Gieseke v. IDCA, Inc.
| Decision Date | 14 January 2013 |
| Docket Number | A12-0713 |
| Parties | John Gieseke, on behalf of Diversified Water Diversion, Inc., Respondent, v. IDCA, Inc., et al., Appellants. |
| Court | Minnesota Court of Appeals |
Affirmed
Hennepin County District Court
Todd Wind, Fredrikson & Byron, P.A., Minneapolis, Minnesota (for respondent)
Kelly Vince Griffitts, Griffitts Law Offices, PLLC, Bloomington, Minnesota (for appellants)
Considered and decided by Ross, Presiding Judge; Schellhas, Judge; and Kirk, Judge.
A claim of tortious interference with prospective advantage—also referred to as tortious interference with prospective economic advantage, tortious interference with business expectancy, wrongful interference with business relations or relationships, tortious interference with prospective contractual relations or relationships, and wrongful interference with prospective contractual relations or relationships—is a valid tort claim under Minnesota law.
Appellants challenge the district court's piercing of appellant-company's corporate veil to hold appellant-individuals liable for the jury's verdict that appellant-company converted respondent-company's property and interfered with respondent-company's prospective economic advantage. We affirm.
This case arises out of a protracted and complicated feud between appellant Michael Hogenson and his brother, Arthur Hogenson, (the Hogensons) and their two competing businesses—Standard Water Control Systems and respondent Diversified Water Diversion, Inc. The Hogensons jointly and equally owned Standard Water, which employed John Gieseke. Disputes arose between the Hogensons; they stopped working together in 1999; and Michael Hogenson retained ownership of Standard Water, which discharged Gieseke in part because of his friendship with Arthur Hogenson. In December 2001, Gieseke and Arthur Hogenson incorporated Diversified Water. Shortly thereafter, the companies became enmeshed in litigation. That litigation included Diversified Water suing Standard Water to enforce a non-disparagement agreement, which arose out of separate litigation, and the district court granting judgment to Diversified Water against Standard Water in the amount of $67,717.45.
In September 2007, Thomas Fallon obtained a $737,679.65 personal-injury judgment against Arthur Hogenson. Ultimately, the district court vacated the Fallon judgment on the ground that the court lacked jurisdiction because Fallon was anemployee of Diversified Water when he was injured on the job. But, about two years before vacation of the Fallon judgment, a company owned by Michael Hogenson—MWH Properties—purchased the Fallon judgment for $62,500, intending to enforce it against Arthur Hogenson and give 50% of any judgment proceeds to Fallon. Michael Hogenson and his wife, appellant Debra Hogenson, also decided to purchase Arthur Hogenson's 50% stock interest in Diversified Water, and they formed appellant IDCA, Inc. for that specific purpose. Michael Hogenson testified that IDCA intended to "[s]ettle [Diversified Water's] outstanding debts, lawsuits, and so on and shut the company down." Debra Hogenson was IDCA's sole director, officer, employee, and stockholder.
After acquiring the Fallon judgment, Michael Hogenson attempted to levy the judgment against Arthur Hogenson's assets. The district court issued a writ of execution, and the Hennepin County Sheriff's Office noticed a sheriff's sale of Arthur Hogenson's stock in Diversified Water and one other company. At the sheriff's sale, IDCA purchased Arthur Hogenson's 50% stock interest in Diversified Water. Then, without proper corporate authority, IDCA changed Diversified Water's registered address to that of Standard Water's and towed some of Diversified Water's equipment from Arthur Hogenson's home to Standard Water's building. Additionally, IDCA, based on its 50% interest in Diversified Water, settled Diversified Water's $67,717.45 judgment against Standard Water for $12,0001 In September 2009, on behalf of Diversified Water and based on his 50% ownership interest, Gieseke sued numerous parties, including IDCA, Michael Hogenson, and Debra Hogenson, alleging breach of fiduciary duty, conversion, replevin, interference with prospective economic advantage, and alter-ego liability. In their answer and counterclaim, Michael Hogenson, and Debra Hogenson alleged that Gieseke's claims "may be barred by the doctrine[] of unclean hands," that IDCA is "a bonafide purchaser for value of the shares of Diversified," and that IDCA "has good title to the shares of Diversified" because IDCA had no knowledge based on the face of the Fallon judgment that it was void for lack of subject-matter jurisdiction.
