Legacy Rests., Inc. v. Minn. Nights, Inc.

• Decision Date: 23 July 2012
• Docket Number: A11-1730
• Parties: Legacy Restaurants, Inc., Appellant, v. Minnesota Nights, Inc., Respondent.
• Court: Minnesota Court of Appeals

Legacy Restaurants, Inc., Appellant,

v.Minnesota Nights, Inc., Respondent.

A11-1730

STATE OF MINNESOTA IN COURT OF APPEALS

Filed: July 23, 2012

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2010).

Affirmed

Schellhas, Judge

St. Louis County District Court

File No. 69DU-CV-09-3313

Nicholas Ostapenko, Paul W. Wojciak, Johnson, Killen & Seiler, P.A., Duluth,

Minnesota (for appellant)

Jerome D. Feriancek, Jr., Thibodeau, Johnson & Feriancek, PLLP, Duluth, Minnesota

(for respondent)

Considered and decided by Schellhas, Presiding Judge; Kalitowski, Judge; and Chutich, Judge.

UNPUBLISHED OPINION

SCHELLHAS, Judge

In this commercial landlord-tenant dispute, appellant challenges the following orders of the district court: (1) denying appellant's motion to amend its complaint to add a claim of punitive damages; (2) granting respondent's motion to amend its answer toinclude the affirmative defense of release and motion in limine to exclude evidence of appellant's damages, based on a sublease exculpatory clause; (3) denying appellant's motion to amend its complaint to include the claims of gross negligence and willful and wanton conduct; and (4) denying appellant's motion for reconsideration and granting summary judgment for respondent. We affirm.

FACTS

Appellant Legacy Restaurants Inc. leased space on two floors of a building in Duluth. The Duluth Athletic Club restaurant (DAC), owned and operated by Legacy, occupied the lower floor; and, commencing in March 2007, Legacy subleased the upper floor to The Tap Room, a nightclub, owned and operated by respondent Minnesota Nights. In May 2009, Legacy sued Minnesota Nights, alleging that, in September 2007, DAC sustained damage to its premises in excess of $50,000 as a direct result of sewage effluent backup caused by The Tap Room. Legacy asserted claims of negligence, breach of lease, nuisance, and trespass. Legacy attached to its complaint the sublease agreement between it and Minnesota Nights. The sublease contains the following exculpatory clause, in relevant part:

Landlord [Legacy] and Tenant [Minnesota Nights] each hereby release the other from any and all liability or responsibility to the other . . . for any loss or damage to property caused by fire or any of the extended coverage causalities covered by the insurance maintained hereunder[.]

Minnesota Nights denied Legacy's claims.

In January 2010, the district court issued a scheduling order, setting a discovery deadline of August 1, 2010; a dispositive-hearing deadline of August 31, 2010; and a jury trial date of November 9, 2010.

Legacy moved to amend the pleadings to assert a claim for punitive damages, and, on September 17, 2010, the district court denied the motion. On October 5, Minnesota Nights filed a notice of substitution of counsel and subsequently moved for a trial continuance to allow its substitute counsel to prepare. Among other things, Minnesota Nights also moved in limine for an order excluding evidence of Legacy's alleged damages on the basis of the exculpatory clause in the sublease. Legacy moved in limine for an order excluding evidence of its receipt of an insurance payment from its insurer.¹ On November 2, the court granted Minnesota Nights's motion for a trial continuance, denied Legacy's motion to exclude evidence of the insurance payment, and denied Minnesota Nights's motion to exclude evidence of Legacy's damages. As to Minnesota Nights's motion in limine to exclude evidence of damages, the court stated:

The sublease provision unambiguously and mutually releases [Legacy] and [Minnesota Nights] from all liability for damages, including damages resulting from negligence. However, such a release is an affirmative defense under Minn. R. Civ. P. 8.03. [Minnesota Nights] waived the defense by not specifically asserting it in a responsive pleading.

On November 9, Minnesota Nights moved the district court for leave to amend its answer to include the affirmative defense of release and, on January 18, 2011, the court granted the motion. Additionally, based on the exculpatory clause in the sublease, thecourt vacated and reversed its previous order denying Minnesota Nights's motion in limine to exclude evidence of Legacy's damages. Thereafter, Legacy moved to amend its complaint to include claims of gross negligence and willful and wanton conduct, and the court denied Legacy's motion on February 25. Legacy then moved for reconsideration of its motion to amend its complaint to include claims of gross negligence and willful and wanton conduct, and Minnesota Nights moved for summary judgment on Legacy's negligence claim. On June 27, the district court denied Legacy's motion for reconsideration and granted summary judgment to Minnesota Nights.

This appeal by Legacy follows.

