27-CV-16-15531

Filed in Fourth Judicial District Court

12/6/2017 4:28 PM

Hennepin County, MN

STATE OF MINNESOTA

DISTRICT COURT

COUNTY OF HENNEPIN

FOURTH JUDICIAL DISTRICT

Kevin McGregor, individually and derivatively on behalf of a Partnership formed by Kevin McGregor and Jessica Medlin, and Linden LLC, a Minnesota limited liability company. Plaintiff and Counter-Defendant,

Court File No. 27-CV-16-15531

Judge Maiy R. Vasaly

ORDER DENYING DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT

V.

Jessica Medlin, Ryan Gilbertson, Jacob Schaffer, 43UP, LLC, John Doe 1,2,3, and ABC Entities, Defendants, and

Jessica Medlin, individually and derivatively on behalf of the partnership formed by Kevin McGregor and Jessica Medlin and Linden LLC, a Minnesota limited liability company, Counter-Plaintiff and Third Party-Plaintiff, V.

Mark M. Dwyer,

Third-Party Defendant.

This matter came before the Court on October 3,2017, pursuant to the joint motion of

Defendants 43UP, LLC, Ryan Gilbertson and Jacob Schaffer for summaryjudgment on all of Plaintiffs claims against them, and Jessica Medlin's separate motion for summary judgment on all of Plaintiff s claims against her.

Troy J. Hutchinson, Esq., and Rock Hutchinson PLLP, appeared on behalf of Defendants 43UP, LLC, Ryan Gilbertson and Jacob Schaffer in support of their joint motion. K. John Breyer, Esq., and Lindquist & Vennum LLP, appeared on behalf of Defendant and Third Party-Plaintiff, Jessica Medlin, in support of her motion.

27-CV-16-15531

Judicial District Court 12/6/2017 4:28 PIVI

Hennepin County, MN

Mary L. Knobloch, Esq., Daniel R. Hall, Esq., and Anthony Ostlund Baer & Louwagie P.A., appeared on behalf of Plaintiff in opposition to the motions. Mark M. Dwyer did not appear.

Based upondie arguments of counsel and all of the records, files andproceedings herein, the Court makes the following; ORDER:

1.

The Defendants' Motions for Summary Judgment are DENIED.

2.

The attached memorandum of law is incorporated herein. BY THE COURT:

Dated: December 6,2017

^ ^

^

^ Vasaly,Mary 2017.12.0611:50:30

-06'00'

Mary R. Vasaly Judge of District Court

27-CV-16-15531

Judicial District Court 12/6/2017 4:28 PIVI

Hennepin County, MN

MEMORANDUM OF LAW

I. FACTUAL BACKGROUND^

On April 18,2008, WCW, Inc. ("WCW"), a company owned by Defendant, Mark Dwyer, entered into an agreement with Linden Landholdings, LLC (the "Swensons"), to

purchase property located at 4264 UptonAvenue South in the Linden Hills area of Minneapolis that had previouslybeen a FamousDave's restaurant (the "Famous Dave's" parcel) for $2,000,000.00. (Olson Decl. Ex. 72.) In June 2008, WCW entered into a purchase agreement

with anther seller for adjoining property at 4250 Upton Avenue South (the "Edward Jones"

parcel) for $414,000.00. (M,Ex. 69.) Dwyer plarmed to developa project on the two sites. (Id. at 42:9-24, 50:10-51:7.)

In April 2010, Dwyer and the Swensons entered into a First Amendment to the Famous

Dave's parcel purchaseagreement that changedthe name of the buyer to Linden Hills

Redevelopment, LLC, and extended the time period to close onthe purchase agreement.^ (M, Ex. 74.) Subsequently,Dwyer worked to obtain approval from the City of Minneapolis (the "City") to develop the Famous Dave's and Edward Jones parcels. Eventually, on October 1,

2012, theCity approved Dwyer's plans for a project called Linden Crossing ("the Project").^ (Hall Decl. Ex. 5.)

In March 2014, Dwyer approached Plaintiff about investing in the Project. Plaintiff

agreed. Shortly afterward. Plaintiff asked a friend, Paul Medlin, whether he and his wife, Jessica Medlin, would be interested in investing in the Project. On the morning of March 7,2014, Plaintiff sent the Medlins an email explaining the Project. (Olson Decl. Ex. 3.) In the email.

Plaintiff told the Medlins: (i) the Project had already attracted $4 million in condominium presales, one for $1 million in cash to offset building costs; (ii) total revenue from the Project would

be approximately $18 million, with conunercial space renting for $26 to $36 per square foot; (iii) a conservative estimate ofthe total shell build cost of the Project would be $7.5 million; and (iv)

' All facts are eitherundisputed or the Courthas adopted Plaintiffs version of facts to the extent imderlying evidence exists.

^ Hereinafter, the Court refers to the "buyer" as the "Linden Hills Group," which includes Dwyer, Plaintiff, Medlin, and/or the Partnership and Linden.

^Later, the City approved two variances and a conditional usepermit that allowed expansion of the Project to include, among other things, the addition of a fourth floor with additional residential units. {See Hall Decl. Ex. 5 at KM004778; Olson Decl. Ex. B at 63:9-16.)

27-CV-16-15531

p.|g^

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

the profit on the Project would be approximately $3 to $6 million, plus additional incomefrom the leased commercial space. (Id.) Plaintiff sent the Medlins another email on March 16,2014, informing them that he had negotiated a reduction of the price of the Famous Dave's parcel by $200,000.00, increasing the anticipated profits of the Project to at least $3.2 million. (Id, Ex. o.)

Without notifying Plaintiff, Medlin forwarded Plaintiffs March 7,2014, email to her exhusband Ryan Gilbertson. (Olson Decl. Ex. 3; Hall Decl. Ex. 2 at 44:17-46:10.) After reviewing the Project, Gilbertson noted that it was "an interesting project that has a high probability of working out." (Id. Ex. 4.) However, he also told her he would want to be "the controlling investor and the terms would have to be dictated a little differently." {Id.) Medlin never told

Plaintiff and Dwyer that Gilbertson would be interested in the Project only if he could be the controlling investor. (Olson Decl. Ex. D (McGregor Dep.) at 251:12-14,252:23-253:3; Ex. B (Dwyer Dep.) at 81:18-23.)

Later, the Medlins told Plaintiffthat they planned to send Gilbertson information on the

Project and invite him to invest. (Hall Decl. Ex. 2 at 42:12-16; Ex. 7.) When they contacted Gilbertson again, he asked: "[h]ow much of this deal would you want to do if I put a group together?" (Id.) Again, Medlin did not tell Plaintiff that Gilbertson was interested in pursuing

the project with his own group. Neither Gilbertson nor Paul Medlin pursued an investment at that time.

Medlin, however, decided to invest and she formed a partnership with Plaintiff (the

"Partnership"). (Olson Decl. Ex. H (Medlin Dep.) at 22:9-24.) At the time, Medlin says she understood that her 50% contribution would be approximately $500,000.00. (Id. at 23:12-14.) However, in an email to Gilbertson, she indicated that she expected to invest $1 million. (Id. Ex. 10.) hi any event, she told Plaintiff that "she had the personal finances available for contributing

equity and securing financing for the Project." (Compl. T| 23; Medlin's Answer f 19.) Plaintiff and Medlin agreed they would be equal partners with "[e]qual equity in, equal profit paid out."

(Id. at 99:19-21; Compl. ^21; Medlin's Answer 117.) Unknown to Plaintiff, however, Medlin's financial resources were subject to a number of substantial loans and liens. During her discussions with Gilbertson, he had warned her that she would not be "a good guarantor."

(Olson Decl. Ex. N.) He admonished her: "You don't have any money to do that project with" and reminded her she owed him $1,200,000. (Olson Decl. Ex. 8.) 4

27-CV-16-15531

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

On June 17,2014, Plaintiff and Medlin formed Linden LLC ("Linden"). (Hall Decl. Ex.

9 at Alerus000183; Medlin's Answer ^ 21.) On June 25,2014, Dwyer, Plaintiff and Medlin

agreed in writing that they would invest "in such amount as necessaryto meet the requirement of the senior bank lender and sufficient, when combined with other sources of financing, to

complete the project based upon the finalized budget." (Hall Decl. Ex. 8 at p. 2.) The agreement did not limit the amount that Plaintiff and Medlin were expected to invest. In return, they were

to receive an 85% equity interest in the Project. (Id.) The Project's net profit distributions were

to be split: 85% to Plaintiffand Medlin, and 15% to Dwyer, up to $4,500,000.00. (Id.; Olson Decl. Ex. H (Medlin Dep.) at 24:8-17.) For profits in excess of $4,500,000.00, the parties agreed that Plaintiff and Medlin would receive 65% and Dwyer would receive 35%. (Hall Decl. Ex. 8 at p. 2.)

Next, Plaintiff and Medlin opened a checking account for Linden at Alerus Financial NA

("Alerus"). (Hall Decl. Ex. 9 at AlerusOOO 178-79; Medlin's Answer ^ 21.) They deposited hundreds of thousands of dollars into the account, which was used to pay Linden's expenses.

(Id. Exs. 10-11;see also Medlin Countercl.

22, 23.) Plaintiff personally invested$200,000.00

in the Project. (Olson Decl. Ex. D (McGregor Dep.) at 206:2-6.)

In the meantime, Dwyer sought other professionals with development experience to consult on the Project. He put together a management team that included Michael Trautner and Jon Gumbrill. (Olson Decl. Ex. 168.) Trautner, an investment banker at Dougherty Co, had

more than thirty years' experience in finance including financing real estate developments. (Trautner Aff f 2.) Gumbrill, a developer's representative and construction manager, had worked in the construction industry for more than thirty years and performed services on projects worth a combined total of more than $1 billion. (Hall Decl. Ex. 14; Olson Decl. Ex. B (Dwyer

Dep.) at 90:20-91:17.) Plaintiff, Medlin and Dwyer also brought in developer Dan Hunt to advise them. (Id. at 20:6-19.) Hunt had extensive experience in developing projects, including large apartment complexes. (See Hall Decl. Ex. 15.) In order to meet their obligation to finance the Project, Plaintiff and Medlin sought loans through Frandsen Bank & Trust ("Frandsen") and Alerus. Alerus noted that the group had assembled a strong management team. (Olson Decl. Ex. 168.) But to obtain the loans, both Plaintiff and Medlin were required to provide personal financial statements to Frandsen and Alerus. (Hall Decl. Exs. 16-17.) Medlin completed and signed her financial statement and

27-CV-16-15531

p-j^^

Judicial District Court 12/6/2017 4:28 Pl\/1

Hennepin County, MN

certified that the information it contained was true, correct and complete as of September 25,

2014. (/(rf., Ex. 17.) In her personal financial statement, Medlin stated that she had $2,650,000.00 in cash and owned a cabin in Wisconsin worth $1 million that was not

encumbered by any loan. She also stated that she owned another xmencumbered investment

property in Deephaven, Minnesota, worth $799,900.00. (Id.) Medlin includeda numberof additional properties, stocks, and her home among her assets. (Id.) However, Medlin's financial statement contained a number of significant errors and

omissions. For example, although Medlin reported that she had $2,650,000.00 in "cash," she later admitted that she did not have that cash. In addition, she did not disclose that she and her

husband owed the Internal Revenue Service and the Minnesota Department of Revenue himdreds

of thousands of dollars for the 2012 and 2013 tax years.'' (See id, Exs. 17,20-21.) Shealsodid not disclose her debts to Gilbertson, which at one point totaled at least $2 million. (Id, Ex. 16.)

