John R. Shoemaker,
Appellant,

vs.

Murnane, Conlin, White and Brandt Professional Association, et al.,
Respondents.

Ramsey County District Court
File No. C0967895

Floyd E. Siefferman, Jr., Saliterman & Siefferman, P.C., 1000 Northstar Center East, 608 Second Avenue South, Minneapolis, MN 55402 (for appellant)

Terence J. O'Loughlin, Matthew J. Hanzel, Geraghty, O'Loughlin & Kenney, P.A., 1400 Ecolab University Center, 386 North Wabasha Street, St. Paul, MN 55102 (for respondents)

Considered and decided by Kalitowski, Presiding Judge, Schumacher, Judge, and Klaphake, Judge.

SCHUMACHER, Judge

Appellant John R. Shoemaker, a former shareholder in respondent Murnane, Conlin, White and Brandt, P.A. (Murnane), challenges adverse summary judgment on his various claims. He also argues the district court erred in denying his motions to amend his complaint and for recusal, and by failing to address valuation of shares and discovery sanctions. We affirm.

In August 1988, Shoemaker began work at Murnane as an associate attorney in the finance and business section. At the time, Murnane was organized as a partnership. In January 1993, Murnane became a professional corporation. As an associate, Shoemaker consistently received favorable performance evaluations. In January 1994, Shoemaker became a shareholder of Murnane and learned the extent of its financial and morale problems.

In June 1994, the executive committee, consisting of respondents John E. Brandt, Steven J. Kirsch, and Andrew T. Shern, issued a memo to Shoemaker, indicating, among other things, a concern about billable hours being under budget. In August 1994, Shoemaker attended a meeting with Brandt, Shern, and respondents John D. Hirte and James F. Baldwin at which he was told his hours were under budget. Shoemaker acknowledged his hours were down, having just returned from his honeymoon, and requested Murnane share work with him. In late 1994, Shoemaker was told that Murnane expected him to keep himself busy. Throughout 1995, Shoemaker continued to request work from fellow shareholders.

In May 1995, Shoemaker attended a meeting of the executive committee, at which Hirte, Baldwin, and respondent Daniel A. Haws complained about Shoemaker's handling of files. In August 1995, Shoemaker met with the executive committee and was informed that Hirte, Baldwin, and Haws did not want him to remain a shareholder of Murnane and would present their complaints for a vote at the next shareholder meeting. Shoemaker responded that he had no idea what the complaints were about, as they had refused to share files with him for many months. Shoemaker did not attend the shareholder meeting, but did hand-deliver a letter to the executive committee, alleging constructive discharge. In March 1996, Murnane transmitted a check for $2,968.98 to Shoemaker for redemption of his shares, which Shoemaker returned.

In August 1996, Shoemaker filed this action against Murnane and Brandt, Kirsch, Shern, Hirte, Baldwin, and Haws (shareholders), alleging breaches of employment contract, shareholder agreement and fiduciary duty, misrepresentation, promissory estoppel, and violations of Minn. Stat. § 302A.751 (1998). The district court denied Murnane and shareholders' motion to dismiss and ordered them to comply with discovery requests, issued various scheduling orders, and appointed a discovery referee. As the district court noted, the litigation became particularly acrimonious, with both sides engaging in finger pointing, exaggeration, and multidirectional attacks.

In April 1998, the discovery referee denied Shoemaker's request for sanctions. The referee ordered Murnane and shareholders to produce all weekly "open file reports" for the years 1993 through 1995. Murnane and shareholders maintain that they did not retain copies of open file reports for 1994 or 1995.

Murnane and shareholders moved for summary judgment. Shoemaker moved to amend his complaint to add a claim for punitive damages. On May 15, 1998, a hearing was held on the summary judgment motions. Prior to a decision on the motions, a previously scheduled pretrial hearing was held in June 1998. At that hearing, the judge disclosed that William Davern, an expert for Murnane and shareholders, was a friend and relative and stated she would consider recusal if requested. There was no request for recusal at that time. In July 1998, the district court granted Murnane and shareholders' motion for summary judgment and denied Shoemaker's motion to amend his complaint.

