This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2006).




Frank Howard, et al.,


John Webb, et al.,

BDP Architects, et al.,


Filed December 18, 2007


Minge, Judge


Ramsey County District Court

File No. C3-04-7050


Richard M. Carlson, Kelly Vince Griffitts, Morris, Carlson & Hoelscher, P.A., 8300 Norman Center Drive, Suite 710, Bloomington, MN 55437 (for respondents)

Mark A. Carter, Carter Legal Services, P.A., 810 South First Street, Suite 100, Hopkins, MN 55343 (for appellants)


            Considered and decided by Hudson, Presiding Judge; Willis, Judge; and Minge, Judge.

U N P U B L I S H E D   O P I N I O N

MINGE, Judge

            Appellant developer challenges the district court’s denial of his motion for a new trial.  That denial upheld a jury verdict and resulting judgment that awarded respondent investors damages for fraud and found that appellant was not entitled to damages on his counterclaim for slander of title.  Appellant claims that the opening argument by counsel for respondent investors, along with the district court’s rulings excluding evidence of settlement offers and permitting certain questioning, constituted prejudicial and reversible errors.  Respondents appeal the jury-verdict determinations and the resulting judgment based on those determinations as irreconcilable.  Because we conclude that the district court’s evidentiary rulings were neither erroneous nor an abuse of discretion and that the jury’s determinations are reconcilable, we affirm.


This case arises out of two real estate projects.  In May 2003, appellant John Webb was developing a condominium project in Beaver Bay (Beaver Bay project).  Webb prevailed on respondents Frank Howard, Jane Southwood, and Sidney Wood (investors) to invest in that project.  The parties formed respondent Unique Properties, L.L.C.[1] to own the development, with Webb serving as manager and the investors holding membership units in Unique Properties.  Over the course of the summer of 2003, Webb made numerous requests for money for Unique Properties from investors in the form of “capital calls.”

            Subsequently, Webb approached the investors about a Duluth real estate project (Duluth project).  Earlier, Webb had worked with defendant Wayne Dahlberg to form respondent Endion Shores, L.L.C. as the legal entity to develop the Duluth project.  Webb later formed respondent Safehaven Investments, L.L.C. as the legal entity to hold his half of Endion Shores.[2]  In July 2003, the investors purchased a minority interest in Safehaven.  The parties presented conflicting evidence related to this transaction, and a central issue at trial was whether the investors understood that their investment in Safehaven was the purchase of a membership interest in a limited liability company or the purchase of a direct ownership interest in the Duluth land.

            During 2003, the trust between the parties deteriorated along with the viability of both projects.  The investors stated that Webb misrepresented himself as a multimillionaire and an experienced real estate developer with the financial wherewithal to develop multiple projects; that Webb obtained access to the bank accounts of Unique Properties by providing the banks with falsified company resolutions; that Webb used the investors’ money to pay his personal expenses, such as liquor and overnight stays at the Bluefin Bay Resort, while failing to pay bills and fees necessary to advance the Beaver Bay project; that Webb also used money earmarked for the Beaver Bay project to develop his investment in the Duluth project; and that Webb engaged in a variety of other improper activities in managing the projects, which resulted in the loss of the investors’ investments. 

The investors sued after the parties were unable to settle their disputes, claiming, in relevant part, that Webb breached his contracts with the investors and committed fraud by misrepresentation, breach of fiduciary duty, securities violations, and civil theft.  The investors also filed a notice of lis pendens on the Duluth property, effectively halting further development of that site until the parties’ interests in the land could be determined.  In February 2005, the district court found that the investors’ interests in Safehaven (the Duluth project) did not constitute an interest in real estate under Minnesota law.  After the district court discharged the notice of lis pendens, Webb counterclaimed for slander of title. 

            Between early 2004 and the start of the trial in 2006, the parties conducted extensive but fruitless settlement negotiations.  Webb claimed that the investors used the development-stopping effect of their lis pendens as leverage to ask for more than three times their investment in both real estate projects.  The investors objected to evidence concerning any settlement demands and negotiations and, before trial, moved to exclude all such evidence under Minn. R. Evid. 403 and 408.  The district court granted the motion.

