Reichel v. Wendland Utz, Ltd.
| Docket Number | A23-0015 |
| Decision Date | 11 September 2023 |
| Parties | Craig A Reichel, et al., Appellants, v. Wendland Utz, LTD, et al., Respondents. |
| Court | Minnesota Court of Appeals |
This opinion is nonprecedential except as provided by Minn. R Civ. App. P. 136.01, subd. 1(c).
Olmsted County District Court File No. 55-CV-19-7968
Charles A. Bird, Grant M. Borgen, Matthew B. De Jong, Bird Stevens & Borgen, P.C., Rochester, Minnesota (for appellants)
Kevin P. Hickey, Jessica L. Klander, Peggah Navab, Bassford Remele, P.A., Minneapolis, Minnesota (for respondents)
Duane A. Lillehaug, Maring Williams Law Office, P.C., Detroit Lakes, Minnesota; and Michael L. Weiner, Yaeger & Weiner, PLC, Roseville, Minnesota (for amicus Minnesota Association for Justice)
Considered and decided by Worke, Presiding Judge; Ross, Judge; and Cleary, Judge.
In this appeal from a partial judgment under Minn. R. Civ. P. 54.02, appellants Craig A. Reichel et al., challenge the district court's grant of summary judgment for respondents Wendland Utz, LTD, et al. on appellants' legal-malpractice and fraud claims. Appellants argue that the district court erred by (1) concluding they were required to show "but for" causation in a legal-malpractice claim; and (2) applying Minn. R. Civ. P. 9.02 at the summary judgment stage to conclude that appellants failed to plead fraud with particularity. By notice of related appeal, respondents, as cross-appellants, argue that the district court erred by denying their motion for partial summary judgment on appellants' remaining claims that require appellants to prove "but for" causation. We conclude that the district court did not err in dismissing appellants' legal malpractice claim because appellants failed to show "but for" causation, but that the district court erred in dismissing appellants' fraud claim because the district court did not properly conduct a judgment analysis. We also conclude that the district court erred in denying summary judgment on appellants' remaining claims that involve a showing of "but-for" causation. But we conclude that the district court did not err in denying respondents' motion to dismiss on appellants' respondeat superior claim. We affirm in part, reverse in part, and remand.
Appellant Craig Reichel is the owner and president of Reichel Foods Inc (RFI), and several LLCs: Coyote Creek LLC, Herdbull Holding LLC (Herdbull), and Bullets & Broadheads LLC. Craig's brother is the principal of Reichel Investments LLC. This appeal stems from a multi-year business dispute between Reichel Investments and Craig's LLCs (the underlying lawsuit) which led to a lawsuit against respondents Wendland Utz, LTD., et al., for the law firm's allegedly negligent handling of the business dispute.
On May 21, 2013, Reichel Investments sued Craig's LLCs and Craig personally. RFI was not included in the complaint. The complaint alleged that Reichel Investments had invested $186,000 in Coyote Creek and therefore had a 40% ownership interest in Coyote Creek. Craig asserted that the $186,000 payment was for repayment of a loan, not an investment.
Craig had a longstanding relationship with respondent law firm Wendland Utz and hired an attorney from the firm to defend the lawsuit. By October 2013, just a few months into the litigation, the district court ordered a temporary restraining order against Craig and his LLCs, ordering them to "preserve and maintain all records and evidence in their possession" following an alleged discovery violation. A month later, Reichel Investments brought a motion for contempt, alleging that Craig and his LLCs again failed to comply with discovery. The district court granted the motion for contempt and ordered Craig and his LLCs to produce the documents within seven days and pay a $12,133.51 fine. Around the same time, Reichel Investments brought a motion for temporary injunction, arguing that Craig and his LLCs lost, hid, or otherwise secreted electronically stored information and failed to provide complete discovery. The district court entered a preliminary injunction and appointed a receiver to manage the LLCs due to the discovery violations.
The district court provided the receiver with the power and duty to take custody and control of all funds, property, and other assets of the LLCs.
