may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
Martin Harstad, et. al.,
Affirmed in part and reversed in part; motion denied
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.
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.
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.
I. Fiduciary Duty
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.
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.
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.
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.