Profits Plus Capital Mgmt., LLC v. Podesta

• Decision Date: 08 July 2014
• Docket Number: No. 39964.,39964.
• Citation: 332 P.3d 785,156 Idaho 873
• Court: Idaho Supreme Court
• Parties: PROFITS PLUS CAPITAL MANAGEMENT, LLC, a Delaware limited liability company; Dollars and Sense Growth Fund, LP, a Delaware limited partnership; Robert Coleman, an individual, Plaintiffs–Counterclaimants–Respondents, v. Jeffrey PODESTA, an individual; and Street Search, LLC, a New Jersey limited liability company, Defendants–Counterdefendants–Appellants.

156 Idaho 873

332 P.3d 785

PROFITS PLUS CAPITAL MANAGEMENT, LLC, a Delaware limited liability company; Dollars and Sense Growth Fund, LP, a Delaware limited partnership; Robert Coleman, an individual, Plaintiffs–Counterclaimants–Respondents,

v.Jeffrey PODESTA, an individual; and Street Search, LLC, a New Jersey limited liability company, Defendants–Counterdefendants–Appellants.

No. 39964.

Supreme Court of Idaho, Boise, February 2014 Term.

July 8, 2014.

Rehearing Denied Sept. 15, 2014.

Clark & Associates, Eagle, for appellants. Eric R. Clark argued.

Jones Gledhill Fuhrman Gourley, Boise, for respondents. Kimbell D. Gourley argued.

BURDICK, Chief Justice.

This case arose out of a contract dispute when Robert Coleman, Profits Plus Capital Management, LLC ("Profits Plus"), and Dollars and Sense Growth Fund Limited Partnership ("Dollars and Sense") filed a claim for declaratory judgment against Jeffrey Podesta and Street Search, LLC. Coleman, Profits Plus, and Dollars and Sense sought a judgment declaring that they did not have a contract with either Podesta or Street Search. Podesta and Street Search then counterclaimed seeking damages for breach of contract, fraud, constructive fraud, and breach of fiduciary duties. Ultimately, only Podesta and Street Search's breach of contract and breach of fiduciary duty claims went to the jury, which decided those claims in favor of Coleman, Profits Plus, and Dollars and Sense. Podesta and Street Search now appeal a number of the district court's decisions made before, during, and after trial. We affirm the district court's decisions.

I. FACTUAL AND PROCEDURAL BACKGROUND

Respondent Robert Coleman resides in Idaho and is the sole member and manager of Profits Plus. Profits Plus serves as the sole general partner for Dollars and Sense, an investment fund that purchases, sells, and stores precious metals. Both Dollars and Sense and Profits Plus are organized in Delaware. The precious metals purchased by Profits Plus are stored in facilities located in Idaho. As a general partner, Profits Plus is only entitled to a management fee and some incentive fees from Dollars and Sense. All other profits, losses, and revenues Dollars and Sense generates are distributed solely to the limited partners based upon their investments.

Appellant Jeffrey Podesta is a resident of New Jersey and the sole member and manager of Street Search, a New Jersey limited liability company. Operating as Street Search, Podesta locates investors and raises capital for investment opportunities for which Street Search usually charges a monthly fee along with a percentage of the money raised.

In May 2008, Coleman contacted Podesta to discuss marketing Dollars and Sense. Podesta was interested in the concept of the precious metals market and felt that he, with his experience in raising capital, and Coleman, with his knowledge of the precious metals market, would make a great combination.

In late April or early May of 2009, Coleman and Podesta traveled to New York to meet with various individuals, including an attorney, to discuss the formation of a new entity, an open-ended mutual fund consistent with the limited partnership, but not limited by the same securities regulations. Following these meetings, the parties agreed that the new fund idea was too expensive to pursue. From here, the parties disagree as to what form of agreement, if any, was reached between them.

Podesta and Street Search contend that because Coleman could not afford Street Search's fees, Coleman offered Street Search a fifty percent ownership interest in Dollars and Sense in exchange for Podesta's services. Podesta and Street Search also claim that Coleman amended the name of Dollars and Sense to Street Search Dollars and Sense as consideration for the offer of ownership interest and Podesta's agreement to act as President and CEO. In contrast, Coleman asserts that he only entered into an independent contractor agreement with Street Search and never promised an ownership interest in Dollars and Sense to either Podesta or Street Search. He asserts that the name of the fund was only amended to Street Search Dollars and Sense upon Podesta's claim that it would better enable Street Search and Podesta to market Dollars and Sense. Coleman also points out that while the name of Dollars and Sense was changed, no substantive alterations were made to the limited partnership agreement.