The district court denied summary judgment to IDCA, Michael Hogenson, and Debra Hogenson, rejecting their argument that IDCA was a bona fide purchaser of the Fallon judgment because it was void for lack of subject-matter jurisdiction. The district court also rejected the argument of unclean hands. The case proceeded to trial, and a jury answered special-verdict questions in part as an advisory jury under Minn. R. Civ. P. 39.02. The jury advised the district court that: IDCA breached a fiduciary duty to Diversified Water; the breach caused damages of $41,000; and IDCA's corporate veil should be pierced. And the jury returned verdicts that: IDCA converted Diversified Water's property and Diversified Water is entitled to damages of $10,000; IDCA is liable for replevin and Diversified Water is entitled to damages of $10,000; and IDCA committed tortious interference with Diversified Water's prospective economic advantage and Diversified Water is entitled to damages of $220,000.
Based on the advice of the advisory jury, the district court pierced IDCA's corporate veil but, because IDCA was not a fiduciary to and did not owe a fiduciary duty to Diversified Water, the court rejected the jury's advice that IDCA breached a fiduciary duty to Diversified Water. The district court awarded damages of $10,000 for the conversion and replevin claims, reasoning that the damages for each were duplicative. The district court also awarded $220,000 for tortious interference with prospective economic advantage. The total damages award was $230,000.
IDCA, Michael Hogenson, and Debra Hogenson moved for amended findings, a new trial, and judgment as a matter of law (JMOL), and the district court denied their motions.
This appeal follows.
I. Is tortious interference with prospective advantage a valid tort claim under Minnesota law?
II. Does the evidence sustain the jury's verdict that IDCA committed tortious interference with Diversified Water's prospective advantage?
III. Did the unclean-hands doctrine preclude the district court from piercing IDCA's corporate veil?
IV. Does the evidence sustain the district court's piercing of IDCA's corporate veil to hold Michael Hogenson and Debra Hogenson liable for IDCA's conduct?
V. Is the jury's damages award excessive?
Appellate courts will reverse a district court's denial of a new-trial motion only if the district court clearly abused its discretion, Frazier v. Burlington N. Santa Fe Corp.,811 N.W.2d 618, 629 (Minn. 2012), but appellate courts "need not give deference to the district court's decision" on issues of law, Stoebe v. Merastar Ins. Co., 554 N.W.2d 733, 735 (Minn. 1996). Appellate courts review de novo a district court's denial of a JMOL motion, Glorvigen v. Cirrus Design Corp., 816 N.W.2d 572, 581 (Minn. 2012), and in doing so, "apply the same standard the district court uses," "constru[ing] the evidence in the light most favorable to the prevailing party" to determine whether "'there is [a] legally sufficient evidentiary basis for a reasonable jury to find'" for the party denied JMOL. Kidwell v. Sybaritic, Inc., 784 N.W.2d 220, 229 (Minn. 2010) (quoting Minn. R. Civ. P. 50.01(a)). JMOL is appropriate when "the evidence is practically conclusive against the verdict and reasonable minds can reach only one conclusion or the jury's findings are contrary to the law applicable in the case." Moorhead Econ. Dev. Auth. v. Anda, 789 N.W.2d 860, 887 (Minn. 2010) (quotation omitted). JMOL is "inappropriate if jurors could differ on the conclusions to be drawn from the record." Daly v. McFarland, 812 N.W.2d 113, 119 (Minn. 2012) (quotation omitted).
A jury's "answer to a special verdict question should be set aside only if it is perverse and palpably contrary to the evidence, or where the evidence is so clear as to leave no room for differences among reasonable persons." Moorhead Econ., 789 N.W.2d at 888 (quotation omitted). But an advisory jury's answers to special-verdict questions "only . . . advise the court" and an advisory jury's findings do not "supplant" a district court's findings but "merely reinforce the court's own decision on the disputed fact." Onvoy, Inc. v. ALLETE, Inc., 736 N.W.2d 611, 616 (Minn. 2007) (quotation omitted); see In re Estate of Balafas, 293 Minn. 94, 94, 198 N.W.2d 260, 260 (1972) (); Noble v. C.E.D.O., Inc., 374 N.W.2d 734, 739 (Minn. App. 1985) (); cf. Minn. R. Civ. P. 39.02 ().
A district court may grant a new-trial motion when the "verdict . . . is contrary to law," Minn. R. Civ. P. 59.01(g), and may grant a JMOL motion when "the jury's findings are contrary to the law applicable in the case," Moorhead Econ., 789 N.W.2d at 887 (quotation omitted). IDCA, Michael Hogenson, and Debra Hogenson argue that tortious interference with prospective economic...
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