At the time she formed the Partnership with Plaintiff, she still owed him at least $1.2 million.

(Id, Ex. 8.) In addition, her $1,000,000.00 cabin in Wisconsin was the subjectof a $900,000.00 mortgage to Gilbertson, originated in April 2012. (Id, Ex. 19.) The loans on the cabin property existed throughout late 2014 and early 2015. (Olson Decl. Ex. H (Medlin Dep.) at 95:14-96:13.) Relying on the accuracy of the financial statements provided by Medlin and Plaintiff, Frandsen prepared a credit presentation in October 2014 regarding the loans that it would be willing to provide to finance construction of the Project. (Olson Decl. Ex. 51.) Frandsen proposed a construction loan of $11.3 million based, in part, on its internal assessment that Medlin had an adjusted net worth of $7,196,697.00, with more than $12 million in total assets

(id. at JM002799), and Plaintiffhad an adjustednet worth of $732,302.00, with more than $4 million in total assets (id. at JM002801). Frandsen projected that the Project as designed would

require Plaintiff and Medlin to invest an additional $2.5 million at closing. (Id. at JM002793.) On December 1,2014, Dwyer obtained another extension to close on the Famous Dave's

parcel. (See Olson Decl. Ex. 84 at MD000476.) The parties agreed that the sale would close no later than December 15,2014, and that no more extensions would be given. (Id. at MD000475-

76.) Therefore, it became imperative that Plaintiff and Medlin obtain sufficient financing to close on the real estate before that date.

In early 2015, the IRS imposed a lien on the Medlins' Wisconsin real estate for the unpaid federal tax due at that time of $389,919.26. (Hall Decl. Ex. 22.)

27-CV-16-15531

pj|g^

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

In the process of completing underwriting for Alerus to issue a loanto Medlin and Plaintifffor the purchase of the parcel, Sarah Kostial asked Medlin if she could use some of the $2,650,000.00 in cash listed on Medlin's financial statement as collateral for a loan. (Hall Decl.

Ex. 1 at 41:5-42:14; 44:5-24.) Medlin replied "What cash?" {Id.) Medlin said she did not know how she determined the cash figure she used on the financial statement, and in a December8, 2014, email to Ms. Kostial, she speculated that she could have includedher shares in Dakota Plains Holdings, Inc. or cash that she had received for the sale of property she owned in Deephaven. {See Hall Decl. Ex. 18.) After this conversation, Medlin once again asked Gilbertson to invest. (Olson Decl. Ex.

22.) When she contacted him again on December 9,2014, she told him that she felt "very proud of the fact that we have turned [the Project] around and everything including the numbers are

lookingvery profitable." {Id., Ex. N.) Gilbertson responded that he had told her that she would run into trouble with the Project because "[p]eople with limited net worths don't just get to build $22 million condo projects that make $6 mm in profits by only putting up tiny amounts of

capital." {Id.) He then reiterated that "if [he] gets involved [he] is taking over."^ {Id, Ex. 22.) Medlin pleaded with Gilbertson to at least provide her a short-term guaranty (30 to 60 days) so she could obtain the loan to close the purchase of the Famous Dave's parcel, but warned him that "you cannot tell the Banks your involvement is only short term." {Id, Ex. 22.) In December, Medlin asked Plaintiff, Trautner and Dwyer to meet with Gilbertson to

discuss the possibility of his investing. {Id., Ex. B (Dwyer Dep.) at 108:18-23;Ex. L (Schaffer Dep.) at 13:13-25.) However, because Gilbertson was out of town, Gilbertson asked Jacob Schaffer to meet with the group, telling Schaffer that Medlin was involved in a "deal" and that she and "the ownership group" wanted to meet to talk about financing." (Ex. L (Schaffer Dep.) at 13:6-7,13-15.)

Ultimately Gilbertson declined to help "[Medlin] and [her] partners" finance the Project. {Id., Ex. 21.) Medlin and Plaintiff were unable to obtain sufficient cash to close the purchase of the Famous Dave's parcel on December 15. Notwithstanding the failure to close, no cancellation

ofthe purchase agreement was immediately issued.

' At this point, Medlin had not told Plaintiff that Gilbertson had previously told her that if he got involved, "I would want to be the controlling investor." {Id. Ex. 4.)

27-CV-16-15531

pj,g^

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

In the meantime, however, Gilbertson had continued to advise Medlin about her

involvement in the Project. On December9, he told her "You need to stop thinking you know what is best... and listen to EXACTLY what I tell you to do regarding ANYTHING financial."

(Jd. Ex. N.) He continued, "I can look at this project and I can talk you through ideas." (Jd.) The next day, he instructed her to "involve [Gassen] and I will guarantee the whole thing and

you can keep a piece." (Id., Ex. 21.) At the time, on the advice of Gilbertson, Medlinhad already refusedto use her assets as collateral for a loan to get the cash needed to finance the Project. (Olson Decl., Ex. N (telling Gilbertson that they wanted to "hook my stuff and you told me not to do that.))

At Gilbertson's direction, Medlin arranged a meeting between Dwyer, and Gilbertson and Schaffer. On December 19,2014, she told Dwyer that the meeting would include Schaffer but

not Plaintiff. (Hall Decl. Ex. 23 at 43UP000197-198.) Dwyer met with both Schaffer and Gilbertson. (Olson Decl. Ex. B (Dwyer Dep.) at 212:9-12; Ex. L (Schaffer Dep.) at 14:2-5.)

Dwyer informed the group that the Project was a "disaster." (Id, Ex. L (Schaffer Dep.), 14:6-19.) Gilbertson told Dwyer "he'd pay [him] a hundred grand to just bring the project to him." {Id. Ex. B (Dwyer Dep.) at 191:20-22.) Dwyer understood that Gilbertson was willing to provide $100,000.00 to hold the land, and then they would create a new company to move forward with a

new development, "get[ting] rid of these other investors and subs." {Id, Ex. B (Dwyer Dep.) at 211:23-212:8; 213:23-214:4; Ex. L (Schaffer Dep.) at 14:6-19.) Gilbertson told Dwyer that he

did not want Plaintiff involved. {Id, Ex. B (Dwyer Dep.) at 214:9-19.) Ultimately, they reached a "handshake deal." All agreed that Dwyer would not be identified on any documentation "because of his liability with whatever, we didn't know, we just... it was too messed up." {Id, Ex. L (Schaffer Dep.) at 14:6-15:24.)

The evidence is inconsistent regarding what happened after the meeting. Schaffer says

that a few days after the meeting, the group told Dwyer to offer the Swensons $1,600,000 for the parcel, the Swensons counteroffered at $1,680,000, and the counteroffer was accepted. {Id, Ex. L (Schaffer Dep.) at 14:21-15:24.) He says that Dwyer worked with the Swensons to send out the notice of cancellation of the previous purchase agreement. {Id.) Contrary to Schaffer's testimony, however, Swenson remembers that it was Schaffer who contacted him about buying the Famous Dave's parcel. (Swenson Aff. at ^ 24.) After speaking with Schaffer, Swenson served a notice of cancellation of the purchase agreement on Dwyer. {Id. Ex. 88.) After the 8

27-CV-16-15531

Judicial District Court 12/6/2017 4:28 PIVI

Hennepin County, MN

notice of cancellation was served, the Linden Hills Group had until January 28,2015, to cure the default and close on the Famous Dave's parcel.

According to Dwyer, a day or two after his meeting with Gilbertson and Schaffer, he changed his mind about going forward with the new group and decided to continue to work with Plaintiff and Medlin. (Olson Decl. Ex. B (Dwyer Dep.) at 219:17-220:25.) He let Trautner

know that Plaintiff was working toward getting the pieces in place to keep the Project on track; he indicated that the Linden Hills Group would be able to close on the Famous Dave's parcel by

January 2 or 5 and that Frandsen would have an appraisal ready by mid-January. (Olson Decl. Ex. 52.) Unfortunately, the next day, he learned that the cost of construction might be higher than anticipated. {Id.) On December 29,2014, Dwyer notified Plaintiff and Trautner that a

construction bidfrom Engelsma had come in several million dollars higher than budgeted.^ Dwyer suggested that they still could break ground within four months if they redesigned the Project and used a different builder. He warned, however that "Gassen and Co are doing all they can to steal this deal." {Id.)

On January 2,2015, Dwyer, Plaintiff, Hunt and Medlin met to discuss securing the needed financing to cure the default. (Olson Decl. Ex. D (McGregor Dep.) at 164:25-165:13, 251:15-252:6; Olson Decl. Ex. B (Dwyer Dep.) at 223:8-226:1; Hall Decl. Exs. 28-29.) On

January 8,2015, they asked Frandsen to provide a $1,000,000, 6-month term loan, secured by a mortgage on the land and Medlin's 500,000 shares in Dakota Plains Holding. (Olson Decl. Ex.

61.) A preliminary appraisal valued the land at $2,670,000. {Id.) In addition to this loan. Plaintiff and Medlin would have to provide $500,000 each to close the purchase of the parcel. Frandsen was satisfied that Plaintiff had sufficient equity to meet that requirement. (Olson Decl., Ex. K (Gunderson Dep.) 89:9-22.) This belief is supported by Plaintiffs expert report. (Hall Decl., Ex. 36.)

In addition to working with Frandsen to obtain the $1,000,000 loan. Plaintiff also was working with Medlin to make sure she could provide her half of the remaining $1,000,000 required. Not knowing that Medlin's cabin property in Wisconsin was subject to a mortgage. Plaintiff suggested that Medlin obtain a line of credit using the property as security. (Hall Decl.

^Despite the Engelsma bid, the evidence would support a finding that the Project could still have been built as designed and eamed a profit. {See Hall Decl. Ex. 6.) The typical costs for similar properties in the Twin Cities were below the costs used for the Engelsma bid. {Id.)