Although the parties now dispute the terms of any agreement between them, Podesta and Street Search worked with Coleman marketing Street Search Dollars and Sense throughout 2009 until their falling-out in March 2010. The dispute arose on March 2, 2010, when Coleman emailed Podesta expressing his displeasure in Podesta's performance at raising capital and stating that they needed to talk. Podesta responded that same day declaring that Coleman's attempts to steal his portion of the fees were illegal. The parties' subsequent emails devolved from there, with Podesta's attorney contacting Coleman on March 5, 2010, to assert an ownership interest in Dollars and Sense. Podesta asserted that the agreement between the parties was not a consulting agreement, but a contract promising Street Search a fifty percent ownership interest in Dollars and Sense in exchange for Podesta's services.

On July 22, 2010, Coleman, Profits Plus, and Dollars and Sense [collectively "Coleman"] filed a complaint for declaratory judgment. Podesta and Street Search filed a notice of special appearance in accordance with I.R.C.P. 4(i) on September 27, 2010, and a motion to dismiss for lack of personal jurisdiction on October 12, 2010. On December 17, 2010, the district court issued its decision denying Podesta and Street Search's motion. Podesta and Street Search then filed their answer and counterclaim seeking damages for breach of contract, fraud, constructive fraud, and breach of fiduciary duties. Coleman filed three motions for summary judgment and succeeded in dismissing Podesta's claims as an individual for breach of contract, constructive fraud, and breach of fiduciary duty.

After seven days of trial, the court ultimately instructed the jury on the claims by Street Search against Coleman for breach of contract and breach of fiduciary duties. The jury was further instructed on Coleman's equitable estoppel defenses. The jury returned a special verdict finding that no contract existed.

Street Search then filed a motion for judgment notwithstanding the verdict and an alternative motion for new trial following a jury trial—both of which the district court denied. Coleman timely moved for an award of attorney fees and costs pursuant to I.C. § 12–120(3) and I.R.C.P. 54. While disallowing some fees related to expert witnesses and other fees associated with the status of Podesta's securities licenses, the court awarded Coleman the majority of his requested attorney fees under I.C. § 12–120(3) as the prevailing party. On March 17, 2012, Street Search filed its first notice of appeal, which was subsequently amended twice following the two amendments to the judgment.

II. ISSUES ON APPEAL

1. Whether the district court had personal jurisdiction over Podesta and Street Search.

2. Whether the district court abused its discretion in denying Podesta and Street Search's motion for a new trial.

3. Whether the district court abused its discretion in excluding evidence as settlement negotiations.

4. Whether the district court erred by failing to instruct the jury on fraud and constructive fraud.

5. Whether the district court abused its discretion in refusing to instruct the jury on promissory estoppel.

6. Whether the district court abused its discretion in refusing to allow Podesta and Street Search to present evidence of tort damages.

7. Whether either party is entitled to attorney fees on appeal.

III. ANALYSIS

Podesta and Street Search appeal a number of the district court's decisions made before, during, and after trial. These decisions include denying Podesta and Street Search's motion to dismiss for lack of personal jurisdiction, denying their motion for new trial, dismissing their fraud and constructive fraud claims, excluding certain evidence, and refusing to instruct the jury regarding promissory estoppel. Because the issue of jurisdiction could be dispositive, it will be addressed first.

A. Personal Jurisdiction

Podesta and Street Search [collectively "Street Search"] claim that the district court incorrectly held that it had personal jurisdiction over them when neither conducted business in Idaho as required by Idaho's long arm statute. Coleman argues that the district court properly exercised jurisdiction and that this issue is moot because Street Search acquiesced to jurisdiction by filing counterclaims in Idaho.

The question of the existence of personal jurisdiction over an out-of-state defendant is one of law, which this Court reviews freely. Blimka v. My Web Wholesaler, LLC, 143 Idaho 723, 726, 152 P.3d 594, 597 (2007) (quoting Knutsen v. Cloud, 142 Idaho 148, 150, 124 P.3d 1024, 1026 (2005) ). When reviewing a motion to dismiss based on lack of personal jurisdiction, this Court applies the same standard as when reviewing appeals from summary judgment orders; "we construe the evidence presented to the district court in favor of the party opposing the order and accord that party the benefit of all inferences which might be reasonably drawn." Knutsen, 142 Idaho at 150, 124 P.3d at 1026. Accordingly, in reviewing the district court's denial of Street Search's motion to dismiss, we construe the evidence in favor of Coleman.

There are two requirements for an Idaho court to properly exercise jurisdiction over non-resident defendants: (1) the non-resident's actions must fall within the scope of Idaho's long-arm statute; and (2) jurisdiction over the non-resident defendant must not violate the defendant's due process rights. Id.

1. Filing compulsory counterclaims is not a voluntary appearance.

After Coleman filed his complaint, Street...