Dunn v. National Beverage Corp.

• Decision Date: 06 March 2008
• Docket Number: No. A06-396.,A06-396.
• Citation: 745 N.W.2d 549
• Parties: Susan DUNN, et al., Appellants, v. NATIONAL BEVERAGE CORP., a Delaware corporation, et al., Respondents, DTM Distributing, Inc., Defendant.
• Court: Minnesota Supreme Court

745 N.W.2d 549

Susan DUNN, et al., Appellants, v. NATIONAL BEVERAGE CORP., a Delaware corporation, et al., Respondents, DTM Distributing, Inc., Defendant.

No. A06-396.

Supreme Court of Minnesota.

March 6, 2008.

Heard, considered, and decided by the court en banc.

OPINION

PAGE, Justice.

Appellants Susan Dunn, Richard Newstrom, and Twin City Home Juice Company¹ (collectively, Twin City) sued National Beverage Corp. (National Beverage) and DTM Distributing, Inc. (DTM), alleging, among other things, a violation of the Minnesota Franchise Act, Minn.Stat. ch. 80C (2006), and breach of contract. The jury found that National Beverage breached the franchise agreement between the parties and awarded $288,000 in damages for the breach. The jury also found that National Beverage violated the franchise act but awarded no damages for the violation. Twin City filed a post-trial motion for attorney fees under Minn.Stat. § 80C.17, subd. 3. The district court denied the motion, concluding that section 80C.17, subdivision 3, bars an award of attorney fees to a plaintiff who receives no relief under the franchise act. The court of appeals affirmed. We granted Twin City's petition for review, and, for the reasons discussed below, we affirm the court of appeals.

In 1972, Twin City entered into a written agreement with Chicago Home Juice that granted Twin City the right to distribute certain Chicago Home Juice products "within Twin City's marketing area." Chicago Home Juice also agreed not to sell its products to any customer within Twin City's defined marketing area without Twin City's prior written permission. Included among those products was the "Mr. Pure" brand. In 1995, Chicago Home Juice extended its agreement with Twin City for another ten years.²

National Beverage acquired Chicago Home Juice in 1999. The asset purchase agreement stated that National Beverage was purchasing "[a]ll business, properties and assets of every kind and description, whether real, personal or mixed, tangible or intangible, wherever located, used or necessary in the operation of the Business." After National Beverage acquired Chicago Home Juice, National Beverage and Twin City continued to do business in the same manner as Twin City had with Chicago Home Juice.

In March 2002, Twin City sold its assets, including its rights under the agreement with National Beverage, to Service Distributing, Inc. The purchase price was a minimum of $288,000 (to be paid in 48 monthly installments of $6,000 each), plus a share of Service Distributing's future profits, to a maximum of $350,000 in the aggregate. Service Distributing chose DTM as its sub-distributor for National Beverage's products. In the summer of 2002, Service Distributing stopped ordering products from National Beverage, either because of National Beverage's actions (according to Twin City) or because Service Distributing decided to leave the business (according to National Beverage). By letter dated August 19, 2002, National Beverage warned Twin City that it would "take all steps necessary to protect [its] Mr. Pure brand in the Minnesota market." On August 30, 2002, Service Distributing and Twin City formally terminated the purchase of Twin City's assets by Service Distributing.

Twin City then entered into a stock purchase agreement with another company, Tri-County Beverage & Supply, Inc. (Tri-County). But National Beverage had begun an at-will, nonexclusive distributor relationship with DTM, the company formerly acting as a sub-distributor for Service Distributing, and had been shipping products to DTM since late August. Dunn testified that National Beverage refused to sell its products to Twin City, forcing Twin City to tell its customers to buy the products from DTM instead. The purchase by Tri-County never closed, according to Twin City, because National Beverage denied the existence of an agreement with Twin City and because National Beverage told Tri-County and other resellers that DTM, not Twin City, was its distributor in the area.

Twin City, along with its owners, Susan Dunn and Richard Newstrom, sued both National Beverage and DTM for damages resulting from the end of Twin City's relationship with National Beverage. The parties tried several causes of action to a jury in September 2005, including: (1) violation of the Minnesota Franchise Act;³ (2) breach of contract by both National Beverage and DTM; (3) violation of the Minnesota Deceptive Trade Practices Act; (4) violation of the Minnesota Trade Secrets Act; (5) defamation; (6), tortious interference with contractual relations and prospective business advantage by DTM and National Beverage; and (7) common law business disparagement. At trial, Twin City sought as damages the $375,000 it would have received from the stock sale to Tri-County, plus prejudgment interest, plus a variety of expenses and costs Twin City claimed it incurred and benefits it claimed it did not receive because the stock sale to Tri-County was never finalized, for a total damages claim in excess of $1 million.