Filed in Fourthi Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

Ex. 1 at 66:1-17.) Plaintiff obtained an expedited appraisal of the property from a Wisconsin

bank in preparation for obtaining the needed financing. {Id., Ex. 24.) He later forwarded the appraisal to Ms. Kostial at Alerus for the purpose of issuing the line of credit. (Jd.) In late January, while Plaintiff worked to obtain the appraisal, Ms. Kostial requested that Medlin provide her with an updated personal financial statement and other information that was necessary to obtain the line of credit. (Jd., Exs. 25-26.) Medlin did not provide the information until January 29, 2015, the day after the end of the cure period for the purchase of the Famous

Dave's parcel.' Meanwhile, Medlin kept Gilbertson and Schaffer informed about Plaintiffs efforts to

cure the defauk on the purchase agreement for the Famous Dave's parcel. On January 22,2015, Medlin texted Schaffer:

Just got this from Dwyer along with 3 missed calls while I am at Holden's soccer...Kev and Jess, Frandsen saying they may back out of funding this mtg unless you provide the required doc from Jess and also the time for closing on Tuesday. Eric says he needs to know now... (Hall Decl. Ex. 30 at 43UP000408.) Four days later, on January 26, 2015, Medlin again updated

SchafFeron Plaintiff and Dwyer's efforts to close on the Famous Dave's parcel by forwarding him a text from Dwyer:

Hey Jess! For $100k toward purchase nonrefundable. I just need green light from you and Kev. Deal must be signed tmrw. {Id.) Medlin warned Shaffer when she sent him the text: "be careful what u say and how u say it. I can't get this Imked back to me." {Id.) At around this time, the seller's attorney mentioned to Dwyer that somebody was working against him from his own team. (Olson Decl., Ex. B (Dwyer Dep.) 171:3-6.) He said that the competing group "knew what we were up to before we did." He observed that it was like they were being told we weren't going to close. {Id, 175:14-22.)

With the knowledge that Plaintiff and Medlin would probably not close, Gilbertson, Schaffer and Gassen prepared to acquire the Famous Dave's parcel as soon as the cancellation

period expired on January 28,2015. As early as January 8,2015, Sunrise Banks had prepared a

financing proposal that referenced a to-be-determined real estate holding company. (Hall Decl. Ex. 33.) On February 3, 2015, SchafFer executed a purchase agreement with the Swensons for

' In the meantime, Medlin continued to interact with Gilbertson. For example, she asked him to review the Linden LLC organizational documents before she signed them. (Hall Decl. Ex. 32) 10

27-CV-16-15531

pj|g^

Judicial District Court 12/6/2017 4:28 PIVI

Hennepin County, MN

the Famous Dave's parcel. (Schaffer Aff. K13; Swenson Aff. Ex. J.) On February 5, 2015,

43UP, LLC ("43UP"), was organized. One week after the purchase agreement was signed, on

February 10,2015,43UP closed on its purchase of the Famous Dave's parcel for $1,680,000.00. (Gilberston Aff., f 17.)

After 43UP closed on the Famous Dave's parcel, both Plaintiff and Medlin were invited

to invest in the new project. (Olson Decl. Ex. D (McGregor Dep.) 225:11-226:4.) Plaintiff declined. But Medlin invested $200,000, which she later offered to Gilbertson as payment of a

portion of her debt to him. (Olson Decl. Ex. 16 (referring to the "200KI have in the Linden

Hills project.") Gilbertson replied that "[a]s for Linden Hills,the project is YEARS awayfrom a profit which is when you can get your money." (Id.)

43UP proceededto develop the property,which it named Linden43. (GassenAff. f 17.) The project did not use the Edward Jones parcel. (Olson Decl. Ex. A (Gassen Dep.), at 60:1019.) As a result, 43UP had to go through the development approval process again. (Id. at 92:22-

23.) During the process, a city councilmember asked Gassen to restore the pocket park on the

premises, which was Dwyer's responsibility under the permits he had been issued. (GassenAff 120.) He agreed, and took over the restoration of the pocket park in exchange for Dwyer granting him permission to use several environmental reports, which had been prepared in 2009 and 2010 for the property. (Id.; Ex. B (Dwyer Dep.) at 131:6-15.) 43UP lost money on the

exchange because restoring the pocket park cost more than $100,000, while the environmental

reports could have been generated for approximately $10,000. (GassenAff. If 20.) 43UP used a number of vendors on the new project who had been involved with the

previous Project. Gassen explained that they did so because the vendors had not been paid and at least one had a lien on the property. Gassen thought it would be fair to allow them to bid on the work for the new project. (Olson Decl. Ex. A (Gassen Dep.) at 107:6-108:16.) However, there

was at least one previous vendor they could not use because the work was too different. (Id. at 109:9-12.)

Plaintiff later commenced this lawsuit individually, and on behalf of the Partnership and Linden. The defendants include Medlin, Gilbertson, SchafFer, 431JP, and "Jane Doe" defendants

and entities. He asserted individual and derivative claims against all defendants for usurpation of

corporate opportunity (Counts One, Two and Three), individual and derivative claims against Medlin for breach of fiduciary duty (Counts Four, Five and Six), individual claims against 11

27-CV-16-15531

^1^^,

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

Medlin for fraud, negligentmisrepresentation and breach of contract (Counts Seven, Eight and Nine), an individual claim against Schaffer, Gilbertson and 43UP, for tortious interferencewith

contact (Coimt Ten), individual and derivative claims against Schaffer, Gilbertson and 43UP for

intentional interference with prospective economic advantage (CountEleven), individual and derivative claims against Schaffer, Gilbertson and 43UP for aiding and abetting (Count Twelve), and individual and derivative claims against all defendants for civil conspiracy, and unjust enrichment (Counts Thirteen and Fourteen).

Medlin countersued Plaintiff individually, and on behalf of the Partnership and Linden,

for breach of fiduciary duty. She also countersued individually for breach of contract, fraud, and

negligent misrepresentation. She served a Third Party Complaint against Dwyer and Trautner in which she asserted claims for fraud and negligent misrepresentation against them and demanded indemnity and contribution for any liability established against her by Plaintiff. The claims against Trautner were later dismissed without prejudice. Medlin has now moved for summary judgment on Plaintiffs claims against her. Schaffer, Gilbertson and 43UP (the "43UP Defendants") have also moved for summary

judgment on all of Plaintiffs claims. II. LEGAL ANALYSIS

A.

The Summary Judgment Standard

Summary judgment is appropriate when the record "show[s] that there is no genuine issue as to any material fact and that either party is entitled to a judgment as a matter of law." Minn. R. Civ. P. 56.03. Under Minnesota Law, "[s]ummary judgment is appropriate when the evidence, viewed in the light most favorable to the nonmoving party, establishes that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law."

Citizens State Bank Norwood YoungAm. v. Brown, 849 N.W.2d 55, 61 (Minn. 2014) (citation omitted). "Summary judgment is inappropriate where reasonable persons might draw different conclusions from the evidence presented." Illinois Farmers Ins. Co. v. Tapemark Co., 273

N.W.2d 630, 634 (Minn. 1978). There is a genuine issue of material fact when the nonmoving

party presents evidence that is "sufficiently probative with respect to an essential element of the nonmoving party's case to permit reasonable persons to draw different conclusions." Mclntosh Cty. Bankv. Dorsey & Whitney, LLP, 745 N.W.2d 538, 545 (Minn. 2008).

12

Filed in Fourth Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

However, a genuine issue of material fact cannot be created by speculation. Bob

Useldinger & Sons, Inc. v. Hangsleben, 505 N.W.2d 323, 328 (Minn. 1993). A moving party is entitled to summary judgment when "there are no facts in the record giving rise to a genuine

issue for trial as to the existence of an essential element of the normioving party's case." Nicollet Restoration, Inc. v. City ofSt. Paul, 533 N.W.2d 845, 847-48 (Minn. 1995). All doubts and

factual inferences made must be resolved in the favor of the nonmoving party. City ofShakopee V. Kopp & Assocs., Inc., 159 N.W.2d 901, 903 (Minn. 1968). B.

Medlin is Not Entitled to Summary Judgment on Plaintiffs Claims.

Plaintiff has asserted individual and derivative claims against Medlin for usurpation of

corporate opportunity (Counts One, Two and Three), individual and derivative claims against Medlin for breach of fiduciary duty (Counts Four, Five and Six), individual claims against Medlin for fi-aud, negligent misrepresentation and breach of contract (Counts Seven, Eight and Nine), and individual and derivative claims against her for civil conspiracy, and unjust enrichment (Counts Thirteen and Fourteen). As explained below, Medlin's motion for summary

judgment on these claims must be denied. i. Breach ofFiduciary Duty

Plaintiffs claim for breach of fiduciary duty rests on his allegation that Medlin breached the fiduciary duties she owed to him, the Partnership and Linden, by failing to disclose material information to him and by working with 43UP, Gilbertson and Schaffer to facilitate their interference with the Project. To succeed on a breach of fiduciary duty claim. Plaintiff must establish the existence of a fiduciary duty, its breach, causation and damages. See State Farm

Fire & Cas. v. Aquila Inc., 718 N.W.2d 879, 887 (Minn. 2006); Padco, Inc. v. Kinney & Lange, 444 N.W.2d 889, 891 (Minn. Ct. App. 1989).

There is no dispute that Medlin owed fiduciary duties to Plaintiff, the Partnership and Linden. These duties include a duty of loyalty, a duty of care, the duty of utmost good faith, the obligation to disclose material facts, and the duty to act in an honest, fair and reasonable manner

in the operation of the business. See Minn. Stat. § 323A.0404; Minn. Stat. § 322B.833, subd. 4; Stein V. O'Brien, 565 N.W.2d 472,474 (Minn. Ct. App. 1997) ("The relationship ofpartners is

fiduciary and partners are held to high standards of integrity in their dealings with each other.") The duty imposed upon fiduciaries in their dealings with their partners is high. Justice Cardozo has famously described that duty as far stricter than the morals of the market place; "Not honesty 13

27-CV-16-15531

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

alone, but the punctilio of an honor the most sensitive, is then the standardof behavior." Meinhardv. Salmon, 249 N.Y. 458, 463-64, 164 N.E. 545, 546 (1928).

