Roemmich v. Eagle Eye Development, LLC

• Decision Date: 13 September 2005
• Docket Number: No. A1-04-79.,A1-04-79.
• Citation: 386 F.Supp.2d 1089
• Parties: Bruce ROEMMICH, Plaintiff, v. EAGLE EYE DEVELOPMENT, LLC; Leland Bertsch; Jane Bertsch; Janet Scholl; and Jon Wagner, Defendants.
• Court: U.S. District Court — District of North Dakota

386 F.Supp.2d 1089

Bruce ROEMMICH, Plaintiff, v.EAGLE EYE DEVELOPMENT, LLC; Leland Bertsch; Jane Bertsch; Janet Scholl; and Jon Wagner, Defendants.

No. A1-04-79.

United States District Court, D. North Dakota, Southwestern Division.

September 13, 2005.

Mark R. Hanson, Nilles Law Firm, Fargo, ND, for Plaintiff.

David Rodger Bliss, Olson Cichy Bliss, David Allan Tschider, Tschider & Smith, Bismarck, ND, for Defendants.

ORDER ON SUMMARY JUDGMENT MOTIONS

HOVLAND, Chief Judge.

Before the Court are cross motions for summary judgment.On April 15, 2005, both parties filed Motions for Partial Summary Judgment.On June 15, 2005, the Defendants filed a second Motion for Summary Judgment.For the reasons set forth below, the Plaintiff's motion is granted, the Defendants' motion regarding the statute of limitations is granted in part, and the Defendants' second motion for summary judgment is denied.

I.BACKGROUND

Eagle Eye Development, LLC(Eagle Eye) was organized on June 12, 1995, and certified by the North Dakota Secretary of State on June 13, 1995.Eagle Eye's principal place of business is located in Bismarck, North Dakota.The purpose of Eagle Eye was the building of post office facilities.Leland Bertsch was named initial governor and manager of Eagle Eye.Jane Bertsch, Leland's wife, was also named a governor.Leland Bertsch made a 95% capital contribution and received a 95% voting interest.Jane Bertsch made a 5% capital contribution and received a 5% voting interest.

On June 28, 1995, at a special meeting of the Eagle Eye board of governors, Jane Bertsch assigned "for value received" her 5% interest in Eagle Eye to her brother, Bruce Roemmich, the plaintiff in this action.Roemmich is a resident of Florida.Jane Bertsch resigned as secretary, treasurer and governor of Eagle Eye.On June 28, 1995, Leland Bertsch also assigned "for value received" a 25% ownership interest in Eagle Eye to Roemmich.Leland Bertsch was elected governor and president while Roemmich was elected as governor and secretary/treasurer.These transfers gave Roemmich a 30% ownership interest and Leland Bertsch a 70% ownership interest in Eagle Eye.

The "value received" was to have been Roemmich's services in the development of two post office buildings in Florida.It is alleged that Roemmich walked off the job in Florida on or about June 7, 1996.At a special member meeting of Eagle Eye on June 24, 1996, Roemmich, who was not in attendance, was removed as governor by Leland Bertsch and replaced by Jane Bertsch.Another meeting of Eagle Eye was held the same day during which Roemmich, although not in attendance, was removed as treasurer and replaced by Jane Bertsch.Eagle Eye built three post offices, two in Florida and one in Minnesota.The construction projects were completed in September 1997.

Jon Wagner is the secretary of Eagle Eye.He acts as Eagle Eye's accountant and is married to Leland Bertsch's sister.Janet Scholl is Leland Bertsch's aunt.She worked for Bertsch Construction as office manager from 1992-1998.She had limited involvement with Eagle Eye.

The plaintiff, Bruce Roemmich filed this lawsuit on April 13, 2004.The action is for a corporate "freeze out."Four separate cause of action are alleged including: (1) unfairly prejudicial conduct towards a member, (2) breach of fiduciary duty and duty to act in good faith towards another member, (3) breach of fiduciary duties and duty to act in good faith by officers of a limited liability company, and (4) dissenters rights.The statutory basis for all four causes of action is found in Chapter 10-32 of the North Dakota Century Code, commonly referred to as the North Dakota Limited Liability Company Act.The Defendants filed a counterclaim for breach of contract and rescission on May 10, 2004.

II.STANDARD OF REVIEW

It is well-established that summary judgment is appropriate when, viewed in a light most favorable to the non-moving party, there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.Fed.R.Civ.P. 56(c);Graning v. Sherburne County,172 F.3d 611, 614(8th Cir.1999).A fact is "material" if it might affect the outcome of the case and a factual dispute is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party.Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202(1986).