Twin City's counsel prepared the first draft of the special verdict form, which contained 49 questions including subparts. Relevant to this appeal, questions 1 through 4 concerned the breach of contract, and questions 5 through 10 related to the violation of the franchise act. In his closing argument, Twin City's counsel spoke to the jury first about the breach of contract questions and then the statutory violation questions. In doing so, he told the jury:

If I could make this comment now, so I don't forget, all of these individual claims are important. They all have legal significance. So even though you might conclude that the damages are the same for the first cause of action and the second cause of action, don't skip one or not do it full justice. We need answers to all of them even if the damage answer remains the same.

The trial court instructed the jury to determine the amount of money that would compensate Twin City for the breach of contract but did not separately instruct the jury to determine the amount of money that would compensate Twin City for the statutory violation. Furthermore, the court instructed the jury that "[n]othing the attorneys say during the trial, including opening statement and closing argument, is evidence. * * * What the attorneys say about the law may be different from what I say. If this happens, you must rely on what I say about the law."

In answering the special verdict questions, the jury found that National Beverage both breached its contract with Twin City and violated the franchise act. For the breach of contract, the jury awarded $288,000 in compensatory damages. For the franchise act violation, the jury specifically found that National Beverage terminated Twin City's franchise rights without good cause.⁴ However, the jury wrote a zero in the blank for the damages that would compensate Twin City for National Beverage's franchise act violation.⁵

National Beverage moved for judgment notwithstanding the verdict on the breach of contract, violation of the franchise act, and defamation claims. Twin City moved for prejudgment interest under Minn.Stat. §§ 549.02-.09 (2006) and for attorney fees under the franchise act, which provides that "[a]ny suit authorized under this section may be brought to recover the actual damages sustained by the plaintiff together with costs and disbursements plus reasonable attorney's fees." Minn.Stat. § 80C.17, subd. 3. Additionally, Twin City moved for judgment notwithstanding the verdict⁶ to award damages of $288,000 for the statutory violation, "should such be necessary to authorize the Court to enter its Order granting Plaintiffs reasonable attorneys' fees." In its memorandum to the court, Twin City asserted that the same facts supporting the jury's breach of contract award also supported an award of damages for the franchise act violation. At the motion hearing, however, Twin City withdrew its motion for judgment notwithstanding the verdict. The district court denied Twin City's motions for prejudgment interest and attorney fees, as well as National Beverage's motion for judgment notwithstanding the verdict.

National Beverage appealed the district court's judgment, and Twin City cross-appealed on the denial of attorney fees. Dunn v. Nat'l Bev. Carp., 729 N.W.2d 637, 641 (Minn.App.2007). The court of appeals affirmed the district court's rulings. Id. at 655. Twin City petitioned this court to further review the denial of attorney fees, and we granted review.

The general rule in Minnesota is that "attorney fees are not recoverable in litigation unless there is a specific contract permitting or a statute authorizing such recovery." Barr/Nelson, Inc. v. Tonto's Inc., 336 N.W.2d 46, 53 (Minn.1983). Because there is no specific language in the parties' contract permitting the recovery of attorney fees, Twin City can recover attorney fees only if permitted by statute. In this case, the applicable statute is Minn. Stat. § 80C.17, subd. 3, which provides: "Any suit authorized under this section may be brought to recover the actual damages sustained by the plaintiff together with costs and disbursements plus reasonable attorney's fees."

We first address Twin City's argument that an award of attorney fees under section 80C.17, subdivision 3, does not require an award of damages under the franchise act. In Martin Investors, Inc. v. Vander Bie, we rejected the argument that this provision limited awards of attorney fees to suits for monetary damages. 269 N.W.2d 868, 876 (Minn.1978). Noting that the statute "specifically permits a claim for costs and disbursements plus reasonable attorneys fees in `[a]ny suit authorized under this section,'" and noting that the statute permitted suits for rescission and restitution,⁷ we affirmed the district court's award of attorney fees to plaintiffs who sought and were awarded rescission of the franchise agreement and restitution of their payments...