Medlin argues that she is entitled to summaryjudgment on Plaintiffs breach of fiduciary duty claim because the evidence does not establish a breach. The Court disagrees. Plaintiff has provided sufficient facts to allow a jury to conclude that Medlin breached her fiduciary duties, including:

•

Failing, at the time the parties formed the Partnership, to disclose that her existing liabilities (and unwillingness to encumber assets) would make it unlikely that she would be able to contribute sufficient financial backing for the Project;

•

Failing to disclose to Plaintiff that the personal financial statement she provided to the banks contained errors and omitted material facts regarding her finances;

•

Failing to disclose to Plaintiff that Gilbertson was interested in pursuing the Project, but only if he was the controlling investor, and that he was interested in "taking over" the Project, and then continuing to provide information to Gilbertson (and Schaffer) and to take his direction regarding the Project;

•

Facilitating and participating in efforts of the 43UP Defendants to acquire the Famous Dave's parcel and otherwise pursue their own development ofthat site, including arranging a secret meeting that resulted in the issuance of the notice of cancellation of the purchase agreement, further decreasing the time available to save the Project, and almost resulting in the defection of Dwyer, a key partner in the Project;

•

Providing information about Plaintiffs efforts to close the purchase of the Famous Dave's parcel to the 43UP Defendants at a time when she had an ongoing duty to Plaintiff, the Partnership and Linden to pursue the Project on their behalf;

•

Failing in December and January to disclose that she would be unable or unwilling to use her Wisconsin cabin, stock and other assets to secure financing to acquire the Famous Dave's parcel; and

•

Participating in the development of a new project using the Famous Dave's parcel, while efforts to save the existing Project were ongoing.

These actions viewed in a light most favorable to Plaintiff would support a jury finding that Medlin acted wrongfully and breached her fiduciary duties to Plaintiff, the Partnership and Linden. Cf. Sanitaty Farm Dairies v. Wolf, 261 Minn. 166,175, 112 N.W.2d 42,48 (1961) (an employee breaches his duty of loyalty to his employer if he takes steps to feather his own nest at the expense of his employer while still employed). In Wolf, the court noted that there is "no

precise line between impermissible competition and permissible preparation" and accordingly, "[wjhether an employee's actions constitute a breach of the duty of loyalty is a question of fact

14

27-CV-16-15531

pj,gj

Judicial District Court 12/6/2017 4:28 PIVI

Hennepin County, MN

to be determined based on the totality of circumstances." Id. In this legally analogous situation, it is for the factfinder to determine whether Medlin breached her fiduciary duty in light of all of

the evidence. Although the facts are disputed, and rely to a great extent on inference, in the

procedural postureof a summary judgmentmotion, the Court mustview the facts, and inferences from those facts, in favor of Plaintiff. Medlin is not entitled to summary judgment on the breach of fiduciary duty claims. a. Fraudulent Misrepresentation by Omission

Plaintiff seeks to recover against Medlin for fraud in the inducement by omission (Count Seven). Under Minnesota law, to prove this claim, a plaintiff must establish: (1) there was a false representation by a party of a past or existing material fact susceptible of knowledge; (2) made with knowledge of the falsity of the representation or made as of the party's own knowledge without knowing whether it was true or false; (3) with the intention to induce another to act in reliance thereon; (4) that the representation caused the other party to act in reliance thereon; and (5) that the party sufifer[ed] pecuniary damage as a result of the reliance.

Hoyt Properties, Inc. v. Production Resource Group, LLC., 736 N.W.2d 313, 318 (Minn. 2007). Although the general rule is that "one party to a transaction has no duty to disclose material facts to the other," an exception to this rule is made when the parties are in a fiduciary relationship. See Midland Nat'l BankofMpls. v. Perranoski, 299 N.W.2d 404, 413, n. 10 (Minn.

1980). Parties who have fiduciary duties must disclose material facts to one another. Graphic Commc'ns Local IB Health & Welfare Fund A v. CVS Caremark Corp., 850 N.W.2d 682, 695 (Minn. 2014); Klein v. First Edina Nat'l Bank, 293 Minn. 418,421, 196 N.W.2d 619, 622

(1972). Thus, where a fiduciary relationship exists, silence may constitute fraud. Toombs v. Daniels, 361 N.W.2d 801, 809 (Minn. 1985). Given her fiduciary duty to Plaintiff, the

Partnership and Linden, Medlin had a duty to disclose material information to him. Appletree Square I Ltd. P'ship v. Investmark, Inc., 494 N.W.2d 889, 892 (Minn. Ct. App. 1993). In this case. Plaintiffs' fraud claim is based on Medlin's failure to disclose to Plaintiff

material facts related to the Partnership and Linden, including facts relating to her ability and willingness to provide financial support for the Project. (Compl. ^ 80.) For example. Plaintiff alleges that despite her assurance that she had sufficient resources to meet her contractual obligations, she failed to disclose that "her assets were not liquid, that her assets were not sufficient to provide any security for the Project, or that she had significant income taxes due in 2014." (Compl. H23.) 15

27-CV-16-15531

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

Medlin seeks summary judgment on both procedural and substantive grounds. First, she

argues that the claims are not properly plead pursuant to Minn. R. Civ. P. 9.02, which requires that "all averments of fraud ... the circumstances constituting fraud ... shall be stated with

particularity." To plead with particularity is to plead the "ultimate facts" or the "facts constituting fraud." Hardin County Sav. Bank, 821 N.W.2d at 191 {citingIn re Estate and Guardianships of Williams, 254 Minn. 272,283, 95 N.W.2d 91,100 (1959)). A party pleads the "ultimate facts" of a fraud claim when it pleads facts underlying each element of the fraud claim or the "who, what, when, where, and how." Baker v. Best Buy Stores, LP, 812 N.W.2d 177,184

(Mirm. Ct. App. 2012) (quoting Parnes v. Gateway 2000, Inc., 122 F.3d 539, 549-50 (8th Cir. 1997)).

Medlin suggests that the claim is not properly pleaded because it is based on the alleged

misrepresentation that Medlin "had the personal finances available for contributing equity and securing financing for the property" and that allegation lacks sufficient particularity. (Medlin's Mem. at 25-27.) But that is a straw man argument. As noted above, Plaintiffs claim does not

rest on this affirmative representation. Rather, it rests on Medlin's failure to disclose material information to Plaintiff relating to her actual financial status and her willingness to provide

financial support for the Project. (Compl. K23.) The Complaint provides significant detail regarding these omissions. (Id., 1ft 24-49, 80.) The allegations leave no doubt as to the "who, what, when, where, and how" of the claimed fraud. Accordingly, the claim is sufficiently

pleaded.

Medlin also seeks summary judgment on the grounds that any representations she made

were mere opinions and conclusory and that Plaintiff could not have reasonably relied on her representations as a matter of law. (Medlin's Mem. at 26.) But once again these arguments misconstrue the substance of Plaintiffs allegations. As noted above. Plaintiff does not allege

fraud based on Medlin's express representations alone, but on herfailure to disclose material facts and Plaintiff has provided sufficient evidence to create a disputed issue of fact on whether she failed to disclose material facts.

For example, at the outset of the Project, Medlin failed to disclose that her assets were the subject of encumbrances and that she had significant debt to the IRS and to Gilbertson that offset her seeming liquidity. (See Olson Decl. Ex. 8; Ex. D (McGregor Dep.) at 130:17-131:6; Hall Decl. Ex. 22). The evidence also supports a finding that these facts were within her personal 16

27-CV-16-15531

pj,gj,

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, IWN

knowledge. Ajury could properly infer thatMedlin knew herown personal financial situation. Indeed, Gilbertson had expressly warned her, basedon his knowledge of her financial status, that she had insufficient assets to proceed withthe Project. A jury could also conclude based on the evidence that Medlin also made material omissions about her finances when she provided her

personal financial statement to the bank. Shehad a duty at the timeto disclose to Plaintiffthat the information she was providingto the bank was both demonstrably false and also incomplete, in that it misstated her cash position and omitted significant liabilities. She also failed to disclose, when Plaintiff was seeking to obtain a line of credit on her cabin in Wisconsin, that the cabin was encumbered with a mortgage. (See Hall Decl. Ex. 1 at 66:1-17; 102:21-103:11; Exs. 19,24.)

There is also sufficient evidence for a jury to conclude that Plaintiff reasonably relied on Medlin's representation having made full disclosure of her financial status. "Whether a party's reliance is reasonable is ordinarily a fact question for the jury unless the record reflects a

complete failure of proof.... [A] party can reasonably rely on a representation unless the falsity of the representation is known or obvious to the listener." Hoyt Properties, Inc. v. Prod. Res. Grp., LLC., 736 N.W.2d 313, 321 (Minn. 2007). Unaware of the true facts. Plaintiff relied on Medlin

to disclose any problem with her financial status at the outset ofthe project and he continued to rely on Medlin to disclose her actual financial resources until it was too late to change course. The evidence supports a finding that if she had disclosed the information to Plaintiff in June, in September, or even in December or January, he could have attempted to find another investor,

obtained additional credit or found another method of closing on the land before the cure period ended. (Olson Decl. Ex. B (Dwyer Dep.) at 170:2-5; 172:6-16.) Moreover, Medlin failed to disclose her continuing contacts with Gilbertson and his

group. A jury could conclude that if she had disclosed what occurred during the secret meeting in December, in which the group made their plans to contact the seller of the Famous Dave's parcel, propose a new deal and obtain a cancellation of the existing purchase agreement, Plaintiff

would have recognized that he could not rely on Medlin for any support in accomplishing the transaction by the cure date.

A jury could also conclude that Medlin's failure to disclose these facts to Plaintiff was done with fi-audulent intent. Fraudulent intent is, in essence, dishonesty or bad faith. Florenzano V. Olson, 387 N.W.2d 168, 173-74 (Minn. 1986). Wrongful intent, which is a state of mind, is 17

27-CV-16-15531

pj|gj

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

rarely proved directly, e.g. by anadmission of bad faith, but is normally established through circumstantial evidence. Id. But the court in Florenzano pointed out that there is no doubt of fraudulent intent when:

the misrepresenter knows or believes the matter is not as he or she represents it to be. Fraudulent intent is also presentwhen a misrepresenter speaks positively and without qualification, but either is conscious of ignorance of the truth, or realizes that the information on which he or she relies is not adequate or dependable enough

to support such a positive, unqualified assertion. In ordering one's conduct, what these formulas mean is that a person, aware that a representation is or may be untrue, would disclose doubt or would disclose the source or limitation of the information on which his or her representation relies.

Id. Thus, a claim to an honest belief that what is false is true is not automatic protection from

liability in fraud, if that claim is, underthe circumstances, completely improbable. In such a case, logicalprobability leads to a jury inferenceof dishonesty, despite the representer's

protestations. Id. at 174. Basedon the evidence, a jury could conclude that Medlin withheld the material facts with fraudulent intent.

Finally,Medlin argues that Plaintiff cannot prove that any material omissions caused Plaintiffs claimed damages. Proximate cause is generally a question of fact for the jury to determine. Bryan v. Kissoon, 767 N.W.2d 491,495 (Minn. Ct. App. 2009). However, where reasonable minds can arrive at only one conclusion, proximate cause is a question of law. Lubbers v. Anderson, 539 N.W.2d 398,402 (Minn. 1995).