A jury trial was held.  During his opening statement, investors’ counsel told the jury that “[w]hat [the investors are] asking you for is their money back.  You will see what money they have put into this.  They want their money back. . . . They lost the land. They lost all the money that was put into it.  They want their money back and it is the fault and the liability of [Webb].” 

Webb argued that because the investors’ settlement demands were inconsistent with these remarks, the remarks effectively violated the settlement-exclusion order and opened the door to rebuttal.  The district court excluded Webb’s proffered evidence, but allowed Webb to counter respondents’ opening remarks through limited testimony.  After a ten-day trial, a jury returned a special verdict with answers to 43 questions, finding that Webb generally committed fraud by misrepresentation in his dealings with the investors.  With respect to Unique Properties (the Beaver Bay project), the jury found that Webb had breached a fiduciary duty to investors Frank Howard and Sidney Wood.[3]  The jury did not find that Webb committed breach of contract or securities violations in his dealings with the investors in the Safehaven venture (the Duluth project).  The jury also denied the investors’ claim that Webb committed civil theft.  Finally, the jury denied Webb’s counterclaim, finding that the investors did not commit slander of title. 

Webb moved for a new trial, alleging that because the history of the settlement negotiations demonstrated the investors’ malice (a key element of Webb’s counterclaim for slander of title) and illustrated the good-faith nature of Webb’s conduct toward the investors, the district court improperly excluded that evidence.  The investors moved for judgment as a matter of law, arguing that the jury could not find fraud without finding securities violations or civil theft.  The district court denied both motions.  This appeal follows. 



The first issue is whether the district court erred by excluding evidence of the parties’ settlement negotiations under Minn. R. Evid. 408 and 403, thereby denying Webb’s motion for a new trial. 

To prevail on his counterclaim for slander of title, Webb had to prove, in part, that respondent investors knowingly and maliciously filed the notice of lis pendens on the Duluth property.  See Paidar v. Hughes, 615 N.W.2d 276, 280 (Minn. 2000), reh’g denied (Minn. Sept. 1, 2000).  Webb wanted to offer five “snapshots” of the extensive settlement history between the parties for the purpose of showing that investors filed the notice of lis pendens with malicious intent. 

Absent an erroneous interpretation of the law, the question of whether to admit evidence is within the district court’s discretion.  Kroning v. State Farm Auto. Ins. Co., 567 N.W.2d 42, 45-46 (Minn. 1997).  When we review a district court’s evidentiary rulings, “our duty is to look to the record as a whole to determine whether, in light of the evidence therein, the district court acted arbitrarily, capriciously, or contrary to legal usage.”  State v. Profit, 591 N.W.2d 451, 464 n.3 (Minn. 1999) (quotation omitted).  Furthermore, district courts have the discretion to grant new trials, and appellate courts will not disturb a decision to deny a new trial absent a clear abuse of discretion.  Halla Nursery, Inc. v. Baumann-Furrie & Co., 454 N.W.2d 905, 910 (Minn. 1990).  “Entitlement to a new trial on the grounds of improper evidentiary rulings rests upon the complaining party’s ability to demonstrate prejudicial error.”  Uselman v. Uselman, 464 N.W.2d 130, 138 (Minn. 1990).  “An evidentiary error is prejudicial if the error might reasonably have changed the result of the trial.”  Cloverdale Foods of Minn., Inc. v. Pioneer Snacks, 580 N.W.2d 46, 51 (Minn. App. 1998) (citations omitted).

A.  Rule 408 Exclusion of Compromise Offers

Webb argues that exclusion under rule 408 was improper.  In this case, the apparent function of rule 408 is to protect Webb from a prejudicial disclosure.  Webb asserts that the evidence is not prejudicial to him because (1) he made a “total admission” to liability by offering the investors more than their original investment in both projects; and (2) the evidence was not offered to dispute the validity or amount of the investors’ claims, but rather to show malice as an element of Webb’s slander-of-title counterclaim.