By December 2013, another attorney at Wendland Utz took over as the primary attorney on the case. After discussing the receivership order, the attorney advised Craig to file for bankruptcy. Craig agreed and hired a new law firm to assist him with the bankruptcy proceedings. On December 26, 2013, Coyote Creek filed for bankruptcy a nd the state-court action was stayed pending the approval of the bankruptcy plan. Two years later, the bankruptcy court confirmed the bankruptcy plan. Craig then moved to dismiss the state-court action, arguing that all of Reichel Investments' claims d epend ed on its status as the owner of Coyote Creek and the bankruptcy proceedings had determined the ownership of Coyote Creek. The parties stipulated to a dismissal of all state-court claims against Coyote Creek, but the claims against Craig himself remained until August 27, 2015, when the district court granted Craig's motion to dismiss with prejudice. Reichel Investments appealed and this court affirmed the summary judgment dismissal of claims. See Reichel Invs., L.P. v. Reichel, No. A15-1724, 2016 WL 3884552 (Minn.App. July 18, 2016).
On November 20, 2018, approximately two years after the underlying lawsuit concluded, Craig, RFI, and the LLCs (collectively appellants) commenced an action against Wendland Utz and the attorney (collectively respondents) alleging nine causes of action in connection to the underlying lawsuit: (1) breach of contract; (2) professional malpractice; (3) unjust enrichment; (4) breach of fiduciary duty; (5) negligent supervision; (6) respondeat superior; (7) fraudulent misrepresentation against Wendland Utz; (8) fraudulent misrepresentation against the attorney; and (9) fraudulent nondisclosure. In a deposition, Craig testified that a primary reason for the lawsuit was that he believed that if his "legal representation would have done the right things[,] that it never would have escalated to the point it did."
On June 16, 2021, respondents filed a motion for partial summary judgment as to RFI, arguing that RFI lacks standing because it was not a party to the underlying lawsuit. Alternatively, respondents argued that if RFI had standing, appellants' substantive claims still fail. The district court concluded that there were genuine issues of material fact as to whether RFI had an attorney-client relationship with Wendland Utz and declined to grant summary judgment on the issue of standing. But the district court found that summary judgment was appropriate on four of appellants' other claims.
First, as to the professional malpractice claim, the district court found that appellant s failed to demonstrate an essential element of the claim: that, but for respondents' conduct, appellants would have succeeded in the prosecution or defense of the action. The district court reasoned that the appellants could not prove this element because "the ultimate result" in the underlying litigation "was favorable to Plaintiffs." Second, as to the unjust enrichment claim, the district court found that the "record does not support a genuine issue of material fact" because appellants could not establish what services were paid for and retained illegally by respondents.[1] Third, as to the fraudulent-misrepresentation claims, the district court found summary judgment was appropriate because appellants "failed to plead the elements of a fraud claim with particularity." Finally, as to the fraudulent-nondisclosure claim, the district court concluded that summary judgment was appropriate for the same reasons as the fraudulent-misrepresentation claims: appellants failed to plead the elements of the claims "with particularity." The district court, in a footnote, declined to grant summary judgment on the remaining counts because respondents did not address those causes of action in their brief or discuss why they should be dismissed.
On June 2, 2022, respondents filed another motion for summary judgment as to appellants' remaining claims. They argued that the claims were derivative of appellants' malpractice claim that had been dismissed in the district court's summary-judgment order, and those claims too should be dismissed. On June 9, 2022, appellants filed an amended motion for leave to amend the complaint to claim punitive damages and additional instances of fraud. They argued that additional allegations of fraud were discovered after the complaint was served and during discovery. That same day, appellants filed a motion for entry of a partial final judgment pursuant to Minn. R. Civ. App. 54.02.
The district court held a two-day motion hearing. Following the hearing, the district court, in an amended order, granted appellants' motion for a final partial judgment and reserved appellants' motion for leave to amend their complaint to claim additional instances of fraud and punitive damages. The district court also reserved ruling on the remaining issues pending the outcome of this appeal.
This appeal follows.
Both appellants and respondents challenge the district court's decisions on summary judgment. Summary judgment is appropriate when the moving party shows that "there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law." Minn. R. Civ P. 56.01. "A defendant is entitled to summary judgment as a matter of law when the record reflects a complete lack of proof on an essential element of the...
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