Here, Medlin argues that Plaintiffs damages were not caused by her alleged material omissions, but rather by Plaintiffs inability to obtain financing. She says the Project simply never reached a position where either party was required to perform. (See Olson Decl. Ex. L

(SchafferDep.) at 48.) But, the Court cannot draw that conclusion as a matter of law, considering the evidence in a light most favorable to Plaintiff. The record contains significant evidence from which a jury could determine that Medlin's fraud caused Plaintiffs damages. The evidence supports a finding that Alerus was willing to finance a loan for Plaintiff and Medlin before it discovered that Medlin lacked the cash she claimed to have. (Hall Decl. Ex. 1 at 90:8-

11.) Indeed, although both Medlin and the 43UP Defendants argue that Plaintiffs financial

statementdemonstrates indisputably that he had insufficient assets to fiind the Project,the bank continued to work with the parties after it analyzed his financial statement. Similarly, there is evidence that Plaintiff could have provided his half of the funding needed to close the purchase 18

27-CV-16-15531

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

of the Famous Dave's parcel, if Medlin had provided the information and assets required of her. (Id, Exs. 6,25, 36.) As Medlin concedes, a determination whether she could have properly funded the Project would be "fact laden and susceptible to a finding that issues of disputed fact exists." (Medlin's Mem. at 25, n.7.) Similarly, the question whether Plaintiff could have

successfully pursued the Projecthad Medlindisclosed the true facts, is a question for thejury. Accordingly, the Court cannot enter summaryjudgment dismissing the fraud claim. Hi. Negligent Misrepresentation by Omission

Count Eight is PlaintiflTs claim against Medlin for negligent misrepresentation by

omission. To prove negligent misrepresentation, a plaintiff must prove (1) the existence of a duty of reasonable care in conveying information; (2) breach of that duty by negligently giving false information; (3) reasonable reliance on the misrepresentations, proximately causing injury;

and (4) damages. Smith v. Brutger Cos., 569 N.W.2d 408,413 (Mirm. 1997); see also Hardin County Sav. Bank v. Housing and RedevelopmentAuthority ofCity ofBrainerd, 821 N.W.2d 184,191 (Minn. 2012). The difference between an action for jfraud and an action for negligent

misrepresentation is the level of scienter required. See Florenzano v. Olson, 387 N.W.2d 168, 173 (Minn. 1986).

The question whether a duty of care exists in a particular relationship is a question of law for the Court. Williams v. Smith, 820 N.W.2d 807, 816 (Mirm. 2012) (citing Domagala v.

Rolland, 805 N.W.2d 14,22 (Mirm. 2011)). In Minnesota, a duty of care exists when a person

supplies information, either for the guidance of others in the course of a transaction in which one has a pecuniary interest, or in the course of one's business, profession or employment. Id. Here, Medlin had a duty to Plaintiff, the Partnership and Linden to use reasonable care in conveying

information because she was a partner and the parties were engaged in a transaction in which they had a pecuniary interest.

A misrepresentation is made negligently when the misrepresenter has not discovered or communicated certain information that the ordinary person in his or her position would have discovered or communicated. Bonhiver v. Graff, 311 Mirm. Ill, 122, 248 N.W.2d 291, 298-99

(1976). Proof of the subjective state of the misrepresenter's mind, whether by direct evidence or by inference, is not needed to prove negligence. Id. Negligence is proved by measuring one's

conduct against an objective standard of reasonable care or competence. Florenzano v. Olson, 387 N.W.2d 168,174 (Minn. 1986) 19

27-CV-16-15531

pj,gj

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

All of the evidence discussedabove with respect to Plaintiffs fraud claim applieswith

equal force to hisnegligent misrepresentation claim. Butin addition, Plaintiff need notshow that Medlin knew that she had failed to disclose material facts to him. Rather, Plaintiff need only

demonstrate Medlin's conduct failed to meet an objective standard of reasonable care, hi light of the above facts, whether Medlin's conduct fell below the standard is a jury question. Thus, the

evidence is sufficient to allow a jury to conclude that Medlin negligently failed to disclose material facts in connection with the Project, and that Plaintiff was damaged as a result.

Accordingly, summaryjudgment on the claim must be denied. iv. Breach ofContract

In Count Nine, Plaintiff alleges that Medlin breached an oral and/or quasi contract to

equally invest in the Project. There is no disputed issue as to the existence of such a contract as both Plaintiff and Medlin agree that they formed a binding contract to equally invest in the

Project. (Compl. If 91, Medlin's Countercl. K54.)^ Medlin argues that she is not liable for breach of contract because it is undisputed that Medlin's failure to provide financing did not cause the Project to fail. However, Medlin concedes that a determination whether she could have properly funded the Project would be "fact laden and susceptible to a finding that issues of disputed fact exists." (Medlin's Mem. at 25, n.7.) She also tacitly concedes that the question whether Plaintiff could fund the Project, also requires resolution of disputed fact issues. {Id.) This being the case, her argument boils down to an alleged lack of causation: once again she argues that the facts are undisputed that issues other than the lack of funding firom the

Partnership/Linden caused the Project to fail. For example, she argues that the Project failed because Frandsen could not close the construction loan by December 15,2014. According to

Medlin's argument, the construction loan could not close "on time" because: •

cash from the "pre-solds" had not yet been deposited;

•

there was no sworn construction statement;

' Plaintiff asks the Court to strike the arguments Medlin makes in her Reply Memorandum because they were not raised in her opening brief. The Court agrees that Medlin's arguments are improperly raised for the first time in a reply brief. But more importantly, Medlin's argument that no enforceable contract existed is directly contrary to her pleading in which she asserts a claim against Plaintiff for breach of the parties "valid and binding oral and/or implied-in-fact contract to equally invest in the Project and share equally in the financing of the Project." (Medlin's Countercl. If 54.) 20

27-CV-16-15531

Judicial District Court 12/6/2017 4:28 PM

Hennepin County. MN

•

due diligence had not been completed on the organizational documents for the new entity;

•

there was no certificate of insurance; and the bank had not completed its due diligence and obtained approval from underwriting.

But the problem with Medlin's argument is that she conflates the December 15,2014, deadline to close on the Famous Dave's parcel (see Olson Decl. Ex. 84), with a "deadline" to close on the Frandsen construction loan. There was no such deadline and no evidence that any of the above-

listed tasks needed to be completed by December 15,2014. Whether the loan could have been closed at a later date if Medlin had made the financial contribution required by the parties'

contract is a question of fact for the jury.

Medlin also argues that the undisputed facts demonstrate that the closing on the purchase of the Famous Dave's parcel, which did have an initial December 15,2014 deadline, but could have been closed as late as January 28,2015, was the result of factors unrelated to her own

alleged breach of contract. But as explained above, the evidence, considered in the light most favorable to Plaintiff, suggests that the parties' inability to close on the parcel was the result of inter alia, Medlin's conduct, including her refusal to use her assets as collateral for a loan, her failure to disclose to Plaintiff that her cabin was encumbered, her delay in providing documents

to the bank and her general delay in disclosing to Plaintiff that she could not finance her share of the loan transaction.

Given the numerous fact issues regarding the breach of contract claim, summary judgment cannot be granted. V. Civil Conspiracy

Medlin also seeks dismissal of Plaintiffs civil conspiracy claim. The elements of a civil

conspiracy claim are (1) a combination oftwo or more people (2) to commit an unlawful act or a lawful act by unlawful means. Harding v. Ohio Cas. Ins. Co., 230 Minn. 327, 337, 41 N.W.2d 818, 824 (1950). The alleged conspirators must have a meeting of the minds regarding "a plan

or purpose of action to achieve the contemplated result." Bukowski v. Juranek, 227 Minn. 313, 318, 35 N.W.2d 427, 429 (1948). A claim of civil conspiracy must be supported by an

underlying tort. D.A.B. v. Brown, 570 N.W.2d 168,172 (Minn. Ct. App. 1997) (citing Harding, 230 Minn, at 337, 41 N.W.2d at 824). A conspiracy may be proven by circumstantial evidence. See Nathan v. St. Paul Mut. Ins. Co., 251 Minn. 74, 81, 86 N.W.2d 503, 509 (1957).

21

27-CV-16-15531

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

Medlin argues that Plaintiff has failed to prove there was an agreement to engage in a

conspiracy. The other defendants deny such an agreement existed. (See Gilbertson Aff. 112; Schaffer Aff. ^16; Gassen Aff. If 14.) But Medlin's and the other Defendants' denials do not

require dismissal of the claim. As noted above, the agreement can be provenby circumstantial evidence. See Nathan, 251 Minn, at 81, 86 N.W.2d at 509.

The circumstantial evidence in this case, considered in a light most favorable to Plaintiff

creates a genuine dispute as to whether Medlin agreed with the 43UP Defendants to assist them

to acquirethe FamousDave's property. This evidence includes Gilbertson's directionto Medlin to follow his advice regarding financial matters, including his instruction not to use her assets as

collateral, which advice she appeared to follow (Olson Decl. Ex. N); Gilbertson's offer to Medlin that he would guarantee funds for the project and give her a "piece of it" if she involved Gassen (Olson Dec. Ex. 21); Medlin's transfer of Linden's documents to Gilbertson {id., Ex. 31); Medlin's facilitation of a secret meeting between Dwyer, Gilbertson and Schaffer, which resulted in issuance ofthe notice of cancellation of the purchase agreement for the Famous Dave's parcel and almost resulted in loss of Dwyer as a development partner (Hall Decl. Ex. 23 at

43UP000197); Medlin's continued updates of the group regarding PlaintifPs efforts to cure the

default and purchasethe FamousDave's parcel, includingher texts and emails to Schaffer(Hall Decl. Ex. 30); and Medlin's own investment in the 431JP Project (Jd., Ex. 16). This evidence is sufficient to allow a jury to infer the existence of a conspiratorial

agreement between Medlin and the 43UP Defendants to disrupt Plaintiff's efforts to pursue the Project and to pursue a project themselves. Accordingly, the claim carmotbe dismissed. vi. Unjust Enrichment

The elements of a claim for unjust enrichment are: (1) a benefit conferred; (2) the defendant's appreciation and knowing acceptance of the benefit; and (3) the defendant's

acceptance and retention of the benefit under such circumstancesthat it would be inequitable for him to retain it without paying for it. Acton Constr. Co. v. State, 383 N.W.2d 416,417 (Mirm.

Ct. App. 1986), review denied (Minn. May 22,1986). A claim for unjust enrichment does not "lie simply because one party benefits from the efforts or obligations of others, but instead it must be shown that a party was unjustly enriched in the sense that the term 'unjustly' could mean illegally or unlawfiilly." First Nat'l Bank ofSt. Paul v. Ramier, 311 N.W.2d 502, 504 (Minn. 1981). "[T]he cause of action for unjust enrichment has been extended to also apply where ... the 22

27-CV-16-15531

pj|gj

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

defendant['s] conduct in retaining the benefit is morally wrong." Schumacher v. Schumacher, 627 N.W.2d 725, 729 (Minn. Ct. App. 2001); see also Mon-Ray, Inc. v. Granite Re, Inc., 677

N.W.2d 434,440 (Minn. Ct. App. 2004) review denied (Minn. June 29, 2004); Anderson v. DeLisle, 352 N.W.2d 794, 796 (Minn. Ct. App. 1984).