Rule 408 states that

Evidence of . . . furnishing or . . . accepting . . . a valuable consideration in . . . attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability for or invalidity of the claim or its amount.  Evidence of conduct or statements made in compromise negotiations is likewise not admissible.  This rule . . . does not require exclusion when the evidence is offered for another purpose . . . .


As rule 408 is a rule of exclusion, rather than a rule of discretion, a district court does not have discretion to admit a statement if it violates the rule. 11 Peter N. Thompson, Minnesota Practice § 408.01, 182 n.4 (3rd ed. 2001).  In C.J. Duffey Paper Co. v. Reger, 588 N.W.2d 519, 524 (Minn. App. 1999), this court stated that three elements must exist before the rule requires that evidence be excluded: (1) the evidence must relate to an offer to compromise a disputed claim; (2) the evidence must be offered to prove the validity or amount of the claim; and (3) the evidence is not presented for another legitimate purpose.    

Here, Webb claims that he offered the investors the entirety of their cash investments in both real estate projects plus 10% in order to release any potential claims.  Webb contends that this offer constituted a total admission of liability, rather than a compromise negotiation subject to rule 408.  See 11 Peter N. Thompson, Minnesota Practice § 408.01, 182-183 (3rd ed. 2001) (noting that total admissions are not excluded under rule 408).  But the investors strongly contested Webb’s characterization of the settlement negotiations and stated that Webb never made a viable offer providing cash or sufficient security for settlement payments.  Although this is basically an objection based on the value of the offer, it is arguable that an offer that is not viable is essentially an effort to compromise and a de facto dispute to a claim.  With Webb claiming he made a total admission of liability and the investors claiming they never received a serious offer, the district court was presented with a factual question as to whether the first Duffy element required exclusion.  In such a setting, we decline to rule that the district court acted arbitrarily or capriciously in barring the evidence under the first Duffy consideration.

Related to the second Duffy consideration, Webb claimed throughout this litigation that he was not offering the settlement evidence to dispute the validity of respondent investors’ claim or its amount.  As noted above, Webb claims to have made a total admission of liability by offering the investors more than their original investment.  But again, the investors argued that Webb never came forward with a serious offer, and we decline to rule that the district court erred in determining that Webb’s proffered evidence effectively left the validity of the investors’ claim or its amount open to debate.  

We reach a different conclusion, however, when we turn to the third Duffy criterion and the “other purpose” exception to rule 408.  Webb repeatedly stated that he was not offering the additional settlement evidence to contest liability, but to meet his burden of proving malice as an element of his slander-of-title counterclaim.  Webb claimed the proffered evidence would prove that the investors used the filing of the lis pendens as leverage to demand more than double their investment or wrest control of the property away from Webb.  Rule 408 only requires exclusion when the evidence is offered to prove liability or invalidity of a claim, but not when offered for another legitimate purpose, such as “proving bias or prejudice of a witness.”  Minn. R. Evid. 408.  Although malice is not listed among the legitimate purposes listed in rule 408, the court in Duffy stated that “the rule does not purport to contain an exhaustive list of legitimate purposes.”  Duffy, 588 N.W.2d at 525.  And as respondent notes, the court in Duffy allowed the introduction of a settlement letter between the parties, in part because the letter was offered to prove bad faith.  Id. at 525.

Because Webb’s proffered evidence falls within the “other purpose” exception to rule 408, the district court erred in excluding the proffered evidence under that rule.  However, this leaves us with the question of whether the evidence was properly excluded under Minn. R. Evid. 403. 


B.  Rule 403 Discretionary Exclusion of Probative Evidence

Rule 403 gives district courts the discretion to exclude otherwise relevant evidence “if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.”  Minn. R. Evid. 403.  Although rule 403 favors the admission of all relevant evidence unless its probative value is “substantially” outweighed by one of the listed dangers, State v. Schulz, 691 N.W.2d 474, 478 (Minn. 2005), “[r]ulings on the admissibility of evidence . . . are committed to the sound discretion of the district court.”  Id. at 479.  Furthermore, even when evidence has some probative value, if its introduction may confuse or mislead the jury, the district court has discretion to exclude it.  In re Commodore Hotel Fire & Explosion Cases, 324 N.W.2d 245, 249 (Minn. 1982). 