Shoemaker subsequently moved to exclude the judge for bias, which motion was denied. Shoemaker moved for reconsideration of his motion to exclude the judge, which the chief judge denied. After judgments were entered on the district court's orders, Shoemaker appealed. Shoemaker subsequently moved for sanctions for discovery abuses and spoliation of evidence, which the district court dismissed after this court denied a motion to stay the appeal pending resolution of that motion.

1. On appeal from summary judgment, this court determines whether there are any genuine issues of material fact and whether the trial court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990); see Minn. R. Civ. P. 56.03 (setting forth standard for summary judgment). This court must view the evidence "in the light most favorable to the party against whom judgment was granted." Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted). A party cannot rely on speculation or general assertions, however, to create a genuine issue of material fact. Nicollet Restoration, Inc. v. City of St. Paul, 533 N.W.2d 845, 848 (Minn. 1995).

Shoemaker asserts the district court erred in determining that he, as a shareholder-employee, was an at-will employee of the law firm without a contract for permanent employment. Shoemaker argues that he had a reasonable expectation of long-term employment. But, as the district court noted, an employee's belief alone is insufficient to find a permanent employment contract. See Ruud v. Great Plains Supply, Inc., 526 N.W.2d 369, 371-72 (Minn. 1995) (statements that employee would be taken care of do not constitute contract). Under Minnesota law, when the duration of employment is for an indefinite term, courts presume employment is at will. Pine River State Bank v. Mettille, 333 N.W.2d 622, 627 (Minn. 1983). But even with employment for an indefinite term, courts must ascertain the intent of the parties to determine if the employment relationship may be terminated at-will. Pedro v. Pedro, 463 N.W.2d 285, 289 (Minn. App. 1990), review denied (Minn. Jan. 24, 1991).

In determining the intent of the parties, the district court looked to language in the stock purchase agreement. The 1993 stock purchase agreement of the law firm that was effective when Shoemaker became a shareholder provided that one of the events upon which the stock purchase provisions are exercised is the "termination of employment of Shareholder with the Corporation for any reason." A subsequent draft of the stock purchase agreement signed by Shoemaker refers to the "voluntary or involuntary termination of a Shareholder as an employee of the Corporation for any reason." These references to termination for any reason do not indicate any limitations on at-will employment. Drafts of proposed employment agreements between Murnane and Shoemaker also support the district court's determination that Murnane did not intend a shareholder's employment to be anything other than at-will, as they contemplate involuntary termination of a shareholder by shareholder vote without further limitation. Nothing in the stock purchase agreements or drafts of employment agreements indicates any limitation on the firm's ability to terminate a shareholder at will.

Shoemaker points to various statements made by Murnane shareholders to associates that being a shareholder meant "their futures are secure," a "long-relationship," a "long-term relationship," "long-term lawyer," and "long-term future" as strong evidence that a shareholder's employment is considered secure and long term. But these statements are too speculative to create any genuine issue of material fact suggesting limitations on at-will employment. See Bob Useldinger & Sons v. Hangsleben, 505 N.W.2d 323, 328 (Minn. 1993) (concluding no fact issue precluding summary judgment where evidence presented by non-moving party more speculative than probative); Hunt v. IBM Mid America Employees Fed. Credit Union, 384 N.W.2d 853, 855 (Minn. 1986) (concluding party opposing summary judgment must point to specific facts that create issue for trial). Furthermore, these statements are analogous to statements that Minnesota courts have indicated do not create limitations on at-will employment. See Ruud, 526 N.W.2d at 371 ("Good employees are taken care of."); Degan v. Investors Diversified Servs., 260 Minn. 424, 428, 110 N.W.2d 863, 866 (1961) (employee told he was in a career position, had a great future with the company, and should consider his job a career situation); Aberman v. Malden Mills Indus., 414 N.W.2d 769, 771-72 (Minn. App. 1987) (employer stated "I will always take care of you," "we are offering you security," and "[you will be a] lifetime sales representative") (brackets in original).

To shore up his assertion of permanent employment, Shoemaker relies on two experts who opine that any associate who becomes an equity partner in a law firm has a reasonable expectation of permanent employment. One expert asserts that the "real deal was never accurately reflected in the written documents but existed in oral understandings, consistent conduct, policies and practices." Such an assertion is as vague and speculative as the statements avowing shareholders' long-term relationship and does not offer evidentiary support of any limitations on at-will employment. An expert's conclusory opinion does not create a fact issue precluding summary judgment. Potter v. Pohlad, 560 N.W.2d 389, 395 (Minn. App. 1997), review denied (Minn. June 11, 1997). Further, we note that the experts' opinions were not under oath and were the subject of a motion to exclude that had been postponed to trial. Accordingly, the district court did not err in granting summary judgment on the breach of employment contract claim.