Medlin argues that she is entitled to summary judgment because there is no evidence that she acted "illegally or unlawfully" or that she received any benefit. But as shown above, there is sufficient evidence on which a jury could find that her conduct was wrongful. In addition,

although she and the other Defendants deny she invested in 431JP, there is disputed evidence on

this point. Not only do Defendants concede that she was offered an interest both before and after Plaintiff lost the opportunity to purchase the Famous Dave's parcel, there is evidencethat she acceptedthat offer. (5ee Olson Decl. Exs. 16, 21.) As a result, a jury could concludethat she benefited from her wrongful conduct. Accordingly, the unjust enrichment claim cannot be dismissed.

vii. Usurpation ofBusiness Opportunity

Finally, Medlin seeks dismissal of Plaintiffs claim for usurpation of a business

opportunity. A partner may not take a business opportunity that rightly belongs to the

partnership. TripleFive ofMinnesota, Inc. v. Simon, 404 F.3d 1088,196 (8th Cir. 2005) {citing Miller v. Miller, 222 N.W.2d 71, 78 (Minn. 1974)). An opportunity that is closely related to the

partnership's existing or prospective line of business, would competitively advantage the partnership, and is one that the partnership has the financial ability, knowledge and experience to pursue, is a partnership opportunity. Miller, 222 N.W.2d at 81. If the opportunity is found to be

a partnership opportunity, liabilityexists if the evidence establishes that the acquisition of the opportunity violatedthe defendant's fiduciary duties of loyaltyand good faith. Id. An opportunity ceases to be a partnershipopportunity, however, when a practical impossibility preventsthe partnershipfrom acquiringit. See PJAcquisition Corp. v. Skoglund, 453 N.W.2d 1, 11 (Minn. 1990).

In this case, none of the parties disputes that the acquisition of the Famous Dave's parcel

and pursuit of a development thereon, constituted a "partnership opportunity" for the Partnership and Linden. There is also sufficient evidence to allow a jury to conclude that Medlin acted

wrongfully by usurping the opportunity in violation of her fiduciary duties. See Rensch ex rel. Nominal Defendant Northern Oil & Gas, Inc. v. Reger, No. 10-3679, 2012 WL 1593237 at *5 23

27-CV-16-15531

Judicial District Court 12/6/2017 4:28 PIVI

Hennepin County, MN

(D. Minn. May 7,2012) ("a usurpation claimrequires some wrongful conduct by the alleged

usurper.") (quoting Miller, 222N.W.2d at 81). The evidence of Medlin'swrongful conduct is described above in connection with the breach of fiduciary duty claim. Medlin's breaches of

dutyprevented Plaintifffrom looking elsewhere for investors at the inception of the Partnership and prompted him, because he did not knowthe true facts, to rely on her seeming ability and willingness to satisfy her common law and contractualduties to fund the Project, and delay alternative financial options until the clock had run on the Partnership's opportunity. Medlin nevertheless argues that she has no liability as a matter of law on the claim, because it was a "practical impossibility" for the Partnership or Linden to acquire the

opportunity. She says that (i) the Partnership was never prepared to close on either the construction loan or the purchase of the Famous Dave's parcel and (ii) neither Frandsen nor

Alerus was prepared to provide financing to the Partnership because many due diligence items had not been completed.

As discussed above, with respect to the breach of contract claim, there are disputes of material fact as to whether the Partnership and Linden could have consummated the transaction. There are facts on which a jury could conclude that the banks would have made the loans, well aware of the contents of Plaintiffs financial statement, if Medlin's finances had been as

represented. The evidence suggests that Frandsenwas willing to lend $1,000,000.00 for the purchase of the Famous Dave's parcel (Olson Decl. Ex. 59), and Plaintiff had more than enough liquidity to cover his portion, or the entire balance of the purchase price, of the Famous Dave's parcel. (See generally Hall Decl. Exs. 6, 36.) The facts in the record are also sufficient to allow a jury to conclude that Plaintiff himself could have raised the capital necessary to purchase the

property if he had not relied on Medlin's assurances that she was working with him to fund the acquisition. (Olson Decl. Ex. B (Dwyer Dep.) at 170:2-5; 172:6-16; 132:23-133:10.) Medlin has not shown, as a matter of undisputed fact, that financing the Project would have been impossible even if her financial resources had been as she represented them to be. Similarly, except for argument, she has not shown as a matter of law that the Partnership could not have obtained other investors if Plaintiff had known about the true state of her finances

beginning in the spring of 2014. In sum, Medlin has failed to carry her burden to show that she is entitled to summary judgment on any of Plaintiffs claims against her. 24

27-CV-16-15531

Judicial District Court 12/6/2017 4:28 PH/I

Hennepin County, MN

C.

Summary Judgment is Denied on Plaintiffs Claims against the 43UP Defendants. i. Usurpation ofBusiness Opportunity

Plaintiff has asserted three usurpation claims against the 43UP Defendants (Counts One,

Two and Three). The claims are not based on allegations that they breached a fiduciary duty to Plaintiff. Instead, the claims are based on a theory of "constructive trust." Plaintiff argues that a

constructive trust must be imposed on the assets and profits the 43UP Defendants obtained by

participating with and benefittingfrom Medlin's breach of fiduciary duty and usurpation of the Partnership and Linden's opportunity. Generally, constructive trusts are created by operationof law to protect a beneficial interestagainst one who, either by actual or constructive fraud, duress, abuse of confidence, mistake, commission of a wrong, or by any form of unconscionable

conduct, has either obtained or holds the legal title to property which the person, in equity and in

good conscience, ought not to enjoy. Wright v. Wright, 311 N.W.2d 484 (Minn. 1981);see also Rockv. Hennepin Broadcasting Associates, Inc., 359N.W.2d 735 (Minn. Ct. App. 1984). A constructive trust arises whenever legal title to property is obtained through fraud committed by

a fiduciary. Fingerhut Corp. v. Suburban Nat. Bank,460 N.W.2d 63, 67 (Minn. Ct. App. 1990.) In imposinga constructive trust, the court is not bound by a formula, but is free to effectjustice to avoid unjust enrichment according to the equities. Freundschuh v. Freundschuh, 559 N.W.2d 706, 710 (Minn. Ct. App. 1997).

Plaintiff asserts that because Medlin usurped Plaintiffs busmess opportunity and

providedthat opportunity to the 43UP Defendants, they must be named as parties on the claim so that the Court can order the imposition of a constructive trust on the assets that the 43UP

Defendants wrongfully received. See Triple Five, Inc. v. Simon, 280 F. Supp. 2d 895 (D. Minn. 2003) ("If the partnership opportunity is usurped, 'the opportunity and any property or profit acquired becomes subject to a constructivetrust for the benefit' of the partnership") {quoting Miller v. Miller, 222 N.W.2d 71 (Minn. 1974); see also Shepherd ofthe ValleyLutheran Church

ofHastings v. Hope Lutheran Church ofHastings, 626 N.W.2d 436, 443 (Minn. Ct. App. 2001) (holding that the trial court had discretion to order return of property to plaintiff for the purpose of fashioning an equitable remedy to restore the injured party to the position it occupied before the breach of fiduciary duty).

Triple Five illustrates this use of a constructive trust in similar circumstances. In that

case, a complex network of entities held title to and managed the Mall of America. One ofthe 25

27-CV-16-15531

p.|gj

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

defendants, Si-Minn Developers LP ("Si-Minn"), and the plaintiff, Triple Five of Minnesota, owned equal shares in an entity (Mall of America LP) that owned 45% of the Mall. Si-Minn

secretly negotiated a sale of a portion of the remaining 55% ownership of the Mall held by Teachers Insurance and Annuity Association ("Teachers") to Simon Property Group ("SPG"). The individuals and owners of Si-Minn also owned a minority interest in SPG. The Court held that Si-Mirm, and various other defendants, breached their fiduciary duty to Triple Five and

usurped a corporate opportunity. It ordered that SPG hold the property in a constructive trust for the benefit of Triple Five, despite the fact that SPG was not found to have breached any duty to

Triple Five and was not even a named defendanton the claim against Si-Minn. 280 F. Supp. 2d at 900. SPG was required by the court to transfer its interest in the Mall to Triple Five and

disgorge allnetprofits it had received byholding that interest.^ Similarly here, the Court can fashion an equitable remedy to compensate Plaintiff, the

Partnership and Linden for the breach of fiduciary duty. See Triple Five, 280 F. Supp. 2d at 900 Commercial Assoc., Inc. v. The Work Connection, 712 N.W.2d 772 (Minn. Ct. App. 2006) (the

court may fashion appropriate equitable remedy for breach of fiduciary duty); In re Minnesota Kicks, Inc., 48 B.R. 93,102 (1985) (citing Battelle v. Northwestern Cement and Concrete

Pavement Company, 37 Minn. 89, 33 N.W. 327 (1887) (a corporation may be liable if it receives benefit of transaction authorized by its agents). That remedy may include a constructive trust over the assets the 43UP Defendants received and the profits generated by those assets. Because

the remedy may require the Court to issue an order directed to the 43UP Defendants, it is appropriate to require their participation as parties on this claim. Moreover, as shown below, there is sufficient evidence for a jury to find that they are liable on claims arising out of their

own wrongful conduct. Depending on the facts presented at trial, a constructive trust may be an

appropriate equitable remedy with respect to one or more of these claims as well. Accordingly, summary judgment is denied.