In its order denying Webb’s motion for a new trial, the district court noted that the investors strongly disputed Webb’s characterization of the settlement negotiations.  For example, according to the investors, Webb’s offer to settle for their total investment plus 10% was an empty promise to pay at a future date without adequate security to guarantee the promise.  The investors stated that Webb’s promise to pay was contingent on the receipt of proceeds that never materialized following a refinancing of the Duluth property.  But Webb stated that he offered alternate security to guarantee the settlement payments.  The investors countered that the alternate security was of questionable value. 

Given the parties’ widely varying descriptions of the settlement process, the district court stated that it would have been unfairly prejudicial to allow Webb to present his evidence without giving the investors an opportunity to respond.  The district court determined that this would have “open[ed] the door to the entire settlement history of this case.”  The district court concluded that presentation of the parties’ extensive settlement negotiations would have “confused the issues at hand, been time consuming, and had the potential to mislead the jury.”  The district court continually weighed these considerations over the course of a ten-day jury trial.  Because we review the district court’s ruling under rule 403 on an abuse-of-discretion standard, we do not second-guess the district court’s determination.  On this record, we conclude that the district court did not act “arbitrarily, capriciously, or contrary to legal usage” in barring the parties’ settlement negotiations pursuant to rule 403.  Profit, 591 N.W.2d at 464 n.3. 

C.  Prejudicial (Opening Remarks)/Evidentiary Remedy

The opening remarks by investors’ attorney suggested that the investors only wanted their money back, but Webb refused to give it to them.  Webb claimed that it was necessary to introduce evidence of the settlement history between the parties to counter any prejudice caused by these remarks.  The district court denied Webb’s request under Minn. R. Evid. 403 and 408, but allowed Webb’s counsel to counter the offending opening remarks by directly examining Webb as follows:

Q.        Did you ever offer to the plaintiffs to give their money back?

A.        Many times.

Q.        And did they accept that offer?

A.        No, they did not.

Q.        Was that both before and after the notice of lis pendens was recorded?

A.        Before and after.


Webb contends that the district court’s limited remedy resulted in severe prejudice.  Because we determine that barring the introduction of all evidence related to settlement discussions was within the district court’s discretion under rule 403, it is unnecessary to address Webb’s argument that the district court abused its discretion in granting Webb a limited opportunity to counter the opening remarks by investors’ attorney. 

We note our skepticism, however, of Webb’s claim that the remedy fashioned by the district court led to prejudicial error that might reasonably have changed the result of the trial.  Cloverdale, 580 N.W.2d at 51.  For an error to be prejudicial, there must be a reasonable likelihood that it substantially affected the verdict.  See State v. Griller, 583 N.W.2d 736, 741 (Minn. 1998).  In addition to directly countering the allegedly offending opening, Webb had other opportunities throughout the trial to convince jurors that investors maliciously filed a notice of lis pendens that damaged his investment in the Duluth property.  For example, Webb’s counsel spent a significant amount of time cross-examining the investors about their motivation in filing the lis pendens.  Webb also presented direct testimonial evidence about the alleged damages caused by the lis pendens filing.  It is unlikely that Webb’s additional settlement evidence could have reasonably changed the jury’s final determination, especially in light of the investors’ plan to present rebuttal evidence showing that none of Webb’s settlement offers was genuine.

Examining the record as a whole, we conclude that the district court’s decision to allow Webb a limited opportunity to counter the investors’ opening statement did not constitute prejudicial error. 


The second issue is whether the district court erred in denying the investors’ motion for judgment as a matter of law (JMOL)[4] and refusing to otherwise reconcile the jury’s verdict that Webb committed fraud, but not securities violations or civil theft.  The investors claim that the fraud verdict entitles them to a holding that they are also entitled to recovery for securities violations and civil theft. 

