This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1996).

STATE OF MINNESOTA

IN COURT OF APPEALS

C9-96-2215

BRW, Inc.,

Respondent,

vs.

Martin Harstad, et. al.,

Appellants.

Filed July 8, 1997

Affirmed in part and reversed in part; motion denied

Schultz, Judge

[*]

Hennepin County District Court

File No. CT 93-20533

Lewis A. Remele, Jr., Bradley J. Betlach, Bassford, Lockhart, Truesdell & Briggs, P.A., 3550 Multifoods Tower, 33 South Sixth Street, Minneapolis, MN 55402 (for Respondent)

John M. Koneck, Cynthia Jokela, Fredrikson & Byron, P.A., 1100 International Centre, 900 Second Avenue South, Minneapolis, MN 55402 (for Appellants)

Considered and decided by Norton, Presiding Judge, Peterson, Judge, and Schultz, Judge.

U N P U B L I S H E D O P I N I O N

SCHULTZ, Judge

In a consolidated appeal, appellants Harstad, et al. argue that the jury's finding that there was no breach of fiduciary duty was contrary to the evidence and that the district court improperly denied their motions for a new trial and JNOV. Respondent BRW, Inc. argues that the district court abused its discretion by (1) not awarding attorney fees for in-house counsel; (2) reducing its attorney fees award by 40%; and (3) by referring to both respondent and appellants as a "prevailing party" for purposes of costs and disbursements. We affirm on all issues except the 40% reduction in attorney fees, which we reverse.

FACTS

Appellants Martin Harstad, et al. (Harstad) bought a parcel of undeveloped land from Harstad's father. In 1990, Harstad hired respondent BRW, Inc. to perform design and engineering work necessary to develop the property in Plymouth, Minnesota. The southern 23 acres of the 106-acre parcel were originally guided or zoned for office use. Initially, Harstad, who was inexperienced as a developer, hoped to have the southern acres reguided for retail use, but BRW advised him that he would have more success getting approval for townhouses. From October 1990 to July 1991, BRW performed work on the package to be submitted to the city of Plymouth, only to have the planning amendment ultimately denied. BRW withdrew from the project while Wal-Mart considered developing the southern section of the property. Then, in 1992, North Memorial Hospital approached Harstad about repurchasing the southern 23 acres, which North Memorial had previously owned. North Memorial was interested in building an ambulatory care facility. North Memorial, which had previously enlisted the work of BRW, requested that BRW again be used, and with the permission of both Harstad and North Memorial, BRW accepted. Ringrose and Kost, the BRW managers who were involved in the Harstad/North Memorial project, were unaware that in March 1992, Abbott Northwestern Hospital approached Jarvis and Lindberg of BRW about developing an ambulatory care center on land owned by Prudential, approximately one mile from Harstad's property; BRW was hired for that project on April 15. When Ringrose and Kost learned in May 1992 that BRW was also working on the Abbott/Prudential project, they met with Jarvis and Lindberg, deciding that the two projects did not represent a conflict of interest. However, both hospitals were called and informed of BRW's work on both projects. BRW did not inform Harstad about their work on the Abbott/Prudential project.

It was decided that the North Memorial/Harstad and Abbott/Prudential projects would be submitted jointly to the city. In June 1992, North Memorial and Abbott Northwestern announced that they would work together on a joint venture on the Prudential property. BRW performed over $200,000 of work for Harstad over the next three years, part of which was paid with promissory notes. In August 1993, BRW sued for unpaid services; Harstad counterclaimed, alleging negligence and breach of fiduciary duty. The district court awarded BRW $328,458 for unpaid fees, plus interest and attorney fees which were reduced by 40%, and awarded Harstad $38,347 for BRW's negligence.

D E C I S I O N

I. Fiduciary Duty

The jury found that BRW did not breach its fiduciary duty in performing professional services for Harstad. Whether a fiduciary duty has been breached is a question of fact. Appletree Square I v. Investmark, Inc., 494 N.W.2d 889, 892 (Minn. App. 1993). Answers to special verdict questions will not be set aside on review unless they are "perverse and palpably contrary to the evidence or where the evidence is so clear to leave no room for differences among reasonable people." Hanks v. Hubbard Broad., Inc., 493 N.W.2d 302, 309 (Minn. App. 1992), review denied (Minn. Feb. 12, 1993). The evidence must be viewed in the light most favorable to the verdict, and the verdict will not be disturbed if it can be reconciled with the evidence on any theory. Id.

Harstad contends that there was no dispute regarding the facts on the fiduciary duty issue. We disagree; there was evidence that would negate the claim. First, there was testimony regarding BRW's rationale in deciding that working for both projects would not represent a conflict of interest and that they would not inform Harstad of their work for Abbott: (1) the projects did not involve the same parcels of land; (2) the projects did not represent necessarily competing interests; (3) BRW would not be recommending one project over the other; (4) Harstad had little, if any, control over the North Memorial project; and (5) both hospitals had asked BRW to maintain confidentiality. Further, Bernard Mittelsteadt, an experienced civil engineer who worked for a large multi-disciplined firm similar to BRW, testified that in his opinion there was no conflict of interest in BRW's simultaneous handling of both projects. He explained that it is common for engineers to work for multiple developers in the same city on a similar, competitive project, and that a conflict of interest only exists when an engineer, serving two clients at the same time, gives one client an advantage, financial or otherwise, over the other. While Mittelsteadt did testify that it would have been better from a client relationship standpoint for BRW to have informed Harstad that it was also working on the Abbott/Prudential project, he did not believe that BRW breached any fiduciary duty owed to Harstad.