' The Eighth Circuit Court of Appeals modified this order, requiring that the property held in constructive trust, be held in favor of the partnership. Mall of America LP, not Triple Five, one of its partners. Triple Five, Inc. v. Simon, 404 F.3d 1088, 1100 (8th Cir. 2005). 26

27-CV-16-15531

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

a. Tortious Interference with Contract The 43UP Defendants move for summary judgment on Plaintiffs tortious interference

with contract claim (Count Ten). Count Ten alleges that they interfered with Plaintiffs contract with Medlin to pursue the Project. "A cause of action for tortious interference with contract has five elements: (1) the

existence of a contract; (2) the alleged wrongdoer's knowledge of the contract; (3) intentional procurement of its breach; (4) without justification; and (5) damages." Sysdyne Corp. v. Rousslang, 860 N.W.2d 347, 351 (Minn. 2015) (quotation omitted); see also Kallok v. Medtronic, Inc., 573 N.W.2d 356, 362 (Minn. 1998); Kjesbo v. Ricks, 517 N.W.2d 585, 588

(Mirm. 1994). Tortious interference with a contract requires that the interference cause the breach of an existing contract. Schaetzel v. Minnesota Min. and Mfg. Co., No. C5-98-2023,1999 WL 289286 at *2 (Minn. Ct. App. May 11,1999). The alleged wrongdoer must have knowledge of the alleged contract he allegedly interfered with. See Sysdyne Corp., 860 N.W.2d at 351. The knowledge requirement is met if "the defendant had knowledge of facts which, if followed by

reasonable inquiry, would have led to complete disclosure of the contractual relations and rights of the parties." Kjesbo, 517 N.W.2d at 588 n.3. The measure of damages for tortious interference with contractual relations is the loss of the benefit of the contract or the prospective relationship and other losses directly caused by the interference. Potthoffv. Jefferson Lines, Inc., 363 N.W.2d 771, 111 (Minn. Ct. App. 1985). Once a loss is established, "the difficulty of proving its amount will not preclude recovery so long as there is proof of a reasonable basis upon which to approximate the amount." Id. at 775

(quoting Polaris Indus, v. Plastics, Inc., 299 N.W.2d 414,419 (Minn. 1980)). Lost profits may be recovered where they are shown to be the natural and probable consequences of the wrongful act and their amount is shown with a reasonable degree of certainty and exactness. Cardinal Consulting Co. v. Circo Resorts, Inc., 297 N.W.2d 260,266 (Minn. 1980). But damages are not recoverable if they are "speculative, remote, or conjectural." Leoni v. Bemis Co., 255 N.W.2d 824, 826 (Minn. 1977) (quotation omitted).

Here, Gilbertson and Schaffer argue they are entitled to summary judgment because: (i)

they lacked knowledge of any contract; (ii) no evidence shows that they caused a breach of the contract; (iii) their conduct was justified because they had a right to compete with Plaintiff, the

27

27-CV-16-15531

pug^j

Fourth Judicial District Court 12/6/2017 4:28 PIVI

Hennepin County, iVIN

Partnership and Linden; and (iv) Plaintiffhas failed to offerany evidence of damages as a result of any such interference.

Regarding the first point, the evidence is sufficient to establish that Gilbertson and Schaffer knew Plaintiff and Medlin had a contract. They admit they knew Plaintiff and Medlin

were partners in the Project together. (43UP Mem. at 29.) See T. E. Foley Co. v. McKinley, 114 Miim. 271,273,131 N.W. 316, 318 (1911) ("a partnership is a contract between two or more

parties to combine their capital, labor, and skill, or some or all of them, in a business in which they are to have a community of interest, as principals, for the purpose ofjoint profits.") And the evidence supports the existence of such knowledge. See, e.g., Olson Decl., Ex. N (Medlin's

email to Gilbertson referring to Plaintiff as her "partner" and discussing the parties' need for additional funding); Ex. 21 (Gilbertson telling Medlin, "you and your partners on this project have no net worth."); Hall Decl. Ex. 30 (Medlin's text to Schaffer regarding Plaintiffs efforts to close on the Famous Dave's parcel). But Gilbertson and Schaffer argue that they are entitled to dismissal of the claim as a matter of law because they did not know the "structure of the arrangement." (43UP Mem. at 29.) The case they rely on—Webb v. Savik, No. C2-02-42,2002 WL 1614059 (Minn. Ct. App. July

17,2002)—does not support their argument that the law requires detailed knowledge ofthe

terms of the contract to support a claim. In Webb, the defendants obtained a franchise for an Original Pancake House in Minnesota. Plaintiff, who also operated an Original House of Pancakes, sued for interference with contract on the grounds that he had an exclusive right to Minnesota fi-anchises. Plaintiff argued that the defendants should have known he had an exclusive franchise right, because they knew the plaintiff had a franchise and was interested in

obtaining additional fi-anchises, and they had explored whether they could purchase stock in the plaintiff or agree to a partnership to operate a fi-anchise. The court of appeals affirmed dismissal of the claim because none of these facts demonstrated that defendants knew that the plaintiff was an exclusive firanchisee. Here, in contrast, there Gilbertson and Schaffer admit having had actual knowledge of the partnership between Medlin and Plaintiff to pursue the Project. And a jury could conclude based on the facts that they could have obtained more detailed knowledge ofthe terms of the contract, if they had chosen to inquire. Accordingly, this element of the claim is met. Kjesbo, 517 N.W.2d at 588 n.3.

28

27-CV-16-15531

Judicial District Court 12/6/2017 4:28 PH/I

Hennepin County, MN

Next, the 43UP Defendants argue that there is no evidence that Gilbertson or Schaffer

procured a breach of the contract.

The Court disagrees. Plaintiff has provided evidence that

Gilbertson was directing Medlin's actions during the period contrary to her ongoing contractual and fiduciary duties to Plaintiff to pursue the Project on the Partnership's behalf, including

advising her not to use her assets as collateral and to otherwise act at his direction, including "involving Gassen." During this time, at Gilbertson's direction, she arranged a secret meeting between Dwyer, Gilbertson and Schaffer. Medlin told Dwyer that Schaffer "ha[d] been told" to

meet with Dwyer. This email would permit a factfinder to infer that Gilbertson, the only other participant in the meeting, was the source of the message. (Hall Decl. Ex. 23 at 43UP000197.) Although Defendants argue that they told PlaintiflF about this meeting, the evidence they rely on

simply suggeststhat from time to time the parties mentioned Gilbertson as a possible investoror backer. There is no evidence that Plaintiff knew about the meeting, and no evidence that he was aware that Gilbertson was interested in "taking over" the project.

Similarly, Schaffer was aware that the discussions at the meeting could cause a breach of

the parties' agreement. He knew from his previous meeting with Plaintiff, Medlin and Dwyer that the parties were engaged in intense efforts to obtain financing to purchase the Famous

Dave's parcel, including an investment or guaranty from Gilbertson. Because the purpose of the meeting was to obtain financial support for the Project, it may be inferred that Plaintiff, Medlin and Dwyer shared with Schaffer the particulars of the financial status of the Project and their various roles in connection with the Project. Just days later, he met privately with Gilbertson and

Dwyer. Thus, he was aware that Gilbertson desired to take over and eliminate "the other investors," which could result in Medlin or Dwyer violating the existing agreements among the

parties, hideed, Schaffer himself admitted that they discussed keeping the participation of Dwyer (who was a signatory to the investment agreement with Medlin and Plaintiff) a secret due to his potential liability. This evidence, along with the fact that the meeting was kept secret, requires that a jury determine whether the discussions at the meeting and the actions taken pursuant to those discussions interfered with the contract between Plaintiff and Medlin.

The 43UP Defendants also contest whether Medlin actually breached any contract that she had with Plaintiff. However, as discussed above, there are sufficient facts for a jury to determine that Medlin breached the parties' contract. 29

27-CV-16-15531

Judicial District Court 12/6/2017 4:28 PM

Hennepin County. MN

The 43UP Defendants argue, however, that Plaintiff has not provided sufficientevidence to show that any interference proximately caused Plaintiffs damages. In order for a party's

conduct to be the proximate causeof an injury "the act [mustbe] one whichthe party ought, in the exercise of ordinary care, to have anticipated was likely to result in injury to others,... though he could not have anticipated the particular injury which did happen." Wartnick v. Moss & Barnett, 490 N.W.2d 108, 113 (Minn. 1992) (quoting Ponticas v. K.M.S. Investments, 331

N.W.2d 907, 915 (Minn. 1983)). There must also be a showing that the defendant's "conduct

was a substantial factor in bringing about the injury." Flom v. Flom, 291 N.W.2d 914, 917 (Minn. 1980). Generally, proximate cause is a question of fact for the jury; however, where reasonable minds can arrive at only one conclusion, proximate cause is a question of law. Lubbers v. Anderson, 539 N.W.2d 398, 402 (Minn. 1995).

Here, the 43UP Defendants' argument is that Plaintiffs damages are impossible because

they consist of lost profits on a Project that could not be profitable, based on the Engelsma bid and the fact that Plaintiff could not fund his portion of the Project. As a general rule, damages in

the form of lost profits may be recovered where they are shown to be the natural and probable consequences of the act or omission complained of and their amount is shown with a reasonable degree of certainty and exactness. Cardinal Consulting Co. v. Circo Resorts, Inc., 297 N.W.2d 260, 266 (Minn. 1980). In cases of "wrongdoing, courts often award the profits gained by the

wrongdoer as a method of deterrence." Wenzel v. Mathies, 542 N.W.2d 634, 642 (Minn. Ct. App. 1996) (citations omitted).

Here, there is sufficient evidence that the Project could have been profitable. {See Hall

Decl. Ex. 6, Shenehon Expert Report (projecting the value of the Project was $3,625,758.00), Olson Decl. Ex. D (McGregor Dep.) at 206:2-6 (Plaintiff personally lost $200,000.00 that he contributed to the Project).) As Plaintiff points out, Engelsma is not the only company that could

have built the Project. And, according to Plaintiffs expert, Engelsma's bid overstated the rates at which the Project could be built. The expert opines that the build-out could be accomplished

at $150.00 to $200.00 per square foot, far below the rates included in the Engelsma bid. {Id.) A fact finder could conclude, based on this evidence, that Plaintiff could have solicited other bids

or redesigned aspects of the Project to reduce construction costs. (Olson Decl. Ex. B (Dwyer Dep.) at 134:16-20; Olson Decl. Ex. D (McGregor Dep.) at 156:14-25.) Furthermore, Plaintiff

has provided evidence that he had the funds to purchase the Famous Dave's parcel. (See Hall 30

27-CV-16-15531

pj,g^

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

Decl. Ex. 36 at p. 10-13.) This evidence creates disputed fact issues that preclude summary judgment on the claim.

Finally, 43UP argues that it cannot be liable for interference with contract because it did not exist at the time of the events constituting the alleged interference. It is well settled that a

corporation may be held liable for the torts of its agents, acting within the scope its agency and on its behalf. Wenzel, 542 N.W.2d at 642; Cherne Indus., Inc. v. Grounds & Assocs., Inc., 278

N.W.2d 81, 96 (Minn. 1979) {citing Eastman v. Leiser Co., 148 Mirm. 96, 100, 181 N.W. 109,

111 (1921) (a corporation found liable for agents' malicious prosecution)). The rule applies where the acts of the agent occurred before the entity was organized, if the corporation

acquiesces in them or expressly or impliedly adopts them. In re Minnesota Kicks, Inc., 48 B.R. 93,102 (1985) (citing Battelle v. Northwestern Cement and Concrete Pavement Company, 37 Minn. 89,33 N.W. 327 (1887). Thus, a corporation may not be allowed to deny liability where it has received the benefit of the contract. Id. (citing Bond v. Pike, 101 Minn. 127, 111 N.W. 916

(1907); Battelle v. Northwestern Cement and Concrete Pavement Company, 2>1 Mirm. 89, 33

N.W. 327 (1887)). Facts in the record would support a determination that 43UP is liable for Gilbertson's and Schaffer's acts before its formation because 43UP expressly or impliedly ratified those acts by receiving the benefit of their conduct. Accordingly, the factfinder must be allowed to determine whether Gilbertson's and Schaffer's acts that allegedly interfered with

Plaintiffs contract, were within the scope of their agency, and whether 43UP received the benefit of such interference, or otherwise ratified their conduct.