The supreme court has stated that “the verdict is to be liberally construed to give effect to the intention of the jury and to harmonize answers to interrogatories if it is possible to do so.  Hudson v. Snyder Body, Inc., 326 N.W.2d 149, 156 (Minn. 1982), reh’g denied (Minn. Nov. 29, 1982) (internal quotation omitted).  Where JMOL has been denied by the district court, the denial must be affirmed on review if, “in the record, there is any competent evidence reasonably tending to sustain the verdict.”  Pouliot v. Fitzsimmons, 582 N.W.2d 221, 224 (Minn. 1998) (quotation omitted).  “Unless the evidence is practically conclusive against the verdict, [this court] will not set the verdict aside.”  Sandhofer v. Abbott-Northwestern Hosp., 283 N.W.2d 362, 365 (Minn. 1979).  The evidence must be considered in the light most favorable to the prevailing party and an appellate court must not set the verdict aside if it can be sustained on any reasonable theory of the evidence.[5]

A.  Comparing the Jury’s Denial of Securities Violations with Its Finding of Fraud


The investors presented evidence of improper conduct on the part of Webb related to both the Beaver Bay and Duluth projects.  The special-verdict form was complex.  It called for answers to 43 specific questions.  The fraud and civil-theft questions were general.  The fiduciary-duty questions dealt only with Unique Properties (the Beaver Bay project).  The breach of contract and securities violations involved only Safehaven (the Duluth project).  The slander-of-title counterclaim dealt only with the Duluth real estate.  The jury ultimately found that Webb committed fraud, but with respect to Safehaven, did not commit securities violations or breach of contract.  The jury found against the investors on their civil-theft claim.  But the jury also denied Webb’s slander-of-title counterclaim.    

In considering whether Webb committed fraud by misrepresentation, the jury was instructed to determine whether the following five elements were met: (1) Webb falsely represented a past or present material fact to the investors; (2) Webb knew the representations were false at the time they were made; (3) the representations were made intending that the investors rely on them; (4) the investors relied and acted on the false representations; and (5) the investors were harmed as a result of relying on the false representations.  See Davis v. Re-Trac Mfg. Corp., 276 Minn. 116, 117, 149 N.W.2d 37, 38-39 (1967) (parsing the elements of common-law fraud).

By contrast, to find against Webb on a securities-violation claim, the jury needed to find that Webb violated Minn. Stat. § 80A.01 (2006), which states that

[i]t is unlawful for any person, in connection with the offer, sale or purchase of any security, directly or indirectly:(a) to employ any device, scheme, or artifice to defraud;(b) to make any untrue statement of a material fact or to omit to state material facts necessary in order to make the statements made . . . not misleading; or(c) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.


(Emphasis added).

At first glance, the basis for the investors’ claim of inconsistency in the verdicts is readily apparent.  There is overlap.  In order to find that Webb committed fraud, the investors had to show that Webb made knowingly false representations concerning material facts with the intent that respondents would rely on those statements.  By comparison, the standard for showing a securities violation required the investors to show that Webb employed a scheme to defraud, made an untrue statement of material fact, or engaged in a practice or course of business that operated as a fraud or deceit on the investors.  Minn. Stat. § 80A.01.  Although these causes of action share similarities, the securities statute is more focused—there is no liability for fraud generally, only fraud in connection with the offer, sale, or purchase of a security.  

We are unable to conclude that the district court erred in denying the investors’ motion to reconcile the common-law fraud and securities-law verdicts.  The jury was asked to determine whether Webb committed fraud in connection with the offer, sale, or purchase of a security related specifically to the Duluth property.  The jury answered in the negative.  However, when asked whether Webb committed general common-law fraud related to his entire course of conduct with the investors, the jury answered affirmatively. 

