Dominium v. Nationwide Housing

• Decision Date: 13 May 1999
• Docket Number: No. 98-2620,98-2621,98-2620
• Citation: 195 F.3d 358
• Parties: (8th Cir. 1999) Dominium Management Services, Inc., Plaintiff - Appellee, v. Nationwide Housing Group; Nationwide Development Group, LP, Defendants - Cross-Defendants - Appellees Pinnacle Group Realty Management Company, Defendant - Cross-Claimant - Appellant. Submitted:
• Court: U.S. Court of Appeals — Eighth Circuit

Page 358

195 F.3d 358 (8th Cir. 1999)

Dominium Management Services, Inc., Plaintiff - Appellee, v. Nationwide Housing Group; Nationwide Development Group, LP, Defendants - Cross-Defendants - Appellees

Pinnacle Group Realty Management Company, Defendant - Cross-Claimant - Appellant.

No. 98-2620, 98-2621

United States Court of Appeals FOR THE EIGHTH CIRCUIT

Submitted: May 13, 1999

Filed: October 28, 1999

Appeals from the United States District Court for the District of Minnesota. [Copyrighted Material Omitted]

[Copyrighted Material Omitted] Before RICHARD S. ARNOLD, JOHN R. GIBSON, and BOWMAN, Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

Dominium Management Services, Inc. brought this diversity action against Pinnacle Group Realty Management Company, Nationwide Housing Group, and Nationwide Development Group, LP (we refer to the latter two parties collectively as "Nationwide") seeking a declaratory judgment that it had a binding agreement with Nationwide under which it was to purchase Nationwide's real estate partnership interests. Pinnacle cross-claimed that Nationwide had breached an earlier similar contract. The jury found that Nationwide and Pinnacle entered into an enforceable contract, that Nationwide breached the agreement, and that Pinnacle was entitled to compensatory damages of $18.3 million. The district court granted in part Nationwide's motion for judgment as a matter of law as to Pinnacle's claim for management fees and accounts receivable, ruling that the evidence did not support the damages awarded for that portion of the claim. With respect to the jury's award for the value of the partnership interest, the court deducted the price Pinnacle would have paid, reducing the award to $2.8 million. The district court also conditionally ordered a new trial on damages unless Pinnacle consents to a remittitur of $15.5 million from the jury's award and to an entry of judgment in the amount of $2.8 million. Pinnacle appeals, arguing that the district court erred by granting judgment as a matter of law on the damages issues and by conditionally ordering a new trial. We reverse the partial grant of judgment as a matter of law and affirm the conditional grant of a new trial.

I.

Nationwide Housing Group, Inc. is the general partner of Nationwide Development Group, LP which, at the time in question, was the general partner and property manager of approximately forty real estate limited partnerships, which we will refer to as the Portfolio Partnerships. The Portfolio Partnerships were created to own and operate low-income housing that qualified for federal tax credits. Nationwide acted as property manager for the more than eighty apartment buildings owned by the Portfolio Partnerships, overseeing approximately 5,300 apartments. Various individuals and corporations invested in the Portfolio Partnerships by purchasing partnership units and becoming limited partners. In addition, Nationwide formed two limited partnerships with exclusively corporate and institutional investors, the Institutional Fund and the Opportunity Fund, to invest in the Portfolio Partnerships.

In 1996, Nationwide faced significant financial and operational difficulties. It had debts in excess of its assets and was unable to meet its operational expenses. Nationwide contracted for Dominium Management Services, Inc. to take over management of the majority of the Portfolio Partnerships' real estate for a period of one year. It also borrowed money from Dominium to meet its immediate cash needs.¹ Nationwide's Institutional Fund investors formed an Advisory Group to oversee Nationwide in the management of the Institutional Fund portfolio. After Nationwide began looking for a buyer to purchase its interests and replace it as general partner in all of the Portfolio Partnerships, the Advisory Group was actively involved in the selection of a new general partner for the limited partnerships controlled by the Institutional Fund. In its quest to find a buyer, Nationwide ultimately solicited proposals from at least five firms, including Dominium and Pinnacle Group Realty Management Co.

On July 24, 1996, Dominium and Pinnacle met separately with the Advisory Group and Nationwide's three principals, presenting proposals for the acquisition of Nationwide's property management rights. Both Dominium and Pinnacle concluded that an opportunity to purchase Nationwide's general partnership interests also existed. Over the next several weeks, the companies continued to compete for the Nationwide deal.