Shoemaker also challenges summary judgment, claiming breach of common law and statutory fiduciary duty. At common law, shareholders in a closely held corporation owe one another a fiduciary duty. Evans v. Blesi, 345 N.W.2d 775, 779 (Minn. App. 1984), review denied (Minn. June 12, 1984). That duty requires shareholders to deal "openly, honestly and fairly with other shareholders." Id. Minnesota statute chapter 302A provides that a court may grant "any equitable relief it deems just and reasonable" in a shareholder's action against directors who have acted "fraudulently or illegally" or "in a manner unfairly prejudicial." Minn. Stat. § 302A.751, subd. 1(b)(2),(3) (1998). Despite Shoemaker's belief that shareholders were attempting to railroad him out of the law firm by refusing to share work, the record does not reveal any dishonest or fraudulent activities that would constitute a breach of fiduciary duty.

Shoemaker also challenges summary judgment on his misrepresentation claims. To be actionable, a misrepresentation must be a representation of a past or present fact. Hanks v. Hubbard Broadcasting, Inc., 493 N.W.2d 302, 308 (Minn. App. 1992), review denied (Minn. Feb. 12, 1993).

A representation as to future acts does not support an action for fraud merely because the represented act did not happen, unless the promisor did not intend to perform at the time the promise was made.

Cohen v. Cowles Media Co., 457 N.W.2d 199, 202 (Minn. 1990). Under several circumstances nondisclosure of material facts may constitute misrepresentation. L & H Airco, Inc. v. Rapistan Corp., 446 N.W.2d 372, 380 (Minn.1989). As the district court noted, Shoemaker has presented no evidence showing statements of future events were made without any intent to perform. Furthermore, the record does not reveal that Murnane and shareholders concealed information so as to support a claim of misrepresentation.

In sum, we see no genuine issues of material fact or errors in application of the law requiring this court to reverse summary judgment on Shoemaker's various claims.

2. Shoemaker contends that the district court erred by failing to address the mandatory valuation of his shares under Minnesota statute chapter 302A. Minn. Stat. § 302A.751, subd. 2 (1998), provides for a court-ordered buy-out remedy for an action under Minn. Stat. § 302A.751, subd. 1(b). In this case, however, the district court determined that there was no evidence that shareholders had acted fraudulently or illegally in violation of Minn. Stat § 302A.751, subd. 1(b). Accordingly, the district court did not abuse its discretion by declining to address the buy-out remedy of subdivision 2. The buy-out of Shoemaker's shares is governed by the terms of the stock purchase agreement in effect when he was shareholder.

3. Shoemaker argues the district erred in denying his motion to amend his complaint to add a claim for punitive damages. This court will not reverse the district court's decision to grant or deny a motion to add a claim for punitive damages absent an abuse of discretion. LeDoux v. Northwest Pub., Inc., 521 N.W.2d 59, 69 (Minn. App. 1994), review denied (Minn. Nov. 16, 1994). Here, Shoemaker moved to amend his complaint more than a year and a half after he filed his original complaint. Nothing in the record suggests the district court's denial of the motion was an abuse of discretion.

4. Shoemaker argues the district court erred by refusing to grant his motion for recusal. It is within the district court's discretion whether to honor a request for removal based on allegations of actual prejudice. Pedro, 489 N.W.2d at 804. The focus is whether an objective assessment requires disqualification not only when there is in fact impropriety, but also when there is an appearance of impropriety. Roatch v. Puera, 534 N.W.2d 560, 563 (Minn. App. 1995). In this case, the judge disclosed her connection with Davern at the pretrial hearing, indicating that she had not and would not take his opinions into consideration in reaching her decisions. Nothing in the record establishes that the judge exercised any bias or prejudice in reaching her decisions. Furthermore, prior to the adverse decision, the district court advised Shoemaker that he could request recusal, but he declined to do so.

