In re Estate of Nelson

• Decision Date: 25 November 2019
• Docket Number: A19-0503,A19-0507
• Citation: 936 N.W.2d 897
• Parties: IN RE the ESTATE OF Prince Rogers NELSON, Deceased.
• Court: Minnesota Court of Appeals

936 N.W.2d 897

IN RE the ESTATE OF Prince Rogers NELSON, Deceased.

A19-0503

A19-0507

Court of Appeals of Minnesota.

Filed November 25, 2019

Barbara P. Berens, Erin K. Fogarty Lisle, Carrie L. Zochert, Berens & Miller, P.A., Minneapolis, Minnesota; and John J. Rosenberg (pro hac vice), Rosenberg, Giger & Perala P.C., New York, New York (for appellants CAK Entertainment, Inc. and Charles Koppelman)

Alan I. Silver, Andrea E. Reisbord, Bassford Remele, Minneapolis, Minnesota (for appellants NorthStar Enterprises Worldwide, Inc. and L. Londell McMillan)

Peter J. Gleekel, William J. Tipping, Bradley R. Prowant, Larson • King, LLP, St. Paul, Minnesota (for respondent Estate)

Considered and decided by Rodenberg, Presiding Judge; Larkin, Judge; and Reilly, Judge.

REILLY, Judge

In these consolidated appeals from an order in which the district court directed appellants to refund to respondent estate commissions they previously received, appellants argue that the district court (1) erred by allowing the estate to proceed with its claim under Minn. Stat. § 524.3-721 ; (2) denied appellants due process of law by allowing the estate to proceed under Minn. Stat. § 524.3-721 ; (3) erred by granting a temporary injunction without addressing the Dahlberg factors; and (4) abused its discretion by holding appellants, including their officers, directors, shareholders, employees, agents, assigns and successors, to be jointly and severally liable to the estate for the funds to be refunded. We affirm in part, reverse in part, and remand.

FACTS

Recording artist Prince Rogers Nelson (Prince) died on April 21, 2016. Shortly thereafter, the district court granted a petition, brought by Prince’s sister, to appoint Bremer Trust N.A. (Bremer) as Special Administrator of the Estate of Prince Rogers Nelson (the Estate). Bremer subsequently moved for authorization to negotiate with and potentially employ entertainment industry experts to assist Bremer with management and preservation of the wide-ranging intellectual property of the Estate. The district court granted Bremer’s motion, and Bremer later retained appellant L. Londell McMillan (McMillan) on behalf of appellant NorthStar Enterprises Worldwide Inc. (NorthStar), and appellant Charles Koppelman (Koppelman) on behalf of appellant CAK Entertainment Inc. (CAK), to act as advisors to monetize the Estate’s intellectual property.¹

The "Advisor Agreement" between Bremer and Advisors provided:

5. Services: During and throughout the Term, Advisor[s] agree[ ] to be available to perform and shall undertake to perform services in the Entertainment Industry and advise and counsel [Bremer] in all aspects of [Bremer’s] business in the Entertainment Industry related to [Prince] .... During the Term, [Bremer] agrees to promptly refer to Advisor[s] and to instruct all third parties to refer to Advisor[s] for advice and counsel all verbal and written leads, communications, or requests in connection with all engagements and arrangements that are within the scope of this Agreement.

In exchange for their services, the Advisor Agreement provided that Advisors would be paid a fixed ten-percent commission on "all Gross Monies" paid to the Estate pursuant to agreements entered into by the Estate that resulted from services provided by Advisors. Section 6 of the Advisor Agreement stated that Advisors’ commissions were deemed to have been earned by Advisors "simultaneously with the payment to" the Estate of any amounts due under such agreements.

Advisors were paid commissions in connection with two contracts that were entered into by the Estate. The first contract was with Jobu Presents LLC (Jobu) to organize and promote a Prince tribute concert. Under the terms of Jobu’s proposal, Jobu would guarantee an advance payment to the Estate of $7 million, one-third of which would be payable to the Estate shortly after the agreement was signed. Bremer accepted Jobu’s proposal on July 7, 2016. Jobu then advanced a portion of the required one-third payment to the Estate and directly paid McMillan $116,666, his half of the ten-percent commission. CAK was not paid its half of the ten-percent commission.

Later, the agreement with Jobu collapsed and Jobu demanded repayment of its advance under the threat of litigation. The Estate refunded the entire advance, including McMillan’s $116,666 commission. And Jobu later sued Bremer, Koppelman, CAK, McMillan, and NorthStar, alleging that they fraudulently induced Jobu to enter into the Jobu Agreement (Jobu litigation).