On August 14, Dominium sent a proposal letter to Nationwide. After making changes to the letter, Laura Lynch, the executive vice president of Nationwide, discussed the Dominium proposal with Stan Harrelson, the president of Pinnacle. Pinnacle then sent a letter agreement to Nationwide on the 15th, and Nationwide proposed one change.

On August 16, Pinnacle submitted a "Revised Letter of Agreement" to Nationwide. Michael Weyrick, Nationwide's president, G. Davis Slajchert, its secretary, and Lynch signed the agreement on behalf of Nationwide and returned it to Pinnacle. On August 19, Harrelson and Lynch discussed preparing the documents necessary to implement their agreement. The next day, Dominium delivered a revised proposal to Nationwide. The Advisory Group met on August 20 and listened to presentations made by Pinnacle and Dominium. The institutional investors decided they preferred Dominium as the new general partner of the Institutional Fund partnerships, and the following day the Advisory Group informed Dominium and Pinnacle of this decision.

On the morning of August 22, Pinnacle wire-transferred $162,000 to Nationwide's attorney in connection with the Revised Letter of Agreement. The next day, Nationwide sent a letter to Pinnacle stating that it had chosen to pursue other alternatives because "Pinnacle was unable to perform under the revised letter of agreement dated August 16, 1996 between Pinnacle and Nationwide Housing Group." Nationwide returned the $162,000. Harrelson responded in a letter dated August 26 that asserted:

Your letter does not state how we are unable to perform. In truth, contrary to your claim, Pinnacle and its nominee, Triad, have performed and remain fully able to perform[.] Indeed, we have spent substantial time and money performing to date . . .[.] While we have performed, you have not. And now by your August 23, 1996 letter, you are attempting to renege on our agreement. We will not allow you to do so.

Meanwhile, on August 23 Nationwide's three principals signed a proposal from Dominium outlining terms under which Dominium would acquire Nationwide's interests and substitute for Nationwide as general partner in the Portfolio Partnerships. This litigation followed shortly thereafter.

Dominium sought a declaratory judgment that the agreement between it and Nationwide was valid and could proceed.² Pinnacle filed cross-claims against Nationwide for breach of contract, breach of the implied covenant of good faith and fair dealing, and promissory estoppel, and counterclaims against Dominium for tortious interference with contract and interference with prospective business relations. Pinnacle also sought preliminary injunctive relief, which the district court denied, in an attempt to prevent the Dominium-Nationwide deal from proceeding. After a seven-day trial, the jury returned a special verdict in Pinnacle's favor, affirmatively answering an interrogatory that Pinnacle and Nationwide entered into an enforceable contract for the acquisition of all Nationwide's partnership interests and assets and that Nationwide breached the contract.³ The jury awarded $18.3 million in compensatory damages. The jury penned notations in the margin following the damages interrogatory, including calculations that both Pinnacle and Nationwide agree show $7.3 million for lost property management fees, $6 million for accounts receivable, and $5 million for the partnership interest.

On post-judgment motions, the district court partially granted Nationwide's motion for judgment as a matter of law, holding that there was insufficient evidence to support an award of damages based on either property management fees or accounts receivable. The district court denied the motion with respect to the $5 million the jury awarded as the value of Nationwide's general partnership interest, subtracted the $2.2 million purchase price without dispute from Pinnacle, and arrived at a final figure of $2.8 million. The district court, in the event that we reversed its judgment as a matter of law, ordered a conditional new trial unless Pinnacle consents to a remittitur and to entry of judgment in the amount of $2.8 million.

This appeal followed, with Pinnacle arguing that the district court erred by entering judgment as a matter of law with respect to the management fees and the accounts receivable, and by granting the conditional motion for a new trial. Pinnacle also argues that erroneous evidentiary rulings and a misleading jury instruction require a new trial on its claims against Dominium. Finally, Pinnacle challenges the district court's failure to grant a declaratory judgment that the Dominium-Nationwide agreement is invalid. Nationwide argues that the district court erred by partially denying its motion for judgment as a matter of law because Pinnacle failed to prove breach of contract and because the jury award for the value of Nationwide's general partnership interest was not supported by the evidence. Nationwide also asserts that Pinnacle's claims were not pursued in the name of the real party in interest.

II.

We review a district court's grant of judgment as a matter of law de novo. Van Steenburgh v. Rival Co., 171 F.3d 1155, 1158 (8th Cir. 1999). Judgment as a matter of law is warranted when no "legally sufficient evidentiary basis" exists for a reasonable jury to have found in favor of a party on an issue on which the party has been fully heard....