5. Shoemaker argues the district court erred by not ordering sanctions against Murnane and shareholders for abuse of discovery. Throughout discovery Shoemaker filed several motions to compel production of documents. At one point the district court referred the issue of sanctions to the discovery referee, who denied sanctions. But the issue of sanctions was not before the district court at the hearing on the motion for summary judgment, and accordingly was not addressed by the court. Therefore, this court will not consider the issue. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (court will not consider matters not considered below). Shoemaker also argues that the district court should have drawn an unfavorable inference against Murnane and shareholders due to their apparent inability to produce open file reports. See Federated Mut. Ins. Co. v. Litchfield Precision Components, Inc., 456 N.W.2d 434, 436-37 (Minn. 1990) (failure to produce evidence permits unfavorable inference that evidence, if produced, would have been unfavorable). But, again, we will not address an issue that was not before the court below.

KLAPHAKE, Judge (dissenting)

I respectfully dissent. The function of the district court on a summary judgment motion is to determine whether material fact issues exist, not to weigh the evidence. D.L.H., Inc. v. Russ, 566 N.W.2d 60, 70 (Minn. 1997). From the content and tone of the court’s various orders and memoranda supporting its ultimate grant of summary judgment to the Murnane firm on all counts, it appears that it viewed the evidence in the light most favorable to Murnane.[1] Because reasonable persons could reach different conclusions from the facts presented, a material fact issue exists, and summary judgment was inappropriately granted. See id. Shoemaker produced sufficient evidence to preclude summary judgment on his claim that he was not an at-will employee and on his other tort-based claims.

Viewing the evidence in his favor, Shoemaker offered material facts demonstrating that once he became a partner/shareholder in the Murnane firm, he had a reasonable expectation of permanent employment unless he committed serious misconduct. According to Shoemaker’s two liability experts,[2] any associate who becomes an equity partner in a law firm has a reasonable expectation of permanency by virtue of purchasing a stake in the business. Shoemaker and his experts are not alone in this belief. Other Murnane partners/shareholders, past and present, expressed their understanding of their employment status as consistent with Shoemaker’s belief—that is, if they continued to perform, they would retain their positions and ownership in the business until retirement. Steven Kirsch, at the time Murnane’s president, chairman of the board, and executive committee member, referred to Shoemaker as a "very long-term employee." See Ruud v. Great Plains Supply, Inc., 526 N.W.2d 369, 371 (Minn. 1995) (nature of employment agreement may be inferred from words spoken or parties’ conduct, viewed objectively); Pedro v. Pedro, 463 N.W.2d 285, 289 (Minn. App. 1990) (even where employment for indefinite term, parties’ intent controls whether employment relationship is more than at-will), review denied (Minn. Jan. 24, 1991).

Further, at the summary judgment stage, the partnership and corporate documents, read favorably to Shoemaker, support his claim of permanent employment. The 1992 Partnership Agreement allowed for expulsion of a partner upon majority vote if the partner was "guilty of misconduct of such nature as to render it impracticable for the then partners to carry on the partnership business together." The obvious import of this language is to include a termination for cause requirement in the employment relationship. Cf. Hedglin v. City of Willmar, 582 N.W.2d 897, 901 (Minn. 1998) (at-will employee can be terminated for any reason). There is evidence that in making the change from partnership to corporate form, which was done solely for tax purposes, the partners intended to carry forward the essence of the partnership agreement. Thomas Conlin, a long-standing firm shareholder, stated that "the intent of moving from a partnership to a professional corporation was really to include all of the same ideas and provisions * * * in the partnership agreement into a workable * * * professional corporation." The 1993 Stock Purchase Agreement refers to shareholder termination "for any reason" as a trigger for repurchasing stock from a shareholder. This language pertaining to repurchasing stock does not control the employment relationship, however, and arguably does not alter the "for cause" requirement first expressed in the partnership agreement. The articles of incorporation and corporate bylaws do not address involuntary termination of a shareholder. The purchase agreement language, pertaining only to circumstances requiring a shareholder’s stock to be repurchased, should not control employment status or usurp other language that favors Shoemaker’s claim.