In addition to the contract with Jobu, the Estate contracted with Universal Music Group (UMG) for the distribution and marketing of certain recordings. Pursuant to this agreement, UMG agreed to pay $31 million to the Estate, and, as dictated by terms of the Advisor Agreement, a ten-percent commission would be paid by UMG to Advisors. Bremer submitted the proposed UMG agreement, along with several other proposed agreements, to the district court for approval. Certain heirs opposed the UMG transaction, arguing that the transaction would violate an earlier agreement between Prince and Warner Brothers Records Inc. (WBR). These heirs also challenged, among other things, the reasonableness of the ten-percent commission to be paid to Advisors under the Advisor Agreement.

The district court granted Bremer’s motion to approve the UMG agreement. UMG paid the Estate approximately $28 million, which consisted of the $31 million contract price, less Advisors’ commissions.

UMG also directly paid to Advisors $3.1 million, as their ten-percent of the $31 million contract price, allocated equally between Advisors.

January 31, 2017 marked the final day of Advisors’ term as advisors to the Estate and Bremer’s appointment as special administrator. The next day, Comerica Bank & Trust N.A. (Comerica) was appointed as personal representative of the Estate. Shortly thereafter, WBR contacted Comerica, claiming an interest in certain recordings that were part of the Estate’s agreement with UMG. Because it was concerned about potential litigation with WBR, the Estate rescinded the UMG agreement and refunded the entire advance, including the $3.1 million in commission paid to Advisors.

The district court appointed Peter Gleekel and the law firm Larson • King LLP as second special administrator (SSA) of the Estate and granted the SSA authority to conduct "an independent examination of the facts, circumstances and events relating to the rescission of the UMG Agreement." The SSA’s authority was later expanded to include an independent examination related to the Jobu Agreement.

Following its investigations, the SSA filed two reports, finding actionable conduct by Advisors in connection with both transactions. The SSA brought a motion under Minn. Stat. § 524.3-721, seeking an order requiring Advisors to refund commissions paid in connection with the terminated agreement with Jobu and the rescinded agreement with UMG. The district court granted the motion in part on March 11, 2019, concluding that under Minn. Stat. § 524.3-721, "it is appropriate that the Advisors be required to refund the Jobu and UMG commissions to the Estate." The district court ordered that within 30 days of the entry of the order, appellants, "including [their] officers, directors, shareholders, employees, agents, assigns and successors ... shall refund to the Estate all compensation received as a result of the terminated Jobu transaction and rescinded UMG transaction," and that failure to adhere to the order would result in Advisors "being held in contempt of court." The district court also "deemed" the order "temporary" in "order to protect the assets of the Estate," and ordered that the "refunded commissions ... be held in a designated escrow account by the attorneys for the Estate and not distributed until further order of the Court." Finally, the district court held Advisors to be "jointly and severally liable to the Estate" for the commissions ordered to be refunded.

Advisors each filed notices of appeal. This court consolidated the appeals and questioned whether the March 11, 2019 order was appealable as a matter of right. After the parties filed informal memoranda, this court concluded that "[b]ecause the March 11, 2019 order has the characteristics of a temporary mandatory injunction, the order is appealable under Minn. R. Civ. App. P. 103.03(b)," and accepted jurisdiction over this appeal.

ISSUES

I. Did the district court err by determining that Advisors are subject to the provisions of Minn. Stat. § 524.3-721 ?

II. Did the district court’s application of Minn. Stat. § 524.3-721 in the context of a temporary injunction deny Advisors due process of law?

III. Did the district court err by granting a temporary injunction in favor of the Estate without analyzing the Dahlberg factors?

IV. Did the district court abuse its discretion by holding Advisors, including their officers, directors, shareholders, employees, agents, assigns and successors, jointly and severally liable to the Estate for the commissions ordered to be refunded?

ANALYSIS

I.

Advisors challenge the district court’s grant of injunctive relief, arguing that Advisors are not subject to the provisions of Minn. Stat. § 524.3-721. This argument presents a question of statutory interpretation, which is reviewed de novo. Staab v. Diocese of St. Cloud , 853 N.W.2d 713, 716 (Minn. 2014).

The object of statutory interpretation is to "ascertain and effectuate the intention of the legislature." Minn. Stat. § 645.16 (2018) ; see also Linn v. BCBSM, Inc. , 905 N.W.2d 497, 501 (Minn. 2018). This court applies the plain meaning of a statutory provision if the legislative intent "is clear from the unambiguous language of the statute." Staab , 853 N.W.2d at 716–17. We also "give effect to all of the statute’s provisions," and "no word, phrase, or sentence should be deemed superfluous, void, or insignificant." Allan v. R.D. Offutt Co. , 869 N.W.2d 31, 33 (Minn. 2015) (quotation omitted). "We construe...