Roemmich v. Eagle Eye Development, LLC

Decision Date13 May 2008
Docket NumberNo. 07-1264.,07-1264.
Citation526 F.3d 343
PartiesBruce ROEMMICH, Plaintiff-Appellant, v. EAGLE EYE DEVELOPMENT, LLC; Leland Bertsch; Jane Bertsch; and Jon Wagner, Defendants-Appellees.
CourtU.S. Court of Appeals — Eighth Circuit

Mark Richard Hanson, argued, Fargo, ND (Kirsti B. Hourigan, on the brief), for appellant.

David Bliss, argued, Bismarck, ND, for appellee.

Before RILEY, TASHIMA,1 and SMITH, Circuit Judges.

TASHIMA, Circuit Judge.

Plaintiff Bruce Roemmich brought an action against defendants Eagle Eye Development, LLC ("Eagle Eye"), Leland Bertsch, Jane Bertsch, and Jon Wagner, alleging various violations of his rights as an Eagle Eye minority shareholder. He now appeals the district court's2 partial grant of summary judgment in favor of the defendants on their statute of limitations defense, as well as the district court's3 resolution of most of the issues against him following a bench trial. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

I. Background

In early 1995, Leland and Jane Bertsch, husband and wife, began to bid on projects to construct and lease three post office buildings to the United States Postal Service ("USPS"), one in Minnesota and the other two in Cocoa Beach and Mims, Florida. During the Spring of 1995, after Leland secured the bids on the Florida projects, the Bertschs and Jane's brother, Roemmich, agreed that Roemmich would oversee the construction and development of the Florida projects in exchange for a 30 percent ownership interest in those projects, as well as a $400 per week salary.

The Bertschs formed Eagle Eye on June 12, 1995. According to the Member Control Agreement signed on that date, Leland made a 95 percent capital contribution and therefore retained a 95 percent financial and voting interest. Jane made the remaining contribution and retained a 5 percent financial and voting interest in Eagle Eye. Shortly thereafter, on June 28, 1995, Jane assigned her interest in Eagle Eye to Roemmich. Leland also conveyed a 25 percent ownership interest to Roemmich "for value added," namely, the current and future performance of his job duties, resulting in 70 percent ownership by Leland and 30 percent ownership by Roemmich. Roemmich also became a Secretary, Treasurer, and Governor of Eagle Eye. Later that year, the parties agreed to name Wagner as Secretary of Eagle Eye in place of Roemmich.

Around this time, Roemmich was aware that Eagle Eye planned to rely on another of the Bertschs' companies, Bertsch Construction, Inc. ("Bertsch Construction") to provide support services including accounting, secretarial support, and office space and equipment. Further, although it is undisputed that Leland told Roemmich that he had made arrangements for interim financing, Leland never represented that he would cover costs beyond what was originally contemplated as being necessary for financing the projects. Financing became an issue for the Cocoa Beach project when the city refused to approve initial plans submitted by the USPS, resulting in project delays and change orders that drove up the cost. As a result, the Berstchs and Roemmich secured additional financing through personal loans, which were eventually satisfied. These financial difficulties contributed to Roemmich's decision to leave the Florida projects in June of 1996.

When Roemmich left Florida, physical construction of the Mims site was virtually complete, and the USPS was scheduled to conduct a walk-through inspection the following week. The Cocoa Beach project was about a month behind the Mims project, and required further construction, resolution of claims with contractors, preparation and negotiation of change orders with the USPS, and amendment of the lease agreement. After Roemmich left, Leland hired Donald Haynes, the contractor of record for both the Mims and Cocoa Beach projects, to complete Roemmich's tasks.

Although relations between Roemmich and the other officers of Eagle Eye had already begun to decline prior to Roemmich's decision to leave Florida, they dropped precipitously after that point. During a June 12, 1996, meeting, Roemmich became upset with Wagner and physically and verbally threatened him. After the June 12 meeting, Leland scheduled a special meeting of the members, board of governors, and officers of Eagle Eye concerning the removal and election of governors and officers. That meeting was held on June 24, 1996. Because Roemmich did not attend the meeting in person, or through his attorney, Leland was the only member in attendance. As a 70 percent shareholder, he removed Roemmich as Governor, and appointed Jane as Roemmich's replacement. The Bertschs, in their capacity as Governors, then removed Roemmich as Treasurer, although Roemmich remained the Executive Vice President and retained his ownership interest in Eagle Eye.