Accordingly, summary judgment is denied on this claim. Hi. Intentional Interference with Prospective Economic Advantage To recover for tortious interference with prospective economic advantage, a plaintiff

must prove the following five elements: (1) the existence of a reasonable expectation of economic advantage; (2) defendant's knowledge of that expectation of economic advantage; (3) defendant's intentional interference with plaintiffs reasonable expectation of economic

advantage, and the intentional interference is either independently tortious or in violation of a state or federal statute or regulation; (4) in the absence of the wrongful act of defendant, a reasonable probability that plaintiff would have realized his economic advantage or benefit; and (5) damages. Gieske ex rel. Diversified Water Diversion, Inc. v. IDCA, Inc., 844 N.W.2d 210, 219 (Minn. 2014). "It is important to recognize that a claim for wrongful interference with a 31

27-CV-16-15531

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

contract and a claim for tortious interference with a prospective economic advantage protect

different interests" and that "the law affords greater protection to existing contractual

relationship, than to prospective business relationships." Id. at 218. "To ensure that fair

competition is not chilled, a claim for tortious interference with prospective economic advantage must be limited to those circumstances in which the interference is intentional and independently tortious or unlawful, rather than merely unfair." Id.

Gilbertson and Schaffer argue that they are entitled to summary judgment on PlaintiflTs tortious interference with prospective economic interest for three reasons: (i) PlaintifiPs

expectation of economic advantage was not reasonable; (ii) Gilbertson and Schaffer did not wrongfully interfere with Plaintiffs prospective economic advantage; and (iii) Gilbertson and Schaffer did not cause Plaintiffs alleged damages.

The 43UP Defendants argue that Plaintiff had no reasonable expectation of an economic advantage on the grounds that the Project could not have been constructed as planned once the Engelsma bid was received on December 29,2014. (Olson Decl. Ex. 46.) The Court rejects this argument. As noted above. Plaintiff has provided sufficient facts to create an issue of material fact regarding whether the Project would have been profitable as planned or redesigned. The 43UP Defendants' evidence is far from demonstrating conclusively that the Project could not have generated profits.

Second, the 43UP Defendants argue they did not wrongfully interfere because their

conduct is protected by the competitor's "privilege." That privilege is set out by the Restatement as follows:

(1) One who intentionally causes a third person not to enter into a prospective contractual relation with another who is his competitor or not to continue an

existing contract terminable at will does not interfere improperly with the other's relation if

(a) the relation concerns a matter involved in the competition between the actor and the other, and

(b) the actor does not employ wrongful means, and (c) his action does not create or continue an unlawful restraint of trade, and (d) his purpose is at least in part to advance his interest in competing with the other.

(2) The fact that one is a competitor of another for the business of a third person does not prevent his causing a breach of an existing contract with the other from being an improper interference if the contract is not terminable at will.

32

27-CV-16-15531

pj|g^

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

See United Wild Rice, Inc. v. Nelson, 313 N.W.2d 628, 633 (Minn. 1982). Whether interference

is justified is ordinarily a factual determination based on whether the defendant's conduct was reasonable. Kallokv. Medtronic, Inc. 573 N.W.2d 356, 362 (Minn. 1998). The burden of

proving justification is on the defendant. Id. The defense ofjustification is lost if bad motive is present. See Nordling v. N. States Power Co., 478 N.W.2d 498, 506 (Minn. 1991) (discussing justification in the context of a tortious interference with a contract claim). Here, there are disputed fact issues regarding the second factor, i.e., whether the 431JP Defendants used wrongful means. Plaintiff points to the facts discussed above as constituting

Gilbertson and Schaffer' wrongful conduct, all of which support his separate tort claims against them. These separate tort claims, which the Court has found to withstand summary judgment, meet the "wrongful conduct" requirement. Cf. Cenveo Corp. v. Southern Graphic Systems, Inc.,

784 F. Supp. 2d 1130,1138 (D. Minn. 2011) (finding that a supportable conspiracy claim could constitute wrongful means that would destroy a claim of competitor's privilege); Witzman v. Lehrman, Lehrman & Flom, 601 N.W.2d 179, (Minn. 1999). The 43UP Defendants also contend that their conduct did not cause Plaintiffs damages,

once again on the grounds that the damages were the result of independent factors that prevented Plaintiff from closing on the Famous Dave's parcel, including his own inability to fund his

portion of the Project. The Court has already concluded, as discussed above, that Plaintiffs evidence creates a disputed fact issue on this point such that the Court cannot grant summary judgment. There is sufficient evidence to allow a jury to hear the evidence and determine the cause of Plaintiffs alleged damages.

/v. Aiding and Abetting and Conspiracy Claims The 43UP Defendants move for summary judgment on Plaintiffs claim for aiding and

abetting (Count Twelve) and for civil conspiracy (Count Thirteen). A claim for aiding and

abetting has three elements: (i) the primary tortfeasor's conduct must commit a tort that causes an injury to the plaintiff; (ii) the defendant must know that the primary tortfeasor's conduct

constitutes a breach of duty; and (iii) the defendant must substantially assist or encourage the primary tortfeasor in the achievement of the breach. Witzman v. Lehrman, Lehrman & Flom, 601 N.W.2d 179, 187 (Minn. 1999). The elements of knowledge and substantial assistance are

analyzed in tandem. Id. at 188. "Where there is a minimal showing of substantial assistance, a

greater showing of [knowledge] is required." Id. In determining whether the requisite showing 33

27-CV-16 15531

Fourth Judicial District Court 12/6/2017 4:28 PM

Hennepin County, iVIN

of knowledge and assistance exists the court consider "[factors such as the relationship between the defendant and the primary tortfeasor, the nature of the primary tortfeasor's activity, the nature

of the assistance provided by the defendant, and the defendant's state of mind." Id. The 43UP Defendants' first argument—^that Medlin did not commit an underlying tort— is rejected for all of the reasons cited above in connection with Medlin's summary judgment claims. The Court also rejects the 43UP Defendants' second argument that Plaintiff has failed to

provide any proof that they substantially assisted Medlin in her alleged breaches. As discussed above, the 43UP Defendants knew that Medlin had contractual and fiduciary duties to Plaintiff to

pursue the Project. At the time that the Project was still viable, they participated in a secret meeting that she arranged that arguably resulted in cancellation of the Purchase Agreement, and

gathered information from her regarding Plaintiffs efforts to close the deal. In addition, unknown to Plaintiff, Gilbertson was providing financial direction to Medlin regarding the

Project, specifically instructing her not to allow her assets to be used to secure a loan for the funds required to purchase the Famous Dave's parcel. Based on the evidence submitted, and viewing the evidence most favorably to Plaintiff, the Court finds that there is a dispute of material fact as to whether the 43UP Defendants aided and abetted Medlin's wrongful actions.

The elements of a civil conspiracy claim are (1) a combination of two or more people (2) to commit an unlawful act or a lawful act by unlawful means. Harding v. Ohio Cas. Ins. Co., 230 Minn. 327, 337,41 N.W.2d 818, 824 (1950). Again, Minnesota has '"long relied on the

'well recognized' rule 'that all who actively participate in any manner in the commission of a tort, or who procure, command, direct, advise, encourage, aid, or abet its commission, or who

ratify it after it is done are jointly and severally liable' for the resulting injury.'" World Business Lenders, LLC v. Palen, Case No. 16-cv-329 (PAM/KMM), 2017 WL 2560918 (D. Minn. June 13,2017) (citing Witzman, 601 N.W.2d at 185-86). As discussed with respect to Medlin's

summary judgment motion on the conspiracy claim, the above referenced evidence supports an inference that the parties had a conspiratorial agreement.

Accordingly, summary judgment on these two claims must be denied. V. Unjust Enrichment

Plaintiff bases his unjust enrichment claim on various benefits the 43UP Defendants allegedly wrongfully obtained as a result of the demise of the Project, including paying a reduced

price for the Famous Dave's parcel based on credit for the Linden Crossing Group's previous 34

27-CV-16-15531

Judicial District Court 12/6/2017 4:28 PM

Hennepin County, MN

payments and avoiding certaindevelopment costs, including expediting City approval of the 43UP Project and use of the same vendors.

As noted above, to prove unjustenrichment, a party must show: (1) a benefitconferred; (2) the defendant's appreciation and knowingacceptance of the benefit; and (3) the defendant's

acceptance and retention of the benefit under such circumstances that it would be inequitable for him to retain it without paying for it. Acton Constr. Co. v. State, 383 N.W.2d 416,417 (Minn. Ct. App. 1986), review denied (Minn. May 22,1986). A claim for unjust enrichmentdoes not "lie simplybecause one party benefits from the efforts or obligations of others,but instead it must be shownthat a party was unjustlyenriched in the sense that the term 'unjustly' could mean illegallyor unlawfully." First Nat'l Bank ofSt. Paul v. Ramier, 311 N.W.2d 502, 504 (Minn. 1981). "[T]he cause of action for unjust enrichment has been extended to also apply where ... the defendant['s] conduct in retaining the benefit is morally wrong." Schumacher v. Schumacher, 627 N.W.2d 725, 729 (Minn. Ct. App. 2001); see also Mon-Ray, Inc. v. Granite Re, Inc., 677 N.W.2d 434, 440 (Minn. Ct. App. 2004) review denied (Mirm. June 29, 2004); Anderson v. DeLisle, 352 N.W.2d 794, 796 (Minn. Ct. App. 1984).

The 43UP Defendants seek summaryjudgment on PlaintifiPs unjust enrichment claim on the grounds that Plaintiff has provided no evidence to allow a jury to conclude that (i) they benefited from a reduced price for the Famous Dave's parcel based on credits for payments made

by Plaintiff or that (ii) their approval/construction costs were reduced as a result of Plaintiffs efforts. The Court agrees that the record contains insufficient evidence to go to a jury on those

aspects of Plaintiffs unjust enrichment claim. Nevertheless, considering all of the circumstances, a factfinder could find that the 43UP Defendants unjustly benefited from their

wrongful conduct by beingable to pursuea lucrative projectand deriving profits therefrom. This benefit is sufficient to sustain Plaintiffs unjust enrichment claim. See Wenzel v Mathies, 542

N.W.2d 634, 642 (Minn. Ct. App. 1996). Accordingly, the motion for summaryjudgment on this ground is denied. III. CONCLUSION

Based on the foregoing. Defendants' motions for summary judgment are denied. M.R.V.

35