The basic inquiry for purposes of summary judgment is whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.Quick v. Donaldson Co., Inc.,90 F.3d 1372, 1376(8th Cir.1996).The moving party has the initial burden of demonstrating to the Court that there are no genuine issues of material fact.If the moving party has met this burden, the non-moving party cannot simply rest on the mere denials or allegations in the pleadings.Instead, the non-moving party must set forth specific facts showing that there are genuine issues for trial.Fed.R.Civ.P. 56(e).A mere trace of evidence supporting the non-movant's position is insufficient.Instead, the facts must generate evidence from which a jury could reasonably find for the non-moving party.Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202(1986).

III.LEGAL DISCUSSION

A.STATUTE OF LIMITATIONS

The first two motions before the Court present issues as to whether the actions are barred by the applicable statute of limitations.As this is a diversity action, the Court will apply the substantive law of North Dakota.Paracelsus Healthcare Corp. v. Philips Med. Sys.,384 F.3d 492, 495(8th Cir.2004).

The statute of limitations for a tort action in North Dakota is six years.N.D.C.C. § 28-01-16(5).An action for liability created by statute has a six-year statute of limitations.N.D.C.C. § 28-01-16(2).The statute of limitations for a breach of contract action is also six years.N.D.C.C. § 28-01-16(1);Snortland v. State, Acting Through Its Agencies, North Dakota Department of Public Instruction,615 N.W.2d 574, 577(N.D.2000).The same six-year statute of limitation applies in an action for rescission.N.D.C.C. § 28-01-16(1);Schmidt v. Grand Forks Country Club,460 N.W.2d 125, 128(N.D.1990).

It is well-established that the statute of limitations begins to run from when the action accrues.Snortland,615 N.W.2d 574, 577.A claim accrues when the plaintiff"knew, or with the exercise of reasonable diligence should have known, of the wrongful act and its resulting injury."Id.For continuing torts, the statute of limitations does not accrue and begin to run until the tortious acts cease.Beavers v. Walters,537 N.W.2d 647, 650(N.D.1995).A statute of limitations defense must be proved by showing the aggrieved party had knowledge of the facts which constitute the basis for the cause of action or claim and did not act within the prescribed time period.

1) ROEMMICH'S CAUSES OF ACTION

The complaint contains four separate causes of action which Roemmich describes as (1) unfairly prejudicial conduct towards a member, (2) breach of fiduciary duty and duty to act in good faith towards another member, (3) breach of fiduciary duties and duty to act in good faith by officers of the limited liability company, and (4) dissenters rights.Roemmich describes this action as a case of corporate "freeze out" and brings the action pursuant to the North Dakota Limited Liability Company Act which is codified at Chapter 10-32 of the North Dakota Century Code.

The Defendants contend that all of the claims are barred by the six-year statute of limitations in North Dakota.The Defendants refer to the claims as arising solely from the development and construction of the two post office buildings in Florida which were completed in September 1997.However, this characterization oversimplifies Roemmich's claims.Roemmich alleges a number of alleged instances of improper treatment and alleged breaches of fiduciary duty by the Defendants which occurred between 1995-2004.These include failure to provide Roemmich with proper notice of meetings; failure to provide a proper accounting or compensation for Roemmich's share of Eagle Eye; the removal of Roemmich as a governor of Eagle Eye on June 24, 1996; alleged self-dealing by Leland Bertsch and Jane Bertsch regarding two loans given to Eagle Eye totaling $147,166.94 on December 31, 1997, and amendments to those notes made on December 31, 1998; alleged self-dealing in entering into a management agreement on January 2, 1997, wherein Bertsch Construction, which is owned by Leland Bertsch, was hired to manage the post office facilities Eagle Eye was constructing in Florida and Minnesota; the payment of a salary to Leland Bertsch beginning sometime in 1996; the use of Eagle Eye funds to finance the development of a post office in Hawaii in 1996; the recent hiring of Bertsch Construction to do repair work on the post offices in Florida, and the assignment of $4,886.00 in taxable income to Roemmich for the year 2004 even though Roemmich had received no distribution from Eagle Eye.Roemmich alleges he was not consulted regarding any of these actions.

Roemmich commenced this lawsuit on April 13, 2004.As such, any cause of action which accrued on or after April 13, 1998, would not be time-barred by the six-year statute of limitations.With respect to actions which occurred prior to April 13, 1998, Roemmich contends that his allegations of wrongdoing are a continuing tort and are not time-barred as the Defendants continue to freeze him out of Eagle Eye operations.

Case law in North Dakota concerning continuing torts is sparse.The most recent case is Beavers v. Walters,537 N.W.2d 647(N.D.1995), wherein the court held that a continuing tort does not accrue until the tortious acts have stopped.Id. at 650(citingO'Fallon v. Pollard,427 N.W.2d 809, 811(N.D.1988)...