Throughout the remainder of 1996, Roemmich received Eagle Eye's financial statements. In late November 1996, Roemmich began expressing his view that Leland and Eagle Eye were committing fraud, tax violations, and other criminal conduct. Roemmich contacted Eagle Eye's bank, suggesting that litigation would be imminent if the bank did not place a freeze on Eagle Eye's accounts and only allow withdrawals accompanied by his signature. The acrimony carried over to an annual meeting held on May 17, 1997. At that meeting, Roemmich had the opportunity to inspect the 1995 and 1996 financial reports, review mortgage and lease information concerning the post office properties, and ask about certain payables and compensation to Leland. The parties again squabbled over Roemmich's threatened legal challenges.

Although Roemmich was provided with notice of a February 23, 1998, annual meeting, he did not attend. Thereafter, the string of meetings came to a stop, and Eagle Eye's documentation of corporate decisionmaking grew sparse. The February 23, 1998, meeting was the last members' meeting held, and there has not been a formal meeting of the board of governors since March 1999. Aside from repairs occasioned by hurricanes in 2004, the primary activity of Eagle Eye after 1999 has been to collect rents, pay bills, file tax returns, and perform necessary maintenance and repairs. Moreover, starting in 1999, at Leland's instruction, Wagner stopped forwarding any financial information to Roemmich, except for Schedule K-1 tax information forms. Although Roemmich has the right to request regular and special member meetings under Eagle Eye's Operating Agreement, he has never exercised it. Similarly, since 1999, he has not requested detailed financial information.

In the meantime, several events occurred that anchor Roemmich's claims of self-dealing against defendants. In April 1997, Eagle Eye received $152,247.35 from the USPS as part of the renegotiation of the Cocoa Beach lease agreement. Most of the money was paid to Bertsch Construction as reimbursement for various expenses, and Roemmich learned about that disbursement at the May 17, 1997, annual meeting. Bertsch Construction also charged Eagle Eye approximately 3 percent of project costs to provide support services including accounting and secretarial support. Although there is no evidence that the 3 percent management fee was formally approved by Eagle Eye's board of governors or members, Roemmich knew of this expenditure by the May 17, 1997, meeting. Sometime after Roemmich was removed as Governor, Leland instructed Wagner to retroactively compensate him (Leland) for his services beginning in April 1995, at the rate of $400 a week. These payments ended in April 1997, and totaled $41,600. Roemmich asked about these payments to Leland at the May 17, 1997, meeting, and therefore had notice of them. Eagle Eye also hired Bertsch Construction to do repair work on the Florida project caused by hurricanes that hit the state in 2004, at a rate of a 10 percent markup for profit and 10 percent for overhead expenses. Finally, the Eagle Eye made payments on behalf of the Bertschs for non-Eagle Eye expenses, although these payments were always credited against payables owed to the Bertschs.

Based on this conduct, Roemmich filed suit against defendants on April 13, 2004, claiming that their actions were unfairly prejudicial, breached fiduciary duties and a duty to act in good faith owed to Roemmich in his capacity as a member and minority shareholder, and denied his right to vote as a member of Eagle Eye. Roemmich sought damages, dissenter's rights, equitable remedies including a buy-out of his share of the LLC, and costs and attorney's fees. Defendants brought a counterclaim based on Roemmich's decision to leave the Florida projects. Considering the parties' cross-motions for summary judgment, the district court held that North Dakota's six-year statute of limitations for tort, contract, and statutory causes of action barred Roemmich's claims accruing prior to April 13, 1998, as well as defendants' counterclaim. It also allowed Roemmich's suit against defendants in their individual capacity to go forward. See Roemmich v. Eagle Eye Dev., LLC, 386 F.Supp.2d 1089 (D.N.D.2005). The parties stipulated to a bench trial, which resulted in dismissal of most of Roemmich's claims. See Roemmich v. Eagle Eye Dev., LLC, 2006 WL 2433410 (D.N.D. 2006); 2006 WL 2620373 (D.N.D.2006). The district court later awarded attorney's fees to defendants, see Roemmich v. Eagle Eye Dev., LLC, 2006 WL 3833433 (D.N.D. 2006), a decision which Roemmich also appeals.

II. Discussion

The district court had jurisdiction based on the complete diversity of the parties. See 28 U.S.C. § 1332. "In diversity cases, we apply the substantive law of the state in which the district court sits." Gen. Elec. Capital Corp. v. Union Planters Bank, NA, 409 F.3d 1049, 1053 (8th Cir. 2005). We therefore look to North Dakota law to resolve Roemmich's claims, and review de novo the district court's interpretation of state law. See id.

A. Statute of...

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