The jury heard extensive evidence of fraud that was not directly related to the offer, sale, or purchase of a security.  Given the complexity of this record, we decline to second-guess the jury’s determination that Webb committed common-law fraud, but not securities fraud specifically in connection with the offer or sale of a security interest in the Duluth project.  The question is not whether a reviewing court would have reached the same conclusion.  Rather, we must liberally construe the verdict to give effect to the intention of the jury, Hudson, 326 N.W.2d at 156, and if there is competent evidence supporting the verdict, the verdict must stand.  Pouliot, 582 N.W.2d at 224.

Based on our close review of the record, we conclude that there is competent evidence supporting the jury’s finding of general fraud and denial of securities fraud and that the verdict may be fairly reconciled. 



B.  Jury’s Finding of Fraud but Denial of Respondents’ Civil Theft Claim


Minn. Stat. § 604.14 (2006) (civil liability for theft) states that “[a] person who steals personal property from another is civilly liable to the owner of the property for its value when stolen plus punitive damages of either $50 or up to 100 percent of its value when stolen, whichever is greater.”  Based on this statute, the jury was given the following instruction: “A person who steals personal property from another is civilly liab[le] to the owner of the property for its value when stolen. Money is considered personal property with respect to this claim.”  The special-verdict form simply asked if Webb committed civil theft.

The investors argue that “the evidence presented to the jury for civil theft is exactly the same evidence submitted to the jury to support the finding of fraud against [a]ppellants.”  Theft was defined by use of the word “steals.”  “Stealing” may be understood as requiring wrongful conduct at the time the thief first obtains property.  Similar to the jury’s denial of the investors’ securities claim, the jury may have determined that Webb did not initially obtain the investors’ money by improper practices, but that he retained or used their invested money fraudulently.  As observed in the prior section dealing with the securities law, there is extensive evidence of such alleged improprieties by Webb after he obtained the investors’ money.

Furthermore, the jurors may have understood “stealing” as different from fraud.  The investors assert that they lost money on the projects as a result of Webb’s fraudulent misrepresentations.  But it does not necessarily follow that the jury believed the money was “stolen.”  Without a clear definition, the jury may have decided that stealing required a more brazen, overt act and fraud as more nuanced.  Absent a jury instruction or verdict question that equates theft and fraud, we cannot find that the jury’s answers on theft and fraud are irreconcilable.

Based on the foregoing analysis, we conclude that the verdict is reconcilable and that the district court did not err in denying the investors’ motion for judgment as a matter of law.




[1] Although a named plaintiff and respondent on appeal, the record does not indicate that Unique Properties, L.L.C. has an interest in the judgment on this appeal.  Thus, in this opinion the investors are all the respondents.

[2] Although named defendants and appellants; the record does not indicate that Wayne Dahlberg; Dahlberg’s architectural firm, BDP Architects; Endion Shores, L.L.C.; Safehaven Investments, L.L.C.; or another Webb firm named Lighthouse Management and Leasing, L.L.C. have any interest in this appeal.  For purposes of this opinion, Webb is considered the appellant and to the extent any other person or entity has an interest, references to Webb include that interest.

[3] The special verdict did not ask whether Webb breached a fiduciary duty with respect to Jane Southwood and accordingly there is no jury finding on that issue with respect to her.

[4]The parties characterize the investors’ motion as one for judgment notwithstanding the verdict or “JNOV.”  The 2006 amendments to the Minnesota Rules of Civil Procedure changed the characterization of the motion from JNOV to judgment as a matter of law (JMOL).  This change did not alter the substantive practice relating to these motions.  SeeMinn. R. Civ. P. 50 2006 advisory comm. cmt.


[5]Rather than accepting the answers to the special-verdict questions, the district court may have considered (1) rendering judgment against the party having the burden of proof;
(2) ordering a new trial; (3) sending the jury back for further deliberations; or (4) reconciling the verdicts by using the district courts’ powers of interpretation.  See MUSICLAND Group, Inc. v. Ceridian Corp., 508 N.W.2d 524, 534 (Minn. App. 1993) (citations omitted), review denied (Minn. Jan. 27, 1994).  Here, the district court stated that “the claims of securities violations and civil theft contain elements not present in the claim of fraud by misrepresentation.”