Shoemaker disputes the validity of the corporate documents that were proposed after the 1993 Stock Purchase Agreement. Although the district court relied on these later documents in granting summary judgment, as does the majority here, they were not signed by all shareholders and were therefore unenforceable under Minnesota law. See Minn. Stat. § 302A.457, subd. 2(a) (1996) (to be enforceable, shareholder control agreement must be signed by all corporation shareholders). Further, the fact that Shoemaker signed some of them did not affect his reasonable expectation of permanent employment because the firm did not follow the requirements of other key corporate documents, such as the shareholder voting rules mandated by the corporate articles and bylaws. Because the existence of a contract and its terms are in dispute, summary judgment was prematurely granted on this issue. See Eklund v. Vincent Brass & Aluminum Co., 351 N.W.2d 371, 376 (Minn. App. 1984) (position was permanent, so long as Eklund performed satisfactorily, until retirement), review denied (Minn. Nov. 1, 1984); Roglien v. Carter, 443 N.W.2d 217, 219 (Minn. App. 1989) (Roglien "would not have to worry about his job so long as he did good work"). The majority relies on cases where the terms of employment were more general, vague, and indefinite than the terms in this case.

Shoemaker also set forth sufficient facts to avoid summary judgment on his other claims, particularly his claims of fraud, misrepresentation, constructive discharge, and breach of fiduciary duty. Shoemaker has provided evidence that the Murnane firm failed to disclose the following material information: (1) that the firm had serious financial problems in 1993, as evidenced by its need to borrow money to meet its operating expenses, and that it was likely to lose its principal client, Midway Bank; (2) that the firm falsely represented that the July 1993 departure of two partners, several associates, and staff members, did not affect the firm’s net income; (3) that the firm had altered its prior work distribution and retraining policies, which became unfavorable to younger partners who lacked a client base; and (4) that a female shareholder was about to resign from the firm after making allegations of sexual harassment and retaliation against a present powerful shareholder and that she had informed the firm of the conduct in 1992 and 1993.

After he became a partner, Shoemaker claimed that certain shareholders in the firm engaged in a pattern of isolation, deception, and abuse to force him out of the firm. Shoemaker’s liability experts, one in corporate law and one in employment law, offered opinions that support his claims. Summary judgment should not have been granted in this case. See L & H Airco, Inc. v. Rapistan Corp., 446 N.W.2d 372, 380 (Minn. 1989) (misrepresentation by nondisclosure exists where (1) the parties are in a confidential or fiduciary relationship, (2) disclosure is necessary to prevent misleading the other, or (3) the party "has special knowledge of material facts to which the other party does not have access"); Pribil v. Archdiocese of St. Paul & Mpls., 533 N.W.2d 410, 412 (Minn. App. 1995) (constructive discharge occurs where employer with intent to force employee to quit creates working conditions which reasonable person would find intolerable); Evans v. Blesi, 345 N.W.2d 775, 779 (Minn. App. 1984) (shareholder duty to deal "openly, honestly, and fairly with other shareholders" includes requirement of acting with "highest standards of integrity and good faith" with each other), review denied (Minn. June 12, 1984).

This case involves an improper rush to judgment after a premature determination on the validity of evidence offered by Shoemaker on his various claims. The true question to be decided by summary judgment is merely whether there are material facts in dispute. Because Shoemaker has presented material facts on his contract and tort claims, I would reverse and remand for trial.

[2] The majority attempts to exclude consideration of the reports of Shoemaker's experts, relying on Potter v. Pohlad, 560 N.W.2d 389, 395 (Minn. App. 1997), review denied (Minn. June 11, 1997). In Potter, the expert made conclusory statements that corporate officers were "grossly negligent and reckless." Id. at 394-95. Noting that gross negligence cases do not "contemplate the submission of hind-sight evidence," the court concluded that the expert's opinion did not create a fact issue for trial. Id. at 395. The limited holding of Potter should not apply in this case because here the experts' opinions are not "conclusory," illuminate industry standards that relate to law firms and their internal workings, and assist in raising a fact issue that precludes summary judgment. See Sorenson v. St. Paul Ramsey Med. Ctr., 457 N.W.2d 188, 192 (Minn. 1990) ("purpose of expert testimony is to interpret the facts and connect the facts to conduct which constitutes" a cause of action); Bryson v. Pillsbury Co., 573 N.W.2d 718, 721 (Minn. App. 1998) (testimony of employee's expert raised material fact issue precluding summary judgment on whether employee's chromosome damage was present injury).