DECISION

As an initial matter, we note that the same district court judge presided over all of the proceedings in this case from the denial of Legacy's motion to amend its complaint to include a claim for punitive damages in September 2010 through the summary-judgment dismissal.

Denial of Legacy's Motion to Amend to Add Claim of Punitive Damages

Legacy argues that the district court erred by denying its motion to amend its complaint to include a claim for punitive damages.

Punitive damages shall be allowed in civil actions only upon clear and convincing evidence that the acts of the defendant show deliberate disregard for the rights or safety of others. Punitive damages are an extraordinary remedy to be allowed with caution and within narrow limits. If a party seeks punitive damages, then a district court must first determine whether the evidence is sufficient to submit the issue to the jury.

J.W. ex rel. B.R.W. v. 287 Intermediate Dist., 761 N.W.2d 896, 904 (Minn. App. 2009) (quotation and citation omitted). "This court may not reverse a district court's denial of a motion to add a claim for punitive damages absent an abuse of discretion." Id. (quotation omitted).

A motion to amend for a claim of punitive damages is properly granted only when the moving party presents a prima facie case that will reasonably allow the conclusion that clear and convincing evidence will establish that the defendant deliberately disregarded the rights or safety of others. Minn. Stat. §§ 549.191, .20, subd. 1 (2010); Bjerke v. Johnson, 727 N.W.2d 183, 196 (Minn. App. 2007), aff'd, 742 N.W.2d 660 (Minn. 2007). A prima facie case is established when evidence is presented, which if unrebutted, supports a judgment. McKenzie v. N. States Power Co., 440 N.W.2d 183, 184 (Minn. App. 1989). Neither negligence nor gross negligence is sufficient to satisfy the deliberate-indifference standard required for punitive damages. See Admiral Merchs. Motor Freight, Inc. v. O'Connor & Hannan, 494 N.W.2d 261, 268 (Minn. 1992) (stating that to properly demonstrate an entitlement to allege punitive damages, "[a] mere showing of negligence is not sufficient"); Wirig v. Kinney Shoe Corp., 461 N.W.2d 374, 381 (Minn. 1990) (stating that employer's conduct constituted gross negligence but not negligence rising to the level of willful indifference so as to warrant punitive-damages claim); Utecht v. Shopko Dep't Store, 324 N.W.2d 652, 654 (Minn. 1982) (stating that negligent conduct was insufficient to establish punitive-damages claim). In determining whether punitive damages are allowed, a court should "focus on the wrongdoer's conductrather than . . . focus on the type of damage that results from the conduct." Jensen v. Walsh, 623 N.W.2d 247, 251 (Minn. 2001).

Here, Legacy argued to the district court that Minnesota Nights deliberately disregarded Legacy's rights when The Tap Room caused sewage effluent to backup into the DAC and The Tap Room's owner, Andrew Gamache, refused to shut off its water and close after receiving multiple requests to do so. Legacy claimed that The Tap Room caused the sewer pipe to become clogged with paper towels by allowing its patrons to use paper towels in place of toilet paper after the toilet paper ran out. Legacy claimed that Gamache "knew the importance of keeping bathrooms properly supplied with toilet paper because, if there is no toilet paper, patrons will use paper towels."

The district court determined that Legacy failed to allege a prima facie case of clear-and-convincing evidence that The Tap Room knew that its water usage was causing the sewage backup and that The Tap Room deliberately disregarded or acted with indifference toward Legacy's rights. The court reasoned that, although Gamache's conduct might be negligence, "there is, by no stretch of the imagination, anything willful, or malicious, or knowingly wrongful in these alleged actions. The failure to stock adequate toilet paper, if proven, is negligence, nothing more." We agree that Legacy did not allege a prima facie case of clear-and-convincing evidence that The Tap Room knew that its patrons' use of paper towels would create a high probability of risk of clogging the sewer pipe and causing damage to the DAC and that The Tap Room deliberately disregarded or acted with indifference towards that risk. See J.W. ex rel. B.R.W., 761 N.W.2d at 904 (concluding that appellant failed to assert punitive-damages claim becauseappellant presented no evidence of "specific knowledge" that an individual "would create a high probability of injury" to another person).

We therefore conclude that the district court did not abuse its discretion by denying Legacy's motion to amend its complaint to add a claim for punitive damages.

Grant of Minnesota Nights's Motion to Amend Answer

Legacy argues that the district court abused its discretion by granting Minnesota Nights leave to amend its answer to include the affirmative defense of release, based on the sublease exculpatory clause. After a party has served its responsive pleadings, the opposing party may amend its pleading only by the district court's leave or by the opposing party's consent. Minn. R. Civ. P. 15.01....