In addition, the testimony of Richard Sathre, who opined that BRW had breached its fiduciary duty to Harstad because of conflict of interest, was based on assumptions that the jury could have rejected. These assumptions included that there could only be one new ambulatory care center in the area, which was disputed, and that Harstad suffered financially because of delays, even though Harstad had already tied up the parcel until July 1992. Further, the jury's task is to determine credibility, and especially given Sathre's admission that his assumptions were a "little shaky," it seems plausible that the jury discounted his testimony.

Viewing the evidence in the light most favorable to the verdict, the verdict was not perverse and palpably contrary to the evidence.

II. New Trial/JNOV

Harstad argues that the district court improperly denied his motion for a new trial, and in the alternative, for judgment notwithstanding the verdict (JNOV). An appeal from a denial of a motion for a new trial must fail unless the verdict is manifestly and palpably contrary to the evidence, viewed in the light most favorable to the verdict. ZumBerge v. Northern States Power Co., 481 N.W.2d 103, 110 (Minn. App. 1992). A motion for JNOV will not be reversed if there is "any competent evidence reasonably tending to sustain the verdict." Rettman v. City of Litchfield, 354 N.W.2d 426, 429 (Minn. 1984).

Harstad asserts that the district court, in its jury instructions, focused too heavily on whether the breach of fiduciary duty caused damages. This does not have merit, as contemplation of damages is in a separate paragraph from the simple definition of breach of fiduciary duty. The district court's denial of Harstad's motions for a new trial and JNOV was not contrary to the evidence.

III. Attorney Fees

The district court's award or denial of attorney fees will not be reversed on review absent an abuse of discretion. Becker v. Alloy Hardfacing & Eng'g Co., 401 N.W.2d 655 661 (Minn. 1987).

In posttrial hearings regarding attorney fees and other litigation expenses, the district court determined that Martha McPhee, in-house counsel for BRW, was not acting in a legal advocate position at trial and therefore denied BRW's motion for payment of her fees. The district court then awarded BRW 60% of its remaining litigation expenses, denying 40% because it found that was a reasonable percentage to attribute to BRW's defense of the fiduciary duty counterclaim. In addition, the district court awarded litigation expenses to Harstad for his successful negligence claims against BRW.

First, BRW argues that the district court abused its discretion by excluding fees for in-house counsel Martha McPhee. We disagree. The district court excluded fees for McPhee because she was not acting in an attorney capacity at trial, but rather was serving as a "client representative." BRW cites foreign cases that have upheld payment of in-house counsel. See Zacharias v. Shell Oil Co., 627 F. Supp. 31, 34 (E.D.N.Y. 1984) (approved fees for in-house counsel who served as lead counsel in the litigation). However, Zacharias can be easily distinguished, since there, the in-house counsel was acting as counsel in the litigation. The most important question is whether McPhee was acting as an attorney at trial; here, there is no evidence that she was acting in any role other than as a client representative.

BRW also contends that the district court abused its discretion by reducing its award of attorney fees by 40% in order not to pay for fees associated with the fiduciary duty counterclaim. BRW argues that the attorney fees associated with the defense of the fiduciary duty claim should be covered because they were part of the cost of collecting the amount owed by Harstad. We agree. See Potter v. American Bean & Grain Corp., 388 N.W.2d 22, 25 (Minn. App. 1986) (where promissory note entitles all reasonable fees and costs associated with collection, and counterclaim, if successful, would have reduced amount received under award, attorney fees for defending counterclaim is awarded), review denied (Minn. Aug. 13, 1986). The contract between BRW and Harstad provided that

BRW shall be entitled to recover all costs and attorney's fees incurred in the collection or attempted collection of any amounts due under this Agreement.

The promissory notes executed by Harstad also stated:

Borrower agrees to pay all costs, including reasonable attorneys' fees, incurred or paid by BRW in the event this Note is not paid in accordance with its terms.

Because this court in Potter determined that attorney fees associated with the defense of counterclaims under such circumstances must be awarded, we conclude that the district court abused its discretion by not awarding BRW the fees associated with the fiduciary duty counterclaim. We reverse the district court's 40% reduction in BRW's attorney fees.

Finally, BRW argues that the district court erred in finding that Harstad, as well as BRW, was a "prevailing party." This determination, which affects taxation, is within the discretion of the district court. Kusniryk v. Arrowhead Reg'l Corrections Bd., 413 N.W.2d 182, 184 (Minn. App. 1987). Because Harstad prevailed on his negligence claims, the district court did not abuse its discretion.

IV. Motion to Strike

After oral arguments, Harstad moved to strike certain statements made by BRW's counsel. Because we do not rely on those statements in formulating our opinion, we need not address the issue.

Affirmed in part and reversed in part; motion to strike denied.

[ ]* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.