may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
Kelley V. Rea,
Ronald C. Rutten,
Douglas County District Court
File No. C495672
Kelley V. Rea, 700 Lumber Exchange Building, 10 South Fifth Street, Minneapolis, MN 55402 (Appellant pro se)
Lindsay G. Arthur, Jr., Paul A. Banker, Arthur, Chapman, Kettering Smetak & Pikala, P.A., 500 Young Quinlan Building, 81 South Ninth Street, Minneapolis, MN 55402 (for Respondent Selbo)
Michael J. Dolan, Thornton, Hegg, Reif, Johnston & Dolan, P.A., 1017 Broadway, P.O. Box 819, Alexandria, MN 56308 (for Respondent Rutten)
Mitchell A. Carver, 2559 Willow Road NE, Fargo, ND 58102 (for Respondent Carver)
Considered and decided by Kalitowski, Presiding Judge, Randall, Judge, and Schumacher, Judge.
Kelley V. Rea, plaintiff in a misrepresentation, civil conspiracy and tortious interference action, appeals from the order of the district court granting summary judgment, contending he established a prima facie case as to all claims. By notice of review, respondents challenge the trial court's denial of their motion for sanctions under Minn. Stat. § 549.21 (1996) and Minn. R. Civ. P. 11. We affirm on all issues.
Advanced began to suffer severe financial problems that impacted the ongoing litigation. Advanced's president failed to attend his deposition over a period of six months and expert witnesses were not prepared in a timely fashion. In May 1992, the federal court precluded Advanced from offering the testimony of any expert or of Advanced's president. Advanced's financial condition progressively weakened and in August 1992, it voluntarily transferred its assets to its primary creditor, First Interstate Bank of Fargo, North Dakota, N.A. (Bank). While the transfer did not refer specifically to the lawsuit, it included "[a]ll contract rights and general intangibles now in force or hereinafter acquired." The next day, Bank sold all the assets it had acquired from Advanced to Pioneer Systems, Inc. (Pioneer). The closing documents made no mention of the lawsuit, but they expressly provided that Pioneer did not acquire any liabilities or debt obligations of Advanced.
Following Rea's inquiries as to the status of the lawsuit, respondent Gregory Selbo, acting as an attorney for Pioneer, advised Rea by letter that Pioneer did not acquire any interest in the lawsuit. Selbo advised Rea that he might contact Bank or Advanced directly for copies of the documents transferring Advanced's assets to Bank. Rea did not attempt to obtain copies. Rea claims that respondent Ronald C. Rutten, Pioneer's president, stated that the lawsuit was not transferred to Pioneer and additionally told Rea that Pioneer was not liable for any of Rea's services or for the costs of the lawsuit. Rutten denies having that conversation.
Respondent Mitchell Carver, acting as CEO of Advanced, stated that the lawsuit stayed with Advanced and that Rea had the authority to continue with the case "on his own." In addition, Rea would get his fees from any settlement that might be reached.
In late 1992, the federal court dismissed three of the five claims asserted by Advanced against White. Advanced was dissolved on August 1, 1993.
Pioneer ran into financial difficulties and in early 1994, Pioneer entered into an agreement with White for the transfer of Pioneer's assets. As part of the final transfer agreement, Pioneer transferred whatever interest it might have acquired in the lawsuit. Following the transfer, White sought summary judgment in federal court on the grounds that Advanced lacked standing to continue the lawsuit, having sold its interest in the lawsuit, and because it was a dissolved corporation. The motion was unopposed and the lawsuit was dismissed.
Rea claims that his fees and costs exceeded $100,000. Although Advanced had agreed to pay Rea $45,000 for legal services, only one payment of $7,000 was ever made.
Establishment of both intentional and negligent misrepresentation requires proof of damages proximately caused by the misrepresentation. Florenzano v. Olson, 387 N.W.2d 168, 174 n.4 (Minn. 1986) (quoting Davis v. Re-Trac, 276 Minn. 116, 117, 149 N.W.2d 37, 38-39 (1967) (setting forth elements of intentional misrepresentation)); Bonhiver v. Graff, 311 Minn. 111, 122, 248 N.W.2d 291, 298 (1976) (negligent misrepresenter is liable for pecuniary loss caused by justifiable reliance upon the misinformation).
The record shows the following undisputed facts: (1) appellant was retained by Advanced to prosecute the lawsuit; (2) Advanced's inability to pay appellant stemmed from financial difficulties unrelated to respondents' alleged representations regarding ownership of the lawsuit; (3) Pioneer never retained appellant or asserted an interest in supporting the lawsuit; (4) closing documents expressly provided that Pioneer did not acquire any liabilities or debt obligations of Advanced; (5) Advanced was dissolved before Pioneer transferred any rights it might have had in the lawsuit to White; and (6) Advanced failed to pay appellant for his legal services before dissolving. There is nothing in the record to indicate that Pioneer was willing to support the lawsuit or pursue it. In light of this, we cannot assume that appellant, as a matter of certainty, would somehow have convinced Pioneer to retain him in furtherance of the lawsuit. See Lubbers v. Anderson, 539 N.W.2d 398, 402 (Minn. 1995) (refusing to engage in speculation and conjecture in order to conclude that defendant's conduct proximately caused plaintiff's injuries). In the absence of damages attributable to respondents' representations, the trial court properly granted summary judgment on the intentional and negligent misrepresentation claims. See id., 539 N.W.2d at 401 (holding that 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 plaintiff's claim") (citation omitted). Furthermore, because appellant failed to establish a valid fraud claim, summary judgment is appropriate on the civil conspiracy claim. See Venier v. Forbes, 223 Minn. 69, 75, 25 N.W.2d 704, 708 (1946) (establishment of a claim for civil conspiracy requires establishment of a valid fraud claim). Rea has suffered an unfortunate pecuniary loss through events beyond his control. But that cannot be rectified by the courts on these facts.
The standard of review for decisions on sanctions under Minn. Stat. § 549.21 and Minn. R. Civ. P. 11. is whether the trial court abused its discretion. Radloff v. First Am. Nat'l Bank of St. Cloud, N.A., 470 N.W.2d 154, 156 (Minn. App. 1991), review denied (Minn. July 24, 1991). In addition, Rule 11 should be construed "somewhat narrowly" as it is preferable that some sanctionable conduct escape discipline rather than cause the deterrence of legitimate or arguably legitimate claims. Uselman v. Uselman, 464 N.W.2d 130, 142 (Minn. 1990). "Requisite to an award of statutory sanctions is that counsel proceeded in bad faith." Id. at 140 (citation omitted). As the existence of bad faith is an issue of fact, the trial court is in the best position to make this determination. Id. (citations omitted). Respondents failed to demonstrate any bad faith on appellant's part.
The trial court did not find appellant's lawsuit to be frivolous. Appellant has lost thousands of dollars. In the absence of bad faith, the trial court properly denied sanctions.