnesota. Before the Bredbergs and their children moved to Realife in late August 1979, they visited Realife twice, received a phone call from Nelda Long, and were visited at Dunnell by Nelda and Dean Long. A few weeks after they arrived at Realife, the Bredbergs transferred all their assets to Realife. The livestock and much of the equipment at the Dunnell farm were sold at an auction and the proceeds were sent to Realife; the Longs returned to Minnesota to assist in organizing this sale. Farm property not sold at this auction was later transported to Realife. After the auction, the remaining members of the Dunnell community moved to Realife.

Shortly after they joined Realife, at the request of the defendants, Carl and Diane Bredberg signed statements that they were volunteers and expected no compensation for work performed in any of Realife's profit-making ventures. While at Realife, the Bredbergs worked in various businesses run by the defendants, including a restaurant and a convenience store. The Bredbergs received no wages for this work, but they were provided with nonmonetary benefits that included food and lodging, and each received three dollars a week as an "allowance."

On July 28, 1981, the Bredbergs left Realife and returned to Dunnell, Minnesota, where they now live. Realife and the Longs have returned to the Bredbergs money and property worth only a fraction of the value of the assets the Bredbergs transferred to Realife.

The Bredbergs' original complaint alleged fraud and breach of contract in connection with the transfer of their assets to Realife, and named the Longs and Realife as defendants. A little over a year after this complaint was filed, the Bredbergs amended it to include claims that Realife had willfully violated the FLSA in failing to pay them wages and overtime for work they performed in its business ventures.

In their fraud claim, the Bredbergs contended that the defendants had engaged in a variety of misrepresentations in order to convince the couple to move to Realife and to obtain their assets. They maintained that the defendants had falsely represented that they intended to set up a dairy comparable to that at Dunnell and place it under Carl Bredberg's management; in fact, only a small dairy was ever established. The Bredbergs also asserted that the Longs made extensive misrepresentations about the quality of life at Realife, including representations that decision-making at Realife was done on a group basis, that Realife, Inc., was run by a Board of Directors, and that Realife emphasized the promotion of family relationships. In truth, the Bredbergs asserted, Realife Ranch and Realife, Inc., were under the complete control of Nelda and Dean Long, and family relationships were continually undermined.

After a four-week trial, the jury returned special verdicts in the Bredbergs' favor, awarding them $160,708.05 on their misrepresentation claim and punitive damages of $100,000 against Dean Long, $750,000 against Nelda Long, and $750,000 against Realife. The jury further found that Realife had willfully violated the FLSA and assessed liability at $47,790.46. The District Court denied the defendants' directed-verdict, judgment-notwithstanding-the-verdict, and new-trial motions; it awarded the Bredbergs $47,790.46 in liquidated damages and $14,980.00 in attorney's fees on the FLSA claims.

With respect to the FLSA claims, the Longs and Realife contend here that venue was improper in Minnesota, that the trial court lacked personal jurisdiction over Realife, that the claim was barred by the statute of limitations, and that the evidence was insufficient in several respects. The defendants also challenge the sufficiency of the evidence on the fraud claim and the admission of certain evidence as irrelevant and prejudicial. The defendants further assert that the punitive-damages awards were excessive and unsupported by the evidence.

We agree with the defendants that venue was improper for the FLSA claims, and therefore find it unnecessary to reach the remaining FLSA issues. We hold that there was sufficient evidence to support the jury's fraud verdict and that the evidence that the defendants claim was irrelevant was properly admitted. Lastly, we conclude that the punitive-damages awards against Nelda and Dean Long were excessive, but affirm the punitive damages assessed against Realife.

II.

There is no special venue provision for FLSA claims, so the general venue provisions of 28 U.S.C. Sec. 1391 govern this case. The Bredbergs' original complaint, which stated only fraud and breach-of-contract claims, invoked diversity jurisdiction. Under 28 U.S.C. Sec. 1391(a), in actions where jurisdiction is "founded only on diversity of citizenship," venue exists in any district where all plaintiffs reside, where all defendants reside, or in which the claim arose. Because the plaintiffs reside in Minnesota, venue was proper there for the suit as it originally stood. However, addition of the FLSA claims against Realife imported a federal-question basis for subject-matter jurisdiction over the suit. Under 28 U.S.C. Sec. 1391(b), in actions where jurisdiction is "not founded solely on diversity of citizenship," venue is proper only in a district where all defendants reside or in which the claim arose. The defendants maintain that inclusion of the FLSA claims ended the availability of plaintiffs' residence as a basis for venue for the suit, rendering venue improper in Minnesota.

The trial court found venue proper because the FLSA claims were asserted against parties to an existing action, making demonstration of an independent basis for venue over the FLSA claim unnecessary. We can find no prior case in which venue was found proper where a federal-question claim was joined with a state-law diversity claim and venue was based solely on Sec. 1391(a)'s plaintiffs'-residence provisions. We conclude that the "pendent venue" approach adopted by the trial court is in this context irreconcilable with the requirements of Sec. 1391(b). See 15 C. Wright, A. Miller, and E. Cooper, Federal Practice and Procedure: Jurisdiction Sec. 3808 n. 3 (1976). Section 1391(a)'s extension of venue to the district in which all plaintiffs reside would be available in any suit based, in whole or in part, on diversity jurisdiction, if it were permissible to ignore the impact of a federal-question claim on venue on the ground that venue has already been established for the state claim under the Sec. 1391(a) plaintiffs'-residence provisions. The more limited venue provisions of Sec. 1391(b) would then apply solely to actions where only a non-diversity basis for jurisdiction could be invoked, whereas Congress has directed that they should apply to all actions "not based solely on diversity of citizenship."

The plaintiffs seek to avoid this inconsistency between a pendent-venue approach and Sec. 1391(b) by distinguishing between cases where multiple claims are brought initially, where they admit that venue must be proper as to each claim, and cases where an additional claim is added to a pre-existing action, where they contend that venue for the original claim alone is sufficient. This does not save their approach. Plaintiffs in suits where diversity exists who raise both federal-question and state-law claims would still virtually always be able to avoid Sec. 1391(b)'s strictures simply by first pleading only their state claims and later adding their federal claims under the liberal amendment provisions of the Federal Rules of Civil Procedure.

This is not to say that there are no circumstances in which establishing venue for one claim makes it unnecessary to demonstrate an independent basis for venue for other claims in an action. Where venue is proper for the original claims by a plaintiff against a defendant and additional claims are asserted as counterclaims or cross-claims, or come in through impleader, interpleader, or intervention, a venue objection may be unavailable as to the additional claims. See, e.g., Brandt v. Olson, 179 F.Supp. 363, 370-372 (N.D.Iowa 1959) (third-party claim). Where a federal court (in the absence of diversity...